ETHIOPIA: Interview with World Bank representative

[ This report does not necessarily reflect the views of the United Nations]

ADDIS ABABA, 18 Nov 2005 (IRIN) - Ishac Diwan is the World Bank representative in Ethiopia. The bank is the country's largest donor, providing some US $450 million of the $1.2 billion in development assistance Ethiopia receives each year.

Diwan spoke with IRIN on Wednesday about the institution's concern over political unrest and the impact of deteriorating governance on development. Below are excerpts from the interview:

QUESTION: What is the World Bank's view on recent events in Ethiopia?

ANSWER: Recent events are doubly painful, because of the loss of life and also in terms of the great risks to the good development outcomes we have been seeing. We have seen a deterioration of governance - rule of law, free press and human rights. This is very detrimental to development efforts. We have been calling for dialogue and cooperation as the best and only way to resolve the current impasse.

Q: What good development outcomes had you been seeing?

A: In the past two years, we have been seeing double-digit growth. We are seeing growth in agriculture and in the private sector. We have seen that past efforts in building roads are starting to give rise to dynamic small towns. We have seen a horticultural rose revolution. We are also seeing more efforts in new sectors like construction, tourism or the information and communication sector. There have been major gains in education and against malnutrition. The possibility that Ethiopia is turning the corner, getting on the path of long-term growth, is - or was - quite incredible.

Q: Why do recent events jeopardise that growth?

A: They jeopardise growth in a number of ways. They affect the investment climate. If governance deteriorates, growth not only falls but also stops being pro-poor. They also affect macroeconomic stability. In the recent past, there has been a series of shocks, the question mark over donor support being only the last one. It comes on top of a huge increase in imports of oil, which has increased from $300 million two years ago to $900 million this year.

High oil prices have not been passed on completely to the consumer. Since December 2004 they have been subsidised from the budget, and that is not pro-poor. The risk there is that social expenditure will be cut, which will hurt the poor and deepen the country's poverty trap.

Q: Do you think Ethiopia has strayed seriously from the road to democratisation?

A: We are a multilateral organisation so we don't have the freedom of the bilaterals to have political positions. We rely on the ambassadors’ group for the political dialogue, and we take note of its results, which affects the way we work. But I can say this. There was an attempt at democratisation that went relatively well until voting started. There was record high participation in the election. Since then, there have been deep divisions, violence with loss of lives and thousands of detentions. There are claims and counterclaims as to why this situation has materialised.

It is still not clear how the situation will be resolved. The jury is out. But this is an unsustainable situation and a resolution is needed very soon.

Q: What do you see as measures that need to be taken?

A: Again, we are a multilateral organisation and we focus on development. This is our mandate. From a developmental perspective what we want to see is the rule of law established, the participation by civil society, a dynamic and free political process and a free media. We are calling on Ethiopians to increase dialogue at this difficult moment. It is a very sensitive moment. Everything most be done to protect the poor from being affected. The central challenge is, to what extent it is possible in the current environment to shield development from partisan politics. The political transition is important but very painful. Is it possible for a country as poor as Ethiopia to come together and say 'Our development effort is sacred and there are a lot of elements on which we agree and these should not be affected?'

Q: Have you put a time frame on when you would like to see improvements?

A: As soon as possible. This is not business as usual. We have tried to ring the alarm bells and will continue to do so. We are already starting to do business differently. The World Bank is quite disciplined. The amount of support we provide to a given country depends on its population size, the extent of poverty, and the quality of its policies. If governance declines, aid amounts would fall over time. That assessment takes place every year, and the next assessment will be carried out in a few months. In the short term, however, what will be more affected will be the modalities of our support, whether we give it to the budget or in a much more structured and "projectised" way. We will be focusing much more on governance issues - both the World Bank and the other donors have received positive signals from the government and others about focusing much more on good governance.

Q: Some sectors have urged cuts in aid. Should aid be cut?

A: I think this is the big question for the development community to ponder. Ethiopians in government, civil society and the opposition will also influence the answer in how they behave in the next weeks.

The development community has not been very good until now in situations of deteriorating governance. Up until now we have been much better at situations of good governance or post-conflict situations, to come back and reconstruct. There have been recent cases where the donors have left too quickly and exacerbated the crisis, hurting the development efforts and especially the poor. So Ethiopia will be an important test case.

It is very important now to do several things. To really open dialogue with civil society, government, the opposition, the private sector on the usefulness of the various aid programmes. We are ready to put these programmes on the table and ask in which way are they partisan. Our work here is a long-term relationship intended to benefit the Ethiopian people. We would have to carefully measure our response in the best interests of the Ethiopian people.

As I said earlier, aid will fall over time if governance does not improve, because the effectiveness of aid is reduced in environments with poor governance. But we should not divorce rapidly; we need rather to rearrange the relationship. We will do all we can in the short term to reorganise our programmes to ensure they reach the poor and reach out to all segments of society, to ensure that our programmes are supported by all. We are extending our hand to all groups, including the opposition, in order to review our programmes to try and build broad support.

Q: Is that a shift in aid from the government towards the people?

A: There is a possibility to move projects outside of government. But this is limited in scale. People get organised for mass service delivery through the state. If you want to build and maintain thousands of schools, at reasonable cost, or to transfer resources for work programmes to millions of people, the public sector remains the best system. But to use the public system as the main vehicle for service delivery, we have to be sure that the system has the kind of checks and balances necessary to avoid that particular interests capture public resources for their own political interests.

This has become increasingly more important as the environment has become more politicised. We can rely to some extent on external checks and balances, for example independent audits. But eventually, what is needed to enforce accountability is a free society, a free press and transparency of information.

There are several programmes such as roads or energy that can be more easily immunised from the risk of political capture. It is harder in programmes where the state has more discretion, programmes where the targeting of beneficiaries needs to be done at various levels of government. Good performance in such programmes depends on three dimensions, which we try to measure regularly: voice and empowerment, capable staff and institutions, and good financial management.

In Ethiopia, the main weakness is in the first dimension. The country has good traditions on financial management and has low levels of corruption. It tends to be moderately good on having effective institutions. The current situation exacerbates the risks of decline in voice and empowerment. There is also a risk of losing senior government officials who do not want to be associated with what the government is currently doing. Ultimately, declines in both of these fronts would affect the levels of corruption.

Q: By what amounts would aid be affected?

A: It is very difficult to say at the moment because all donors are reviewing. The decision will depend on the developments. I think the modalities will definitely be affected - where the money goes.

Q: You can't say clearly that aid will be cut?

A: In the short term, the total aid envelope will almost certainly fall this year, at least compared to expectations. The question is by how much.

Q: Does the current border situation feature in concerns by donors?

A: It has always featured. If there were a conflict it would be terrible. We support conflict resolution. We have also always stated that the goal of scaling up international assistance, which is very important for Ethiopia because it gets a small share of what it should get, that goal is not realistic unless this situation is resolved. Of course, scaling up is not at all realistic under the current circumstances anyway, but what I am trying to say is that in addition to a good resolution of the current political difficulties, the border issue would also need to be resolved before Ethiopia could credibly claim its true share of international assistance.

Q: Do you think this situation has stayed the same or gotten worse?

A: It has not improved. All in all, the current environment is extremely challenging, with multiple issues possibly feeding into each other. This is an important moment where the country should come together to address the historical challenges it now faces.

[ENDS]