Ethiopia: Insurers, Bankers Cautious, Despite Reforms - Report Example

The African continent and its member nations are considered the most underdeveloped regions in the world. High levels of poverty, malnutrition among the population, and diseases are among the social problems the people that live there encounter on an everyday basis. This report covers the African country of Ethiopia. The focus is on the viability of reviving the countries financial markets. The first part of the report will provide a country profile, and then the second part will analyzed the possibility of reviving the financial markets in Ethiopia to place the nation in a better position to obtain economic growth. Ethiopia is a mountainous country in the Horn of Africa with an area of 435,184 square miles that has over 60 million inhabitants living in the region (CultureGrams, 2008). The natural structure of the land is not very suitable for industrial expansion due to large chucks of mountainous areas. The infrastructure of the country is very poor and energy and suitable water are in short supply. Poverty in the country is at on of the highest levels in the world with a real gross domestic product per capita of only $1057 per year. The life expectancy of its citizens is in the low 50’s and the infant mortality rate is a devastating 109 per 1000 child births (CultureGrams, 2008). The social standing of a country is one for the first factor investors evaluate when they making viability study of a region. The country does have areas which are more developed. The cities areas have a descent transportation system composed buses and trains that travel back and forth into the major cities. The countries mass communication is limited to one television station and four radio stations numbers which staggering low for such a large population of over 60 million citizens. One of the most alarming social problems the countries encounters is in its education system. Education which is the backbone that allows progress in any civilization has not been made a priority by governmental officials. Education at the elementary and intermediate levels is not mandatory. Public survey estimate than less than half the children in the country obtain a formal education from the state. Despite the low enrollment school are overcrowded and children study on a part time basis in which the government has four hour shifts for two groups of student to attend class one in the morning and one in the afternoon. The telecommunication in the city is fairly good which is good sign for potential business endeavors. The country profile of Ethiopia leaves a lot to be desired, but the fact that they are so behind in economic progress means that there is a lot of room for improvement and outside help is needed to get to the roots of the internal government structures that are stuck in no man’s land doing nothing to bring any kind of change to this nation is dying need for major reforms. One of the problems is that the country’s poverty and bureaucratic financial systems dissuade underwriters and banks from operation on any but most cautious terms (Anonymous). Working with such constrains this type of resistant is to be expected, that is why it is imperative for the intervention of higher order organization to step in to force changes to occurs. Corruption in Ethiopia is latent and considering they are rank the second most poverty ridden in the world the WTO and the United Nation must step in initial planning phase on how to instill radical change in Ethiopia. The working capital to rebuild the economy is insufficient. The foreign reserves of the nation are currently hovering at around 500 million dollars and the private sector has set aside nearly $2.5 billion. These numbers seem good for a small; a nation such as Ethiopia with 60 million inhabitants needs a lot more. The major world organization including the World Bank have to step in and providing a combined capital injection of at least an extra 10 billion dollars in the short with more money set aside for the mid term and long term growth plans of the nation economic recovery. Analyzing the current economic of Ethiopia is heavily relying in the exports of crops such as coffee, hides and skin. In the coffee end the country should immediate move away from growing normal coffee and start an alliance with companies such as Starbucks which are involved in the highly profitable new niche market of Fair Trade Coffee. Fair Trade Coffee sells in the open at double the price per pound and the companies involved in this revolution invest a lot of their money in the local farms to improve the pay and working condition of the farmers and workers in the industry. The move could solidity the country agricultural base and increase employment. Another potential initiative in the farming end is to form other alliances for new innovative products that are suitable for African soil. In Australia there is an initiative of a company called Papyrus Australia which developed a new paper commodity called banana ply paper which uses the truck of banana trees as its prime material. Africa holds 53% of all banana crops in the world. This is an ideal industry that can be started in Ethiopia since the operations can be set up to be practically self-sustained. The money the government gets should also be invested in improving the educational system of the nation. Education is the key to long term development. These children have to be taught of the new wonders of the real so that hope goes in to the young minds who are going to be the next generation of workers in Ethiopia which will hopefully increase the diversity of its economy. The only way for the financial markets in the area to open is by establishing new business and corporation in Ethiopian soil. Many of them can become public companies that become a part of the capital markets of the company in which anyone can invest them when they become publicly traded firms. There are industries already establish with good potential for immediate growth. Three of these industries are the airline industry, the mine industry and duty free shops. Exports in precious metals can help increase the gross domestic product of the nation if production is increased significant. To do so professional consultants must come in to evaluate the current facilities and make a judgment on whether full blown expansion is a viable solution at the time. There are positive political changes in Ethiopia such as the liberation of Marxist structures inhered from the Mengistu regime, implying the government may be open to serious negotiations to implement radical liberal changes need to start turning things around in Ethiopia. When a country reaches rock bottom the only good thing is that there is lots of room for improvement. In Ethiopia things could not be worse and the current course of action is not going to liberate the financial market to allow the economy to start on the recovering end. The main problem is that the economy is absolute chaos and leaving such a state of extreme underdevelopment is not easy. Breaking with old tradition is one of the keys for a successful turnaround. Raising the levels of literary among the population and placing a greater emphasis in education such as instill a policy of mandatory education for all children is one the initial steps the must take place. Struggle is a part of human evolution and the strong fighting souls of Ethiopian are ready for the challenge that lies ahead. References Anonymus (2008). Ethiopia: Insurers, bankers cautious, despite reforms. International Trade Finance. 301,9. CountryGrams (2008). Country Profile: Ethiopia. Retrieved July 31, 2008 from CountryGrams database. Read More