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The infrastructure of growth

Interview - May 4, 2012
Deriba Kuma, Ethiopian Minister of Transport, discusses the role transportation infrastructure is playing in the Growth and Transformation Plan 2010-2015 and how air, rail and road infrastructure have all been targeted for development

We have achieved slightly more than 11% average growth for the last eight years. The major sector that contributes to this growth is agriculture and related activities, which account for slightly more than 43% of GDP, while industry and social sectors contribute 12% and 45% of GDP, respectively. Last year the manufacturing sector grew faster than the social and agriculture sectors. We hope that in the coming five to seven years manufacturing will be the leading sector in our economy.

The government has created a growth model called Small and Micro Enterprises (SMEs), which helped us to create millions of jobs for urban and rural poor. In addition to this, growth in private investment in manufacturing, horticulture and large scale agriculture have enhanced the job creation capacity of the economy.

We have been implementing a broad based and equitable growth policy, which enabled us to create fair income distribution among citizens for instance; the Gini coefficient for Ethiopia is .29, which indicates the most equitable income distribution in Africa. Favourable policy environment for private sector, comprehensive support for small and micro enterprises as well as technological and extension services provided to small holder farmers are some of the underlying factors that contributed to equitable income distribution.

Many of our interviewees have spoken about this goal of becoming a middle-income country in the next ten years. One way to achieve this is the Growth and Transformation Plan (GTP) 2010-2015 launched by Prime Minister Meles Zenawi. This is a medium term strategic framework to develop economic growth. How feasible do you think this plan is, and what are the main challenges?

Over the past eight years we have sustained an average growth rate of slightly over 11%. To become a middle-income country in the next ten years, the minimum scenario is achieving and sustaining an annual grow rate of 11% in this time period, which we have already proved in the last eight years, but still the economy has huge potential to grow more than 11%. So the realization of becoming middle-income country even sooner than the deadline is possible, but it obliges us to achieve a higher growth rate that we have set in the GTP, namely high case scenario.
To achieve a higher growth rate than 11%, the government has been undertaking various intensive capacity building programmes to enhance the implementation capacity of public, private and civic institutions which will enable us to exploit huge growth potential in the economy. From our past experiences we have learned that there are immense possibilities to place the economy on a higher growth trajectory by doubling agricultural value added through scaling up the productivity of smallholder farmers. Increases in global commodity prices on items like fuel, fertiliser, agricultural products, etc has impact on local commodity prices, which in turn push commodity prices upward in local markets. Thanks to the prudent monetary and fiscal policy inflation is well managed.

During our interview with the Ethiopian Ambassador to Germany, he highlighted the sound policies of the government, as well as Ethiopia’s strategic position within the Common Market for Eastern and Southern Africa (COMESA) to reach Middle East, Europe, Africa and Asia markets. What do you think is conducive to the development of Ethiopia at this moment, and where do you see potential for European and international markets?

As you said Ethiopia has a strategic position within the common market for Eastern and Southern Africa. The trade link between Ethiopia and the Middle East, Europe and Asia has been dramatically improving over the last few years. Currently we are exporting more 30 types of commodities to these regions, and compared to other regions, large number of investors are coming from Asia, the Middle East and Europe.

So there is a will to welcome investors, with facilities, incentives, and huge opportunities ahead.

Yes, there are huge opportunities available here. Land lease prices and labour costs are very low. The Government has to be sure that trained manpower is available for incoming investors. Conducive investment policy has been in place to facilitate the bank service, and various incentives have been in place for investors who produce here and export to global market.

Transportation infrastructure in Ethiopia has been neglected for decades, but there are now policies in place to develop the proper facilities, including roads and railways. What is the current state of transport right now, and what are the main projects in the pipeline?

