HE Meles Zenawi, Prime Minister of Ethiopia

Annual Report to Parliament

Tuesday 4th July 2006


Honorable Speaker,

Honorable Members of the House,

On this occasion which marks the conclusion of The House’s annual working session, I wish to present my report dealing with the highlights of the Government’s activities during the year for the realization of its democratization, peace building and development objective. I believe it is appropriate and necessary to limit my report to a summarized version since members of the Council of Ministers and myself have periodically presented detailed reports to The House.

Honorable Speaker,

Honorable Members of the House,

In as much as the year in review has been a period marked by our determination to bring to new heights the democratization efforts of many years in the past, the obstacles we encountered were of no mean magnitude. The annual work commencement of The House was marked by ominous circumstances with ramifications of danger to our country and The House. This was because some quarters, which did not want to accept the outcome of the Third Regional and National Elections, opted for incitement to violence and rebellion as instruments for airing their views rather than resorting to mechanisms of dispute settlement established by the constitutional order.

Although the Government went out of its way to tackle the challenge through dialogue and negotiations, the other side persisted with its rigidity to pursue the road of insurrection, as a result of which the attempt to foment it could not be averted. Therefore, when Government efforts to resolve the issue by peaceful means were exhausted, it was forced to take the necessary legal measures in line with its obligatory duty to maintain law and order. Contrary to the expectations of some and the hopes of others, the events never led to the disruption of the constitutional order, nor was the country engulfed in unending intra-communal violence and turmoil. Nevertheless, the scars of the events cannot be underestimated. Meanwhile, those events have provided lessons on the need to be vigilant against a repeat of similar dangers to our democracy and to redouble our efforts in strengthening the process of democratization in the country.

In order to strengthen the democratic order, the Government has decided to take measures based on the lessons learned from the shortcomings of the election process as one of its priority areas of focus. In this respect, the issues of contention at the time were in connection with The House’s rules of procedure and code of conduct, the law on the media, capacity building of the Election Board, investigation of alleged human rights violations during the attempted rebellion and violence and determination on appropriate resolution of the issue if the allegations were proved to be accurate. Many tasks regarding these issues were performed during the year. Meanwhile, sufficient focus was accorded to consolidating the practice of legal and peaceful political competition in an atmosphere of tolerance. Numerous activities were carried out in this respect.

With regard to the rules of procedure and code of conduct of The House of People’s Representatives, four countries with advanced traditions in parliamentary practices, as well as in the management of federal systems of governance, were selected to serve as models to emulate. Experts from these countries were employed to furnish a comprehensive report of studies on the experiences of their respective countries in this respect. The report was distributed to representatives of the various parties in The House with a view to soliciting their comments and amendments that they deemed necessary to the rules of procedure and code of conduct on the basis of their examination of the study made available to them. Continuing consultations and negotiations which were conducted on the ideas forwarded, and the agreements reached on major issues have been made public. Furthermore, the ruling party has forwarded its own proposals which reflect the experiences of the four countries identified in the study.

The proposals of the ruling party, which take into account the need to enable the opposition parties to be heard sufficiently, go further than the scope of practices of the countries identified in the study, and are based on the provisions of our constitution and go beyond the proposals of the opposition parties. In addition to this, the governing party has incorporated proposals of opposition parties on the basis of their appropriateness. The process has reached a conclusion whereby a draft has been submitted to The House with the assumption that it will examine and approve the document and endorse it before The House begins its recess. Therefore, it is possible to conclude that productive tasks have been performed in the process of negotiations, resulting in the possession by The House of a system that favorably compares with the best practices from countries which have advanced experiences and traditions in democratic governance.

The study with respect to media legislation has gone through a similar process and is now concluded. However, since the work has taken more time than had been originally anticipated, consultations between stakeholders in the manner applied with respect to the rules of procedure and code of conduct have not advanced to the extent of submitting a draft to The House before its recess. Therefore, the study will be distributed to party representatives in the House and consultations on the report are expected to be held among the parties during the rainy season. Following that, actors in the field and other stakeholders will be invited to express their views on the study. The process is expected to be completed by the time The House re-opens after recess, at which stage a final conclusion of the issue will be reached.

