Vous êtes sur la page 1sur 26

Ethiopia in the World Economy: Trade, Private Capital Flows, and Migration

Author(s): Kenneth A. Reinert

Source: Africa Today, Vol. 53, No. 3 (Spring, 2007), pp. 65-89
Published by: Indiana University Press
Stable URL: http://www.jstor.org/stable/4187793 .
Accessed: 27/04/2011 03:55

Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at .
http://www.jstor.org/page/info/about/policies/terms.jsp. JSTOR's Terms and Conditions of Use provides, in part, that unless
you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you
may use content in the JSTOR archive only for your personal, non-commercial use.

Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at .
http://www.jstor.org/action/showPublisher?publisherCode=iupress. .

Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed
page of such transmission.

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of
content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms
of scholarship. For more information about JSTOR, please contact support@jstor.org.

Indiana University Press is collaborating with JSTOR to digitize, preserve and extend access to Africa Today.

Ethiopia in the World Economy:Trade,
Private Capital Flows, and Migration
KennethA. Reinert

Economic globalization can be evaluated with reference to

at least three dimensions: trade, private capital flows, and
migration. For each of these dimensions, pathways through
which economic globalization can alleviate or contribute to
poverty can be identified. This paper makes a preliminary
examination of globalization and poverty in Ethiopia, one of
the world's poorest countries. Ethiopia's integration with the
world economy has specific features: Ethiopia is highly depen-
dent on the exports of a few goods, imports many armaments,
is largely excluded from global foreign direct investment
flows, benefits from large inflows of remittances, and derives
few benefits from the evolving global regime of intellectual
property. Despite a number of negative trends with regard to
globalization and poverty, there is room for small-win policies
that would enhance the role of globalization in supporting
poverty alleviation.


Economic globalization can be evaluated with reference to at least three

dimensions: trade, private capital flows, and migration. For each of these
dimensions, pathways through which economic globalization can help or
hurt poor people can be identified. For example, exports of labor-intensive
goods have the potential of supportingpoor people's incomes, but imports of
armaments can have disastrousimpacts, especially for poor children. Capital
inflows in the form of foreign direct investment (FDI)can enhance employ-
ment and technological learning, but unwise bond finance and commercial
bank lending can precipitate crises with devastating effects for poor people.'
Sortingout the positive and negative impacts of increasedglobalization from
the perspective of poor people is therefore of great importance. This paper
attempts to do so using the circumstances of Ethiopia as a reference point.
A few papers have taken up issues related to Ethiopia's involvement
in the process of globalization. These include Asefa and Lemi (2004), Bour-
guignon et al. (2004), Dercon (2003), Ramakrishna (2002), and Tessema
(2003). This paperwill try to place these studies in the wider context of the
globalization-and-povertyresearch agenda.The economic challenges facing
Ethiopiatend to lead observersto conclude that little can be done to improve
Ethiopia'sengagement with the global economic system. This paperwill be
somewhat more optimistic, suggesting that the strategy of a country such
as Ethiopia in engaging the world economy is best engagedin terms of what
Weick (1984) called "small wins."2 The paperexplores potential small wins
within Ethiopia's grasp in order to identify specific strategies to make its
globalization more favorableto the poor.
- -

The most common measure of poverty is income poverty, a deprivation of
goods consumption due to a lack of necessary purchasing power. Measured
in terms of purchasing power parity (PPP),gross national income (GNI)per
Ix capita in Ethiopia was just over US$700 in 2003, up from approximately
US$400 in 1985. Figure 1 compares GNI per capita in Ethiopia with that of
two other transitional economies, South Africa and Vietnam. What stands
I out in this figure is the "flatness" of per-capitaincome in Ethiopia over time
in comparison to these other countries.
0 In the parlance of the World Bank, individuals who subsist on less
m than one dollar a day (1985 purchasing-powerparity dollars) are known as
z the "extremely poor," while individuals who exist on less than two dollars
a day (1985 purchasing-powerparity dollars) are known as the "poor."3For
. .
Ethiopia, figures on the "poor"and "extremely poor" are available for only

the year 2000. They indicate that approximately one quarter of Ethiopia's
population is "extremely poor," but that more than three quarters of the
-u population is "poor."
m There is a growing recognition that income poverty is not the only
importantmeasureof deprivation.With regardto health poverty, for example,
infant and child mortality are key indicators. As is indicated in figure 2,
approximately one in six Ethiopian children do not live to age five. Again,
0 this figure compares Ethiopia with South Africa and Vietnam. While Ethio-
pia shows some improvement relative to South Africa, it falls far behind the
gains of Vietnam, where infant and child mortality was cut in half in thirteen
years. Short of mortality, numerous morbidity issues are of central concern
for Ethiopia. For example, Christiaensen and Alderman refer to the "the
0 sheer magnitude of child malnutrition in Ethiopia"(2004:288).In the case of
stunting, for example, the rate is approximately60 percent of all children,sig-
nificantly above an averageapproximately40 percent for sub-SaharanAfrica.4
Bourguignonet al. (2004)note that, while down from its 1990 level, the 2002
maternal mortality rate (per 100,000 live births) was still more than 600.
Education poverty, including gender disparities, is important, both in
its own right and as a factor contributing to health poverty.5Bigsten et al.
(2003) suggest that primaryeducation plays an important role in translating
Figure 1. Gross national income per capita, PPP (currentinternational $).
1 2 0 1 2 . .. . . . . .. . . . . . . .... . . . .. . . .. . . . .. . . . . . . .. . . . .. . . . . . . . . . . .. . .. . . . . . . . . . . . . .. . . . . . . ... . . .............. . . ... . . . . . .................. . . . .. . ............. . . .. . . .. . .. .

10000 -

8000 _ _ _ _ -

2000 _ _ _

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Ethiopia Sout Africa - - Vienam|

Source:WorldBank. (2006). WorldDevelopment Indicators.

Figure2. Under-five mortality rate (per 1,000 population). m


200 --


, 100

__ .... ....

*_Ethlopia *SouthAf_,cc Ua_V_et ]

Source:WorldBank, WorldDevelopment Indicators 2006.

growth into poverty reduction in Ethiopia, albeit more for the urban poor
than the rural poor. Fortunately, it is here that we see a bit of good news.
As presented in figure 3, the gross primary enrollment ratio has been on a
long-term, upward trend. More importantly, though, this ratio increased
rapidly during the 1990s, and the 2002 ratio was just under 62 percent.6
That said, however, as noted by Bourguignonet al. (2004),Ethiopia'sprimary
completion rate is below the average for sub-Saharan Africa.
Figure3. Gross primary enrollment ratio (percent of relevant age group).

: 50.0-
0 40.0
"'O 30.0

w 20.0--
P-t c 10.0
1970 1975 1980 1985 1990 1995 2000
0 - Gross Pnmary Enrollment Ratio (%)

I Source:WorldBank, World Development Indicators 2006

I Whetherfrom the perspectivesof income, health, or education,poverty

levels are of grave concern for Ethiopia. The orthodox view of the multilat-
eral development institutions is that more domestic liberalization, growth,
and globalization can help address this concern. Is this so? Dercon (2003)
analyzes domestic liberalization and concludes that it is poverty alleviat-
ing overall, despite the fact that poor people in remote areas and with poor
m household endowments do not necessarily benefit. With regardto growth,
Bourguignonet al. note that: "Whilethe linkage between income growth and
income poverty reduction is quite tight, so that high growth leads to signifi-
cant reductions in income poverty,improvements in the other [humandevel-
opment measures are] not readily achieved from growth alone" (2004:1-2).
With regardto globalization more broadly,we consider trade,private capital
flows, and migration in the remainderof this paper.


