Ethiopia “Facing challenges across all pillars”

September 5, 2013

by Keffyalew Gebremedhin – The Ethiopia Observatory

Poor performance in global competitiveness ranking

Ethiopia has never been stalwart performer in international competitiveness. The poor state of its institutions, the lack of accountability, poor human and infrastructural development, quality and supply of goods and services, undeveloped goods and financial markets, and the unfavorable macroeconomic environment, especially as pertains to state-private sector relations, have contributed to this present state of affairs.

Consequently, the Global Competitiveness Report for 2013/2014 has passed harsh verdict against Ethiopia’s record of competitiveness. This is shown by its global ranking, which has slipped down to 127th.

From a technical point, however, this huge slippage cannot entirely be attributed to the country’s poor performance alone, although it remains the major determining factor. We need also to realize that the number of competing countries has for the first time surged to 148. Clearly, the more high performance countries enter the arena, poorly performing are pushed down to the bottom.

At the same time, one can look to risers, among others, like Kenya, which have moved from 106th ranking in 2012 to 96th and Zambia from 102 to 93rd.

Adding to the worsening situation in our country, as the report has pointed out, is the TPLF politics and policies and the manner of program and project implementation by its foot soldiers that for a long time have lacked semblance of respect for the rule of law and accountability.

It is common knowledge that in Ethiopia the country’s top investor is the state, alongside the ruling party’s business empire EFFORT and the world’s 63rd billionaire Sheik Al-Amoudi’s Midroc. These have thrived among others through political influence and corrupting politicians from higher-ups in the country’s leadership to ordinary civil servants, as several indications have intimated for some time now.

As far as state policies and operations are concerned, the ten major concerns for Ethiopia and its economic growth and development – in order of importance – are:

(i) foreign currency regulations,

(ii) inefficient government bureaucracy,

(iii) corruption,

(iv) access to financing,

(v) tax rates,

(vi) inflation,

(vii) tax regulations,

(vii) poor work ethic in national labor force,

(ix) inadequate supply of infrastructure, and

(x) policy instability.

Ethiopia’s problems have manifested themselves – as the report has clearly put it – in the state’s prevalent violations of “property rights, [problems with] ethics and corruption, undue influence, and government efficiency”. Nevertheless, it is essential to point out that what the report has failed to mention are the massive violations of human rights, enormous dislocation of rural and urban people and the uncertainty unrepresentative politics of a small group have created.

Consequently, the country’s performance has now confirmed that Ethiopia has slipped down in the competition to prevail in the international market or attract meaningful growth oriented investments. This is more clearly shown by the report, seen against the areas evaluated, as presented hereunder:

(a) On the metrics of basic requirements earn each country 20 percent of the ranking score: The basic requirements encompass institutions, infrastructures, macroeconomic environment, and health and primary education;

(b) Efficiency enhancers take 50 percent of the available points. These mainly relate to higher education and training, the goods market efficiency, financial market development, technological readiness and market size, and;

(c) On measures of innovation and sophistication a highly competitive country could earn 30 percent of the ranking grade. Chief considerations under this are: business sophistication (local supplier quantity, local supplier quality, value chain breadth, etc.) and innovation (company spending on R&D, quality of scientific research institutions, etc.)

Based on these above measurers, Ethiopia in 2013 has fallen to the ranking of 127th out of 148 countries. Its poor performance is described in the report as evidence of the country “facing challenges across all pillars”.

Here is the report’s picture of the Ethiopian situation:

“Ethiopia falls six places to 127th this year, facing challenges across all pillars. The country ranks above 100th only for its market size (67th) and the quality of its institutions (95th), although it should be noted that the assessment of institutions has been falling over recent years across almost all indicators, including property rights, ethics and corruption, undue influence, and government efficiency.

Furthermore, the country’s goods (136th) and labor markets (108th) seem to be deteriorating, with more procedures and time required to start a business along with increasing concerns about the quality of labor-employer relations (121st), hiring and firing practices (99th), and the alignment between pay and productivity (125th).

Ethiopia also requires significant improvements in the areas of infrastructure (124th), higher education and training (137th), and technological readiness (139th). On a more positive note, security — ranked 55th—is better than in many of its sub-Saharan peers, primary education with a net enrollment rate of 87 percent is comparatively good (although the quality of primary education is very low), and women account for a high percentage of the country’s labor force.”

SOURCE, ECADF AND Global Competitiveness Report