09 June 2014 News Round-Up

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Latest Budget Besieged by Threats of Deficit, Inflation

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The questioning of the Finance Minister could run on for several days after the budget is presented to Parliament

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Sufian Ahmed, minister of Finance & Economic Development

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The Council of Ministers has approved a budget bill for the coming Ethiopian fiscal year, comprising of close to 179 billion Br. The Council has passed the bill for Parliament to ratify. Sufian Ahmed, minister of Finance & Economic Development (MoFED), is expected to defend his government’s policy of an ever increasing fiscal expansion.

The bill is due to arrive in Parliament in a week or two, according to people familiar with the legislative process. Delegated by the Prime Minister, the Finance Minister will give a budget speech. This will then be followed by a question time, which may extend to three days, according to an MP who has served in the Finance & Administrative Committee.

Sufian will have to explain to MPs about the macroeconomic context in which the latest federal budget, representing a 15pc increase from the current fiscal year, is designed, according to experts. It is a budget tabled from an administration wary of the inflationary trend, thus prides its accomplishments in the current fiscal year, taming it to single digits.

“It is amazing to see a government approving a new budget without us fully using the one that has already been approved,” said a businessman in the manufacturing sector.

His is a sign of frustration at the methods the administration of Prime Minister Hailemariam Desalegn used to contain inflation, whose unintended consequences were a slowdown in the economy and a cash strapped private sector. Critics point to a deliberate policy of tightening disbursement of approved budget where inflation has been arrested, but at the expense of growth in gross domestic product (GDP).

Both the International Monetary Fund (IMF) and the African Development Bank (AfDB) have projected expansion in GDP by 7.5pc in 2014/15 – much lower than the 11.2pc average growth targeted in the five-year Growth and Transformation Plan (GTP). Contrary to the views that an “economy shrinks when government grows too large,” the administration appears to be taking the policy of stimulating growth by increasing public expenditure, of which 70 billion Br is allotted to capital expenditure.

The federal government has several mega projects, such as roads, railways and electric power generation and transmissions, which take up much of its annual budget. However, subsidies to regional states claims 51 billion Br and financing to achieve the millennium development goals get 15 billion Br – an amount that has not changed much from last year.

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The amount of budget that the Council of Ministers has approved for coming Ethiopian fiscal year.

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Macroeconomists fear a boost in the budget without a parallel growth in GDP is a recipe for budget deficit, which may cause inflation in the economy. Although the proposed budget is lower than the 201.1 billion Br projected in the GTP document, and its growth rate is three percentage points down from its average record since 2011, those who follow Ethiopia’s macro economy caution that inflating the federal budget deficit from the 3.3pc of GDP registered in 2013/14 fiscal year is inevitable.

For a country whose domestic and external debt is ballooning to over 20 billion dollars, representing 25.7pc of the GDP, the concerns are that the administration may get compelled to print money to finance its deficit. Doing so would certainly push up the inflation rate of 9.10pc, registered in April 2014, to double digits, thereby eroding gains achieved in overcoming poverty.

Ethiopia has an economy ravaged by inflation in recent years, with an average of nearly 20pc in the eight years since 2006, where the peak of 64.2pc was recorded in July 2008. The inflationary pressure seen during these years has “undermined poverty reduction and the overall economic development effort by adversely affecting investment and the wellbeing of the urban poor,” a policy document issued last year by the MoFED conceded.

In order to alleviate inflationary pressure on the urban poor, the administration has had over six billion Birr expenditure since 2008, where it had bought wheat and edible oil to be distributed to the market through a highly subsidised rate.

Economists generally agree that persistent budget deficits – as in the case of Ethiopia –generate macroeconomic imbalances. Ethiopia has a history of budget deficit averaging at 3.45pc of the GDP ever since the EPRDF took power in 1991, reaching a record high of 6.6pc in 2003. The increase in budget deficit and the potential resurgence of inflation are the major threats to the economy next year, according to a macroeconomist who spoke to Fortune anonymously.

However, with hardly any detail on the budget now sent to Parliament, it is yet to be clear on the size of the budget deficit and the plans the administration has in financing them.

http://addisfortune.net/articles/latest-budget-besieged-by-threats-of-deficit-inflation/

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Chinese Ethiopia Visit Stirs Investment Interest

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The delegation of businessmen were especially interested in joining the hotel sector, which had left them disappointed

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Girma Temesgen, Ethiopia’s Consul General in Chongqing, China.

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A group of Chinese businesses and businessmen are talking to a major British consultancy firm about huge investments they are considering in Ethiopia. This came after they visited the country in early May 2014. A group of leather companies are also expected to come sometime between now and September.

A delegation comprising of 23 companies, all in the manufacturing sector, including electronics, machinery and chemicals, came to Ethiopia for a visit that lasted from April 29 to May 4. The group – which came in the company of Girma Temesgen, Ethiopia’s Consul General in Chongqing, China, covering southwest China – was selected from a larger group of businesses that the consulate had been talking to with the assistance of China’s government and Chamber of Commerce, Girma said.

The group was able to see first-hand what the consulate had been telling them in words, said Girma, a career diplomat who had previously been a director at the Ministry of Foreign Affairs (MoFA)for 20 years and who opened Ethiopia’s Consulate General in Frankfurt, Germany. After their visit, five of the group had crystallised their interests in three areas. These included Liu Yudi, Chairman of the Chongqing Shandong Chamber of Commerce and owner of several landmark buildings in Chongqing city; Dong Yintong, owner of several companies in real estate, transport and coal mining, who also owns two ships to transport coal, and Ram Jianguo, owner of Kailt Machines Plc, manufacturer of agricultural machines, pumps and engines, as well as the owner of a financing company, the Chongqing Beibei Rongde Micro-Credit Co Ltd.

