A University of Wisconsin sophomore recounts her experience being detained and deported from her host country of Ethiopia.
By Rory Linnane | The Daily Cardinal
MADISON, WISCONSIN — A strong hand planted stiffly on my shoulder and sent shivers through my body, freezing every muscle as I stood on my host family’s front lawn in Ethiopia. I slowly turned as my eyes traveled up a large arm and over to the other arm, which was grasping an AK-47. I looked up at his face as he glanced back at two other armed men and his lips parted into a grin.
At this point I was halfway through a two-month summer trip to teach English in Haramaya, Ethiopia, through Learning Enterprises, a nonprofit student-run organization. Fourteen volunteers and a student program coordinator were staying with host families in eastern Ethiopia.
Capture
I was on my way to school with two other volunteers July 9 when I was stopped by the three armed men on my lawn. We later learned they worked for the Ethiopian National Intelligence Agency.
“You need to come with me to the police station for questioning, all of you,” the man who stopped me said.
“Why?” I demanded.
No response. Oh, right, I thought, authorities in Ethiopia don’t respond to that question. I learned it was dangerous to question their government. Any time I tried to discuss politics in a public place I was quickly hushed. As an American citizen on Ethiopian soil, I had no more rights than the Ethiopian people. A couple minutes after my foolish “why” question, we were flailing and yelling for help while the men shoved us into the back of a car.
Not knowing who was taking me or where I was going, the tears came abruptly like a kid in a grocery store who suddenly looks up to find she has lost her mother. My remaining dignity left with the breath stuttering out through my quivering mouth. I cried tears heavy with the universal fear felt by humans deprived of basic human rights. At that moment I felt perhaps the greatest connection with the Ethiopian people as I was forced to face what they struggle against every day.
In the next town over, we pulled into the police station where more volunteers from our program were waiting. We sat in the police office where we were watched fidgeting for hours before they told us that we were missing “a document” required for teaching in Ethiopia—a document to be discussed with officials in the capital 10 hours west, Addis Ababa. Commanded to pack all of our things for the trip to Addis, we concluded we probably wouldn’t be coming back to the town we had grown to call home.
Back at my host family’s house, trying to keep my eyes dry enough to pack my bags, I avoided looking anyone in the eyes. My efforts became futile when I opened the front pocket of my pack and found all the gifts I had planned to give my host family.
“Why are you crying?” the men asked me, laughing from behind their AK-47s.
“This is my family,” I whispered. “You are taking me from my family.”
Giving words to my emotions solidified them into a burning anger that replaced my fear and sadness. I thought of my students who waited hours on end for the chance to get into 50 minutes of class, before going home to help their family scrape up a living. They were certainly waiting at school for us now. And here was their government, ignorant and self-important, carting away free teachers and guarding us with 10 armed men in case we tried anything.
Detention
We drove all day toward Addis Ababa. In the morning we began requests for lunch that went unsatisfied, and in the afternoon we tried for dinner. Finally they gave in and we pulled over to a roadside shop. An official went to the shop and came back with a small pack of crackers for us all to split.
We kept driving into the night until we stopped at a hotel, still hours out of Addis. We were in a malaria zone. We asked to get our bug nets but were denied access to our bags. You’re not supposed to take malaria medication on an empty stomach, but I was getting bitten. I took my pill and just minutes later was keeling over. I spent the night without sleep, weak and dehydrated in the sticky lowland heat, dry-heaving over a hole in the ground overflowing with sewage, guarded by armed men with unknown objectives. The next morning we made it to the capital.
In Addis they took us straight to immigration. Again we were kept hungry, though this time we were advised to enjoy the “mental food” offered by the view from our holding room. Despite our waning energy, we kept our spirits up with songs, games and stories. Immigration officials interviewed us each individually. The officials gave each of us a different reason about what we were doing wrong in the country. My favorite was that we were “overknowledging” our students by challenging them in the classroom.
While we waited as a group during the interviews, we decided that no matter what happened, our primary goals were to stick together and to contact the U.S. embassy. We wrote the embassy’s number on skin covered by clothes and on small pieces of paper that we hoped we would be able to pass off to someone.
By the last few interviews, the officials became consistent in telling us that we had the wrong type of visa. Although airport staff told us to get tourist visas, these officials thought we needed business visas. That night they told us we had to leave the country the following day. If we had the cash on us to change our flights, we could do so; otherwise it was Ethiopian jail until our original flights left, which was a month later for me. We did not believe we had enough cash for all of us, but our goal to stick together remained intact.
