ETHIOPIA’S DEVELOPMENT AND THE GROWTH AND TRANSFORMATION PLAN II

GTPii

The report of the Overseas Development Institute (ODI) – “One Foot on The Ground, one Foot In The Air” – at which we looked last week emphasized that Ethiopia had made remarkable progress in the last few years. It underlined the developments achieved under the Growth and Transformation Plan I (2010/11-2014/15) as well at some of the problems that arose during this period. The ODI’s conclusions were that Ethiopia as an island of stability and peace, had registered double digit economic growth for over a decade, showing one of the largest declines in the number of those living in extreme poverty in sub-Saharan Africa and becoming one of the fastest growing economies in the world. It seemed set to be able to continue this over the next five years.

A significant element in this development has been the political reforms which provided for the democratic elections and the creation of elected federal and regional governments within the devolved federal system set up under the new constitution of 1995. With this has been associated the Agricultural Development-Led Industrialization strategy (ADLI) to shift the country’s economic basis from agriculture to industrial manufacturing. It is a strategy that also intends to improve the productivity of the agricultural sector as well as create a domestic mass market for industrial products, increasing the income of poorer members of society and the supply of goods and. It is simultaneously a growth and employment program for development. Its priorities include accelerated growth in the agriculture sector, facilitation of small and medium industries and infrastructure to expand and diversify exports, and encourage private investment through a wide range of incentives.

Social sector policies, in health and education, have been designed to provide the basis for these developments as well as for the reduction of poverty. Planned health developments are expected to provide that by the end of 2020, Ethiopians will have an increased life expectancy of 69 years; the Maternal Mortality Ratio will decline from 420 per to 199/ 100,000 live births. Under five-year, infant and neonatal mortality rates will be more than halved, from 64, 44 and 28 per 1,000 live births to 30, 20 and 10 per 1,000 live births. The figures for under-5 year-olds for childhood stunting, wasting and under-weight in decrease from 40%, 9% and 25% to 26%, 4.9% and 13%, respectively. HIV incidence will be brought down by at least 60% compared with 2010. There will be zero new HIV infections among children. TB deaths will come down by 35% and the incidence of TB will fall by 20% in comparison with the 2015 figures. The incidence of malaria and malaria deaths will fall by at least 40% in comparison with 2015, and premature mortality from NCDs will fall by 12.5% from the current level.

While the progress has been substantial, as the ODI report noted, there is still a long way to go, and developing the framework laid down under the GTP I will be the task of GTP II.

The GTP II is designed to enable the economy to grow at an average of 11%, a year to enable structural transformation of the economy. It will involve stabilization of the macro-economy, keep inflation in single digits, and stabilize foreign exchange rates. The current fiscal policy, focusing on effective administration of tax policies, raising tax revenue, allocating public expenditure on capital investment and on key poverty-reduction sector will continue. Efforts will be made to cover major investments by mobilizing internal savings, narrowing the gap between investment and savings. The aim is to provide appropriate fiscal policies to allow internal revenue to reach 29.6% of GDP and for investment to account for 41.3% of GDP by the end of the GTP period.

The export of manufactured products will play a large role in this, with special attention being given to scale up the production of value added exports, including textile and leather garments, shoes and other leather products, agro-processing products and sugar. Mineral development will be another priority. One effect of this will, of course, be a real reduction in rate of unemployment in both rural and urban areas. The overall aim is to reduce poverty levels to 16% in the next five years and move almost all of the population out of lowest levels well ahead of the international community intended eradication of poverty from by 2030.

One central element of GTP II is the concentration on development of manufacturing industry to ensure the necessary transformational change in the economy. At both federal and regional levels, the base for the manufacturing sector will be widened through increasing numbers of micro and small enterprises as well as medium and larger industries. To bring about visible structural changes, asset addition in the manufacturing sector is expected to increase at an annual average of 24%, and allow manufacturing industry to provide 8% of the national economy by 2020. The amount of jobs created by the sector for youth and women will be doubled. Specific efforts will be made to create a conducive environment for the enhancement of selected foreign direct investments with special attention for local investors to work in collaboration with foreign manufacturing sector investors and acquire knowledge and skill transfers to provide for import replacement.