Of all aspects of globalization, international trade is held out as the great

hope for poverty alleviation.7Tradecan contribute to poverty alleviation by
expanding markets, promoting competition, and raising productivity, each
of which has the potential to increase poor people's real incomes; but, as the
recent histories of a number of countries demonstrate, it would be a mistake
to rely on trade liberalization alone as a means of reducing poverty.8A more
comprehensive approach,one that addresses multiple economic and social
challenges simultaneously and emphasizes the expansion of poor people's
capabilities, especially in health and education, is needed.9 Nevertheless,
trade has vital roles to play.
International trade is a means of expanding markets, and market
expansion can help generate employment and incomes for poor people.
Comparisons are often made between the wages of workers in poor-country
export industries and the wages of workers in developed countries. In these
comparisons, the wages of workers in developing-country export industries
often appearto be very low. Consequently, tradehas often been identified as
worsening poverty;however, the more relevant comparisonis between what
people may have earnedbeforeand aftertradeopportunitieswere made avail-
able. From a poverty perspective, this could be between the wages of export
sector workers with agricultural day laborers,both in the same developing
country. Here, it can often be seen that it is the alternative of agricultural 0-I
day labor that is much worse. It is precisely this type of income comparison 0

that draws workers into export industries.10 0~

It must be kept in mind that not all export activity equally raises poor
people' s incomes. Exportingcan best contribute to poverty alleviation when
it supports labor-intensive production, human-capital accumulation (both
education and health), and technological learning.In addition,poor individu- z
als' incomes depend on buoyant and sustainable export incomes, which in
turn depend on export prices.
International trade is a means of promoting competition, which in -4i
many instances can help the poor. Increased competition lowers the real
costs of consumption and production. For example, domestic monopolies
charge monopoly prices that can be significantly above competitive prices;
the competition introduced by imports erodes market power, lowering
prices. These procompetitive effects of trade can make tight household bud-
gets go fartherand lower costs of production. The latter can have additional
employment effects advantageousto poor individuals by lowering nonwage
costs in labor-intensive production activities. Also, procompetitive effects
can arise in the case of monopsony power: here, sellers (small farmers, for
example) to the monopsony buyer can obtain higher prices for their goods
as the buying power of the monopsonist is eroded.
There is some evidence that international trade can promote produc-
tivity in a country, and productivity increases may in turn support poor
people's incomes." It is not the case that exports of all types or in all coun-
tries generate positive productivity effects, but there is evidence that this is
the case in certain instances. Exportpostures can place the exportingfirms in
direct contact with discerning international customers, facilitating upgrad-
ing processes. There is no consensus within international economics on the
extent of these upgradingeffects, but they nonetheless remain an important
possibility, including in natural-resource-intensivesectors.'2
There are occasions where international trade can have direct health
and safety impacts on poor individuals, impacts that can be beneficial or
detrimental. Perhapsmost importantly, improving the poor people's health
outcomes usually involves imports of medical products.It is impossible for a
small, developingcountry like Ethiopiato produceall its needed medical sup-
plies, nor can it produce advancedmedical equipment, but many developing
Figure4. Total trade as a percent of GDP.


100- S ~ ^ ~ ^ . 4

i ##

* 60-
0 -5-

40 _


-4 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

I- Etiopia - SoutAfrica - - Vietnam


Source:WorldBank, WorldDevelopment Indicators 2006

0 counties import largeamounts of weaponry and export sexual services, both
of which can have dramaticallynegative outcomes for the health and safety
of poor individuals.13 In addition, the production processes of some export
m industries can adversely affect the health of workers in those industries, and
a small but important amount of trade involves hazardous-wastedumping.
DO Ethiopia has increased its involvement in international trade, though
r- less rapidly than other countries. Figure4 plots the standardmeasure of the
0r) sum of exports and imports as a percent of GDP for Ethiopia, South Africa,
and Vietnam. Note that, in the mid- 1980s, Ethiopia was slightly more
engagedin tradingactivities than Vietnam, whereas in the most recent years,
its total trade has been less than half of Vietnam's, measured as a percent
of GDP. In comparison with South Africa, however, Ethiopia has slowly
achieved parity in this measure of trade openness.
0 Ethiopia's export profile is presented in figure 5, which shows Ethio-
pia's dependence on coffee exports. Primarycommodity dependence of this
z sort has several drawbacksfrom the viewpoint of poverty alleviation. Firstis
the secular, downward trend in commodity prices. Second is the escalating
protection in primarycommodity markets in developed countries.'4Third is
the monopsonistic pricing along commodity chains practicedby majorcoffee
multinationals.15This dependence problem was apparent as coffee-export
revenues fell by more than US$100 million between 1999 and 2001, as coffee
prices fell to a thirty-year low. As noted by Oxfam (2002a), this decline in
export revenues more than offset the debt relief Ethiopia obtained from the
highly indebted poor country initiative, and many Ethiopian coffee farmers
have been forced to shift to the production of chat, a stimulant used in the
region around the Red Sea.
Figure 5. Ethiopia's exports by product group, 2003 (percent and US$ million).

60.-00 160
50. 00 - 140
=40.0oo -_ \ - 100 O
30.00 ~~~~~~~80
CL20.00 -_ A - 86?o
10.00 - -o _ - 40
0.00 X 0


Source: International Trade Centre. z


We must be careful in interpreting data such as presented in figure 5. m

Such descriptions exclude trade in services, which is significant for Ethiopia.
Figure 6 plots commercial service exports as a percent of total exports. This
has been on a steady, though somewhat volatile, upward trend, reaching
nearly half of total exports in 2002. As any passenger on Ethiopian Airlines
will appreciate, the bulk of Ethiopia's service exports is accounted for by
transportation services. It is therefore important to consider the full range of
Ethiopia's trade engagement, not the traditional, commodity-only view.
Despite the pressing human development needs of the poorest coun-
tries such as Ethiopia, arms imports have at times composed a significant
part of its total imports, and government military expenditures have been
a significant part of total government expenditures. This is illustrated for
various years (determined by data availability) in figure 7. The vertical bars
in this figure plot government military expenditures as a percent of total gov-
ernment expenditures. For the years in which data are available, this ranged
from just over 20 percent to nearly 55 percent. The line in figure 7 plots arms
imports in constant 1990 U.S. dollars. This peaked in 1998 at approximately
US$200 million, but has composed up to one fifth of total imports at times.
Such trade cannot be conceived of as alleviating poverty. Indeed, in the case
of Ethiopia (and Eritrea), it has been nothing less than a catastrophe, and it
is difficult to conceive of a more perverse role for trade than in facilitating
the death and injury of the very people it should be benefiting.p6
Figure6. Commercial service exports as a percent of Total.

