The Role of Development Aid in fuelling Corruption and Undermining Governance in Ethiopia

My own research as well as the research of other scholars show that the control of donor resources allowed the ruling Ethiopian People’s Revolutionary Democratic Front (EPRDF), not only to consolidate political power that it seized in 1991, but also virtually penetrate the Ethiopian society at the grassroots level and expand its repressive and predatory tentacles.*

This paper also makes use of my ongoing studies regarding corruption in Ethiopia. The concluding part of the paper ties the corruptive practices of the TPLF/EPRDF when it was a liberation front (that is, the humanitarian aid-corruption nexus) with its current and similar activities (that is, the capture and misuse of development aid.) The paper exclusively focuses on the development aid -corruption nexus.

The paper uses theme-based cases (heavily donor-funded projects) in order to illustrate the captured nature of development aid and extent of corruption in the country. The theme-based cases used as examples of capture include corruption within the so-called Productive Safety Net Programs, privatization of state owned enterprises, trade mispricing and illicit financial outflows, the judicial system, resettlement and villagization programs, health extension programs and corruption within the primary and higher education expansion programs.

I use the concept of state capture (the highest and most intractable form of corruption) as a framework of reference to explain the predatory nature of the Ethiopian state. State capture is a form of grand corruption initially observed in post-communist countries evolving to captured-economies during their political and economic transitions. The concept gained traction after experts working for the World Bank and the International Monetary Fund described the phenomenon of corruption that was found in transition countries of Eastern and Central Europe and the former Soviet Union. The paper shows the Ethiopian corruption experience being a stronger form of the state capture that was observed in East and Central Europe and the former Soviet Union.

The paper establishes that, by creating opportunities to the highly organized groups and elites, donor aid has led to a legacy of corruption, maladministration, cruelty, brutality, money laundering and the establishment of a ruthless oligarchy in Ethiopia. I show that the type of corruption which has transpired in Ethiopia is the strongest and highest form of corruption known as State Capture. The paper documents how various powerful ethnic, social, personal, regional, political and economic groups in Ethiopia were able to extract rents and use it for their own political survival and hegemony. The case studies in the paper show the captured nature of the donor-funded projects by the ruling elites in Ethiopia and how those who are able to capture the foreign aid resources are using them as tools of control and repression. The work also shows how, when it comes to Ethiopia, donor aid has poisoned the wells with deep corruption and, by implication, the unholy alliance between donor aid and corruption and donor aid and tyranny. In addition to foreign aid being used to finance repression, it has exacerbated the extent and level of the income gaps between the haves and the have-nots while at the same time increasing the vulnerabilities of the poor. The increased level of rent-seeking that one finds in the country indicates that foreign aid has undermined governance in the country.

By exploring the heavy-handed use of development aid by the ruling party and the culpability of donors and aid agencies, the paper provides analytical support behind aid and corruption, aid and extraction of rents and the type of corruption that one finds in Ethiopia. The paper also shows that misusing and abusing of foreign aid by the TPLF/EPRDF is a learned behavior it acquired when it was a guerrilla force.

Taken together, therefore, both humanitarian aid and a large portion of development aid have exacerbated the already worse governance structures of the country. Despite the huge annual influx foreign aid (to the tune of $3.3 billion by 2009 and rising), life in Ethiopia has gotten worse, not better- with the poor getting poorer, income inequality worsening, citizens leaving their country in drones trying to escape the onslaught of poverty and oppression that has been aided and abetted by foreign aid and, close to 20 million Ethiopians still depending on foreign aid. In short, all that foreign aid begat is absolute dictatorship, repression, kleptocracy, aid dependence. The paper inescapably concludes that development has been a curse and both Ethiopia and its people would have been better off without foreign aid than with it.

* This short write-up is the synopsis of a much longer piece. It is the second installment of the three (and possibly four) short blogs which are intended to introduce the reader to research papers published in Ee-JRIF, Volume 5, and No. 1. In particular, this short write-up summarizes the rather lengthy paper entitled as “Aid, Predation and State Capture: The Role of Development Aid in Fuelling Corruption and Undermining Governance: The Case of Ethiopia.” Those interested in reading the (non-technical) entire manuscript will definitely benefit from the extensive literature that I have used and incorporated in paper.

This work is motivated in part by the studies and findings supporting the research and investigative findings made by Human Rights Watch (2010(a) & 2010(b), 2012(a) and 2012(b)), Epstein (2010), Hassan (2009), BBC (2011), Nigussa et al (2009), Bazezew (2012), Endale, Debalke (2012) and several others.