Projects for the Horn: Strategic Goals

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Around the 1960's and early 1970's, an unexpected and unplanned phenomenon evolved in “Silicon Valley” (the countryside and villages South and Southeast of San Francisco in California). With a mushrooming effect, many small innovative high-tech companies were being created there spontaneously in increasing numbers -- and they were leading the US electronics, computers, and telecommunications branches with the latest technologies and products. The name “Silicon” comes from the element used for making “integrated circuits” (also called “chips”) which have formed the backbone of modern electronics -- and the largest number of developers and manufacturers of such silicon chips were founded in Silicon Valley.

Since then, other parts of the USA and other countries around the world have tried to duplicate this phenomenon locally -- with varying degrees of success. They have tried to study what ingredients made this phenomenon possible in Silicon Valley and have tried to assemble these ingredients in their own new local “Silicon Valleys”.

At the end of World War II, much of Eastern Asia consisted of “under-developed countries”. At that time, many experts predicted that the under-developed countries of Africa would develop much faster than the under-developed countries of East Asia! The reason for this argument was that both regions were about equally poor, but the African countries were much richer in natural resources. Another reason was the expectation that the European colonial powers would provide more support for Africa than Eastern Asia.

With hindsight, we know today that the under-developed countries of Eastern Asia, starting with Japan first, did develop much faster than expected into what are now called the East-Asian “Tigers” (Japan, Hong Kong, Formosa, Indonesia, South Korea, Malaysia, and the Philippines) whereas none of the under-developed countries of Africa have developed significantly.

The experts ask today: “Why this unexpected difference?” One answer is that East Asia had better education and health care as a basis for starting. Nick Eberstadt, at the American Enterprise Institute claims that cutting off traditional foreign aid, or even threatening to do so, to Taiwan and South Korea forced their economic planners to make the necessary reforms.¹ By contrast, former colonial powers with guilty consciences kept donating money to Africa without forcing African leaders to make the necessary painful changes in policy.

The Harvard Institute for International Development is promoting a new policy towards Africa, recommending “in place of the handouts-as-usual, they would substitute market access, foreign debt concessions and technology transfers.² Their coordinator for southern Africa, Robert Rotberg, said that `Africa could even catch up with Asia if it did everything right'. By “getting everything right, he meant: “prudent budget policies, investment in education and infrastructure, deregulation of domestic markets and foreign trade, ooo“

Nicholas Kristof suggests that a vital first step in Africa “is [to] understand why such yawning disparities have occurred” between East Asia and Africa. He concludes that “although East Asia enjoyed some significant cultural and historical advantages, its economic boon relied on factors that probably can be replicated elsewhere.” He also stresses that “a central feature of the successful East Asian model was a high level of education and public health ooo“ as well as that “the East Asian countries sooner or later adopted relatively open, market-oriented policies emphasizing exports.”³

Two vice presidents of the World Bank, Callisto Madavo and Jean-Louis Sarbib, stress that “significant improvement in political stability and the shift to democracy have underpinned social peace in much of Africa, encouraging the participation of civil society in the development process, and strengthening the legitimacy of governments.” They also claim that “the key factor driving economic progress in much of Africa is improved economic policy -- liberalizing exchange rates, lowering or eliminating import and investment barriers, and dismantling price controls.” They claim that “Africa is increasingly the final frontier of global investment” for investors seeking high returns from developing countries. They prove this shift by claiming that “From 1990 to 1994, rates of return on foreign direct investment in Africa averaged between 24 and 30 percent, compared with 16 to 18 percent for all developing countries.”⁴

We note that, particularly for Ethiopia, nearly all of the policy changes recommended above are already in place:

We note that most of the advice given by these experts is in the form of slogans and general policies or strategies that others should adopt and implement -- without mentioning the costs and sacrifices involved. There are many agreements between these recommendations and what DACO is proposing to the IDT. A key difference is that DACO is proposing a detailed set of projects to be implemented by the IDT as a private trust with private funds under private control -- without the massive bureaucracy associated with nearly all substantial amounts of foreign aid. We are presenting details with cost estimates here for what we recommend that the IDT should do, rather than general maxims for what we think others ought to do.