60 -
50 -


10 -

Comm Ser Exp as % of Exp

Source:WorldBank, WorldDevelopment Indicators 2006

I Figure 7. Arms imports and military expenditures as a percent of total
m expenditures
0 6 0 .0 ... .. . .. ... .. .. . ..... .. . ... . . .. .. ... . . .... .. 2 50

z 50.0 -
0 .- 200

40.0 - :
a 150

LL 30.0



0 .00 0
1990 1991 1997 1998 1999 2000 2002

z SMectedYeam

j-=MifitaryExpenditure -*-ArmsIn9borts

Source: World Bank, World Development Indicators 2006

Private Capital Flows

Private capital flows are an important resource for developing countries.

Capital flows augment domestic savings and can contribute to investment,
growth, financial sector development, technology transfer, and poverty
reduction; however, there is substantial evidence that capital flows entail
potential costs that are both much largerthan in the case of tradeand dispro-
portionately carriedby the poor.Additionally,it has become clear that not all
capital flows are the same in their benefit and cost characteristics. Forthese
reasons, a careful assessment of the impact of capital flows on poverty does
not lend itself to across-the-boardstatements. Rather, the cost and benefit
characteristicsof distinct types of capital flows must be consideredin detail. 0
Here, we distinguish among foreign direct investment, equity portfolio
investment, bond finance, and commercial bank lending. -H
The financial markets involved in equity portfolio investment, bond
finance, and commercial bank lending are characterized by a number of z
market failures. In normal circumstances, these imperfections tend to con- z
tribute to a certain amount of market volatility. Under circumstances
that are not fully understood (but are particularly important in emerging m

economies such as Ethiopia), they can lead to full-blown financial crises.

Imperfections in financial markets appear to be particularly problematic
when commercial banks in developing countries are given access to short-
term foreign lending sources."7The resulting problems have three causes.
First, systems of financial intermediation in developing countries tend to
rely heavily on the banking sector, other types of financial intermediation
typically being underdeveloped. Second, developing countries have been
encouragedto liberalize domestic financial markets, sometimes before sys-
tems of prudential bank regulation and management are put in place. Third,
developing countries have sometimes prematurely liberalized their capital
accounts.'8Consequently, caremust be taken in managingevolving financial
systems and their access to international capital flows.


Foreign direct investment can have positive impacts on poverty by creat-

ing employment, improving technology and human capital, and promoting
competition. Not all kinds of FDIcontribute in this way, however, and some,
through unsafe working conditions and environmental degradation, can
adversely impact certain dimensions of poverty. Nevertheless, if we were to
identify the most promising category of capital flows from the point of view
of poverty alleviation, FDI would be it.'9
Many developing countries lack access to the technologies available
in developed countries, and hosting multinational enterprises (MNEs)from
developed countries is one way to gain access to that technology. There are
limits to technology transfer, however. First, MNEs will employ the tech-
nology that most suits their strategic needs and not the development needs
of host countries. For example, MNEs can employ processes that are much
more capital intensive than would be desired on the basis of host-country
employment considerations.20Second, MNEs have a strong tendency to
conduct their research and development in their home bases, ratherthan in
host countries.2'
Despite these limitations, in some important cases, MNEs do trans-
fer technology and establish significant relationships with host-country
suppliers via backward linkages. If a foreign MNE begins to source inputs
O-t- locally, ratherthan by importing them, the host country can gain important
p benefits. First, employment can increase, since the sourced inputs represent
-I new production. Second, production technologies can be better adapted to
local conditions, since suppliers are likelier to employ labor-intensive pro-
cesses. Third, the MNE can transfer state-of-the-artbusiness practices and
technologies to the local suppliers. Fourth, the local suppliers can coalesce
into a spatial cluster that supports innovation and upgrading.22
Another avenue throughwhich MNEs can positively affect host econo-
mies is through "spillovers" to other sectors of these economies. The
evidence to date suggests that such spillovers do occur in some circum-
z stances and can be significant; however, in the words of Blomstrom and
Sj'oholm,they are not "guaranteed,automatic, or free" (1999: 916). What
:p determines whether positive technology spillovers will occur?Many factors
are involved, and these include host-country policies, MNE behavior, and
industry characteristics.A key factor is the capacity of local firms to absorb
foreign technologies. Blomstrom and Kokko (2003) suggest that learning is a
key capacity that is responsive to various host-country policies, and evidence
0 presented in Tsang, Nguyen, and Erramilli (2004) in the case of Vietnam
supports this view.
There is some evidence that MNEs in Africa offer higher wages than
domestic firms.23This effect is more predominant for skilled than unskilled
workers. FDI can therefore have differential impacts that exclude unskilled
workers. This can result in what te Velde (2001) calls the "low-income low-
skill trap."All these considerations point to the role of basic education and
skill development in making the most of FDI for poverty alleviation.24
The low-income countries as a whole are largely excluded from global
FDI flows. For example, in 2002, low-income countries received only two
percent of total FDIflows, with nearly half of this going to Indiaand Vietnam
alone. Figure8 comparesEthiopiawith South Africaand Vietnam and shows
H that, with the exception of a few years in the late 1990s, FDIflows into Ethio-
0 pia have been nearly nonexistent. This situation poses a serious challenge to
the country. As we discuss below, the country might be able to make better
use of its diasporato stimulate inflows of FDI,since these individuals will be
better able to overcome information gaps regardingthe investment climate
in the country. A regional approachto FDI under the Common Market for
Eastern and Southern Africa (COMESA)is another possibility.
Figure 8. Net foreign direct investment as a percent of GDP.
1 4 . - .........
-- -- -- -- --------

12 -

9 N~~~~~~~~~

10 / 0
19A,S-1986 1987 1988 1989 1990 1991 1992 1993 1994 1999 1996 1997 1999 1999 2009 2901 2002 2003

8- Sot h Afic a

Source:WorldBank, WorldDevelopment Indicators 2006 z

EquityPortfolioInvestment z

There is evidence that capital inflows in the form of equity portfolio invest-
ment might be more beneficial than both bond finance and commercial bank
lending. Reisen and Soto (2001) have examined the impact of all four capital
inflows considered here on growth for a sample of forty-fourcountries. They
found that FDI, considered above, did indeed have a positive impact on
economic growth. The most positive growth impact, however, came from
equity portfolio flows. Bond finance, considered below, did not have any
impact on growth, and commercial bank lending, also consideredbelow, had
a negative impact. These results suggest that equity inflows, along with FDI,
could play an especially positive role in growth, development, and poverty
Why can equity portfolio investment play a positive role in growth and
development, at least under some circumstances? Rousseau and Wachtel
(2000) summarize research on this question with four possibilities: equity
portfolio inflows are an important source of funds for developing countries;
the development of equity markets helps provide an exit mechanism for ven-
ture capitalists, increasing entrepreneurial activity; portfolio inflows help
developing countries move from short-term finance to longer-term finance
and help finance investment in projects that have economies of scale; the
development of equity markets providesan informational mechanism evalu-
ating the performance of domestic firms and can help provide incentives
to managers to perform well.
With regardto volatility, there is evidence that institutional investors
managing equity flows are less likely than banks to engage in herd and con-
tagion behavior;25however, in general, equity markets areunderdevelopedin
much of the developing world. For example, nearly the entire net portfolio
equity inflows into sub-SaharanAfrica are accounted for by one country
alone: South Africa.The WorldBank summarized the features of developing-
country equity markets as follows:

