Ethiopia is now transforming its home- grown economy and financial reforms to build a stable and strong economy. The private sector is believed to play a key role. It is well known that the private sector, which can make a significant contribution to the country's economy, was led in unhealthy system. However, the government is currently undertaking various reform measures to address the shortcomings that have directly or indirectly contributed to the failures in economic growth.
Recently, Addis Zemen daily Amharic newspaper has approached with Melaku Alebel, Minister of Trade and Industry, to discuss on government's efforts and its outcome regarding the steps being taken to support the business community affected by the epidemic COVID-19, and the efforts made to create a healthy trade system in the country. The Ethiopian Herald has selected some important points of the interview and translated it as follows.
How do you explain the country's economic growth in the past 27 years? How do you describe the successes and challenges?
A lot of things have been done over the last 27 years, particularly in setting foundations for the industry as well as for the country's growth and development. For example, improvements were observed in terms of the number of industries started, the number of jobs created, and the foreign exchange earnings from the manufacturing industry.
Over the past 27 years, there have been changes, especially in the economy. The efforts made to increase production and productivity, to reduce poverty, to expand the number of private banks, and to improve the incentives given to encourage foreign investors and local investors so as to participate in various investment activities in the country were among the changes that have been taken place at a national level. However, there were some shortcomings during these periods of growth and transformation.
One of the shortcomings was the lack of quality which could be measured in terms of the number of employment opportunities created in the economy. Citizens' incomes cannot grow unless economic growth creates jobs. This will cause for the unfair distribution of wealth that has been proved over the past 27 years.
The second problem is that the economy was under a lot of pressures from foreign debt. This means that the growth is not only in domestic production capacity but also in foreign loans and grants. Most importantly, due to the high credit burden, the country's economic growth was led to serious quality problems.
Third, the other problem observed in the economic growth was in terms of equity. The growth did not depend on the supply of resources or the development potentials between regional states. The political leadership was mismanaged; and because of the misuse of state power, the economic growth could not become equity between states.
In general, the private sector remains the same but has not been properly managed for the past 27 years. The private sector should have been supported more. There was no financial provision to address the financial crisis in the private sector. At the time, much of the loans were spent on government projects.
All in all, although there are improvements in the economy, but there are many shortcomings. Therefore, the government is currently working to address these shortcomings by developing an independent economic reform that will address such identified problems in the next ten years.
Many argue that most of the business development was politically motivated; so that most of the business communities have been excluded from the sector. What do you say on this?
The growth of a country's business is mainly related to its accessibility, second to information, third to the establishment of a fair trade system, and fourth to the creation of a conducive business environment.
In this regard, there were many illegal traders who trade without limitation but do not fulfill the obligations of the government; the origin and destination of their products were unknown; some of the products were also monopolized. In addition, it was a big problem for the government to manage where the commodities are being distributed and accessible from one end of the country to the other.
Hence, there must be a stress-free business environment to enter and remain in businesses. Since there is lack of a well-developed business system in the country, there could not be healthy business competition that would further contribute to the consolidation of inequality between and among the private sectors.
What has been done now to establish a healthy business system in the country?
The government is currently making various efforts to address these issues. The first task is to make the information system transparent and more accessible. Hence, technology-enabled business registration and licensing activities have begun since 2010. This indicates that a business information system is being developed to answer questions such as where and who trades, and who does it offer among others. Thus, there are 1,134 licensing stations.
About 95 percent or 1,070 of these sites have technology-supported business registration and licensing activities. Various reform measures have still being undertaken to improve access to business licenses.
What is the impact of the COVID-19 pandemic on the country's economy, and the support provided to the business community?
As you know, the COVID-19 pandemic is an unexpected problem occurred in the world and in our country. The coronavirus pandemic is far more devastating to the economy than the impact on public health. This is not to say that the impact on public health is insignificant. But it is hurting the economy. First, the raw materials of many industries in the country are imported. We have also products to export.