J. Brian Atwood, the administrator of the USAID program that is actually engaged in providing foreign aid to Africa, claims that one of the 2 US priorities for Africa is to “take advantage from new African leadership, from new experiments with democracy and from better economic growth in some countries.” He complains that “Africa has seen an enormous increase in growth in recent years and yet Africa still attracts only 1.2 percent of the $200 billion of annual global private investment.” For the activities of USAID, he reports that “We are spending about $1.4 billion [in Africa], half of it humanitarian assistance and the other half development assistance. That is out of a total AID budget of $6.6 billion.”⁵

Half of $1.4 billion spent on development assistance, i.e. about 700 million USD, divided by 47 countries in Africa, leaves an average of only about 15 million USD per country per year. Any aid helps a little. But according to our analysis, it is necessary to invest much more for at least a few years to reach a critical threshold level or “critical mass“ before substantial results can be expected quickly. This is the reason why we are proposing that the IDT inject between 2 billion USD to 5 billion USD over 5 years into just the Horn of Africa, averaging at least 400 million USD per year for this relatively neglected region with a relatively small population. It would be easier for the IDT to simply give these funds to local governments for a small number of relatively large projects, that would be easy for the IDT to manage, because the local governments would be responsible for the details. Rather, we propose that the IDT manage a larger number of smaller projects itself, using modern management methods copied from private industry rather than from governmental administrations. Our proposed minimum of 400 million USD per year of private investment in this one region also provides a larger concentration than the 1.2% of 200 billion = 2.4 billion USD being currently being invested privately in all of Africa per year.

As one interesting example, USAID is now “also providing Internet for foreign and development ministers [in Africa] so they can communicate more with each other.”⁶ This amounts to providing 2 individuals in each African country with access to the Internet. We are proposing that the IDT give many thousands of people (government officials, scientists, managers, students, and pupils) on the Horn of Africa access to Internet! This is what is required to reach the “critical mass“ where a substantial fraction of the educated people in a country or region are communicating efficiently to modern standards with each other as well as with the outside World.

The past strategies and policies of the World Bank, UNDP of the United Nations, the European Community, and bilateral foreign aid have certainly not been effective in Africa over many decades. Part of the problem has been how these funds have been donated and part of the problem has been local in the recipient countries. The local conditions have improved, particularly on the Horn of Africa, but this will not be enough. A continuation of these past strategies and policies by the International Community, at higher or lower levels of funding, still appears to offer little chance for quick success. This is the reason why the set of projects proposed here is based upon different strategies than those used until now in Africa.

If the model proposed here is successful on the Horn of Africa, it should be possible to duplicate it, with appropriate local modifications, to many of the other underdeveloped countries and regions of Africa, as well as to Central and South America.

“Quickly” means much faster than the several evolutionary decades required for the development of Silicon Valley and the East-Asian Tigers. This means that we must study these precedents carefully, learn our lessons well, and then apply the results efficiently. Strategically, it means that we can not focus upon chasing after these continuously evolving other models. They would always stay in front, with the Horn of Africa always trying to catch up. Rather, we must perform leap-frogging that bypasses some of the long evolutionary processes in these other phenomena, so that the IDT can put the Horn of Africa at the leading edge of at least a few key technologies within about 5 years. This will require a focus of energy and resources on a selected set of technological areas, rather than a broad-based approach.

Experts on development generally think in terms of phases of development. With an underdeveloped country, they try to develop the agricultural sector first, then they try to develop manufacturing of simple goods based upon low labor costs, etc. In most cases, they never get to developing a high-tech industry at the end of this chain.

The economies of the developed countries of the World are now in a painful “restructuring”, changing their focus from manufacturing to services. Does a country need to be efficient in agriculture before progressing to manufacturing? Does it need to be efficient in manufacturing before progressing to services, particularly high-tech services? No. This was the historical path in Europe and North America. But starting out today in an underdeveloped country, it makes more sense to jump from an inefficient agricultural economy to a high-tech services economy -- without going through the other technically unrelated phases.

The economies of Western Europe are suffering today from the painful transition of reducing the over capacity in their manufacturing sectors and expanding the inadequate service sectors of their economies -- in order to become economically competitive on world markets. Why should we ask developing countries in Africa to develop manufacturing sectors of their economies, in competition with the subsidized manufacturing sectors of European economies that are over producing? Why should these African countries first build up their manufacturing sectors and then immediately replace them with service sectors as they progress faster along the historical evolutionary path?

Following are a few examples of the kinds of high-tech services that we propose to export electronically from the Horn of Africa: Swiss Air has moved the computers for its passenger-booking system from expensive Switzerland to less expensive India. Several large brokerage houses on Wall Street in New York have moved their computer systems for managing the accounts of their investor clients from New York to Ireland. IBM currently has a team of programmers of computer software working 24 hours per day worldwide in China, India, Latvia, and the USA for just one project of developing products based upon the JAVA programming language, developed by SUN Microcomputers for Internet applications. IBM and other major companies have many programmers working in many different countries for them. In all of these examples, the services are exported electronically. Why can't the Horn of Africa export such services too, if the IDT puts the necessary local infrastructure in place?

The set of projects, that DACO proposes here, does define some projects for improving the key agricultural sectors of the economy on the Horn of Africa -- as obvious goals in themselves, but without the achievement of these goals being a pre-requisite for starting to work on either manufacturing or services in parallel. This set of projects also defines projects for developing the services sectors of the economy now, without making this work dependent upon the agricultural or manufacturing sectors of the economy being developed first. This is an example of “leap-frogging” by cutting out unnecessary steps.

