MeU ;College: SSH; Department: Geography and ES (GeES3011), 2014EC

Chapter One: Introduction

What is development geography?
• Development geography is a branch of geography which refers to the standard of
living and its quality of life with its human inhabitants.
• In this context, development is a process of change that affects peoples' lives.
• It may involve an improvement in the quality of life as perceived by the people
undergoing change.
• Development geography is based upon an understanding that wealth is unequally
distributed on this planet and that this has fundamental consequences for all of us.
• Trying to understand the causes and consequences of this inequality often
involves studying a combination of social, economic, historical, political and
environmental factors.

• More specific foci /emphases include economic development, livelihoods,

resource distribution, natural disasters, population change, and differing
consumption…etc

• Through such studies, development geographers also want to understand better;

the broad range of potential development options at the level of local, regional
andglobal.
Q……What is development?

• Development has different meaning as disciplines.

For example:

• As economics: It is to enhance welfare of the society and improving the life of the society
through application of d/t theories and models

• As Malthus: Development is by reducing population of a country

• As Mills: Development is by exchanging rural to urban and viseversa

• As Adam Smith: Development is by capital saving

• As Roston: Development is if effective labour

• Development = growth + change

• Development is progress of a country in terms of economic growth, use of
tecknology and human welfare

• It is the generation and spread of wealth; political freedom; safety and

security and well-being

• Traditionally, in 1940s, development is assumed as just as economic growth

i.e increase in production and employment in agricultural sector, manufacturing

and industrial sectors.
• Todaro and Smith (2003, 51) defines development as a multidimensional

process involving major changes in social structure, popular attitudes, and

national institutions, as well as the acceleration of economic growth, the reduction

of inequality, and the eradication of poverty.

• Therefore, it can be seen as a complex multi-dimensional concept involving

improvements in human well-being.

• As a geographer, we can say ―Development is a continuous process to improve

the socio-economic, political and environmental aspects for quality life and

happiness‖.
Development in any society must have at least the following three objectives:

• To increase the availability and widen the distribution of basic life

sustaining goods, such as food, shelter, health services and clothing.

• To raise living standards and levels of income, employment, education and

attention to cultural and human values.

• To expand the range of economic and social choices.

• Development is a multidimensional process undertaking to achieve a higher quality
of life for all people including.

Change of social structure (social development)

 Change of economic structure i.e from agriculture to manufacturing and service

(economic development)

 Change in institutions i.e political development

 Change in traditional cultural practice in to the modern way of practicing the already
existing cultural values of the respective community (cultural development)

 Change in psychological aspect or psychological development

 Economic development

• It indicates the change in GDP and GNP

• It is a change in which we transform society from a primitive way of life to the

modern way.

For example: (from primary to secondary, secondary to tertiary….)

• In this process, one economic sector helps as input for another one

 Social development:

• It is a process of transformation of social system, social structure, social institutions.

i.e.

• It is a change in popular attitude from a backward outlook to modern

• It is the development through the provision of social services including:
- Education
- health care
- telecommunication
- electrification
- banking and insurance
- social security
- postal service….etc
• Social development can be promoted if there is improvement of society’s
income, education, employment opportunity, better health, nutrition facilities,
better water and sanitation, transportation and entertainment
 Cultural development:

• Culture includes ideas, values, customs, opinions, norms etc.

• It is in which backward cultural practices are removed and the good cultural
development are made available for the existing society in a way of keeping the good
cultural activities to continue to make a better cultural practices

 Political development:

• It is in which the institution of a nation well service a society in a free and fair way

• This has a more attention because the government has power to make different
development policies and strategies to enhance other development issues
• Generally, development is the process of lifting the quality of living condition

of population by increasing income, reducing the poverty and increasing the

opportunity of individual economy including a better education receiving, health

care taking and a better nutrition than usual, a better maintenance of natural

resources, fresh environment and rich cultural living.

Indicators of development
 Economic indicator

• trade link

• debt

• An economy based on primary product

• Gross Domestic Product (GDP) This is the total value of goods and services (in
$US) produced by a country in a year.

• Gross National Product (GNP) is similar but also includes foreign investments.

• These measures indicate that level of economic activity as well as the productivity
of a population.
• Economic Structure: This measures the percentage of the GDP that is created
through the different sectors of the economy.

- A country that produces its wealth through secondary and tertiary industries is likely
to be more developed than a country which relies on primary industries.

• Aid received: This measures the amount of money a country receives as a

percentage of their GDP.

- Higher values of aid would suggest that countries are unable to create enough
wealth domestically to provide for their population.
 Growth rate of different sectors of the economy such as agriculture and linked,

industrial sector and growth rate of service sector

 Percentage of population working in non-agricultural sector

 Contribution of non agricultural sector to GDP

 Total food production

 Total foreign exchange reserve

 Investment as percentage of GDP

 per capita consumption of inanimate energy

 Fiscal/monetary deficit/scarcity as percentage of GDP

 Rate of inflation

 Export as percentage of GDP

 Social Indicators:

• Social indicators measure how developed a country may be through non-

financial and economic means. For example:

• Drinking water

• Place of women in society

• Child education
The commonly used social indicators of development are:
1. Female Literacy Rate
2. Male Literacy Rate

3. Enrolment ratio of girls in school

4. Enrolment ratio of boys in school

5. Percentage of population living below poverty line

6. Percentage of population with access to sanitation

Literacy Rate: This measures the percentage of adults in a country who
are able to read and write their common language.

• A higher literacy rate is an indication of higher standards of education

and the good ability of the population to find formal employment.

Life Expectancy: This measures the average age at which a person of that
country is likely to die.

• This is a good indicator of the quality of the health care provided by a

country as well as the ability of the population to access adequate sanitation
and simple disease prevention methods.
People per doctor: This measures the average number of people that could

be seen by a doctor at any one time.

• The higher the number the greater the indication of low central funding for

healthcare and low education levels that would allow people to train in the

profession.
 Health and other demographic indicators of development

. Infant mortality rate

. Child mortality rate

. Maternal mortality ratio

. Proportion of births attended by skilled birth attendant

. Percentage of children who are under weight

Political factors

• unstable government

• Corrupt government

• War

 Environmental factors

- Poor climate

- Limited water supplies

- Few raw materials

- Lots of natural hazards

Growth and development

• Difference between Growth and Development:

• There is a significant difference between growth and development.

• By single statement, we can distinguish growth and development.

• If the population of a city increases one million to three million over a period,
we usually say the city has grown.

• However, the civic amenities such as housing, sanitation, communication,

transportation etc. remain the same; the growth does not consider as
development.
• Development is often confused with growth.

• Growth conveys the idea of physical or quantitative expansion of the economic

system.

• By contract, development is a qualitative concept incorporating notions of

improvement and progress and including cultural and social as well as economic

dimensions (Blowers,1995:5)
• Development is a much broader concept of human welfare, with important

social, political and cultural implication (Ingham,1995: 34)

• Development should be perceived as a multidimensional process involving the

reorganization (reformation or restructuring) and reorientation of economic and

social system.

• According to Todaro (1977:95) there are two views about the concept of

development.
A. Traditional View of Development

• Development for the past two decades has meant the capacity of national
economy whose loss static for long time to generate and sustain and annual
increase in its gap at rates of perhaps 5-7 % or more.

• Economic development has in the past also been typically seen in terms of the
planned alteration of the structure of production and employment so that,
agriculture shares of both declines where as that of the manufacturing and service
industries increases.
B. New Economic View of Development

• Development was redefined in terms of the reduction or elimination of poverty,

inequality and unemployment with in the growing context of growing economy.
Growth Development

Growth is a quantitative improvement. Development is a qualitative improvement.

Growth is often a physical change Development can be physical, social or psychological.

Growth may be either positive or

Development is always positive.
negative.

Growth is often vertical Development can be vertical as well as horizontal

Growth is a part of development. Development includes growth

But development is subjective interpretation of one’s may c

Growth can be measured accurately.
to others.

Table 1: Difference between Growth and Development

• Economic growth: It is increase in the national income of the economy ,
without structural changes, showing expansion of the economy

• Single dimensional

• Spontaneous change

• Discontinues change

• Growth is possible without development

• Solution to the problem of developed countries

• Quantitative change: change in national and percapita income

• Economic development:

- Refers to structural changes in production and consumption, with increase in the total output of the
economy

- Refers to changes in technology, modes of production, labor skills, education, health and

- Reduction in poverty and unemployment

- Important to identify which sections are growing

- Multidimensional

- Qualitative change

- Gradual and steady change, planned

- Continues change

- solution to the problem of underdeveloped countries

- economic and non-economic factors

Development and underdevelopment …What is the difference b/n them?
• Economic growth refers to the increase (or growth) of a specific measure such as real
national income, gross domestic product, or per capita income.
• It is an increase in value of goods and services produced by an economy.
• It is conventionally measured as the annual percent change or rate of increase in real
gross domestic product (GDP).
• National income or product is commonly expressed in terms of a measure of the
aggregate value-added output of the domestic economy called gross domestic product
(GDP).
• When the GDP of a nation rises economists refer to it as economic growth.
• Underdevelopment is:

• Suggests the desirability of applying additional capital, labor or technology to

the resource base of an area to permit the present population to improve its
material well-being

• subdivisions of development have been introduced less developed, least

developed, moderately, least developed countries, newly industrialized,
middle income can be employed
• Economic Development: Some economists have used the concepts of economic
growth and economic development interchangeably.

• The economic growth refers to the rise in per capita income while

• Economic development refers to the rise in income and changes in economic

and social structure.

• Thus economic growth and the economic development refer to quantitative and
qualitative aspects of development, the former being quantitative and the latter
qualitative in nature.
• Under developed countries generally refer to those countries or regions where

levels of real income and per capita income are lower than the standard

• In the under developed countries the fruits of scientific and technological

advancement are not applied on large scale in the field of industries and

agriculture.

• In the under developed countries, it has been observed that there is marked

inequality in the social distribution of income.

Space and development
The causes of areas and country’s developing/not developing economically are various.

 The best way to think of this various causes is in terms of the resources which are factors of
production.

* There are four basic factors of production leading to space development. These are:
- Natural resources including land, climate, minerals and etc
- labor
- capital and technology
- Knowledge or education

 Greater production and economic development between places comes about when one or
more of these factors become more productive.
 Classification of countries & their defining characteristics

The 3rd world is a term originally used to distinguish those nations

that are neither unlike with the western nor east during cold war

 These countries are also known as southern, developing countries,

less developed countries or least developed countries.

 The World Bank classifies countries as low-income countries,

middle-income countries and high income countries based on Gross
National Income (GNI) per capita.
According to the latest classification, countries with;
• GNI per capita of $745 or less are termed as low income countries,
• Countries with GNI per capita between $746 to $9205 are termed as middle
income countries
• Countries with GNI per capita of $9206 or more are called as high income
countries.

• Further the middle-income countries are classified as;

• lower middle-income countries (GNI per capita between $746 to $2975)
and
• upper middle-income countries ($2976 to $9205).
• From time to time an economy classification is revised because of change in the
above cut off values or in the country s measured level of GNI per capita.
 The common characteristics of developing nation
 Low living standard (miserable life)
 Low level of production
 High rate of population growth and dependency burden
 Substantial dependency on imperfect market cultural production and primary
products export
 Prevalence/existence and incomplete information
 Dominance, dependence and vulnerability in the International Relation (IR)
 High income elasticity of demand for manufactured goods
 High rates of foreign direct investment
 Activity-1:
1. Analyze the current situation of political issue in Ethiopia and relate
progression of the social, economic, cultural and psychological aspects; then
what do you think to be, based on your opinion raised?
2. Why development varies from one place another?
3. Development is multidimensional concept. Illustrate it
4. Characterize developing and developed countries briefly
5. What is the problem of underdevelopment for countries?
6. Differentiate growth and development
CHAPTER TWO

SUSTAINABLE DEVELOPMENT

 Origin of sustainable development

 The concept of sustainable development has been evolving for more than 30
years.

 The 1972 United Nations (UN) Conference on the Human Environment in

Stockholm, Sweden, contributed to the evolution of sustainable development by
emphasizing that protection of the human environment is a crucial element in
the development agenda.
• The term ―sustainability‖ derived from the Latin root, sus-tinere, which means

to ―under-hold‖ or hold up from underneath, implying;

- robustness/ strength and durability over time.

• Accordingly, sustainability depicts a paradigm that seeks to protect the planet’s

life support systems to ensure longevity for humans and other species.
• Sustainability is a paradigm for thinking about the future in which

environmental, societal and economic considerations are balanced in the pursuit

of an improved quality of life.

