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TUESDAY 25 FEBRUARY 2003 __________ Members present: Tony Baldry, in the Chair __________ HIS EXCELLENCY MR MELES ZENAWI, Prime Minister of the Federal Republic of Ethiopia, examined. Chairman
(His Excellency Mr Zenawi) Thank you, Chairman and friends. I would like, first of all, to thank the House of Commons International Development Committee for giving me this opportunity to share my views on trade and development in the context of the Doha development round. I would also like to take this opportunity to thank the UK Government for being at the forefront in terms of promoting broad development and global policies in the area of reforms, debt reduction and trade. I am confident that the UK Government and the House of Commons will do more to defend and promote the interests of development in the poor countries. The first issue that needs to be addressed, in my view, is why governments such as that of the UK have to defend the interests of the poor countries and why the poor countries do not defend their own interests in the upcoming round of trade negotiations. Let me start with the second aspect of the question. Despite limitations of capacity the poor countries do indeed have proposals that would promote their development interests, but international trade negotiations are based on bargaining and give and take. We know that whatever the rhetoric might be, those with the bigger bargaining power get what affects their interest more. That is the reality. The poor countries, particularly those in Africa, because their share in global trade is insignificant, have no significant bargaining power. They cannot engage in meaningful give and take. In addition, their trade policy is governed by the international financial institutions which, in turn, are governed by the developed countries. When push comes to shove during trade negotiations the developed countries call the shots directly and indirectly. Africa is, thus, in substance, unable to defend its interests in trade negotiations in any meaningful way. Why should developed countries be altruistic and go beyond defending their own interests and defend Africa's interests? I believe this has less to do with altruism and more with enlightened self-interest. The developed countries cannot shelter themselves from the impact of a continent that is in deep crisis and which has, in effect, become the continental ghetto of a globalised world. Unless Africa develops, it will spawn all sorts of criminal groups en masse, including drug cartels and terrorists, which will haunt all of us. Unless Africa develops people will flee not in their thousands but, perhaps, in their tens of thousands and hundreds of thousands, and that will haunt all of us. Unless Africa develops there will be environmental devastation in the continent and the rest of the world. Unless Africa develops a large part of humanity will be, in effect, excluded from the global cake and the global cake will be smaller for all of us. Developed countries have, therefore, a stake in Africa's development. It is in their enlightened self-interest to help Africa develop. That is why they have to come up with real development around trade reforms, regardless of whether Africa can do this for itself or not. But why, of all developed countries, the UK? If Africa's development is in the interest of all developed countries why should not all the developed countries take care of the problem? The answer, in my view, is that not all developed country governments are aware of their enlightened and long-term interests, and even when they are aware of them not all are able to withstand the pressure of myopic vested interests and do the right thing. The UK Government has demonstrated that it can do the right thing when it places itself at the cutting edge of reform and debt reduction. I believe it can do so on trade reform and encourage others to join it in such a noble cause. Once you are convinced that your government should take the lead and do the right thing the next issue that needs to be addressed is what is the right thing? What indeed is the right thing for Africa in terms of trade reforms? Some would argue that across-the-board and reciprocal trade liberalisation is the right thing. The economic reforms in Africa over the past 20 years have been guided by such a view. The results, I believe, can speak for themselves. Obviously, trade reforms alone cannot be blamed for the failure of development in Africa. We all agree, on the whole, free global trade is beneficial to all countries. However, if the answer were to be across-the-board and reciprocal liberalisation the Doha Round would not need to be called the development round, it would be more appropriate to call it a more comprehensive liberalisation round. If we have all agreed that there should be a special round of trade reforms designed to promote growth in the poor countries it can only be because we are all convinced that trade is a key instrument of development policy and that if the only way, or correct policy, were to be across-the-board liberalisation then there will, in effect, be no alternative policies and, hence, no trade policy as such. We all know that very few countries, if any, have developed through across-the-board liberalisation. If the Doha Round is to be a developmental round then the most important consideration must be to empower the poor countries, particularly the least developed countries, to design their own trade policies in accordance with the level of their development