Marketcapitalizationas a shareof GDP in low-income coun-

tries is about one-sixth of that in high-income countries.
... Stock exchangesin developingcountriesalso tend to lag
P-3 technologicallybehinddevelopedmarkets.Technologyplaysa
majorrole in the trading,clearance,andsettlement processes;
problemsin those areas can discouragesophisticatedinves-
0 tors. Institutions that supervise and support the operation

0~ of the stock exchangealso tend to be weaker in developing


The development of equity markets in low- and middle-income coun-
tries is more complex than it might first appear.This situation reflects the
a increased globalization of financial services. Observershave shown a set of
domestic factors to be particularlyimportant in equity-marketdevelopment.
I These factors include sound macroeconomic policies, minimal degrees of
0 technology, legal systems that protect shareholders, and open financial
markets. However, as pointed out by Claessens, Klingebiel, and Schmukler
(2002), these are precisely the factors that tend to promote the "migration"
of equity exchange out of developing countries to the major exchanges in
financial capital of developed countries. This migration process complicates
m standardnotions of equity-market development. Steil (2001)has arguedthat
the way forwardis to link local markets with global markets;however, there
might remain medium-sized firms with local information needs that could
benefit from some kind of domestic equity market. This is an area that
m requires urgent attention for the development of novel approaches.
At present, inflows of equity investment into Ethiopia are essentially
nonexistent. As in the case of FDI,then, this situation representsa significant
challenge to Ethiopian policymakers. We take up this challenge below.
-- BondFinanceand CommercialBankLending
0 In the minds of the financial world, there are significant differencesbetween
portfolio equity investment and debt. This shows up in the fact that, in the
case of bankruptcy,debt is given priority over equity. This tends to support
the preferencefor debt over equity in markets, a preferencethat appearsto be
misplaced from a development and poverty-alleviation perspective. At pres-
ent, inflows of bond finance into Ethiopia are nonexistent. From a poverty
perspective, this is not a cause of great concern at present; greaterbenefits
would be attained from increases in FDI and equity-portfolio inflows.
With regard to commercial banks, Dobson and Hufbauer note that
bank "lending may be more prone to run than portfolio capital, because
banks themselves are highly leveraged, and they are relying on the borrow-
er's balance sheet to ensure repayment" (2001:47). The World Bank notes,
"Incentives are key to limiting undue risk-taking and fraudulent behavior
in the management and supervision of financial intermediaries-especially
banks that are prone to costly failure" (2001:3).
What can be done to support the safe development of banking sectors
in low-income countries such as Ethiopia?Some of the necessary steps can
be thought of in terms of information, institutions, and incentives. With
regardto information, it is important for banks to embrace internationally
sanctioned accounting and auditing procedures and to make the results of
these assessments available to the public. In the case of institutions or the
rules of the "banking game," risk-management practices (both credit and
currency)must be sufficiently stringent, and prudential regulation systems
must be well developed. With regard to currency risk, the World Bank
notes that "particularcare should be taken to ensure that foreign-currency
liabilities are appropriatelyhedged" (2004:30).26These informational and
institutional safeguardsare no small task and inevitably cannot be achieved z
in the short term. Consequently, they should be buttressed with incentive
measures in the form of market-friendlytaxes on banking capital inflows. m

Debt flows in the form of bond finance and commercial bank lending
appearto have different properties than equity flows in the form of FDI and
portfolio-equity investment. They are more prone to the imperfect behav-
iors that characterize financial markets, and do not appearto have positive
growth effects as large as those associated with equity flows. Consequently,
the utilization of debt finance must be cautious and sufficiently hedged
against exchange rate risks.


Historical analysis demonstrates that international migration can offer an

effective means for poor people to escape poverty while promoting economic
growth and technological progress.27Communities can be lifted out of pov-
erty via remittance flows from the country's diaspora.Also, when migrants
are successful in business endeavors, the diasporacan become involved in
trade and capital flow networks that facilitate market access, investment,
and technology transfer.That said, however, migration can be devastating
to those left behind. Migrants can take with them critical skills, especially
in the area of health. Further,the loss of household heads, innovators, and
social leaders can cause a broadarrayof costs, including to social cohesion.
As noted by the Organizationfor Economic Cooperation and Development
(2005) among other, the loss of highly skilled workers through emigration
can have a deleterious impact on long-term economic development. Since
highly skilled workers tend to generate the largest share of tax revenues,
emigration can have detrimental impacts on the tax base, with additional
effects in the areas of public services and infrastructure.Some governments
have attempted to offset these losses by taxing remittance inflows, but these
attempts are not generally successful.28The net impact of migration on
source countries is therefore uncertain.
The loss of highly skilled workers is a significant issue for Ethiopia.
Migrating involves incurring private costs that can be significant. Conse-
quently, migration rates tend to be higher for highly skilled individuals who
can better overcome these costs.29African countries have been hard hit in
this process of "braindrain,"and Ethiopiahas not escapedthis phenomenon.
El-Khawas(2004)points out that there are more Ethiopiandoctors in Europe
P and North America than in Ethiopia.More generally,Aredo (1998)estimated
-I that, between 1968/69 and 1995/96, more than one-third of Ethiopian stu-
0 dents who went abroadfor graduate study did not return. As pointed out
by Beath, Goldin, and Reinert (2006), a brain drain does increase the rate of
return to education; however, since the skills lost are often crucial ones-,it
seems unlikely that this would offset the losses involved in the Ethiopian
case. The Ethiopiangovernment, having hosted the Regional Conference on
I BrainDrain and Capacity Building in 2000, is aware of these problems.
-o On the positive side and as indicated in Figure 9, Ethiopiareceives a
m significant amount of remittances from its migrants.In discussions of global-
ization and poverty,the role of remittancesis often underestimated.Figure10
plots Ethiopia'sremittancesas a percentof FDIinflows. As this figuredemon-
strates,though smaller,remittancesareon the same orderof magnitudeas FDI,
even reachingover 90 percent of FDIin 2001. As empiricallydemonstratedby
Aredo (2005),Ethiopiansuse remittance income as a risk-sharingmechanism
for self-insuranceagainst shocks of various kinds.30A key challenge for the

ZO country,then, is to make betteruse of these remittanceflows, while harnessing

the diasporafor increasedFDIflows. I addressthese issues below.

Small-Win Policy Recommendations


H Globalization is not a panaceafor the poor citizens of low-income countries
0 like Ethiopia,but it is worthwhile to inquire into whether, via policy changes
0 and endeavors,there are any opportunities for incremental improvements in
outcomes, or what Weick (1984) called "small wins." The most important
policies are in the area of universal primary education and the fight against
infectious diseases. Forexample, Silva (2005)has identified the externalities
associated with basic environmental services (externalitiessuch as water and
sanitation on child malnutrition in Ethiopia), and health advances can be
made by training that falls short of fully certified doctors and nurses.3'With
regardto globalization, however, we consider some policy recommendations
for trade, capital flows, and migration, respectively.
Figure9. Foreignremittances (currentUS$ millions).