• For example, a prosperous society relies on a healthy environment to provide

food and resources, safe drinking water and clean air for its citizens.
• The concept of sustainable development was described by the 1987 Bruntland

Commission Report as ―development that meets the needs of the present

without compromising the ability of future generations to meet their

own needs.‖

 There are four dimensions to sustainable development;

- society,

- environment,

- culture and economy that are intertwined, not separate.

 Generally, Sustainability is often thought of as a long-term goal (i.e. a more

sustainable world), while;

 Sustainable development refers to the many processes and pathways to

achieve it (e.g. sustainable agriculture and forestry, sustainable production and

consumption, good government, research and technology transfer, education and

training, etc.).
 society
economy
Human Well being

environment

Fig: Components of sustainable development

• According to Khan (1995) as cited in Bassiago (1999):

• “If a man in a given geographical area lacks a job (economic), he is likely to be

poor and disenfranchised/excluded (social); if he is poor and disenfranchised,
he has an incentive to engage in practices that harm ecology, for example, by
cutting down trees for firewood to cook his meals and warm his home
(environmental).

• As his actions are aggregated with those of others in his region cutting down
trees, deforestation will cause vital minerals to be lost from the soil
(environmental).
• If vital minerals are lost from the soil, the inhabitants will be deprived of the
dietary nutrients required to sustain the intellectual performance needed to learn
new technologies, for example, how to operate a computer, and this will cause
productivity to reduce or stagnate (economic).
• If productivity stagnates (economic), poor people will remain poor or poorer
(social), and the cycle continues.”

• The above hypothetical case illustrates the linkages among the three
interconnected domains

• Unfortunately, a clear definition of sustainable development has still not been

devised.
 Indicators of sustainable development

• Sustainable development of human society has environmental, material,

ecological, social, economic, legal, cultural, political and psychological

dimensions that require attention:

• Some forms of sustainable development can be expected to be much more

acceptable to humans and, therefore, much further away from eventual collapse

than others.
• Indicators are observable phenomena or states of nature that are believed to tell

the observer something of unobservable phenomena or states of nature.

• Indicators always point at something else, something beyond direct observation.

• There can be many reasons why something is unobservable; sometimes it may be

too costly to directly observe, in its entirety, the phenomenon of interest.

• Indicators of sustainable development belong to this class of indictors of the

future.
• For a proper understanding of the indicator issue, it is of importance to recoup

a few central characteristics of sustainable development:

• Sustainable development is a forward-looking concept: it asks whether

society’s current development path is fair and can be maintained in the future.

• Sustainable development is a multidimensional concept: it looks, at least,

at issues of economy, environment and social justice.

• Following on from these first characteristics, sustainable development
envisages/ foresees the interests of both present and future generations i.e it has
to do with intra-generational and intergenerational equity:
• Sustainable development is a complicated concept: it looks at the
interrelationships among economic, environmental and social development
paths.
• Sustainable development is a vague concept: it is not very precise on the
conditions
• Indicators of sustainable development must, therefore:

 be forward-looking;

 look at different dimensions;

 envisage/ foresee equity;

 simplify, and

 quantify.
 The Goals of Sustainable Development/ Global goal

• Sustainable development relates to the principle of meeting human development

goals while at the same time sustaining the ability of natural systems to provide

the natural resources and ecosystem services upon which the economy and society

depend (Cerin, 2016).

• For development to be sustainable there is a need to set fundamental goals that

would guide all decisions concerning future development and in pursuit of which

effective policies need to be developed.

• Therefore according to Blowers (1995:6-7) there are five fundamental goals
for sustainable development.

• These are:
 Resource conservation
 Environmental quality
 Built development
 Social equality
 Political participation
Built Development

• This goal is concerned with the use of physical resources and their impact on the
land.

• Resource conservation requires patterns of development that minimize energy

consumption, maintain the productivity of land, and encourage the re-use of
buildings.

• The size, density and location of human settlements that is most appropriate for
sustainability will vary in the light of technological developments in energy,
building, manufacturing and transportation.
Resource Conservation

• Sustainable development involves the continuing supply of resources for

future generations.

• It means the efficient use of non-renewable energy and mineral resources

through higher productivity, recycling, the development of alternative
technologies, and substitution where this is possible and not environmentally
harmful.

• It also requires the protection of biological diversity, thereby maintaining the

potential of species and habitats to assist the development of agriculture,
medicine and industry.
Environmental Quality

• Development must also respect environmental quality.

• This means that processes must be avoided which degrade or pollute the
environment and thereby reduce its regenerative capacity.

Example: Some industries are pollutant and not environmentally friend

Social Equality

• Under presents economic arrangements, patterns of trade, aid and investment are
largely shaped by the demands of the richer countries.
• Promoting gender equality will not, of itself, achieve sustainability, since both
rich and poor degrade the environment.

• But the conflicts that arise through inequalities are a major obstacle to
cooperation.

• There is also a need to bequeath/ give to the future environmental resources at

least as good as those which exist today.

• This is the principle of equality between generations.

Political Participation

• A sustainable environment can not be achieved without the political

commitment to make the necessary changes.

• The changes envisaged/ predicted in the way we lead our lives are drastic in
their scope and implications.

• A move from economic and social organizations based on the exploration of the
environment and material consumption towards a post industrial society focused
on social equality, conservation and resource management can not be achieved
quickly, however imperative/ commanding the need.
 Sustainable development goals

• SDGs are set up in 2015 by the United Nation General Assembly (UNGA) and

are intended to be achieved by the year 2030 and were developed in the post

2015 development agenda as the future global development framework to

succeed the MDGs which ended in 2015 beginning from 2000.

What were the MDGs?(8 in No)
 Eliminate extreme poverty and hunger
 Achieve universal primary education
 Promote gender equality and empower women
 Reduce child mortality
 Improve maternal health
 Combat HIV/AIDS, malaria and other disease
 Ensure environmental sustainability
 Develop a global partnership
• Of these MDGs, the two showed very low progress include:

- Gender equality and improvement and

- Improving maternal health

• This is due to some unhealthy traditional practices and misperceptions along

with paucity/ scarcity of some critical infrastructure remained Challenges

accounting for the failure to achieve these goals 100%.

• SDG is to bring better and more sustainable future for all people and the world by

2030 having the following goals (17 goals and 169 targets)

• It is universal call to action to end poverty, protect the planet, and ensure that by 2030

all people enjoy peace and prosperity.

• The FDRE accepted and approved the 2030 Sustainable Development Agenda during

the UN- member states’ meeting held in New York from September 25 to 27/2015.

• Subsequently, it integrated the SDGs with the 2nd Growth and Transformation Plan

(GTP-II).
The goals include:

1. No poverty

• End extreme poverty in all forms by 2030.

• Yes, it’s an ambitious goal—but we believe it can be done.

• More than 800 million people around the world still live on less than $1.25 a day

Example: Rapid growth in countries such as China and India has lifted millions out of

poverty, but progress has been uneven.

2. Zero hunger

• End hunger, achieve food security and improved nutrition and promote sustainable agriculture

3. Good health and wellbeing

• Ensure healthy lives and promote well-being for all at all ages

4. Quality education
• Ensure inclusive and equitable quality education and promote lifelong learning opportunities
for all

• In fact, kids/ children from the poorest households are four times more likely to be out of
school than those of the richest households.

• The total enrolment rate in developing regions has reached 91%., after 2000
5. Gender equality
• Achieve gender equality and empower all women and girls

6. Clean water and sanitation

• Ensure availability and sustainable management of water and sanitation for all

• Water scarcity affects more than 40% of people around the world, and that
number is projected to go even higher as a result of climate change.

• More international cooperation, protecting wetlands and rivers, sharing water-

treatment technologies leads to accomplishing this Goal
7. Affordable/ inexpensive and clean energy

• Ensure access to affordable, reliable, sustainable and modern energy for all

• Between 1990 and 2010, the number of people with access to electricity

increased by 1.7 billion.

• Power generation in Ethiopia focuses on hydropower, geothermal energy,

wind and solar power, which are all renewable energy sources.
8. Decent work and economic growth

• Promote sustained, inclusive and sustainable economic growth, full and

productive employment and decent work for all

• We can promote policies that encourage entrepreneurship and job creation.

• We can eradicate forced labour, slavery and human trafficking.

• And in the end we can achieve the goal of decent work for all women and men

by 2030
9. Industry, innovation and infrastructure

• Build resilient/ resistant infrastructure, promote inclusive and sustainable industrialization and
foster innovation

• Technological progress helps us address big global challenges such as creating jobs and
becoming more energy efficient.

• For example, the world is becoming ever more interconnected and prosperous
thanks to the internet.
• The more connected we are, the more we can all benefit from the wisdom and
contributions of people everywhere on earth.

• Yet 4 billion people have no way of getting online, the vast majority of them in
developing countries.

10. Reducing inequlity

• Reduce inequality within and among countries

• Income inequality is a global problem that requires global solutions

• Income inequality is a global problem that requires global solutions.

11. Sustainable cities and communities

• In 1990 there were ten “mega-cities” with 10 million inhabitants or more.

• In 2014, there were 28 mega-cities, home to 453 million people……increasing

• Make cities and human settlements inclusive, safe, resilient and sustainable

• More than half the world’s population now lives in cities, and that figure will go

to about two-thirds of humanity by the year 2050.

To make cities sustainable for all, we can create:

• Good, affordable/ cheap public housing.

• We can upgrade slum settlements.

• We can invest in public transport,

• Create green spaces, and get a broader range of people involved in urban

planning decisions.
12. Responsible consumption and production
• Ensure sustainable consumption and production patterns

• We can manage our natural resources more efficiently and dispose of toxic
waste better.

• Help countries that have typically not consumed a lot to move towards more
responsible consumption patterns

• We can consume in a way that preserves our natural resources so that our
children can enjoy them, and their children and their children after that.
13. Climate action

• Take urgent action to combat climate change and its impacts

• Every country in the world is seeing the drastic effects of climate change, some

more than others.

For example: earthquakes, tsunamis, tropical cyclones (hurricans, tornado,

typhoons…) and flooding count in the hundreds of billions of dollars.

14. Life below water
• The oceans make human life possible.

• Conserve and sustainably use the oceans, seas and marine resources for
sustainable development
• More than 3 billion people depend on marine and coastal diversity for their livelihoods.

• Oceans are carbon sinking area

• Oceans absorb about 30 percent of the carbon dioxide that humans produce;
but we’re producing more carbon dioxide than ever before and that makes the
oceans more acidic, 26% more, since the start of the industrial revolution.
15. Life on land

• Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage
forests, combat desertification, and halt/stop and reverse land degradation and halt
biodiversity loss

• Humans and other animals rely on other forms of life on land for food, clean air, clean

water, and as a means of combatting climate change.

• Plant life makes up 80% of the human diet.

• Forests, which cover 30% of the Earth’s surface, help keep the air and water clean and the

Earth’s climate in balance.

• Arable land is disappearing 30 to 35 times faster than it has historically

16. Peace, justice and strong institution
• Promote peaceful and inclusive societies for sustainable development, provide
access to justice for all and build effective, accountable and inclusive institutions
at all levels

Q…. How can people eat and teach and learn and work and raise families
without peace?

Q….. How can a country have peace without justice, without human rights,
without government based on the rule of law?
• Some parts of the world enjoy relative peace and justice, and may come to take it
for granted.

• Other parts seem to be plagued by armed conflict, crime, torture and

exploitation, all of which hinders their development.

• The goal of peace and justice is one for all countries to strive towards.

17. Partnerships for goals

• Strengthen the means of implementation and revitalize/ regenarate the global
partnership for sustainable development
• The world is more interconnected today than ever before, thanks to the
internet, travel and global institutions.
• There’s a growing consensus about the need to work together to stop climate
change.

• And the Sustainable Development Goals are no small matter either.

• About 193 countries agreed on these goals.

• This final goal lays out a way for nations to work together to achieve all the
other Goals
 The Principles of Sustainable Development

• A number of common principles are embedded in most charters or action

programs to achieve sustainable development, sustainability, or sustainable
prosperity. These include:

 Dealing transparently and systemically with risk, uncertainty, and

irreversibility.

 Ensuring appropriate valuation, appreciation, and restoration of nature.

 Integration of environmental, social, human, and economic goals in

policies and activities.
 Equal opportunity and community participation/ Sustainable community.

 Conservation of biodiversity and ecological integrity.

 Ensuring inter-generational equity/ justice.

 Recognizing the global integration of localities.

 A commitment to best practice.

 No net loss of human capital or natural capital.

 The principle of continuous improvement.

 The need for good governance.

CHAPTER THREE

3. Development Problems and Factors Affecting Development

a) Poverty:

The World Bank defines poverty as the inability of people to attain a minimum

standard of living.

• Poverty is a Condition where people's basic needs for food, clothing, and shelter are

not being met.

