Transcript Ethiopia Template

Growth case study presentation
Ethiopia
Economics 6470 Growth & Development ,
Fordham University, Spring 2013
Brandon Payne, IPED
Growth case study: Ethiopia
1. Growth history for
Ethiopia peers/twins
2. IMF’s outlook Ethiopia
going forward
3. Conclude with thoughts on
institutions & governance and
Ethiopia’s new export
partner: China
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Brandon Payne Ethiopia Sp 2013
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Figure T-1 1960 Twins for Ethiopia China leaves
only to return…. (PWT 7.1 series y2 Ethiopia GDP as share of 18.1
U.S.)
Mozambique
Zimbabwe
Burundi
Ethiopia
Malawi
Tanzania
Burkina-Faso
China
3.1
2.9
1.9
1.92.5
1.8
1.0
2.8
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2008
2005
2002
1999
1996
1993
1990
1987
1984
1981
1978
1975
1972
1969
1966
1963
1960
2.6
2.4
2.2
3
Source: PWT v7.1
Figure T-2 1960 Twins for Ethiopia (1960) China
leaves but then returns (PWT 7.1 series y2)
3.1
2.9
2.8
2.6
2.5
2.4
1.9
1.9
1.8
2.2
Mozambique
Ethiopia
Burkina-Faso
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Zimbabwe
Malawi
Burundi
Tanzania
Brandon Payne Ethiopia Sp 2013
1.0
4
Source: PWT v7.1
Figure T-2: Ethiopia and twin economies excluding China (1960)
Per capita income relative to the United States (PWT 7.1 series y2)
3.1
2.82.8
2.9
2.6
2.5
2.4
2.2
2.2
1.9
1.9
1.8
Zimbabwe
Malawi
Burundi
Tanzania
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
Mozambique
Ethiopia
Burkina-Faso
1.0
0.9
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Brandon Payne Ethiopia Sp 2013
Source: PWT v7.1
Figure T-3: Ethiopia and twins since 2000 (no China)
Mozambique
Burundi
Malawi
Burkina-Faso
Zimbabwe
Ethiopia
Tanzania
1.9
1.8
2.9
2.5
1.8
1.1
1.0
0.9
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
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Source: PWT v7.1
Ethiopia and peer economies
12.0
Per capita income relative to the United States
10.0
Rwanda
8.0
Uganda
Bolivia
6.0
Paraguay
Zambia
4.0
Ethiopia
2.0
0.0
2000
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2001
2002
2003
2004
2005
2006
2007
2008
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2009
2010
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Source: PWT v7.1
Ethiopia and comparator economies
Per capita income realtive to the United
States
14.0
12.0
10.0
Uganda
Egypt
8.0
Kenya
Rwanda
6.0
Ethiopia
Eritrea
4.0
2.0
0.0
2000
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2001
2002
2003
2004
2005
2006
2007
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2008
2009
2010
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Source: PWT v7.1
Source: Cols 1 and 2 Jones, 2001, Appendix C, IMF WEO October 2012, accessed 3-25-2013.
Columns 3-8 are trend line and data per capita income as share of $U.S. per capita income in
$PPP 2005 current or constant 2005 prices. (from Prof McLeod’s spreadsheet)
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IMF ETHIOPIA PROJECTED GROWTH: 2013: 6.5% 2014: 6.5%
Lots of Aid & FDI,
But lowest in group
LIC4/24/2013
SS African region: 2013: 6.9% 2014: 7.9%
Source: IMF WEO Chapter 2, April 2013
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Source: Alemayehu Geda & Abebe Shimeles & John Weeks, 2009. "Growth, poverty and
inequality in Ethiopia: Which way forBrandon
pro-poor
growth?," Journal of International Development,12
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Payne Ethiopia Sp 2013
John Wiley & Sons, Ltd., vol. 21(7), pages 947-970.
Source: Alemayehu Geda & Abebe Shimeles & John Weeks, 2009. "Growth, poverty and
inequality in Ethiopia: Which way forBrandon
pro-poor
growth?," Journal of International Development,13
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John Wiley & Sons, Ltd., vol. 21(7), pages 947-970.
• Geda, Shimeles and Weeks (2007) find that
growth in Ethiopia since 2000 has increased
inequality in the country (consistent with
Kuznets hypothesis)
• “Growth with redistribution is the optimal
strategy for Ethiopia”
• Productive Safety Net Program!
Alemayehu Geda & Abebe Shimeles & John Weeks, 2009. "Growth, poverty and
inequality in Ethiopia: Which way for pro-poor growth?," Journal of International
Development, John Wiley
& Sons, Ltd., vol. 21(7), pages 947-970.
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Productive Safety Net Program
• Pays the poorest and most vulnerable people
to work on public works projects for six
months a year
• Increase livestock holding by 10 head per
household
• Rehabilitates degraded land, creates terraced
fields, feeder roads, small-scale irrigation
systems
• Funded by 10 development partners
Source: “World Bank Support for Social Safety Net to Benefit 8.3 million
Ethiopians by 2015. “ World Bank press release. 29 March 2012.