If this set of projects sets its goals high in terms of technological quality, they will automatically attract other investors to follow with other projects at lower levels of technical quality, such as for manufacturing low-cost athletic shoes by benefiting from low labor costs on the Horn of Africa. If Nike, Reebock, Adidas, Puma, et al want to establish shoe factories on the Horn of Africa, the proposed Horn-of-Africa Venture-Capital Company can assist them in their decisions, such as by building factories or converting existing buildings to meet their specifications and then leasing these facilities to them -- to reduce their capital costs and risks. Such projects can contribute to creating larger numbers of low-level jobs quicker than it is possible to create large numbers of high-level jobs. This important aspect or side effect is usually not mentioned here, because our focus is upon the longer-range goal of creating a much larger number of high-level jobs that will substantially raise the standard-of-living on the Horn of Africa on a sustained long-term basis.

What were the keys to success for the phenomenon that developed in Silicon Valley -- that the IDT may need to create on the Horn of Africa in order to promote a similar phenomenon there? They might be summarized as follows:

None of these keys to success alone were sufficient. All of them
interacted symbiotically with each other.

At the end of World War II, several large technology companies in the USA transferred their research-and-development operations to the pleasant surroundings of California, without transferring their manufacturing operations and smokestacks there. One idea was that the pleasant dry climate and recreational opportunities would be more attractive for scientists performing research than the centers of manufacturing in the USA. Silicon Valley lies conveniently between a beautiful coast line as well as skiing opportunities in the nearby Sierra Nevada mountains. It is also near San Francisco with its famous night life and the other assets of a major city -- but far enough away to avoid the unpleasant aspects. Low land prices and low taxes in the relatively under-developed California also played a role at that time.

Later, France focused upon this factor by promoting high-tech, research-and-development parks along the scenic but otherwise under-developed Cote d'Azur on the Mediterranean Coast, that is also near to the French Alps for skiing. One early example was at Sophia Antipolis near Nice, where many European and US high-tech companies have established large research-and-development facilities.

This key to success may be helpful, but it is not sufficient alone without the other key factors.

Scientists want to work in a location where their children can get a good education and where they themselves can interact with experts at local universities. Technical companies want to be able to hire qualified students and graduates from local universities.

The State of California had a good public school system at the secondary level as well as a concentration of excellent universities in and around Silicon Valley. These universities were engaged in research-and-development activities for the US Department of Defense at the leading edge of several important technologies.

The existence of a strong local educational system was probably more important than the climate, scenic beauty, and recreational opportunities. However, it is also not sufficient by itself.

The counter example is India, which has an excellent university system producing far more top-notch scientists and other professionals than India is able to employ locally. The bureaucratic environment does not encourage these well-trained people to become entrepreneurs and form enough local high-tech companies to employ the output from their universities. Therefore, India has become one of the largest exporters of high-level scientists and other technical experts. (The ex-Soviet Union is also quickly becoming a major exporter of scientists, that they can no longer employ themselves.)

There was a large and mobile pool of professional people in and around Silicon Valley that contributed significantly to its success. Many major high-tech companies established research-and-development facilities there around the end of World War II. Key companies included

Key people left Fairchild first in a steady stream to form their own small new high-tech start-up companies. Once these companies matured, such as Intel (a spin-off from Fairchild) as one example, their key people left to form their own start-up companies. The user-friendly software at the basis of the early products of Apple Computer Company and later Microsoft's WINDOWS came from the Rank Xerox laboratories. Hewlett Packard and its spin-offs were developing the new test equipment required for the new technologies developing in other local companies.

These examples show that there were different older companies, with different areas of specialization from which people were leaving and recombining know-how to form new kinds of companies.

The local universities contributed to this pool of local talent. With the flexible American approach, much different than in Europe,

The intimate interactions between these universities and neighboring high-tech companies led to a general prevailing philosophy within these universities based upon free-market economics and entrepreneurism -- in sharp contrast to many other universities, with their emphasis upon socialism and planned economies managed by governments. Graduates from these universities were intellectually and psychologically prepared to become entrepreneurs -- in sharp contrast to graduates from most other universities.

Many experts did not work for more than 2 or 3 years at a time in any one company or university. This lateral mobility and cross-fertilization of ideas played a significant role.

It is difficult to successfully create a new small high-tech company. It involves not only technical know-how for the design of new products and the technical ability to manufacture them. It also includes market analysis, advertising, distribution, financial planning, controlling, etc. In general, over 50% of all such new entrepreneurs fail the first time they try -- due to lack of knowledge and experience in other areas than their own areas of specialization.