60.0 -
c 40.0 -
e 30.0
10.0 I-A.
1996 1997 1998 1999 2000 2001 2002
a Remitances

Source:WorldBank, WorldDevelopment Indicators 2006 z

Figure 10. Foreignremittances as a percent of FDI. m


100 . - -------------. ---------- .---.-----------------.-



L 40-
1996 1997 1998 1999 2000 2001 2002

1,m Remit as % oFDI1

Source:WorldBank, WorldDevelopment Indicators 2006


The tradechallenge facing Ethiopiafrom the viewpoint of poverty alleviation

is to promote labor-intensive exports in order to support a widely dispersed
expansion of incomes. This practice will not occur through an automatic
comparativeadvantageprocess, and it is more productiveto think in terms of
potential competitive advantagesin narrowproductcategories.It is important
to be alert to any potential cluster effects among these productcategories.For
example, Ethiopia'sexport profile suggests that it is possible to think about
the emergence of cotton products and leather clusters. Given the success of
the African Cotton Initiative in the WorldTradeOrganizationdispute-settle-
ment process, the future of cotton might be brighterthan in the past. With the
right marketingand documentation, Ethiopiahas potential in organiccotton-
productniches in Europeand the United States. More generally,it could take
advantage of the increase in China's demand for cotton that accompanies
China'srapidlyexpandingexportsof clothing. With regardto leatherproducts,
the presence of the COMESALeatherand LeatherProducts Institute (LLPI)
in Addis is a positive sign; such institutes are often at the center of emerg-
0 ing clusters. With regardto both cotton and leather products, the Ethiopian
Ministry of Trade and Industry'sinvolvement in the 2004 United Nations
IndustrialDevelopment Organizationworkshop on these sectors is a positive
step, particularlyfor strengtheningthe leather supply chain.32
In the case of coffee, the promotion of "fairtrade"certification would
ensure the maximum value for developing country producersin the face of
I export price declines.33As noted by Oxfam, "At the Oromiya Coffee Farm-
0 ers Cooperative Union in Ethiopia, farmers can get 70 percent of the export
z price for coffee that sells as Fair Trade, while those in the Jimma zone of
Ethiopia's Kafaprovince, selling in the open market, get only 30 percent"
0 (2002a:41).Given the magnitude of the coffee crisis, it is difficult to disagree
with Oxfam's assessment that "whether or not Fair Trade can be applied
m in the mainstream, the lack of alternatives and the absence of government
z safety nets for poor producersmake this sort of supportto farmersan entirely
justifiable and appropriateattempt to cope with the human cost of the rigors
of the free market" (2002a:42). Expansion of fair-trade opportunities for
Ethiopia'scoffee farmersis therefore a key priority,especially in light of the
difficulties outlined by Talbot (2002)in attempting forwardintegration along

the coffee commodity chain.34Forwardintegration along the tea commodity

chain is easier than for coffee, but promoting fair-tradeopportunities for the
expanding tea sector is also important.
z The movement of naturalpersons (WTOMode 4 of services trade)offers
largepotential benefits to a country such as Ethiopia.Though Ethiopiais not
a member of the WTO, it needs to make as much use of this service-trade
mode as possible through bilateral arrangements. As Winters et al. (2002)
have shown, the gains for developing countries from an increase of only 3
percent in their temporarylabor quotas would exceed the value of total aid
flows and be similar to the expected benefits from the Doha Round of trade
negotiations, with most of the benefits to developing countries coming from
increased access of unskilled workers to jobs in developed countries.35
Ethiopia'sexport of tourist services remains largely untapped,and the
potential for cultural tourism and ecotourism is great, especially so given
the country's airline and its diaspora'sinvolvement in travel agencies. In a
related area, Ethiopia is largely excluded from the evolving global regime
of trade-related,intellectual property.The government needs to follow the
lead of India and begin to construct a traditional knowledge digital library
containing a formal inventory of all cultural propertythat its citizens might
exploit.36This inventory is important to prevent the theft of the country's
cultural patrimony. One important areais that of music copyright,but there
are others.37
As has been recently noted by a number of researchers, develop-
ing countries play a role in trade as nodes in global production networks
(GPNs).38GPNs refer to the process whereby the production of a final good
having previously taken place in a single country is broken down into dis-
crete steps, each taking place in different countries. The evolution of GPNs
has responded to technological progressin transportation,communication, C)
and dataprocessing;reducedrestrictions on FDIinflows; and tradeliberaliza- -I
tion. As noted by the WorldBank (2003), to date, Africa has been largely left
out of this important globalization process, and the United Nations Confer- 00
ence on Tradeand Development (2002)has questioned the benefits involved
in GPN participation. It is unclear whether Ethiopia will achieve the neces-
sary policy and infrastructureprerequisites to be a potential GPN partici- 7;
pant, but sustained trade-relatedcapacity building supportedby multilateral z

financial institutions could potentially change this situation. m

CapitalFlows z

Both the Ethiopiangovernment and the Addis AbabaChamberof Commerce

have investigated the possibility of organizing an equities exchange-no
small endeavor.39 Though the presence and upgradingof the Nairobi equities
exchange in Kenyaindicates that it might be possible, the first priority with
regardto capital flows would be to ensure the prudential regulation of the
banking sector, with care given to strenuously conditioning its borrowing
in foreign currencies. Given this first step, one possibility would be to link
any nascent exchange to the one in Johannesburgin orderto tap into existing
technology. More realistic still would be to give serious consideration to the
suggestion of Mwenda and Muuka (2001) for cooperation within COMESA
to form a regional equity market in order to promote multiple listings and
cross-borderequity investments. Given the liquidity requirements of equity
exchanges, this would appearto be a wise option.
With regardto direct investment, the Ethiopia Investment Authority
(EIA) could make better use of the country's foreign population to facilitate
FDI flows. In addition, it makes sense to link the EIAtightly to the proposed
COMESA Regional Investment Agency. As discussed above, it is simply a
characteristicof modern, global productionthat it involves international and
regional networks. Attempting to "go it alone" with regardto investment
projects is therefore shortsighted.


Improving the benefits of migration includes strengthening the financial

infrastructure supporting remittances. New e-commerce technologies,
including foreignexchange markets and electronic cards,offergreatpotential
to reduce the overall transaction costs. The availability of accessible remit-
tance services in expatriate communities and near the destination of the
people to whom the funds are to be transferred,which offer simple processes
in languages understood by the migrants, can greatly facilitate remittance
flows and can encourage the movement of remittances from unofficial and
unregulated networks into regulated flows-which is important to address
security and poverty concerns. Beforerecommending tax measures, official
0- savings associations, and other government-led mechanisms to increase the
-I beneficial impact of remittances, care must be taken to ensure that these
will be welcomed by the diasporaitself. Otherwise, they will reduce their
000 remittances or revert to unofficial channels.
To some degree,governments can influence skilled people's decisions
-4 to leave and to keep their capital in the country by shaping the overall
environment for skilled people, providinga safe and secure working environ-
ment, reaching out to skilled people, and seeking their involvement in deci-
I sionmaking. However, given the gaps in earningpower and the attractions of
-4 cosmopolitan environments, this holding power is limited, particularlyfor
poor countries such as Ethiopia.Some countries have implemented programs
to direct remittances into development-oriented investments. For example,
the Mexican government has assisted Mexican emigrants in establishing
z "hometown associations," which support infrastructure and enterprise in
-4q home communities and "economic development funds," in which contri-
m butions are matched by the Mexican government. This effort has spawned
similar policies by El Salvadorand its emigrant community.4'
m Within the context of the African continent, the South African Net-
work of Skills Abroad (SANSA) offers a model for harnessing expatriates'
skills.42A primarypurpose of SANSA is to gather information about expatri-
ate South Africans in orderto assess how their skills can be best matched to
zz local needs. Modes of contribution by expatriates include participation in
G0 training programs,technology transferactivities, researchresult dissemina-
K tion, and facilitation of business contacts and development.43Since South
Africa and Ethiopiashare the characteristicof having diasporasconcentrated
z in relatively few countries, the SANSA model holds out some promises for
Ethiopia and could perhaps be replicated. Highly skilled migrants could
be tracked through a data bank and catalogued for future consultation
assignments. This data-gatheringexercise could be achieved throughvolun-
tary, web-based registration, passenger surveys on Ethiopian Airlines, and
inquiries by embassy staff.44