• Poverty is generally of two types:

(1) Absolute poverty:

• Is synonymous with destitution/ impoverishment and occurs when people

cannot obtain adequate resources (measured in terms of calories or nutrition)

to support a minimum level of physical health.

• It is about the same everywhere, and can be eradicated as demonstrated by

some countries.
(2) Relative poverty:

• Occurs when people do not enjoy a certain minimum level of living standards

as determined by a government (and enjoyed by the bulk of the population) that

vary from country to country, sometimes within the same country.

• Relative poverty occurs everywhere, is said to be increasing, and may never be

eradicated.

• Poverty can be continuous if no intervention taken place and became

development trap
Fig.1 Poverty cycle is a development trap when applied to countries
• Many developing countries are caught up in vicious cycle of poverty.

• Low level of income:

- prevents savings,

- retards capital growth,

- hinders productivity growth, and

- keeps income low.

b) Inequality:

 Turning now to the consideration of the distribution of world income in relation

to the population, and using the three-fold classification of lowincome, middle-
income and industrial countries.

 Low-income countries contain approximately 60% of the world's population

and receive only 6% of the world's income;

 Middle-income countries contain 15% of the world's population and receive

17% of world income, and

Rich industrialized countries contain 25% of the world's population yet

receive 77% of world income.
• There is increasing evidence that countries with high levels of inequality –

especially of assets achieve lower economic growth rates on average.

• In addition, a given rate and pattern of growth of household incomes will have

a larger poverty reduction impact when these incomes are more equally

distributed to begin with.

C) Unemployment:

• The term unemployment refers to a situation when a person who is

actively searching for employment is unable to find work.

• Unemployment is considered to be a key measure of the health of the economy.

• The most frequent measure of unemployment is the unemployment rate, which is

the number of unemployed people divided by the number of people in the labor

force.
• Open unemployment in the urban areas of developing countries is another

dimension of the development problem, and an increasingly serious one.

• Poor countries for a long time, and particularly since the population explosion,

have been characterised by underemployment, or disguised/ hidden

unemployment on the land

What is underemployment?
• Underemployment is a measure of employment and labor utilization in the
economy that looks at how well the labor force is being used in terms of skills,
experience, and availability to work.

• People who are classified as underemployed include workers who are highly
skilled but working in low-paying or low-skill jobs and part-time workers who
would prefer to be full-time.

• May be defined as a situation in which workers are employed below their

education or skill level, or their availability.
Who are economically inactive population?

• The economically inactive population comprises all persons who were neither
"employed" nor "unemployed" during the short reference period used to
measure "current activity". This population is split into four groups:
 Attendant at educational institutions;
 Retired;
 Engaged in family duties;
 Other economically inactive.
d) Inflation:

Inflation does not affect all income sources homogeneously.

It is decline in the value of money

Since households differ in their sources of income, the impact of inflation on

their total incomes will not be homogeneous.

By affecting each household differently, inflation can thus modify the income
distribution.

To identify the potential channels through which inflation can potentially increase or
decrease income inequality, let us first divide total income into

three categories: labor income, capital income and government transfers.

 Factors affecting development

a) Environmental factors affecting development – the impact of natural hazards.

• The physical environment can have a direct impact upon the development of a
place.

• The UK benefitted in many ways from its physical or natural environment for its
rise to a global superpower during the Industrial Revolution.

• Its Island natural gave it a coastline to fully exploit for resources and many
potential trade routes.
• It had the right mix of natural resources to exploit for many Industrial

processes, including coal, iron Ore and Limestone.

• It also had a temperate climate without the extremes of weather that can

damage development.

• Many countries are not as fortunate and the following factors can limit

development;
1. Climate related disease: Many tropical countries unfortunately suffer from
diseases that thrive in hot humid conditions, such as Dengue Fever, Chagas
Disease and Malaria.

• People who get these diseases are incapacitated and cannot work or may even
die, limiting development.

2. Lack of natural resources: Countries with few natural resources start off at a
very low economic base and find it hard to create products that can sell on world
markets.
3. Natural resource curse theory: This is a theory that states if a country has one very
valuable resource all efforts of the country are put into the exploitation of that resource.

• This limits the potential development of other industries.

• If the resource is in the hands of a minority unscrupulous ruling elite, the profits are
not shared well amongst people in the country.

4. Being landlocked with bad neighbours: Although this has a political element to it,
countries that have no access to the sea are at the mercy of their neighbours.

• If they are ―bad neighbours‖ who expect huge payments or have regular conflict, this
can severely limit development.
5. Climatic hazards such as hurricanes and drought are more likely to strike
some countries than others.

• For fragile countries a drought could have a devastating impact on development.

E.G: The 2011 to 2012 Horn of Africa famine that affected Ethiopia, Eritrea,
Kenya and Somalia had a long term impact.

• As well as killing and weakening people from hunger and thirst, many of these
countries had to deal with a refugee crisis, diverting valuable resources away
from other development objectives.
b) Economic factors affecting development
Q…….What are economic factors affecting development?

• Available labor force (skilled labor)

• Natural resources

• Power and energy resources

• Capital accumulation (the more capital, the more jobs created)

• Technological resources (computers, devices)

• Transportation and communication

Figure: poverty trap
• Unfortunately poverty can lead to poverty.

• Populations in countries at low levels of development can become

more vulnerable to ill health (as we have seen with HIV and AIDs in
sub-Saharan Africa) which reduces the productivity of the workforce.

• In addition, a lack of education leads to a lower quality workforce,

and poor road networks are not attractive to outside investors.

• Simple things like these can exacerbate (make worse) poverty, and
keep countries mired/ delayed in a low level of development.
• In addition, countries at low levels of economic development are also more

likely to be victims of civil wars.

E.g: Countries such as the Sudan, Democratic Republic of the Congo and

Rwanda are good examples of this.

• Wars consume vital resources and divert attention away from the crucial issues

for normal people, healthcare, reliable food supplies, stability, economic well-

being and access to clean drinking water.

• In addition, the lack of reliable energy supply, political stability,

infrastructure and educated workforce put countries at a disadvantage.

• The net result in many poorer countries is that they are forced to export only

lower value raw materials such as agricultural goods, whilst/ whereas they buy

back more expensive manufactured goods or services.

• Poorer countries do not have the capital to set these types of industries up.
C) Social Factors

• There are many social factors that can affect the level of development of a place.

• Things like lack of drive of social motivation for betterment, unproductive

social functions such as having very large family sizes, negative social cultures
(gambling and drinking), and lack of skills due to poor training and education
are some of these factors.

• Education is particularly important, as many countries cannot afford to send all

children to school even at a basic level.
• Any country with plenty of human resource but with low quality and fertile

natural resource can slow down or make the development fail.

• Today, some countries even lacking natural resources but the population of

high education, perfect working regulations, hard working and economizing

people can make more progress in the development of their countries.

D) Cultural factors affecting development

• Although any religion teaches people for good doing, it also has an impact on

the value of people in society which may possibly contribute or block the socio-

economy development.

• Religious issues related to different ceremonies

E.g: Some days are occupied by celebrating rather working

E) Historical factors affecting development
• Most of Africa and Asia nations at one time a colonies of Western European nations
like UK, France, Netherland and Spain.
• The economic structure, educational institutions, social institutions of the developing
nations were moduled by the colonial rulers
• This has created a long lasting impact on economic, political, social and cultural
institutions.
E.g: British in India, Kenya
• Africa got political independence just recently, this has put a series impact on the
African economy, political structure, cultural structure and social structure which
almost make all Africans to depend on their colonial rulers
F) Political factors: The impact of unstable governments.

• Governments play a lead role in the development process, and many

governments are filled with honest people who do a good job trying to raise

both the standard of living and quality of life of the people who live there.

• Unfortunately there are cases of governments that have corrupt officials who

make money and wealth at the expense of the people that they are supposed to

represent.
E.g: Nigeria has been labeled as one of the most corrupt countries on Planet

Earth by the BBC.

• When politicians are corrupt developments in health, education, roads, power

generation and clean water are less likely.

• Companies and other governments are also less likely to invest in those

countries as they are unstable.

CHAPTER FOUR

THEORY OF DEVELOPMENT

• One of the key thinkers in 20th c Development Studies was W.W. Rostow, an

American economist and government official.

a) Rostow’s five stages of growth (1960)

Stage 1: Traditional society (subsistence agriculture, barter economy,

hierarchical structure, low social mobility)

Stage 2: Pre-conditioning (agricultural modernization, transition to industrial

economy; infrastructure growth; centralization)

Stage 3: Take off (increase in industrialization, high investment, steady

economic growth)

Stage 4: Drive to maturity (economic and technical progress; diversification)

Stage 5: Maturity (social prosperity; mass consumption, service sector

dominance)
• Traditional Society: This stage is characterized by a subsistent, agricultural-based economy

with intensive labor and low levels of trading, and a population that does not have a

scientific perspective on the world and technology.

• Preconditions to Take-off: Here, a society begins to develop manufacturing and a more

national/international—as opposed to regional—outlook.

• Take-off: Rostow describes this stage as a short period of intensive growth, in which

industrialization begins to occur, and workers and institutions become concentrated around

a new industry.

• Takeoff to sustained growth is the critical developmental stage, lasting perhaps 20-30 years
• Drive to Maturity: This stage takes place over a long period of time, as
standards of living rise, the use of technology increases, and the national
economy grows and diversifies.
• Economic output growing faster than population
• Age of high mass consumption: At the time of writing, Rostow believed
that Western countries, most notably the United States, occupied this last
"developed" stage.
• Here, a country's economy flourishes in a capitalist system, characterized
by mass production and consumerism.
• Rostow’s model makes the assumption that the inequality between states
will eventually disappear once each progresses on the timeline of
modernity
Criticism of the model
 His model is based on American and European history and defines the American
norm of high mass-consumption as integral to the economic development process of all
industrialized societies.
 His model assumes the inevitable adoption of Neoliberal (role of state at minimal
level) trade policies which allow the manufacturing base of a given advanced polity to
be relocated to lower-wage regions.
 Rostow's model does not apply to the Asian and the African countries as events in
these countries are not justified in any stage of his model
 The stages are not identifiable properly as the conditions of the take-off and pre
take-off stage are very similar and also overlap.
b) Core-Periphery Model of Development

• It is a model of the spatial organization of human activity based upon the

equal distribution of power in economy and society.

• The core dominates (although it may in turn be dominated from outside) whilst

the periphery is dependent.

• Helps to understand dualism that exist with in many spatial systems such as

urban-rural contracts commonly seen in infrastructure, health, and education

• If any reason one section of a country experience accelerated economic
development, that section becomes increasingly attractive for investors,
entrepreneurs and migrants. ore

national core

national nacore
c) Modernization theory of development

• Modernization theory is a theory used to explain the process of modernization

that a nation goes through as it transitions from a traditional society to a modern
one.

• It emphasized on social transformation as pre-requisite for economic, cultural,

political, psychological through time.
• There are three major events which paved the way for modernization post WWII:
- Rise of USA (post 1945 was US era (cooperation based), pre 1945 was European
era (forced based rule)
- Spread of communism(USSR) in the east Europe, china and Korea
- Disintegration of European colonial powers (collapse of colonial era) in Afr, Asia
& L-America giving birth to many new nation state in the 3rd world

:. The American social scientist with genuine support from US gov’t of young
American political scientist, economist, sociologist, psychologist, demographers
established modernization school of thought presuming that social transformation
is pre-requisite for developing nations to promote their p,s,e,c &ps dev’t
• Therefore, in order to progress, the traditional societies must emulate/

match the culture of modern societies, which is characterized by accumulation

of capital and industrialization which are compatible with development.

• In essence, this theory seeks to improve the standard of living of traditional

societies through economic growth by introducing modern technology

(Huntington, 1976).
There are two theories that base for modernization theory

a) Evolutionary theory: Social change is gradual, slow, unidirectional, inevitable

and its final phase of the change is good.

- Society will change from a simple primitive to complex modern society

- For modern society to appear, it takes centuries to complete the process

b) Functional theory: Social transformation as a system

- Human society is like biological organism and studied like it.

- Social transformation is gradual, rate of transformation is slow, multidirectional

playing their role in the society to bring social change
d) Dependency theory

 Dependency theory first emerged in the 1950s, advocated by Raul

Prebisch whose research found that the wealth of poor nations tended to

decrease when the wealth of rich nations increased.

 Developing countries become poor by their interaction with advanced countries

 Development creates underdevelopment

 Dependency theory states that the poverty of the countries in the periphery

is not because they are not integrated into the world system, but because

of how they are integrated into the system.

 These poor nations provide natural resources, cheap labor, and

consumer markets for the wealthy nations, without which, they could not

have the standard of living they enjoy.

