1. Earth Day
Causes, Impact, and Resolution
of the current
‘Financial Crisis’ on Environment
and Development in Ethiopia
Ministry of Agriculture and PHE Network -Ethiopia
Faculty of Business and Economics, Addis Ababa University
April 22, 2009
BT Costantinos, PhD
Centre for Human Environment
Lem Ethiopia, The Environment and
Development Society
costy@costantinos.net

2. Contents
1.
Policies and Institutions of the environment in Ethiopia
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2.
How bad is the financial crisis?
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3.
Environmental Policy Strategic issues
Ethiopian Forestry Action Programme
National Conservation Strategy
The world of derivatives
Marx’s critique of Capitalism
Financial Shenanigans, Greed and Capitalism
Towards a New Global Financial Order
Could China be the answer to Africa?
Federal Consultative Council on Fiscal Affairs
It is fashionable to talk about climate change when the
fundamentals of the Ethiopian environment (policy,
strategy and institutions) are not dealt with
Thursday, January 16, 2014
Earth Day Lecture - BT Costantinos, PhD
Slide 2

3. Institutions and policies of environment
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Perpetually, the issue of environment in Ethiopia is
invariably linked to the forestry sector;
Ethiopia has lost most of its high forests in the past few
decades. As a result, development efforts were started
with the establishment of forestry institutions, which
were made responsible for managing the country's
forest resources;
In a nation haunted by famines organisational
imperatives of the sector play an important equation, a
luckless sector that has been changing names since its
establishment. Indeed, the frequent reorganisation
processes, the absence of appropriate institutional
setup and the resulting lack of institutional stability has
been one of the major hindrances to the development
the forestry sector in Ethiopia. These have contributed
much to the weakness of the sector
The frequent restructuring process of the sector has
caused hardship to the employees and has contributed
to the low morale of the professionals.
Thursday, January 16, 2014
Earth Day Lecture - BT Costantinos, PhD
Slide 3

4. Institutions and policies of environment


Environmental Policy:

Since the emergence of a forestry service in 1940, there has
been no forest policy in Ethiopia. Instead, forestry
proclamations have been serving as a policy basis for
conservation, development, and utilisation of forest
resources

In 1991, the Transitional Government of Ethiopia created a
favourable atmosphere to develop appropriate forest policy
and legislation including private sector afforestation
Strategic issues: Prior to 1975, over 70% of Ethiopia's natural
forest was owned by few individuals that practised tree planting.

Ethiopian Forestry Action Programme (EFAP): EFAP
is a government initiative aimed at conserving, developing,
and sustainably managing the country’s forest resources.

National Conservation Strategy (NCS) : To mitigate the
pace of environmental degradation and establish a viable
natural resource management, the country has prepared the
NCS under whose umbrella is the EFAP
Thursday, January 16, 2014
Earth Day Lecture - BT Costantinos, PhD
Slide 4

5. Institutions of the Ethiopia environment
1.
2.
3.
4.
5.
6.
7.
Early 1970s - the State Forest Development Agency
(SFoDA)
1977 - The Forestry and Wildlife Development
Authority (FaWDA).
1979 - Forestry and Wildlife Conservation
Department under MoA.
1980 - The Forestry and Wildlife Conservation and
Development Authority (FaWCDA) was created
1984 – main department under MoA
1993 - Ministry of Natural Resources Development
and Environmental Protection (MoNRDEP)
1995 - the MoNRDEP was abolished, and FaWCDD
was placed back under the MoA reorganised into a
Team
Thursday, January 16, 2014
Earth Day Lecture - BT Costantinos, PhD
Slide 5

6. The Global
Financial Crises

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
With the global markets in crisis, economies in the
developed world are hitting a new low that is leading to
the 1930s depression.
The rescues, bankruptcies and dizzying write-downs
signal a reckoning for Wall Street wizards who engineered
the credit crisis with opaque securities based on risky
subprime home loans with the assumption that prices
would never decline. The liquidity capacity of these
markets was overwhelmed.
The market was primed for subprime. The market for
credit default swaps foundered, and co-movement on
other debt instruments spiked dramatically. The interbank markets froze
Thursday, January 16, 2014
Earth Day Lecture - BT Costantinos, PhD
Slide 6

7. Financial shenanigans - greedy capitalism
Africa loses an estimated
USD 148 billion annually to
corrupt practices (25% of the
continent’s GDP). The
amount of money extorted
and stolen each year from
developing countries is
assumed to be over 10 times
the approximately USD 100
billion in foreign assistance.
TI estimates that despots
around the world have
siphoned-off billions from
their country’s coffers for
personal gains
Thursday, January 16, 2014
Earth Day Lecture - BT Costantinos, PhD
Slide 7