These business people and two others have expressed the possibility of investing in a city upgrade and the construction of a five star hotel in Addis Abeba, as well as the development of an industry park. They have already heard from one consulting company about turning these into concrete businesses in Ethiopia, Girma said. This week they will also be hearing from a British consultant.

The city upgrade they have in mind considers taking some parts of Addis Abeba and rebuilding the entire area into a city complex, with a complete set of facilities – schools, hospitals and entertainment.

Their desire towards building a five-star hotel, Girma said, was borne out of their disappointments with their stay in Ethiopia, despite paying high room rates. They have told the Ethiopian consulate in Chongqing that they want to model their hotel after the Yu Zhou Hotel, where Chinese officials, including those at the highest level, stay when they are visiting that part of the country, Girma said, stating that he is yet to visit the hotel. This hotel, though, might not be bigger than Dreamliner Hotel in Addis Abeba, say some who know both hotels.

The leather industry group expected to visit in the near future was supposed to come to Ethiopia along with the 23 that came in May, Girma said. The local government officials from Bishan County that were to accompany them had to stay due to tight schedules, however, and the entire group decided to stay. Bishan County has been traditionally known as a shoe making community for centuries. Currently, there are 991members of the footwear association, Girma said. Twenty to 25 of the well-known companies have already been confirmed as part of the delegation, he said. Seven of them are companies that deliver products to international brands, according to him.

The consulate covers a region of China with a population of 150 million. Its tasks include seeking investment, technology transfer, trade and tourism opportunities for Ethiopia. It also follows on the complaints of Chinese companies from South-West China already in operation in Ethiopia – these include companies involved in the construction of the Addis Abeba light railway and the Sebeta-Meiso railway, as well as a road construction project from Mekenejo to Dembi Dolo and another company installing transformers to take the electric power from the under construction Gereat Ethiopian Renaissance Dam (GERD)to the national grid. Some of the complaints these companies had raised to the consulate included the delayed installation of electric poles for the railways and farmers who were not leaving road construction sites because compensation was not delivered on time.

The consulate office has arranged years for 76 companies to visit Ethiopia over the past two and half.

“Whether they decide to invest or not, arranging for all these to visit the country is not a simple thing,” Girma said. “Over the next four to five years, southwest China could be a big source of investment in Ethiopia.”

http://addisfortune.net/articles/chinese-ethiopia-visit-stirs-investment-interest/

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Lifan Motors Has a Long Road Vision in Ethiopia

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The company is facing fierce competition from used cars, with brands like Toyota remaining popular

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Employees of Lifan Motors working with diligence and attention at one of the 17 plants of the Company located in China.

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Lifan has recently moved into a new plant at the Eastern Industry Zone in Dukem, 37kms outside the capital, Addis Abeba. The company says, however, that it is in business in Ethiopia more as a long-term investment as opposed to an immediate profit, which at present, it is making only from the after-sale service it offers to customers.

Ethiopia, or Abyssinia – as a translation from the Chinese of one of the presentations at its convention last week put it – is, actually a very small market for Lifan. The third Global Distributor Convention of Lifan Motors, organised every three years, took place at the Jiuzhai Paradise Intercontinental Hotel in Juizhai, China, on June 4, 2014. Attending were distributors, dealers and journalists from over 30 countries, as well as ambassadors, including Girma Temesgen, Ethiopia’s Consul General in Chongqing, China, where Lifan Motors is also based.

“When talking about the positive roles played by Chinese partners, it would be unfair not to mention the contribution of Yangfan Motors,” said Girma. “It was the first Chinese private automotive assembling, marketing and after-sale service company in Ethiopia.”

The late prime minister, Meles Zenawi, himself had a great role in convincing the Chinese company to invest in Ethiopia, he later told Fortune. The Company undertakes production in Ethiopia and five other countries, including Russia, Azerbaijan, Myanmar, Iran, Iraq and Uruguay, with Russia serving it with the sale of tens of thousands of cars a year and Ethiopia, according to company founder and chair, Yin Mingshan, with a low market that has stiff competition from old cars. Lifan says it sold 70,000 cars in Russia between 2011 and 2013.

The one-day convention, marked by bold and loud videos of Lifan’s existing and upcoming models, was accompanied by equally bold speeches from Yin and other top executives of Lifan Motors, which tried to elevate the confidence of their partner distributors and dealers, several of whom would be recognised by various awards for their achievements in 2013.

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Lifan cars undergoing the finishing stage of assembly process before getting ready for the market.

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The Company reported, during the convention, that the year 2013 was a time when it achieved a total sales revenue of a little over one billion dollars, “up 23.37pc year on yea, or 7.6pc against the industry average”. That same year, it says it exported 60,000 cars, with its sedans claiming 12pc of the export market in their category. The export volume was 12 times the 4,990 it exported in 2007 – its cumulative exports since then reaching 210,000 cars.

“Lifan motors grew to be the third largest automobile exporter with a self owned brand in China,” said Mark Timber, Lifan Group’s vice president.

Lifan is working to boost its quality and credibility by partnering with the Massachusetts Institute of Technology (MIT), in R&D, and the German, Bosch, for electronic supplies, according to Yin.

The Company, which is listed on the Shanghai Stock Exchange, has 23 plants, with six of them located outside China, Mark said. Ethiopia, one of those countries where Lifan has semi-knockdown or assembly plants, has recently seen a boost with government orders, despite the lukewarm market. It has been delivering 125 Lifan 520 sedans and two X60 SUVs over the past four months, all ordered by the Public Procurement Property Disposal Service

There is production every day at the assembly plant, however minimal, says Biniam Mengesha, sales and marketing manager at Yangfan Motors, Lifan’s Ethiopia subsidiary. The profit making repair service receives up to 120 cars a week at the Company’s two garage’s near Kera, in Kirkos District.