Regarding the Election Board, the study by foreign experts on measures to enhance its capacity to conduct elections was concluded recently. However, the work has taken more time than had been originally expected, as a result of which the final conclusion of the issue through inter-party consultations has not taken place yet. The inter-party consultations could be concluded during the parliamentary recess and subsequently the appointment of new Election Board members by The House may take place when The House re-opens after recess. Taking this into account, I believe The House may grant a limited number of months of extension to the tenure of the incumbent Board.

To promote positive and healthy inter-party relations and competition, the governing party has been holding continuous dialogue with some representatives of parties in the House. Similar consultations are expected to be held with the rest. The purpose of the dialogue is, first and foremost, to establish a consensus on the duty of all parties to uphold and respect the Constitution and the laws of the land. After continuous consultations, a common position has been reached regarding this issue. From now on, there is no reason to expect insurmountable problems other than making certain that all parties adhere to their commitments of proving, in action, that they truly honor their constitutional obligations.

On the basis of the agreement to honor the fundamental issues just mentioned, consultations and constructive dialogue were held focusing on the rules of procedure and code of conduct of the House. It is assumed that the consultations between parties will continue when the House is in recess.

Dialogue between parties is intended to narrow their differences but is not expected to put an end to them completely. Since all parities are organizations with different objectives, the on-going negotiations cannot lead to any result beyond narrowing their differences.

The dialogue should recognize that the parties will continue to hold different opinions. In fact, on this basis, the goal of the negotiations should be to enable the parties to engage in constructive inter-party exchange of ideas in a legal manner and a cordial atmosphere and to cooperate in nurturing this practice. In this respect, while much remains to be done towards realizing the prevalence of democratic inter-party relationships, it is possible to note that there is an encouraging start on the road of promoting this important attribute of democratization.

In addition to the major tasks outlined above, the year in review witnessed the establishment of the Human Rights Commission and the Institution of Ombudsman with the view of strengthening democratic institutions. Other positive developments such as the full implementation of the Civil Service Reform Program and the strengthening of democratic institutions and culture have produced encouraging results as previous reports have already demonstrated. Next year [i.e. Ethiopian year – from September this year], we shall be engaged in taking up the unfinished work left over from this year; we shall seek further improvements in building democratic institutions and culture guaranteeing the prevalence of democratic practices; we shall strive to conduct successfully Kebele and Wereda elections in the regions as well as an election of the city administration of Addis Ababa. Full cooperation of all is imperative in the execution of these tasks. I wish to assure the House that my administration will deploy its full capacity, including during the rainy season’s parliamentary recess and beyond, to the execution of its responsibilities in all areas of endeavor entrusted to it.

Honorable Speaker,

Honorable Members of the House

Positive relationships with all countries neighbouring Ethiopia are of paramount importance to the maintenance of peace in our country. With this conviction, the Government has been exerting ceaseless efforts regarding this issue. Consequently, our relations with Djibouti, the Sudan and Kenya are progressing in a healthy and positive direction. Although conflicts do occur intermittently between Kenyan and Ethiopian citizens on the common border between the two countries, they have not had a negative impact on the relationship of the two countries which is based on a healthy and strong foundation. Such intermittent clashes are unlikely to negatively impact this positive relationship. Our efforts to augment close relations with the Sudan and Djibouti, by promoting mutually beneficial cooperation in the economic sphere, can be characterized as successful and encouraging results have already materialized. The projects underway in the construction of roads between Ethiopia and these countries, in the rehabilitation of the railway line to improve transport to Djibouti, in the installation of electric and telephone lines and other efforts to link these countries through modern infrastructure services are manifestations of this good-neighborliness.

