external influence in the making of development ... - FES Ethiopia

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There is broad agreement about the key policies that led to success in East Asia. The basic story of macroeconomic stability, openness to foreign trade, and investment in people is a familiar one. Good macroeconomic policies-- especially the open trade policies -- made East Asia's good education policies more effective. It is important to understand how good macroeconomic policies and good microeconomic policies interacted to provide unusually strong benefits. The second issue is why the East Asian economies adopted good policies. There is growing consensus about what constitutes good policy. An important question now is why some countries adopt good policies and others do not. At the macro-level, the following policies and measures have proved effective: A sound economic and financial policy designed to forestall high inflation rates or overvalued currencies as well as limiting government activities to the tasks that the market cannot handle results in economic growth based on allocation mechanisms in conformity with the market economy. Economic growth is a critical but not the sole requirement for success in the fight against poverty. It is equally important to have a social policy that places particular emphasis on meeting basic human needs. Education, training and extension services as well as availability of credit foster self-reliance and initiative in people of all segments of society. A further component is a social climate in which the door to full personal development is open to everyone - regardless of gender, race, socio-cultural background or other differences. Many of the countries that are successfully integrating with the global economy - such as China, Thailand and Vietnam - are not rapid import liberalizers. Conversely many rapid import liberalizers have registered weak record in poverty reduction, despite the spirit and letter of the WB - IMF policy advice. With respect to SSA, the experience in the past was not encouraging. In 1950, Africa's share of what the world earned from trade was 3%. In 2000 this had dropped to 1.4% (excluding South Africa), despite the fact that Africa has 12 % of the world's population. If Africa had maintained its 1950 share of world trade, today it would earn $70 billion more in exports each year,, i.e. nearly six times what the region currently receives in foreign aid. Some studies have shown that improving education – while the trade regime remains restricted – takes you to 3.8 percent average growth. Similarly, liberalizing trade while education remains poor takes you to 3.8 percent. But in the long-turn, investment on education is certainly the better option since it lays foundations that one cannot attain by simply liberalizing trade. The combination of good education and open trade results in a much greater impact, raising the average growth rate to 5.5 percent. However, every year Sub-Saharan Africa, the poorest region of the world, spends $14.5 billion dollars repaying debts to the world's richest countries and international institutions 26
such as the World Bank and International Monetary Fund. Many countries in Africa spend more each year on debt than on health care or education. The $70 billion that African will generate through a one percent increase in its share of world exports is approximately five times the amount provided to the region through aid and debt relief. Oxfam (2003) reports that "apart from financial benefits, export growth can be a more efficient engine of poverty reduction than aid". There is a belief that the aid versus trade dichotomy is overstated. Aid can be used to promote the realization of the benefits of trade. Negative consequences of globalization may be numerous, ranging from financial contagion and banking crises to illegal drug trafficking; but in the context of equity two aspects deserve particular attention. First, some important benefits brought about by globalization are typically not equally distributed. For instance, international capital flows, including especially FDI, are generally highly concentrated, favouring some selected countries and regions. Similarly, information and knowledge are not disseminated evenly and freely, but tend to concentrate in countries and/or social groups where general education levels are already high and advanced communication technologies already exist, such as personal computers and access to internet. International trade policies must support, not destroy, the national agriculture and rural development policies that are desperately needed to stabilize domestic market. 6. Recent Socio-economic/ Development Performance in Ethiopia Since coming to power in 1991, the government has implemented wide ranging economic measures in collaboration with the World Bank and IMF. Reform measures undertaken by this administration at the beginning included: lifting of prohibitions and restrictions on the private sector, devaluation of the exchange rate which was followed by the introduction of an auction market for foreign exchange; and most prices and trade items were liberalized, to name only few. These reforms together with favorable weather and large foreign largesse, at times helped the economy register an average growth of five percent. A close observation of the economy reveals, however, most of the growth over the past decade has come from services, which accounts for 40pc of the gross domestic product. Agriculture remains to be erratic, while the contribution of industry more or less remained stagnant at a very low level. After about 12 years period of reform, internal economic dynamism and sustained growth are not yet achieved. The economy failed to surmount structural barriers and unleash vibrant investment and production activities in spite of huge resource injection and policy initiatives in multiple fronts. 27
Page 1 and 2: EXTERNAL INFLUENCE IN THE MAKING OF
Page 3 and 4: Hence, developing countries are dou
Page 5 and 6: other goals may include advancing t
Page 7 and 8: Since 1991, Ethiopia mainly followe
Page 9 and 10: WIDER (2004), total official develo
Page 11 and 12: The end of the Cold War removed the
Page 13 and 14: Aid (grant) Data on aid flows is in
Page 15 and 16: FDI flow to Ethiopia Year FDI Inflo
Page 17 and 18: 4. Ethiopia's Dependence on Aid Eth
Page 19 and 20: Source of Aid Ethiopia receives a f
Page 21 and 22: Dependence on Aid could stifle inte
Page 23 and 24: Aid conditionalities Aid is expecte
Page 25: South conflict, but a fundamental s
Page 29 and 30: higher, plateau level. The large in
Page 31 and 32: Conclusion Ethiopia has been quite
Page 33: References Abebe Taddesse, (2004):

external influence in the making of development ... - FES Ethiopia

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