Lifan came into business in Ethiopia in 2007 in partnership with Holland Cars, a partnership that ended on bad terms in 2009. Since then, it has continued solo as Lifan Motors in Ethiopia, while Holland Cars went downhill over the following years, with the founder, Tadesse Tessema, eventually fleeing the country amidst claims of undelivered vehicles.

Lifan has sold about 3,000 cars in Ethiopia since, about 45pc of which were Lifan 520 sedans, according to Yared Seifu, sales and marketing deputy manager at Yangfan. The X60 SUV has sold more than 300 units since its launch in May 2012; this model, first launched in April 2011, had sold 100,000 units by the end of 2013. The company is now receiving orders for the Lifan 530, launched in March 2014, while the 730 is expected to follow, although the date has not yet been fixed for it.

Lifan’s short term plan for Ethiopia includes leasing 10,000sqm of land in Addis Abeba to build its own office and showroom building, says Liu Jiang, Yangfan’s general manager. Although the company has a long-term plan of manufacturing Lifan cars in Ethiopia for export to the African market, current sales of 600 to 700 cars a year and high logistical costs of 3,000 dollars a unit are limiting the company’s ambitions, Liu says, expressing hope that the figure could go down with the Ethiopian Shipping & Logistic Services Enterprise (ESLSE) charging less and increasing sales in the market, which could reduce the unit cost. Lifan’s brand, he says, is not yet strong enough to beat the competition from used cars, with such brand names as Toyota, he adds.

“While customers know the value of a used Toyota car, they cannot put a price to a five year old Lifan car,” he said. “There is also a huge established service capacity for the used cars, which gives buyers a level of confidence in them.”

Both Liu and company founder, Yin, argue that it is the government that has to do something to discourage the sale of used cars in Ethiopia, so that makers of new cars could succeed.

“Ethiopia’s market is not more than 10,000 units a year, and most of it is in used cars,” Yin Mingshan said.

Yin, now 76 years old, established the company after retiring from government work. Now he is building it into a kind of empire with a presence in some 50 countries worldwide. North America and Western Europe are the only markets that Lifan has not yet set foot in. But Yin says his company will venture into both markets in the recent future.

He is said to be prepping his son, Yin Xidi, and daughter, Yin Suowei, both board members in the Company, for leadership positions, although he said during a press conference that he will only let a fit person to take over from him, child or otherwise.

http://addisfortune.net/articles/lifan-motors-has-a-long-road-vision-in-ethiopia/

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New Association to Put Ethiopian Automotives on the Right Road

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The new association, established with 14 members, will focus on improving the processes within the sector

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Rolf Gautschi (far left), general manager of Orbis Trading; Melkamu Assefa (left), the CEO of Marathon Motors; Abraham Abegaz (middle), CEO of Nyala Motors and Chris De Muynck (right), managing director of MOENCO

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The Automotives and Machineries Importers & Assembly Sectoral Association was established with an official launching ceremony at the Sheraton Addis Hotel on Thursday, June 5, 2014.

The Association was established with fourteen members who then selected four members of the board of directors and a chairman.

Abraham Abegaz, Chief Executive Officer (CEO) of Nyala Motors S.C, is the chairman of the Association. Alemayehu Mengesha (Eng), CEO of Race Engineering; Bekele Haile, owner of B.H Trading and Manufacturing Plc; Rolf Gautschi, general manager of Orbis Trading & Technical Centre S.C, and Chris De Muynck, managing director of MOENCO, are members of the board of directors.

“The formation of the association took a two years process,” said Abraham Abegaz. “It has finally got recognition and certification from the Ministry of Trade (MoT), as well as the Documents Authentication & Registration Office (DARO).”

Ten aims were listed in the Association’s structure document, including campaigning for the designing and implementation of policies that will support the Industry’s strength, to work on the challenges the companies are facing locally and internationally and to solve problems that appear in the business process among the members.

“To be a member of the Association, the companies should have a license of sole distributer or assembler of automotives and machineries,” said Melkamu Assefa, the CEO of Marathon Motors Engineering and founding member of the Association.

There are nine companies assembling vehicles in Ethiopia, including Mesfin Industrial Engineering; Maru Metal and Automotive Company; Bishoftu Automotive Industry; and Adama Agricultural Machinery Industry, with cars accounting for 80pc of production, according to recent data from the Metals Industry Development Institute (MITI).

The association members include prominent companies in the business, such as the Equatorial Business Group, Belay Ab Motors, the Automotive Manufacturing Company of Ethiopia (AMCE), Tana Engineering Plc and National Motors Corporation Plc.

In addition, members of the association include the sole distributers of Mercedes Benz, Hyundai, Nissan and UD trucks, as well as assemblers of branded automotives such as Toyota.

“The full percentage payment for a Letter of Credit (LC) from banks, the price defrayal by the Ethiopia Revenue & Costoms Authority (ERCA) on the automotives for taxation, the shortfall of foreign currency and the sluggish process at the Ministry of Transport (MoTr) in the registration of new brands are some of the major challenges we are facing,” said Abraham. “This forces us to have excess stock in our warehouses.”

According to Abraham, the main target of the Association is to address these major challenges that the companies are currently facing.

Ethiopia remains a relatively small market for automobiles, but in recent years it has shown a seven percent increase in open economy and consumer demand after the Growth & Transformation Plan (GTP) was designed and implemented in 2011.

Ethiopia imported 1,940 trucks in 2011/12, up from 1,008 in the 2010/2011 fiscal year, according to the Federal Transport Authority (FTA), which says 10,404 vehicles were imported during 2012/13. However, it notes an estimated 1,500 additional vehicles were likely to have been smuggled in.