Rescue
We spent that night under tight guard at a government hotel where we were still unable to contact the embassy, and the next day they drove us to the airport where we were held in a back room. After waiting all day, later that evening my blank stare at the wall was interrupted when a team of men entered the room and stated, “We are from the U.S. embassy. We are here to help you.” I bolted from my chair and smothered them in hugs and tears. The next hour was a flurry of phone calls home, information release forms and random expressions of glee.
A few hours later we were all on flights home, lessons learned. When traveling abroad it is important to be knowledgeable about the country and its government. While we were never given an official reason for our deportation, many of us believe it had to do with the ethnicity of the students we were teaching: Oromo.
Every Oromo person I talked to felt that the government actively oppresses the Oromo ethnic group as a means of maintaining power. The ruling party of Ethiopia, the Ethiopian People’s Revolutionary Democratic Front Tigrean People Liberation Front ({www:Woyanne}), has proven it will go to great lengths to protect its power. After the 2005 national elections threatened the party’s majority in parliament, Ethiopians accused the party of intimidation at the polls and forging ballots. Hundreds were injured, killed or arrested.
In a country with such a paranoid and forceful government, we could have foreseen some trouble with serving the Oromo people without any sort of clearance from higher up. We also should have gone to the U.S. embassy as a group for information about risks and instruction on safety.
When you go to another country, you don’t take your rights with you. As romantic and adventurous as it sounds to spontaneously pack up and travel the globe, when you don’t do your homework, reality can be harsh.
Sen. Edward M. Kennedy, D-Mass., 77, died from a brain tumor on Tuesday night. The brother of President John F. Kennedy, he was elected to the Senate in 1962.
WASHINGTON (AP) — In the quiet of a Capitol elevator, one of Edward M. Kennedy’s fellow lawmakers asked whether he had plans for a family Thanksgiving away from the nation’s capital. No, the Massachusetts senator said with a shake of his head, and mentioned something about visiting his brothers’ gravesites at Arlington National Cemetery.
In his half-century in the public glare, Kennedy was, above all, heir to a legacy — as well as a hero to liberals, a foil to conservatives, a legislator with few peers.
Alone of the Kennedy men of his generation, he lived to comb gray hair, as the Irish poet had it. It was a blessing and a curse, as he surely knew, and assured that his defeats and human foibles as well as many triumphs played out in public at greater length than his brothers ever experienced.
He was the only Kennedy brother to run for the White House and lose. His brother John was president when he was assassinated in 1963 a few days before Thanksgiving; Robert fell to a gunman in mid-campaign five years later. An older brother, Joseph Jr., was killed piloting a plane in World War II.
Runner-up in a two-man race for the Democratic nomination in 1980, this Kennedy closed out his failed candidacy with a speech that brought tears to the eyes of many in a packed Madison Square Garden.
“For me, a few hours ago, this campaign came to an end,” he said. “For all those whose cares have been our concern, the work goes on, the cause endures, the hope still lives and the dream shall never die.”
He was 48, older than any of his brothers at the time of their deaths. He lived nearly three more decades, before succumbing to a brain tumor late Tuesday at age 77.
___
That convention speech was a political summons, for sure. But to what?
Kennedy made plans to run for president again in 1984 before deciding against it. By 1988, his moment had passed and he knew it.
He turned his public energies toward his congressional career, now judged one of the most accomplished in the history of the Senate.
“I’m a Senate man and a leader of the institution,” he said more than a year ago in an Associated Press interview. He left his imprint on every major piece of social legislation to pass Congress over a span of decades. Health care, immigration, civil rights, education and more. Republicans and Democrats alike lamented his absence as they struggled inconclusively in recent months with President Barack Obama’s health care legislation.
He was in the front ranks of Democrats in 1987 who torpedoed one of President Ronald Reagan’s Supreme Court nominees. “Robert Bork’s America is a land in which women would be forced into back-alley abortions, blacks would sit at segregated lunch counters, rogue police could break down citizens’ doors in midnight raids, children could not be taught about evolution,” he said at the time.
It was a single sentence that catalogued many of the issues he — and Democrats — devoted their careers to over the second half of the 20th century.
A postscript: More than a decade later, President Clinton nominated a former Kennedy aide, Stephen Breyer, to the high court. He was confirmed easily.
___
There were humiliations along the way, drinking and womanizing, coupled with the triumphs that the Kennedy image-makers were always polishing. After the 1980 presidential campaign, Camelot took another hit when he divorced. He later remarried, happily.