8. The world of derivatives
Economists believe derivatives will allow more precise pricing of
financial risk and better risk management, while they concede that
when derivatives are misused, the leverage that is often an integral
part of them can have devastating consequences. The world of
derivatives is peppered with brainteaser lingo:

a forward contract commits the user to buying or selling an asset at a
specific price on a specific future;

a future is a forward contract traded on an exchange;

a swap is a contract by which two parties exchange the cash flow linked to
a liability or an asset;

an option is a contract that gives the buyer the right, but not the
obligation, to sell or buy a particular asset at a particular price, on or before
a specified date;

an over-the-counter is a derivative that is not traded on an exchange but
is purchased from, say, an investment bank;

exotics are derivatives that are complex or are available in emerging
economies and

Plain-vanilla derivatives, are typically exchange-traded, relate to
developed economies and are comparatively uncomplicated.
Thursday, January 16, 2014
Earth Day Lecture - BT Costantinos, PhD
Slide 8

9. Marx’s critique of capitalism

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Marx argued that this alienation of human work is
precisely the defining feature of capitalism. Capitalist
mode of production developed in Europe when labour itself
became a commodity
Marx believed that this cycle of growth, collapse, and
growth would be punctuated by increasingly severe
crises. Many proponents of capitalism have argued that
capitalism is a more effective means of generating and
redistributing wealth than socialism or communism, or that the
gulf between rich and poor was a temporary phenomenon. Some
suggest that self-interest and the need to acquire capital is an
inherent component of human behaviour, and is not caused by
the adoption of capitalism
Contemporary Marxists argue that Marx was correct
that human behaviour reflects historical and social
conditions. His analysis of social class and commodities is still
very useful, that his critique of capitalism can easily be applied to
the current global situation, and that alienation is still a problem.
Thursday, January 16, 2014
Earth Day Lecture - BT Costantinos, PhD
Slide 9

10. Does the Crunch affect Africa?
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Businessmen and budding entrepreneurs have always
moaned about the excessive regulations and conservatism of
African banks. Controls on foreign exchange often prevent
them raising more money by investing in exciting financial
instruments. Foreign ownership of banks is unusually
limited. Now, however, this very de-linkage from the Western
financial system has turned out to Africa’s advantage. Its
banks have almost no exposure to the subprime market
causing such havoc elsewhere in the world.
There is a reasonable chance that Africa may survive the
current world financial crisis less bruised and battered than
some other parts of the world. The very factors that damaged
the continent in the past may now be working in its favour
No one doubts that Africa will feel the effects of the
crisis eventually. As world trade contracts, so will the
demand for Africa’s oil and minerals, the main commodities
behind its current boom and aid pitfalls.
Thursday, January 16, 2014
Earth Day Lecture - BT Costantinos, PhD
Slide 10

11. China’s Africa answer
China's hunger for African ex ports
3500
3000
1 9 9 9 =1 0 0
2500
2000
1500
1000
500
0
Soy a bea n s
1 9 99
2 001
Cr u del oil
2 003
2 005
Min er a ls
2 007
Thursday, January 16, 2014
Earth Day Lecture - BT Costantinos, PhD
Slide 11

12. Greed is gone - Wall Street, the sequel

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20th Century Fox is already working on a sequel to
the 1987 classic, “Wall Street”, with Michael
Douglas mulling a reprise of his Oscar-winning
role as Gordon Gekko, the predator-in-chief of the
junk-bond boom
But what will Gordon Gekko be like when he is
back? era-defining catchphrase in the original,
“Greed is gone” (a mis-quote: it was actually
“Greed—for lack of a better word—is good”), jars in
these harsh times. “Greed—provided it is
sufficiently regulated—is tolerable” might be more
appropriate now.
The studio might also want to rethink the working
title, “Money Never Sleeps”; just now many
people’s money is under the mattress -- given
rising anxiety that America has replaced redblooded capitalism
Thursday, January 16, 2014
Earth Day Lecture - BT Costantinos, PhD
Slide 12