and their development strategies. This, in turn, implies that there must be fundamental reform to the special and differential treatment provisions of the WTO. Proposals of developing countries in this regard are on the table. The UK should not only support but spearhead the efforts to reform the SDT, to ensure trade policy autonomy for developing countries, particularly the least developed ones. The Everything but Arms proposals of the European Union is a crucial step in the right direction, but it can be undermined by demands for reciprocity. The EBA should provide non-reciprocal access to EU and other developed country markets. This is important, for otherwise the special and differential treatment provisions could be undermined by the EBA. This is also true because the developmental impact of the EBA would be nullified if it loses its preferential and non-reciprocal aspects. I am confident that you all know we are not going to flood your markets with our goods simply because you give us access to them. We have no production capability to do so. The whole point of preferential and non-reciprocal access to your markets is not to sell products that we are already producing, but to liberate such access so as to boost investment in our countries and boost our production capacity. Let me repeat: the whole point of preferential and non-reciprocal access to your markets is not to sell products that we are already producing but to liberate such access so as to boost investment in our countries and boost our production capacity. The preferential access we get to your markets would compensate for our lack of adequate infrastructure, trained manpower etc, and enable us to attract investment using non-reciprocal preferential access as a liberator. More investment would, in turn, enable us to improve our infrastructures, train our labour force etc and, therefore, compete on an even footing with everyone else. In brief, I believe the UK should commit itself to making the development round of negotiations a real instrument for taking Africa out of the quagmire that it is in; it should see to it that this is indeed designed to specifically and consistently promote sustainable growth and it should insist that this round be a developmental round in substance and not just in rhetoric. I believe the UK should, therefore, insist on change to the SDT along the lines suggested by many less developed countries and on providing preferential and non-reciprocal access to developed markets for the least developed countries. Thank you very much. (His Excellency Mr Zenawi) We believe that achieving the Millennium Development Goals in Ethiopia and elsewhere in Africa is going to be a very serious challenge. Despite the problems that we currently face, I am confident that we can achieve those goals. Let me say why. For example, with regard to primary school attendance rates in our country, when we took over in 1991/1992 the primary school attendance rate was in the range of 17 to 19 per cent and primary school was provided for six years. Since then we have made some reforms and primary school is now given for eight years. While the drought this year has affected the attendance rate, nevertheless we are in the range of 60 per cent now. So I believe we can complete the remaining 40 per cent in the remaining time we have. Again, despite the recurrent droughts over the past ten years we have achieved growth rates of between 5 and 6 per cent, on average. That is much less than we need to overcome poverty in our country. We need to be in the range of 7 to 10 per cent growth per year. I believe with additional effort on our part and on the part of the international community we can do that during the remaining period we have. I believe, also, that an effective and developmental government is necessary to achieve the Millennium Development Goals. With all the limitations of capacity that we have as a government, I think we do indeed provide such an effective institute of government, and a committed one. I believe that view is shared by many donors who have assessed the situation in our country. So for all of these reasons, while it will clearly be a major challenge, I believe we can achieve it. Hugh Bayley (His Excellency Mr Zenawi) Education is where we have made the most progress - not just access to primary education but education across the board. For us education is not just a key instrument in development and fighting poverty, it is also, in my view, a key instrument of institutionalising democracy in a country such as ours. In my view, democracy requires an informed citizenry and that requires at least primary education. So that is where we believe we have made some significant progress. Access to primary health services have also been improved. That, again, is an instrument of development because you need healthy bodies to promote growth. Where things have not gone as well as we would have liked them to go is in promoting proper growth in our country and that has to do, to a large extent, with the recurrent droughts that we face. Before the current drought our growth rates were in the range of 7 to 8 per cent; currently they have plummeted. Hopefully, we will have good rains next year and if we have good rains next year I would not be surprised if we go back up again to within the range of 8 to 9 per cent. So it has been a see-saw. That is directly related to the drought we face. Now, the peculiar character of the drought we face in Ethiopia is that, on the whole, the total amount of rain we get is adequate for at least