November 19, 2005

Ethiopia unrest shakes business confidence

By David Mageria

ADDIS ABABA (Reuters) - Abdilazik Hussein's tiny shop in
the Ethiopian capital Addis Ababa is full to the brim with
white robes, headscarves and copies of the Koran.

Usually, the end of the Muslim fasting month of Ramadan
allows the 32-year-old trader to rake in the biggest profits of
the year as customers snap up his goods to offer each other in
celebration of the Eid al-Fitr festival.

But this year, he was forced to shut shop as riot police
fired tear gas and live rounds at stone-throwing protesters
angry about a disputed May parliamentary poll, shooting dead
more than 40 people in Ethiopia's worst violence in months.

"What I have lost in the last three days is equivalent to
my entire income for the whole year," Abdilazik said.

He reluctantly opens the shutters of his shop in the
volatile Mercato area where the clashes started, feeling he
must because the government has threatened to revoke his
trading license if he does not, but fearing there could be
further violence ahead.

Across Addis Ababa, many shopkeepers are still struggling
to repair windows and doors damaged in a spate of looting
during the clashes sparked by calls for protests by the biggest
opposition party, the Coalition for Unity and Democracy (CUD).

Political tensions in Africa's top coffee-grower have
heightened since the May 15 parliamentary election amid growing
opposition claims of vote-rigging and intimidation.

Prime Minister Meles Zenawi's government denies fraud. But
the unrest and security crackdown in which thousands of people
were arrested and most opposition leaders jailed has fueled
fears for the stability of the Horn of Africa's dominant power.

The business community says November's violence, coupled
with clashes in June in which 36 people were shot dead by
police, has worsened the commercial environment in Ethiopia, a
donor-dependent country whose economy relies heavily on

"Business generally for the last four years has not been
that buoyant," said Eyessus Zafu, president of the Addis Ababa
Chamber of Commerce, a body that represents more than 10,000

"While there may have been other reasons, recently there
has been a lot of political uncertainty. Business does not like
uncertainty," he told Reuters in an interview.


Eyessus, a successful businessman who chairs the board of
leading bank United Bank and is managing director of United
Insurance Company, spent 18 years in exile during the reign of
Marxist dictator Mengistu Haile Mariam, ousted in 1991 by
Meles' former rebel movement.

He only returned after Meles promised to promote democracy,
end mismanagement and pursue free-market policies to improve
the economy -- similar issues the opposition rallied for.

Eyessus said that while the economy has recorded noticeable
improvements under Meles, the recent problems exposed a serious
decline in living standards especially among youngsters.

The uncertainty has prompted investors to adopt a
wait-and-see attitude.

"What I saw were young people who have lost hope. It was
probably the worst example of the country's destitution,"
Eyessus said.

"Ethiopia, and let me say Addis Ababa in particular, has
not been generating enough employment opportunity for the
growing young population that has to be given a stake in the
society -- that is the most worrying aspect of the present

Ethiopia, sub-Sahara's second most populous country after
Nigeria, is ranked the seventh poorest in the world.

Although a top producer of high quality coffee, it has some
of the highest rates of HIV/AIDS infection and unemployment in
the world.

Meles, who accuses the CUD of plotting a rebellion against
his government, has repeatedly blamed unemployment for the
violence in the capital where he says 300,000 youths are idle.


Experts say Ethiopia has implemented reforms in the
agriculture sector and the civil service and introduced tax
measures that have improved domestic revenue collection.

But they say Ethiopia needs to accelerate privatization and
restructuring of state-owned banks, allow the entry of foreign
banks, ensure there is security of land tenure and improve its
legal and regulatory environment.

The economy recorded an average growth of 5.3 percent
between 1993 and 2002 but contracted by 3.9 percent in 2002/03
because of drought and the effects of a border war with

The government expects gross domestic product growth of 7
to 8 percent this year, accelerating to 10 percent in the next
five years, to help create jobs.

Eyessus faulted the ruling Ethiopian People's Revolutionary
Democratic Front party's development plan which he said places
a lot of emphasis on rural populations, virtually neglecting
urban areas.

"We need rural development but not at the expense of
neglecting the exploding population of the youth in the city,"
he said.

"The youth that yesterday were begging for a loaf of bread
or for a few cents will soon stop begging. They will soon start
demanding and if they can't get enough, will soon start killing
for it."

In its latest review on Ethiopia, the International
Monetary Fund calls for increased external aid to help Ethiopia
accelerate and deepen economic reforms.

Critics have called on the donor community, which gives
Ethiopia more than $1 billion a year, to squeeze aid as a means
of forcing Meles to negotiate with his opponents.

"I would advocate strongly against stopping humanitarian
aid to this country and to some degree development aid as well
because how do you get out of a humanitarian problem if you do
not have development aid?" a senior western diplomat said.