In later years came grumbling from fellow Democrats that his political touch had failed him, and that he was too eager to strike a deal with President George W. Bush on education and Medicare.
“I believe a president can make a difference,” he said over and over in that campaign of 1980, at a time the country was suffering from crushing combination of high interest rates, inflation and unemployment.
But it wasn’t necessary to be a president to make a difference, or to try.
He once startled a Republican senator’s aide, tracking her down by phone in Poland, part of an attempt to complete a bipartisan compromise.
For years, he left the Capitol once a week to read to a student at a nearby public school as part of a literacy program.
When a longtime Senate reporter fell terminally ill, Kennedy dispatched one of his watercolors to her room in a nursing home, and cheered her with chatty phone calls.
___
Kennedy took up painting in earnest after a plane crash that broke his back in the mid-1960s and led to a lengthy convalescence. Much of his work hangs in his Senate office, several seascapes or images of sailboats of the type he piloted in the waters off Cape Cod.
The walls of other rooms are filled with political and personal memorabilia, family photographs or letters or some combination of the two that hint at the passage of time and power.
In one room hangs a photo showing Kennedy and his siblings and parents in a family portrait taken in the 1930s, at a time their father, Joseph P. Kennedy, was U.S. ambassador to England.
In another hangs a plaque from the USS John F. Kennedy, the Navy vessel commissioned in 1968 and named for the slain president.
In another, the letter he wrote his mother, Rose, teasingly accusing her of having covered up a deficiency in math. No, she wrote back firmly in pencil, she always got an A.
Elsewhere, this:
“To Dad. Thank you for helping me get ahold of that first rung,” wrote his son, Patrick, after winning a seat in the Rhode Island Legislature in 1990. The parent had dispatched aides to Providence to help assure victory for the child, now an eighth-term member of Congress.
___
There were other, far more public ways that Kennedy became the family standard bearer.
Robert Kennedy had spoken of the assassinated president at the 1964 Democratic National Convention. Four years later, he, too, was dead, and this time the last surviving brother delivered the eulogy.
“My brother need not be idealized or enlarged in death beyond what he was in life,” his voice trembled at St. Patrick’s Cathedral in New York. “He should be remembered simply as a good and decent man who saw wrong and tried to right it, saw suffering and tried to heal it, saw war and tried to stop it.”
A generation later, John Kennedy Jr., who had been a toddler when his father was in the White House, died in a small plane crash off Martha’s Vineyard. This eulogy invoked the words of William Butler Yeats, the poet: “We dared to think, in that other Irish phrase, that this John Kennedy would live to comb gray hair. But like his father, he had every gift but the gift of years.”
___
“Thank you my friend for your many courtesies. If the world only knew,” reads a letter hanging on one wall of the office. It came from Sen. Trent Lott of Mississippi, once the Senate’s top Republican.
As the most prominent liberal of his day, Kennedy was long an easy and popular target for Republicans. The automobile accident that resulted in the death of a young Pennsylvania woman, Mary Jo Kopechne, drew snickers both before and after it shadowed his presidential campaign in 1980. Kennedy was driving the car in the accident at Chappaquiddick.
It is a cliche, yet true, that if his name was invaluable in Democratic fundraising, conservatives long ago discovered they could generate cash simply by telling donors they were doing battle with Kennedy.
Kennedy understood that, and knew how to turn it to his own advantage.
When a Moral Majority fundraising appeal somehow arrived at his office one day in the early 1980s, word leaked to the public, and the conservative group issued an invitation for him to come to Liberty Baptist College if he was ever in the neighborhood.
Pleased to accept, was the word from Kennedy.
“So I told Jerry (Falwell) and he almost turned white as a sheet,” said Cal Thomas, then an aide to the conservative leader.
Dinner at the Falwell home was described as friendly.
Dessert was a political sermon on tolerance, delivered by the liberal from Massachusetts.
“I believe there surely is such a thing as truth, but who among us can claim a monopoly?” Kennedy said from the podium that night. “There are those who do, and their own words testify to their intolerance.”
___
More than a quarter-century later, he was still eager to make a difference. At a critical point in the 2008 presidential race, he endorsed Barack Obama over Hillary Rodham Clinton for the Democratic nomination, then embarked on an ambitious schedule of campaign appearances.
He cast his endorsement in terms that linked Obama to the Kennedys.
“There was another time, when another young candidate was running for president and challenging America to cross a new frontier,” he said.
“He faced criticism from the preceding Democratic president, who was widely respected in the party,” Kennedy said.
“And John Kennedy replied: ‘The world is changing. The old ways will not do. … It is time for a new generation of leadership.'”