Expansion of transport infrastructures has been given a top priority in the GTP; particularly rail and road construction is the major one. Improving interconnectivities among regions, economic corridors and with neighbouring countries is vital to boost trade, port services and investment. Top priority has been given to railway projects that connect Ethiopia to Djibouti to improve transit time and cost for import and export commodities. Addis Ababa light rail transit has also taken its place as one of the top priority projects in GTP.

At Bole International Airport, the number of passengers has more than doubled in the last five years.

Yes, currently the number of international passengers that have been served by Ethiopian airline exceeds 4 million passengers with more than 65 international destinations. Ethiopian Airlines is also one of the biggest cargo service providers in Africa.

So there is a focus on passengers, as well as freight, which is crucial to bring everything together. Ethiopian Airlines is a member of the Star Alliance, and aims to be a world-class airline. What role does Ethiopian Airlines play as the nation’s flagship and worldwide ambassador?

Ethiopian Airlines was first established 65 years ago, and since that time they have been promoting Ethiopian culture and commodities all over the world. Today, in terms of attracting tourists, Ethiopian Airlines has played a vital role.

Ethiopian Airlines plays a huge role in bringing passengers here, and the airport is becoming more and more of a transit hub. Would you like to see Bole International Airport as an international hub and gateway for East Africa?

Yes, Bole International Airport is one of the biggest and fastest growing airports in Africa with a capacity of serving more than 5 million passengers per year.
In Africa, the market share for African Airlines is less than 20%. There are few African airlines which survived fierce competition in the industry. Bole International Airport has a strategic advantage to become transit hub for international and African passengers. Taking this competitive advantage into consideration the airport enterprise has started investing in airport infrastructure and facilities. Advanced radar technologies, highly sophisticated aircraft take off and landing equipments have been constructed. 

One goal is to increase the number of tourists here. Germans are the biggest spenders in tourism. How are you targeting German tourists? 

We have a direct flight to Frankfurt in addition to other parts of Europe. Europe in general and Germany in particular are the biggest markets we are focusing on in terms of tourism attraction and air transport service, as I said Germany is one of our first priorities in Europe in terms of attracting tourists and investment.

There are so many on-going projects, but what are the main responsibilities of your ministry? What is your main focus?

The main responsibilities and top priorities for the Transport Ministry are to make sure that planning and implementations of strategic projects like rail and road have been properly managed as well as checking whether quality has been ensured. We have a properly designed system to control and supervise whether institutions deliver the high priority projects timely and within their allocated resources. The other priority is enhancing the implementation and project management capacity of implementing agencies, enterprises and private contractors.

Moving forward, expanding rail and roads is not only crucial for domestic demand to develop Ethiopia, but also to open the country to international markets. What are your needs in terms of technology, know-how, and investment?

We have plenty of experience in road construction but the railway industry is new to our country. Ethiopia had built a railway line 100 years ago called Ethio-Djibouti railway, but now it is closed. Understanding the few experiences we have had in the railway industry, we have tried to focus on building the human resources and technological capability necessary to design, construct and manage railway projects. Training railway engineers and project managers is top priority, and a railway excellence centre has been created to ensure continued supply of trained human resources. Various mechanisms have also been designed to transfer knowledge and technology.

Of all these achievements, what is the one you are most proud of?

What I’m most proud of, of all the achievements that we have made so far, is the greatest capacity that we have created in terms of skill and know how, that can be a guarantee to sustain the growth that we achieved so far. We will aggressively continue training and educating the young generation so that the skills and knowledge needed to sustain our growth are ensured.

Where would you like to see the transport sector in ten years’ time?

I would like to see highly developed and advanced transport infrastructures and services. Over the last few years the government has invested a lot of resources to improve transport infrastructure and services with the aim to improve trade competitiveness.
In the next five years, I think the utilisation of IT technologies and intelligent transport systems, IT enhanced traffic and fleet management system and services will be major areas of investment in transport.

Do you have a final message for our readers about Ethiopia? 

Ethiopia has a sound investment policy to attract foreign direct investment. We would like to see vibrant German investors to come here and invest. Thank you.