13. Crises could forge a New Financial Order
1.
2.
3.
4.
A system needs to be designed where participants cannot
threaten the safety of the economy - this crisis is bad enough
that there's a better chance of doing something right ... than there
has been for decades.
The most obvious change in the financial markets is the
government's new role as a major owner of banks
The commercial paper market is likely to revive, but the
recent experience probably will make businesses more conservative
about using it. Many companies have relied on it for long-term
needs, repeatedly paying off each month's loans with new
borrowing.
To assess risks building up in the system, regulators are
sure to demand more transparency as oversight of
different types of securities needs to be more consistent -bets on individual stocks can now be made in various ways -- by
purchasing the stocks themselves, or through futures, options or
swaps contracts based on those stocks. The swaps market, often
involving individually tailored contracts, has virtually no
regulation.
Thursday, January 16, 2014
Earth Day Lecture - BT Costantinos, PhD
Slide 13

14. Aid for trade? Global Fund, G8,
G20, Pepfar, EU/ACP Lome,
Direct Budget Support, Aid
Harmonisation, Paris declaration,
Civil Society! What? Are you out
of your mind or crazy!!!
Is foreign aid
indispensable for
Ethiopia???
Thursday, January 16, 2014
Earth Day Lecture - BT Costantinos, PhD
Slide 14

15. Ethiopia: Total aid 2004-2005
(loans and grants)
US Millions
2500.00
2000.00
1500.00
1000.00
500.00
0.00
IFIs Loan
Eu Grants
America & Canada Grants
Europe Grants
IFIs Grants
UN Grants
Asia & Middle East Grants
TOTAL AID
Thursday, January 16, 2014
Earth Day Lecture - BT Costantinos, PhD
Slide 15

16. Aid Commitment (in USD Billions)
Ch a r t I: Et h iopia A id Com m it m en t
3000
2500
2000
1500
1000
500
0
2003/04
Mu lt ila t er a l
PBS
DBS
2004/05
Loa n
Bila t er a l
PBS
2005/06
Gr a n t
Loa n
T ot a l
Thursday, January 16, 2014
Earth Day Lecture - BT Costantinos, PhD
A v er a ge
DBS
Gr a n t
Slide 16

17. Ethiopia: Aid disbursement
Ch a r t II- A id Disbu r sem en t 2004-2006 in US Mil lion s
1600
1400
1200
1000
800
600
400
200
0
2003/04
Mu lt ila t er a l
PBS
DBS
2004/05
Loa n
Bila t er a l
PBS
2005/06
Gr a n t
Loa n
T ot a l
Thursday, January 16, 2014
Earth Day Lecture - BT Costantinos, PhD
DBS
Gr a n t
Slide 17

18. Ethiopia: Domestic Resources for Development
(In US Millions)
600
500
400
300
200
100
0
ADM INISTRATIVE AND GENERAL SERVICE
ECONOM IC SERVICE
SOCIAL SERVICE
ECONOM IC DEVELOPM ENT
SOCIAL DEVELOPM ENT
GENERAL DEVELOPM ENT
C. SUBSIDY TO REGIONS
Thursday, January 16, 2014
Earth Day Lecture - BT Costantinos, PhD
Slide 18

19. Ethiopia: Resources for Development
(2004, in USD billions)
2.5
2
1.5
1
0.5
0
Total Aid
Domestic Resources
FDI
Thursday, January 16, 2014
Earth Day Lecture - BT Costantinos, PhD
Slide 19

20. Financing Protection of Basic Services in Ethiopia
(in USD Millions)
EC, 89.84
AfDB ,
57 .33
KFW, 12.01
Gov 't,
331.08
IDA, 169.12
DFID,
149.88
Thursday, January 16, 2014
Earth Day Lecture - BT Costantinos, PhD
Slide 20

21. How does Ethiopia
escape from the current
financial crises and aid
dependency?
“To every challenge in Africa,
there is a tendency to always to
try find a solution that is smart,
simple, and immoral”
Thursday, January 16, 2014
Earth Day Lecture - BT Costantinos, PhD
Slide 21

22. How do we deal with the crisis in Ethiopia?
Proposing a Federal Consultative
Council on Fiscal Affairs
A Federal Consultative Council on Fiscal Affairs be
constituted from Ethiopians of all walks of life with a
potential for international advisory services as a forum for
consideration of the economic crises analysis and those
activities reflective of long-term national policies and
objectives and the challenges facing the Ethiopian economy
from a global perspective. This may inter alia, entail
economic policy analysis, formulation, and management in
relation to national policies and objectives and civil service
reform (recruitment modalities, merit of the civil service,
and remuneration) and recommend for approval, scenarios
and options for the legislature and the executive .
Thursday, January 16, 2014
Earth Day Lecture - BT Costantinos, PhD
Slide 22