___
That endorsement came a few months before the seizure that signaled the presence of a deadly brain tumor. There were memorable public moments ahead, a surprise visit to the Senate to cast the decisive vote on a Medicare bill and, before that, a turn at the podium at the Democratic National Convention in Denver.
“As I look ahead, I am strengthened by family and friendship,” he said there last summer. “So many of you have been with me in the happiest days and the hardest days. Together we have known success and seen setbacks, victory and defeat.
“But we have never lost our belief that we are all called to a better country and a newer world,” he said. “And I pledge to you, I pledge to you that I will be there next January on the floor of the United States Senate when we begin the great test.”
His time in the Senate was growing short, though. He smiled broadly as he took his seat outdoors at Obama’s inauguration on Jan. 20, then suffered a seizure a few hours later at a luncheon inside the capitol.
“He was there when the Voting Rights Act passed” in the mid-1960s, the nation’s first black president said moments later in his remarks. “And so I would be lying to you if I did not say that right now a part of me is with him. And I think that’s true for all of us.”
___
Generations of aides recall Kennedy telling them the biggest mistake of his career was turning down a deal that President Richard M. Nixon offered for universal health care. It seemed not generous enough at the time. Having missed the opportunity then, Kennedy spent the rest of his career hoping for an elusive second chance.
Now, some Democrats wonder privately if the party can learn from that lesson, and take what is achievable rather than risk everything by reaching for what it uncertain. Republicans and Democrats alike say Kennedy’s absence has affected the debate on Obama’s signature issue, with unknown consequences.
It was the issue that motivated him even after he was no longer able to travel to the Capitol to cast a vote. He called it “the cause of my life.”
And in July, in a reflection on his own mortality, he worried that his precarious health might mean Massachusetts would have only one senator for a brief while, and Democrats would be handicapped as they tried to pass health care legislation.
After 47 years in the Senate — in a seat held by his brother before him — Kennedy urged a change in state law so the governor could appoint a temporary replacement “should a vacancy occur.”
Republicans join Democrats in mourning Kennedy
BOSTON – Sen. Edward M. Kennedy was a Democrat’s Democrat, so much so that he became a rallying point for those in his party and an object of derision for Republican opponents.
Yet his affability and capability to span the partisan divide on an array of legislative matters prompted an outpouring of condolences from those in the GOP as well as the Democratic Party following his death Tuesday at age 77 from brain cancer.
President Barack Obama led the Democrats, saying in a statement: “For five decades, virtually every major piece of legislation to advance the civil rights, health and economic well-being of the American people bore his name and resulted from his efforts.”
Former President George H.W. Bush spoke for his son, former President George W. Bush, in expressing sympathies from members of the Republican Party.
“While we didn’t see eye to eye on many political issues through the years, I always respected his steadfast public service,” said a statement issued by the elder Bush.
“Ted Kennedy was a seminal figure in the U.S. Senate – a leader who answered the call to duty for some 47 years, and whose death closes a remarkable chapter in that body’s history,” he said.
The widow of another Republican president, Ronald Reagan, echoed those sentiments.
“Ronnie and Ted could always find common ground, and they had great respect for one another,” Nancy Reagan said in a statement from Los Angeles. “In recent years, Ted and I found our common ground in stem cell research, and I considered him an ally and a dear friend.”
Her husband died in June 2004 of complications from Alzheimer’s disease.
For the governor of her home state, the loss was personal.
California Gov. Arnold Schwarzenegger, whose wife, Maria Shriver, was Kennedy’s niece, came to politics after careers as a bodybuilder and actor and credited Kennedy with helping him in his current role.
“I have personally benefited and grown from his experience and advice, and I know countless others have as well,” the governor said in a statement. “Teddy taught us all that public service isn’t a hobby or even an occupation, but a way of life and his legacy will live on.”
Kennedy’s death came just two weeks after that of Shriver’s mother, Eunice Kennedy Shriver, one of the senator’s siblings.
Vice President Joe Biden fought tears as he spoke about his friend and colleague of many decades in the Senate.
“I truly, truly am distressed by his passing,” Biden said. “You know, Teddy spent a lifetime working for a fair and more just America. For 36 years, I had the privilege of going to work every day and sitting next to him and being witness to history. … He restored my sense of idealism.”
Former Massachusetts Gov. Mitt Romney, a 2008 GOP presidential contender, recalled losing to Kennedy in a Senate race. Nonetheless, the two joined forces in 2006 to help pass a universal health insurance law in Massachusetts.
