By Chris Turner, The IAAF

Kenenisa Bekele from Ethiopia speeds to win the
5000 meters competition during the IAAF “Weltklasse
Zurich” Golden League meeting at the Letzigrund
stadium in Zurich, Switzerland on Friday, Aug. 29.
[AP Photo/Daniel Maurer]

Zürich, Switzerland – Ethiopia’s World 5000m and 10,000m Olympic champion and World record holder made a demonstration out of Friday’s 5000m at the Weltklasse Zürich, ÅF Golden League meeting, in front of a capacity 26,000 strong Letzigrund stadium crowd.

Eight Kenyans (not counting the two pace makers), two Ugandans, and one Qatari, the vast majority of whom had not even raced in Beijing, had no answer to the relatively fatigued limbs of Kenenisa Bekele.

The Ethiopian maestro said before the race he was “a little tired” after his three races, two golds and two Olympic records in China. But even at 90% capacity Bekele is a match for the rest of the world. His virtually solo run this evening ended in a 12:50.18 world season lead, nine seconds ahead of his nearest rival (Moses Kipsiro of Uganda 12:59.48). Enough said!

Jelimo in on historic mark

Pamela Jelimo’s latest improvement of the senior African and World Junior 800m records, and Usain Bolt’s first outing since Beijing were the undoubted highlights of

Bolt electrifies but provides no shocks

“Lightning Bolt” electrified us again but there was to be no storming finish in Zürich. While not quite as extravagantly coasting to victory as he did in the Beijing 100m final, Jamaica’s Usain Bolt was smoothness personified as he made up for an appalling start. His 0.193 reaction time to the gun was the slowest of the entire nine man line-up, but he effortlessly cut through the field from about 30 metres out to take a comfortable victory in 9.83 sec (-0.5m/s wind).

Has anyone run such a time in cruise control, without hitting top gear? Bolt brilliance again and we were served up the now customary “Lightning Bolt” posing after the race which sent the crowd wild.

In second, USA’s Walter Dix, the double Olympic bronze medallist, produced 9.99, with Olympic silver medallist Richard Thompson third in 10.09.

“It was good, nice track, great crowd,” said Bolt who spoke with a noticeable cold. “My start was not too good. I concentrated on winning, and as I’m starting to get a cold I was not able to think about any faster time. My coach told me that I should make sure to end the season healthy.”

Jelimo and Vlasic remain in the $1 Million hunt

With only one more meeting to go, Pamel Jelimo and Blanka Vlasic successfully completed the fifth of six stages in their quest to at least share the ÅF Golden League $1 Million Jackpot by the conclusion of the series in Brussels next Friday (5 Sep).

Jelimo improves Area senior and World Junior record again!

There is no stopping the 18-year-old Pamel Jelimo. The Kenyan Olympic 800m champion improved the Area senior and World Junior records jointly for the fourth time this season (the junior mark for a fifth) with a 1:54.01 run. This puts the phenomenal teenager who has only been racing 800m for the first time this season into third place on the all-time list, with just World record holder Jarmila Kartochvilova (TCH 1:53.28 – 1983) and Nadezhda Olizarenko (URS 1:53.43 – 1980) ahead.

The race was taken through 400m by Svetlana Klyuka in 55.66sec. The Russian who was fourth in Beijing had been specially contracted to pace the race given there are few athletes who have the strength to set the necessary tempo for Jelimo. Klyuka continued down the back straight for quite a way before stepping aside for the Olympic champion, who is learning race by race a more balanced approach to two lap running. What will another winter’s training and a year’s more competitive experience bring the world we can only guess, and there are still at least two more opportunities for Jelimo to stun us in 2008.

Bahrain’s World 1500m champion Maryam Jamal, a heavily legged fifth at her specialist distance in Beijing, showed a lot more spark in the Kenyan’s wake tonight, setting a national record of 1:57.80. 1:58.66 back in May was Jamal’s previous national best.

Well beaten in third was World 800m champion Janeth Jepkosgei in 1:58.26. What a difference a year makes. A year ago, Jepkosgei was the season’s great find and won here in 1:59.03, with the Kenyan record at the time standing to her at 1:56.04. There is no argument that we have witnessed a seismic change in women’s 800m running in 2008.