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Light Manufacturing in Africa 2012:
“Light manufacturing can offer a viable path for
Ethiopia and other Sub-Saharan African
countries as they transform their economic
structure and strive for productive job creation.”
“Africans do not need to wait to have perfect
investment climates to create millions of
productive jobs in light manufacturing.”
Light Manufacturing in Africa: Targeted Policies to Enhance Private Investment
and Create Jobs. World Bank. 2012.
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Problems for Ethiopia in attracting FDI
•
•
•
•
•
•
Customs clearance efficiency
Restrictions in foreign exchange markets
Inconsistency in the tax regime
Low educational attainment among labor
Insufficient access to local finance
A lot of time spent on government relations
Source: Geiger, Michael; Goh, Chorching. 2012. Chinese FDI in Ethiopia : a World Bank
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survey.
Washington DC : World Bank.
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Ethiopia’s advantages in attracting FDI
• Limited competition in an expanding local
market
• Cheap land
• Cheap labor
• Preferential market access
• Tax holidays and tariff-free equipment imports
• Stable political environment
Source: Geiger, Michael; Goh, Chorching. 2012. Chinese FDI in Ethiopia : a World Bank
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survey.
Washington DC : World Bank.
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Chinese investment has blown up
• FDI from China to Ethiopia increased from
virtually zero in 2004 to an annual amount of
US$58.5 million in 2010
• Strongly facilitated by governments
Source: Geiger, Michael; Goh, Chorching. 2012. Chinese FDI in Ethiopia : a World Bank
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survey.
Washington DC : World Bank.
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“Helen Hai, GM for overseas investment at Huajian Group, a
leading Chinese footwear manufacturer, has a bold vision: in 10
years she wants Ethiopia to be a global hub for the shoe industry,
supplying the African, European and American markets and
providing jobs for more than 100,000 local workers.”
Source: “Ethiopia could be shoemaker to the world” Yahoo News South Africa. 4 April 2013.
http://za.news.yahoo.com/ethiopia-could-shoemaker-world-035129218--finance.html
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What does Ethiopia have to do?
• Only ranks 33rd on governance in Ibrahim
Index but 15th in sustainable economic
opportunity
• 39th in Participation and Human Rights
• 38th in Safety and Rule of Law
• 29th in Human Development
Source: http://www.moibrahimfoundation.org/ethiopia/
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Table I-2 Starting a Business indicator:
Cost (% of income per capita)
Year
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
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Ethiopia
484
77
65
46
41
30
267
199
181
135
Malawi
113
141
140
216
189
126
108
108
91
84
Burundi
China
240.2
181.4
190.2
213.8
241.2
206.7
145.7
124.3
116.8
18.3
17.8
15.9
13.6
9.3
8.4
8.4
4.9
4.5
3.6
2.1
Brandon Payne EthiopiaSource:
Sp 2013
Zimbabwe Mozambiqu
e
371
304
20
6375
676
433
354
183
149
107
112.1
93.4
94.7
85.7
21.6
22.9
19.3
25.2
21.2
19.7
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World Bank Doing Business 2013
Education
• 36% of adults are literate
• Ethiopia is doing well on primary education
but needs to expand secondary education and
revise curricula and be more flexible, and
pursue gender equity
• Necessary reforms possible to achieve this
decade
Joshi and Verspoor. Secondary Education in Ethiopia: Supporting Growth and
Transformation. World Bank. 2013.
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Agriculture (43% of GDP, 80% of exports)
• “The proposed
approach will enable
the government to
harness resources more
effectively and unlock
up to USD 20 billion of
additional GDP by
2025.”
Accelerating Ethiopian Agriculture
Development for Growth, Food Security,
and Equity. Bill and Melinda Gates
Foundation. 2010.
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Ethiopia’s Tourism Sector: Strategic Paths to Competitiveness and Job Creation. World
Bank. 2012
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Tourism
•
•
•
•
•
•
Huge growth potential
Need better marketing
Need better training for service provision
Need Special Tourism Economic Zones
Need multi-stakeholder platforms for dialogue
Need infrastructure development
Ethiopia’s Tourism Sector: Strategic Paths to Competitiveness and Job Creation. World
2012Sp 2013
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BrandonBank.
Payne Ethiopia
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Creating infrastructure
• In fiscal 2013 the government is investing 16%
of GDP in industrial development, transport,
telecom, energy and housing
• Dispute with IMF/Egypt over Grand Renaissance
Dam Project
“IMF Urges Ethiopia to Slow Nile Dam Project to Protect Economy” Bloomberg News.
14 September 2012. http://www.bloomberg.com/news/2012-09-14/imf-urges-ethiopia-to-slow-nile-dam-project-to-protecteconomy.html
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The Federal Democratic Republic of Ethiopia: 2012 Article IV Consultation—
Staff Report. International Monetary Fund. 2012.
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Keep momentum but seek financial
partners and focus on governance and
human rights
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Fasilada’s castle at Gondar, Ethiopia
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