In Silicon Valley, many new companies were formed by half a dozen scientists, engineers, and managers as a team. The key 1 or 2 top people often stayed longer, but the lower-level people in the team, such as at levels 3 or 4, were often quick to leave and start their own companies. Such people, who had participated in a successful start-up of a new high-tech company near the top, obviously had much better chances for success than those who have never worked in a small new company that has just started operations. Even if a small team fails to make their new start-up company successful, they learn quickly from the painful experience of failing.

In this general environment of many new start-up companies being formed all of the time, a rapidly-growing pool of experience in making such start-ups successful developed in parallel. Both banks and venture capitalists learned from this local experience and were willing to provide the necessary venture capital plus loans to give these new start-up companies a chance.

In Europe, when scientists and managers from a large bureaucratic company, such as Siemens, leave to form a start-up company, the chances for success are much smaller. The reason is that the founders are all specialists from a large company without the broad experience from many different disciplines needed to make a small new start-up company successful. Also, banks and venture capitalists are more reluctant to provide financing than in Silicon Valley. And, if the principals have failed once, there is practically no possibility for getting a second chance, whereas people who have failed once and have learned from their experience were seen as good credit risks in Silicon Valley -- and received 2nd and even 3rd chances until they were successful.

Within a bureaucratic system, everyone hides his or her own information and does not cooperate any more than absolutely necessary in sharing information with others. This is particularly true with those people seen as competitors, even within the same bureaucracy or organization. Substantial know-how may exist in such organizations, but it is not readily accessible and hence not useful.

A very-loose and informal atmosphere developed in Silicon Valley. This was at least partially based upon the American pioneering heritage -- which left the USA much-less formal in the West, which was settled and developed last, than in the East, which was settled first. Scientists, engineers, and managers were not only moving frequently among different jobs among different companies. They retained personal working relationships with people in their former companies and there was a continuous open dialog of shared ideas, know-how, and technical assistance -- even among competing companies.

This unusually-high degree of openness and lack of censorship of ideas and know-how for any reason was a particularly important key ingredient for the success of Silicon Valley. Everyone contributed to the common pool of knowledge and therefore everyone benefited as recipients. This may be the single key factor of success that imitators of Silicon Valley around the World most often have not been able or have not wanted to implement in their own local versions of Silicon Valley. This is turn may be the most important reason for the many failures in attempting to copy Silicon Valley as a model.

Particularly the move towards a global economy and a “global village” has increased the demands upon the technical telecommunications infrastructure for facilitating free communications among professionals. Those countries that do not have such an open technical communications environment, or do not want to create one, can not hope to be successful or competitive in any attempts at creating a duplicate of Silicon Valley in their country today.

One of the key factors of success at Sophia Antipolis in Southern France was the decision by the French Government very early to install of one of the most-modern telecommunications networks (glass-fiber, ISDN, etc.) in the World, not only in the research park of Sophia Antipolis, but also in the neighboring communities up to about 30 km. around Sophia Antipolis. Scientists, engineers, and managers working there have high-powered communications from their homes to their offices. The many small spin-off companies and suppliers around the park are also interconnected. Many small high-tech companies choose locations near Sophia Antipolis just to take advantage of this excellent local telecommunications infrastructure.

2.3.5 A Non-Bureaucratic Environment Encouraging Entrepreneurs in a Free-Market Economy

In the free-market atmosphere of California, there were few unreasonable bureaucratic restrictions upon businesses operating there, particularly in new technologies. It was possible to form a company, obtain a few permits, and start operations -- with a minimum of time or expenses required for obtaining various permits and authorizations. Entrepreneurs could make the decision to form a company and have it operational a few days later in Silicon Valley. By contrast, in Europe it would usually take a few months to get a company registered and fulfill the various bureaucratic requirements to start operations.

The laws for forming a new company in Ethiopia are positive, but the implementation by the bureaucracy can be time-consuming and expensive. Generous tax benefits and exemptions from customs duties are offered for both new start-up companies and expansions of existing companies. However, a minimum capital investment of 500,000 USD is required to qualify for such benefits, and the bureaucracy can take considerable time. One of the goals of the proposed HoA Venture-Capital Company is to allow it to increase its capitalization in increments of 500,000 USD or more in order to qualify for tax benefits, but allow it to make local investments in smaller quantities quickly when appropriate for smaller start-ups.

The availability of adequate venture capital was certainly a key factor of success in Silicon Valley. Other attempts around the World to create local Silicon Valleys have often focused upon making adequate venture capital available. However, it is not only a question of the quantity, but also the conditions and philosophy that are important.

European banks focus upon seizable assets as security for loans while American banks focus upon a plausible cash-flow plan for repaying the loan plus interest. Most young entrepreneurs do not have sufficient assets that they can pledge in order to qualify for obtaining bank loans in Europe, whereas they would qualify for obtaining bank loans in Silicon Valley. The availability of bank loans reduces the requirements on the amount of equity capital required.