“I can tell you I’m so tired,” said Jelimo. “The World record is now closer but I’m not sure I can do it this year, maybe next.”

Maria Mutola, who has taken twelve victories in Zürich, made her final farewell to the crowd in great style finishing fourth in 1:58.71, while a newcomer to the two laps, Olympic 1500m champion Nancy Lagat, was ninth in 2:05.84.

Vlasic resumes control

With Olympic champion Tia Hellebaut exceptionally heavy legged following her first time clearance 2.05m victory in Beijing – the Belgian would finish eighth here with 1.90 – it was left to World champion Blanka Vlasic to overcome a shaky moment at 1.98. With two poor attempts at that height the Croatian sailed clear on her last effort, and being the only athlete to successfully scale the next height of 2.01 (with her second jump) she confidently kept herself on path to the $1 Million Jackpot.

Russia’s Olympic bronze medallist Anna Chicherova was second at 1.98 beating USA’s Beijing sixth placer Chaunte Howard, at the same height on count back.

“Everybody was so tired,” said Vlasic. “So it was good to win and remain in the Jackpot race. I must say that the track surface was soft for me. When I pushed hard I could not find my technique.”

Thorkildsen emphasises who is boss

If breaking Jan Zelezny’s Olympic record in Beijing with a 90.72m release to become only the fourth man in history to retain an Olympic Javelin Throw title wasn’t enough, Andreas Thorkildsen of Norway hit another 90m mark in Zürich to emphasise once again who is the boss with a spear.

All but one of Thorkildsen’s series of four valid efforts – 86.29, 90.28, 88.15 and 89.05, pass, foul – would have taken the victory tonight. While Finland’s World champion Tero Pitkämäki is slowly rediscovering his top form (87.26m for second), compatriot Tero Järvenpää also threw long again (86.45), and 2004 Olympic silver medallist Vadims Vasilevskis of Latvia was also over 85 metres (85.97 – season’s best), the Norwegian was once again in a different class.

“I threw really well today,” said Thorkildsen. “I made only very small technical mistakes, otherwise I could have thrown even further.”

Wariner bounces back

Jeremy Wariner was blown away by LaShawn Merritt in Beijing who was all but a full second ahead of his season long rival. Tonight the double World champion was the one in charge, winning in 43.82 from the Olympic gold medallist who finished in 44.43. Wariner took control from the midway point and Merritt, who was running in lane 3 immediately inside him, had no response.

Wariner’s time was his season’s best. Notably only Merritt’s win in Beijing of 43.75 is faster in 2008, but that will be the one that lives in the memory such is the ultimate reality of all post Olympic comebacks even when as impressive as the one Wariner produced today.

Robles pushed all the way by Oliver

There was none of the expected dominance by Cuba’s World record holder and newly crowned Olympic champion Dayron Robles. It’s not that he ran a bad sprint hurdles race, it’s just that David Oliver, the only other man under 13secs this year, suddenly rediscovered his top form. The American had beaten Robles in their opening outing of the season in Berlin (1 June) but by the time Beijing was reached Oliver had no answer to the fluency of the Cuban. Tonight Oliver was back to very near his best clocking 12.98 in lane 4 with such a drive that Robles, outside him in 5, only just held him off, winning in 12.97.

Jones back to winning ways

Lolo Jones made no hurdle error in Zürich, as had cost her the Olympic title last week. The experience which will probably haunt the World Indoor 60m Hurdles champion for the rest of her career, was put to the very back of her mind tonight. The American won the 100m Hurdles in a tight finish (12.56; -0.2m/s) from Spain’s Josephine Onyia (12.62), with Australia’s Olympic silver medallist Sally McLellan in third (12.63).

USA’s surprise Olympic winner Dawn Harper was back in sixth in 12.73. But like the few other defeated Beijing winners tonight, I doubt the 24-year-old who won in China in a PB of 12.54 will lose much sleep, as unlike Jones and the other successful avengers she no longer needs to dream about owning an Olympic gold medal.

Taylor holds off Clement

Angelo Taylor, was well aware that the 2007 and 2005 World champions, respectively Kerron Clement and Bershawn Jackson, who had finished behind him in the 400m Hurdles in Beijing in that order, were intent on gaining revenge here.

