Quest For Global Public Investment

Hello and welcome. This is MN's weekly program, Talk to Addis, and I'm Gemmachi Samandida, bringing the program to you. Today we'll be talking about investment in general, but specifically global public investment. And today we are joined by Dr. Semena Bassey, who is an associate professor and also a PhD and a managing director of IDATA Technology Center in Ethiopia. Dr. Semena, welcome to our program. Let me ask you to tell us, you know, briefly what we mean by this global public investment. Yeah. Global public investment, known as GPI, is a new concept. It is a funding, a new funding model, which is actually very inclusive, very dynamic, flexible, and innovative, which will be important for nations. So the intention of bringing this concept is actually, as I did say, it is a new concept and requires, you know, awareness creation. And I'm actually promoting to socialize the concepts of GPI in Africa in general, and particularly in Ethiopia. You are the main author of an article titled, The Quest for a Global Public Investment. As an author, what motivated you to write this article? Tell us, please. Nowadays, if you look at the world, there is a cold, what you call the global triple C challenge. There is problems of COVID, the conflict, and conflict in this country, and global actually. And yet this transboundary or, you know, cross-boundary problems has not yet been addressed single-handedly. And therefore, it requires collective action and solidarity and cooperation of the global nation in general. Particularly, if you look at the impact of climate change, it has been disturbing the global economy. And also, particularly triggering food insecurity and exacerbating poverty in Africa. And therefore, I was very much concerned, and in fact, I'm the main author of the article. There are colleagues from Ethiopian Economic Association, and this article was actually financed by development initiatives. If you look at the past international economic order and the new economic order of the Second World War, it has failed actually to address the interests and priorities of development nations. And actually, we need, you know, a new economic order, a new economic, you know, system, financing system, and just like the BRICS. And the BRICS is another important that can substitute probably the new economic order of the World Bank and the IMF, you know, IMF. And if you look at the so-called the Bretton Woods Institution, that means the IMF and the World Bank, they are not, you know, flexible, their narrative is wrong, and it is all outdated, and which realize actually the donor and the recipient narrative, which we don't like as an African country. And therefore, this is actually the motive that encouraged me to write a new funding model, which is actually important. And I wish Ethiopia as a nation and all other stakeholders should take, you know, a motivation to socialize the concept of global public investment. I just tried to skim, you know, your article a little bit, and I just came across, you know, the term the global triple challenge. Can you tell us about it, please? Yeah, as I've tried to mention that the global triple challenge are the global challenges, not only the Ethiopian challenge, not only the African challenge. If you look at the COVID for instance, COVID might have started somewhere probably in China, and it has covered all over the world. And yet, the impact is catastrophic. So if you look at the, you know, the vaccine, and also if you look at the impact, the consequences particularly in Africa is very serious, despite adequate, you know, vaccines for COVID, right? If you look at the impacts of war, for instance, if you take the Russian-Ukraine war, it has been affecting the global economy, particularly in the African economy in terms of, for example, in fuel, fertilizer, and increasing the price of goods and services in Ethiopia. And that has to be addressed. Another part of, of course, a component of triple C challenge is the climate change. The climate change has become trans-global, trans-boundary challenge, which requires actually a collective action and global cooperation in order to address the global three challenge. And it is impossible. And of course, you know, the new financial order, the IMF and the World Bank procedure didn't allow us to address this global challenge. And therefore, it is important to promote. It is only through this fair, more dynamic, flexible funding model that we can address this global challenge. Well, I would say IMF and the World Bank, their operations have, I think, attempted, you know, to deal with projects in African countries and the developing nations in general. And we've been receiving, you know, funds from these organizations, these huge organizations, the IMF and the World Bank. But still, you are telling us that the way they have been doing business with African countries was not good enough. Can you tell us, you know, the gap that you have observed? Yeah. My argument, and of course, most developing nations' argument, and particularly if you look at some of the African leaders' argument, including our prime minister's argument, is actually there has to be reform in the financial procedure, the rules, and the values of this IMF and World Bank. Because we need to teach, you know, a fish, not to give us the fish. However, if you look at their narrative, they are the giver and we are the recipient. And also, we rely on the donor's interest, the IMF's conditionalities and terms and conditions. You don't prioritize. We don't want to let them to plan for us. We don't want to let them to set an agenda for us. So, however, the discourse, the narrative is actually the donor-recipient model, which was actually less democratic. If you look at the IMF and World Bank administration, and the top five countries have dominated about 30% of the share and decision-making power in other words. And if you look at the top, you know, 20 countries, they have about, you know, 30% of the share to make a decision, to make anything, to maneuver anything. The rest, about 162 countries, have only and invisible about 30% of shares in making a decision in their structure. And therefore, we don't want the top-down approach. And rather, we need more flexible, more inclusive, more dynamic, and that actually avoids dependency and actually we want to maintain our moral. Let's go to, you know, allocation of resources to projects and meeting societal needs, especially in developing nations like ours. Are you implying that, you know, the IMF and the World Bank have not been giving, you know, enough to projects and, of course, you know, other public societal needs? No, I don't mean that. They have been, of course, the IMF and World Bank group has