Development of micro and small industries will continue to be the main focus of direction and provide for up to 6 million new jobs in the GTP II period with support and encouragement to produce competitive price and quality products. It is anticipated that up to 2% of micro and small enterprises will then be able to will be promoted to the next industrial level. The private sector will be expanded to include expanded public-private partnership. Attention will be given to make government services transparent, accountable, fair, efficient, effective, and predictable, and remove bottlenecks in infrastructure, logistics, credit and finance, foreign currency provision, customs systems, and tax administration.

Manufacturing industries will be encouraged to build their technical, productive, and quality management capacities and enhance their competitiveness. The country’s specialized institutes, science and technology universities, technology institutes and sectoral research institutes as well as technical and vocational training institutes will be encouraged and strengthened to ensure these industries are sustainable. Priority will be given to indigenous companies. Strong partnerships will be created with experienced foreign institutions. The Kaizen quality and productive leadership philosophy, which Ethiopia is using, will be implemented in micro and small enterprises, medium and large industries, as well as in industry extension support services, providing for productivity, cost-effective quality, minimizing waste and acceptable work environment.

Industry parks and clusters will be expanded as part of the effort to remove rent-seeking practices observed in land management and help avoid logistics and customs bottlenecks as well as provide the necessary infrastructure. This will also allow for horizontal relationships between small and large industries and create opportunities for technological, production and skill transfers. It will also provide for effective use of local resources within the framework of creating a pollution-free green economy.

The GTP II also calls for agriculture to grow at 8% a year under a lower case scenario, or 11% in an upper case, with the doubling of food crop production. This will be accompanied by concerted efforts to ensure family-level food security, control inflation, provide agricultural inputs for agro-processing industry and, by expanding exports, narrow the trade imbalance as well as by expanded agricultural research and extension services, the strengthening cooperatives and incentivized agricultural investment.

Concentration will be on transformation in the area of strategic food crops, crops for export and industry, floriculture, horticulture, animal husbandry and fishery development sectors. Emphasis will be on the creation of development zones in which problems in the supply of agricultural technology, inputs, marketing, crop protection and post-harvest management can be removed.

Efforts will be made to enable a majority of farmers to reach the productivity level attained by ‘model’ farmers, increasing production of strategic food crops and agricultural inputs for industry and export. The targets at country level, on the lower case scenario, are: stock cereals -170 million quintals, cereals -185 million quintals, pulses – 40 million quintals, and oil crops – 11.5 million quintals. Attention will be given to scaling up the use of forest products with economic value and produce wood for industrial purposes, substituting for imports. Bio-fuel plantations will be developed in places unsuitable for crop production and for production of animal feed.

Agricultural development plans and implementation strategies will be aligned with green economy development, with up to four million hectares developed through small scale irrigation. Small holder and pastoralist agriculture will continue to be the major source of agricultural development which in turn will ensure rapid economic growth. The GTP II will allow for extensive scaling-up of best practices through the use of the ‘development army’, centering around development zones. This will involve improving animal breeds, animal feed and animal health. The goal is to double the current 5% annual growth rate of animal husbandry. Areas will be designated for ranches and quarantine centers. These will serve as sources of inputs and technology, and coordinate market facilities. Jobs will be available for women and youth Efforts will also be made to raise the current average annual production fish from 15% to 25%.

The GTP II underlines the necessity of increasing exports in manufactured goods and scaling up tourism and air transport services as well as other infrastructure. It anticipates that exports should reach US$12 billion by the end of GTP II so major export commodities will be scaled up in both volume and value added. To encourage this, attention will be given to expanding infrastructure and making services provided by the government transparent, accountable, fair, efficient, effective, and predictable. This will resolve bottlenecks in infrastructural provision, logistics, credit and finance, foreign currency provision, customs systems, and tax administration. Another area of emphasis is the removal of rent-seeking attitudes and practices both to encourage the development of agricultural exports and more generally to deal with issues of corruption and inefficiency. The fiscal policy, already under implementation, will focus on effective administration of tax policies, efforts to raise tax revenue, allocation of public expenditure on capital investment and on sectors that fight poverty. In the finance industry, banks will double their number of branches; micro financial institutions will be strengthened to cover at least 50% of rural kebeles. A central element in all of this will be an emphasis on the role of women and the youth and provision of employment.

The GTP II will allow Ethiopia to continue its impressive levels of development and lay down the basis for the development of a green industrial economy. It will also provide the way forward for a continuing decline in extreme poverty, the central aim of Ethiopia’s development and the core of its pro-poor polices over the last decade. Source: Ethiopian Foreign Ministry

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