Entrepreneurs must personally share at least some of the commercial risks of their proposed new companies. Different lending environments force entrepreneurs to take high or low personal risks, sometimes so high that they back down and do not proceed. Venture capital reduces, but does not eliminate these personal commercial risks for entrepreneurs, whereby the amount of this reduction also depends upon the conditions under which it is offered.

Venture capitalists also tend to reflect the operational philosophies of local banks around the World. Therefore, a start-up company that would receive venture capital in Silicon Valley would not qualify for venture capital in many other countries.

Part of this problem is that the vast concentration of experience in successfully launching high-tech start-up companies in Silicon Valley generated an unusually high fraction of these start-ups becoming successful. The matching lack of experience in other parts of the World, where an attempt has been made to create a new Silicon Valley, means that a large fraction of such start-ups fail -- quite naturally making venture capitalists there extremely cautious. They seldom give entrepreneurs who fail the first time a 2nd chance, as venture capitalists in Silicon Valley learned to do. They also impose stricter conditions upon entrepreneurs, thereby transferring more of the commercial risks to from the venture capitalists to the entrepreneurs.

On the Horn of Africa at the beginning, potential entrepreneurs will have had substantially less practical experience as entrepreneurs, than was the case in “Silicon Valley”.

Even if all of the critical factors of success above are more-or-less met, this will not be sufficient to successfully launch a new Silicon Valley somewhere else -- unless an adequate critical mass is reached. (In nuclear physics, a critical mass is the minimum amount of fissionable material that must be assembled together in order to start a sustainable chain reaction or nuclear explosion.) Because each individual new high-tech company can only operate efficiently within an environment of many other similar companies cooperating informally with each other, it is also necessary to achieve a critical mass of enough such companies at one time for them to be able to interact and create a chain reaction allowing all of them plus additional companies to function efficiently and grow together.

If only one single small high-tech start-up company is launched in a potential new Silicon Valley, it will have no partners in the vicinity from which it can receive symbiotic support. Therefore, a small number of start-ups will fail, even though the same start-ups would have succeeded if they had been started in an environment with a larger number of similar companies interacting together.

In this context, a small budget allowing only a few small experiments may be doomed to failure, whereas a larger budget allowing a larger number of larger experiments would succeed. Particularly when other expensive components of infrastructure are also missing and need to be financed, a large amount of capital may be required to adequately meet all of the key factors of success above on a scale that is large enough to start a chain reaction. This is the reason for the relatively large budget foreseen for the large number of different interacting projects being proposed.

The Horn of Africa already has comparable geographical assets to those of Silicon Valley in California or Sophia Antipolis in Southern France. It has a relatively dry climate with two light rainy seasons. It has scenic beauty with recreational opportunities -- particularly in the highlands along the Rift Valley to the south of Addis Ababa. Although close to the equator, but due to the altitude, there is a moderate climate the year around, with temperatures averaging 2 C^o lower than in Paris during July and August but substantially warmer during the Winter than in Paris. Most buildings require neither heating nor cooling to maintain comfortable temperatures inside the whole year long. There is virtually no pollution of the atmosphere on the Horn of Africa.

The geographical focus for the development of a “Silicon Valley” on the Horn of Africa will be

There are natural hot springs used for hot baths in health spas along the Awash River in this area. There is plenty of unused land that can be developed for recreational purposes, such as golf courses, tennis courts, swimming pools, etc. Dams along the Awash River generate more than sufficient low-cost non-polluting hydroelectric energy for this region. There is a railroad from Addis Ababa through Nazareth, continuing on to the port in Djibouti. There is a modern international airport in Addis Ababa. There are paved roads with low-cost bus service branching out of Addis Ababa.

To the north, there are the monolithic Coptic churches hewn out of the rock of large hills. To the west, there are undeveloped mountainous regions. There are about 80 different ethnic groups in Ethiopia, each with their own language, culture, art forms, music, etc. In the city of Addis Ababa, there is a National Theater with programming capacity available for additional concerts and performances, as well as many movie theaters and discotheques.

Addis Ababa is the home for the Organization of Africa Unity (OAU) as well as the Economic Commission for Africa (ECA). The World Bank, African Development Bank, and many branches of the United Nations have major regional offices in Addis Ababa. There are over 100 international NGO's (Non-Governmental Organizations) with major offices in Addis Ababa. Together with the various consulates and local headquarters of international companies, there is a community of 300,000 foreigners living in Addis Ababa, consisting of officials and employees of these various organizations and their families. They are usually paid salaries in hard currencies to European standards, creating an affluent international community of professionals from many fields, with their own resources of libraries, recreational facilities, etc.

