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Nation Unites over Grand Cause; A Good One 




Grandiosity is noticeably an American phenomenon. Cars, houses, roads, and even burgers are hefty in the land of Uncle Sam.

In the global competition for power, the United States (US) is marked by its leading military capability and expenditure. Yet, the lavishness of Americanism are fading away with the rise of the rest. Not that the rise has brought new measures of power, but the rest is becoming Americanised.

EPRDFites have exposed their Americanised valour with a plan to build the largest dam ever on Abay River, dubbed the Great Millennium Dam. The dam is projected to generate 5,250MW of power, while it is estimated to cost 78 billion Br. To be built in Guba village of Benishangul Gumuz Regional State, 17km from the Sudanese border, it is projected to hold 63 billion cubic metres of water.

The dam is serving as symbol for the patriotic spirit of Ethiopians. While Egypt and Sudan were sharing the cake, Ethiopians were gnashing their teeth of their disadvantaged position. With the dams plan disclosed, patriotism regained its height. Ethiopians from all walks of life are supporting the construction of the dam, not only for its developmental implications but also for its symbolic nature.    

As cash strapped as the Revolutionary Democrats are, partially as a result of insistent Egyptian lobbying, they have introduced government bonds with a 5.5pc interest rate and a maturity date of five years to raise 11 billion Br of the total cost.  The Ethiopian nationalist string has successfully been pulled, and people are lining up to buy the bonds. Most of the otherwise passive opposition are also supporting the project, albeit sceptically.

Egyptians are worried about the plan, if not the aggression of EPRDFites. The post-Mubarak government has embarked on extensive diplomatic efforts, regionally and internationally, to block the construction of the dam.

The arrival of Mohamoud Abu Zied, former minister of Irrigation, and 25 other eminent Egyptians in Enttebie, Uganda, where the Nile Basin Initiative (NBI) is headquartered, on March 28, 2011, was a showcase for this attitude. Anxious Egyptians have also asked for the technical and environmental feasibility study of the dam. Yet, the Revolutionary Democrats have dashed the enquiry.

Dina Mufti, spokesperson for the Ethiopian Ministry of Foreign Affairs (MoFA), has even said that Ethiopia would not be dealing with Egypt on bilateral terms, as the modus operandi has changed, making the Comprehensive Framework Agreement (CFA) the only channel to approach over questions on the development of Nile water.

The stand was reaffirmed by Prime Minister Meles Zenawi in his eight-month report to Parliament on Tuesday, April 5, 2011.

Constructing mega dams is a rare phenomenon, globally. The largest dam in the world, which holds over 39 million cubic metres of water and generates 22,500MW, is located in China. The dam cost more than 26 billion dollars to construct. Other dams of comparable size are Itaipu, Boliver, and Tucurui dams located in Paraguay, Venezuela, and Brazil, respectively. They generate 14,000MW, 10,200MW, and 7,960MW of power, in that order.

By contrast, the largest dam in Africa, Lower Usuma, is located in Nigeria. The dam has the capacity to hold 93,000 cubic metres of water. Katse Dam in Lesotho and Morome Dam in Sudan are other African dams of comparable size and power generation capacity, with the generating potential of 1,500MW and 2,500MW, respectively.

Ethiopia has 10 hydroelectricity projects with a total power generation capacity of 1,832MW. The largest operational plant is Tana Beles Integrated Project, which produces 460MW. With a generation capacity of 420MW and 300MW, Gibe II and Tekeze dams are the countryís other mega power plants.

Yet, none would compete with the Millennium Dam, which will be producing 286pc of the combined power generated by the existing hydroelectric power plants.

In a country with electricity coverage of 41pc, planning mega power projects is celebrated. The EPRDFites know that infrastructure is the silver bullet for both economic and social development. Besides, they realise it is a sustaining political card to bet on during electoral challenges. As a result, pulling the string of Ethiopian patriotism to accelerate infrastructure expansion has become their new mantra.