The target is in line with the country’s GTP for 2011-2015, which calls for 85pc local content in locally produced cars by 2015.

http://addisfortune.net/articles/new-association-to-put-ethiopian-automotives-on-the-right-road/

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Jinka Airport Given Green Light With Construction Contract

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The Ethiopian Airports Enterprise is also looking to construct new airports in Hawassa and Robe

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Wondeme Teklu, head of the communication affairs office at the Enterprise.

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The Ethiopian Airports Enterprise (EAE) has awarded a 571.7 million Br contract to Afro-Tsion Construction Plc for the construction of the country’s 18th airport at Jinka, 587kms south of Addis Abeba.

The Enterprise contracted the project to Afro-Tsion on May 27, 2014, and the contractor was handed over the land, located three kilometres away from Jinka town, on Thursday June 5, 2014.

Afro Tsion, a grade one general contractor, was established in 1990 and is engaged in road and bridge construction, infrastructure and real estate development and water works. The contractor has previously worked on the construction of numerous projects, such as Mekele University, Oromia Regional Offices, Gondar University, Assela Malt Factory, Jimma University, Awash International Bank Project (Adama Branch Office Building), water works at Gewanie and Awash Arba water supply projects.

The Transport Construction Design Enterprise (TCDE) – a fully fledged state owned consulting firm, which  deals mainly in the design and construction supervision of roads, bridges and airports – is the consultant for the construction of the Airport. The TCDE was established in August 1987. Before this, the TCDE had been a division under the Ethiopian Roads Authority (ERA) for about 30 years, serving as a consultant.

“The construction will only include the landing part of airport, which will be finalised within two and half years,” said Wondeme Teklu, head of the communication affairs office at the Enterprise. “The passenger terminal is under design and will be ready for construction next year.”

According to Wondeme, the airport will lie on a three million square metre plot of land and the landing area will be 2.5kms in length and 60ms in width. It  is designed to serve the Boeing 737 model of aeroplane.

Currently, the Enterprise administers 17 airports all over the country; three of these are gravelled airports – Semera, Pawe and Robe Goba. Among the total airports, four of them are international – Addis Abeba Bole, Dire Dawa, Bahir Dar and Mekelle Alula Aba Nega.

The Enterprise selected Jinka for the construction of the airport for two reasons, according to Wondeme: the economic growth of the city and high tourist flow towards Jinka.

According to the Growth & Transformation Plan (GTP), the Enterprise planned to have a total of 21 airports before the end of 2014/15 fiscal year.

“We floated a tender for the construction of the Hawassa and Robe Airports as well,” said Wondem. “As for the construction of the Hawassa, Robe, Semera and Jinka passenger terminals, we will auction tenders soon.”

According to Wondeme, the construction of the passenger terminal of Jinka, which will be built next year, will have the capacity to accommodate 178 passengers at a time.

The Ethiopian Airports Enterprise (EAE) was formally established as a public enterprise in January 2003, by the Council of Ministers (CoM), with a capital of two billion Br.

Before the Enterprise’s establishment, the former Civil Aviation Authority was responsible for administering the economic and technical regulations, airport services and aviation security. But later, the government decided to handle the three responsibilities separately by forming the Ethiopian Civil Aviation Authority and the EAE. Airport security has continued with the National Security & Intelligence Affairs.

The Enterprise provides two services: aeronautical (runway, taxiway and flood lights) and non-aeronautical (restaurant, hotels, banking and shopping) to generate revenue. Currently, the Enterprise generates a net profit of 900,000 Br annually and shows an average annual increase of 10pc.

http://addisfortune.net/articles/jinka-airport-given-green-light-with-construction-contract/

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Billion Birr Construction of Additional 40/60 Houses Commenced

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Approximately 860,000 people are registered across the three housing schemes – 10/90, 20/80 and 40/60

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Experts laboring in the preparation of the land for the construction of 6,551 houses at Ayat Bole site

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In addition to the ongoing construction of low cost houses, the Addis Abeba Saving Houses Development Enterprise (AASHDE) has embarked on the construction of new condominium houses at a cost of more than one billion Birr, Fortune learnt.

This project, which is located at the Ayat bole site, will see the construction of about 6,561 houses on a 49ha plot of land under what is known as 40/60 housing scheme. This is the ninth site for the construction of houses under this scheme.

The construction of 6,048 houses under this scheme are taking place at eight sites in four districts in city as of June 2013. The construction progress reached an average of 19.15pc in April, 2014. The highest progress achieved is at sites in Lideta District, with 45.4pc of construction completed, with the lowest progress at a site in Kolfe Keranio District, progressing by 12.4pc.

City residents registered under this scheme must save 40pc of the value of the houses within five years and the government arranges a loan for the remaining 60pc from the Commercial Bank of Ethiopia (CBE). They achieve this by mortgaging the house to be transferred to the user upon completion.

The new construction site will accommodate a total of 133 blocks with a varying number of storeys. Eighty of the buildings will have seven floors with a basement, while 35 of them will be nine storey apartments with one basement. The remaining 18 will have twelve floors with two basements.

The construction of the 12 storey buildings will be conducted by nine grade one contractors, and those with nine storeys will be erected by 16 grade two and two grade one contractors. The grade three contractors will participate in the construction of the seven storey blocks of the new site, according to Yohannes Abayneh, head of Communications at the Enterprise.

Fifty-one contractors have signed a construction agreement with the enterprise out of the total 57 contractors that will erect the apartments, according to Yenus Muhammed, general manager of the branch two office of the Enterprise. These are on the way to commence construction, while the remaining six are soon to sign a contract with the enterprise, he said.

A soil compatibility study has been finalised and the contractors are making the land ready for construction. Some already started the construction last week, Yohannes told Fortune.

It will take a year and half to complete the condominiums with 12 storeys and the nine storey blocks are due to be finished within 15 months. The third category of buildings are supposed to be finalised within close to a year’s time, according to Yenus.

