'Development' and Improved Living Standards The Need to Harmonize the Objectives of Ethiopian Investment Law.

• Author: Stebek, Elias N.

1. Introduction

   Investment toward the production of goods and services presupposes saving or mobilization of capital to generate profit, to obtain interest or to benefit from the appreciation of value. In effect, it simultaneously serves the self-interest of investors and the common good. Investment involves economic activities that usually bring about supply of goods or services to society, financial benefits to the owner/s, employment opportunities, technological spillovers, tax revenue, foreign exchange earnings, export promotion, import substitution, and other multifaceted benefits. Ultimately, the benefit accrued from every investment is an element of the overall social benefit which takes the form of economic and social development. The objectives of investment promotion in Ethiopia's Investment Proclamation thus envisage not only statistical growth in the production of goods and services but also the steady enhancement of domestic production capacity and corresponding positive changes in the standards of living of the majority at the grassroots.

   This article briefly addresses the objectives of investment promotion in Ethiopia embodied in the Preamble and Article 5 of Ethiopia's Investment Proclamation No. 769/2012, namely strengthening domestic production capacity in Ethiopia to bring about 'economic development' and 'improved living standards' of people. To this end, it highlights the specific objectives of investment promotion in Ethiopia and the embodiment of the economic, social and environmental pillars of sustainable development in the Ethiopian Constitution after which a brief discussion is made on national competitiveness and productivity, the notion of standards of living, the demographic challenge in enhancing living standards and its pressure on the environment, the Millennium Development Goal to eradicate extreme poverty, and the tensions that permeate the gaps between Ethiopia's GDP/HDI growth figures vis-a-vis the standards of living of the majority at the grassroots.

2. Development and enhanced living standards envisaged under Ethiopian law and development strategies

   Article 43(1) of the Ethiopian Constitution stipulates that '[t]he People of Ethiopia as a whole, and each Nation, Nationality and People in Ethiopia in particular have the right to improved living standards and to sustainable development.' In conformity with this constitutional provision, the first paragraph in the Preamble of Ethiopia's Investment Proclamation (1) states that '... the encouragement and promotion of investment, especially in the manufacturing sector, has become necessary so as to strengthen the domestic production capacity and thereby accelerate the economic development of the country and improve the living standards of its peoples.'

   According to Article 5 of the Investment Proclamation 'the objectives of the investment policy of Ethiopia are designed to improve the living standards of the peoples of Ethiopia through the realization of sustainable economic and social development.' Sub-Articles 1 to 8 of the provision state that the specific objectives of Ethiopia's investment policy are to (1) 'accelerate economic development'; (2) 'exploit and develop the immense natural resources of the country'; (3) 'develop the domestic market through the growth of production, productivity and services'; (4) 'increase foreign exchange earnings by encouraging expansion--in volume and variety and quality--of the country's export products and services as well as to save foreign exchange through production of import substituting products locally'; (5) 'encourage balanced development and integrated economic activity among the regions and to strengthen the inter-sectoral linkages of the economy'; (6) 'enhance the role of the private sector' in accelerated economic development'; (7) 'enable foreign investment play its proper role in the country's economic development'; and (8) 'create ample employment opportunities for Ethiopians and to advance the transfer of technology required for the development of the country.'

   Although Article 5 of Ethiopia's Investment Proclamation uses the terms 'sustainable economic and social development', the specific objectives do not reflect the integration of the three interdependent pillars of sustainable development which 'reconcile the ecological, social and economic dimensions of development, now and into the future'. (2) The incidental reference made to the environment in Article 5(2) is indeed inadequate even if envisages not only the exploitation of natural resources, but also their simultaneous development. Most of the stipulations under Article 5 thus clearly fall under one of the pillars of sustainable development, i.e. economic development. These provisions could have at least made general reference to the social and environmental concerns.

   They thus fall short of both the 'weaker' model of sustainable development 'whose aim is to integrate capitalist growth with environmental concerns' (3) and the 'strong' version which 'requires that political and economic policies be geared to maintaining the productive capacity of environmental assets (whether renewable or depletable)'. (4) While the former considers economic development as a precondition of environmental protection, the latter on the contrary asserts 'that environmental protection is a precondition of economic development'. (5)

   The tension between the pillars of sustainable development is usually resolved in favour of economic actors who may either use the phrase as a facade for the 'growth first' paradigm or as a public relation medium. This is particularly so, when the institutions in charge of enforcing environmental compliance standards are weak. The mere embodiment of legal provisions that require a balance in the three dimensions of sustainable development cannot thus ensure the applicability of the notion. As Nayar notes, the notion of sustainable development can be maneuvered 'depending on one's inclination'. (6) He observes that the concept of sustainable development 'does not articulate a well-defined strategy for action' and 'remains an accepted philosophical approach but in a vacuum'. (7) The strength of the concept thus lies not in its mere embodiment in laws as a concept or principle but in its integration with enforceable specific laws. The constitutional provisions on sustainable development should thus be used as a norm of 'integration' that facilitates a 'balance and reconciliation between conflicting legal norms relating to environmental protection, social justice and economic development'. (8)

   Articles 89 to 92 of the FDRE Constitution state the economic, social, cultural and environmental objectives that are required to be the pursuits of the Ethiopian Government at federal and state levels. Article 89 titled 'Economic Objectives' lists down the duty of the Government (federal and state) to: (1) formulate policies that ensure 'all Ethiopians to benefit from the country's legacy of intellectual and material resources'; (2) 'ensure that all Ethiopians get equal opportunity to improve their economic condition and to promote equitable distribution of wealth among them'; (3) 'take measures to avert any natural and man-made disasters, and, in the event of disasters, to provide timely assistance to the victims'; (4) 'provide special assistance to Nations, Nationalities, and Peoples least advantaged in economic and social development'; (5) 'to hold, on behalf of the People, land and other natural resources and to deploy them for their common benefit and development'; (6) 'promote the participation of the People in the formulation of national development policies and programmes' and also 'support the initiatives of the People in their development endeavors'; (7) 'ensure the participation of women in equality with men in all economic and social development endeavors'; and (8) 'endeavor to protect and promote the health, welfare and living standards of the working population of the country.'

   Some of the objectives stated under Article 89 such as health can also be considered as social objectives. Articles 90 and 91 embody the social and cultural objectives embodied under the Constitution. Article 90 states the Government's duty to provide all Ethiopians (to the extent resources permit) 'access to public health and education, clean water, housing, food and social security' (9) and provide education 'in a manner that is free from any religious influence, political partisanship or cultural prejudices'. (10) The cultural objectives embodied under Article 91 of the Constitution state the government's duty to support 'the growth and enrichment of cultures and traditions that are compatible with fundamental rights, human dignity, democratic norms and ideals, and the provisions of the Constitution' (11) and also support (to the extent resources permit) 'the development of the arts, science and technology'. (12)

   Article 91(2) further entrusts the Government and all Ethiopian citizens with the duty 'to protect the country's natural endowment, historical sites and objects.' These duties that are expected of the Government include both duties of result and duties of diligence. In the case of certain rights that bear qualifying phrases such as 'shall endeavour' and 'to the extent that resources permit' the rights can only be progressively realized. The environmental objectives stipulated under Article 92 of the Constitution include such duties.

   By virtue of Article 85(1) of the Constitution, '[a]ny organ of Government shall, in the implementation of the Constitution, other laws and public policies, be guided by the principles and objectives specified under [Articles 85 to 92 of the Constitution].' Article 43(2) of the Constitution which (as highlighted above) ensures 'the right to improved living standards and to sustainable development' in conjunction with the stipulations enshrined in Articles 85 to 92 clearly show...