Ethiopia: Global Economy in the Eyes of COVID-19 Era

interview

The Ethiopian Herald (EH) has been covering different issues across the nation and worldwide on its guest column. In today's edition and the coming one, we shall delve into the Corona virus impacts over all sectors. Dr. Ravi Kanth Makarla, an Assistant Professor in the Department of Accounting & Finance, College of Business and Economics at Ambo University. EH had a brief moment with Kanth.

Herald: How do you anticipate the flow of Global Investment?

Dr. Ravi: When we observe situations taking the present context as a frame of reference, the flow of global investment might be slowdown in the coming years because every country is insisting on investors capitalizing on homeland involvement, giving extra benefits to those entrepreneurs to help them shift from foreign land to homeland. This scenario may help some countries grab new opportunities in establishing clusters of manufacturing and service sectors.

Herald: The recent flexibility in banking norms, in your view?

Dr. Ravi: Nobel Prize in economics 2019 winner Mrs. Esther Duflo has discussed the need of using mobile money and agent banking tools for transferring benefits of the various policies of the Government directly to the households in developing countries. This will enable to beef up governance efficiency with a view to reaching out to the needy and reducing bureaucracy.

In addition, the financial institutions have to make flexible norms to free the borrowers from the burden of monthly instalments via giving various options of postponement for a few months along with waiver of interest at individual and institutional levels.

Business, being an efficient game, helps SMEs adopt an on-going transformation of business process and take part in the new age business models.

Information sharing by international cooperation is very much needed for a win-win situation.

Herald: Does the demography have any role on the impact of Covid-19?

Dr. Ravi: In general, older population were financially stable as they have enough wealth and assets by taking part in early stage of economic transition. But the younger generation are striving hard for their basic needs. In many European countries, due to demographic imbalance, younger generations are burdened by indirectly sponsoring older generation. This may change due to policy modifications and heavy loss of lives of older generation in the years to come. It is not just about income earners against the livelihood of older generation. But, asking younger generation to pay the cost of older generation has an impact on the life style of income earners.

Herald: What is your observation on 'Defence Spending'?

Dr. Ravi: World biggest economies USA and China are spending heavily on their defence pumping an outlay of $ 732 billion and $261 billion per annum respectively. As per earlier

declaration of President Trump, America wants to modernize its defence by enhancing budget proportion in the years to come. This is resulting negative impact on developmental activities of developing countries, where policy makers have considered defence modernization in addition to Covid-19 recovery.

Herald: What is your reflection on the dynamics of Geo Politics between China and other developed World?

Dr. Ravi: International Relations were in strain even before the outburst of corona virus crisis, they were worsened after the incidence of current health crisis.

Many countries become spectators of USA and China cold economic war due to fear of negative effects of interference between global giants in economy and military power. The countries' image is the basic reason for this quarrel. Peace needs to be established between USA and China by initiating negotiations with mediation of global players to combat the common enemy Covid-19 and to prosper with economic growth and sustainability.

Personally, I am a big admirer of the accomplishments of modern China. I am very much impressed by the dynamism and entrepreneurism of that society. It's amazing what China has abled to achieve. Even in Covid-19 crisis, it supported many countries on voluntary and philanthropic basis, which is worth praising.

USA must see China not as an opponent rather as collaborator or partner in the transition of global economic growth. China's success leads many countries' success including America. Entrepreneurship in China has lifted millions of Chinese out of poverty and provided the world with benefits. If

any country wants to stop Chinese success, they must be ready to face many challenges internally. Therefore, many countries want to reap benefits from the relationship with China rather than straining the relationship.

I personally feel that the present administration leading by President Trump is showing more aggressiveness towards China. The same administrations led by earlier leaders of U.S were actually encouraged China in achieving great success in the world trade.

I believe that Chinese Scientists may be the first to come up with vaccine to fight against Covid-19. We must take the benefits of working together than indulging in politics against China or any other nation. The world needs cooperation and competitive treasury than political rivalry.