The average cost to construct each of the 12 storey blocks is estimated at around 17.3 million Br, whereas 13 million Br and 11 million Br will be spent on each one of the nine storey and seven storey apartments, respectively.

Upon their completion, the houses will accommodate almost 33,000 people, said Yenus.

Currently, about 164,779 individuals have registered and opened a blocked saving account at the CBE for the 40/60 housing scheme.

The houses under this scheme are designed to have one to three bedrooms, the cost of which varies accordingly.

Those with a single bedroom will cost a total of 162,000 Br and requires a monthly saving of 1,033 Br, while the two bedroom houses are estimated at a value of 250,000 Br with a monthly saving of 1,575 Br. The houses with three bedrooms are worth 386,000 Br, with a monthly saving requirement of 2,453 Br. The monthly saving shall be made for five consecutive years and account for the 40pc of the total value of the houses.

For the current fiscal year the enterprise has allocated a budget of 1.25 billion Br for the construction of the new houses and the ongoing projects. It has also planned to start the construction of 13,881 houses at nine sites under the same scheme, according to Yohannes.

According to the current data obtained from the Addis Abeba City Administration, the estimated demand for houses stood at 311,432, whereas the total housing supply was only 70,000 units – indicating an outstanding housing demand of 233,143 units. The supply of housing units is only 22.5 pc of the demand.

In addition to the 40/60 housing scheme, two other schemes – 10/90/ and 20/80 – are also under implementation by the government, with the aim of replacing substandard accommodation in the city on top of satisfying the housing demand of the city’s residents.

For these three schemes, around 865,000 people have been registered and started saving through blocked accounts they opened at the CBE.

Along with the 40/60 schemes, the construction of 122,000 houses under the 20/80 scheme and 24,000 houses under the 10/90 scheme are also underway.

http://addisfortune.net/articles/billion-br-construction-of-additional-4060-houses-commenced/

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MetEc to produce 100MW electric power from waste

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Metal and Engineering Corporation (MetEc) has signed a memorandum of understanding with the Addis Ababa city administration and the Ethiopian Electric Power Service to produce 100 MW of electric power from Addis Ababa’s waste.

MetEc has also signed an agreement last week with the Canadian company that provides the technology for generating electric power from waste. MetEc is expected to begin operation next month once it finalized the agreement with the Canadian company.

The waste power generators will be located at the Akaki-Kaliti and Bole-Arabsa solid waste sites.
The project’s 75% power will be generated from Addis Ababa’s solid waste and the remaining 25% is known to be from the city’s liquid waste. MetEc is preparing to receive fourteen hectares of land for the project.

The finance source for the project will be provided by the Canadian company. The amount of electric power generated depends on the amount of waste available.
Once the project is finalized and when power generation is started, Ethiopian Electric Power Service will issue the payment for the project through MetEc.

It is remembered that a British company named Harvard had began operation to generate electric power from the waste located at the Repi area of Addis.

http://www.waltainfo.com/index.php/explore/13714-metec-to-produce-100mw-electric-power-from-waste-

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Nation to Plant Eight Billion Seedlings

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In the coming Ethiopian rainy season 8 billion tree seedlings are to be planted, all over the country, announced the Ministry of Environment and Forest.

Preparations are being made in cooperation with the regional governments to accomplish seedling planting program at the beginning of the rainy season, said Public Relations Director of the Ministry, Birhanu Ayalew.
Implementing Climate Resilient Green Economy, the goal of making Ethiopia ‘middle income nation’ by 2025 is still on the right track, he said.

According to the director protection and reforestation works have been done with the public participation.

http://www.waltainfo.com/index.php/explore/13713-nation-to-plant-eight-billion-seedlings

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Taiwanese Shoe Factory in Ethiopia Starts Marketing

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George Shoe Corporation, a Taiwanese shoe factory in Ethiopia, has offered its first 10,000 pairs of shoe for international market.

Established by Taiwanese investors 15 kilometers to east of Addis Ababa at Bole Lemi Industrial Zone,George Shoe factory is producing 4,000 pairs of shoe a day now. The factory makes 16,000 pairs when working in full capacity, explained on a visit paid to the factory by officials from Ethiopian Ministry of Industry (MOI).

State minister of MOI, Sisay Gemetchu said that George Shoe is the top in Ethiopia offering quality products and in quantity as well.
The Ethiopian government has been providing incentives to the investors for the accomplishment of their plans, he said.

The Company’s General Manager, O.K. Kaul acknowledged the Ethiopian government support to his company’s endeavor. The factory’s produce bears ‘Made in Ethiopia’ brand, he said.
This company produces 5 million pairs of shoes a day in China.

http://www.waltainfo.com/index.php/explore/13711-taiwanese-shoe-factory-in-ethiopia-starts-marketing

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PM Inaugurated Butajira Gubre Road

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Butajira-Gubre asphalt concrete road built with the principal of 800 million Birr was inaugurated by Ethiopian Prime Minister, Hailemariam Desalegn.

Construction of the road cutting the 1,300metre high Zebider mountain ranges by indigenous Sunshine Construction Companyhas indicated that local contractors’ capacity is growing, said the premier.

Ethiopian Transport Minister, Workineh Gebeyehu also appreciated the efforts of local contractors in saving the nation’s foreign exchange by winning more similar contracts these days.

The road shortens the former Butajira-Addis Ababa-Wolkitie 250 km distance to 82 km. Formerly it was necessary to cover a distance of 250km through Addis Ababa and Alemgena to travel from eastern town of Butajira in Gurage Zone to reach the zone’s capital, Wolkitie.

