As Ethiopians around the world gathered over the weekend to remember those who were gunned down by Meles Zenawi’s death squads following the May 2005 election, Judge Frehiwot Samuel, Dr Berhanu Nega and others have asked how long are we going to allow ourselves to be victims? When are we going to start holding the perpetrators of gross injustice in our country accountable?

Ethiopians are facing an enemy that is armed and financed to its teeth by the US, EU, and their financial arms, the World Bank, IMF, DFID, and USAID to the tune of $3 billion per year. Ironically, the same amount of money is flowing into Woyanne coffers from Ethiopians in the Diaspora [read here]. It is therefore pertinent to ask why are we complaining about the money flowing from the World Bank and others to Woyanne while we Ethiopians are doing the same thing? We all know that Meles and gang (Woyanne) cannot survive one month in power without the foreign aid and Diaspora remittance. The hard currency from these sources are Woyanne’s life blood.

This question was one of main themes of this month’s 5th anniversary of the Ethiopian election massacre remembrance events around the world.

Ethiopian Review, in collaboration with other Ethiopian media, will delve into this issue deeper and challenge Ethiopians in the Diaspora to come up with an answer. To start with, please read the following summary of a study paper presented by a civic action study group that was formed recently to come up with recommendations [an Amharic version will be made available shortly]:

Ethiopia’s Diaspora and the Moral Hazards of Remittances

Drying up fuel that is feeding the Meles dictatorship

Presented by Ethiopian Civic Action Study Group

For the past 20 years, the Ethiopian people have suffered from repressive political governance and an exploitative economic system that have offered immense wealth and assets to members of the ruling party, Tigray People’s Liberation Front (TPLF), its core membership, its puppets, allies and endowments. Remittances have become a major source of foreign exchange and firms and individuals involved in its transactions continue to benefit.

The first big wave of the Ethiopian Diaspora that established permanence abroad begun because of repression, factional onslaughts, civil wars and unbearable conditions in the country. This wave consisted mostly of professionals, civil servants, military leaders and personnel, students and political opponents to the Socialist Dictatorship. It was the beginning of what one would call the de-institutionalization of the country and the erosion of its social capital. This phenomenon of the emergence of Ethiopia’s Diaspora continued with a second wave in 1991 when TPLF took power.

The single most important variable that drove the next wave of Ethiopia’s social capital, especially those with tertiary and advanced education: professionals, technical personnel, military officers and leaders, business women and men was ethnic-federalism and ethnic division. The TPLF virtually made it impossible for national and democratic leaning persons to work and live in the country. In other words, both the first and second waves of immigrants were caused primarily by political conditions in the home country. Immigration in search of economic and social opportunities is a recent phenomenon for Ethiopians. The second wave was supported by relaxations in entry requirements among favored countries such as the United States and member countries of the European Union, Canada, New Zealand and Australia among others. The United States begun to issue Diversity visas that attracts a steady stream of Ethiopian individuals and families. Further, Ethiopians found other homes in developing countries in Africa and the Middle East. Today, Ethiopians live and work not only in Western countries but also in Kenya, Ghana, Uganda, South Africa, Lebanon, Egypt, Saudi Arabia, Yemen, United Arab Emirates and others.

It is reasonable to estimate that at the end of 2010, the number in the Diaspora to exceeds 1.5 million. This estimate includes individuals who are undocumented. For the purpose of gauging remittances, one can assume the single most important driver, namely the outflow and descendants of Ethiopian immigrants to be substantial and increasing at a steady pace.

One of the most interesting features of the Ethiopian Diaspora—a feature also shared by other African immigrants–is that 84 percent possess at least a high school education and 29.5 percent have college degrees. Before 1974, there was only one known Ethiopian physician living and working overseas. The World Bank’s Migration and Remittances Fact Book shows that at least 29.7 percent of Ethiopian trained physicians have left the country since 1991 and continue to leave each year. The proportion of nurses and other professionals who leave the country is at least the same or higher. Where ever they live and work, Ethiopians have proven to be a model immigrant community in almost all sectors of economic, spiritual and cultural life across the globe. These attributes mean that employability is better and incomes more secure than for others. There is resiliency in remittances. However, self-sufficiency and self reliance and creating communities and institutions abroad come at a huge cost for the country in the form of massive brain-drain. No matter how one may try to put a positive spin on the subject, no amount of remittances could possibly compensate for this massive brain-drain on the country’s capacity and development. All experts in development not with dismay that Ethiopia’s well trained, educated and experienced human capital resides overseas and this affects the country’s rapid, inclusive and sustainable growth and development.

