Chapter Two

Development Policies and Strategies

during the Imperial Regime
The Pre 1950 Modernization Attempt:
Ethiopia is an old state having mixed type of dev’tal history:
The ancient grand civilized country:
 The civilization however, does not contribute for the present dev’t
 It came to be arrested before 19th c.
 B/se gap: in generation, civilization, transition
The history of war, backwardness and poverty:
•The traditional society was not able to bring moder’n until 20 th
•Indeed, 20th c was the era of moder’n in Eth. (Tewodros II)
•the scale & diversity of moder’n ventures reached much higher
levels during the reign of Emperor H/S I.
 Modernization Process in Ethiopia
• It is during Emperor H/S regime a conscious dev’t plan
began
• moder’n in Ethiopia started during Tewodros II
• Factors for modernization: Modernization influenced by:
 Internal: aimed at the moder’n of the nation &
restoration of strong central government
External: Industrial Revolution: forced them to look on
Africa for (commercial, official, missionary & scientific)
• Modrn’n showed advancement during Minilik II,
• He organized & finalized the project started by Tewodros II
& added up new achievements:
 Development Plans During the Imperial
Regime (1957- 1974)
• In H/S: the three successive dev’t plan was prepared & implemented
• the first national dev’t plan was prepared during H/S regime (1957-
61
• The plan was a transform of Ethiopia’s traditional & subsistence
economy in to modern manufactured industry
• To facilitate & coordinate the state's dev’t plans & planning process,
the gov’t had created the National Economic Council:
– National Economic Council:
• chaired by the emperor,
• Devoted to improve agricultural & industrial productivity,
• A policy-making body
• Eradicating illiteracy and diseases,
• Improving living standards of the people
• Prepare the first and second five year plans, but,
• The third five year plan was developed by ministry of planning
 The First- Five Year Plan (1957-61)
• Socio-economic dev’t plan of the country
• The first genuinely created nation wide economic
policy
• the plan sought/intended to:-
 develop a strong and modern infrastructure: Linkage
(transportation, construction, and communications) to link
isolated regions with the central parts of the country
 expansion of indigenous work skill in industries to
reduce dependence on foreign imports
 accelerate agricultural dev’t by promoting
commercial agricultural undertakings
 objectives of the 1st 5 year dev’t plan:
 increase the productive capacity of the economy:
 to secure an abundant production of goods & services,
 to accelerate the economic growth by a better utilization of available
resources,
 to change the existing technology:
 by introducing modern machinery & equipment, and
 to raise the skill and productivity of labor,
 to raise the country saving & investment potentials
 by accelerating the growth of saving,
 improve living conditions & standard of the living
 provide better social services: like
 education,
 public health,
 social security and
 cultural services so as to strengthen the personality & integrity of the Ethiopian
 Contd,…
 offer an equal opportunity to all citizens to contribute to
the economic and social progress of the country
 create a sound economic basis for national defiance &
security:
 to ensure peaceful development to the nation, and
 to contribute to world peace and progress.
Targets of the 1st 5 year dev’t plan:
• To achieve the above mentioned objectives of the
1st 5 year dev’t plan: the following had been the
targets:
1.infrastructural dev’t: a prerequisite for economic growth
2. education & training of technical personnel: for the
implementation of the five- year programmed
 Contd,…
3. Agricultural dev’t: because
 the major national economy
 contributes the greatest part of exports and
 Major industrial raw materials,
4. establish processing industries
5. direct the economic & financial policy: It helps
 mobilizing financial and human resources for economic dev’t
Major Achievements of the 1st 5 year dev’t plan:
• By the end of the First Five year dev’t plan, the f/g achivements
have been made:
 construction of major highways
 airport, a new seaport and a modern telecommunication had
begun
 Modern manufacturing industry
 Contd,…
 Hydroelectric Power production: ‘Koka’
 Exporting large agricultural raw materials
 Imports on consumer goods, machinery and equipment
 So therefore, (GNP) of the country had showed little
increment, but
Failures of the plan
 growth in sectors such as agriculture, manufacturing, &
mining failed to meet the national plan's targets
 Negative trade balance: (Imp-Expo)
exports increased at a 3.5 percent annually, whereas
imports grew at a rate of 6.4 percent per annum,
 Contd,…
• Generally, despite the First Five-Year Plan’s aspirations to:
 modernize & integrate agriculture with an industrial economy,
through the promotion of large-scale commercial farms, the
country could not even meet the consumption of its people
• At the end of the 1st 5 year plan, the country was net
importer than exporter of food grains.