Scientists across the globe must cooperate with one another to find an end to this crisis by inventing vaccine at the earliest time possible, not by exacerbating confrontation based on the nationality. America has lost more than 86,000 lives during last few months accounted for more than lost lives in Vietnam War during 1995-75. America alone weighs around 1/3rd of positive cases and of deaths due to Covid-19 in the world. Labelling as "China Virus" by initiating blame game is not a noble gesture from the American President with unfounded proof against China. The U.S. must realise that when AIDS first identified in America (1981) and hunting so many nations, mainly the African states, nobody in the pointed their fingers towards any nation.

Herald: How do you see the global cooperation?

Dr. Ravi: We can't put all the blame on USA. But we can see general deterioration of cooperation among the global leaders,

with recent example of G20 issues. Global response is needed to take measures for bringing togetherness in practice. In recent developments, USA has stopped funding World Health Organisation (WHO) citing the reasons of cover-up the information in favour of China. However, the UNO member nations are able to raise more than $ 80 Million a day without the participation of USA to fight against the pandemic. This vividly shows the strength of unity among UNO member nations and this kind of cooperation is required to fight against any crises and help the poor and weaker nations become stronger.

Herald: What are your views on IMF Notification saying that the world economy is facing worst depression after the great depression?

Dr. Ravi: The world as a whole and countries in specific horizon are having more pessimistic estimates. As we study more, we can find the impact is very wide spread than what appears or presumed to be. India, China and a few more nations are showing positive growth after shrinking in their estimation of GDP output.

There is no concrete estimation about the end of this pandemic. The longer the pandemic, the greater recession would be.

China is struggling to get back to normal scenario because it could not be able to operate at maximum levels of production process by facing reduction estimates of global demand.

In the global economy, pilling up of Government Debt, Corporate Debt and even Household Debt are at historical peaks.

Herald: What is your opinion about the changing scenario of balance of power globally?

Dr. Ravi: Everyone in this world has stunned about the degree of chaos in USA. The healthcare system was found to be inadequate; during initial days of pandemic they don't have clear statistics about the availability of number of beds, number of ventilators, etc. It is a serious blow to American image. People always believed that American Technology, Healthcare, etc. are the best in the world. But, in the present scenario, the American image has come down. The situation is not different in respect of so called developed or super power nations in the Europe as well.

On the contrary, Ethiopian Government's commitment to save both lives of the people and the economy has boosted its image in the global arena. All the world leaders have faced the leadership challenge to respond to this new pandemic health crisis. In this challenge, South Korea and Germany stood as models for other countries for taking measures much earlier than others with leadership commitment and innovation.

The so called developed and super power nations of the world completely failed to give needed attention and thereby lost lots of lives (more than 86,000 in USA) compared to 5 lives in Ethiopia. In this common global challenge, medical scientists are passing updated information to their leaders and acting upon it. It is the only leadership to take forward necessary measures to cope with this health crisis.

Cooperation among the countries is the lesson to be learnt from this crisis. It has awakened the global leaders on health and safety measures. Corona is the common enemy to mankind in the universe, results in human tragedy with economic cost and exacerbates unemployment levels by more than 20% from the earlier levels.

Herald: What could the impact of Covid-19 be on elections and politics?

Dr.Ravi: The leadership who has taken initial measures in controlling the spread of this corona virus has won the hearts of their loyal citizens like South Korea, Germany, Ethiopia, etc. On the contrary, many Americans in specific states who have severely suffered from economical grudge and lost their loved ones have negative perceptions on the administration following its failure to take appropriate measures.

Loose comments of Trump naming 'China Virus' than taking necessary measures like Germany and South Korea has made the world super power lessen its image. Experts are expecting that President Trump may announce huge packages to win back the hearts of the citizens and the industry.

Herald: What are the major recent observations from India and Africa?

Dr. Ravi: India, being a giant manufacturer of human pharmaceutical drugs and vaccines in the world, supplies major share of all medicines including that of AIDS and different types of Cancer.