The proposed Horn-of-Africa Venture-Capital Company will be able to provide venture capital that allows local managers to buy appropriate hotels from the Government, renovate them, and operate them to support visitors to this new “Silicon Valley”. Venture capital can also be provided to local entrepreneurs for developing golf courses, tennis courts, swimming pools, etc. to improve the offering of recreational facilities.

Particularly Ethiopia does have a reasonable primary and secondary school system functioning throughout most, but not all, of the country. It does not yet provide complete coverage for all economic levels, since a significant fraction of the poor people can not afford to buy the mandatory uniforms and shoes so that their children can attend free public education. It is a bi-lingual system, with instruction in Amharic, the official local language, and English as the first foreign language. There are about 80 different ethnic groups in Ethiopia, each with their own language, and about 60% of the population are reasonably proficient in the official Amharic language of one of these 80 ethnic groups.

There are also a number of private primary and secondary schools in Addis Ababa run by different countries or citizens from those countries, teaching bi-lingually or tri-lingually in Amharic + English + their national language. Examples are from the USA, France, Italy, and Greece.

Several of the projects proposed here complement and enhance the existing local secondary educational system. They include

The University of Addis Ababa is a reasonably-good and functional university, with both undergraduate and graduate programs, providing free education for all students with adequate grades from high school. There are also several smaller technical and vocational schools in Addis Ababa. A substantial amount of the instruction at the University is in English.

Several of the projects, that DACO proposes here for the IDT, complement and enhance the existing capabilities of the University of Addis Ababa, such as by

In particular, the proposed Horn-of-Africa Institute of Advanced Technology provides research capabilities and facilities that roughly emulate the research activities at the universities in California that played such an important role in the evolution of Silicon Valley. It will conduct state-of-the-art research in a few selected areas that are key for the development of a new “Silicon Valley” on the Horn of Africa. These are activities that are otherwise non-funded and therefore complement, rather than compete, with the existing University and related facilities.

There already is a substantial pool of professional people in Addis Ababa, but it is not currently mobile and flexible enough to generate significant symbiosis. The proposed

play key roles in mobilizing a large and mobile pool of professional people that can form the basis for a new “Silicon Valley” on the Horn of Africa. They actively support the currently missing mobility within the current pool of professional people, by promoting job opportunities for these professionals to switch many times during their careers among

This mobility will in turn promote more professional experience and competence for the faculty at the University as well as in the Ministries of the Government. It will also promote more managerial experience and competence for managers working for private companies on the Horn of Africa in general as well as within the new “Silicon Valley” in particular.

DACO also proposes that the HoA IAT maintain a Personnel Placement Office, that maintains a computerized data base of all professional citizens on the Horn of Africa who wish to participate. This will include as many as possible of the many professionals trained and working abroad, so that they can be identified and contacted when appropriate job opportunities become available at home. It will send newsletters by mail and e-mail informing these individuals of local job opportunities and local developments in their fields. This will expand upon the accessible mobile pool of professional people interacting in the new “Silicon Valley” as well as other sectors of the local economy and government.

DACO proposes that the Advanced-Technology Company in the USA should invest its funds strategically in state-of-the-art companies in the USA. Major goals for these strategic investments will be to facilitate:

This will be one of the key obstacles to overcome on the Horn of Africa. Particularly under the former socialist dictatorships, the government nationalized nearly all business activities, creating large and inefficient bureaucracies with an atmosphere of much secrecy. The new democratic government is trying to denationalize most of these business activities. The Ethiopian Government has created open laws promoting the creation of new enterprises in the private sector. However, it is difficult to quickly change the traditions within an unwieldy bureaucracy from closed secrecy to an open exchange and flow of information among managers, scientists, and engineers in both the public and private sectors.

The Horn-of-Africa Institute of Technology will promote free communications among professionals on the Horn of Africa by making them more mobile, particularly between the sectors of

When professionals move from one job to another, they will retain personal contacts at their former jobs, opening a complex maize of informal channels for more-effective communications on the whole Horn of Africa. This will also serve to reduce counter-productive bureaucratic secrecy and inflexibility on the Horn of Africa.

The HoA IAT will bring a significant number of visiting foreign scholars for an average of one year in residence each to the HoA IAT, where they will do research with local staff and teach one seminar or course at the University. This will establish bilateral informal channels of communication between various professional groups on the Horn of Africa with the foreign research institutes from which these visiting scholars come.

The HoA IAT will also provide post-graduate scholarships for its own staff and faculty members at the University of AA to work for one year each in a foreign research institute performing state-of-the-art research. Some of these visits will be to companies in the USA in which the ATC in the USA has strategic equity holdings for this purpose. This will also establish bilateral informal channels of communication between the respective groups on the Horn of Africa and abroad.

