While the regime in Ethiopia cannot be accused of squandering every opportunity to show off the country’s recent economic development (perhaps rightly), its selective euphoria holds no water when the subject at hand is the involvement and contribution of the private sector in the country’s economy.
Speaking at a side event during the Third International Conference for Financing for Development held in July this year in Addis Abeba, Ethiopia’s Prime Minister Hailemariam Desalegn conceded that his administration needs to engage the private sector more than it had done so far if the country is to attain its ambitious aspiration of becoming a middle income country by 2020, and the continents’ manufacturing hub by 2025.
In theory, the regime in Ethiopia portrays the private sector not only as essential ingredient to the economy but also its engine of growth; government officials are not short of commitments and often say they are dedicated to design private sector friendly policies and create an all-inviting investment atmosphere both for local firms and international ones. It is a pledge that comes as music to the ears of some members of the private sector on the ground (many of whom accept as true words from government officials); and a pledge foreign investors often hold on to. But undoubtedly it’s a pledge cautious Ethiopia minders consume with a grain of salt, not without a good reason.
Despite a decade old hyperbole on the double digit GDP growth, several looks into various indicators ranking Ethiopia – from the ease of doing business to corruption and investment freedom indices – reveal unflattering details. The latest report in Ease of Doing Business (DB) released by the World Bank, for instance, paints a gloomy picture: Ethiopia ranked 132nd – a three spot slip from the preceding edition – out of 189 countries surveyed. It scored 56.31 in Distance to Frontier (DTF), a score that benchmarks economies with respect to regulatory practices showing the absolute distance to the best performance, 100 being the best. Meanwhile, Paul Kagame’s Rwanda, something of an ideological sibling for the incumbent Ethiopian People’s Revolutionary Democratic Front (EPRDF), achieved a remarkable 46th with 70.47 on the DTF. A comparison between Ethiopia and Rwanda in a 2015 index of economic freedom by the Heritage Foundation shows Ethiopia trailing Rwanda by all indicators from business freedom to monetary, labor, property and investment freedom. (See chart below for comparison in investment freedom).