Taylor, who also won the Olympic laurels in 2000, was not about to give them that satisfaction. Taylor bravely took on the field from the gun, blasting the first 200m, and still had a sizeable advantage on Clement entering the final straight. Clement was closing fast but just as we thought the Olympic champion had shot his bolt, he dug deep and in the run off the final hurdle to the line had enough strength to prevail – 48.07 to 48.20.

Also challenging hard down the home straight was Jamaican Danny McFarlane who closed out just behind these two protagonists in 48.40. Jackson was never in the race finishing in seventh in 49.19.

Isinbayeva takes straightforward victoryWhy ever doubt Yelena Isinbayeva in the women’s Pole Vault? In trouble at 4.75m, her doubts if she ever experienced any, which is unlikely, were soon dispelled at her next height. Game over and no surprise!

The Russian, who has taken everything that there is to be won during the last Olympiad and set her 24th World record in Beijing while defending her Olympic title, celebrated with a first time clearance at 4.88.

In second position after a third time success at 4.75 behind American Area record holder Jenn Stuczynski, who had taken that bar in her second attempt, the peerless Isinbayeva flew well clear over 4.88, while the American had three failures at 4.93 in response, after passing what was ultimately Isinbayeva’s winning height.

Isinbayeva made no attempts at any further heights, ending her day with the straightforward victory, still fatigued after Beijing.

Season’s best for Richards, redemption also for Felix

Her recent extravagant racing tactics were slightly subdued tonight. After her heavily legged run into the line in China, Sanya Richards produced a more conservatively paced race even though after the first 150m she was already up on the stagger on the athlete immediately outside her in lane five. Shericka Williams of Jamaica, who had taken silver ahead of Richards’ Olympic bronze, was that athlete, and she had no answer (finished fourth in 51.28) this evening to the former Golden League Jackpot winner who came home easily in a season’s best of 49.74.

The American was most of a second ahead of her nearest opponent, Russia’s Tatyana Firova (50.70). Confidence restored for Richards? Perhaps yes but oh what might have been in Beijing!

Allyson Felix was another Olympic disappointment by her own illustrious standards. Like Richards, the double World champion at 200m made up in sorts for her silver behind Veronica Campbell-Brown in Beijing with a confident run in 22.37. Felix was probably surprised to find she was not in the lead with 90m to go, as in front coming out of the bend was Lauryn Williams. Felix took little time to settle that attack and crossed in 22.37, with Williams second in 22.68, and Marshevet Hooker completing a USA sweep in 22.74.

Koech off sub-8 form

It was a brave bid to become the first sub-8min steeplechaser of 2008 but Paul Kipsiele Koech, the world season leader with 8:00.57 couldn’t quite manage the effort needed when alone at the front with three laps to go. He crossed in 8:04.26.

Well beaten but setting the European lead for 2008 in second place was Mahledine Mekhissi-Benabbad of France in 8:08.95. There was a PB for Kenyan Michael Kipyego in third (8:09.05). Olympic bronze medallist Richard Matelong was eighth in 8:28.38.

Ramzi surprised

Running in the first track event of the main programme this evening, Rashid Ramzi, one of the large group of Beijing Olympic champions who had assembled in Zürich, was beaten in the run into the line in the men’s 1500m. The Bahraini who took the Olympic crown in style was upstaged by African champion Haron Keitany in a PB of 3:32.06 to Ramzi’s 3:32.86, which was his season’s best.

Third and fourth places were also taken by Bahrain via Belal Mansoor Ali and Yusuf Saad Kamel, respectively 3:33.06 (SB) and 3:33.11 (PB). In 8th was 2007 World 800m champion and Beijing 800m bronze medallist Alfred Kirwa Yego, who set a PB of 3:33.69.

Very heavily legged was Asbel Kiprop, the Beijing 1500m silver medallist, who was in the lead at the bell (behind the pace maker) but faded badly in the last 400m to finish 13th in 3:36.68.

Long Jump taken by Al-Saba, and relay by USA

The men’s Long Jump was won by Saudi Taher Al-Saba, who was eleventh in Beijing, with a PB equalling 8.35m. Back into some form was European champion Andrew Howe of Italy, with 8.06 for second place. The Italian who was injured earlier in the season, had been one of the major casualties of the Beijing qualification round. These two were the only athletes over 8m tonight.

The evening was closed out by the Zürich Trophy, a 4x100m relay race which went to the USA thanks to a dip finish which denied a quartet from Trinidad and Tobago – 38.01 to 38.03.