Ceaseless efforts have been exerted to resolve the dispute between Ethiopia and Eritrea on the basis of our goals to establish a relationship of good-neighborliness. In this regard, the meeting made possible through the initiative of the American Government in connection with the ruling of the Ethiopia-Eritrean Border Commission can be cited as an example. The Government has duly attended, with appropriate participation, two meetings called by the Border Commission, because of our desire to promote peace and in line with the five-point peace plan endorsed by this House. Be that as it may, the process was cut short before getting off the ground because of Eritrea’s intransigence, which was responsible for the lack of any outcome of the meeting and because Asmara has rejected any invitation to meetings connected with the dispute. The Eritrean government has demonstrated no interest in conducting a peaceful policy in its relations with its neighbors. Instead, Asmara is pursuing a strategy it had devised to disturb the peace in the Horn countries including Ethiopia. Eritrea’s actions of arming radical elements in Somalia, which are well known, have been confirmed by United Nations reports and constitute concrete manifestations of Eritrean strategy of destabilizing the region. In short, the Eritrean government has confirmed, through its actions that it stands to be a source of destabilization in the Horn of Africa and a mentor of radicals and terrorists.

Ethiopia’s policy on Eritrea will remain the same as before, which is to guarantee durable peace through dialogue and negotiations. The rigidity of the Eritrean government and its current actions which are detrimental to peace will never be reasons for us to question our peace policy. In fact, they will be reasons for us to redouble our pursuit of this policy’s realization. While we remain committed to our peace policy, we shall, as always, be vigilant in order to prevent the Eritrean Government from igniting war and if prevention is not possible, to defend ourselves. We are taking the necessary precautionary measures to nip in the bud, as usual, any attempts at disturbing our peace by elements recruited, trained and armed by the Eritrean Government.

It is to be recalled that Ethiopia has been actively participating in the efforts towards restoring peace in Somalia within the parameters of the cooperative endeavors by member countries of IGAD. While encouraging results of the efforts were showing signs of hope, an armed conflict in Mogadishu has created a new situation which raises doubts about the implementation of agreements promoted by IGAD. At this point in time we do not believe that the forces in control of Mogadishu and its environs are all fundamentalists. Although the fundamentalist and terrorist group, AI-Ithad, is at the helm of the movement and although elements armed by Eritrea have joined this group in the operations, the great majority of the participants were the people of Mogadishu and members of groups with no other intentions, we believe, except putting an end to the rampant lawlessness in the city and to restore peace. Therefore, in line with the support to the Somali Transitional government by IGAD, the African Union and the entire international community, we strongly support the proposal that calls for negotiation between the Transitional Government and those who accept the Transitional Charter and its institutions. We strongly support the position of IGAD and the African Union that the arms embargo on Somalia should not apply to the Transitional Government. In line with the positions backed by the entire international community, we shall continue lending strong support to the Transitional Government and the Somali people in the efforts to restore peace to that country.

After the attempted rebellion failed at the beginning of the year under review, the Eritrean government has been attempting to foment trouble and disturb the peace in our country by organizing armed surrogates made up of agents of rebellion and violence, and deploying them as accomplices of its conspiracy. The explosions and other acts of terror which took place in our capital city at various occasions were perpetrated by this unholy alliance. It is clear that these forces of violence have worked hand-in-glove with the Eritrean government as their main actors continue their errant activities to further their sinister motives of aggravating the usual minor disputes within communities into conflicts. The Government is aware that these sinister acts are manifestations of political bankruptcy and frustration. No one however, would anticipate that these acts can negatively impact our peace.

Nevertheless, the loss of life and damage to property they continue to inflict cannot be underestimated. Therefore, vigilance continues to be heightened in the tasks of conducting surveillance and control to prevent the repeat of these acts, to hunt down the perpetrators and to bring them to justice.

Honorable Speaker,

Honorable Members of the House,

The onslaught on poverty and our struggle to ensure rapid growth were successfully carried out during the year under review. On the basis of data collected in the past eleven months, the forecast of GDP growth in our economy stands at 8.55%. While an average GDP growth of 6 and 7% is necessary to achieve the Millennium Development Goals (MDG), the Government has on this basis adopted the target of 7-10% growth and viewed from this perspective, the first year of implementation of the five-year plan adopted by the House has indeed been successful.

