News Column

Unrelenting Stance

July 7, 2014

Dawit Taye

The debacle between members of the private sector and the government regarding access to finance has continued this week where Prime Minister Hailemariam Desalegn reaffirmed the unflinching position of the his administration on the 27 percent NBE-Bill directive and the availability of finances for those in the manufacturing sector.

The meeting organized under the Public-Private Dialogue Forum (PPD) brought together representatives of the of the business community and government officials to deliberate on pertinent issues facing the Ethiopian business environment at the Millennium Hall from Monday to Wednesday. The overall gist of the questions of the business community circulated around the availability of finance; specifically bank loans. The PM , who attended the forum on Wednesday, was firm to dismiss the notion of shortage of finances. He argued that Development Bank of Ethiopia (DBE), the policy lending arm of the Ethiopian government, is availing adequate amount of financial resources exclusively to the private sector and members of the business community. "In fact, the private sector took 52 percent of the overall loan disbursed during the past ten months," Hailemariam argued.

According to the PM, during the same period, DBE alone has provided some 22 billion birr to members of the private sector. However, there is a twist to that. The policy lending institution lends only to those in the manufacturing sector or planning to join the sector. What is more bizarre is that almost all of the 22 billion in loans was advanced to foreign firms which are coming to Ethiopia in the form of Foreign Direct investment (FDI). According to the PM, this was because there was no local firms who step up to take the loan. "With the exception of 2 billion birr which went to state owned enterprises and even a less amount that was advanced to few private firms, all the credit went to foreign firms," Hailemariam said. So, the notion that there is a serious credit shortage in Ethiopia is not true, the PM explained to members of the private sector, maybe with the exception of businesses which are not priority to Ethiopia at the moment. On the other hand, the PM dealt with the longstanding complaint of the private sector against the 27 percent NBE-Bill directive and its implication to access to credit. Hailemariam challenged the petition on both ideological and practical basis. He accused the business community of echoing the international organizations like the International Monetary Fund (IMF) and World Bank. They push for the repeal of directive based on their ideology, the PM argued. According to his explanation, the NBE-Bill directive seeks to reallocate the funds from the less productive domestic trade and services sector to manufacturing. "We are not going to facilitate more imports of cheap consumer items commodities while there is the chance of promoting their production domestically," he explained. At any rate, the PM said, the finances channeled towards DBE is dedicated to the private sector anyways. According to reports, thus far, 24 billion birr worth of NBE-Bill is purchased by the 16 private commercial banks in the country.

The petition of the business community can be seen to evolve over time, however. First it was the total repeal of the directive they were after, while over time the business community offered various milder adjustments to the directive starting from reduction of the 27 percent requirement to exemption of loan portfolios to the manufacturing sector. The PM denied all adjustment or any alternations to the 27 percent directive. In fact, the business community went as far as asking support to get access to foreign credit. However, the PM rejected the idea of borrowing from foreign financial institutions since it repayment will drain the country's foreign currency reserve.

It is the second time that Hialemariam meet the business community under the PPD platform since he assumed the position. The platform which aims at creating a dialogue forum between the private sector and the government in hopes of fostering public private partnership. The platform has various layers where government officials at different levels meet the representatives of the business community. The meeting with PM is the highest tier which is scheduled to happen one a year. The platform was in fact initiated during the tenure ship of late prime minister Meles Zenawi who never got around to meeting the business community on the PPD.

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Source: AllAfrica

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