ZURICH (Reuters, Track Profile) – Ethiopia’s double Olympic champion Kenenisa Bekele improved on his gold medal performance in the 5,000 metres — setting a year’s best time of 12:50.18 — at the Weltklasse Golden League meeting in Zürich, Switzerland Friday night.

Competing just a week after completing an historic 5000/10,000m double in Beijing, Kenenisa Bekele didn’t let his tired legs keep him from dominating yet another 5000m contest. Running at the front for more than three kilometers, the unparalleled Ethiopian crushed the opposition — many of whom did not compete in Beijing — in the fastest in the world this year. Ugandan Moses Kipsiro was closest, dipping under 13 minutes in 12:59.48 to finish second.

Triple Olympic champion Usain Bolt confirmed his domination of the sprints with a comfortable 100 metres victory at the Weltklasse Golden League meeting.

The 22-year-old Jamaican, who set world records in winning the 100 metres, 200 metres and 4×100 metres relay in Beijing, finished Friday’s race in 9.83 seconds, 0.16 seconds clear of America’s double Olympic bronze medallist Walter Dix.

After taking silver behind Bolt at the Olympics, Trinidad & Tobago’s Richard Thompson had to settle for third place in Zurich, a further 10th of a second behind Dix.

“It was good, but my start was not too good,” said Bolt. “I concentrated on winning and as I’m starting to get a cold I was not able to think about any faster time.”

Fellow Olympic champion and world record holder Dayron Robles was also able to back up his stunning 110 metres hurdles performance in Beijing.

The 21-year-old Cuban ran neck and neck with Olympic bronze medal winner David Oliver before ducking his head at the line to finish in 12.97 seconds, 0.01 seconds ahead of the American.

JACKPOT CONTENDERS

Kenyan teenager Pamela Jelimo continued her fantastic season, following up her Olympic gold medal in the 800 metres by setting the year’s best time of one minute 54.01 seconds.

Jelimo, 18, kept well on track for a share of the Golden League’s $1 million jackpot awarded to athletes who win their event at all six of the season’s meetings.

“There’s still one race to go for the jackpot and the world record is closer now, too, though I’m not sure I can do it this year,” she said.

With only next Friday’s Golden League meeting in Brussels remaining, Jelimo faces competition for the main prize only from Croatian high jumper Blanka Vlasic.

After being denied the gold medal in Beijing by surprise Olympic champion Tia Hellebaut of Belgium, Vlasic struck back impressively in Zurich.

Overcoming some nervy moments to clear 1.98 metres at her third attempt, the world champion then kept her jackpot hopes alive with the only successful clearance at 2.01.

WARINER WIN

America’s Jeremy Wariner and LoLo Jones were among the other athletes fighting back from Olympic disappointment on Friday.

Wariner set his best time of the year to win the 400 metres in 43.82 seconds, 0.61 seconds ahead of compatriot and Olympic gold medallist LaShawn Merritt.

Jones, seventh in the Beijing 100 hurdles after hitting the ninth hurdle while leading, cruised to victory in 12.56 seconds.

Olympic javelin champion Andreas Thorkildsen further enhanced his reputation with a throw of 90.28 metres – only the second throw past 90 metres this year following the Norwegian’s own 90.57 in Beijing.

ANNOUNCEMENT

All who are concerned about the future of Ethiopia are invited to a symposium where civil leaders from different organizations will speak on the topic: “Where Do We Go From Here?”

Keynote Speaker: Donald Levine

Saturday, August 30, 2008
4:00 PM to 8:00 PM

Place: Unification Church, 1610 Columbia Rd NW, Washington DC

Sponsored by Obang Metho and the Committee for the Solidarity Movement for a New Ethiopia

See poster below. Click to enlarge.

EDITOR’S NOTE: Mr Ohashi, next to Woyanne, you are one of the main troublemakers in Ethiopia who are financing a brutal, repressive regime that is terrorizing Ethiopians and plundering the country. It would be a big favor to the people of Ethiopia if you and your stupid, corrupt World Bank staff just pack up and leave.

