Reviewing the Post-Meles Economic Transition and the Somali Region

Published on 5th March 2019

With stability and political management of the country ever becoming difficult and conditions tenuous, PM Abiy of Ethiopia must re-examine the lopsided economic policies his predecessors followed. It is unthinkable to stabilize Ethiopia without addressing some of the bread and butter issues faced by landless peasants who had flocked into the cities in recent years and employ faire policies towards the Ogaden gas.

The first phase of EPRDF rule was partly toppled because of a festered anger towards the economic policies that have gone awry and adversely promoted inequality in the middle of economic boom. If the same path is travelled by Abiy’s nascent government, the fragile reform could easily be reversed.

Economic [mis]development

The country-wide civil unrest that toppled phase one of the rule of EPRDF, phase one because EPRDF is still on the driver’s seat, were born out of several demands, most of them bread and butter issues. As millions of acres of agricultural land were transferred from the hands of peasants to the ownership of corporations a large under class was created. This was done without significant safety net created for those displaced peasants. (In the era of the Dergi, for example, the government nationalized much of the land, hence making the junta overnight the main employer of the country, leading to the strengthening of a strong dictatorship). Under EPRDF, communities have been destroyed to safeguard the interests of corporations.

The so-called Ethiopian economic “miracle” – about 10 percent annual GDP growth rate – has not translated into poverty reduction. Despite some positive job creation realized in the Amhara region and Addis Ababa, a serious economic study of the latest decade shows that “lack of manufacturing jobs” in the peripheries were one of the main culprits of why poverty in the country barely improved. And more so in the country’s major city. As matter of fact, what some sociologist called “the throwaway class” has exponentially grown.

In the last 27 years, the EPRDF government pursued policies that favored the assembling of agricultural land to benefit the goals of agribusiness. In the battle for land, Gambella region, which lost a quarter of a million acres as early as 2012 was one of the main casualties. At times, millions of arable lands were summarily transferred into cash-crop and flower-producing farms to bring in more foreign exchange. And those policies, promoted both by the government and by World Bank advisors, inadvertently hurt peasants mainly in Oromo and southern regions.

It is very likely that PM Abiy will most likely pursue the same economic model as in the past. He may even go for more privatization of major sectors (like telecommunication) of the economy without creating a safety net for the masses. And that will once again put Ethiopians in harm’s way. More stress will be felt resulting from the country’s inability to finance and repay Ethiopia’s debts, particularly that of china’s $30 billion.

There lies the genesis of the 2015-2018 civil unrest – the incongruency between the interests of the masses and the goals of the state – that toppled the first phase of the EPRDF rule. Despite government’s lofty yet unmet goals of national development, when peasants lose their land they are menace to stability.

The push factor resulting from land expropriation in western and southern Ethiopia caused the unavoidable rural to urban migration. This in turn lead to the creation of huge slums in major cities of the country. An additional factor for the rural to urban migration is poor health sector and a near-absence of sanitation infrastructure. For example, in Ethiopia for every 40,000 residents, there is one doctor compared to Somalia’s 14,000 to one doctor. Over 70 percent of rural areas lack sanitation (CIA World Fact Book, 2017). Food scarcity has also worsened in the rural areas. Some may refer to this coercive type of rural-urban migration as “urbanization.” However, as poor people move into big cities like Addis Ababa without safety net, they inadvertently create a new political space for social and economic justice. Slum is what they create.

The bad urbanization taking place has a far-reaching political and social consequences for the next generation. It even becomes too costly to fix once it takes roots. As slums age, they become a burden on the economy. More than any other city, Addis Ababa is the epitome of that scenario. It houses both the landless peasants pushed out of the rural areas (80% of Ethiopians are rural) and the affluent who has gotten wealthy too fast since EPRDF took power. It is a perfect venue to bread discontent and revolt. In the coming years, here lies PM Abiy’s challenge.

According to Habitat Humanity, Great Britain, of the roughly 4 million residents in Addis Ababa, 80% of them are living in slums, thus making Addis Ababa one of the most stressed urban environments in the world. This problem will worsen as the city’s urbanization is trending upward at a rate of 8% per annum. And more so in the absence of economic development policies and comprehensive urban planning. Compare the Ethiopian urban growth to that of Nairobi’s 3.8, or that of New York of 2% for 2017. Both countries have better economy and planning and still they struggle with their underclass.