23. Vectors of the financial crisis in Ethiopia


Lack of desirable levels of competent economic
management, efficient public services, and sound
infrastructure and the problems of government
adoption of strategies to overcome constraints to
investments in large, complex undertakings
Dearth of institutional capacity for policy development
and co-ordination and under-defined core business of
public sector and poorly managed restructuring of
public sector



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Lack of the review of the role of lending institutions,
dearth of sound information systems on micro-economic
behaviour and markets
lack of measures to promote informal sector and smalland intermediate-scale entrepreneurship: the supply of
indigenous managerial skills experience and expertise is
understandably limited and the skewed role of market
networks and lack of enterprise-level support systems
and adaptation and the ‘negative role’ of government and
NGOs in business
Thursday, January 16, 2014
Earth Day Lecture - BT Costantinos, PhD
Slide 23

24. Objectives of the crises management plans


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Since no one can claim to be developing all forms of
complex and uncertain systems, developing socially
responsible think tank capacity that has broad
based participation for all sectors of stakeholders in
Ethiopia is imperative.
Policy dialogue on this timely issue of competent
economic and development management will
legitimately enhance the leadership’s capacity to
effect change and develop the capacity, through
statements and actions: to shape debate, dialogue,
and morality, and eventually determine what is
socially acceptable, culturally sound and politically
uplifting.
Based on current experience and aimed at guiding
mainstreaming management at different levels, five
simple principles have emerged that attempt to
provide a comprehensive framework to analyse
where and when to introduce and implement
institutionalisation
Thursday, January 16, 2014
Earth Day Lecture - BT Costantinos, PhD
Slide 24

25. The FCCFA
The FCCFA is a voluntary body that provides the executive
to provide overall guidance at the stage of the review of
progress in formulation of economic crises management
plans and take such other decisions and actions
considered necessary to subvert the crises

The FCCFA considers and recommends for approval
concept papers, scenarios and options on the challenges
facing the Ethiopian economy for the legislature and the
executive, which may entail economic policy analysis,
formulation, and management in relation to development
activities including meritocratic reform to provide highquality analysis and advice on economic and social
development strategies

Government must attach a high priority to the FCCFA into
a first-rate provider of objective economic and social
policy advice, where increased maturity and sustainability
of FCCFA must be
Thursday, January 16, 2014 self-evident. Costantinos, PhD
Earth Day Lecture - BT
Slide 25


26. Issues to be addressed by the FCCFA:



The first and second stage of the FCCFA are aimed at
accelerating and improving the quality and sustainability
of the economic reform process by helping to improve the
Government’s capacity to formulate and monitor the
implementation of national economic policies, including
with respect to regional integration.
The FCCFA would retain the use of social and economic
policy advisors to help ensure quality control, including
over national consultant outputs, with emphasis on
training an expanded group of core researchers able to
balance analytical rigour with the need to provide
recommendations that will be implemented
The third stage of support seeks to build on this more
general capacity building by providing targeted assistance
that helps the nation demonstrate its operational
effectiveness. Specifically, this would support the
preparation of high quality and priority analyses and
studies as necessary inputs into revised or new economic
and social development policies that are being prepared
for consideration by the Government
Thursday, January 16, 2014
Earth Day Lecture - BT Costantinos, PhD
Slide 26

27. Principles of mainstreaming





Principle 1: developing a clearly defined and focused entry
point or themes for institutionalising competence in
economic management to maintain the critical focus
necessary for impact.
Principle 2:national policies or strategic frameworks for
economic management should be used as the frame of
reference, located within existing institutional structures.
Principle 3: necessitates advocacy and sensitisation, in
order to place institutionalisation in a better position
Principle 4: maintain a distinction between two domains
in institutionalisation: the internal domain or workplace,
where risks and vulnerabilities are addressed; and the
external domain, where interventions are based on
mandate and capacities in support of strategic efforts.
Principle 5: developing strategic partnerships based on
comparative advantage, cost effectiveness, and
collaboration.
Thursday, January 16, 2014
Earth Day Lecture - BT Costantinos, PhD
Slide 27

28. Conclusion
Beyond GDP growth, state effectiveness
and market performance anatomy is
perhaps the most subtle trait of all
economies - the interactions between
leadership and strategy, innovation and
technology, and human quality
development and meritocracy that are
critical to defining a high-performance
market–driven development.
End
Thursday, January 16, 2014
Earth Day Lecture - BT Costantinos, PhD
Slide 28