By Ken Ohashi
World Bank’s Country Director for Ethiopia and Sudan

The international community in Addis seems to have suddenly turned pessimistic about the prospects for Ethiopian economy. Inflation, which was troublingly high at 19% in January, has by June jumped to 55% (measured as the 12-month increase in the overall Consumer Price Index). Ethiopia’s foreign exchange reserves are running low, making it more difficult for domestic investors to secure foreign currencies needed to import key materials and equipment. Though much better now, load shedding had affected daily life in many areas last several months. Above all, however, the food crisis and images of children in acute malnutrition are enough to make anyone not just saddened but gloomy about the future. Was the five years of rapid economic growth all so fragile? Was it only a result of good weather and a ‘rebound’ from the 2002/03 drought?

Ken Ohashi

Not so long ago, many of the same people were optimistic that Ethiopia would sustain fast growth and quickly overcome abject poverty and recurrent famines. This optimism was shared by many Ethiopians overseas, who were busy making real estate and other investments back home. Even a feeling of a boom economy was emerging.I do not wish to minimize the terrible suffering of those in hunger, or those who struggle with rising food prices. Nevertheless, I also believe this swing in outlook is unwarranted. If the past optimism was euphoric, the current “Ethiopessimism” is equally excessive. Over the last several years, Ethiopian economy has become much stronger, but it also faces complex new challenges today. In the first of a two-part series of articles, I will focus on the developments in the recent years and argue why the past achievements are more durable than the skeptics believe. In the second article, I will discuss the emerging economic risks and possible ways to address them.

How has the economy changed?

First, physical infrastructure has improved.

• Roads: Paved Federal roads, which form the main transport arteries, have increased from 3,800 km in 2000 to nearly 5,500 km by 2007, an increase of 43%. Including the expansion of other Federal and Regional roads (to 37,000 km) and the explosion of woreda and community roads, the total road length has tripled to 100,200 km. Extension of roads means improved access to market and more economic opportunities for everyone.

• Power: Since 2000, power generation capacity has nearly doubled to 791 MW today. It will rise to 1,970 MW within the next 18 months. The percentage of households with direct access to electricity has increased from 5% to 8%, and is expected to reach 15% by 2010. These are still modest figures, but the percentage of population living in areas with access to electricity has increased from 13% to 22%, and should reach about 50% by 2010. This ‘indirect’ coverage at least gives people benefits of many services that are impossible without electricity. Electricity brings more advanced technology.

Second, agriculture, which still generates 40-45% of GDP, is undergoing some changes, and there is now a base to sustain significant increases in productivity. The spread of new technology has been slow thus far. At only 36 kg per ha of cultivated land, average fertilizer use remains very low by international standards. In certain areas, however, use of fertilizer has increased sharply. The evidence suggests some farmers are successfully adopting new technologies. The key is to scale it up. In this regard, the deployment of Development Agents (extension workers) is important as the interface between farmers and new technologies. From about 15,000 in 2000, the number of DAs has risen to about 67,000 now. That is a significant institutional capability. Land certification programs have also improved land use security for many farmers, with tangible increases in investment.

Third, Ethiopia has become more investor friendly. For instance, whereas the Investment Climate Survey of 2001 reported a number of serious obstacles, such as access to land, tax administration, finance, etc., the new survey in 2006 found there had been significant improvement in all key areas. In the Doing Business 2008 rating, Ethiopia is ranked ninth by African firms in terms of the overall business environment. Targeted Government support to strategic industries (flowers, leather products, and textiles) has been quite effective.

Finally, the education and health status of the work force has been rising, supported by dramatic improvement in basic service delivery. For instance, from 1999 to 2006, primary school enrollment has increased from 5.2 million to 14 million. Of course, the impact on the overall labor force is only gradual; still, between 1999 and 2005, the percentage of employed urban workers with a minimum of 5 years of education has risen from 52.7% to 56.1%. A more educated work force is more productive.

Turning to the actual growth record, my contention is that Ethiopian economy is now capable of delivering much higher growth than in the 1990s, and that the recent strong growth is not just good luck. 1991/02 was the worst year in Ethiopia’s modern economic history. The per capita income level was about 30% below the previous peak in 1971/72. It is not easy to estimate the potential growth rate of a quickly changing economy, but if we compare 1991/92 and 2000/01, I think we get a pretty good estimate for those years. In the early part of that 10-year span, Ethiopian economy enjoyed a rebound from the disastrous economic performance of the Derg period (1974-1991). Later, Ethiopia suffered from a war, with GDP contracting by 3.7% in 1997/98. These exceptional factors are likely to offset each other to a large extent. Thus the average of 5.5% seems to be a reasonable estimate of the potential growth rate, a rate intuitively consistent with the kind of economy Ethiopia was in the 1990s, with improving economic policies but a modest infrastructure base.