“He was the kind of man you could like even if he was your adversary,” Romney said.
The Senate’s top Democrat, Sen. Harry Reid, D-Nev., promised that Congress, while mourning Kennedy’s loss, would renew the push for the cause of Kennedy’s life – health care reform.
“Ted Kennedy’s dream was the one for which the founding fathers fought and for which his brothers sought to realize,” Reid said in a statement. “The liberal lion’s mighty roar may now fall silent, but his dream shall never die.”
Sen. Max Baucus, a Montana Democrat who heads the committee working on the health care bill, made a similar vow, saying, “We will continue to advance the ideals and issues that were so close to his heart and such a part of his remarkable life.”
Sen. Christopher Dodd, a Connecticut Democrat who visited Kennedy on Cape Cod this summer to discuss strategy on the health care overhaul, said he would miss his friend for the rest of his time in Congress.
“I’m not sure America has ever had a greater senator, but I know for certain that no one has had a greater friend than I and so many others did in Ted Kennedy,” Dodd said.
Former President Jimmy Carter, who beat out Kennedy for the 1980 Democratic presidential nomination, called him “an unwavering advocate for the millions of less fortunate in our country.”
Speaking during a visit to the West Bank town of Ramallah on Wednesday, Carter said Kennedy’s life was “devoted to the improvement of the status of life of those who are poor and deprived and persecuted and ignored and in need in our country.”
Kennedy’s junior colleague, Sen. John Kerry, D-Mass., lauded him for his cancer fight.
“He taught us how to fight, how to laugh, how to treat each other, and how to turn idealism into action, and in these last 14 months, he taught us much more about how to live life, sailing into the wind one last time,” Kerry said.
“No words can ever do justice to this irrepressible, larger-than-life presence who was simply the best – the best senator, the best advocate you could ever hope for, the best colleague and the best person to stand by your side in the toughest of times.”
By Eleni Zaude Gabre-Madhin
Many Ethiopians have been intrigued by the advent of the Ethiopia Commodity Exchange and many voices have been heard from around the world in our virtual cyber-community and in private communication, some encouraging, some thrilled, some questioning, some skeptical, some downright opposed. I would like to thank all of those who have taken the time to express their interest, whatever their viewpoint. Open dialogue on important ideas, in a mutually respectful manner, is vital to our ability to grow and evolve as a society and as an economy. As we proceed in our dialogue, I trust that those who organize these forums will enforce the necessary standards of courtesy worthy of our age-old civilization.
To quote Victor Hugo, “there is nothing so powerful as an idea whose time has come.” In response to the many thoughtful and sometimes provocative questions that have been raised, I would like to take this opportunity to share with you why we believe that the Ethiopia Commodity Exchange is an idea whose time has come. Here in Ethiopia, over the past two years, we have continuously held open discussions with our stakeholders, in numerous events, engaging with thousands of private market participants from farmers to traders to processors to exporters, from all sides of the market, as well as others. Given the recent interest by those in the Ethiopian Diaspora, we are happy to take the time to respond to concerns raised and to clear up the misinformation and misunderstanding that seem to currently prevail among some. We do so out of respect for our fellow Ethiopians and because we believe that all deserve to get the facts about this important initiative in our country. This is probably a good time to make the appropriate disclaimer that the views presented here are my views and, where relevant, those of the Exchange, and do not represent the government of Ethiopia, any other institution, or any political party. In this essay, I will focus on the core questions related to the need for the Exchange, its ownership and possible control by government, and whether it is a free market or a monopoly. For those who might not appreciate the technical detail provided, please skip to the end where I summarize the key points. For the rest, buckle up and enjoy the ride.