Globalization is not a panacea,but small-win policy changes affecting trade,

capital flows, and migration can benefit Ethiopia's poor. Trade, FDI, and
migration can be harnessed synergistically to deliver a modicum of benefits
from the inevitable process of globalization the country confronts. Leverag-
ing fair trade and promoting natural resource clusters can provide gains in
export expansion. Of all capital flows, FDI and equities hold the most prom-
ise with regardto long-term poverty reduction. Ethiopia should give serious
consideration to regional efforts within COMESA,with regardto a regional
investment agency and the development of a regional equities exchange.
To prevent future crises, prudential regulation of commercial banking is
a priority. As a country with a diaspora that involves many highly trained
and motivated individuals, it can exploit the potential of this network, par-
ticularly because the country's position in air-transportationservices can
effectively tie it into this network.
In two respects, the focus of this paperis too narrow.First, as the work
of Bourguignonet al. (2004) makes clear, progresson an inclusive set of pov-
erty measures in Ethiopia will depend on foreign resources, in the form not a00
just of private trade incomes, capital inflows, and remittances, but of public
or quasi-public foreign aid. Properly securing and managing these flows is
crucial for poverty reduction, but it involves a set of considerations beyond z
the scope of this paper. Second, any amount of small-win policy changes in
Ethiopia, important as they are, will not change the external environment, -i

which remains, in many crucial respects, antagonistic to the success of

low-income countries. Protectionism, agriculturalsubsidies, inappropriately m

defined protection of intellectual property,and resistance to the temporary

movement of labor-intensive service providers constrain success. For these
reasons, the challenges facing Ethiopia are manifold and numerous indeed.


Thispaperdrawson a fruitfulcollaborationwith IanGoldinand AndrewBeathon the subjectof glo-

balizationand development,and Iam verygratefulto both of these individuals.Ihave also benefited
from conversationswith SisayAsefa,GelayeDebebe, and Dave Kaplan,and fromcomments by two


1. As noted by Eichengreen(2004),an "average"

or "typical"
financialcrisiscan claim up to 9
percentof GDP.Some of the worstcrises,such as those in Argentinaand Indonesia,reduced
GDPby morethan 20 percent,declinesgreaterthan that whichoccurredin the UnitedStates
during the GreatDepression.This situation has particularrelevancefor potential capital-
accountliberalizationin Africancountries,since,as noted by Singh(1999),bankingsectorsin
this region are notoriouslyfragile.Additionally,as documented by Stiglitz(2001)and Wade
(2001),Ethiopiahas in the past been underpressureby the InternationalMonetaryFundto
liberalizeits capitalaccount.
2. Weicknoted,"Changingthe scale of a problemcan change the qualityof resourcesthat are
directed at it. Callinga situationa mere problemthat necessitates a small win moderates
arousal,improvesdiagnosis,preservesgains,and encourages innovation"(1984:48).
3. See Chenand Ravallion(2004).
4. See also Silva(2005).
5. On gender disparitiesin education,see Schultz(2002).
6. The primarycompletionratewas just under40 percentin 2003, up from 15 percentin 1993.
7. See Dollarand Kraay(2004),forexample.Analternativeview is given in Rodriguezand Rodrik
(2001).Athoroughreviewof tradeand povertyis providedbyWinters,McCulloch, and McKay
-I 8. The fact that the trade-povertyalleviationlinkage is not automatic has been stressed by
the United NationsConferenceon Tradeand Development (2004) in the case of the least-
developed countries.
0 9. Oxfamnotes that,"Initself,trade is not inherentlyopposed to the interestsof poor people.
Internationaltrade can be a force for good, or for bad.... The outcomes are not pre-
determined.Theyare shaped by the way in which internationaltraderelationsare managed,
I and by nationalpolicies"(2002a:28).
10. Inthe case of Bangladesh,forexample,see Zohir(2001)and Oxfam(2002b).
z 11. Fora reviewof the evidence on trade liberalizationand productivity,see Winters,McCulloch,
I and McKay(2004).
12. On the latterpoint,see de Ferrantiet al. (2002).
13. Thispoint is emphasizedby Reinert(2004).
14. Tobe fair,as noted by Oxfam,"import tariffsinto rich-countrymarketsarenot the mainbarrier
for most coffee producers"(2002a:33).
15. Thisissue was raisedby Brownand Tiffen(1992)and more recentlyin the case of coffee by
Oxfam(2002a).Inthe case of coffee,the mainplayersare Kraft,Nestle,Procter&Gamble,and
SaraLee.See alsoTalbot(2002).
16. The authorcannot resist relatingthe observationof an individualfromthe regionthat the
0m borderconflict between Ethiopiaand Eritreahas been like"two bald men fighting over a
17. TheWorldBanknotes that "Iffinanceis fragile,bankingis the most fragilepart"(2001:11).
-I 18. Fora critiqueof prematurecapitalaccountliberalization,
see Stiglitz(2000).Asthe WorldBank
0 notes,"Poorsequencingof financialliberalization
ina poorcountryenvironmenthas undoubt-
m edly contributedto bankinsolvency"(2001:89).Hanson,Honohan,and Majnoninote that"the
riskinessof capitalaccountliberalization
withoutfiscaladjustment... and withoutreasonably
strong financialregulationand supervisionand a sound domestic financialsystem, is well
recognized"(2003:10).On pressuresfor prematurecapitalaccount liberalizationin Ethiopia,
see Stiglitz(2001)and Wade(2001).
19. Thepresentpaperis in broadagreementwith Singh,that the "experienceof manyAsianand
LatinAmericancountrieswith portfoliocapitalflows... indicate[sic]thatthe Africancountries
would benefit from using their effortsand institutionalresourcesto attractFDIratherthan
portfolioflows"(1999:356).Itdoes, however,distinguishbetween portfolioflowsinthe formof
equity investmentand those in the formof bond finance,with a preferenceforthe former.
20. Caves noted, "Surveyevidence indicatesthat MNEsdo some adapting (of technologies to
labor-abundantconditions),but not a great deal,and it appearsthat the costs of adaptation
commonlyare high relativeto the benefitsexpected by individualcompanies"(1996:241).
21. Dunningnoted,"Withthe exception of some European-basedcompanies,the proportionof
R&Dactivityby MNEsundertakenoutside their home countriesis generallyquite smalland,
in the case of Japanesefirms,negligible"(1993:301).
22. Forthe role of clusters in naturalresource-baseddevelopment, as might be importantto
Ethiopia,see Ramos(1998).
23. See te Veldeand Morrissey(2003).
24. Borensztein,De Gregorio,and Lee(1998)findthat it is the combinationof FDIand education
that has a statisticallysignificantimpacton growth.
25. Thisevidence is reviewedin chapter1 of Dobsonand Hufbauer(2001).Singh(1999),to some
extent, contests this conclusion.
26. Mistakesmade inthese areashaveprovedto be too costlyto the poorinthe pastforcountries -I
to relaxtheirvigilance.Prasadet al.concludethat:"Therelativeimportanceof differentsources V
of financingfor domestic investment,as proxiedby the followingthree variables,has been
shown to be positivelyassociatedwith the incidenceand the severityof currencyand finan- 00
cialcrises:the ratioof bankborrowingor other debt relativeto foreigndirectinvestment;the
shortnessof the term structureof externaldebt;and the shareof externaldebt denominated
in foreigncurrencies" (2003:49).
27. Thissection drawson Beath,Goldin,and Reinert(2006).
28. See Lowell(2001). --.