If you assume Ethiopian economy after the 2002/03 drought was similar in its potential growth capacity, then you would expect GDP to move back to the 5.5% trend line shown in the following chart. Actually the economic output was 12% higher than the “potential” by 2006/07. It is hard to argue this is primarily a rebound, which is based on underutilized production capacity and pent-up demand. It is more natural to think that the trend rate had changed. The average growth rate from 2000/01 to 2006/07 turns out to be about 7.7%. I think this is a much better estimate of the growth potential today.

Still this does not explain why Ethiopia has suddenly run into a multitude of economic difficulties? One way to think of it is that Ethiopia suffers from its own economic successes.

Rapid economic growth can be a double-edged sword. Its intrinsic benefits are obvious. Economic damage done during the Derg period was so severe that only in the last few years Ethiopian per capita incomes have surpassed the previous high of the early 1970s. Yet, Ethiopia remains one of the poorest countries in the world. Therefore, it desperately needs to grow in order to lift its citizens out of poverty.

Rapid growth, however, can also expose serious structural weaknesses in an economy, making such growth ultimately difficult to sustain. This is the challenge Ethiopia faces today. Aggressive public sector-led investment programs resulted in sharp increases in demand for both investment and consumption goods. But, without deeper structural reforms, the expected private investment—both domestic and foreign—did not materialize on a scale to keep pace with the demand growth. This imbalance between demand and supply is at the core of the rising trade deficit as well as inflation. The trade deficit has ballooned to an estimated $4.7 billion equivalent in FY2007/08, about 22% of GDP. Of course, the global rise in oil and other commodity prices has made it worse. But, the inflation in Ethiopia has been much higher than in most other African countries. I have little doubt that this is to an important degree caused by the domestic demand-supply imbalance.

Does this mean Ethiopian economy now needs to slow down sharply, at least to the recent trend rate of around 7.7%, and perhaps to an even lower rate temporarily to restore the basic balances? Or are there ways to preserve relatively high growth while dealing with the twin imbalances, i.e., inflation and external deficits? I believe there are things the Government can do to avoid a costly shock therapy.

Sustaining Growth: A Way Forward

Setting aside the food crisis for a moment, Ethiopia’s two main economic challenges today are rampant inflation and rising trade deficits. They are interrelated. They reflect an economy that is trying to grow faster than the supply side could keep up. When domestic demand grows faster than domestic supply, an underlying inflationary tendency is created, and imports rise sharply to alleviate domestic shortages. Of course, the external shocks of high oil and other commodity prices and the failure of Belg rains earlier this year have exacerbated the problem.

Behind all this is the growth strategy of the Government of Ethiopia (GoE). It aims to create quickly a strong infrastructure base and certain key production capacity (e.g., in hydropower, cement, and export industries in general) so that in time, growth of imports will moderate and exports will begin to narrow the trade deficit. This is a risky approach, for it is an attempt to “over invest” in certain things in anticipation of a strong supply response. But, Ethiopian policymakers argue that a gradualist approach will not do in a country that has been mired in severe poverty for decades. The current food crisis, which was caused by a failure of rains that generally contribute no more than 10% of the annual food supply, is a stark reminder that Ethiopia needs fast and sustained growth to overcome such vulnerability. Having managed to get the unprecedented growth started—an impressive feat in itself—GoE leaders are keen to sustain this at all cost. Until a tipping point in external imbalance arrives, they hope that more aid and remittances may bridge the financing gap.Is this a credible scenario? Should the donors step up aid efforts to help fill the temporary financing gap? I believe this strategy has certain coherence. But, the recent experience has also revealed an important weakness. Private investment, while very strong in select sectors, has not responded to the increasing opportunities on the scale needed to keep the supply side of the economy growing fast enough. Various analyses indicate that investors still find the ‘business climate’ in Ethiopia not good enough for a major investment rush that could have avoided this supply problem. One should also not forget that after a 17-year Derg regime, Ethiopia’s private sector started from a very weak base in the early 1990s.