How are remittances deployed by recipients?

One is obliged to accept the notion that individuals have moral obligation and the right to remit monies in support of families, relatives, friends and organizations committed to social and economic causes. Ideally, remittances could meet an investment gap in importing goods and services not available domestically and therefore enhance domestic productivity and services. There is another compelling point augmenting these pro-remittance views. It strengthens freedoms and enables access to opportunities for recipients. Given wide spread repression and human rights violations in Ethiopia, freedoms and access to economic and social opportunities are heavily curtailed. The survey based data findings in Ethiopia counter the widely held view that remittances would have impact on society by reducing poverty levels. It is this view that compels development groups to support immigration and remittances. They suggest that remittances fill an important investment gap by mobilizing foreign exchange from the Diaspora and channeling them into productive activities. In some countries such as China, Ghana and India, remittances play developmental roles. Evidence shows that these countries have lifted millions out of poverty. Remittances support good economic policies and management. Foreign exchange from remittances and or local currency equivalents are invested heavily and consistently into productive enterprises such as commercial farms, manufacturing and social infrastructure such as school, clinics, hospitals and roads and services. In the case of Ethiopia, there is no substantial evidence that shows relationships between remittances and investments in socially meaningful activities and productive enterprises that reduce poverty, increase incomes and substantially boost sustainable growth and development and generate significant employment opportunities.

What then are the issues?

Those who are skeptical about the prudent developmental and poverty reducing impacts of remittances in Ethiopia accept the principle that members of the Diaspora have moral obligation and responsibility to help family, relatives, friends and organizations by remitting monies. There is no indication or argument that anyone should be asked not to remit. The issue is how remittances can and should be transmitted. The how is buffeted by a number of substantive points. First, the foreign exchange remitted fortifies single party dictatorship. The leadership uses foreign exchange to purchase weapons and other tools of control. Second, given wide-spread corruption in the country, foreign exchange is routinely and illicitly taken out of the country for private use. This deprives communities and the country from using foreign exchange for development and reduction of poverty. Third, there is ample evidence to show that remittances, foreign aid and FDI induce unacceptable level of inequality. Fourth, the ruling party channels foreign exchange to party owned and endowed enterprises. The national prominence of enterprises such as EFFORT, which manages numerous firms under it, is a consequence of its favored status. Easier access of foreign exchange is a manifestation of such privileged status.

It is these arguments that suggest redirecting as much of the remittances as possible through informal channels with a view of depriving the ruling party free and unbridled access to the Diaspora’s hard earned foreign exchange. In this regard, it is reasonable to ask what difference rechanneling or redirecting would bring when the government has accesses to foreign aid, FDI and remittances from those who support the ruling party. Here, the amounts of remittances sent through formal and informal channels might tell the story of why redirecting, as part of an overall sustained approach, might have some effect in changing government policy. Let us first explore volume.

Official remittances inflows provided to the World Bank by Ethiopian officials show a steady rise in remittances from 2003 to present, with a sharp drop from a peak of US$386.7 in 2008 to US$301.1, a decline of US$85.6 million. For a country like Ethiopia, this is a substantial loss, largely driven by the financial and economic crises in developed countries. Given the contradictory figures from various sources and the low level figures from the National Bank, it is highly probable that official remittances are underestimated by hundreds of millions each year. In contrast to official remittances inflow reported by the World Bank, whose source is the National Bank of Ethiopia, other sources report higher figures. It may be reasonable to hypothesize that drop in remittances would require additional foreign aid, while rise in remittances would not necessarily result in reducing aid dependency. It is clear from this concern of possible decline and from the government’s continued courting of the Diaspora that remittances played a huge role in supporting the government’s needs for predictable foreign exchange resources. The figure of official remittance of US$1.2 billion in 2008 is the most credible that one can and should assume. In the event, the combined informal or unofficial of a low of two times the official amount would mean close to US$3.6 billion. In light of the financial and economic crisis, this figure may still be too high. However, it is reasonable to assume that informal or non-official remittances are at least twice official remittances. With the above conservative assumption, the total amount of remittances of US$3.6 billion per year since 2008 is reasonable. This is a huge amount and exceeds net foreign aid and export earnings. In light of these estimations and various reports from independent experts as well as conversations with numerous Ethiopians over the past few years, figures provided to the World Bank are said to be very low and not realistic. When one combines remittances sent via official and informal channels, the amounts are substantial enough that the country should be doing better if these resources were used for the sole purpose of boosting productivity, stimulating the private sector and generating income earning opportunities for recipients and others.