Certainly, the urban growth of Addis Ababa, a mirror through which we glance at Ethiopia’s failed economic policies, will be giving PM Abiy many sleepless nights, not because of the competing narrative of the city’s ownership, but because of the fast mushrooming Ethiopian version of ‘favela’ under his watch. Additionally, other growing cities (Dirdhaba, Bahir dhaar, Jima, Nazret, et el) are following suite of Addis Ababa where poverty and squatter settlements define them more than amenities.

Addis Ababa’s slum communities are so massive that they wrap around the city’s civic and commercial districts.

In order to ameliorate future conditions, government policy must address a two-pronged issue:

1. Infuse enough investment into the economy to generate acceptable and equitably-distributed number of urban-based jobs for the urban dwellers, while improving the conditions of slum dwellers.

2. Reassess past policies regarding the agricultural sector that expropriated arable lands from peasants to foreign corporations.

If these two bread and butter issues are not addressed, more landless peasants will become squatter dwellers, and make Addis Ababa what Manual Castells calls a center where “movements combine struggle for community culture and political self-determination.” Such a movement could easily wash out Abiy-mania that had swept the country since April 2018.

The Somali Regional State

As the second largest geography and the third most populous region, whatever economic policy is adopted by Addis Ababa would have impacts on the Somali region. In the past, Somali region did not feel at all the economic boom of Ethiopia of the last 10 years. According to a fascinating article, “Laughing Hyenas” by Liban Farah, “there were 5,239 FDI projects since January 2000, of which 4,278 (about 82%) were in Addis Ababa and Oromia, plus additional share from unspecified multi region FDI, whereas only 26 (or just 0.5%) were made in the Somali region. More damningly, half of the projects were investments from the Somali diaspora, 14 out of 26 went to implementation stage and only 6 are operational.” The same author catalogues the dismal proportion of loans given to the Somali region.

If any, the only economic policy in the region is government project implementation. For a long time, projects are implanted through politically connected individuals in the form of contractors. A policy signature of EPRDF in the last 27 years, Alex de Waal calls this system “the politics of budget.” The intent is to buy loyalty and patronage by strategically awarding and distributing the budget dollars to certain contractors. This system is more pronounced in the Somali region.

If history is any lesson, the region may not see a significant expansion of public and [big] private sectors that often invest in Addis Ababa or elsewhere. So far, the Somali region received either emergency aid or insignificant international donor projects. In addition to attracting the right investment, the region must develop its own region-tailored policies for growth.

Meanwhile, three economic incubators need to be carefully watched and managed as the region emerges from 10 years of dictatorship: (1) the Berbera-Jigjiga Corridor, (2) the Ogaden gas resources, and (3) the region’s under-utilized potential in agriculture. These three factors can mend or break the region’s future.

Berbera-Jigjiga Corridor: On February 27, 2019, the official ribbon-cutting ceremony for the Berbera-Jigjiga Corridor took place in Somaliland. It is a project that has come and gone for quite some time. This project was is reportedly bankrolled by the United Arab Emeritus (UAE) as part of the comprehensive upgrade to the Berbera Port to the tune 0f $441 million. The UAE has in 2018 agreed to “build a modern highway between Berber Project and the border town of Togwajale,” thus linking it with the modernized road to Jigjiga.

If the Berbera-Jigjiga Corridor materializes, there are two interrelated prerequisites to make this project beneficial to the Somali region: (1) A well-functioning administration that prioritizes and sequences the interests of small and privately-owned business in the region; and (2) a well-crafted and region-tailored Somali-centered planning overlays within the Corridor.

Since the EPRDF took power, this Corridor had been functioning albeit at a lower capacity. However, it never benefited Somalis. Heavy trucks have been hauling merchandises as far back as 1992 from Berbera Port to Addis Ababa without either selling to or buying anything from the Somali region. In other words, the north-bound shipments never recycled any of their dollars in the region. Often than not, they bypassed Jigjiga or the rest of the Somali region as much as freeways in American cities bypass ghettoes in favor of suburban districts.

Only negative impacts accrued for the region in the form of environmental degradation and destruction of the road that connects Berbera to Jigjiga. A new paradigm of planning is needed so that Somalis on both sides of the border can benefit from the Berbera-Jigjiga Corridor project.

Agricultural Sector: The second big factor in the region’s economy is Agriculture, both farming and the pastoral sector. The region’s administration has neglected both sectors for too long. As a result, the residents of the region have been dependent on food aid. Overall, food production in the region fell by more than 20 percent in the last 20 years at the rate of 4% yearly (CIA World Factbook); the Somali region is worse in food safety today because of conflicts that still rages in the agricultural districts including but not limited to Babili, Tuliguuleed, Liibaan, Chinacsani, and Ma’eso. Add to this the war in the eastern sections of the region that devastated the pastoral sector of the region.

