Reluctance on Market Infrastructure Development Costly

The appearance of Prime Minster Hailemariam Desalegn in front of the federal legislative, which witnesses 99.8pc domination by members of the ruling EPRDF, was meant to disclose the nine months performance of his government. In what could be said as a lacklustre session, the 547-member legislature saw a rather forceful Prime Minister with the heartiness to speak about the achievements of his government. There was less of the axiomatic expressions and rare idioms that take the house by laughter common to the late Prime Minister Meles Zenawi.

By and large, the session was evidence to fact that Hailemariam is trying to set a different standard of his own to the office that had for long been typified by centralisation of power, near-dictatorial dominance over policymaking, exceptional articulation and meticulousness. Frankness has also become the new element of the office.

In his report, Hailemariam tried to paint a rather optimistic picture of the economy of the nation. Aside disclosing figures of growth, he tried to delve into the details of the macroeconomic sphere to sell the policies of his government, both to the public as well as the increasingly constituent-oriented Members of Parliament (MPs).  Of course, his details on the dynamics of the macroeconomy, which seems to have become constrained by fiscal lagging and monetary fissures, are not as advanced as his predecessor. Yet, he has tried to set his own tone.

Whether the markets are to pick enough signals from his tone and arguments is something to be seen in the future. After all, building a personality that markets could pick signals from is a time taking task for a politician.

As much as the report was dominated by mentions of accomplishments in the infrastructure sphere, however, it did not say anything about market infrastructures. This happens in spite of the repeated advises by various agents to both federal as well as regional governments to establish modern market centres.

In reporting the changes in the economy, Hailemariam seems to assume that the structural bases of the economic system are healthy. What matters most is the change that is happing on the essential traits of the economy, the implicit assumption seems to go. What is missed amid such assumption and reporting is, however, the essentiality of the very existence of the markets themselves.

As it stands, the economy the ruling EPRDFites are entrusted to lead is dominated with exchanges made in a very traditional way under traditional markets centres. For a large part of the country, this means trading on hills and plains with no essential infrastructure.

Exchanges are made under a scorching sun and after hours of walking on foot. Little is there in the form of feeder roads, loading and unloading, quality checking and banking services in or around most of the market centres. As result the cost of trading is very high. The case is similar with the market centres in most of the regional capitals and urban centres.

Each unit of economic growth reported by Hailemariam is, therefore, obtained under an economic system that lacks modern market centres. No doubt the cost of each unit of growth would have been lesser than what is implied in the report had the issue of market infrastructures been given due attention by policymakers.

Amazingly, even the largest market centre in the nation, Merkato, is far from being modern. It continues to be as chaotic a place to conduct traceable trading as it used to be even before six decades. There is almost nothing that has been done to modernise the market, which is, in many ways, the nerve centre of the economy. Saddening is the fact that there is no strategic plan of transforming it.

This very fact is true to many of the current market centres in regional cities and towns. If anything, reluctance is what explains the attitude of the federal and regional policymakers towards market centres, in particular, and modernised trading, in general.

Certainly, this reluctance is in contradiction with the oft-declared pronouncement of the ruling Revolutionary Democrats. It is this very pronouncement of attributing inflationary build-up to traditional market chains, which needs modernisation, that even Hailemariam mentioned in his latest appearance at the Parliament. But uncertain is how a market chain modernisation could be achieved without having modern market centres.

Markets are essential infrastructures of a market economy. They are places where buyers and sellers meet to make exchanges. They are also places where effective price discovery is made and price information is obtained. Even if technological advancement and globalisation has brought change in the forms of markets, with virtual markets and electronic trading systems becoming all the more dominant, the essentiality of physical market infrastructures remains as important as it had been centuries before.

Of course, the Ethiopian economy has witnessed its own flagship electronic market place – the Ethiopian Commodity Exchange (ECX). Yet, surrounded by both political and corporate opportunism, it has reduced itself to a place where only high-value agricultural produces are traded. As a result, it impact is very limited.

In this modern era of globalisation and high speed trading, however, Ethiopian policymakers are giving their back to the expansion of modernised market centres, be it electronic or physical. They seem to think that what is here today will stay intact the same way.

Yet, an evolving world is making the existence of modern market centres very essential. The speed of trading is increasing at an alarming state that the world has reached to a position of conducting exchanges worth billions of dollars in fractions of a second. Amazingly, undertaking such a huge exchange with no default risk has become manageable.

It is this very advantage that Ethiopia is missing. Surely, its impact is an irreplaceable miss in the race to enhanced productivity, market capitalisation, investment attraction, wealth and employment creation, economic competitiveness and better livelihood for citizens. Indeed, this is the race that Ethiopia could not afford to lose.

Therefore, if the ruling EPRDFites are true to their words of realising modern market chains, then, they ought to rethink their policy towards market centres. They ought to avoid their reluctance to the importance of the long overdue suggestions made by various parties, including international financial institutions, on establishing modern market centres.

It is only, then, that effective price discovery and market regulation could be undertaken. There, after all, could not be a market economy without modern market centres, at least not in this era of globalisation of value chains. Now is, therefore, the right time to end the era of reluctance in this regard.


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