 First world nations actively, but not necessarily consciously, perpetuate a state
of dependency through various policies and initiatives.

 This state of dependency is multifaceted, involving:

 economics, media control, politics, banking and finance, education, sport and
all aspects of human resource development.

 Rare, but any attempt by the dependent nations to resist the influences of
dependency could result in economic sanctions and/or military invasion and
control.
 It is Proposed from developing countries/nation economist (L-America) on the
ground that under development of developing nation is because of the resources are
flowing from peripheral (poor nation) areas to the core (wealthiest nation)

 Third World countries were poor while "developed" countries were rich.

 Third World countries had bad health conditions, while other countries had good
health conditions.

 Third World countries had little military power, while other countries had
tremendous military resources.

 Third World countries faced starvation, while citizens of other countries had to
worry about losing weight.
Stream of thought under dependency theory:

* Neo-classical (neo-colonial) dependency model: Says underdevelopment of

developing nation is mainly facilitated and worsen because unequal power relationship
regarding political, social, economic and psychological aspects with wealth (rich or
northern) (external) nations making not to stand on their own feet.

• False paradigm model: Attributes under development of developing nation is

inappropriate policy advise by the northern nation (northern economist are biased)

E.G IMF& W-Bank experts, political scientists…..

* Dualistic development model: Represents co-existence and persistence of increasing

divergence b/n the rich and poor nation, literate & illiterate…etc.
 The theorists further argue that social progress can happen in the under
developed nation only if there is a freedom of this states to exercise their own
- economic strategy,
- political structure,
- social interaction,
- cultural practice and
- psychological independence.
e) Theory of Post Modernism
• Postmodernism entered geography in the early 1980s as part of the reaction to
the consolidation of positivist spatial science as the dominant disciplinary
paradigm.
• In each stream, postmodernism focused attention on the distinctiveness of the
present, on what is new and different in the contemporary period.
• The truth is relative and not absolute (it is impossible to reach truth)
• Rejected the Idea of Representation: Postmodernism rejects all representation
operations in any form of representation.
• It recedes/takes the modern way of thinking

• Its central idea is that there is NO universal truth, but there are multiple views or
theories which always are bounded to place and time, so meanings are related to the
context/ conditions of the world today which leads to reality rather than following
certain theories

• Focused on changing ways rather than calling for action

• The truth is what we see today, tomorrow is with another truth

• There is multiple way to know something

• Every thing is good or in accordance to the observer (e.g. homosexual and the street)
 f) New (endogenous) Growth
• Endogenous growth theory is an economic theory which argues that economic
growth is generated from within a system as a direct result of internal processes.
• More specifically, the theory notes that the enhancement of a nation's human
capital will lead to economic growth by means of the development of new forms
of technology and efficient and effective means of production.
• Endogenous growth theory maintains that economic growth is primarily the
result of internal forces, rather than external ones.
• It argues that improvements in productivity can be tied directly to faster
innovation and more investments in human capital from governments and
private sector institutions.
• This view contrasts with neoclassical economics.
• Endogenous growth economists believe that improvements in productivity can

be tied directly to faster innovation and more investments in human capital.

• As such, they advocate for government and private sector institutions to nurture

innovation initiatives and offer incentives for individuals and businesses to be

more creative, such as research and development funding and intellectual

property rights.
g) Balanced vs unbalanced theory of development

 The Balanced Growth Strategy

• Fredrick List was first to put forward this theory suggesting agriculture,
industries and trade balanced.

• According to Rodan, Nurkse and Lewis, economy should make simultaneous

investment in all sectors to achieve balance growth.

• As regards the choice of the pattern of resource allocation, the balanced growth
school argues that the pattern of resource allocation should be chosen such that at
every stage of development, the available production capacity is fully utilized in
all the economic sectors; therefore no surplus or shortages should exist.
• According to Lewis ―Balanced growth means that all sectors of economy

should grow simultaneously so as to keep a proper balance between industry and

agriculture and between production for home consumption and production for

exports. The truth is that all sectors should be expanded simultaneously.‖

Explanation of Lewis’s Theory of Balanced Growth:

• Lewis has given the following two arguments in favour of balanced growth:

(i) In the absence of balanced growth, price in one sector may be more than the

prices in others.

(ii) When the economy grows then several bottlenecks appear in different sectors.
Advantage of Theory of Balanced Growth
• Large size of Market
• External Economies
• Horizontal and vertical Economies
• Better Division of Labor
• Better Use of Capital
• Rapid Rate of Development
• Encouragement of Private Enterprises
• Breaking of Vicious Circle of Poverty
• Encouragement of International Specialization
The Unbalanced Growth Doctrine

• Hirschman, Rostow, Fleming, Singer have propounded/advocated the concept

of unbalanced growth as a strategy of development for the underdeveloped
nations.

• The theory stresses the need for investment in strategic sectors of the economy,
rather than in the all sectors simultaneously.

• Unbalanced growth is a situation in which the various sectors of a given

Specific sectors of the economy will be growing at a rapid rate, while other
sectors are either stagnant or experiencing a significantly reduced rate of
growth.
Criticism of the Theory of Unbalanced Growth
• Inflation
• Wastage of Resources
• No Mention of Obstacles
• Increase in Uncertainty/ambiguity
• Unbalance is not Necessary
• Lack of basic Facilities
• Disadvantages of Localization
Generally, unbalanced growth

1. Focuses is on the growth of certain key sectors of the economy

2. The process of growth through Imbalances in the system.

3. Requires relatively much less investment.

4. A Short period strategy of growth.

5. It is decision making and entrepreneurial/innovative skill

 h) Coordination Failure: The O-Ring Theory of Economic Development

• The O-ring theory of economic development is a model of economic

development put forward by Michael Kremer in 1993, which proposes that tasks
of production must be executed proficiently together in order for any of them to
be of high value.

• The key feature of this model is positive assortative matching, whereby people
with similar skill levels work together.
There are five major assumptions of this model:

- firms are risk-neutral,

- labor markets are competitive,

- workers supply labor inelasticity,

- workers are imperfect substitutes for one another, and

- there is a sufficient complementarity of tasks.

CHAPTER FIVE

DEVELOPMENT POLICY AND STRATEGIES

Development planning and policy making

 What is development planning?

Basically development planning refers to the strategic measurable goals that a

person, organization or community plans to meet within a certain amount of time.

It is a systematic or carefully formulated course of action/ policy designed to achieve

the development goals of society

It generally also includes the criteria that will be used to evaluate whether or not the
goals were actually met.
 Planning bridges the gap from where we are to where we want to go.

 Any attempt to control without plans is meaningless, since there is no way for

people to tell whether they are going where they want to go (the result of the task

of control) unless they first know where they want to go (part of the task of

planning).

 Plans thus furnish the standards of control.

Purpose of planning
i. To provide direction
ii. To reduce / offset uncertainty and change
iii. To minimize waste and redundancy
iv. To set the standards to make control effective
v. To manage by objectives
vi. To help in co-ordination
vii. To secure economy in operation
viii. To increase organizational effectiveness
 Types of planning
• planning can be classified either according to its focus or according to its time frame.
a. Long term planning (perspective plan): Covers 10-20 yeras
b. Medium term planning: Ranges from annual plans to plans extending to 2-3 years
c. Regional planning: Focuses on specific regions of a country
d. Sectoral planning: Focuses on r/n ship and needs of d/t sectors of a country
e. National planning: Covers all geopolitical units in a country
f. Indicative planning: It relies to some extent on market forces to allocate resources
- The gov’t only provides rules, ceiling, rates, guidelines, and penalities
g. Comprehensive planning: Touches all aspects of the economy, small and big
enterprise, domestic and foreign trade, price and output
 Development planning processes
• Though it varies from organization to another organization, the steps in the planning process
are:
• Develop objectives: The first step in the planning process is to determine what you want to
accomplish during the planning period.
• Develop tasks to meet those objectives: The next step is to come up with a list of required
tasks to meet the objectives defined.
• Determine resources needed to implement tasks: In this case, 'resources' includes both the
people needed to implement the plan and the supplies or other resources needed to support
those people.
• Create a timeline
• Determine tracking and assessment method
• Finalize plan
• Distribute to all involved in the process Fig: Planning processes
 Agricultural Development Led Industrialization (ADLI)

What is ADLI?

―The development strategy that aims to achieve initial industrialization through

robust agricultural growth and close linkage between the agricultural and the
industrial sector.

Core of ADLI

 Increase agricultural output and productivity

 Increase industrial output and productivity

 Close input-output linkage between the two sector

 productivity

productivity
Output

Output
- Food
- raw material
Agriculture Industry
(rural) Machinery, fertilizer, (urban)
Pesticides, insecticides…etc.
- Consumption good
Commercialize - Export orientation
agriculture - Labor intensiveness
―Thus if ADLI strategy is successfully applied it will be changed to industry led
development strategy‖
The alleviation of poverty via fast economic growth is the main goal of Ethiopian
government.
In this regards, lack of appropriate policies and strategies was considered by the
government as the ultimate reason for the sector’s past stagnation.
Consequently, to solve this problem, the national development strategy called
Agricultural Development Led Industrialization (ADLI) was devised.
ADLI was built on the development theories of the 1960s in which
(smallholder) agriculture needs to be developed first to facilitate demand for
industrial commodities and inputs for industrialization ( Moller, 2016).
• This strategy has been justified because agriculture is the largest sector in terms

of output and, particularly, employment and exports; the bulk of the poor live in

the agriculture-centered rural areas; considerable gaps exist between rural

and urban across key dimensions of human well-being including health,

education and income; and there exists substantial potential to raise agricultural

productivity (Lulit et al., 2010).

In this regard, the growth in agriculture was expected to cause overall economic
growth through structural transformation by stimulating demand and supply.

 On the demand side, expansion in agricultural activities would increase

demand for industrial products (both agricultural inputs and consumer goods)
produced by domestic industries.

 On the supply side, the agriculture sector can supply food to domestic market,
raw materials to industries and export products (Lulit et al., 2010).
• In this strategy, agriculture was taken as the engine of national economic growth.

• Through ADLI:

- to achieve rapid growth in agricultural production,

- raise income for rural households,

- attain national food self sufficiency, and

- produce surpluses which could be marketed to the urban or industrial sectors,

small holder farms, especially crop producers were initially targeted by the ADLI
strategy.
• The government’s emphasize of building the capacities of the small-scale
farmer as fundamental goal in the implementation process will make use
of country’s huge labor force, abundant agricultural lands, diversified agro-
climatic zones and sufficient water resources in the rural areas (Lulit et
al., 2010).

• More specifically, the government introduced measures like providing the

smallholder farmers with technology and better farming practices, improved
seeds, fertilizers, irrigation, rural roads, and marketing services to increase
agricultural production.
• A rise in agricultural output in turn was expected to stimulate industrial
production by providing food and industrial materials, thus establishing a link
between the rural and urban sectors.

• In other words, the objective of ADLI is to strengthen the linkages between

agriculture and industry by increasing the productivity of small scale farmers
and investing in those industries with most production linkages to rural areas.

• Because, the strategy assumes that inter-sectoral linkages will reinforce the
growth impetus derived from increasing productivity in both sectors with
the agricultural sector obtaining machinery, chemicals and consumption goods
from industry in exchange of food and raw material ( Moller, 2016).
 Industrial Development Led (IDL)

 If the agricultural development- led industrialization (ADLI) strategy can be

successfully practiced, the developmental strategy would be gradually transformed-in

to industrial-led development strategy.

 The Industry Development Strategy of the country has put in place the principles that

primarily focus on the promotion of agricultural-led industrialization, exportled

development, and expansion of labor intensive industries.

• These principles are inter-dependent and inter-linked one with another.

• The strategy has also set the other principles that clearly stated the pivotal/
crucial contribution of the private sector, the leadership role of the
government, and the integrated and coordinated participation of the public
at large in nurturing/ fostering the strategy.

• This strategy refers to those industries which are primarily involved in the
production of manufactured goods.

• It is also tried to include other industrial classified sectors in the document other
than the manufacturing industries.
Fundamental Principles of the Strategy

 Considering the Private Sector as an Engine of the Industrial Development Strategy

Implementing Agricultural Development Led Industrialization Principle

 Implement Export-led industrialization principle since

 Focusing on the expansion of labour intensive industry direction

 Implementing effective domestic-foreign investment partnership method

 Implementing the direction where, the government will play a leading managerial
role.

