The leadership must have the courage to drive forward with economic reforms that can create competitive markets, writes Asseged G. Medhin (firstname.lastname@example.org), deputy CEO of operations at the National Insurance Company of Ethiopia (NICE).
There was a time when it could be said that Ethiopia was the light of Africa. As one of only two nations that were never colonised, it inspired others in the continent that an African state can have a rule-based society and a thriving economy with a government formed by its own citizens.
But after a drawn-out civil war, a military dictatorship and a famine, Ethiopia found itself severely lagging behind African countries and even some of its neighbours.Indeed poverty has always been prevalent but decades that could have been used to create wealth and prosperity were wasted.
There have been significant strides in the past two decades, but they were far from what the nation could have achieved had it opened its economy for competition in the strategic sectors of the economy.
The past three years have been especially challenging given the political unrests that have hit investors’ confidence harshly. This was the last of people’s worries though as internal displacements and ethnic conflicts created rifts in society.
That doom and gloom have since subsided with the assumption of office of Prime Minister Abiy Ahmed (PhD). Through his ability to connect with people and call for justice and democracy, he has effected a movement that can help us refocus on economic development.
Abiy has pronounced multiple times, the need to take a more liberal worldview and adapt to change. His philosophy of leadership, his message for national unity and a thirst for change should indeed be backed by the need to ensure that every sector of the economy crosses into the 21st century.
The Prime Minister wants to take this nation to the world stage in terms of peace, security, technology and competition through knowledge-based leadership. Many professionals including me support his leadership if affected without jeopardising the competitive advantage and core-competence of Ethiopia.
We need to keep up this momentum. He should begin by establishing think-tanks at every sector of the economy that will provide analysis.
We have room for multinational companies that we can help create using effective corporate finance and financial engineering, the glue that binds monetary and fiscal policies.
There is also a need for policy reforms that can facilitate a path towards globalisation, intrinsically linked with the privatisation of state-run corporations and enterprises, as well as liberalisation of strategic sectors.
Here, the fruits that can be reaped from knowledge and skills transfers must not be underestimated. While a broad international perspective is vital to the contemporary leadership of government institutions, the teams of professionals in the private sector must have a good understanding of the workings of the global market as well. This crossover can only be realised by building the domestic consumer markets that can only be sustained with a healthy circulation of currency in the economy.
The financial sector can be the first to be opened amongst the industries that are still closed to the international market, given the World Trade Organisation (WTO) accession Ethiopia’s government has been looking forward to. Thus, banks and insurers should be proactively advised to trade in regional markets by joint venturing with international brands and with the aid of the government.
The leadership of the banks and insurers would be exposed to technology and knowledge transfer leading to innovative products. They would also be able to take experiences on asset and wealth management of transnational companies, capital markets, risk management, capital and rating advisory.
The nation’s greatest asset is human capital, which if invested and geared towards knowledge-intensive industries such as finance, it could lead us out of the rut of poverty.
When the financial sector is open to foreign investment that creates employment opportunities, helps transfer knowledge, skills and technology, and channel currencies into the economy, the nation can be home to multinational companies and create competitive markets sooner than later.
The leadership, in the public or private sectors, must have courage in their conviction to drive forward with the momentum of change in the country. We need monetary and fiscal policies that have the long-term outcomes in mind, and whose ultimate goal is to situate the private sector at the head of development.
The misguided pretext that the Ethiopian economy is too shallow to open itself up to international competition should be counteracted. Competitive markets will arise when exposed to stronger competition, not when camouflaged from it.
Privatisation has been the right step forward, but Abiy’s administration should go forward with liberalisation also. Competition in strategic sectors such as telecom can dramatically better services and products as well as make them cheaper. More dynamism creates multiplier effects on the entire economy while also encouraging consumers to spend and take on more loans.
Parts of the economy such as the financial sector are an engine that can accelerate growth if handled with care and regulated by proactive authorities. What matters most is not the passion but the willingness to reform. There are no shortcuts to the sort of regional and global player Ethiopia strives to become.
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