Economists advocate transparency, caution on privatisation

Former World Bank Chief Economist Joseph Stiglitz warned on Monday of the perils of development without openness, transparency and accountability. He and other participants in a symposium on "Democracy, Development and the Case for the Developmental State" in Addis Ababa, Ethiopia, also argued against blanket privatisations. Developing countries need to respect human rights, have a diverse media and strong political opposition groups, Stiglitz told the senior politicians, business leaders and aid officials attending the symposium, which was organised by an Ethiopian think tank, the Inter-Africa Group. “You can get political systems that ossify and become less than dynamic and competition is one of those forces that releases dynamic leaders,” added Stiglitz, who won the Nobel Prize in economics in 2001. He also urged greater public access to information: lack of information, he said, stifled growth and led to distorted economic markets that exacerbate poverty. He said development should not just about an increase in GDP for poor nations. Rather, he said, it should be “sustainable, equitable and democratic”. Stiglitz and fellow economist Professor Robert Wade also argued that privatisation did not necessarily reap economic benefits, and advocated state involvement in the economy. Both urged caution in the liberalisation of capital markets – which remain under strict state control in Ethiopia - and in the privatisation of the telecommunications sector. Several Western nations have urged Ethiopia to open up the telecoms and banking sectors to foreign investors. However, the two economists cited the example of Korea, whose telecoms industry remained under government control and, they said, competed effectively against multinationals. On the other hand, fast, large-scale privatisation in the former Soviet Union had had disastrous results and left millions of people worse off, the economists said. They called on developing countries to develop and help protect their domestic markets, even if it meant falling foul of World Trade Organisation (WTO) rules. They also stressed that price controls and government regulation could reap rewards and should not be demonised. The conference came as Prime Minister Meles Zenawi stressed the importance of attracting foreign investment to Ethiopia. Meles has called back all diplomatic missions to Ethiopia to emphasize the importance of attracting foreign direct investment and encouraging trade. Foreign direct investment (FDI)in Ethiopia stands at about US $75 million, one of the lowest in Africa, according to the United Nations Economic Commission for Africa. However, the potential for investment is enormous, the UN’s Conference on Trade and Development (UNCTAD) argued in a country investment report released this year. It cited the country’s corruption-free environment, an enormous and largely untapped domestic market of 70 million people and what it described as a near perfect climate.