 Implementing the principle that encourage the active participation of the public.
In order to achieve the above objectives, it is important to formulate a suitable
industrialization strategy, the major elements of which comprise the following.
Create and develop appropriate institutions to promote industrialization
Create a conducive environment for industrial development
Promote inter and intra-sectoral linkages.
Create an appropriate financial environment
Promote balanced regional industrial development
Establish a close coordination between industry and other sectors of the
economy, especially agriculture and mining
Develop infrastructure
Promote industrial exports
Develop national technological capability
 Import Substitution
• Import substitution industrialization (ISI), development strategy focusing on promoting
domestic production of previously imported goods to foster industrialization.

• Import substitution industrialization (ISI) was pursued mainly from the 1930s through the
1960s in Latin America—particularly in Brazil, Argentina, and Mexico—and in some parts of
Asia and Africa.

• In theory, ISI was expected to incorporate three main stages:

(1) domestic production of previously imported simple nondurable consumer goods,

(2) the extension of domestic production to a wider range of consumer durables and more-
complex manufactured products, and

(3) the export of manufactured goods and continued industrial diversification.

• Import substitution is a government strategy that emphasizes replacement of some
agricultural or industrial imports to encourage local production for local consumption, rather
than producing for export markets.

• Import substitutes are meant to generate employment, reduce foreign exchange demand,
stimulate innovation, and make the country self-reliant in critical areas such as food, defense,
and advanced technology.

• Substituting products that are imported with domestic ones as this reduces cost of import
resulting in savings of the country

• It also makes the country self reliant and enables to increase its export

• It encourages development of domestic industries enabling in faster growth of the economy,

reduces unemployment poverty & in a way contributes in the national income.
 Export-oriented industrialization
• Export-oriented industrialization (EOI) sometimes called export
substitution industrialization (ESI), export led industrialization (ELI)
or export-led growth is a trade and economic policy aiming to speed up
the industrialization process of a country by exporting goods for which the
nation has a comparative advantage.
• Export-led growth implies opening domestic markets to foreign competition in
exchange for market access in other countries.
• However, this may not be true of all domestic markets, as governments may aim
to protect specific nascent industries so they grow and are able to exploit their
future comparative advantage and in practice the converse can occur.
• For example, many East Asian countries had strong barriers on imports from the
1960s to the 1980s.
• Reduced tariff barriers, a floating exchange rate (a devaluation of
national currency is often employed to facilitate exports), and government
support for exporting sectors are all an example of policies adopted to promote
EOI and, ultimately, economic development.

• Export-oriented industrialization was particularly characteristic of the

development of the national economies of the Asian Tigers: Hong Kong, South
Korea, Taiwan, and Singapore in the post-World War II period.
 Inclusive growth

• Inclusive growth is a concept that advances equitable opportunities for

economic participants during economic growth with benefits incurred by every

section of society.

• The definition of inclusive growth implies direct links between

the macroeconomic and microeconomic determinants of the economy and

economic growth.
• Many consider the concept of inclusive growth as a utopian/best concept.

• This is because inclusive growth is based on the assumption of equitable

allocation of resources and benefits accruing to every section of society, but
perfect equality cannot be found anywhere.

• However, the practical idea is to keep inequality into tolerable limits.

• Even bringing inequality within tolerable limits cannot be achieved overnight.

• Thus, the goal of inclusive growth needs to be a medium-long-term goal, as it

takes time to include the excluded.
Chapter six
Development of Ethiopia
Development trends and status of Ethiopia
Ethiopia is without question one of Africa’s high achievers, with a rapidly
growing economy and falling poverty rates.
 It also faces some serious national development challenges. As one of Africa’s
largest and most populous countries, it has vast infrastructure needs.
 Continued dependence on rain-fed agriculture, in the face of increasingly
variable rainfall, creates persistent problems of food security.
• In response to these socio- economic situations, various development policies and
strategies have been brought in to practice by the successive governments that ruled the
country which had in most of the cases ended up with bare minimum impacts in
reversing the prevailed development bottlenecks of the country.

• Development Policies up to 1974

• The imperial government of Haileselasie, was the first government to exercise different
development policies as Ethiopia is first African state to attempt economic development
planning (Georgi. G. 1981).
• But the plans determined only general trends and likely development rates as they gave
an extremely generalized allocation to particular sectors of the economy as of 1960s
(Haile H., 1995).
• During this time three five-year plans were prepared for the development of the

economy with different targets and area of priorities. They were:

• The first five year plan (1957-62)

• The second five year plan (1963-67)

• The Third five year plan (1968-73)

First five year plan (1957-62)
• This plan had some targets on the agricultural sector. According to the
evaluations of the plan targets that was made in the second five year plan, its
impact on the agricultural sector was negligible since emphasis during this plan
period was on infrastructure and social transformation (raising the level of
education and the training of technical personnel) for the implementation of
the five year program.
• ” No need to bring about fundamental changes in present methods of (peasant)
production” and stuck to the “kind of tools now used”(Dejene (IEG 1957),pg 45
Second five-year plan (1963-67) [3]
• Mainly the priority focus was given to industry (manufacturing), minerals
and electric power development, but, unlike the first five year plan, some
attention was given to agriculture.
• In this plan, quantitative targets for the production of agricultural
marketable products like cereals, cotton, cattle, and coffee; and for the rate
of growth of agriculture were set.
• To achieve the production targets set in the plan three main approaches
were outlined:
• Execution of land reform, introduction of tools implements and
machinery as well as elementary training of the producers so as to raise
productivity, per capita income and consumption so as to transform the
subsistence economy into a monetized economy.
The third five-year plan (1968 -73) [4]
• This time exhibited a marked departure from the previous plans. It
recognized the importance of the agricultural sector and charted out a
relatively clear and well articulated agricultural development strategy.
• The plan argued that modernization of peasant subsistence agriculture in
all areas of the country simultaneously is hardly possible, but no time
should be lost in making a start in strategically selected areas in which
good results can soon be seen.
• This being the strategy, two main approaches for the development of
Ethiopia agriculture were indicated in the third five-year plan.
• These were the package program and the development of large-scale
commercial farms:
The Package Program

• The package program followed the policy of concentrating development efforts in a

given area so as to bring the required changes in agriculture.

• The practice was to be limited to specific areas since the modernization of peasant
subsistence farms in all areas of the country simultaneously was assumed that it would
lead to the dilution of efforts and scarce resources.

• In accordance with this, the implementation of the program was started in strategically
selected areas where good results were expected in a relatively short period of time.