one harvest. It is the intermittent nature of the rain that is the problem. That would not have been a problem had we had water harvesting and irrigation structures on the ground. That has not been possible in the past, largely because we are an originator of the Nile River and there are downstream countries who claim historic rights to practically all of the Nile water. I am sure some of you will know that in 1959 Egypt and Sudan signed an agreement to divide the total amount of water from the Nile. As you probably know, 85 per cent of Nile waters at Aswan come from Ethiopia. Technically, we do not have access to a litre of it. The Egyptians would obviously have to come and physically occupy Ethiopia to prevent us from putting in all the structures, but they do not need to do so because we need to have access to external funding, and by blocking our access to external funding they can stop us from carrying out such projects. So, at the moment, what we have decided to do is focus on water management techniques that do not require external funding and which can be carried out at household level, primarily by utilising the labour of each household. That may not be the most elegant way of promoting irrigation but that appears to be the only feasible approach. Even there, there will still be a need for some funding because all of the materials that you need for such water harvesting techniques are not produced by the household: you might need some plastics, you might need some cement and they are not produced at the household level - you need some funding. There is a shortfall in that funding. If we can break this cycle, the cycle of recurrent drought affecting the growth rates in our economy, I think we can achieve the Millennium Development Goals in terms of having people living in poverty, and I think we can do even more. So what I would hope to see, and it is beginning to happen but not as fast as we would like it to, is commitment on the part of our development partners, not just for emergency assistance but, also, to address the root cause of those emergency situations - that is, to help us build those small-scale water management techniques which are not going to affect Egypt downstream in any significant way. Secondly - and this may come as a surprise - while we do not currently have much to sell except coffee (and coffee prices are collapsing), nevertheless access to your markets would spur investment not only in that but, also, in commercial agriculture. Ultimately, the famines that we see after droughts are problems of poverty. I am told there is a serious drought in the United States now, but one can never imagine famine in the United States however dry the United States might be. Ultimately, famine is directly related to poverty. So more investment, more employment and more access to your markets would mean less poverty, and less likelihood of famine. Thank you. Mr Battle (His Excellency Mr Zenawi) Let me see if I can remember the exact figures. We had stopped paying interest in principle to the debt that we had to the former Soviet Union when we took over. That was the major debt burden to us. Now, on the other debt we had we used to pay between $90 million and $110 million a year to service the debt. If we had $90 million a year invested in water management techniques every year and if we assume that the cost of such water management techniques per household would, at the most, be, say, $500 to $1,000, then obviously you can figure out what this means for our food security. Within a matter of a few years we would have such structures covering practically all the food insecure people in our country. That is the impact of debt on our economy. We are beneficiaries of HIPC. We reached the decision point of HIPC in November 2001 and it is our hope that we will reach the completion point this November. In between the two Novembers three things have changed. When we qualified for the decision point the calculations were such that we were assumed that after HIPC our debt would be sustainable. I am sure you know the figures - 150 per cent of exports, etc. In between the two Novembers three things have changed. The first thing that has changed is that the price of coffee has collapsed. That has made our debt unsustainable even after HIPC. The second thing that has happened is the US interest rates have collapsed, and because they calculate our debt on net present value terms that has made our debt unsustainable because the discount that they use is lower now. Thirdly, the euro has appreciated vis-a-vis the dollar. That means our European debt has increased in dollar terms and our debt has, therefore, become less sustainable than was calculated to be the case. The most important factors are reduction in interest rates in the United States and the collapse of the coffee price, because most of our debt is through multilateral use issues. As a result, the World Bank, which according to its own criteria would have provided up to $500 million of debt and grant per year, has said it will not lend us money because our debt would not be sustainable. So they have reduced their assistance to us by $200 million and they are now giving us $300 million, and a big part of it is in grants. They cannot lend us money because the debt would be unsustainable. So you can see how precarious the benefits of HIPC are: they depend on what the Federal Reserve in the United States does in terms of interest rates; they depend on currency movement between the dollar and other currencies; they depend on commodity prices