I start with addressing why ECX is needed to begin with, and why we believe it can fulfill its vision of “transforming the Ethiopian economy by becoming a global commodity market of choice.” Like most countries in early stages of development, Ethiopia depends on agriculture as the backbone of its economy. To get out of agriculture and transform into a modern industrial state, Ethiopian agriculture must become increasingly productive so that labor can shift into other sectors. Greater productivity comes through investing more capital into production, through investing in productivity-enhancing technology, such as fertilizer, seeds, better farming tools, mechanization, etc. This investment can only happen if it is profitable. Profitability depends on whether there is a market where the product can be sold reliably and efficiently. Understandably, farmers hate risk. In addition to weather and production risks due to pests, crop disease, and other vagaries of nature, farmers also face the risk that there is no buyer, that they can’t access the market or it is too costly to do so, that prices are unknown or will drop, or that they won’t get paid. These very real market risks and costs prevent them from making the investments they need to make to be more productive. So they are stuck in a vicious cycle, producing at low yields, mostly for themselves, which is why only 25% of total agricultural production reaches the market. Farmers are not the only people whose livelihood is constrained by the market. If they are unable to get the supply of raw commodity delivered to them when they need it or prices fluctuate or the quality is unreliable, industrial processors, such as flour factories or biscuit or oil manufacturers, routinely incur higher costs because they are unable to utilize their machinery at full capacity and are thus discouraged from expanding their production. Similarly, commodity exporters who have contracted with international buyers face the terrible risk of not being able to make their shipment on time if they are unable to get the supply in time or in the right quality. To avoid this risk, they often are forced to tie up their capital holding large inventories, which means they can’t readily expand their business. So there is a real market problem, and it is faced by many actors on all sides of the market. And this problem constrains our economic growth. How does ECX provide a solution? ECX is a neutral third party, providing service to the market in four major ways. First, ECX certifies the quality of the commodity to be sold and holds it in warehouse on behalf of the seller, thus guaranteeing the quality, quantity, and delivery of the commodity to the buyer of that commodity. This solves the problem faced by buyers such as exporters and processors. Second, ECX operates a payment clearing and settlement system which takes payment from the buyer and transfers it to the seller, guaranteeing that the payment will be made in the correct amount and on time. This solves the problem faced by sellers, such as farmers and traders. Third, ECX provides a trading system which enables buyers and sellers to find each other when they need to trade. This trading system is for now a physical Trading Floor where bids and offers are made in person by buyers and sellers (or their agents) but will also have an electronic trading platform which can be accessed remotely. Finally, ECX disseminates information on prices as soon as trades are made to everyone in the market so that no one is at a disadvantage because they are missing market information. This price transparency helps everyone to plan their commercial actions better and thus make better deals. Having a reliable market system helps farmers produce more, expands our industrial base, increases our exports, and enhances our food security because commodities reach the areas where they are most needed faster and at lower cost. That is why commodity exchanges are part and parcel of most advanced and more recently emerging economies around the globe, starting with the best known US commodity exchange, the Chicago Board of Trade, started in 1848 for precisely the same reasons why our farmers and others in Ethiopia and our economy as a whole would benefit from an organized market.
I would now like to address a set of related questions: Who should own the exchange? If the government of Ethiopia owns it, how can it be considered a free market? Is it a monopoly and/or an instrument of control? These are all valid questions and have been asked many times by our stakeholders here in Ethiopia. Let us start with ownership. The historical experience is that exchanges in Western countries were set up by private actors as “mutual organizations” on a non-profit basis, meaning that a group of merchants got together and set up this third party marketing system which sustained itself from fees charged to its mutual owners, or members, at zero profit. Even though the exchange itself was non-profit, the members who owned the exchange on the other hand privately benefited from the system by restricting entry into the mutual organization and charging for-profit brokerage fees to non-members to use the exchange trading system, thus becoming very profitable, large brokerage firms such as Charles Schwab, Merrill Lynch or others. Over time, this system of mutual ownership become problematic because of the inherent conflict of interest in that the owners who were also members tended to put their private interest ahead of the market’s interests. So, traditional exchanges in most of the Western countries and newly established exchanges in the emerging markets have in the last decade evolved to “demutualized” entities, meaning that the owners are separate from the trading members. In the US, this has meant that most of the exchanges have gone public, meaning that they have sold shares to many individuals, who are not members of the trade. In places like India, exchanges have been recently set up owned by a few investors, such as banks or insurance companies (half state owned and half private), again who are not trading members. However, if there are investors or shareholders, it implies that the exchanges no longer have a non-profit orientation, meaning that they charge fees intending to maximize profit, rather than at cost. In the case of Ethiopia, having reviewed these various global experiences, we chose a unique “hybrid” model. Our model adopts the demutualized entity status in keeping with global trends, but retains the traditional system of membership and the non-profit status of the exchange, in order for it to attract maximum participation and not to impose a financial burden on the market users. In effect, this is a Private-Public partnership model in that, as a non-profit, it would only make sense for the state to sponsor the investment since no private actor would be willing to invest large sums on a non-profit basis. At the same time, there is private ownership of a restricted number of permanent and freely tradable membership seats (like shares) which gives incentive to private members to profit from using the exchange system and from charging brokerage fees to non-members. This model essentially marries the social objectives of creating an organized market with private profit incentives. By law, and unlike any other publicly owned enterprise in Ethiopia, our Exchange operates on an at-cost basis and does not pay dividends to the government Treasury and may only re-invest any net earnings into its own scaling up. Initially, in fact, the Exchange is operating at a loss since it charges fees somewhat below cost, in order to encourage participation. Thus, there is no motive to retain ownership by the state and over time, as the Exchange system takes hold, the government has publicly expressed its commitment to passing ownership to private entities. This model is not entirely without precedent. In the US, Government Sponsored Enterprises (GSEs) in the financial sector, the most well known of which are Fannie Mae and Freddie Mac corporations which operate multi-trillion dollar markets for home mortgages, were set up under state ownership in 1938 and later went into private shareholding in 1968. Their recent bailout, along with other financial institutions, by the US government following the 2008 financial crisis has restored ownership back to the US government. Many stock exchanges in emerging markets, such as Dubai, Tel-Aviv, Eastern Europe, and others, are established with government ownership, usually for the same reasons as Ethiopia, that the investment costs are too high to encourage private investment and because the exchange is desired for social objectives, as a benefit to the economy. I should mention that the start-up cost of our Exchange is in the order of US$ 24 million which, because of its public ownership and non-profit nature, was able to be financed by donor partners such as the USAID, World Bank, UNDP, WFP, Canada, and others.