• At first the package program took the form of a Comprehensive Package Program
(CPP), and later the Minimum Package Program followed.
This program had the following objectives (Tesfai 1975:41)
• To increase the income of low income small holder farmers and tenants
and narrow the prevailing income disparities in the rural areas;
• To achieve economic and social development;
• To enhance local participation in development;
• To increase employment opportunities; and
• To stress on research, training, and transferability.
• The objectives were supposed to be achieved through
• The provision of extension services; i.e., spreading innovations and
organizing demonstration fields to farmers;
• The establishment of marketing organizations aiming at selling
production fairly in comparison to the cost of production;
• Sale of inputs through marketing organizations which would make high
yielding seeds and fertilizers available to the farmers;
• The provision of credit facilities at a reasonable rate of interest so that
the farmers could be able to purchase the new supplies; and
The Minimum Package Program (MPP)
• The comprehensive package projects were found too costly to be duplicated in
other parts of the country.
• It was thus decided to launch a scheme which was thought to be less costly
per farmer.
• Thus, in 1972 the minimum package program (MPP) involving only those
minimum services considered critical for rural development (mainly fertilizer and
credit) started to be implemented along all-weather roads.
• The MPP was envisaged to reduce the cost of developing the agricultural
sector that in comparison to the CPP a much wider coverage could be attained.
• Tentative programs were made for the establishment of about ten projects in
selected high response areas each year for thirteen year.
• According to the program;
• By 1985 it was estimated that one million families or about 20 percent of
the total would be reached
• The MPP was designed to cover 440 woredas out of the 550 woredas of
the country and this was to cover about 70 pre cent of the agricultural
population
• For the implementation of MPP, the Extension and Project
Implementation Department (EPID) was established
• To achieve the objectives, the diffusion of a few proved methods and
innovations including improved seeds, fertilizers and farm implements as
widely as possible was envisaged to reach the small farmers in various
parts of the country.
• However, due to shortages of manpower, improved seeds and fertilizers, the
MPP was not able to achieve its objective of coverage of wider areas and the
cost of the MPP was not as low as it was envisaged. landless and semi-landless
rural population.
• As a result of these, agricultural production did not increase as much as
anticipated was not increased and the standard of living of the majority did
not improve.
• In fact the programs demonstrated that rural development policy based
on feudal land holding arrangements would tend to worsen the conditions
of the low-income target population.
The Development of Large Scale Commercial Farms
• The objectives in establishing large-scale commercial farms were to
achieve rapid gains in output both to domestic consumption and the
availability of surpluses for investment, to get an increase in agricultural
exports or substitution for imports, to create new employment
opportunities this is because of the fact that such farms require big
investment which was not available from internal sources, the
implementation of the strategy necessitated a heavy dependence on
foreign capital.
• To attract foreign investment a number of incentives were provided
including:
• Exemption from income tax (tax holiday) for five years for investments of
Br. 200,000 and above;
• Exemption from customs duty; and
• Remittance of profits and salaries in hard currency.
• As a result, a number of large-scale commercial farms, mainly owned by
foreigners, such as the Wonji Sugar Enterprise, the Setit Humera Plantation,
and the Tendaho Plantation were quickly established.
• But due to misguided incentives, capital dependent operations and
outflow capital the large farms did not live up to the expectations of the
country.
• At the end of the second five years plan the “industry First” argument of
the 1950s was being challenged theoretically as post independent Africa‟s
aspiration for a rapid industrialization process become increasingly
frustrated (Johnston,M et.al 1961) and the major donors made a significant
shift in their aid policies in favor of rural development vis-à-vis
urbanization and construction of infrastructure.
• In an attempt to realize this change of policy, donors subjected to
Ethiopian government to strong pressure foreign assistance agencies,
particularly the World Bank (IBRD) and American organizations, advised
Ethiopia to give high priority to the agricultural sector and recommended
the package approach concentrating on the more promising regions. This
idea also supported by FAO (Nekby 1971:9)
Development Policies during the Derg Regime
(1974-1991)
• It is generally acknowledged that the pre-1975 land tenure system in
Ethiopia was one of the most complex in the world and had not been
thoroughly studied (Cohen and Weintraub, 1975; Gilkes, 1975; Dessalegn,
1984; Dejene, 1999) as sited by (FAO, 2003).
• After the 1975 land reform by the Derge has been considered by many as
a radical measure that has abolished tenant – landlord relationships in
Ethiopia.
• In order to implement the Proclamation, peasant associations were
established at various levels.
• Following the land reform proclamation, another decree that was knows
as Peasant Associations Organization and Consolidation Proclamation No.
71/1975 was made.
• This was followed by the All Ethiopia peasant Association Proclamation
No 130/1977.
• University and high school students were dispatched to rural areas to
help the implementation of the land reform.
Agricultural Development Strategy
• Proclamation No. 31/1005 was not about agricultural production. It was
about radically changing the tenure system that existed in the country.
• The agricultural development strategy of the Derg period was what was
known as “socialist transformation of agriculture”; that of transforming
agriculture along socialist lines.
• This was to be implemented through the establishment and
consolidation of state farms and producers‟ cooperatives.
• Thus producers‟ cooperatives and state farms became the overwhelming
priority of the government and its implementation was supported by
various proclamations and decrees.
• Implementation of this policy resulted in the existence of two main types
of economic structures in agriculture; namely,
• The small peasant sub sector represented by the overwhelmingly large
number of small farmers; and
• The “socialist” sub sector represented by the producers‟ cooperatives and
state farms.
The small peasant Farms
• In countries like Ethiopia peasant farms have a relatively good
productivity record.
• Although they employ traditional technology and hardly use modern
inputs, their crop-yields are often comparatively high, as they make more
efficient use of productive resources than cooperatives or state farms.
• However small scale agriculture is often considered an obstacle to long-
term industrial development and the creation of more mechanized frames.
Faced with the choice between a smallholder strategy and a “socialist”
approach, based on collective ownership, group and state farming and
governmental control of the rural economy, the government chose the
latter.
• The peasant farms continued to be dominant in Ethiopia even at the height of
collectivization year in 1987 by cultivating 94% of the total farmland in Ethiopia.
• Nevertheless, government policy towards small farmers was discriminatory in
that it favored the „socialist‟ sub sector.
• Government policy pertaining tax, modern inputs, credit, pricing policies, and
extension services almost completely ignored the small peasants in favour of
cooperatives.
• Quota have been set for every peasant association to sell a given amount of
their produce to the Agricultural Marketing Corporation (AMC) at prices fixed by
the AMC which were substantially lower than the open market prices and even
lower than the prices fixed for cooperatives and state farms.
• In situation where peasants could not meet the quota, there were incidences
where farmers had to buy from the market at higher prices and sell to the AMC
at extremely low prices.
• In spite of all these, however, the smallholders were more successful at
absorbing labour, raising yield and increasing income than producer
cooperatives and state farms were.
• Small farmers were resistant to be collectivized, but the government
adamantly pushed forward to strengthen cooperatives unsuccessfully.
• Apart from other concomitant factors, the disappointing performance of
the agricultural sector during the Derg period can be attributed to
agricultural policies favoring the socialist strategy as opposed to a
smallholder approach.
• The Socialist Sub Sector
Producers‟ Cooperatives
• The Directive for the establishment of producers‟ cooperatives was issued
in June 1979.
• Accordingly, an agricultural producer‟s cooperative was defined as an
economic organization of farmers which is established through the gradual
transformation of individually owned means of production in to common
ownership based on the will and common interest of the farmers.
• The Directive for the establishment of cooperatives was based on the
following principles:
The principle of voluntarism:This principle indicates that cooperatives shall
be established on the free will of those to be cooperativezed.
• The principle of gradualism: According to this, the development of
cooperatives shall proceed from the simpler type to the more advanced
types of cooperatives.
• The principle of all round state assistance: The government is expected to
provide all embracing assistance to the establishment and consolidation of
cooperatives.
• In practice, the principle of voluntarism was violated.
• In many cases the establishment of cooperatives was conducted by force
as opposed to the principle of voluntary entry.
• As for the gradualism, the directives provided for a gradual progress of
cooperatives from simple to advanced types.
State Farms
• State farms are farming enterprise that are owned, managed and
undertaken by the government. Most state farms were privately owned
commercial operations before 1975. According to the March 1975 land reform
proclamation all large-scale farms shall be organized, as state farms, and the
government shall administer these farms in any manner found it fit. In
addition to these, many state farms were also established during the Derg
period.
• The chief aims of state farms were to help alleviate the countries food
problems, Contribute to export earning and employment generation.
However their performance had been very disappointing due to the following
main reasons.
• Management inefficiency: Lack of appropriate management in the sate
farms resulted in misutilization of resources. Highly centralized management
system curtailed the exercise of managerial autonomy at farm levels.
Problems of Planning and Implementation: Farms were not given the right of
preparing their own plans.
• Plans were prepared at enterprise or corporation level, and each farm was
ordered to implement the plan, which may not reflect the objective conditions
in the farm.
• The establishment of state farms was not conducted on the basis of proper
study and analysis.
Inadequate Controlling Systems: State farms, as in other public firms, had little
managerial freedom to plan and to control.
• Even the cost-benefit analysis was worked at higher levels and each farm is
evaluated base on the grand balance sheet of the enterprise or corporation.
Disguised Unemployment: Every farm was over populated.
• There exist unnecessary labour imposing additional costs to the farms.
• Unnecessary structures were formulated deliberately to absorb more
employees.
Resettlement and Villagisation
Resettlement
• Prior to the 1974 revolution, resettlement was started out on a small scale
as a result of individual initiatives by local governors and aid agencies with
a variety of motives and objectives.
• By the time of the revolution a mere 7,000 household heads had been
established in 20 settlement sites at a cost of 8 million US dollars.
• Resettlement was seen as a means of addressing a range of issues.
•
• From an ecological perspective it reduced population pressure in the highlands; from
an economic standpoint it was believed that resettlement could help to increase
productivity and make use of under-utilized fertile lands; and from a social point of
view resettlement was seen as a way of providing land to those with out it, to settle
paternalists, and remove unwanted urban unemployment.
• Resettlement continued at a small scale in the first decade of the military rule so that
in total some 46,000 households, comprising 150,000 people had been resettled on 88
sites in 11 regions.
Villagization
• Villagization is a process by which rural households were moved from
scattered dwellings into nucleated villages as part of a governmental
attempt to modernize rural life and agricultural production patterns.
• Villagization in Ethiopia began as a regional operation in Bale during the
Ethio-somalia war in 1977/78. One of the main objectives of the program
at that time was to guarantee the safety of the local inhabitants from
invading Somali troops during the war with Somalia.
• Six years later in December 1984, the prorgamme was extended to the
adjusting region of Hararghe, again chiefly for security reasons.
• In June 1986, a National Villagization Coordination Committee was set up to
undertake villagization work as an economic policy to improve rural life.
• By mid-1987, the government claimed that 12 million people (about one third
of the rural population) were villagized.
• The highest number of newly established villages were built in Shewa and
Hararghe.
• The objectives of this program were the creation of a conducive situation that
would facilitate the dissemination of improved agricultural inputs and services.
• However, this program, like the other programs, was not successful because it
was not done on the basis of the participation of the people to be villagized and
they were largely unwilling to be villagized. Moreover, it was poorly planned and
implemented.
Policy reform during the early transitional
government (1991-1994)
• The EPRDF overthrew the Derg regime in May 1991 after a 17-year
prolonged civil war in all parts of the country, leading to the formation of
Transitional Government of Ethiopia (TGE).
• The 1991 economic policy document of the TGE declared collectivization
and villagization as undesirable and liberalized both agricultural markets.
• The overriding objective of the government was given as attaining fast
broad based economic development. an economic reform program was
initated, which took the form of structural adjustment program(SAP) nder
the auspices of the world bank and IMF.
• the reform included the removal of substantial taxation of agriculture,
market liberalization and devaluation.
• The TGE which was replaced by the Federal Democratic Republic of
Ethiopia (FDRE) in August 1995 through public election.
• Since 1992 the TGE was successful to favor market driven development
policy by undergoing important structural adjustments and reforms
(European Union, 2002).
• These included; the abolishment of all price controls to agricultural
products, the reduction and harmonization of trade tariffs, privatization of
state owned enterprises.
• The government has also made decentralization of power from the Addis
based central government to the autonomous regions and nationalities
that were believed to accelerate the policy shift from the previous ones to
agricultural development, which was not actually endorsed during this
period.
• But the period TGE was characterized by unstable political environments
full of suspicion and mistrust over the EPRDF led ruling (Daniel Ayalew, and
et.al, 1999).
• It can therefore be said that main agenda was the “rehabilitation” type of
development thinking and that the development policy in this period was
not just fully materialized for the fact that the government was confronted
with complexity of challenges from the internal environments that were
discussed above.
• The external policy environment during this period can be generally
regarded as cool in response to the structural and policy adjustments
made by the country until the constitution of Ethiopia was fully endorsed
in 1994.
• This was a remarkable condition for the endorsement of the Agricultural
Development Led Industrialization (ADLI) strategy. (EPRDF,1995)
The National Development Policy and the Five-Year
Development Plan (1995-1999)
• In the fiscal year of 1995 the establishment of the first federal
government structure in the country, it was then possible to attract the
attention of the western developed nations.
• The development policy was well recognized in this period and it was
successful enough to become one of the African nations which were
nominated for the Sasakawa Global 2000 Agricultural Extension
Intervention.
• Although this extension model was introduced to the country at a pilot
level in late 1993, it was widely adopted in all the regions.
• Significant production increments were registered as a result of this
extension system through the supply of inputs such as improved seed,
fertilizer, pesticides etc.
• The approach was heavily criticized for its blanket approach with out giving
due consideration to variability in biophysical conditions such as ecology, soils,
moisture condition, fertility, topography, altitude, etc. and socioeconomic
conditions such as wealth, labor, social setting, food habit, culture, etc.
• More over it was recognized by some scholars and research institutions that
landraces, that have been suitable for erratic and unpredictable areas, were
endangered by the replacement of single varieties introduced by the SG2000
extension system (MUC, 1996).
• The way the development policies during this period relate or differ from the
international development thinking can be seen from the discussion made by
the odi published Rethinking Rural Development (odi Briefing Paper, 2002).
• Accordingly the development policies during the TGE remarkably relate to the
policy environments in the developed world back to the 1950s, where a model
based on small farm development has been dominate.
• On the other hand the attempt to address rural development policy
differs from the then international development context in that the budget
priorities given to maintain the balance between productive sectors
(agriculture manufacturing, etc) and social sectors (road infrastructure,
health, education, etc.) was not compromised.
• The development policy emphasized the SG2000 extension system
through the adoption of new technology including improve seeds and
fertilizer.
• Towards the end of this period the macroeconomic policy of ADLI was
supplemented by new policies for the sector development programs (SDP)
that include education, health, HIV/AIDS and other important sectors (EU
Country Strategy Paper, 2002).
• The other development strategy adopted with in the context of ADLI by
the government of Ethiopia in 1996 was the National Food Security
Strategy.
• Following to the adoption of this strategy the National food security
Program was established in 1998 by targeting food insecurity in four
regions.
• The implementation of these programs was interrupted by the boarder
conflict that occurred with Eritrea in the same year.
The Poverty Reduction Strategy (PRS) and the
Second Five Year Development Plan (2000-2004)
• The overall objective of this strategy was to encourage the external
resource/capital inflow and to increase aggregate output level (IPRSP,
2000).
• It can be said that the Ethiopian government have took an initiative to
prepare the IPRSP soon after the end of the Ethio-Eriteria border war look
like to the Marshall plan prepared for the period of 1948-1952 as discussed
in Singer (singer, 1989).
• This is meant for the rehabilitation and reconstruction of the European
countries that were heavily destructed by e World War II.
• On the other hand the government has adopted poverty reduction as the
core objective for development by arguing that economic growth as the
principal, but not the only means to the development of Ethiopian
economy.
• This thinking is quite similar to the combination of the Neo-Classical
Economic Theory that existed in the 1980s and the New Development
Theory (Todaro, 1987) in that it tries to address four important issues: the
sources of economic growth and the potential for growth in the future, the
mechanisms and conditions by which economic growth translates into
poverty reduction, the initial effect of poverty and inequality on the
sustained and rapid economic growth, and the links among economic
growth, income distribution and poverty
The evolution of rural development policies in Ethiopia
• Despite its importance, the agricultural sector has not always taken a
central role in Ethiopia’s national development plans.
• Ethiopia’s political ruling prior to 1991, encompassing the Monarchy
(1941-74) and the Derg period (1974-91), prioritised the industrial sector.
• This was done through mixed strategies: export-oriented (mainly during
the Monarchy period) and industrial development-based import
substitution, while the agricultural sector was frequently used as a source
of foreign currency.
• In 1991, following changes in the political system, Ethiopia’s
development strategies dramatically changed.
• They went from emphasising industry to promoting agricultural
development.
• This led to the establishment of the Agricultural Development-Led
Industrialisation (ADLI) strategy, which promoted small-scale agricultural
sector development.
• Under ADLI, agricultural sector development and rural areas were placed
at the heart of the national development agenda.
• ADLI functioned as the main guiding framework for subsequent national
development strategies (SDPRP, PASDEP, GTP I and GTP II).
Monarchy period (1950-74)
• Ethiopia’s national development strategy under the monarchy aimed to
foster industrialization.
• Export-oriented growth strategies were first adopted in order to attract
foreign direct investments.
• Due to the unsuccessful outcomes of export-oriented strategies, the
monarchy switched to import substitution industrialisation (ISI) strategies in
order to develop an industrial sector.
• Three five-year development plans were launched during the monarchy.
• The First Five-Year Development Plan (1957-62) promoted improved
production of cash crops, including coffee, which accounted for 70%
of foreign exchange earnings (Welteji, 2018[1]).
• Similarly, the Second Five-Year Development Plan (1963-67) continued to prioritise
industrial development.
• Large-scale commercial farms for production of cotton, coffee and sugar were
promoted as a source of income over small-scale subsistence farms, which accounted
for 80% of cereal production (Alemu et al., 2002[2]).
• The Third Five-Year Development Plan (1968-73) shifted its focus to the
development of the agricultural sector in order to address the rising problem of food
shortages in Ethiopia.
• The Integrated Rural Development project was also established to address rural
development challenges and expand the agricultural commercial market system.
• It predominantly focused on improving the distribution of agricultural
inputs, such as fertilisers and seeds used by commercial farmers, and
expanding rural health services.
• Nonetheless, the monarchy continued to envision the development of the
non-agricultural sector as the main driver of economic
development (Alemu et al., 2002[2]).
• During the monarchy, Ethiopia had a complex land tenure system, with
very limited private ownership of land.
• The monarchy and the church had strong control over most of the
agricultural land.
• A combination of public dissatisfaction, food shortages and the rise of a
military government led to the monarchy to be overthrown in
1974 (Clapham, 2019[3])
Derg period (1974-91)
• The Derg government changed the previous national development
strategy, placing the emphasis on a centrally planned economy.
• Industry-led development was deployed as the main development
strategy. Rural land and other productive assets were nationalised, and
land was distributed among farmers.
• Commercial farms were put under GoE control, and land tenancy was
abolished.
• Furthermore, private commercial labourers and commercial farming were
marginalised, and large collectivisation programmes were promoted
through resettlement and villagisation programmes (Welteji, 2018[1]).
• The military government maintained an overvalued currency and implemented
marketing and pricing policies; in addition, the GoE established the Agricultural
Marketing Corporation (AMC) to set pricing systems, for agricultural goods and set
quotas for grain production which were significantly lower than market prices (Alemu et
al., 2002[2]).