The construction of the dam forms part of the plan to elevate the hydroelectric power generation capacity of the country from 1,832MW to 8,000MW by 2015. However, in comparison with the national potential of 45,000MW, the achievement is negligible.

As this endeavour will open the window of electricity usage for an additional 34pc of Ethiopians, it is a move in the right direction. Undoubtedly, such an increment would mean a lot for the 38.7pc of Ethiopians who live in absolute poverty, earning one dollar per day.

Public fear that conflict might arise between Egypt and Ethiopia has been excited. Mona Omar, assistant foreign minister of African Affairs for Egypt, seemed to affirm the doomsday prophecy by saying that all options are on the table. Noting that Egypt has the 26th biggest economy in the world with a GDP of 500 billion dollars, and one of the biggest armies in the world with an active personnel of 448,000 and military expenditure of 2.8pc of GDP, the threat might not be simple rhetoric.

Ethiopia has an 80 billion dollar economy with a per capita GDP of 900 dollars in purchasing power parity (PPP) terms, according to Economy Watch. However, with 352,000 active armed personnel and military expenditure amounting to 3.1pc of GDP, the Ethiopian side would not be an easy target.

However, outweighing the doomsayers is the rising optimism that a win-win solution will be found. In laying the foundation stone of the grand dam, Meles affirmed that his country would always be seeking the best solution to guarantee this scenario for upper and lower riparian countries.

Some moderate officials on the Egyptian side have also emphasised dialogue, negotiation, and bilateral relations over conflict. So uncertain is the road ahead that it would be premature to make conclusions.

Despite the ongoing rattling on the foreign policy and internal political fronts of both countries, much confusion surrounds the grand plan.

Financing is the headache for the Ethiopian government. With the cost of the dam being almost equal to the annual federal budget for this fiscal year, it would be very challenging to generate the funds through conventional means.  Soliciting foreign exchange, which comprises over 50pc of the projected cost, will no doubt be a daunting challenge.

Veering off the road of conservative monetary policy, the government has introduced bonds. Yet, in the absence of a secondary market to support the effective trading of bonds and securities, buying these is not an attractive investment for big buyers like businesspeople, companies, public enterprises, and NGOs.

Nonetheless, the absence of a modern money market did not deter fired up Ethiopians from lining up to buy the bonds.

Although the EPRDFites might exploit the spirit of patriotism, it would not give them unlimited financial space. With backlogs of resentment, contributions from the Ethiopian Diaspora might not be as large as expected. For an economy witnessing an annual budget deficit of 12.7 billion Br and an overall inflation rate of 10.1pc, execution of such a huge project would add pain to the macroeconomic turmoil.

The aggressive demand of the government for financing might also crowd out businesses as it can use its legislative power to twist the hands of domestic financial institutions. Such prospects are already on the horizon, after the regulators at the central bank ordered all private banks to spend their savings on buying bonds.

In light of the challenges ahead, the Revolutionary Democrats could embark on a two-pronged effort. On the one hand, they should initiate an extensive diplomatic effort, both under the CFA framework and bilaterally, to persuade Egypt to its cause. Avoiding their nationalist belligerence, they should play the give-and-take game.

Egyptians should repay this in kind because there is no evidence to prove their interest could be harmed by the dam. The dam could turn into a reason for cooperation as it could spare Sudan from recurrent floods and sedimentation, while Egypt could gain a lot from its loss of millions of cubic metres of water to evaporation at Lake Aswan.

Provided that there is political goodwill in all the countries of the basin, a consensus within the NBI would have the chance to materialise. There is an established consensus among these countries that Ethiopia has a comparative advantage in building dams while Sudanís lies in its ability to develop tens of thousands of hectares of irrigated land. Egypt can chip in with its money and technical know-how to help a regional economic bloc emerge.

On the other hand, the EPRDFites could explore innovative financing arrangements ranging from venture financing to partial privatisation and project unbundling to ease the burden on the economy. As the stakes are high, issues beyond the grandiosity of the dam, such as the national debt that is more than it appears to be, should be treated with due care.





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