As our economic development activity has been export-led, the year under review saw rapid growth in our exports. The data collected for the past eleven months indicates that the rate of growth in our exports was no less than 20% and the export growth rate for the year is forecasted to be around 20% too. The fact that the rate of growth of export is more than twice faster than the overall growth of the economy shows that our economy is progressing on the right track, as outlined in our development strategy. Similarly, the growth rate of imports was no less than 25%, showing a significant gap compared to exports. On the other hand however, of our total import during the past 11 months, 29% accounted for consumer goods while the share of capital goods was 33%, and that of raw materials and semi-processed raw materials was 20.6%. The remaining was mainly fuel. Consequently, although the rate of import growth is higher than our exports, the greater share of the imports is principally for critical inputs to our economic development in the form of capital and raw materials, indicating that the growth is healthy.

It is a fact that the banking system plays a key role in our economic growth. The banks of the country have had their due share of contribution to the expansion of the economy. Out of the total loans of Birr 10.3 billion given by the banks during the first 10 months of the year, 97.1 % was to the private sector. This performance is 23% higher than during the corresponding period in the previous year. The amount collected by the banks in repayment of loans during the 10 months was Birr 8 billion, out of which 89.1% was from the private sector. The collection rate showed a 38.5% growth in comparison to the performance of the corresponding period during the previous year. The aggregate holding by the banks as of May this year was Birr 44.1 billion, representing a growth of 18.8% compared to the situation in the previous year.

Government revenue collection during the last 11 months amounted to Birr 14 billion 148 million, registering a growth of 25.6% compared to the amount of regular revenue collected during the previous year. The performance of the past 11 months in regular revenue collection shows an 86.8% rate of plan implementation. Government budget for the same period was Birr 20 billion 709 million, of which 80.5% of the targeted amount has been utilized.

Although accelerated and positive growth has been registered in our economy as demonstrated by the figures given earlier, the fact is that the inflation rate which was above our plan, is seen as a negative development. Although the rate of inflation had been anticipated to be lower than 10%, the actual rate of the last 11 months stands at 12.4%. The primary cause is price hikes of imports, particularly fuel in which case the Government has provided a support subsidy in order to reduce the consequent inflationary pressure. Nevertheless, it is not possible to take the price increase of imports as the sole cause of the current inflation. One basic cause has been demand increase of commodities stimulated by economic growth.

Government attention has been on critical short-term problems triggered by high demand for commodities in the absence of corresponding growth in supply capacity. In this respect, the Government has done the best it can to ease the problem by importing commodities in which critical shortages occur. Accordingly, it has been possible to satisfy the demand for sugar through its importation in very high quantity and preparations are underway to import cement. Demand increase may appear to be a problem in the short run, but it may also be taken in the medium and long term as a source of sustainable growth. For example, huge investment activities are already underway with respect to sugar and cement production.

Sugar production is expected to increase five-fold and cement production at least three-fold when the investment projects attain their production phases. Similarly, the increase in the price of food grains, which appears to be momentarily significant, can be taken as an incentive to the farmers to increase their production and in the process contribute to growth in the agricultural sector.

On the basis of the positive results achieved during the year in review, the mobilization of resources and fortitude of the government will be enhanced even more to register accelerated development in the coming year. Thus, the budget for the 1999 [Ethiopian] Fiscal Year, which has been prepared in line with the five-year plan of development endorsed by the House, is assumed to be approved soon.

In tandem with this, the farmers as well as the Regional and Federal Governments have embarked on all-round endeavors to make the current main production season in agriculture highly successful. Therefore, agricultural production in the coming year is expected to register higher results than those of the past year to maintain the sustainability of rapid economic growth which is currently in motion. Conditions have been facilitated to stimulate growth at higher levels than ever in the fields of trade and industry. More is also in the pipeline to stimulate growth in these fields. Investment activities of private entrepreneurs are in progress at levels of extent and magnitude never seen before. Government support and service delivery to developmental investors are provided with matching vigour. We believe that our plan for 7-10% economic growth will be achieved in the coming year. We also believe that growth in exports will be double the rate of total economic growth and will continue to accelerate.

In conclusion, I would like to take this opportunity to state that the Government is committed to achieving success in the on-going tasks of consolidating economic development, peace, democracy and good governance for the benefit of all the peoples of our country and, at the same time, call on all Ethiopians to rally behind the Government for the realization of these lofty objectives.

I thank you

June 2006 (Sene 1998, Ethiopian calendar)