World Bank Role in Ethiopia Famine

50 Years listserv
Jul 1, 2003
by Wall Street Journal

WB ROLE IN ETHIOPIA FAMINE

This essential article comes from the Wall Street Journal, of all places.
Although it does not probe as deeply as one might hope into how the World
Bank decided to demand policies that so egregiously failed to take into
account the most basic laws of a market economy (supply and demand), it
makes plain the astounding degree of incompetence in policy-making that
has brought about one of Ethiopia's worst famines. Any time we hear the
World Bank tell us that they are the "knowledge bank" with state-of-the-art
development practices, we need only think back to Ethiopia's famine of 2002-
03, two years after record harvests, to remember that what the World Bank
offers is not expertise, but ideology.

And the people in borrowing countries pay heavily, often with their lives.

Soren Ambrose - 50 Years Is Enough Network - Washington, DC USA

July 1, 2003 - Page 1, Wall Street Journal

Behind the Famine in Ethiopia: Glut and Aid Policies Gone Bad

By ROGER THUROW
Staff Reporter of THE WALL STREET JOURNAL

BORICHA, Ethiopia -- When peasant farmers trekked to this market town two
years ago, they carried heavy sacks of grain, the fruits of the best harvest they
had ever seen. This year, farmers arrived cradling emaciated children in their
arms.

"He is our youngest," said Tesfaye Ketema, nodding toward his five-year-old
son, Hagirso. The boy, who was on the verge of starvation, sat listlessly
between his father's legs on the floor of an olive-green tent at an emergency
feeding center here.

Drought is once again choking Ethiopia, leaving more than 12 million people
desperate for food aid from abroad. But this food shortage began before the
rains stopped.

In the 1990s, Ethiopia went through a decade of global initiatives that sought
to boost agricultural production but at the same time withdrew state support
for the farming sector. The government, under pressure from international
lenders and aid donors, was pulling out of the grain markets in favor of an
underfunded and inexperienced private sector. However, little provision was
made to support this fledgling free market with storage facilities, transport and
financing. When a bumper harvest came in 2001, the markets were
overwhelmed. Prices collapsed, sapping the incentive for farmers such as Mr.
Ketema to produce as much as they could.

After he barely covered his costs two years ago, despite his surplus, Mr.
Ketema sowed cheaper, lower-quality corn seed on his three-quarters of an
acre last year and didn't bother with fertilizer. He knew his harvest would be
less but still hoped to have enough to feed his family. Then the drought set in
and most of what he planted turned to dust. It wasn't long before he was
carrying his starving boy 11/2 hours from his farm to the feeding center.

On a mattress near Hagirso, two emaciated babies were being fed through
nose tubes. In this warren of tents -- one of more than 20 therapeutic feeding
centers set up across the country -- 166 severely malnourished children
battled for their lives. "We've never seen a disaster like this before around
here," says Emmanuel Otoro of the government's Disaster Prevention and
Preparedness Commission in Boricha's region. A few years ago, he notes,
this area had declared itself self-sufficient in food. That didn't last long: "First
the market failed," he says. "And then the weather."

The result is that Ethiopia's unfolding tragedy is compounded by this
absurdity: While the country begs for food, great stretches of fertile land in the
more-drought-resistant wheat and corn belts are lying fallow or being
underworked.

"I know that when I cut the size of my farm, I'm contributing to the food
shortage," says Bulbula Tulle, a commercial farmer and grain trader in
Ethiopia's western highlands. "But at least I'm not losing money." In 2001, he
planted 2,700 acres of corn, reaped one of his best yields ever and lost nearly
$200,000 because prices fell below his costs for labor, seed, fertilizer and
fuel. The next year, to reduce his costs and his exposure to the market, he
planted only about 500 acres. The rest of his land has gone to grass and is
feeding grazing cows rather than hungry people.

Meanwhile, more than 1.5 million tons of food aid has been rushed into the
country by international donors.

The roots of the current food shortage stretch back to 1984, when an epic
famine hit the country and nearly a million people died. In the aftermath, the
government and international relief organizations -- such as the U.S. Agency
for International Development and the United Nations' World Food Program --
pledged that such starvation would never again afflict Ethiopia . They came
up with a two-pronged solution that involved boosting production and building
an early-warning network.

