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Causes, impact and resolution of the financial crises on environmntal development
Causes, impact and resolution of the financial crises on environmntal development
Causes, impact and resolution of the financial crises on environmntal development
Causes, impact and resolution of the financial crises on environmntal development
Causes, impact and resolution of the financial crises on environmntal development
Causes, impact and resolution of the financial crises on environmntal development
Causes, impact and resolution of the financial crises on environmntal development
Causes, impact and resolution of the financial crises on environmntal development
Causes, impact and resolution of the financial crises on environmntal development
Causes, impact and resolution of the financial crises on environmntal development
Causes, impact and resolution of the financial crises on environmntal development
Causes, impact and resolution of the financial crises on environmntal development
Causes, impact and resolution of the financial crises on environmntal development
Causes, impact and resolution of the financial crises on environmntal development
Causes, impact and resolution of the financial crises on environmntal development
Causes, impact and resolution of the financial crises on environmntal development
Causes, impact and resolution of the financial crises on environmntal development
Causes, impact and resolution of the financial crises on environmntal development
Causes, impact and resolution of the financial crises on environmntal development
Causes, impact and resolution of the financial crises on environmntal development
Causes, impact and resolution of the financial crises on environmntal development
Causes, impact and resolution of the financial crises on environmntal development
Causes, impact and resolution of the financial crises on environmntal development
Causes, impact and resolution of the financial crises on environmntal development
Causes, impact and resolution of the financial crises on environmntal development
Causes, impact and resolution of the financial crises on environmntal development
Causes, impact and resolution of the financial crises on environmntal development
Causes, impact and resolution of the financial crises on environmntal development
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Causes, impact and resolution of the financial crises on environmntal development

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  • 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    2. How bad is the financial crisis?      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     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    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    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?    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    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     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    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

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