There has to be a national consensus on key issues

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Name: Arkebe Oqubay

Educational level: PhD

Occupation: Politician, economist, researcher, policy maker, advisor, author.

Position: Minster and Special Advisor to the Prime Minister of Ethiopia.

Publications: “Made in Africa” industrial policy, volume editors of how the

nation’s learn, (among others)

Award: Best African Mayor 2005 by ABN, The Order of the Rising Sun,

Gold and Silver Star, presented by the Emperor of Japan.

The Ethiopian Herald had a moment with senior economist and policy maker Arkebe Oqubay (PhD). Excerpts:

The Ethiopian Herald: How do you see the Ethiopia’s economic growth?

Dr. Arkebe Oqubay: Ethiopia’s economy has been growing quite fast. Currently the economy is displaying a swift growth. In the 90s, the economy was growing by 5.9 percent. Since 2004, the economy has been growing by 10.5 percent. Hence, it is recognized as one of the fastest growing economy. Not only that, this economic growth has been supported by huge investment in long term programs especially, infrastructure, development of human capital and expansion of universities with program changes.

This rapid growth has focused on agriculture and rural development which have contributed a lot to reduce poverty by half since 1991.

In addition, it has contributed to meshed growth. One key indicator is the average life expectancy. If we look at the average life expectancy in Africa, we notice that it had increased from 50 to 60 between 1990 t0 2016, while in Ethiopia the average life expectancy had shot up from 45 to 66 during same period. This is an increment twice as compared to Africa’s Increment.

Africa’s average economic growth has been 5 percent in the recent years. But Ethiopia’s economy is twice that of Africa’s economy.

Herald: Some are saying country’s economy growth is attributable to the government’s push only. What is your take on that?

Dr. Arkebe: The first thing is the government cannot bring economic growth single handedly. The economy has been growing fast. What we have to check is as to where the growth is happening. It was happening in agriculture, service sectors, particularly in agriculture and industrial sector. These are aspects need to be considered.

Of course, the public infrastructure and investment are quite significant but for a country to grow fast and industrialize we have to invest in energy. Despite the investment made so far, we have shortage of power. Connectivity and infrastructure in transport also has been improved by rail system and road connections. So, these are public investments and the government has been pursuing this. Because these are import preconditions for economic growth. The private sector cannot be competitive without sufficient infrastructure in terms of transportation and energy.

Herald: What should be done to tackle unemployment in the country?

Dr. Arkebe: Despite this economic growth, we cannot generate sufficient jobs to meet the need we have. Annually, the population is growing by about two percent. This means it shows an increment of about two million every year. This implies that, close to two million jobs should be created. But what matters is not only the numbers, the type and quality of jobs as well.

We have hundred thousand university graduates every year. We need to create jobs for this ever-increasing segment of society. So far we are not able to do so. Even in industrialization and manufacturing sector on high quality service sectors as well. The government should come up with additional initiatives and demonstrate that the economy could generate more jobs that could satisfy the youths.

Herald: How did you view the effectiveness of industrial parks?

Dr. Arkebe: The economic growth in Ethiopia was primarily driven by agricultural and service sector development for the last two three decades. Agriculture has led the development process but without industrialization the growth cannot be sustainable. So, for the expansion and growth we need new empathy and energy from industrialization. Along this phase, industrial parks have been expanded and one hundred thousand jobs have been created in government and private industries.

The approach is linked with FDI and it has been significant since 2012. In 2012, the FDI flow was USD 1.1 billion. In 2017, it was USD 4.3 billion. It is almost a fourfold growth. The most important thing is, it was primarily leaned on productive sector. In 2017, 18 percent of FDI flow was in manufacturing. I believe more investment would come and this growth happened despite the instability we had witnessed. Investment needs peace and stability. The more FDI increases the more empathy created for the local investors to participate.

Herald: Is Ethiopia’s economic policy effective?

Dr. Arkebe: All international observers recognized that with no exception including the World Bank, IMF, and international scholars that Ethiopia has been following development phase which has been unique. It has been able to generate rapid economic growth.

However, policy making is a process during which mistakes are also made. It needs continuous improvement. So, I believe there is a huge room for improvement to make a policy more effective. Our bureaucracy, public services should be more efficient. The country’s business environment for investment has to be changed. The logistic service should be transformed. Quality of education should be a priority agenda because without competent human capital there will be no sustain economic growth. So, there is a huge room for improvement from the government’s side.

Herald: What are the main challenges for the Ethiopia’s economy?

Dr. Arkebe: From my point of view, the main challenge is the perspective of the economic development that is based on research. I have observed limitations in this aspect. There must be an understanding on how rapid economic growth can be sustainable.

Second, there has to be a national consensus on key issues. On these issues there has to be a consonance between political parties and the public. Public’s awareness on national consensus must focus on what we need to do as a country such as export, if all political parties and the public agree, all social community could be mobilized to support the sector.