And now, for what really matters, what about control? To begin, it is important to understand that, although government-owned, the Exchange is not a part of government. It is not an agency or department of any particular state organ. It is established, by law, as an autonomous commercial enterprise having its own legal status. A parallel example might be Ethiopian Airlines, although the corporate governance of the Exchange is unique. Our establishing law extends the concept of demutualization further to separating ownership, membership, and management. Thus, by law, the Exchange is managed by professionals that cannot be appointed from within government or come from the trading community. The Exchange has its own salary structure and its employees are not part of the civil service. In fact, at present, the Exchange has an internationally recruited management team of 10 professionals, financed by external donors, as a management on loan program, to ensure that the Exchange is run professionally and to transfer needed skills. Again, unlike any other publicly-owned enterprise in Ethiopia, the Board of Directors is composed in almost equal part of representatives of the owner (state) and the private members of the Exchange as well as the CEO as a non-voting director. The Exchange’s CEO is appointed by and reports to this Board of Directors. Thus, without any doubt in the law or in practice, the Exchange is managed independently of any government organ and is a serviceproviding entity to the private market actors. There is no interference or intervention in any aspect of day to day ECX operations, whether it is the warehousing and quality inspection, the dissemination of price information nationally and internationally (which relies mainly on the systems that ECX itself has developed), the financial systems, or the trading sessions. One could say, and many of our private sector members have quickly realized once it was explained, that the ownership-membershipgovernance model described above essentially gives a free pass to our private members, who can gain private profit from the exchange at minimal cost, without investing in the expensive assets, and still have a big say in the management of the entity.
At the same time, like in any country, no market can exist in a vacuum outside the reach of policy or the laws of the land. Thus, our Exchange regularly consults with appropriate line Ministries on the direction of policies, regarding changes to domestic or external trade policies, tax, or macro policies. This is no different than in South Africa, the US, India or elsewhere. For example, in 2008, when domestic inflation got out of hand, the Indian government banned rice and wheat trading on the Exchange and imposed an export ban. This has nothing to do with who owns their exchanges (in fact it is a combination of public and private investors). Similarly, the US has recently initiated a crackdown on excessive speculation in the commodity markets (oil) and imprisoned or fined several market actors such as Bernie Madoff who violated laws in the financial market. In addition to the laws and policies that govern a market in any country, all exchanges also have their own internal Rules that govern how the market is organized and how the market actors must behave. The Rule books of the Chicago and New York commodity exchanges are thick volumes with thousands of pages developed over 160 years with detailed instructions on how to govern their market. We also have our Rules of the Exchange that, like in the US, Argentina, Brazil, India or elsewhere, have to be approved by our regulatory body, the newly established Commodity Exchange Authority. This Authority is a government body which has the mandate of overseeing that our Exchange itself and our Members are in compliance with our law and with the other laws of the country and with our Rules. Having been set up alongside our Exchange, the Authority has been in active partnership to build its capacity through training with the US Commodity Futures Trading Commission, on which it is modeled. In any country with a serious market, government regulators like SEC and CFTC in the US, or FMC and SEBI in India, have a significant and constant presence. So a market is not a free market because it is operates outside of laws or rules. It is in fact the presence of these laws and rules that ensures that the integrity of the free market, or the principle of market competition, is maintained. For example, one of our rules regarding our Trading Floor is that all prices must be shouted out audibly so that all market actors can hear the bid or offer. This is a rule designed to ensure that everyone has a fair chance to compete for that trade.