• Following the severe drought of 1983-84, the government introduced the

Ten-Year Perspective Plan.
• This plan primarily aimed to promote self-sufficiency in food production,
as well as surplus agricultural production.
• The central government set production targets and utilised the AMC to
increase the production surplus of agricultural resources (Alemu et al.,
2002[2
• In 1987, the government unveiled a mixed economy strategy and the
Ten-Year Perspective Plan was partially changed to focus on the
production of staple food crops, until the plan was terminated in 1990.
• Rural development was not part of the overall development agendas of
either the Derg government or the monarchy.
• Investment in the agricultural sector was primarily used as a means to
manage foreign exchange earnings or capital accumulation for investment
in the industrial sector.
• However, by the end of the period of the Derg government, and with the
formation of the new government, national development strategies had
shifted focus.
Ethiopian People’s Revolutionary Democratic Front
(1991 to present)
• The Ethiopian People’s Revolutionary Democratic Front’s (EPRDF’s) rise
to power in 1991 resulted in a considerable shift in national development
strategies.
• The EPRDF moved Ethiopia’s development vision away from the
previous centrally planned industrial development and towards a new
agricultural-led development approach.
• Many of the previous governments policies were reversed, agricultural
price controls were removed, and state farm assets were privatised.
• In addition, the new government adopted an export-oriented
development strategy and implemented structural adjustment
programmes (SAPs).
• In 1994, the home-born ADLI was launched as the foundation for
national development, with the main objective of attaining food self-
sufficiency by increasing agricultural productivity and output.
Changes in Ethiopia’s National Development Approaches 1950 to present

Political ruling Monarchy Derg government EPRDF

Period 1950-74 1974-91 1991 to present

National Industrial development Centrally planned, Home-grown, agricultural-

development through import substitution industry-led led, export-oriented
strategies and industrialisation development development policies
 • Land was mainly • Nationalisation of land and other • Land remains state owned
owned by the state and productive assets • Changed national development
the church • Collectivisation of farms and priority to agricultural
• Establishment of promotion of villagisation development
large commercial programmes
• Adoption of SAPs and export-
Selected farms producing
• Mixed economic policies (1988-89). oriented open economy
policies coffee, as means of
Distortion of markets through price
earning foreign
controls, and overvaluation of the
currency
Ethiopian birr
• Prioritised the
development of non-
agricultural industries

• Food shortages • Severe droughts and famine in 1983- • Persistent food shortages
Key rural • Neglect of cereal 84 and food insufficiency • Rise in rural population
development production despite • Civil conflicts
• Environmental degradation and
issues accounting for 80% of
climate change-related shocks
the cultivated area

Source: Welteji (2018[1]), Alemu et al (2002[2]).

Ethiopia’s policy frameworks for national development since 1991

The ADLI has functioned as the guiding framework for

national development
• Under the ADLI, the GoE envisioned agricultural sector-driven economic
transformation.
• The programme entailed three main strategies: expansion of agricultural
technologies; investment in agricultural infrastructure, including inputs; and boosting
rural non-agricultural sectors.
• The programme aimed at boosting agricultural productivity by improving the use of
fertilisers and seeds, with the ultimate aim to boost agricultural production to serve as
input and drive industrial development (Dercon et al., 2019[4]).
• The ADLI also encompassed wider socio-economic development
programmes, including investment in infrastructure such as roads,
telecommunication and electricity grids.
• Furthermore, the plan aimed at enhancing the flow of finance, local
governments’ administrative capacity, and the development of agro-
processing industries (Mellor and Dorosh, 2010[5]).
• A series of investment plans were made under the ADLI, including rural
technical and vocational education and training services (TVETs), the
development of water resources (hydro power and irrigation),
improvements in microfinance institutions, improvements in the marketing
of agricultural products, and the restructuring of smallholder co-operatives.
• The GoE heavily invested in extension programmes and introduced the
Participatory Demonstration and Training Extension System (PADETES).
• PADETES was used to distribute fertilisers, seed and credit, as well as to
spread information on better agricultural practices, to smallholder farmers.
• The ADLI remains the key pillar and guiding framework for other
successive development plans, including the SDPRP, PASDEP, GTPI, and
the current GTPII.
The SDPRP (2002-05) affirmed agricultural development as
a key sector for poverty reduction
• The SDPRP was the first poverty reduction strategy to be introduced by the
EPRDF, and covered the period between 2002 and 2005.
• While the ADLI constituted as one of the four pillars of the SDPRP, the
programme also encompassed wider sectoral reforms, including the reform of
the justice system and civil service, decentralisation, and empowerment and
capacity building in the public and private sectors.
• SDPRP objectives included poverty reduction, food security and
macroeconomic stability (MoFED, 2002[6]).
• The SDPRP recognised the need for a multisectoral, rural development
strategy to expand beyond an agricultural sector focus.
• It built on the ADLI principles and policies of labour-intensive agricultural
sector development as a way of reducing poverty and improving food security
and growth.
• It promoted the expansion of the agricultural sector into international
markets by increasing commercialisation and intensive farming through
improved technologies and access to microfinance institutions.
• In addition, the SDPRP aimed to expand education and training
programmes such as TVET, and to strengthen rural co-operatives in order
to further develop the links between small-scale farmers and the non-
agricultural private sector (MoFED, 2002[6]).
The PASDEP (2005-10) tapped into the role of urban
areas for poverty reduction while agriculture
remained a national priority
• The PASDEP was Ethiopia’s second poverty reduction strategy, covering
the period between 2005 and 2010.
• The plan mainstreamed and built on the ADLI’s main objective of
attaining food self-sufficiency by increasing agricultural productivity and
output.
• However, the PASDEP altered its approach to agricultural growth,
changing from a focus on small-scale subsistence farming alone to larger-
scale farmers; in addition, it called for “specialisation, diversification and
commercialisation of agricultural production” (MoFED, 2006[7]).
• The PASDEP promoted agricultural specialisation and diversification by
encouraging farmers to focus on agricultural activities with the highest
comparative advantage.
• The plan was aimed at increasing agricultural diversification by
establishing high-value and niche markets, such as floriculture, production
of spices, horticulture and mining.
• In addition, the PASDEP created a long-term programme of private
sector engagement in the agricultural sector in order to facilitate the
state’s long-term progressive withdrawal from the sector (MoFED,
2006[7]).
• Moreover, under the PASDEP, the GoE promoted the provision of
capacity building in technology use, and other skills training for farmers.
• The PASDEP differed from previous poverty reduction strategies in that it
focused on urban areas and promoted rural-urban linkages.
• Moreover, it widened its focus beyond rural areas and agriculture to
include urban areas, and it emphasised their role in industrial and rural
development.
• The plan highlighted the need for rural-urban linkages, and for small
cities and towns to create these linkages.
• As such, the plan called for the development of 600 small towns, each
with 20 000 inhabitants, as a way of promoting rural-urban
linkages (MoFED, 2006[7]). By 2012, the number of towns in Ethiopia with
up to 20 000 inhabitants had exceeded 700 (EGIS International, 2015[8]).
• The PASDEP contained a series of urban development-related objectives,
including infrastructure development (such as road, market infrastructure), the
creation of urban employment and the development of low-cost housing.
• It embedded the goals of the National Urban Development Policy, which was
launched in 2005 (MoFED, 2006[7])

GTP-I (2010-15) widens the national development

agenda towards industrialisation
• GTPI was the third national development plan covering the period
between 2010 and 2015.
• GTPI advanced the Ethiopian national agenda towards becoming a
lower middle-income economy by 2025.
•
• Regarding agricultural sector growth strategies, GTPI highlighted the need to identify and
scale up smallholders’ best agricultural practices.

• It introduced new agricultural technologies aimed at helping to improve soil productivity, and
it provided support to small-scale farmers through training and fertiliser provisions.

• In addition, GTPI promoted the production of high-value crops and set sector-based
targets (MoFED, 2010[9]).
• GTPI built on the PASDEP and widened its remit to include industrialisation as a way of
creating structural transformation.
• The plan recognised the importance of urban areas and industrial development for
structural transformation and for creating employment for Ethiopia’s growing
population (MoFED, 2010[9]).
• It promoted investment in labour-intensive micro and small-scale
enterprises (MSEs), as they provide significant opportunities for
processing of agricultural goods.
• The plan envisioned labour-intensive manufacturing MSEs as a strategy
for creating linkages with the rest of the economy (including the
agricultural sector), as well as a strategy for an import substitution and
export-oriented industrialisation programme.
• GTPI also promoted investment in urban infrastructure, employment
creation and promotion of low-cost housing (MoFED, 2010[9]).
• GTP-II (2015-20) continues the industrialisation agenda,
and taps into the potential of urban areas
• GTPII builds on the main objectives and pillars of GTPI.
• GTPII continues to operate within the framework of the ADLI and Ethiopia’s
agenda of becoming a lower middle-income country by 2025.
• Smallholder agriculture remains considered “the single most important source
of economic growth” (NPC, 2016, p. 82[10]).
• GTPII promotes agricultural sector development by encouraging the
production of selected crops, including high-value crops, and the production of
both industrial inputs and export commodities.
• In addition, GTPII recognises the wider developmental needs of rural areas.
For example, under the new plan, the GoE aims to strengthen land rights
through the provision of land use certificates for 7.2 million rural male- and
female-headed households.
• Additional plans also include an increase in irrigation development,
enhanced agricultural research programmes, increased private sector
participation, and capacity building for rural workers (NPC, 2016[10]).
• Under GTPII, the GoE envisions Ethiopia to become the leading light
manufacturing hub in Africa.
• In this regard, urban development is an important feature of GTPII, as
urban areas are projected to grow and play a key role in Ethiopia’s
industrial development.
• In return, it is expected that industrial development will propel
urbanisation even further, and the plan advocates the development of
urban infrastructure and an integrated housing development programme to
meet the expected housing demand increase (NPC, 2016[10]).
•
Evolution of Ethiopia’s National Development Strategies since 1991

Period Strategies and plans Key policies

1994 to present ADLI A framework for all national
National development strategies

development strategies, with

agricultural sector development
recognised as a catalyst for economic
transformation

2003-05 SDPRP Builds on the ADLI, with primary

focus on poverty reduction,
macroeconomic stability and meeting
the Millennium Development Goals
(MDGs) standards
 National devt’t strategies
2005-10 PASDEP Within the ADLI framework, but promoted large-scale commercial farming,
development of manufacturing sector; and stronger rural-urban linkages
2010-15 GTP-I Reprioritized commercialization of smallholder agriculture, set dual objectives
of agricultural and industrial sector development.
* Urban areas recognised as a catalyst for industrial development.
2015-20 GTP-II Builds on GTPI, mainstreams the ADLI and continues to position urban areas as
catalyst for economic transformation and development of light manufacturing
industry.
2003 Rural Development Policy and The first explicit rural development strategy. Promotes smallholder agricultural
Strategy (RDPS) (2003) development-driven growth.
2003 Food Security Program Attempts to provide systemised and consistent support to poor and food-
insecure rural and urban households.
Policies targeting rural areas

• PSNP
• Resettlement Program
• Household Asset Building
Program
1997-2010 Road Sector Development Road infrastructure development programme to address the country-wide
Program (RSDP) infrastructure gap. Programme focused on restoration of existing roads and
building of new roads.
2010-15 Universal Rural Road Access Follow-up road infrastructure programme
Program (URRAP)
2010 to present AGP(Agricultural Growth Plan) Investment in targeted high-potential agricultural areas to improve agricultural
commercialisation and creation of value chains
2017 RJOCS(rural Job Opportunity A strategy for aligning rural job creation strategies within the framework and
Development Challenges in Ethiopia
• Ethiopia’s main challenges are sustaining its positive economic growth and
accelerating poverty reduction, which both require significant progress in job
creation, as well as improved governance. The government is devoting a high
share of its budget to pro-poor programs and investments. Large scale donor
support will continue to provide a vital contribution in the near-term to finance
the cost of pro-poor programs. Key challenges are related to:
• Like the rest of the world, Ethiopia has been experiencing the unprecedented
social and economic impact of the COVID-19 pandemic. The COVID-19 shock is
expected to be transitory with potential recovery possible in 2021, but the
overall adverse economic impact on Ethiopia will be substantial. The economic
impact of COVID-19 includes the increased price of basic foods, rising
unemployment, slowdown in growth, and increase in poverty.
• Ethiopia has been experiencing the worst locust invasion in decades. This may
undermine development gains and threaten the food security and livelihoods of
millions of Ethiopians.
• Political disruption, associated with social unrest, could negatively impact
growth through lower foreign direct investment, tourism and exports.
• Limited competitiveness, which constrains the development of manufacturing,
the creation of jobs and the increase of exports.
• An underdeveloped private sector, which would limit the country’s trade
competitiveness and resilience to shocks. The government aims to expand the
role of the private sector through foreign investment and industrial parks to
make Ethiopia’s growth momentum more sustainable.
• Rapid population growth and the concomitant addition of 2 million persons per year
is a major barrier to poverty reduction.