University of Oxford has started testing their vaccine on 800 humans and they anticipate vaccine approval by September 2020. It gave an order to Indian pharmacy giant, Serum Institute of India, to produce 40 million vaccines at cost of 0.5 cents each.

With regard to Indian Grievance handling mechanism, National and Regional Toll-free Helpline numbers were announced to smoothly handle the public issues with a high speed of response on humanitarian grounds. Even state ministers personally visited the houses of the needy, to demonstrate their commitment in resolving the problems of the society. This shows local administrator's accountability to the common man in the region. But, the miseries of internal migrant labourers were not handled properly.

Indian Government gave full coverage of Health Insurance and Life coverage of INR 5 million to all frontline healthcare workers for a period of 90 days without any premium payment.

Observations from Africa; Oil price crisis had hardest hit on Angola, Nigeria and South Africa's economy in African Context. Fast growing economies like Ethiopia, Rwanda, Senegal, Ghana are not majorly affected due to timely Government initiatives like raising public awareness, people's acceptance to follow the instructions accurately as per Government directions and community level leadership commitment have played a key role in controlling the pandemic.

Many African countries are majorly dependent on imports including food supplies. Import food bill for Africa is close to $40 billion per annum. Even in this Covid-19 crisis, negotiations are on-going to keep food value chain open within the countries, not for passenger travel.

Good news is that Covid-19 presence in

Africa is at very minimal due to having enough time to understand the nature of pandemic. In Ethiopia, Prime Minister's call to the nation to maintain social distancing has been taken seriously by the public in their daily activities including private and public transportation with 50% capacity to the maximum, since there are challenges in local transportation within the cities, 'work from home' guidelines are well exercised in addition.

In Ethiopia, major sectors badly hit by Covid-19 are; Airline Industry, Flower Industry, Tourism and Service Industry, Textile and Apparel Industry, SME's, Informal Sector, Real Estate and Construction due to postponement of decisions at corporate level and household level.

Ethiopian Safety Net Program has given benefits to 8.5 million rural and 600,000 urban people of informal economy. Tax waivers are proposed to support entrepreneurs. But, Balance of Payments is the major challenge to the economic growth of Ethiopian Economy, in addition to insufficient foreign exchange reserves.

Overall, it is anticipated that there may be modifications or delay in the grants to support Africa in general and Ethiopia in particular due to donor countries themselves demand support to fight against Covid-19. Hence, budget expenditure needs to be adjusted for this last quarter of 2012 (GC) and the upcoming 2013 (GC).

On a positive note, there are transformational opportunities to Africa in general and Ethiopia in particular, where Global IT and other Industries are going to focus now on Africa's potential to move things forward with enhanced infrastructure to the common man's reach. Soon rapid technological changes are going to touch the soils of Africa.

As per African Union directives, Ethiopia has diverted Peace and Security fund in combating against Covid-19 by taking preventive measures.

Covid-19 has positive side effects on some. Ethiopia has showered smiles over 4,000 prisoners by letting them free from their punishments of petty crimes and the same norm is observed in few more countries.

As a whole, people started eating mostly homemade food which helps strengthen family relations and public health. Pollution levels have also come down due to lesser movement of vehicles and shut down of

industries. Birds and animals are roaming freely around their habitats.

Herald: Some Economists regard it as a recession and some as depression, why?

Dr. Ravi: If Economy is like a boiler maintaining sufficient heat, we suddenly completely stopped all economic activities and when we restart them again, we don't know how long it will take to reach the level before. It is anticipated as medium-term recession by 'U-shape' recovery.

In post Covid-19, Government relief and stimulus economic policies will decide the pace or speed of the recovery. It depends upon the aggressiveness of the leadership to take control of the situation by implementing corrective measures to push forward.

We are not sure about the reoccurrence of Covid-19 to those confirmed positive and also billions of people across the globe are in lockdown.