29. See, for example,Carringtonand Detragiache(1999).

30. Similarevidence for risksharingwas found in the case of Maliby Gubert(2002). m

31. See Dugger (2004).This has the advantage of preventing a brain drain of health-sector
32. UNIDOsupportsthe roleof Ethiopiainthe InternationalNetworkforBambooand Rattan,and
this could have some futurepromise.
33. See Raynolds(2000)and referencestherein.
34. Giventhe natureof coffee production,the only realroomforforwardintegrationis intoinstant
coffee production.
35. Aspointedout by Puri,thereis an importantgenderelement here:'Forthe majorityof women,
Mode4 providesthe only opportunityto obtain remunerativeemploymentwith temporary
movementto provideservicesabroad.Ithas been found to have a net positiveeffect on the
economy and povertyreductionin the home country"(2004:8).
36. Forexamples,see Sahai(2003)and Das2006.
37. Thecontributionsto Silverman(1999)are relevantin this regard.
38. See, for example, Bairand Gereffi(2001),Clancy(1998),Hendersonet al. (2002),and World
39. See Tessema(2003).
40. Some of the suggestions here drawfromBeath,Goldin,and Reinert(2006).
41. See Stalker(2001).As pointedout by Kiggunduand Oni(2004),Ethiopiadid benefitforsome
time fromthe InternationalMigrationOrganization'sReturnand Reintegrationof Qualified
AfricanNationals;it has been some time, however,since this programhas been in existence.
42. SANSAis a joint projectof the SouthAfricanNationalResearchFoundationand Department
of ScienceandTechnology.
43. Forfurtherinformation,see http://sansa.nrf.ac.za
and Kaplan(1997).
44. The EthiopianNorthAmericanHealthProfessionalsAssociationis alreadyinvolvedin such
Activities;see www.enahpa.org.

Aredo,Dejene. 1998. SkilledLabourMigrationfrom DevelopingCountries:An Assessmentof Brain

Drainfrom Ethiopia.InHumanDevelopmentin Ethiopia,edited by S. Siyoumand A. Siyoum.
.2005. MigrationRemittances,Shocksand Povertyin UrbanEthiopia:AnAnalysisof MicroLevel
Asefa,Sisay,and Adugna Lemi.2004. Challengesto RegionalIntegrationin Africa:Implicationsfor
Ethiopia.Departmentof Economics,WesternMichiganUniversity.Typescript.
"-A Bair,Jennifer,and GaryGereffi.2001. LocalClustersin GlobalChains:TheCausesand Consequencesof
ExportDynamisminTorreon'sBlueJeans Industry.WorldDevelopment29:1885-1903.
BarrattBrown,Michael,and PaulineTiffen.1992.ShortChanged:Africa and WorldTrade.London:Pluto

Beath,Andrew,Ian.A. Goldin,and KennethA. Reinert.2006. Migration.In Globalization
ment,edited by 1.A.Goldinand KennethA. Reinert.London:PalgraveMacMillan.
Bigsten,Arne,BereketKebede,Abede Shimeles,and MekonnenTaddesse.2003. Growthand Pov-
-Qi erty Reductionin Ethiopia:Evidencefrom Household Panel Surveys.WorldDevelopment
z Blomstrom,Magnus,and Ari Kokko.2003. TheEconomicsof ForeignDirectInvestmentIncentives.
I Cambridge,Mass.:NationalBureauof EconomicResearch,WorkingPaper9489.
0r and FredrikSjoholm.1999.TechnologyTransferand Spillovers:Does LocalParticipationwith
Borensztein,Eduardo,Jose De Gregorio,andJong-WhaLee.1998.HowDoes ForeignDirectInvestment
z AffectEconomicGrowth?Journalof InternationalEconomics45:115-135.
0 Bourguignon,Francois,MaurizioBussolo,HansLofgren,HansTimmer,
and DomiquevanderMensbrug-
m ghe. 2004.TowardsAchievingthe MDGsin Ethiopia:AnEconomywideAnalysisof Alternative
Carrington,WilliamJ.,and EnricaDetragiache.1999. How ExtensiveIsthe BrainDrain?Financeand
Enterpriseand 2nd ed. Cambridge:Cambridge
Chen,Shaohua,and MartinRavallion.2004. HowHavethe World'sPoorestFaredsincethe Early1980s?
0 WorldBankResearchObserver19:141-169.
0-o Christiaensen,Luc,and HaroldAlderman.2004. ChildMalnutritionin Ethiopia:CanMaternalKnowl-
edge Augmentthe Roleof Income?EconomicDevelopmentandCulturalChange 52:287-312.
z Claessens,Stijn,DanielaKlingebiel,and SergioL.Schmukler.2002.The Futureof StockExchangesin
EmergingEconomies:Evolutionand Prospects.Brookings-Wharton
Paperson FinancialServices
Clancy,Michael. 1998. Commodity Chains,Services and Development:Theory and Preliminary
Evidencefromthe TourismIndustry.Reviewof International
Das, Anupreeta.2006. India:Breath[sic] In, and HandsOff OurYoga.ChristianScienceMonitor,9
de Ferranti,David,GuillermoE.Perry,DanielLederman,and WilliamF.Maloney.2002. FromNatural
Resourcesto the KnowledgeEconomy:TradeandJobQuality.Washington,D.C.:WorldBank.
Dercon,Stefan.2003.Globalisationand the Poor:WaitingforNikein Ethiopia.Tijdschrift
en Management48:603-617.
Dobson,Wendy,and GaryC.Hufbauer.2001. WorldCapitalMarkets:Challenge
to theG-1O.
D.C.:Institutefor InternationalEconomics.
Dollar,Dollar,and AartKraay.2004.Trade,Growth,and Poverty.EconomicJoumal114:22-49.
Dugger,C.W.2004. LackingDoctors,AfricaisTrainingSubstitutes.NewYorkTimes,23 November.
Dunning,John H. 1993. MultinationalEnterprises
and the GlobalEconomy.Workingham,England:
Eichengreen,Barry.2004. FinancialInstability.Berkeley:Universityof California.
El-Khawas,Mohamed. A. 2004. BrainDrain:Putting Africabetween a Rock and a Hard Place.
Gubert,Flore.2002. Do MigrantsInsureThose Who Stay Behind?Evidencefrom the KayesArea
Hanson,JamesA.,PatrickHonohan,and GiovanniMajnoni.2003. Globalizationand NationalFinancial
Systems:Issuesof Integrationand Size.InGlobalization edited
by J.A. Hanson,P.Honohan,and G.Majnoni.WorldBank,Washington,D.C. z
Henderson,Jeffrey,PeterDicken,MartinHess,NeilCoe,and HenryW.-C.Yeung.2002. GlobalProduc- a

tion Networksand the Analysisof EconomicDevelopment.Reviewof InternationalPolitical