Sunshine Construction Company General Manager, Samuel Taffese urged the government to continue encouraging and supporting local contractors. The 82 km Butajira-Gubre asphalt concrete road is said to make the economic and social contact of formerly isolated east and west Gurage communities easier

http://allafrica.com/stories/201406090154.html

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Ethiopian Road Sector Creates Over Half Million Jobs

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The road sector has created more than 500,000 jobs during the Growth and Transformation Plan (GTP) period, the Ethiopian Roads Authority announced.

This sector is among those which create massive employment and has contributed a lot to reduce the number of the unemployed in the country, said Authority Communication Director, Samson Wondimu.
According to the director, 68 percent of the construction, maintenance and standard improvement works planned in the GTP were also attained.

The number of kebeles road networked has jumped over 61 percent from 40 percent during the GTP period.
Over 49 road projects have also gone operational, while the participation of consultants and contractors increased to 92 percent of the targeted plan.

http://www.waltainfo.com/index.php/explore/13712-ethiopian-road-sector-creates-over-half-million-jobs

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Land issue dominates Public Private Consultative Forum

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Solomon Afewerk and Kebede Chane

Solomon Afewerk and Kebede Chane

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Written by 

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The Ethiopian Public Private Consultative Forum (EPPCF) of the Ethiopian Chamber of Commerce and Sectoral Associations (ECCSA) opened its eighth forum on Thursday at the Hilton Hotel focusing on the issue of protection of property rights.

The consultative forum was attended by Kebede Chane, Minster in the Ministry of Trade, the newly-elected president of the Ethiopian Chamber of Commerce and Sectoral Associations (ECCSA), Solomon Afewerk, and representatives of the private sector.

During the consultative forum, EPPCF presented a study that noted that a well-specified property rights administration stimulates private investment by encouraging property rights holders to invest in their property.

However, representatives of the private sector said that the current property rights laws and administration do not fully recognize the potential economic value of properties, including land.

After presenting the problems and the gaps in the law to administer property rights, the private sector proposed many recommendations to further strengthen the property rights administration in Ethiopia in line with the constitution.

For instance, while acknowledging the expropriation of properties for a continued public infrastructure development in the country, a more narrowed-down definition to the term “public purpose” was said to be necessary.

In this regard, the forum stressed the need for clear guidelines on compensation of properties transferred to private investment use.

Kebede said that, like the previous consultative forums, the aim of the forum was also to pin-point the problems and challenges of the private sector and to provide solutions. “In this regard I believe the questions and problems will be addressed in line with the policies, the strategies, and the laws of the country,” he said.

Although the issue of land dominated the discussion, during the half-day consultative forum other issues such as intellectual properties like lack of overwhelming intellectual property policy and gaps in legislation with regard to trademarks, copyrights and so on were also raised and discussed.

The Ethiopian Public Private Consultative Forum (EPPCF) is mandated by a Memorandum of Understanding (MoU) signed in July 2010 between the then Ministry of Trade and Industry and the Ethiopian Chamber of Commerce and Sectoral Associations (ECCSA). It was established in 2011 and has organized seven public private dialogues.

The MoU is a result of years of negotiations between the private sector and the government to establish a formal mechanism for Public-Private dialogue.

http://www.thereporterethiopia.com/index.php/news-headlines/item/2099-land-issue-dominates-public-private-consultative-forum

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Bill on water grant to Djibouti tabled before parliament

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“I see the agreement no worse than giving away a piece of sovereign land,” sole independent MP, Ashebir Woldergiorgis (Ph.D.)

The House of Peoples’ Representatives (HPR) in its regular session on Tuesday questioned the government’s agreement that was signed in 2012 regarding allowing the tiny neighboring nation, Djibouti, to develop and transport over 103,000 cubic meters of ground water free of charge from the Shinile Zone of the Ethiopian Somali regional state.

The draft bill presented on Tuesday for parliament’s endorsement stirred tough questions from MPs regarding the content of the agreement, which incorporates both the government’s responsibility as well as obligation vis-à-vis the water development that would allow Djibouti to transport the potable water for at least 30 years.

Ethiopian and Djiboutian ministers of finance and economy, Sufian Ahmed and Ilyas Moussa Dawaleh, first signed the agreement in January of 2013 providing the latter accessing partial water resources from the Shinile Zone.

“Ethiopia agreed to supply to Djibouti the water under this Agreement free of any charge,” an agreement was stated in the bill.

“Ethiopia shall designate 20 hectares of land in Shinile area from which Djibouti shall supply water to its territory, in addition to the 400 hectares of land in the proposed groundwater well field area.” However, the agreement states that “Djibouti shall pay compensations for residents of the area and for residents of some areas inside its territory who may be affected by the project.”

According to the draft bill and the 2013 agreement pact, Djibouti shall have the full and exclusive right to draw water within the designated land of up to a maximum of 103,000 cubic meters per day.

A government representative explained to MPs that the government signed the agreement by putting political and economic advantages in consideration.

The document says that the Republic of Djibouti has been suffering from deep- rooted and longstanding shortages of potable water. According to the document, around 95 percent of the water Djibouti gets is ground water. However, it has serious quality problems as it is a highly salty water. In addition, the Djibouti city has faced an impending challenge in its development efforts due to the shortage of water.

The document also reveals that a study has proved that there is a vast potential of ground water in the eastern part of the country, particularly in the Shinile Zone. “It has been proved by the study that there is a huge amount of ground water reservoir in this area, which is sufficient enough for the area’s development activities as well as beyond to provide for Djibouti.”

According to the bill, Djibouti has committed to hiring a construction company for the construction of a water-supply plant.

Similarly, both Djibouti and Ethiopia have their own respective responsibilities to finance the cost of consultancy to be paid for each consultant company during the construction period.

Both also have to ensure security of each part of the project within their respective territories during the construction as well as operation periods.

In addition, as stipulated in the bill, Ethiopia has the commitment to ensure exemption from tax and duties, goods and vehicles imported for the project.