At the technical level, the HoA IAT can contribute to the development of local Intranets and local-area networks to facilitate free communications among professionals working on the Horn of Africa. It will also cooperate with the local Telecommunications Authorities to establish international communications via high-speed ISDN connections, [1]Internet[1], and the World-Wide Web. These technical communications capabilities will be particularly important for keeping local groups in personal and professional contact with both

The [1]Internet[1] evolved out of DARPANET (the network of the Defense Advanced Research Projects Agency of the US Department of Defense), that was developed so that scientists and engineers working on military research projects could communicate more effectively with each other. It has now evolved into an informal ad hoc network in the public domain with little regulation or control by anybody. This implies free communications in both the

Today, it is no longer feasible to create a viable and competitive research-and-development community without full access to Internet and its later variant of WWW (World-Wide Web). The positive effects can not be achieved without Internet or an equivalent, but the negative effects were there already and can not be eliminated by placing restrictions on the Internet.

As an example for communications with other scientists, Germany has a wide-band high-performance Internet communications network among most of its universities -- to enable German scientists at German universities to communicate effectively with each other. Germany has just established a high-speed Internet link between their own university high-speed Internet network and the Russian Academy of Sciences, using a satellite for communications. The same satellite is positioned so that it could also include the Horn of Africa as a partner at relatively low costs.

As one example for data bases, IBM has just made all of its more-than 2 million patent applications since 1971 available to the public via Internet at no charge from itself. An engineering student at a personal computer in his dormitory room any place in the World has immediate access to this vast information at the price of not much more than a local phone call by contacting http://www.ibm.com/patents on the WWW. An engineer should not try to develop a new circuit, if a solution already exists -- particularly when the solution is already patented and the patent owner could later sue his company for patent infringement.

This is more than 400 million pages of written documents or about 3,000 CD-ROMs. If printed at 400 pages per volume, this would amount to 1 million volumes. If they were sold at 100 USD per volume, the total cost would be about 100 million USD (plus an extra building to house them). Even then, it is much easier to seek a relevant patent application using the search software provided by IBM than printed indexes and getting the individual book off from the shelf.

If an engineer wants to know more about special areas of quality management, and appropriate courses are not available locally, he could take a university course on “Fundamentals of Quality Assurance” or “Quality Assurance in Production” from the University of Hannover, Germany (in German) at (http://iq.uni-hannover.de)

If an engineer needs the specifications of commercially-available integrated circuits, he can immediately obtain the data sheets for any of the 14,000 such products offered by National Semiconductor in the USA at http://www.national.com on more than 40,000 web pages. He can quickly find which of these data sheets he needs using their search software. If the data is interesting, he can, of course, print the data sheet on his own printer for future reference.

If an engineer needs a supplier for a component, data on 150,000 European companies can be searched on the “Yellow Pages” for Europe (“Europages” at http://www.europages.com).

For these reasons, a key factor for success on the Horn of Africa will consist of creating powerful local Intranets (within companies, organizations, and the university) that are in turn connected with each other and the international Internet and WWW.

This level of international openness in communications may be difficult in Ethiopia, a country where it is forbidden to use satellite dishes in order to prevent the public from receiving foreign TV and radio broadcasts. Projects have been proposed within this set of projects for establishing the technical capabilities, but some diplomatic work at the political level will be necessary to obtain the necessary exemptions and permits to actually implement them effectively. By contrast, the Republic of Somaliland has successfully implemented complete freedom of speech, freedom of the press, and freedom of the media since the Summer of 1991 -- although it still has less physical infrastructure for exploiting this valuable democratic freedom.

2.4.6 A Non-Bureaucratic Environment Encouraging Entrepreneurs in a Free-Market Economy

The Horn-of-Africa Institute of Advanced Technology will provide access to its Computer Center and Technical Library not only to students, faculty, and scientists working for it, but also to potential local entrepreneurs. By being able to use modern computer facilities, without needing to buy them when they start operations, this lowers the thresholds for some potential entrepreneurs.

As an example, if a few friends want to start a private translating and desk-top-publishing service, they can start out using the facilities of the Computer Center on a modest rented basis as they need and use them, until they have obtained and delivered on their first paid contracts, proving that their business concept is sound. They can then combine their first profits with venture capital from the HoA Venture-Capital Company to found and finance their new enterprise -- to include buying computer equipment and software of their own.

The HoA Venture-Capital Company will also develop some real-estate properties with modern office space and some capabilities for small-scale high-tech manufacturing operations. With the current down-sizing of the Ethiopian Government, several redundant buildings are available that can readily be converted for such purposes. It will then be able to rent these facilities to new start-up companies, particularly those that it finances with venture capital. By being able to rent rather than needing to buy or develop such facilities, this lowers the threshold levels of capital required to get started. They will also only need to rent as much office space as they currently need, with the flexibility to gradually increase or decrease this office space as their needs change.