The Ethiopian Diaspora has effectively replaced foreign aid as the single most important sources of foreign exchange and investments funds for the Ethiopian government. The sharp decline in inflows that begun in the second quarter of 2008 and continued in the second quarter of 2009 , may be an ominous sign. However, it does not tell us the whole story. Informal remittance amounts may be more resilient than amounts sent through normal channels. In the event, asking the Diaspora to channel its monies through informal or non-official channels is a sellable proposition. Like other immigrants, Ethiopians have a tendency to save more and send more to families, friends and other recipients when times are tough back home. Nevertheless, one would be hard pressed to dismiss the impact of the financial and economic crisis on the amount of remittances to Ethiopia through both official and informal channels.

In summary, it is against the backdrop of endemic poverty, hunger, aid dependency, illicit outflow of funds, massive migration and repressive governance that one must gauge and assess the role and impacts of remittances on Ethiopian society and explore the options available to the Diaspora in leveraging this substantial capital resources in pursuit and support of equitable, inclusive, rapid and sustainable growth and development. The vast majority of one and half million Ethiopians scattered around the globe make every effort to assist close family, relatives, friends and those in need in one form or another. Some invest in corporations and non-governmental organizations committed to the reduction of poverty, especially in the social sectors. In general, members of the Diaspora try to make sure that they share whatever they can afford with the people they left behind. They send huge amounts of remittances through official and non-official channels. While their intent is genuine assistance to families, relatives, friends, those in dire need and various organizations, the Ethiopian government considers this large and relatively well to do Diaspora as an important source of scarce foreign exchange. The ruling-party, on its part, has not lived up to the expectations of the Ethiopian people. Corruption, rent-seeking activities, embezzlements, diversion of financial resources, illicit outflows of funds, endemic poverty, hunger, high inflation, unemployment and hopelessness continue to persist. Billions of dollars in foreign aid have yet to free Ethiopian society from depths of poverty and heavy dependency. The Prime Minister himself acknowledged that “rent-seeking behavior” is no longer acceptable. Yet, it is government policy that has allowed this condition to envelope the entire society with no end in sight. The country is more dependent than at any time in its long history. NGOS are wide-spread with little impact in alleviating poverty.

Approaching the issue with wisdom

Remittances perform humanitarian, social and economic functions. This notion should not be in dispute at all. Hating the ruling party is one thing; but punishing the Ethiopian people is another matter. One needs to make a clear and careful distinction between the two. In an ideal situation of which the Ethiopian case is not a part, Ethiopia’s Diaspora could have played a critical role in the development process, not so much because it has money, but that it has a stock of knowledge and skills that are transferable. However, at the moment, the political environment does not allow most members of the Diaspora to use their intellectual and other social capital in the advancement of their country. So, remittances to family, relatives and friends are morally and socially defensible. Remittances save lives. Remittances supplement incomes and meet day-to-day necessities. It will be political suicide for the Diaspora to ask anyone not to remit monies in support of families, relatives, friends and organizations that support noble causes in the country. Redirecting remittances through non-official and non-formal channels might be defensible as long as the remitters and the recipients are not affected adversely.

If remittances are not sent through non-formal and non-official channels, monies will be used to bolster the ruling party and its allies. If one agrees that the ruling party is repressive, oppressive, uncaring, cruel, discriminatory, corrupt, nepotistic, unchanging and un-representative, then, transfer of remittances through official channels does not make social, economic or political sense. Remittances provide the ruling party with one of the most vital tools in enhancing its arsenal of repression and in diverting foreign exchange illicitly. The same is true of foreign aid and FDI. It is for these reasons that other instruments of informal voluntary transfer must be explored carefully and imaginatively. The ruling party must not benefit from the Diaspora’s moral obligation to help family, relatives and friends or other worthwhile causes. It is possible to do both: deny the ruling party foreign exchange while meeting the social and moral obligation to help. The challenge for those who oppose the ruling party’s malpractices in governance is to deny it the requisite tools as much and as far as possible without harming those who deserve support. In any case, for redirecting of remittances to make any sense, it must be part of a sustained strategy and not a solitary one.