President Isaias’ Call to Boost Savings and Investment Doesn’t Hold Water
By Teweldeberhan Gebre
On the occasion of the 26th Independence Day, in his interview with the local media on the 20th of May 2017, the President called for savings and investment. His target is Eritreans living in the diaspora. However, apparently the President’s call for savings and investment is not supported by legal and policy tools that build the confidence of investors like he did for the mining companies. Right now Eritreans don’t have confidence on the government’s economic management and governance. Above all in the presence of the Red Sea Corporation which dominates every economic aspects of the nation no entrepreneur in his/her right mind will take any risk . The ultimate objective of economic development is poverty alleviation. President Isaias doesn’t have any measurable poverty targets, but he talks about food security. No one knows exactly about the state of poverty in Eritrea. No national poverty line and no single study have been conducted on poverty yet. This clearly shows that the President is not interested in reducing poverty let alone to create a resilient and prosperous nation.
Poverty alleviation (reduction) needs substantial investment both in public and private sectors. Meeting and funding this increased investment requirements through the mobilization of savings both nationally and internationally is the focus of any government strategy. On the ground, the President has no strategy and targets for saving and investment. Savings and investment are measured as a percent of gross domestic products (GDP). To regularly check the state of their economy nations regularly conduct economic SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats). By doing so, they understand the conditions and status of their economy and pass corrective economic policies including setting targets for achieving higher gross national savings (% of GDP) so that to attain a higher gross national investment target (% of GDP). The President talked about measurable development. In the absence of national strategic plan it is not clear what, how and when to measure progresses. Up until today, Eritrea runs party led closed economy. Every time the President appears in the media he demonizes the private sector. Ever since 1991 the President has never acknowledged his policy failures. In my humble opinion, his call for savings and investment will not work and he knows more than anyone does. The culture of saving cannot flourish in the absence of:
- Stable macroeconomic situations;
- Institutionalized mechanisms for savings;
- Expanded financial infrastructure and intermediation;
- Secure and diversified means of savings;
- Capacity and efficiency of financial intermediation; and
- Increased awareness of the tangible benefit of savings.
In Eritrea, none of the conditions above are in place. Once or twice a year, the President appears in the media, and he talks senseless talks. If he thinks he will boost savings under the current scenario, I advise him Eritreans are much smarter than he thinks. As always, his interview lacks economic principles and coherence. If he was honest in his call for savings and investment, he should have begun with clarifying his savings and investment strategy. He should have begun by reviewing his government’s objectives and targets for savings mobilization and the coherence of these targets with national objectives for a sustainable economic development via domestic and foreign direct investment.
Unfortunately, he failed to come to the understanding of the national and international context as well the international best practices of savings and investment. As a matter of fact, the President never had background studies involving data to make informed decisions. He talks out of his mind on all subjects including the subject of mobilizing savings and investment. Not only that but also he completely ignores to mention Eritrea’s needs, applied theories about savings & investment, and global successful practices & innovations. For this and other reasons, the President couldn’t come with feasible ideas for himself and the nation. Ironically, he talked a lot about measurable progress while he has no plan and strategy with SMART (Specific, Measurable, Attainable, Relevant, and Timely) objectives and targets.
I wish the President comes with workable ideas and strategies and tells us his SMART objectives so that we can contribute to the development of our people and nation. Also, the President talked more about savings but less about investment which in itself tells that he wants to continue monopolizing domestic investment via diaspora money. My advise to the respected President is that he better come with a win-win solution in managing the economy and eradicating poverty once for all.