and they depend on estimates of how well we are doing in terms of exports. There is not enough room for flexibility in the package. I understand that before we reach the completion point there is a possibility of what they call topping up; they provide additional debt relief before the completion point in a system they call topping up. We hope to get such a topping up arrangement, but what happens if our debt is proven to be unsustainable after November, after we have got the topping up? Then there will not be any provision for topping up? So it is a very positive step in the right direction but it is inadequate. (His Excellency Mr Zenawi) There are price support arrangements for commodities. There used to be such an arrangement with the European Union. In the long run I do not believe this is going to be sustainable. In the long run I think the solution has to be sought in two directions: firstly, improve the productivity of agriculture in Africa. The productivity of our coffee producers is something like a third of the Vietnamese producers. Countries such as Vietnam are moving up the ladder. If we were to improve our productivity up to their level then in the nature of things there would be global division of labour and coffee would not be within the comparative; they would have to leave that space for us. Now they are not leaving that space for us because despite higher salaries and wages in their countries their productivity is two to three times better than ours, so they can afford to pay twice the wage and still out-compete with African producers. So the improvement of the productivity and quality of our agriculture has to be part of the solution. The second problem, as I see it, as I am sure you know, is that bean prices are anything up to between 6 and 8 per cent of the coffee price in the coffee shops. If there were to be more value added to our coffee then you could compete more. The coffee price collapse affects primarily beans not the coffee that all of you drink in the coffee shops. There has not been a similar collapse in the coffee that you drink. So we are at the tough end of the market. If we could move to the softer end of the market - that of value addition - we could fare well. So one of the reasons why we have not done so in the past is because of tariff escalations. Now that the Everything but Arms arrangement is coming into force, hopefully soon, and if it does not require reciprocity on our part, then we can attract the coffee roasters in your country to our country and invest in value added activities, which would improve our competitiveness. Mr Walter (His Excellency Mr Zenawi) The way I look at it is from the point of view of an investor in the UK: he has access to electricity without any blackouts at any time and he has access to first-rate transportation infrastructure, trained manpower and all the rest. None of this exists in our country. Wages are much lower in our country but wage costs are not necessarily the most important costs that these people face. So we have to have something that the UK does not have in order to attract these people. The only thing that I can think of, at least initially, is for us to have access to the UK market and to other developed country markets that is different from the access that the UK has to other markets. Different, because that is, at this stage, the comparative advantage we will have - an artificially created comparative advantage. Once we attract this investment then we can build our roads, then we can train our people, then we can go for across-the-board liberalisation. That is the basis of my argument that we should have non-reciprocal entry for access to all your markets. It should not be limited to agriculture, it should include agri-processing industries and it should include labour-intensive industries such as textiles, garments, leather products and so on and so forth. As I said, this is not because we have goods waiting in the ports to be shipped over to the UK which are being prevented by tariffs. No, we do not have such goods, and we do not have such goods because we have no such investment. So my argument for market access is not so that we send a product that we now have (we do not have much to send); my argument for market access is as an incentive, as a compensating mechanism, for the advantage that those which have already developed their infrastructure, trained manpower etc, have vis-a-vis us in terms of attracting investment. So for me it is an instrument of promoting investment, and it can only be an instrument of promoting investment if it has these two characteristics: if there is preferential access and if it is non-reciprocal. If we lose these two then trade access does not, in my view, have any developmental potential. (His Excellency Mr Zenawi) We have been an observer of the WTO for quite some time and we have submitted our request to be members of the WTO. Clearly, we have not been as enthusiastic as far as the WTO is concerned. I think I need to explain that. We said "What do we get out of joining the WTO?" In terms of designing rational trade policy, lowering tariffs and so on and so forth, we do not need the WTO to tell us to do so. We can do it on our own and, perhaps more practically, the IMF and World Bank are telling us to do it in a more persuasive manner. So as far as trade reforms are concerned, the WTO does not have a specific advantage. So we asked ourselves "What do we get by joining the WTO?" We do not get anything by way of advice on trade reforms because we are already getting