In tallying, there must be integrity in agricultural sector. It needs serious attention. Finally, we need to develop our human capital. There must be continuous learning. There must be both pushes and passions for improvement.

Herald: Is the ongoing change effective?

Dr. Arkebe: The reform our government is undergoing currently is very important. If we take privatization as example, the government has made important decisions. One of the reform’s focus areas is the /////

 logistics sector. Previously, it was allowed for few local companies and there was a government monopoly in the sector.

Without a competitive logistic sector, there cannot be a competitive export and manufacturing sector. Now, the government has paved the way so that the international logistics sector can make joint ventures with both the local sector and government-run ones. But the state has to own 51 percent. The Ethiopian Airlines for instance has formed a joint venture with an ice breaker logistics service company in the world, DHL.

So, this will help to improve the logistic service in the country. It will improve costs and delivery process in export and import process. In addition, this shows the presence of equal competition among private and state owned companies. Here, the reform is quite important.

The second is the telecom sector. The telecom sector is a monopoly which makes it not efficient. The sector requires continues technological advancement. Therefore, the government has invited technological companies and industrial players to participate in the sector. So, there will be competition. As a result, customers could be satisfied with service. And latest technologies will be upgraded and the price will be minimized.

We miserably failed in sugar and fertilizer projects as a government. They didn’t succeed. The projects had been built by external financing loans and we settle the debt. The aim was to reach an export capability of 5 million tons during GTP II. From the very beginning private participation was allowed. But the mega projects have drained our treasury. We are exerting more efforts to attract international companies to buy these projects.

The Ethiopian Airlines is one of the globally leading companies. It does not need partners, international companies because of technologies and management skills like Ethio-telecom. But we would like to mobilize shares and ensure equity. We have to see to further growth and expansion. People have confusion on privatizations issues. They are not linked to undermine the state; the state remains the key player.

The key point is the government should be engaged in areas where the government could be an example for private companies. But if we have inefficient and subsidized companies which are not competitive globally, we need to find a solution. The state is going to play a leading role in this position.

Herald: Some are saying the country is in debt trap, what do you say about that?

Dr. Arkebe: First in terms of the debt we have, it is not quite big. One key element is what matters is not the amount of the loans that a country takes because during fast growth you could take loans for expansion of productive capacities. The key point is the country should manage to generate foreign exchanges because when we take loans we repay them in foreign currencies. If the country fails to generate such currencies, it will fail to repay.

The second point is the external loans should support flagship projects. Ethiopia has taken a loan for Addis-Djibouti rail line. This is critical infrastructure because it will improve export capacity, delivery time, and reduce costs.

The same thing is energy. If we do not invest in energy, manufacturing capacities cannot be ensured. The important point is we have to generate foreign exchange and the projects should be managed well. The approach in industrial parks stands in sharp contrast to the mega projects. The former was completed within 8 – 9 months. The significant point is not the loan, but the capacity of the economy to repay the loans. If we look at some advanced economies loans are hundred percent of their GDP. Even some are two hundred including Japan, USA and China. The issue is not the loans but the dynamism of the economy, which is expected to repay the loans. Domestic saving should be mobilized to support investment. It will help us balance external financing with domestic financing.

Herald: Tell us the summary of your book how the nation learns?

Arkebe: For countries to climb the ladder, they need to continuously learn from others. Learning is not coping. You need systematic learning. Then you have to adopt and adapt things in your unique conditions. And also, you need policy space to have your own designed policy rather than receiving prescriptions.

The second element is for economic catch-up. It is important to develop manufacturing sectors. It provides huge dynamism in terms of learning technological advancement.

The book tries to bring theories and empirical evidences from different countries’ experiences. It has chapters on Japan. How Japan was able to transform during the Magi restoration. In addition, there is a chapter on China, Korea, Taiwan, and Singapore. The transformation here is only in 50 years. But that of US is hundred years.

Countries which were middle-income countries transited to high income economy. This really shows that countries should have extraordinary effort to catch-up. In technological learning we have a chapter for Ethiopian Airlines. For catching-up purpose countries need to have active industrial policy. The state has also to play a great role in leading during this process. These are the salient points in the book.

Herald: What message do you want to convey?

Dr. Arkebe: Now, we are at a very historic crossroad. The country can sustain rapid economic growth and address the constraints we have on the government’s side, political side, economic side, and sustainable growth. We have made significant achievements in the last two to three decades. We should not miss the opportunity in ensuring rapid economic growth. Catching up in 21st century has become much more complex. It requires wisdom from policy makers, all political parties, and also joint ventures when there is a common consensus. In addition, all private investors should participate to move the country to the next level. Growth is not what we can bring overnight, it needs more efforts. We have to focus on the industrialization and agricultural transformation and export. So that the coming generation can inherit a much more prosperous country.

The Ethiopian Herald Sunday edition October 20/2019

BY AMBO MEKASA