Kaplan,David.1997.Reversingthe BrainDrain:TheCasefor UtilisingSouthAfrica'sUniqueIntellectual m
Diaspora.Science,Technologyand Society2:387-406.
Kiggundu,Moses N.,and BankoleOni.2004. AnAnalysisof the MarketforSkilledAfricanDevelopment
forSkillsRetentioninSub-Saharan m

Lowell,BriantLindsay.2001. PolicyResponsesto the InternationalMobilityof SkilledLabor.Geneva:
Mwenda, Kenneth K.,and GerryN. Muuka.2001. Prospects and Constraintsto CapitalMarket
Integrationin Easternand SouthernAfrica.JournalofAfrican
Organizationfor EconomicCooperationand Development.2005. Trendsin International
2004. Paris.
2002a.Mugged:Povertyin YourCoffeeCup.Oxford.
2002b. RiggedRulesand DoubleStandards:Trade,Globalization,
and the FightagainstPoverty.
Prasad,Eswar,KennethRogoff,Shang-JinWei,and M.AyhanKose.2003. Effectsof FinancialGlobal-
izationon DevelopingCountries:Some EmpiricalEvidence.Washington,D.C.International
Tradeand Development.Typescript.
Ramakrishna, G.2002. Growth,Povertyand Inequalitiesin Ethiopia:An Assessmentof the Impactof
Globalization.Ekonomska lEconomicResearch15:5-18.
Ramos,Joseph. 1998. A Development Strategy Founded on NaturalResource-BasedProduction
Clusters.CEPAL Review66:105-127.
Raynolds,Laura.T.2000. Re-EmbeddingGlobalAgriculture:
The InternationalOrganicand FairTrade
Movements.Agriculture and HumanValues17:297-309.
Reinert,KennethA. 2004. Outcomes Assessment in TradePolicyAnalysis:A Note on the Welfare
Propositionsof the 'GainsfromTrade."Journal
of EconomicIssues38:1067-1073.
Reisen,Helmut,and MarceloSoto. 2001. WhichTypesof CapitalInflowsFosterDeveloping-Country
Rodriguez,Francisco,and DaniRodrik.2001.TradePolicyand EconomicGrowth:A Skeptic'sGuideto
the Cross-NationalEvidence.InMacroeconomics
Annual2000, edited by Ben Bernankeand
K.S. Rogoff.Cambridge,Mass.:MITPress.
Rousseau,PeterL.,and PaulWachtel.2000. EquityMarketsand Growth:Cross-Country
Timing and Outcomes, 1980-1995. Joumal of Banking and Finance 24:1933-1957.
Sahai, Suman. 2003. Indigenous Knowledgeand Its Protectionin India.In Tradingin Knowledge:
DevelopmentPerspectives on TRIPS,TradeandSustainability, edited by C. Bellmann, G. Dutfield,
and R.Melendez-Ortiz.
Schultz,T. Paul.2002. WhyGovernmentsShould InvestMoreto EducateGirls.WorldDevelopment
4) 30:207-225.
-I Silva, Patricia.2005. Environmental Factors and Children'sMalnutritionin Ethiopia. Policy research paper
0 3489.Washington,D.C.:WorldBank.
Silverman,RaymondA.,ed. 1999. Ethiopia:Traditions
of Creativity.
0o UniversityMuseum.
Singh,Ajit.1999.ShouldAfricaPromoteStockMarketCapitalism? Journalof International
m 11:343-365.
Stalker, Peter. 2001. The No-Nonsense Guide to International Migration. Oxford: New International
a Publications.
z Steil,Benn.2001. CreatingSecuritiesMarketsin DevelopingCountries:A New Approachfor the Age
I of AutomatedTrading.IntemationalFinance4:257-278.
Stiglitz,Joseph. E. 2000. CapitalMarketLiberalization,Economic Growth,and Instability.World
Development 28:1075-1086.
.2001. Thanksfor Nothing.AtlanticMonthly,October,36-40.
0 Talbot,John.M.2002. TropicalCommodityChains,ForwardIntegrationStrategiesand International
Inequality: Coffee, Cocoa and Tea. Review of International Political Economy 9:701-734.
Tessema,Asrat.2003. Prospectsand Challengesfor DevelopingSecuritiesMarketsin Ethiopia.African
Development Review/Revue Africaine de Developpement 15:50-65.
teVelde, DirkW.2001. GovemmentPolicies towardInwardForeign Directlnvestmentin Developing Coun-
,and Oliver.Morrissey.2003. Do Workersin AfricaGet a Wage PremiumIfEmployedin Firms
Owned by Foreigners? Journal ofAfrican Economies 12:41-73.
Tsang, EricW. K., Duc T. Nguyen, and M. KrishnaErramilli.2004. Knowledge Acquisitionand
z Performanceof InternationalJointVenturesin the TransitionEconomyof Vietnam.Journalof
0 International Marketing 12:82-103.
UnitedNationsConferenceon Tradeand Development.2002. Tradeand DevelopmentReport.Geneva.
.2004. The Least Developed Countries Report 2004. Geneva.
Wade,Robert.H.2001. Capitaland Revenge:The IMFand Ethiopia.Challenge44:67-75.
Weick,Karl.E. 1984. SmallWins:Redefiningthe Scale of Social Problems.AmericanPsychologist
Winters,L. Alan,TerrieL.Walmsley,Zhen K.Wang, and RomanGrynberg.2002. Negotiatingthe
Liberalizations of the TemporaryMovement of Natural Persons. Discussion paper in economics
87. Sussex:Universityof Sussex.
Winters,L.Alan, Neil McCulloch,and AndrewMcKay.2004. TradeLiberalizationand Poverty:The
Evidence So Far.Journal of Economic Literature42:72-115.
World Bank. 2001. Finance for Growth:Policy Choices in a Volatile World.Washington, D.C.
. 2003. GlobalEconomicProspectsand the DevelopingCountries:Investingto UnlockGlobal
. 2004. GlobalDevelopmentFinance:HarnessingCyclicalGainsfor Development.Washington,
. 2006. WorldDevelopmentIndicators Washington,D.C.
Zohir,SalmaChaudhuri.2001. SocialImpactof the Growthof [the]GarmentIndustryin Bangladesh.