been giving a huge amount of money to Africa. But then what happened? Still, African countries are under poverty. We're food secure. And particularly, if you look at the Ethiopian context, Ethiopia has been receiving aid and grants from IMF, the World Bank, the UNDP, and Western countries in general. And the volume of aid have been increasing from time to time. So, and yet, still, we are not enabled to address particularly the issue of climate change, the issue of conflict, and also we are not yet enabled to, you know, significantly reduce our food security and still we are under poverty and the majority of Ethiopian people have been under poverty line. And therefore, yes, there has been, we need the aid and the official aid. We need the aid. And yet, however, there are two theoretical frameworks with regard to the aid. One is the aid is the necessary and in the necessary condition for economic growth. And others say that it affects actual, it is the determinant factor that affects the economic growth of Ethiopia. And others, however, particularly in African countries, you know, African authors, and Moyo was the now Tanzanian macroeconomist who tried to argue that aid has brought, you know, zero benefit to the economic growth of African country. And African country has become more and more dependent and there is a moral hazard and according to her argument, however, aid has brought zero economic growth and even become, the African people has become more and more dependent and more and more poorer and poorer. But if you look at the Ethiopian context, the aid has, we see the aid in different context. So the aid depends, however, the impact of aid depends on the institution, I mean institution in the sense of formal institution, the way we manage the aid. So, and if you look at the aid, the impact of aid in Ethiopian context, it has, there is no direct correlation between an official aid and an economic growth. There is fluctuation. In absence of aid, for instance, adequate aid, because of the amount of aid nowadays has declined significantly. The IMF, the World Bank and the Western has not been giving me an aid for us now, but still there is an economic growth, which implies there is no direct correlation between aid that we receive from the Western and economic growth. But the problem is in African countries in general, there is a fungibility. Fungibility, what we call, there is diversion of aid. So whenever African countries receive aid, they use for different purpose. There is also corruption and rent seeking and attached to the aid and a lack of absorbing capacity in the sense that there is a lack of capacity to absorb the aid and actually and use and properly utilize the aid. Another important problem, as I did say, with regard to aid is actually the conditionality. The conditionality in the sense they put conditions. For example, the Western were interested to give us aid or money, the IMF were interested to give us the money, but they want to devalue our currency, for instance. They want to make, bring and change different structural change as per their wish and interest, which is not actually violation of sovereignty of the country. So that's why often we say that official aid system has slowed the economic growth of African countries. Dr. Sumeda, I have a serious question here. Look, a lot of money from Western countries has been pumped into African economies and we've been receiving, you know, aids from IMF and World Bank, you know, throughout all these years. And I think that you are suggesting, you know, this GPI is an alternative model of funding for developing nations such as ours, Ethiopia. But what makes you say so? What's different in this GPI? If you look at the empirical evidence on the existing global financial architecture, the current context, one, there is lack of sufficient funds to invest on health. That's why we are harmed. Because of COVID, no adequate finance has been given. No adequate, that's not fair. Second, as I did say, the climate change issue, it's a global concern. It is not an Ethiopian case. And yet we have been harmed for no reason. And if you look at also the humanitarian crisis, the disasters, and also even the African free trade concept, we are not able to finance as per our plan. Again, if you look at the existing international public, you know, financial architecture, by the way, it's not fit for the current 21st century context. As I did say, if you look at the core structure, the way the global financial architecture, tech, IMF, or the World Bank Group, then if you look at the board of directors, if you look at the executive committee members, you don't find an Africans. So in the absence of Africans representation, how do you expect the many that the African needs? And the system itself, even take the African Development Bank, which is owned by an African. It is really surprising that if you look at the African Development Bank, then the board of directors are being dominated by the Western. Because it depends on the share, the amount of share that you have. The more you invest on the share, you become decision maker. And therefore, we require radical change. We require the radical change. This is why, actually, our prime minister was actually requesting during the Paris financial conference, we require, we badly require reform in financial institutions, particularly in the World Bank and IMF. And this was actually President William Brutus also promoting that we are not beggars. The same is also the President of South Africa was also encouraging, and now promoting, insisting that the world has to know, and that we are not beggars. There must be a financial institution where African countries will contribute, will utilize, and decide, which we call the GPR. And as you know, this is very skewed. It is skewed. It is, we don't want the North to South. So the North is giving, and South is the recipient. And therefore, we need, as I did say, and all policymakers, development partners, in general, and particularly African leaders should understand, we scholars have to create, and promote, and push, and of course publish in the GPR how GPR is important for African countries. Let me ask you this, because as you give this explanation, it crosses my mind, which is, as you said, many African leaders in earlier days have been saying, asserting that unless and otherwise Africans become producers, users of their own raw materials, decision makers over their raw materials, unless and otherwise this happens, there's no way that they can come out of this rampant poverty. Do you think this GPR will allow African nations, including Ethiopia, to make producers, users of their own raw materials, so that they can serve foreign currency? What do you say on this? Yeah, thank