Therefore, the impact on the economy will not be easy; if we could not import inputs essential to produce export items, we would not have the opportunity to export our products at the expected level.
Second, our economy is in short supply. This means we also import oil, sugar, wheat and other industrial products. During this time, the supply chain, both internal and external, faced many challenges. As a result, there is significant economic pressure on the business community and the manufacturing industry.
As the producers were afraid of the disease, they did not provide their products to the market, especially in early March and April. However, great efforts have been made to fill the gap by participating cooperatives to distribute products at household level, and by using investors who are fully operated their industries.
Similarly, since some countries have closed their manufacturing industries, some of our export products have been sold out in various foreign markets. This has contributed to the betterment of our export revenue than last year. As the oil prices are lower around the world, we could import at least a 3 billion USD worth of oil at a lower price. This helped to reduce our production costs.
Though the problem was so serious that we had to cover our domestic needs on our own capacity, so our industries were made to produce masks, sanitizers, soaps, and protective clothing. This has led to the expansion of markets that were previously very narrow in size and insufficient in each region. These are the opportunities for the outbreak of coronavirus. Thus, efforts are being made to reduce the economic damage caused by the coronavirus.
How do you explain the overall trend of the import-export trade in this country? What is planned to improve the country's foreign exchange reserves?
This is what we may know when we summarize the balance on import trade revenue. But we earned about 3.3 billion USD from export. The country has huge export potential. So far, we have been generating a large amount of exports and income from the agricultural sector. But the manufacturing industry has a huge potential that we have not used. The textile, leather, and chemical sectors are also the major sectors.
Therefore, the first thing to alleviate the country's foreign exchange deficit is to increase the production and productivity of the manufacturing industry. Increasing their competitiveness, and solving various infrastructure problems is a key issue. If we can do this, we can surely alleviate the country's huge foreign exchange deficit.
How much has been done to encourage and support locally produced import-substituted products, and what is planned for the future?
Looking back ten years ago, the gap between our imports and exports was six billion dollars. By 2011, the deficit had risen to15 billion USD. Why this defect? This is because the volume of our imports is much higher than the products we export. One way to solve this problem is to substitute our imported products with domestic ones.
The second is by increasing the volume of exports. The major strategy, however, is to be able to produce imported products at home with the best quality and quantity. One of the issues we are focusing on is exporting and replacing domestic products by identifying unused leather, chemical, metal and textile products.
Currently, living conditions and income of the community remains constant; then the cost of living is increasing daily. What can be done to reduce the cost of living of the society?
In our recent research, there are price increases in some products. Most of them are known. One example, of course, is onions. There was a shortage of seeds, including onions. It has now been improved.
The government has been able to benefit the community by levying taxes on five products, including oil and baby milk. Teff has also increased to some extent. The main reason for this is the delay in importing wheat. Since wheat and teff are interchangeable, the price of teff increases immediately when we run out of wheat. The absence of one puts pressure on the other.
To solve this problem, by accelerating the bidding and other delays with the procurement of wheat, the price of teff will be stabilized as wheat will be imported from September. However, some agricultural products have become more expensive as the farmers are busy farming; and it is also difficult for them to move freely due to the rainy season.
In general, however, the lack of production and productivity is not in line with demand, which is the main reason for the high cost of living.
Finally, if there is a message you want to forward, you're welcome.
The current situation in the country is a promising one, as it has a lot of potential and energy to produce lots of products to market; it has a lot of educated manpower to expand the government's infrastructure and make a real difference in its economic reforms.
But all of this can only be achieved when there is peace. It is only when there is peace that local investors can also create jobs and reduce the burden of living by attracting foreign investment. There must be an environment in which people can move freely from place to place to create wealth.
In this regard, this mission should be part of not only the government but also all sections of society. If this is done, it will be possible to increase production and productivity by expanding investment and creating a stable economy.
Therefore, it is crucial for everyone to fulfill their responsibilities and ensure Ethiopia's prosperity in the coming years. Happy New Year to all Ethiopians!
Thank you so much for your time.
Thank you too.