The HoA IAT will also develop multi-lingual accounting and management software to make it easier for new companies on the Horn of Africa to quickly establish professional management and accounting systems within their new companies.

This is the primary reason of DACO for proposing that the IDT should create the Horn-of-Africa Venture-Capital Company.

At this time, the Ethiopian Government is still trying to denationalize or privatize the rest of the many enterprises that the former socialist government nationalized. Using the model of a “leveraged management buyout“, the HoA VC Company will be able to provide venture capital to the current managements of many such enterprises, that will enable them to buy their enterprises from the Government and establish operations in the free sector.

The HoA VC Company should provide venture capital as appropriate for new start-ups, both in high-tech companies within the new “Silicon Valley” as well as lower-technology companies throughout the Horn of Africa.

The HoA VC Company should also apply liberal policies in its terms for venture capital, so as to reduce the commercial risks of local entrepreneurs to reasonable levels -- and give them 2nd and 3rd chances if they fail the first times but show that they have learned constructively from these failures.

The following 9 areas have tentatively been selected as key areas for development in a local “Silicon Valley” on the Horn of Africa:

They are implemented as 9 separate “Departments” at the HoA IAT, where local research will be performed in selected topic areas by a staff of both foreign and local experts. The first area, Economics, is focused upon developing managerial and accounting know-how to support spin-offs and start-ups in the other 8 areas.

performing research activities in these areas during the fifth year of operations. Approximately

will have worked at the HoA IAT in these areas and will currently be engaged elsewhere during this 5th year of operations.

This is the kernel of professional people working together, both locally and internationally, that provides the basis for creating the first start-ups in the new “Silicon Valley”. They will have adequate research facilities and equipment for their research activities at the HoA IAT and will have established a powerful network of personal and professional connections to related research activities at the state-of-the-art around the World.

This kernel will be complemented by the professionals from the Horn of Africa who have earned university and graduate degrees, who have not yet worked at the HoA IAT but are registered in the [1]Personnel
Placement Office[1] of the HoA IAT and therefore can be flexibly drawn upon.

The capabilities of the University of AA will have been improved upon as well as the capabilities of the Ministries of local Governments -- making them more flexible and responsive to the needs of high-tech entrepreneurs. Hopefully, modern ISDN telecommunications with international connections via Internet and the WWW will have been installed in Addis Ababa and other locations in the new “Silicon Valley”.

The HoA Venture-Capital Company will have created appropriate office space, space for research, and space for small-scale high-tech production -- ready for renting to appropriate high-tech start-ups in the new “Silicon Valley”. For these purposes, it will purchase redundant commercial properties from the Government and renovate them for such new uses. Around its 2nd year of operations, it should create a small company manufacturing printed-circuit boards -- at least in prototype quantities -- as a service for other companies and institutions on the Horn of Africa. Around the 3rd year, it should create a small company using low-cost 2nd-hand equipment for locally manufacturing integrated circuits (“chips”) -- at least in prototype quantities for local companies and institutions.

Within the philosophy of a free-market economy rather than a centrally-planned economy, no attempt has been made to define which new high-tech companies will be created when. Rather,

Projects that are failing will be curtailed or dropped and resources allocated to them will be reallocated to projects that are successful and need to expand.

The first spin-offs of activities from the HoA IAT as new start-up companies should occur in less than 5 years after starting, probably within the 2nd year.

The summary above indicates that an appropriate environment reaching the necessary critical mass should be in place within 5 years of operations, if these operations are funded as currently proposed. If they are funded at a lower level, it will take longer.

Within less than 5 years, the IDT itself, together with its Portfolio-Management Company and Advanced-Technology Company, should have developed into a strong framework, that can potentially be used for replicating its model on the Horn of Africa in other under-developed regions of the World. Such options will be open for the IDT to decide upon, depending upon both the amount of funds and the management capacity that it has available at that time.

1	"Can Africa Attain `Tiger' Status?”, Peter Passell, New York Times Service, appearing in the International Herald Tribune on 15-16 March 1997.
2	”Can Africa Attain `Tiger' Status?", ibid.
3	”From Asia's `Tiger', a Lesson for Impoverished Africa -- How to Turn Poor Into Rich: It's More Than Economics”, Nicholas D. Kristof, New York Times Service, appearing in the International Herald Tribune on 27 May 1997.
4	”A New Africa Is Generating Success and Hope”, Callisto Madavo and Jean-Louis Sarbib, appearing in the International Herald Tribune on 21-22 June 1997.
5	”Helping Africa Go the Way of Reforms”, Q & A / J. Brian Atwood, appearing in the International Herald Tribune on 20 May 1997.
6	”Helping Africa Go the Way of Reforms”, ibid.

[Note for writers: Bookmarks are installed at the beginning of each section, i.e. 2, 2.1, & 2.1.1, and each footnote, ie. fn1 - fn6]