Ethiopia has the responsibility to ensure the safety of the pipeline within the Ethiopian territory.

It also states that Ethiopia’s government should “consult the Government of Djibouti before taking any measures that affect the pipeline.”

After the construction of the project, Djibouti may set up its own company to manage the operation of the water supply system in Ethiopia’s territory with the right of outsourcing it to a third party.

The sole Independent MP in the House, Ashebir Woldergiorgis (Ph.D.), challenged the bill as it is not in favor of Ethiopia’s benefit despite the importance of Djibouti for Ethiopian economic and political significance beyond the good-neighborhood in the region.

“It is not less underestimated than simply handing over parts of the sovereign land”, he said.

Taking the economic as well as political advantage that Ethiopia benefits from Djibouti into account, we have no problem providing Djibouti the water supply. But they can be treated like any foreign company that is granted licenses and investment projects in Ethiopia. Maybe they can be granted special privileges such as tax and duty exemptions but allowing access to water resources free of charge is nonsense,” Ashebir criticized the agreement.

Ashebir, usually known for his pro-government and critical views during the House’s regular sessions, in a rare move denied his voice to the bill opting to remain abstained while it was given the motion for referring to the Natural Resources Standing Committee and for the Budget and Finance Affairs Standing committees.

http://www.thereporterethiopia.com/index.php/news-headlines/item/2102-bill-on-water-grant-to-djibouti-tabled-before-parliament

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Foreclosure notice forces Karuturi to pay off 25 percent debt

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Sai Ramakrishna Karuturi

Sai Ramakrishna Karuturi

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It has been over a year since the Ethiopian government expressed discontent with the performance of the Indian giant, Karuturi Global Limited group, engaged in the business of commercial farming.

This time around, Karuturi has been scrutinized for failing to settle bank credits which it obtained from the state-owned Commercial Bank of Ethiopia (CBE) amounting to some 65 million birr from its overdraft facility, a credit provision for working capital. The company failed to comply with the deadline, which led CBE to publicize a foreclosure on Tuesday.

Ephrem Mekuria, head of corporate communication directorate at CBE, told The Reporter that the bank was forced to announce foreclosure after exhausting options to negotiate with Karuturi on the repayment of the credit. However, following the foreclosure notice, Karuturi immediately acted to settle the minimum 25 percent of the debt in foreign currency, Ephrem said. The credit recovery department of CBE will further negotiate terms with Karuturi officials to settle the remaining amount on the grounds the two sides agreed on previously. CBE has threatened to rerun the suspended foreclosure if Karuturi fails to negotiate and esteem the terms of the credit. CBE holds the lease title deeds of the 100 thousand hectares of land as collateral, which Karuturi holds in Gambella Regional State in south-western part of Ethiopia.

A few months ago Tefera Deribew, Minister of Agriculture, told Indian media that companies like Karuturi had failed to fulfill the prospects the government had. He went on to say that Karuturi, Saudi Star and others implemented plans way below expectation.

It can be recalled that initially Karuturi and the Ethiopian government, through the Ministry of Agriculture (MoA) had agreed that the former would grow wheat on 300 thousand hectares of fertile land. Later on, the government renegotiated the lease deeds by reducing the farmland size to 100 hectares. However, Karuturi was expected to start development of the land in two years. That was only true on some five thousand hectares after five years.

Attempts made by The Reporter to solicit comments from Karuturi’s Ethiopia office bore no fruit. Yet the company has spoken of the challenges it had been through over the years in Ethiopia. Floods, mounting debts, lack of working capital, disputes with staff and local communities were some of the issues Karuturi was voicing on a number of occasions. During his visit to India in 2013, Tefera gave interviews to the Indian media in which he expressed the need to further analyze why such large-scale commercial farming companies were failing to deliver.

Following the failing experiences of Indian and Middle Eastern giants, the government currently provides some five to ten thousand hectares of land as initial lease policy for large-scale farms.

Founded by Sai Ramakrishna Karuturi, who is also the managing director of Karuturi Global Ltd, in 1994 the company is today one of the largest producers of cut roses in the world. In Ethiopia, apart from wheat, Karuturi’s area of focus is cultivating rice, maize, paddy and palm oil plantations. Karuturi Global ventures is also engaged in IT business, floriculture, agriculture and food processing sectors worldwide. It claims to be the largest producer and exporter of cut roses from its operations in Kenya, India and Ethiopia.

http://www.thereporterethiopia.com/index.php/news-headlines/item/2105-foreclosure-notice-forces-karuturi-to-pay-off-25-percent-debt

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Parliament endorses continental pact on creation of Green Wall

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• Dire Dawa-Dewale road secures 180 million dollars from Chinese bank

The House of Peoples’ Representatives (HPR) on Tuesday endorsed the continental convention favouring the creation of the Pan-African Agency of the Great Green Wall Agency (GGWA) that stretches across the Sahel region from Dakar to Djibouti.

The pact is a new approach that is being undertaken by African governments, their populations and their partners to stop desertification. The GGWA aims at coordinating and following up on the realization of a green barrier of protection against the desert advancement; committing to the durable development in the Sahelian strip (a dry zone extending from Sudan in the east to Senegal in the west and separating the Sahara from the tropical regions of Western and Central Africa), covering a distance of a 7,000 km in length and at least 15 km wide, from Dakar, Senegale, to Djibouti, Djibouti in the Horn of Africa.

According to a motion before the House by the Agricultural Affairs Standing Committee, the ratification of the convention would in turn help strengthen Ethiopia’s role in both global and regional development efforts.

The motion also affirms that the convention can be compatible with the country’s green development strategy with no need of establishing a new structural organization to implement it.

The ratification of the convention also helps the nation to take the financial resource advantage that is mobilized by the Agency from the global and continental bodies.