So what makes a free market? It is, within the confines of the existing rules and laws in place, the absence of interference by any third party in the actual buying and selling of any good. In a free market, as long as the rules are followed, any seller can sell whatever they want to any buyer at any price, any time, and in any amount, and vice versa. Let us think of a free market like driving on a highway. As long as you have a driver’s license, a registered and insured vehicle, and follow the traffic rules, you can drive in any car you want, anywhere you want, with whomever you like, for as long as you like (gas permitting, of course). The rules are there to ensure that everyone is safe on the highway. In our Exchange market, this is precisely the case today. Our 450 mostly private trading members freely trade at prices and quantities and with whom they like without any interference whatsoever.
Finally, what about a monopoly? Why force all coffee or all sesame trading into the Exchange? Why not let people choose to use the Exchange of their own free will? To extend our above analogy, we might say that this is like forcing all drivers onto a single highway. At first glance, this seems quite unpalatable and rather contrary to the notion of a free market. Here is the catch. Among the four functions of the Exchange that were listed above, its very core role is to provide a central trading system for buyers and sellers to match their trades. This trading system results in what is known as “price discovery” which is the emergence of the competitively bid market price that reflects true supply and demand of a good at a particular moment. However, to be a truly representative market price, the trading system needs a critical mass of sellers and buyers, otherwise the Exchange’s price is meaningless as an indicator of market supply and demand. In other words, if the ECX price represents only a small share of the actual market trading, then this price is not the true market price. For this reason, all of the world’s exchanges essentially force this critical mass of trading in a commodity or stock into a single trading system. That is why there are only two major stock exchanges (NASDAQ and the New York Stock Exchange) for the entire U.S. economy and most companies are only listed on one of these exchanges. Similarly, for commodities, although there are about 4 active commodity exchanges in the US, each commodity is traded exclusively on only one exchange. For example, Hard Red Spring Wheat is only traded on the Minneapolis Grain Exchange and Soft Winter Wheat is only traded on the Chicago Board of Trade, and so on. By the way, the term “monopoly” is not the correct use of the term in this case since monopoly implies a single buyer or a single seller that sets prices non-competitively and, here, we have hundreds of buyers and sellers freely trading competitively at their own prices. We would hardly say the Chicago Mercantile Exchange has a monopoly on corn trading, no more than we would consider that the CEO of Fannie Mae is part of the US government. So, more appropriately, it can be said that our exchange, like other exchanges elsewhere, is an exclusive platform for trading in particular commodity contracts. Over time, as the market volume and liquidity grow, it might be appropriate to have more than one commodity exchange and our law provides for the Ethiopian regulatory body to recognize other exchanges.
IN SUM, here are the key points. A better functioning market is good for everyone and for the economy, from farmers to domestic traders to processors to exporters and an exchange is a tried and true model to deliver a better market. Though state owned, ECX is an autonomous (non-government) commercial entity set up on a non-profit basis, with private ownership of membership seats, which thus represents a Private-Public partnership model in which private seat owners are able to gain profit from using the exchange system at minimal cost. Our corporate governance structure ensures that ECX is managed independently and professionally with a Board of Directors representing nearly equally both the owner and the private trading members and a separation by law of management from ownership and membership. At the same time, the Exchange operates within the policies and laws of the country, like any exchange in the world. Within these rules and policies, there is no interference by the state in the operational management of the exchange or in the day to day trading by market actors. Finally, ECX cannot be considered a monopoly in the correct sense of the word but rather an exclusive trading place for specific commodities, in order to have a critical mass of buyers and sellers, in keeping with the way exchanges are set up around the globe.
In subsequent essays over the coming days, I will address the human side of ECX, the lives that have been touched and who is really benefitting, particularly among small farmers, and the very important issue of coffee trading and the concern on specialty coffee, as well as our first year performance and the exciting plans ahead as we embark on our second year. Some of these themes are also addressed on our website, www.ecx.com.et, where you can also find our establishing law. Some have questioned why invest the time to engage in this dialogue. It is because we believe that a national institution such as ours must be accountable and transparent to all Ethiopians, wherever they are. Public education is part of our job. We also believe that, through bringing knowledge or investment, anyone can meaningfully engage with ECX. After all, it is your Exchange too.
(Dr Eleni Zaude Gabre-Madhin is Chief Executive Officer of the Ethiopia Commodity Exchange)