This does not mean the basic strategy is wrong. I think it can still be viable, and I hope it will prove successful. I believe, however, some mid-course corrections may be necessary. To give a more considered answer, we will have to examine carefully the possible export and import trajectories, underlying investment projections, etc. But, I have some tentative suggestions.

First, I do not think Ethiopia can count on increased aid and remittances alone to offset the rising trade deficits for the next several years. The gap is simply too large. An important part of the solution is likely to be found in increasing foreign direct investment (FDI), while moderating investment by the public sector. Both types of investments require imports, but FDI brings its own foreign financing. This switch will allow Ethiopia to maintain high levels of investment without causing foreign exchange problems. Of course, this assumes some public investment projects can be delayed without harming growth, or can even be replaced by private investment. Ethiopia may find such substitution opportunities in electricity generation, transportation, etc. If state-owned enterprises are involved in conventional manufacturing activities, they would offer obvious opportunities for FDI substitution.

Second, there is still much Ethiopia can do to encourage private sector investment broadly and increase the supply response to the growth in demand. Studies have identified several areas of action, including access to finance, access to land, etc. Measures that encourage FDI are usually also good for domestic investors (unless they are preferential measures). Since Ethiopia faces a shortage of foreign exchange, focusing on areas that can attract FDI may be timely. One idea I found interesting is the possibility of opening the domestic civil aviation sector to foreign/domestic joint ventures, and lifting the limit on the size of aircraft private companies can operate. This can bring not only foreign investment but also increase Ethiopia’s attractiveness to foreign tourists. Furthermore, it would increase the passenger traffic for Ethiopian Airlines from its international routes, a major foreign exchange earner for the country. Although I do not know all the complexities of this industry, this seems like an attractive proposition. I imagine there are many other such ideas. If foreign investors are required to enter Ethiopia through joint ventures, then it would also help promote domestic businesses.

Third, agricultural productivity remains too low. This is true despite the significant growth in output and some impressive success stories (e.g., roses). I had indicated in part one that an important foundation has been laid to accelerate productivity growth. There is now a need for a comprehensive program to make it happen on a large scale. Although there is an important role for public investments, e.g., in rural infrastructure and research and development, this needs to be complemented by a policy environment that leads to significantly higher levels of investments by entrepreneurial farmers and the agribusiness sector alike. One way to achieve this is through active promotion of public-private partnerships. For example, a strong cooperation between public agricultural research on the one side and private seed companies and farmers on the other can facilitate market access and availability of high-yielding varieties to farmers.

Fourth, it is essential to tackle inflation. High inflation tends to stifle savings and investment in productive assets, favoring holding of inflation-resistant assets (such as buildings, undeveloped land, or even teff). This does not help growth. Inflation in Ethiopia already points to some of these problems. East Asian countries that sustained rapid growth for many years all kept inflation in check and encouraged domestic savings and investment. I cannot think of any easy solution for Ethiopia’s inflation, for it seems to be now driven significantly by expectations. GoE has already done much to contain growth of money supply. Whether this, combined with good harvest this fall, will be enough to revere the inflationary expectations is yet to be seen. All I can suggest is GoE needs to remain vigilant and perhaps be prepared to take tougher actions as needed (possibly including further slowing of public investments).

These challenges are daunting. It is important, however, to remember that these policy problems arose from too much growth, not lack thereof. Many governments would gladly exchange their headaches of slow growth for GoE’s headaches. Although increased donor assistance is unlikely to be big enough to solve the problem of foreign exchange, I do believe that when combined with policy measures to increase supply responsiveness of the economy, additional aid could be very helpful in facilitating a smoother transition to a more sustainable growth path. Without such help, the acute foreign exchange shortage could force Ethiopian economy to slow down abruptly. That would be a huge setback for poverty reduction and a costly way to adjust to macro imbalances.

In part one of this piece, I had indicated that the potential growth rate of Ethiopia may have risen to around 7.5-8% in recent years. Ethiopia should not be satisfied with maintaining that trend line. With strong policy measures to increase supply responsiveness and manage inflation, I believe that rate has the potential to head toward 10%. Poverty reduction in Ethiopia needs that kind of growth. That would make Ethiopia’s growth strategy truly bold, and well worthy of strong donor support.