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Economy - Development

Ethiopia's investment climate lauded

afrol News, 5 November - The World Bank today lauded the positive investment climate in Ethiopia. The government's development strategy was said to be one of the best options possible to fight poverty, create growth and attract investments. Aid flows into Ethiopia should soon start growing, the World Bank estimated.

Concluding a four-day visit to Ethiopia last month, World Bank President Jim Wolfensohn applauded the government's "vision for growth and poverty reduction." He added that the country - the second most populous in Sub-Saharan Africa - is poised to benefit from higher levels of development assistance and investment.

Following meetings with Ethiopia's Prime Minister and the full cabinet, Mr Wolfensohn told local journalists that "it would be hard to improve upon" the government's development strategy for Ethiopia, which covers health and education, capacity-building, private sector growth, decentralisation, and rural development. "It is remarkable that the country has been able to recover from a very difficult period thirteen years ago and get itself on this track when the per capita income is US$ 100 for 70 million people," he said.

For Ethiopia, a central challenge would be raising the level of development assistance to support its strategy, the World Bank leader held. Without a substantial increase in development aid, analysts say it would be impossible for the country to finance the programmes required to meet even a few of the Millennium Development Goals.

Today, aid flows to Ethiopia translate to US$ 13 per person, less than half the average for Sub-Saharan Africa. "You really should see an increment in assistance from US$ 1 billion to US$ 2.5 billion just to bring you to the average," Mr Wolfensohn said in Addis Ababa.

Studies in aid effectiveness indicate that development assistance has the greatest impact in poor countries with sound policies for development, according to the World Bank. At US$ 100 per capita annual income, and with a broadly credible "Sustainable Development and Poverty Reduction Programme" around which donors are organizing support, Ethiopia could be a country where greater aid flows would bring demonstrable results.

Mr Wolfensohn also urged Ethiopians to create the climate for accelerated private-sector growth. After meeting with leaders from an array of businesses ranging from tourism to horticulture, he said that much could be done to ease regulatory barriers and deliver financial services to companies, particularly through micro-enterprise lending, and credit for small and medium-sized businesses. "Your exports are only US$ 500 million, so you have a huge way to go," he added.

Complimenting Ethiopians on progress they have made in easing regulatory burdens, he noted that "you have dramatically shortened the time for registration of businesses, for certification of businesses." Ethiopia has closely followed the growth prescriptions given by the World Bank and the International Monetary Fund (IMF) in its economic reform efforts.

The World Bank's recent study, 'Doing Business in 2004', put Ethiopia among the top performers in cutting the steps entrepreneurs must follow to launch a business. However, other obstacles - ranging from poor roads, low demand, low level of skills, and limited access to credit - remain.

Mr Wolfensohn further praised "Ethiopia's bold moves" to shift resources and responsibility to local government and communities. "Fifty percent of your money now goes to be spent locally, with decisions made locally," he said. "That is a big step forward for any government."

However, Ethiopia's ability to attract greater foreign aid and private investment was still clouded by residual tension with Eritrea over a disputed border, the source of war that proved hugely costly to both countries. Warned Mr Wolfensohn: "There is a sort of shadow that affects all this, ... frankly, the border dispute. I think it is not for me to enter into domestic politics, but I can tell you that the world is deeply nervous at the moment about conflicts."

Mr Wolfensohn also met with youth representatives, farmers, and local council members to hear their views. He said that he was impressed by the optimism, concern and integrity of the youth he met in a town-hall meeting. "When I go back to the US and comment on my trip, this meeting will certainly be the highlight," he said. He also noted that he was impressed by the farmers he met. The first thing they talked about was getting their kids to school.

The World Bank leader was however critical of some of the legal structures, cultural values, and behaviours in Ethiopia that marginalise women socially and economically. "I think this country is hugely behind in terms of empowerment of women, and I think that the violence against women is a national disgrace," he said. "Opportunities for women need to be enriched considerably."

During his visit, Mr Wolfensohn also interacted with participants in a UN Economic Commission for Africa conference on gender and development, marking the tenth anniversary of the Beijing global summit on women. "I just think that it is a matter of pragmatics - and frankly it is a matter of what is morally right," he said in a final meeting with the Ethiopian press, adding, "it is crazy to try and develop a country without half the population."

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