Article 12 of the convention states that “if a dispute emerged among member staffs which cannot be resolved by consultation and negotiation, the case shall be referred to the Court of Justice and Human Rights of the African Union.

However, Ethiopia has opted to ratify the convention with reservation on this article since it has not been a signatory of the Court.

Similarly, the House during the same regular session ratified three more bills related to loan agreements that Ethiopia had signed earlier with external lenders for various infrastructure development projects.

Among them, a loan agreement that gained the House’s endorsement is the USD 180,000,000 loan that was secured from the Chinese Export-Import Bank (EXIM Bank) to finance the 220 km long Dire Dawa-Dewale road project.

The Dire Dawa-Dewale project is aimed at developing the existing gravel road to asphalt road that connects Dire Dawa to Djibouti.

The other similar bill the House endorsed is the USD 23 million loan agreement signed by the government with the other international lender, the OPEC fund for International Development. The loan will be used for financing the Arab Rakate-Gelemso Micheta upgrading Road project 2.

The 45.5 km long project is planned to upgrade from gravel to fully paved asphalt road. The project is estimated to be worth a total 38.48 million USD. According to a document, the OPEC fund is planned to finance 23 million of the total budget outlet. Meanwhile, the remaining budget is covered by the Bank of Arab Development and Economy for Africa (BADEA) and by the Ethiopian government contributing 10 million and 5.48 million USD respectively.

Whereas the same session has seen one more House endorsement of a bill regarding a financing agreement between the government and the International Development Association stipulating for the latter to provide the Ethiopian government with a credit equivalent to 245.6 million SDR (Special Drawing Right) for financing the Second Urban Local Government Development Project.

The project was first launched in 2001 with financing that had been solicited from the World Bank amounting to 150 million USD. This project was concluded in three years’ time despite it originally being designed for six years. Later it demanded an additional 150 million USD. According to the Ministry of Finance and Economic Development (MoFED), the newly endorsed loan is intended to continue strengthening the implementation capacities of urban and local governments.

http://www.thereporterethiopia.com/index.php/news-headlines/item/2098-parliament-endorses-continental-pact-on-creation-of-green-wall

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Governor roasts banks

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GOVERNOR ROASTS BANKS

Governor of the National Bank of Ethiopia (NBE), Teklewold Atnafu

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The Governor of the National Bank of Ethiopia (NBE), Teklewold Atnafu, slammed a study sponsored by the Ethiopian Chamber Commerce and Sectoral Association (ECCSA) which details how the policies and directives issued by the regulatory body is squeezing a much needed banking credit and liquidity from the system.

He countered by revealing that commercial banks have a combined eight billion birr in excess reserve, available loanable fund.

In a meeting that was called by the Chamber yesterday at Sheraton Addis, the study that was commissioned by their Chamber came hard on the central bank and the various directives it issued to regulate financial sector. The study which was based on various studies and surveys conducted by other international organizations concluded that some of the directives and legal instruments that NBE is using is squeezing the liquidity out of the economy thereby limiting the supply of banking credit that is supposed to go the private sector.

The study appeared bold in asserting what it observed in the financial sector and the Ethiopian private sector. “It is easier to say that currently the private sector in Ethiopia is accessing financial resources from alternative societal financial sources like Equb, a traditional instrument of saving, than it is getting from the formal financial institutions like banks,” the study read. Teklewold was equally bold when he said he was surprised how the study arrived at such a wrong conclusion about the financial system. He further said that he his latest information about the financial sector did not indicate the types of alarms that the study detailed. “According to the central bank’s books which I checked up until yesterday (Thursday), commercial banks which you claim to be cash strapped have a combined eight billion birr in excess reserve at NBE,” he argued. And that is a fund that could be easily be disbursed as credit, he said. In fact, the governor was careful to clarify that the type of reserve he is referring to is not legal or compensatory reserve requirements that should be kept at the central bank. “It is not requirements, it is excess reserve that I am talking about,” he said.

Chamber’s analysis of the financial sector went even deeper and pointed out how difficult it is for start-up businesses to access credit at this time. In fact, even for those established business it is becoming difficult to get access to finances. Even when the loan is available usually part of the loan request is approved by banks, the study said.  “Usually it is from 10 to 50 percent of the loan amount that is approved and disbursed,” it read. Not to mention, the surprisingly limited collateral requirements which is usually is composed of a house or a car to access credit from banks.

Above all, the study pinpointed, NBE directives like, the 27 percent NBE-Bill bond directive, the directive that requires the loan portfolio of banks to be composed of at least 40 percent short-term loan and directives that regulate per-shipment export and merchandise loans. The study cited the three directives as being the most destabilizing for the banking sector. The argument raised on 27 percent NBE-Bill directives was nothing different from what countless other studies has pointed out. But the study did claim that this directive also has far reaching consequences that is extending to the micro-finance institutions.

According to the study, the directive about the loan portfolio is said also problematic starting from the definition of short-term loan (which according to the directive was one year). In Ethiopia one year loan can not be short-term loan as most of the time administrative issues and the bureaucracy by itself takes as long as one year to start a business, it argued. Hence most of the time businesses will be forced to pay the loan back before they start operation. Apart from that, the severe foreign currency shortage is also attributable to NBE’s decision to use it as monetary policy instrument. “NBE controls the forex market for its policy purposes rather than freeing it to be determined by demand and supply,” it argued.

Teklewold did not succumb to most of the claims made by the study. In fact, he argued how the private sector can conclude that the NBE would issue a directive to weaken the financial sector. Citing the experience of the advanced economies during the financial crisis, where governments had to bail out a number of banks, Teklewold was firm is asserting that the failure of the private banks would also be a failure for the whole financial system of a nation.

http://www.thereporterethiopia.com/index.php/news-headlines/item/2094-governor-roasts-banks

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