• For instance, this growth puts tremendous strains on Ethiopia’s resource base and the
government’s ability to deliver services.

• Land-fragmentation: more than 50% of Ethiopia’s small land holders have less than 2
hectares, which deters the use of modern agricultural input and large-scale farming
techniques.

• Environmental degradation has caused frequent droughts.

• Very low productivity

• Low income

• Low levels of investment

• Dependence on unreliable rainfall

• Structural bottlenecks

• Lack of good governance and commitment to accomplishing tasks

• Low infrastructure coverage: although there have been significant

improvements during the past 10 years, the level of infrastructure coverage
remains remarkably low when compared to elsewhere in the world
CHAPTER-7
MEASURES OF GROWTH AND DEVELOPMENT
What is GDP?
GDP stands for "Gross Domestic Product" and represents the total monetary
value of all final goods and services produced (and sold on the market) within a
country during a period of time (typically 1 year).
The first basic concept of GDP was invented at the end of the 18thc.
The modern concept was developed by the American economist Simon Kuznets
in 1934 and adopted as the main measure of a country's economy at the Bretton
Woods conference in 1944.
• It is used throughout the world as the main measure of output and economic
activity.
• The U.S. used Gross National Product as the primary measure of economic
activity until 1991 when it adopted GDP.

• When making the changes, the Bureau of Economic Analysis (BEA) observed
that GDP was a more convenient economic indicator of the total economic activity
in the United States.

• The GNP is a useful economic indicator, especially when measuring a country’s

income from international trade.

• Both economic indicators should be considered when valuing a country’s

economic net worth to get an accurate position of the economy.
Key Differences Between GDP and GNP
• The major differences between GDP and GNP are explained in the given below
points:
1. The monetary value of all the goods and services produced within the geographical limits of
the country is known as GDP.
- GNP is the money value of all the goods and services made by the citizens of the country, no
matter where they dwell.
2. GDP gauges production of products within the country’s boundary. Conversely,
- GNP measures the production of products by the companies and industries owned by the
residents of the country.
3. The basis for calculating the GDP is the location, whereas GNP is based on citizenship.
4. In the case of GDP, the measurement of productivity is done on a local scale
while if we talk about GNP, it measures the productivity on an international level.

5. GDP focuses on measuring domestic production, but GNP focuses on

production by the nationals, i.e., individuals or corporations, of the country.

6. GDP outlines the strength of the domestic economy of a country. On the other
hand, GNP outlines how the residents are contributing towards the economy of the
country.
• In economics, the final users of goods and services are divided into
three main groups:
(households, businesses, and the government).
• One way gross domestic product (GDP) is calculated—known as the
expenditure approach—is by adding the expenditures made by those
three groups of users.

• Accordingly, GDP is defined by the following formula:

GDP = Consumption + Investment + Government Spending + Net Exports

GDP = C + I + G + (Export-Import)
Not included in GDP:
• unpaid work: work performed within the family, volunteer work, etc.
• non-monetary compensated work
• goods not produced for sale in the marketplace
• bartered goods and services
• black market
• illegal activities (contraband activities)
• transfer payments
• sales of used goods
• intermediate goods and services that are used to produce other final goods and
services
GDP per capita
• GDP per capita is gross domestic product divided by midyear population.
• Is an important indicator of economic performance and a useful unit to make
cross-country comparisons of average living standards and economic
wellbeing.
• However, GDP per capita is not a measure of personal income and using it
for cross-country comparisons also has some known weaknesses.
• In particular, GDP per capita does not take into account income distribution
in a country.
• In addition, cross-country comparisons based on the U.S. dollar can be
distorted by exchange rate fluctuations and often don’t reflect the purchasing
power in the countries being compared.
What is Gross National Product (GNP)?
• Gross National Product (GNP) is a measure of the value of all goods and services
produced by a country’s residents and businesses.
• It estimates the value of the final products and services manufactured by a
country’s residents, regardless of the production location.

• How to Calculate the Gross National Product?

• The official formula for calculating GNP is as follows:

Y=C+I+G+X+Z

C – Consumption Expenditure
I – Investment
G – Government Expenditure
X – Net Exports (Value of imports minus value of exports)
Z – Net Income (Net income inflow from abroad minus net income outflow to
foreign countries)
• GNP per capita=GNP/Total population of the country
The Gini index, or Gini coefficient

• It is a measure of the distribution of income across a population developed by the

Italian statistician Corrado Gini in 1912. It is often used as a gauge of economic

inequality, measuring income distribution or, less commonly, wealth distribution

among a population. The coefficient ranges from 0 (or 0%) to 1 (or 100%), with

0 representing perfect equality and 1 representing perfect inequality. Values over

1 are theoretically possible due to negative income or wealth.

KEY TAKEAWAYS

• The Gini index is a measure of the distribution of income across a population.

• A higher Gini index indicates greater inequality, with high-income individuals

receiving much larger percentages of the total income of the population.

• Global inequality as measured by the Gini index increased over the 19th and
20th centuries, but has declined in more recent years.

• Because of data and other limitations, the Gini index may overstate income
inequality and can obscure important information about income distribution.
Understanding the Gini Index
• A country in which every resident has the same income would have an income
Gini coefficient of 0. A country in which one resident earned all the income, while
everyone else earned nothing, would have an income Gini coefficient of 1.
• The Gini coefficient is an important tool for analyzing income or
wealth distribution within a country or region, but it should not be mistaken for an
absolute measurement of income or wealth.
• A high-income country and a low-income one can have the same Gini
coefficient, as long as incomes are distributed similarly within each: Turkey and
the U.S. both had income Gini coefficients around 0.39-0.40 in 2016, according to
the OECD, though Turkey's GDP per person was less than half the U.S.'s (in 2010
dollar terms)
• The Gini Coefficient is a statistical measure that calculates inequality.
• It measures inequality by measuring the distribution of income across the
country.
• Although the Gini coefficient measures wealth inequality, it doesn’t measure or
factor in overall wealth.
Gini Coefficient Formula
• The Gini Coefficient formula is calculated using = A / (A + B). Where ‘A’ is the
area above the Lorenz Curve and ‘B’ is the area below.
• The Gini coefficient can be calculated using the formula: Gini Coefficient = A / (A
+ B), where A is the area above the Lorenz Curve and B is the area below the
Lorenz Curve.
What is Income Poverty?
• The UK does not have an official definition of poverty – cross-sectional
measures are:
• • Relative Low Income – The proportion of population living in
households where income is less than 60 per cent of median household
income
• • Absolute Low Income – The proportion of population living in
households where income in real terms is less than 60 per cent of
median household income in 2010/11
• • Material Deprivation – Indication that a family lacks the ability to
purchase key goods or services – questions that can only be asked in a
survey Department for Work & Pensions 7
Human Development Index (HDI)
• Human Development Index (HDI)
• In order to try to streamline the many different measures that were being used to
measure development, in 1990 the United Nations decided that it was time to
combine some measures into a more usable format.
• It focuses on economic, social and demographic development
• The HDI was introduced to combine three measures:
- life expectancy (a social measure),
- education (average number of years of schooling and expected years of
schooling– a social measure) and
- gross national income per capita (an economic measure).
• The Human Development Index (HDI) provides a single index measure to
capture three key dimensions of human development: a long and healthy life,
access to knowledge and a decent standard of living.
The HDI utilizes four key metrics
• life expectancy at birth – to assess a long and healthy life
• expected years of schooling – to assess access to knowledge of the young
generation
• average years of schooling – to assess access to knowledge of the older
generation
• gross national income (GNI) per capita – to assess the standard of living
• Forming indices for each of the four metrics

• With the actual value for a given country, and the global maximum and
minimum, the dimension (indices) value for each metric is calculated as:

Dimension Index(DI)= Actual value - minimum value/max.value - min.value

• The dimension index is therefore 1 in a country that achieves the maximum

value and it is 0 for a country that is at the minimum value.
 Expected years
Life expectancy Mean years of GNI per capita
Country HDI value of schooling
(years) schooling (years) ($PPP)
(years)

1. Norway 0.943 81.1 12.6 17.3 47,557

2. Australia 0.929 81.9 12.0 18.0 34,431

3. Netherlands 0.910 80.7 11.6 16.8 36,402

4. USA 0.910 78.5 12.4 16 43,017

5. New Zealand 0.908 80.7 12.5 18 23,737

 Life expectancy Mean years of Expected years of GNI per capita
Country HDI value
(years) schooling (years) schooling (years) ($PPP)

183. Chad 0.328 49.6 1.5 7.2 1,105

184. Mozambique 0.322 50.2 1.2 9.2 898

185. Burundi 0.316 50.4 2.7 10.5 368

186. Niger 0.295 54.7 1.4 4.9 641

187. DR Congo 0.286 48.4 3.5 8.2 280

Multidimensional Poverty Index

• The Multidimensional Poverty Index (MPI) is published by the UNDP’s Human

Development Report Office and tracks deprivation across three dimensions and

10 indicators: health (child mortality, nutrition), education (years of schooling,

enrollment), and living standards (water, sanitation, electricity, cooking fuel, floor,

assets).
• It first identifies which of these 10 deprivations each household experiences, then
identifies households as poor if they suffer deprivations across one -third or more of the
weighted indicators.
• “MPI2015” would track extreme deprivation in nutrition, health, education, water,
sanitation, clean cooking fuel, and reliable electricity, to show continuity with MDG
priorities.
• More specifically it would reflect the following deprivations:
• Adult or child malnourishment
• Disrupted or curtailed schooling (a minimum of years 1-8)
• The absence of any household member who has completed 6 years of schooling
• Child mortality within the household within the last 5 years
• Lack of access to safe drinking water
• Lack of access to basic sanitation services
• Lack of access to clean cooking fuel
• Lack of basic modern assets (radio, TV, telephone, computer, bike, motorbike, etc.)
• Lack of access to reliable electricity
• Development Challenges in Ethiopia
• Ethiopia’s main challenges are sustaining its positive economic growth and
accelerating poverty reduction, which both require significant progress in job
creation, as well as improved governance. The government is devoting a high
share of its budget to pro-poor programs and investments. Large scale donor
support will continue to provide a vital contribution in the near-term to finance
the cost of pro-poor programs. Key challenges are related to:
• Like the rest of the world, Ethiopia has been experiencing the unprecedented
social and economic impact of the COVID-19 pandemic. The COVID-19 shock is
expected to be transitory with potential recovery possible in 2021, but the
overall adverse economic impact on Ethiopia will be substantial. The economic
impact of COVID-19 includes the increased price of basic foods, rising
unemployment, slowdown in growth, and increase in poverty.
• Ethiopia has been experiencing the worst locust invasion in decades. This may
undermine development gains and threaten the food security and livelihoods of
millions of Ethiopians.
• Political disruption, associated with social unrest, could negatively impact
growth through lower foreign direct investment, tourism and exports.
• Limited competitiveness, which constrains the development of manufacturing,
the creation of jobs and the increase of exports.
• An underdeveloped private sector, which would limit the country’s trade
competitiveness and resilience to shocks. The government aims to expand the
role of the private sector through foreign investment and industrial parks to
make Ethiopia’s growth momentum more sustainable.
• Rapid population growth and the concomitant addition of 2 million persons per year
is a major barrier to poverty reduction.

• For instance, this growth puts tremendous strains on Ethiopia’s resource base and the
government’s ability to deliver services.

• Land-fragmentation: more than 50% of Ethiopia’s small land holders have less than 2
hectares, which deters the use of modern agricultural input and large-scale farming
techniques.

• Environmental degradation has caused frequent droughts.

• Very low productivity

• Low income

• Low levels of investment

• Dependence on unreliable rainfall

• Structural bottlenecks

• Lack of good governance and commitment to accomplishing tasks

• Low infrastructure coverage: although there have been significant

improvements during the past 10 years, the level of infrastructure coverage
remains remarkably low when compared to elsewhere in the world