To improve production for a population of about 67 million, including five
million chronically in need of food aid, Ethiopia expanded its rural extension
service to teach farmers new tilling techniques and to distribute high-quality
seeds and fertilizer. Yields soared: Grain harvests in the latter half of the
1990s averaged 11 million tons annually, about four million tons more than in
the 1980s. In the bumper years of 2000 and 2001, harvests hit more than 13
million tons.

The early-warning network was working well, too. Weather failures were
predicted throughout the 1990s, and appeals for food aid rallied international
support in a timely fashion. But the early-warning system had also picked up
an ominous trend: falling grain prices. Grain supplies accumulating in the
bigger markets were "driving prices below farmers' expectations and may
discourage farmers for the next production season," said a monthly report of
the Ethiopia Network on Food Security, a coalition of groups that do
forecasting in the country. It was February 2001.

The problem was that the government, at the same time it was pushing to
boost production, was also dismantling its system of state aid to farmers and
intervention in the agriculture sector. In its place came a private-sector system
that was inexperienced and woefully underfunded. It couldn't absorb or
distribute the bountiful harvests that came. Storage facilities were inadequate.
Traders still relied on donkeys for transport. Export markets were nonexistent.
There was no money to support prices or help farmers get through losses.

The warning on prices, though, triggered no great alarm. "The market side
hadn't been thought about at all. The government was saying, 'That's a
second-generation problem,' " says Eleni Gabre-Madhin, an Ethiopian who
explores market dynamics at the International Food Policy Research Institute
in Washington and regularly meets with Ethiopian officials in the capital,
Addis Ababa. "The emphasis was on, 'Let's just produce.' "

While satellite and climate imagery provided by the U.S. kept an eye on the
weather and crops, a swarm of local researchers and Western aid staffers,
called "ground truthers," descended on markets and farms. By mid-2001 they
were reporting that record harvests were fetching record low prices. A 220-
pound bag of corn that could go for $10 in good times was getting as little as
about $2 -- and that was less than half of the standard production costs.

Both peasant farmers and commercial operators had no option but to sell for
what was being offered. They were caught without a safety net between the
withdrawn government intervention and the incomplete free-market system.

In more-developed farming markets, meshing aspects of both the free market
and government support, storage facilities would allow grain to be held until
prices improved, and crops could be sold on a futures market. Loans might be
guaranteed by the government, and farmers protected by crop insurance.
Ethiopia's farmers had none of this. The banks and government agencies that
had extended credit to pay for seed and fertilizer were clamoring for their
money. Many farmers defaulted on these loans or were forced to sell their
cattle to make the payments.

At the central market in Addis Ababa, the grain traders who buy from the
farmers were also having money problems. "I go to the bank to get money to
build a warehouse. The bank says I need collateral. I have no collateral, so I
get no money," says Yoseph Yilak, the general manager of an Addis Ababa
grain traders association.

His office is a tiny shack in the middle of the market. Inside, pictures of Jesus
and the Virgin Mary look down on his cluttered desk. Outside, the parking lot
is a chaotic mix of pickup trucks, donkeys and goats, all laden with bags of
grain. "I'd like to have a truck to take the grain to the places of the country that
need food," Mr. Yilak says. "But I need collateral to buy a truck, too."

Despite constant warnings in 2001 and 2002, there was little effort to stabilize
prices or intervene in the country's underdeveloped storage and trading
system. The grain got bottled up at the market, depressing prices even further.
Belated efforts to create export markets offered no relief. A meeting of
government experts in March 2002 determined that the country's wretched
roads and landlocked situation made exporting a money-losing proposition.
Less than two months later, the first of 2002's seasonal rains was sparser than
normal. Within weeks, the government launched its food appeal.

Now, with the crisis in full bloom, it seems everyone is paying attention.
Policies and philosophies that have guided development aid and famine
relief for years are now under siege. "It's been a wake-up call," says Ishac
Diwan, the World Bank director in Addis Ababa.

The bank has long prodded poor African governments to privatize their
agriculture sectors and abandon any type of farming subsidies. Now, bank
officials concede there might be a place for government involvement in the
grain market after all, as well as in support for farmers. The bank and the
Ethiopian government are studying the creation of a warehouse-receipt
system, where farmers would deliver their grain, get a receipt for the amount
and quality, and then use the receipt as collateral for loans for the following
year's crop.