it from our own experts and from the World Bank and the IMF and so on. Therefore, we said "What is the point of joining?" One advantage would be that our voice would be heard. Whether it is listened to or not, at least we would have the right to express ourselves. We would get some assistance and we would get some rules-bound assurance to markets of the developed world, but we are not selling much. Our exports were not visible in any countries of substance. So we were not rushing to join the WTO. However, since the Doha Round we said "This thing is becoming serious; it is beginning to become a developmental institution, so we should try and join as quickly as possible". So we submitted our request to be full members of the WTO recently and, fortunately, in our case our request has been supported very quickly by all of the member states of the WTO, and our expectation is that within a year or so we will be full members. (His Excellency Mr Zenawi) Last year at about this time the inflation rate in Ethiopia was minus 6. The reason for it was that cereal prices had collapsed, and the reason for that was that we had good rains. When we have good rains and good harvests we thought we could export corn to Yemen. Ours is white corn. The United States sells corn to Yemen; theirs is yellow corn. There is no way we can compete with the United States in the Yemeni market. As you know, Yemen is just next door and so it is not transportation costs. Part of it is that US farms are much more productive than ours, but their labour costs are many times more than ours and so, in effect, one can cancel the other out. Part of the advantage is first-rate infrastructure which we do not have, but they are coming from across the world and we are next door. However inefficient our infrastructure we should do well next door. So in terms of infrastructure that should cancel each other out. So the only remaining factor is subsidies. Therefore, because we cannot compete next door prices will have to collapse and they did collapse. So this thing is happening both sides of the equation in Ethiopia. When we have good harvests prices collapse and farmers lose; when we have droughts production collapses, prices improve but they have nothing to sell. They are caught in a pincer that cuts both ways. I think that can give you an indication as to how damaging it can be. It would be even more damaging if we were to do better than we are doing now. The whole idea is that we should be doing better than we are doing now, and in that case the damage would be even more visible than it is now. (His Excellency Mr Zenawi) Dumping is a concept that has been defined in a very elastic manner by everyone involved. I would not want to engage in that, particularly because the United States is a good friend of ours and is providing lots of assistance. Clearly, I do not think that the trade regime in terms of trading in cereals that the United States and Europe are engaged in is fair or pro-development. Hugh Bayley (His Excellency Mr Zenawi) Let me tell you about AGOA because the EBA has yet to materialise. As yet we have not benefited from AGOA as much as we would like to. Even so, we have seen some clear movement. A few Americans have come and invested in garmenting factories in our country. The first ones to come were former volunteers. Our hope is that these will be pioneers. The reason they invested in Ethiopia is because they knew about AGOA. Their first investment was in garmenting. They would get the fabric from Taiwan, prepare the garments in Ethiopia and export them. The good thing about AGOA is it says after a certain period you cannot do that, you have to buy the fabrics either in-country or in another AGOA eligible country. So what do these American companies do? They start building a textile mill so as to supply their own garmenting factories. This is only one or two cases, and we hope to benefit much more than we have done so far, but I think the ball has begun to roll and AGOA has promoted new investment in Ethiopia; investment by American companies in Ethiopia - people who would not have invested in Ethiopia even if they loved it and they loved it before they began investing in it. Now that AGOA has given them an incentive their love for the country was manifested in their own pioneering investment in our country. So it is beginning to produce results. The ball is beginning to roll. (His Excellency Mr Zenawi) There are two things that we should be doing better and more. One has to do with infrastructure, but that takes time and it takes money. The easiest thing to do, in terms of cost, is improve the effectiveness of AGOA. It takes ages to get all the licences and it takes an inordinate amount of time to have access to land. By changing this radically we can create a more investment-friendly environment. That will not fully compensate for lack of investment in infrastructure, but it should go more than half of the way in removing the barriers to investment, and that is exactly what we intend to do. That is exactly what we are now doing through our civil service reform programme. Our hope, our expectation, is that in a matter of a month or two we should be in a position to complete all the processes including access to land in a matter of a week or two weeks. Chairman: Prime Minister, can we move on, briefly, to talk about the current food security situation in Ethiopia? Mr Khabra (His Excellency Mr Zenawi) The immediate proximate cause of food shortages is drought. The ultimate cause is poverty. As I indicated earlier on, the