Planning is one of the most difficult but necessary aspects in the life of any individual, organisation or company. Taking into account the myriad of dynamic variables in an attempt to set forth goals, most often painting a best case scenario, will forever be the bane of leaders who are made or broken based on abilities to meet targets affected by events often beyond their controls.

Predicting the unexpected fall of the Soviet Union could have saved many developing nations the pains of restructuring from a state of dependency on the centralised economies subservient to their patron into conformity with the free market regime that now pervades the world over. Locally, accurate budgeting for the heavily subsidised petroleum imports whose prices fluctuate on the whims of autocratic rulers and futures traders sensitive to hawkish signs threatening to erupt in conflicts in volatile regions would save the government immensely in the time and resources devoted to supplemental budgets and re-appropriation of funds.

Unfortunately, this is the situation the ruling party too often finds itself in. Projections created in one scenario yield to drastic adjustments when unforeseen circumstances arise. Witness the huge 150pc taxes slapped on unfinished leather products in an attempt to strong-arm the sector into upgrading facilities to put more value-added into high potential products drawing on Africa’s largest livestock population.

The newest manifestation of rosy projections catching up to a government seemingly overstretched in attempting to put its hands into every corner of the economy are glaring discrepancies between export targets and actual earnings released by the Ministry of Trade and Industry (MoTI). Although the findings feature both prominent over-performers as well as those sectors struggling to meet just a fraction of targets, the figures varying wildly across the board reveal a deeper trend of the inability of any central government to accurately predicate the functioning of an entire economy.

THE GOOD AND THE BAD

As a non-oil producing, though oil-dependent, country that consistently runs budget deficits and deals in a currency seldom sought  outside its sovereign borders, Ethiopia, like most developing nations, must pay extra attention to its foreign currency stocks and flows. Garnering the ever-increasing energy requirements is a vital lifeline to achieve the growth necessary to build upon a low industrial base and meet everyday needs of the more than 80 million population.

For this government, following a regime that ostensibly looked inwards in a fruitless and tireless effort to achieve the far-fetched self-sufficiency valued by socialist nationalists, the task of integrating into the globalising world to exploit the vast potential of Ethiopia’s natural resources is a cautiously (maybe sometimes too much so) trodden process.

But rightly so the current regime has put due emphasis on boosting the country’s exports that have every reason and need to rise in volume and value. The results have, of course been mixed.

On the shoulders of rising global grain prices that have sent many poor countries into shock and resulted in back-breaking subsidies, cereal exports in the first three months of the 2007/08 fiscal year have brought in over 600pc of the targeted foreign currency. Similarly, the cotton industry is enjoying windfall earnings racking up a whopping 4.18 million dollars by exceeding ambitions by more than 633pc.

These impressive performances in the agricultural sector, however, may not please the government or insightful economists as much as success in the fledgling industrial sector or with more value-added products. Notoriously unstable primary goods whose prices fluctuate immensely due to seasonal patterns and shifts in mother nature’s cooperation, huge gains may evaporate in following years despite all the support that could be granted to a population still overwhelmingly dependent on agriculture.

More concerning to a government keen to develop competitive industries utilising the comparative advantages of cheap labour and abundance of basic inputs, are some of the disappointing figures reported by the manufacturing sector. Most disturbing is the negligible earnings from the leather and leather product exporters who have often complained of lack of support for the emerging sector.

For too long the potential to capture revenue from transforming the vast hides and skins supply into high-end products has eluded an industry still struggling to maintain the quality control necessary to please big name designers whose marks can fetch top-notch prices. The huge volumes of raw goods shipped abroad, especially to Italy, at mere fractions of the prices the finished products fetch on the market is distressing.

While it is clear that the trainings and support that government has answered industry pleas with has not been the answer to promoting the development of the sector, it is not clear if the discouraging tax slapped on raw and semi-raw product exports will be the answer to finding high revenues. The verdict is still out on the subject of proper market incentives being in place for investors to push capital towards the factories in need of upgrades to turn out the quality the international market demands.

But the most interesting aspect of the first quarter export performance report from a macroeconomic or policy development standpoint is not the individual industries meeting or falling short of targets. In fact, the economy-wide success rate of over 91pc of export targets being met shows a fairly accurate assessment. What is at stake is the whole philosophy of a government intimately involved with the minute details of the economy.

TOO CLOSE FOR COMFORT

In a developing economy with market imperfections across the board that prohibit the proper functioning of a completely laissez faire state, the government is right to take a more involved approach than that of officials leading vastly different and more sophisticated economies of the United Arab Emirates (UAE) or Singapore that market themselves as hands-off to investors. There are important first steps in temporary infant industry protections and supporting roles the government can viably and rightfully play.

However, what is clearly apparent is that there is a lack of capacity on the government’s part to accurately predict the performances of specific industries across the board. Even state-owned enterprises notoriously are poor at predicting their performances, let alone a government attempting to put forth targets for the whole economy.

In private companies found in the developed world, investor confidence can be shaken on quarterly performance reports straying even slightly from projections. What the recent Ethiopian export report reveals is percentages above and below objectives with vast ranges. This seems to be normal operation in a country where accurate information is hard to come by.

The unpredictability of many businesses does not have to be the norm though; it should not be as stability breeds confidence and development strength. But this may be what the Ethiopian economy is relegated to if the overly centralised structure prevails.

Economics is all about incentives. And the free market, not bureaucratic structures, is best at promoting motivations for individual gain within the bounds of the rule of law such that, when aggregated across an entire economy, the result is the realisation of growth potential.

What troublingly prevails in the present is a clumsy state apparatus filled with bureaucrats eager to please superiors whether or not actual progress is made and politicians with constituencies to worry about and infamously astute at manipulating opinion with power over industrialists that make up the hopes of an economy to grow.

Targeting exports is merely an expression of a government overzealous in its involvement in the market. Of course, it must be watchful to ensure a level playing field. However, numbers grossly out of tune with reality calls into question if it is overstepping its bounds and should not rather concentrate on promoting, not controlling, the economy.