you very much. As you rightly said, there is a so-called aid tank. A tank is nothing, but it is the system of the Western, or I could say the Bretton Woods Institution, the IMF and World Bank system, they will give us aid, they give you aid, and then that is tight. In the sense that you are going to buy the goods and services from their country. So in one hand they send the aid, in the other hand they take the money in one another way. They give you 1% and they take 2%, more than 2% of the money. So, and therefore, we recommend, we need to, that has to be, that's an old-fashioned, and we Africans, and my argument is we need to go for GPR. And the beauty of GPR is actually, it diversifies the international funding sources. So it diversifies. It's not a monopoly of some, you know, the IMF and World Bank dominant countries. So that's one beauty of the GPR. The second is it diversifies the decision-making. You know, as I did, the top 10 countries or the top 5 countries are making a decision, for example the US and UK. And the UN countries are becoming decision-makers for everything. And therefore GPR is, however, a more relevant, inclusive, flexible, and sustainable source of money that creates actually mutual trust. Now the African countries have lost the trust for IMF and the World Bank. And they are now responsible to, you know, contribute and actually to be involved. They have to be, they must be involved. They don't want to, no more, you know, dependence. That's it. Yeah, okay, good. Still, I want you to tell us, you know, about the relevance and significance of this GPI to the developing world in general, in terms of, you know, utilisation of technology. Well, when I mention this, we know that Africa is, and even, you know, Asian countries are also rich in resources. They have natural resources which haven't been tapped yet. And unless and otherwise you have proper technology, adequate technology, you cannot utilise, you know, the resources that you have. And we know that these Western countries are ahead of us. And unless and otherwise they offer us, you know, their technology, do you think, you know, is there a way that, you know, we can utilise our resources? And if the case is that, you know, they wouldn't allow us to access their technology for usage, then do you think, you know, GPI, you know, has something to do here? Ethiopia is one of the richest in terms of natural resources, mineral resources, water resources, forest resources, the fauna and the flora. We are one of the blessed countries in the world, and yet one of the poor countries. So I don't mean that we don't want technology. We want the technology, but that has to be selective. If you look at the GPI, in terms of ambition, right, in terms of ambition, you know, the former, you know, funding model, the IMF and the World Bank model focus on, for instance, on poverty reduction. But we want beyond that. The GPI focus on not only poverty, but we want to be justice and, you know, equity and also sustainable development. Second, if you look at, you know, in terms of narrative, the discourse, and they try to patronise, you know, what you call the foreign aid, and rather we don't want that. We don't want foreign aid. We want to empower multilateralism of the common endeavours. And even if you look at the governance, the governance, which as I did say, and this global, you know, financial institutions are being monopolised by few institutions, that has to be, it has to be, you know, democracy. It has to be democratised. And in terms of geography, as I did say, there is the North-South transfer. That has to be changed. And it has to be universal, where we all will be paying in and make a decision and govern. I think you are insisting that, you know, institutions or individuals from developing nations should be, you know, part of this global financial funding organisation, so that, you know, it needs to find a way to allow, you know, these developing nations, you know, have access to the fund that they need, the technology they need. There is a thinking behind GPI. The thinking was actually is co-operation. There must be co-operation. We need to set agenda. There is no way that the Western set agenda and send as many. We don't want that. So co-operation. The second is equality and sustainability. The focus, we don't want them to focus only on the poverty reduction. We want it, that's what I said, the ambition. And therefore we need to think out of box concept. So tell us, you know, the significance and relevance of the changes, the progresses, you know, that this GPI, you know, potentially can bring to Ethiopia. Yeah. Thank you very much. I was promoting that Ethiopia should take the leading role. I was reaching an African Leadership Excellence Academy to take the leading role of bringing to the attention of leaders the importance of GPI to Africa in general. And as one of the pan-African, you know, country, member of the pan-African country. You know, if you look at its role of, in terms of financing, you know, sustainable development goal, Ethiopia has a commitment to address, you know, the sustainable development agendas. And to this effect, Ethiopia has set a plan, a 10-risk perspective plan, and a home-grown economic policy. And yet, in order to address this, we need a finance. We need the money. And that money has been promised by the IMF and the World Monetary Fund, huge money, probably about $10 billion. And yet, they promised at the end of the day, and it has become a false promise. It is not an easy task to implement. One is a political commitment. The political commitment is important. There is a green light from African leaders. That's important. Second is, since the GPI is a new concept, as you said, there might be resistance to substitute this old-fashioned, you know, structure. Second is that there is so-called the collective action and freight rider problem. So whenever you invest on the public goods, and the GPI is all about investing on the public goods where everybody can, and it's very difficult to exclude others. So sometimes there is excludability, I mean, political feasibility. And therefore, my final recommendation is actually, and expectation from Ethiopia is actually, is to initiate, to socialize GPI in Africa in general, in particular in Ethiopia, and initiate a political support, influence leaders, and also organize forums, public forums, and promote the media should actually, you know, bring this kind of policy agenda to the attention. And we need to conduct the research. Dr. Semenya, thank you for coming to our place and have this particular interview. You've been watching Airman's Weekly Program. Talk to us. This program ends right here. Next time, we'll come up with a new edition. Until then, goodbye.