priority should be to address the water management shortfalls in the irrigation projects that we need to put in place and fight poverty. In terms of the specific situation on the ground now, there has been a very positive response, particularly since November to the appeal that we have made. However, there are a number of problems. Firstly, not all the food aid we need has been pledged. Anything from 60 to 70 per cent of what we need has been pledged but not all. Secondly, not all of the pledged food aid is coming in time. Thirdly, supplementary feeding is much less adequate than the food rations. This is affecting children most seriously. Because of this unless additional pledges are made and those pledges are delivered in time the expectation is that we will run out of food by June. The way the system works is we have what we call a food security reserve. At the beginning of this current drought we had about 300,000 tonnes of food in the food security reserve, let us say if the United Kingdom Government donates 70,000 of food we do not have to wait for the food to arrive at our ports before we start using that food we withdraw food from the food security reserve, exactly the same amount that has been pledged by the UK Government, and then replenish it. That is what we did this time. The first step we took as a Government was to commit about 45,000 tonnes of food on our own, we took that from the food security reserve and replenished it. The US provided some assistance. What is happening now it is not being replenished in time and therefore the reserve is diminishing. It is possible that we could ruin out of food by June, and that is the wrong time because that is the rainy season, that is when the rainy season starts and that is when transporting the food aid to the rural area begins to be very difficult. The way we have managed this in the past was we pre positioned the food aid in those areas during the dry season so we would not have to transport it during the rainy season. We are not in a position to pre position this food now, so there are some serious problems despite the support that we got after November. (His Excellency Mr Zenawi) The whole economy becomes depressed. Currently we expect a contraction of the economy to the tune of 2 per cent to 3 per cent. The previous year we had growth of something like 7 per cent or 8 per cent, so when the growth goes from 7 per cent or 8 per cent to minus 2 there is a very serious depression as far as the economy is concerned. Food prices are beginning to creep up but they do not go up as much as people would expect them to. These are the main impacts. Tony Worthington (His Excellency Mr Zenawi) In terms of short-term responses there are differences in style. The US, particularly this year, has been quicker and more generous in terms of assistance. The European Union has, perhaps understandably, been slower and particularly this year has provided less assistance than has been traditional. The European Union is more flexible with the type of assistance it provides, it does not insist that the aid should be in cans, from time to time they provide assistance in cash, in which case we can buy domestically or in the neighbourhood and that does not depress or cut our prices. In this regard the response of the European Union is better. The United States does not provide for such flexibility, they provide food aid in cans, it is a mixed bag. In the current situation the US has been much more generous than the European Union, traditionally it has been one third US, one third European Union and currently the support we get from the European Union in terms of food aid is less than one third. In the case of the US it is close to it, and they have been very quick. The USAID has been very quick, they were the ones who responded immediately. We as the Government bought 45,000 tonnes, the next 50,000 came from USAID, and they came early. They provide food aid in kind so there is no possibility of buying food domestically, preventing food aid from depressing agricultural prices for surplus producing countries. There is a mix there. In terms of long-term responses the pattern so far has been an out-pouring of support during emergencies and a collapse of support as soon as the emergencies are over. It is as if people are waiting for the next emergency to happen to open their wallets, in the mean time they keep them shut and therefore we are not prepared for the next emergency as quickly as we should be because we are left to our own devices to do so and the resources to us are limited. This has been a problem in the past. There is more recognition now than was the case in the past and people are moving towards a more predictable and more sustained support for food security programmes and a more flexible utilisation of the food aid. For example with the emergency food aid we are getting now it is possible for us to use this food aid for food-for-work programmes at a household level and therefore in effect this is seen as development aid. A new flexibility has been added on to it now. I think there is still some distance that we need to cover to make it more flexible, more predictable and more sustainable. (His Excellency Mr Zenawi) Rural development in general and agricultural development, particularly small-scale agriculture, have been out of fashion for a decade or two now. The focus, as you know, has been on AIDS, education, health, and so on, agriculture and infrastructure are out of fashion. Infrastructure is, to some extent, taken care of by the EU and the World