Economic reform has been one of the major focus areas of the incumbent since it took office more than two years ago. For this end, it is to be recalled that it has formulated a “Perspective Development Master Plan”, which is a reform plan to be implemented within the coming 10 years.
The government is currently gathering important input from relevant stakeholders in order to devise policies for the implementation of the master plan. Accordingly Addis Ababa Chamber of Commerce and Sectoral Associations has forwarded policy suggestions for the plan focusing on eight major areas.
The areas the Chamber focused on are budget, trade, doing business, competitiveness, finance, skilled labor, land and digital economy.
Recognizing the sweeping reforms of the reformist government that has been taking on all aspects of life in the economy, it conducted an input to the government policies to create vibrant private sector.
The first recommendation for the government to be implemented on its development policies recommended by the association is reducing budget deficit and debit burden. According to the association, debit burden adversely affects country’s overall economic development and Ethiopia is at a crossroads as it faces challenge of debit accumulation.
The association pointed out that Government Debt to GDP in Ethiopia averages 34.57 percent during 1991-2018, reaching its peak of 60 percent in 2018 from a record low 24.70 in 1997, citing World Bank report. In 2016, Ethiopia ranked 109th out of 186 countries, in terms of its share of debt to GDP, and the country claimed the 29th position in terms of debt per capita, position, it stated.
The increase in debt mainly attributed to increase public deficit and government’s capped the overall budget deficit at three percent of GDP through a general fiscal rule over the past years. However, the document of the association stated, the overall budget deficit in 2016/17 including grant turned out to be 3.4 percent of GDP. The gap was finance from both external and domestic sources through borrowing instruments.
If not abated soon, an economic projection made also show that the ratio will be reaching as high as 75.5 per cent in 2025, the association noted, if the debt burden trend is not managed within short period, the extent of the problem could be worse.
Financing gaps between revenue and expenditure, account deficit mainly due to trade imbalances and weak export performance, government over investment in the economy, illicit financial outflow and slow structural transformation, extensive and inefficient government expenditures, luck of domestic institutional capacity and absence of regulation in state borrowings are among the key factors that worsened deficit and debt situation, it stated.
Increasing trade is the second fundamental policy recommendation by the association. Ethiopia’s export earning with the GDP has dwindled from 12.48 percent in 2013 to 7.74 in 2017, it noted. This has created severe shortage in availability of foreign exchange. The total import-export in 2017/18 stood at 15.2 billion and 2.8 billion USD respectively, yielding a strategic trade deficit of USD 12.4 billion.
To contribute to the structural transformation increasing the export trade is the key issue, according to the recommendation of the association.
Easing doing business environment is also the third fundamental concern by the association recommended to the reformist government. Creating vibrant private sector, the government should ease doing business environment by enacting suitable policies and implementing the policies on the ground properly.
Improving completion is also another key issue commented by the Chamber. In this case since competitiveness is key to boost productivity and quality, the association calls the government to design development programs and policies that could foster the country’s competitiveness through productivity improvement.
Since access to finance is becoming another hurdle in doing business in Ethiopia, improving financial access is also the key issue for the continued development of the country which need an urgent solution, according to the Chamber.
To provide skilled manpower in every sector, parallel with expansion of educational access focusing on quality to create improved skilled labor is also another key issue which the Chamber advised the government to implement strict quality measurements in the sector.
Since access to land is another key issue for development, the AACCSA noted that, it calls the government to give due attention to solve the limitations in ensuring and holders tenure security and the resulting inefficient and ineffective land related investments. In this regard, flexible and business friendly policy environment is required to respond to the growing demand for land and to enhance the contribution of land.
The last but not the least recommendation but AACCSA is the need for information communication technology investment and digital economy improvements. As digital economies are reshaping consumer behavior, social interaction, business models and government activities, it stated, Ethiopia needs digital transformation to provide industries with unparalleled opportunities for value creation and productivities.
Implementing appropriate digital infrastructure could greatly stimulate e-trade and e-commerce, which in turn creates new market places, it stated.
Herald August 1, 2020
BY STAFF REPORTER