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Saturday, November 19, 2005

Ethiopia Unrest Shakes Business Confidence

Reuters AlertNet -- 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 licence 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 fuelled 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 agriculture.

"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 businesses.

"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.

DISAFFECTED YOUTHS

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 situation."

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.

ECONOMIC REFORMS

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 privatisation 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 Eritrea.

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.

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