Bank, bilaterals are no longer involved in the infrastructure. In terms of long-term investment these key issues of the infrastructure of roads, ports and agriculture have not been treated adequately in the past. However, having said that, and in fairness to the Bank, they have provided the foreign exchange that we need to import fertilisers and that has helped agriculture, particularly in areas where we have inadequate rainfall. The World Bank has recently approved a project of about $80 million over three years for food security. Some donors have begun to notice the need for more focus on agriculture. That focus on agriculture in rural areas was initially perceived to be as a result of our own background and the rural movement, now, however, people recognise this is the quicker, faster path to industrialisation, not just agricultural development. It has garnered more support, even amongst bilaterals donors but on the whole it has been forgotten. There is a specific problem with Ethiopia, in the case of Ethiopia we need to deal with water in order to deal with agriculture, we need to have irrigation water schemes and that requires external funding. The World Bank is not allowed to do that, they have a provision in their guidelines to ensure that what we do in Ethiopia does not have what they called appreciable harm in the downstream countries. The Egyptians and the Sudanese have to say, "No, this does not have any appreciable harm on our economy", but they do not respond positively or quickly to such requests from our side to check if this is having any appreciable harm to them. Most of them are reluctant to support Ethiopia at the expense of angering Egypt, so that limits our manoeuvre. Chris McCafferty (His Excellency Mr Zenawi) As of now this is clearly in terms of quality the best development partnership we have established. The way it works and way it has worked so far is that the UK Government had a look at our strategy and they said it was fine, so we can implement this strategy. They said we are not going to earmark assistance for this or that particular project we will support the whole strategy but in return we expect accountability and transparency in the budgetary process. That is the deal. I believe they are reasonably confident that our budgetary process has been reasonably transparent. I believe that they are assured that corruption in our country is much less than the average elsewhere in the continent. Nevertheless we have a system in the mechanism of continued enhancement of budgetary transparency and of continued improvement in our budgetary process. Before we signed this we already had a programme of improving transparency, and that is continuity in the budgetary process as part of our programme. The UK said this programme is good enough and we will support that in addition to supporting the rural strategy. If all of the others were to do this it would mean that we would not have to consult the Egyptians as to whether a household pond dug by some household somewhere in Ethiopia is going to have appreciable harm on a river of something like 85 million cubic metres of water! We would not have to do that if we had a strategy that everybody agreed is good and would implement it. For us this is cutting edge development assistance. (His Excellency Mr Zenawi) Fortunately some countries have given an indication they will be willing to do so, the Netherlands and Sweden are moving in the direction of DFID. We know some others are not going to do it or are very unlikely to do it any time in the near future. To the extent that we have a significant part of the development aid we get managed in the manner that DFID is beginning to manage in our country that will still be a major step forward. (His Excellency Mr Zenawi) We hope so. (His Excellency Mr Zenawi) The benefits to Ethiopia of NEPAD would be threefold: Firstly, to provide a framework for us to devise a development strategy, provide a framework for good governance and good development strategies. We believe we have devised our development strategy and strategy for promoting good governance in Ethiopia in a manner that is consistent with NEPAD training. That would be the first benefit. The second benefit would be in promoting cross-border trade and investment. That is made easier because, hopefully, we all design our development strategies and good governance strategies on the same framework as the NEPAD framework so there is one base for harmonisation amongst us and so there is improvement in cross-border trade. There is already improvement in cross-border trade between us and Sudan. There is a problem of infrastructure in promoting trade between us and Kenya because the last stretch of road between the border and a place called Isiolo, a 100 kilometres inside Kenya, that stretch of the road has not been upgraded. It has been on the cards for maybe 15 years, the European Union are supposed to provide the funding but there have been problems here and there. There is enhanced trade between us and Djibouti, although Djibouti is not a big economy. The third benefit would be enhancing partnership between Africa and the rest of the world and therefore enhancing partnership between Ethiopia and the rest of the world through NEPAD. The response of the G8 in Kananaskis was a step forward, in my view not a complete break with past practice but a step forward in the right direction. Hopefully in the summit in France this year there will be further movement in the right direction. Chairman (His Excellency Mr Zenawi) Thank you very much. |