Untapped potential in the agricultural sector of the region is there. Between Shabelle region, Faafan, and Liban districts, the region can easily be a breadbasket not only for SRS but even for export to other regions. In the year 2016, for example, Tuliguuleed alone produced about 3 million quintals of grain (wheat and Barely), excluding corn, beans and other food items. The same could be said about other agriculture districts. To capitalize on this potential, it would require prudent public policies and a well-run government. So far, the government is disheveled and lacks economic perspective.

Ogaden Gas: The third factor, the economic elephant in the house so to speak, is the Ogaden gas. According to Motuma Mekassa of Ethiopia, there is about 7-8 billion cubic trillion feet (TFC) of natural gas all of which is commercially viable (the Ethiopian Herald, 2018). Several successful tests have been so far carried out with promising results, with a potential revenue of $1 billion in the first year, after which time it increases significantly . With the 2019 Ethiopian total budget hovering around $1.9 billion, the Ogaden gas revenue of $1 billion to start is a timely God-sent manna for Ethiopia.

To commercially export the Ogaden gas, Ethiopia says that construction of the pipeline which is part of a $4 billion project the UAE’s DP investing in the region — will begin in September. This construction plan was memorialized on February 15, 2019, when a bilateral agreement was signed to “transport Ethiopian gas to an export terminal” out of Djibouti.

So far, it is not clear how this project will benefit Somalis. No credible formula for sharing the proceedings from the gas is availed to the Somali region. As of today, the Ogaden gas resources are controlled by the Chinese firm Poly-GCL with a smaller share to the Ethiopian Federal government. To the exclusion of the Somali region, the profit-sharing is strictly between the Chinese investors and the federal government. Profits will be “shared between the company and the Ethiopian government in predetermined ration of roughly 70%-30%,” writes Liban Farah. In that case, the 5% PM Abiy said will go to the Somali region “is not a share of gross production or even net profits, it’s 5% of government’s share of profit oil which in total production value terms is less than 1.5%.” This does not reflect economic justice.

If the Ethiopian government does not give Somalis an equitable role in managing and sharing the benefits received from the Ogaden gas, the region may resemble the Ogoni region of Nigeria. And that must be avoided.

To secure environmental and economic justice related to vast petroleum in the Ogani land, the residents of the region established “The Movement of the Survival of Ogani People,” (MOSOP). It was that movement that produced Sar-Wiwa, a world-known writer and activist who won the Livelihood Award and the Goldman Environmental Price. He was illegally hanged by a military junta for his struggle to stand up for his people and to protect their resources. The politics of oil and petroleum is not a child’s game, and as such Somalis need to be ready for a serious fight over their resources.

PM Abiy Ahmed must come up with a just economic and environmental policies pertaining to the Somali region. Meanwhile two things can be anticipated: First, there would be a massive environmental degradation to the region, and second, there would a lot of dissatisfaction about the degree to which Somalis benefit from this massive resource.

However, an alternative path could be taken to maximize the benefit accrued to Somalis and minimize negative impact. If so, two policy measures must be undertaken:

1. The Somali Regional State, in collaboration with the Federal government and independent consultants, must prepare before it is too late, a full-blown Environmental Impact Analysis of the gas excavation and the pipe that will cut through miles of grazing and agricultural land. As part of the environmental analysis, there must be a well- thoughtout set of mitigation plans, including plans to restore habitat and safeguard farm and grazing (savanna) lands.

2. The Somali Regional State shall seek a way to renegotiate the Ogaden gas agreement and increase its share of revenue. In addition, a well-crafted Public Benefits Package (PBP) that will benefit all the groups to be negatively impacted by the excavation and the transport of the possessed product through the pipeline that connects the source of production to the point of export must be crafted.

There are times that resources can be the curse that you never wished. However, with the right leadership, region-tailored planning tools, and the will to serve the public, the Ogani paradigm can be averted.

By Faisal Roble


Faisal Roble, a writer, political analyst and a former Editor-in-Chief of WardheerNews, is mainly interested in the Horn of Africa region. He is currently the Principal Planner for the City of Los Angeles in charge of Master Planning, Economic Development and Project Implementation Division. (Courtesy:Wardheer).

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