To combat this health crisis USA released $ 2.5 Trillion, around 10% of its economy in spite of having more than $3 Trillion as budget deficit. Indian Government also announced $260 Billion Corona virus Rescue Package recently in addition to the ongoing direct payments and provision of food supplies targeting at giving relief to the millions of poor and deprived. Where need arises, some people reaped benefits unconditionally due to discretion of the concerned officer.

Herald: Do you think there is accurate spread of information?

Dr. Ravi: Though Covid-19 discovered on 17th November 2019, China's failure of passing information to the rest of the world is the biggest criticism. If China has done this correctly, the world might have saved many lives and rescued global economy. But Chinese officials did not notify until the end of December 2020. Recovery and Rehabilitation Policies are expected to be made only after having accurate information and observing for more than 2 months during post Covid-19 crisis.

Herald: How do you feel that life could get back to normal throughout the world?

Dr. Ravi: The problem has been tackled rightly in China. But many countries like Hong Kong have not yet settled and people are working from home.

China was successful in controlling the spread because of the tool 'contact tracing'. All moments of Covid-19 positive were tracked and people who came to contact with the positive were quarantined, all of them were tested, and positive contacts were sent for isolation.

'Contact tracing' technique was not taken seriously by USA, Italy and other countries and thereby pandemic was severe.

South Korea, next to China, has aggressively tested and implemented contact tracing in the early stages and suppressed the pandemic.

Herald: What lessons need to be drawn from Covid-19 health crisis?

Dr. Ravi: Several lessons have to be learned from the pandemic. First, Public Health Facilities need to be strengthened.

Second, strong sustainable economic growth can be achieved only through mutual cooperation among global leaders.

Third, protecting lower income category

people's livelihood is the responsibility of the Government. An income disparity among the fellow citizens needs to be diminished over a period of time.

Some people say there is a need to move from Capitalism centric to Socialism centric and Global supply chain needs to be revised due to over dependence on single source.

Another concern we have to take into account is that globalization doesn't only bring benefits, at times leads to pandemics like this. It throws a challenge to the leadership about their preparedness to handle any crisis such as this in the future. At individual level, having modern life against traditional life is not always virtuous. It revealed that this generation can also be able to lead life in less convenient world with limited choices, less freedom, without coffee shops, clubs, etc.

In addition, more standard economic policies are needed in the post Covid-19 crisis recovery period with regard to rebuilding the global economy to the next high levels. Plus to that, Tax Reforms are much needed to identify those categories of people taken advantage of the loopholes of the present tax laws across the globe. Example, Wealth Taxation.

Fresh thinking of innovation, collaboration for universal well-being is the need of the hour and call of the day, too.

The whole world is experimenting 'work from home' tool. The number is on the rise, with high speed broadband connectivity 'home may be the workplace' for life time to some of the workforce in the coming years. And it would result in savings in rent, utilities, furniture, child care, etc. The idea of office space is just going to be vanished in stages and in the short run daily visits to office might be reduced to 50% resulting in task-based employee performance.

New eco-policies are to be put in place to safeguard the environment to live better.

Countries are moving towards self-reliance than global integration.

Post Covid-19, the service sector which accounts for more than 40% to US GDP and much more to some of the countries has needed government support till it regains the consumer support.

Additionally, adopting innovative strategies in service delivery in all sectors may bring significant changes so as to recover the economy soon.

There has to be accurate information sharing platform across the globe. We have lost many lives outside China only due to lack of this and leadership delay in response to timely take measures to control this pandemic.

Herald: How do you see the present situation?

Dr. Ravi: At present, we don't have vaccination, medicine, and even adequate testing equipment. Innovation in production is needed to conduct mass testing at household level. There are supply chain challenges in terms of production, distribution due to border restrictions. Enormous administrative efforts are required to open up things to normal.

In sum, it is better to optimistically exploit the chance the COVID-19 has brought taking what Albert Einstein said into account, "In the midst of every crisis, lies great opportunity."

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