Other donors, including AID, acknowledge that their assistance to Ethiopia
has been too heavy on food aid and too light on agricultural investment. AID,
for example, has provided an average of about $220 million in food aid
annually in recent years, compared with only about $4 million in agriculture-
development aid. The current crisis has highlighted the need for investments
that will improve the wretched rural transport network and antiquated trading
system.

Donors are considering using some aid money to guarantee bank credits to
farmers or underwrite crop insurance. There is also greater pressure from the
government as well as traders and commercial farmers for the big food-aid
providers from the U.S. and Europe to buy the food from local markets. Buying
locally could bolster prices, while bringing it in from abroad tends to undercut
local sales.

The government is rewriting its food-security strategy. In the prime minister's
office, the talk has shifted from an obsession with corn and wheat production
to diversifying into peppers, apples, bees and chickens. A broader range of
produce gives farmers a better diet at home and more flexibility in the
marketplace. The strategy is also focusing on water-conservation projects and
rural-development programs.

"What we're trying to do is enhance the incomes of drought-affected areas,"
says Prime Minister Meles Zenawi.

On the slopes of Ethiopia's Rift Valley, Kunfe Adam has brought his badly
eroded 13/4 acres back to life. He has terraced his land to preserve water and
prevent soil erosion. Onions, peppers and apple trees now flourish where
corn and wheat once struggled. He says his family is eating better, and he
has made enough money to buy two oxen and build a better outhouse.

"Now we're thinking about a market, and what to do with all our produce,"
says Erkeno Wossoro, an official in the local office of the Ministry of
Agriculture.

Mr. Wossoro is a crusader for soil conservation as a means of preventing
future famines. Driving across Ethiopia's highlands, from Addis Ababa south
to the border with Kenya, is a journey through a moonscape of heavily eroded
gullies and hills. In his country's obsession for production, he says, it forgot
about conservation. About 100,000 acres are lost to cultivation by erosion
annually. Even at modest yields, that's about 60,000 tons of corn a year.

He surveys a badly eroded plateau that is newly checkered with stone
fencing. Villagers from the Alaba district, participating in a food-for-work
program where the World Food Program provides grain for labor, have
reclaimed 1,730 acres by terracing plots and erecting water-retention points.
Grass has begun to grow again. Soon cattle will be grazing. In a year or two,
he says, the villagers will begin planting potatoes, beans, chilis and corn.

Mr. Wossoro bends over a small puddle of water, collected from the previous
week's brief rain. "This water is a precious thing for us," he says. "It is our
future."

Outside the village of Adami Tulu, about a two-hour drive north of Boricha's
feeding center, farmer Chombe Seyoum walks through his parched field to
the river where his irrigation pump, resting under a big fig tree, now sits silent.
Before the market collapse forced him to turn the machine off, he says, "this
was a paradise."

Mr. Seyoum studied civil engineering in Edinburgh, Scotland, but six years
ago he decided to become a commercial farmer. With the government and
international donors pushing all-out production, he thought he could never
fail. "I wanted to help the country, grow food, employ people," he says.

His fields, in three parts of the country, stretch over 4,400 acres. In the western
highlands, corn, sorghum and soy beans covered 2,700 acres in 2001. The
next year, burned by the price drop, he planted just 500 acres; this year 1,200.
In the southern region, he has kept his 1,500 acres in wheat and barley,
because it is part of an area he services with his farming equipment. At
harvest time, his combines go from farm to farm, running day and night.

But at his fields in Adami Tulu, he says he had no option but to stop farming.
The 200 acres he had there were dotted with tomatoes, cabbage and beans,
and some banana and papaya trees, but mainly they were covered in seed
corn, which Mr. Seyoum grew on contract for a seed company. When farmers
reduced their use of high-quality seed to cut down on costs after the price
collapse, Mr. Seyoum lost his contracts. With no guaranteed revenue to pay
the $100 daily fuel cost of running the irrigation system, he turned off the flow
of water.

The bananas and papayas withered away. Seventy farmers who tilled the soil
with him lost their jobs. Now he provides food aid to them from his wheat
fields.

Write to Roger Thurow at roger.thurow@wsj.com

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