?????why 1st 5 year dev’t plan failed??????????
 Factors Hindered First Dev’t Planning:
 Gov’t weak administrative and technical capabilities to
implement a national dev’t plan
 professional staffing problems plagued the planning council’s
effort in the implementation of the plan
 managers neglected approach over monitoring the project:
because they neglected:
 to identify the resources
 to establish the organizational structures necessary to facilitate large
scale economic development
low level of domestic saving capacity
inadequate methods of mobilizing the available
resources
lack of coordination between investment programmers
 The Second Five-Year Plan (1963-67)
• a continuation of the FFYP, with stronger emphasis on
 Producing goods quantitatively
 creation of new living opportunities/styles
 Strengthening the economy transition from agri. – agro-
industry: B/se
i. the majority livelihood are agriculture
ii. Peasant consciousness has a great role for national dev’t
Objectives of the plan:
Diversification of production
Introduction of modern processing methods
Expanding the production capacity of the economy
• The Plan acknowledge the country has become “an
importer of food grains instead of being an exporter”
 Contd,…
• The plan focused on agricultural extension to:
 introduce an advanced farming methods
 Improve techniques to peseant agriculture
• The plan was a pioneer to formally recognize Feudal
land tenure system: as a major obstacle for agr.dev’t
Major achievements:
Large agri- investment on commercial farming
Growth of manufacturing sector (16%)
Construction of new communication facilities
• Unlike the 1st plan, it gave much emphasis to
productive activity than infrustructural dev’t
 Third Five Year Plan (1969-73)
• The Plan sought to expand education opportunities and
improve peasant agriculture
• the Plan was relatively a refined plan as it was based
upon the previous dev’t plan
priority areas of the plan
• fast growth & dev’t: socio-cultural welfare of the people
• A steady rise in the standard of living
• Building a foundation for sustained growth & dev’t: by
 enlargement of education
 Investigating the potential country’s natural resources,
 improvement of the administrative capacity of the gov’t.
• improvement in:
 distribution of real incomes,
 Enlarge popular opportunity
 the plan identified two major problems
Peasantry:
 prevailing Exploitative landlord-tenant tenure system
 The monarchy ownership and usufruct rights (lease out
land to tenants on a sharecropping basis
Production:
 Relationships for the owners benefit
 on the fruits of the farmer’s labour
 peasants produces was expropriated by the land lords
• Due to this, the plan sought to an Immediate concern
on land reform
 land reform concern of the plan:
• The plan sought to an Immediate concern on land
reform : To overcome
 apathy on agricultural popn,
 concentration of land in a small group,
 insecurity of tenure, and
 sharecropping arrangements
• Two major types agricultural dev’t strategies were
pursued:
1. Regional agricultural project:
 CADU: chilalo agricultural dev’t union
 WADU: Wolaita agricultural dev’t union
 ADDP: ada’a district dev’t plan
• National agricultural dev’t project: Intended to
gradually the encompass of food-grain sectors
 Industrial Dev’t under the Imperial Regime (1950-74)
• Modern industrialization in Eth. started from1953-61.
• Industrialization expand due to the imperial gov’t
enacted legislation to encourage foreign investment:
among policies:
 tax exemptions,
 remittances of foreign exchange,
 import and export duty relief,
 tax exemptions on dividends, (personal share from the total
 Finance provision (Ethiopian Investment Corporation and the
Development Bank of Ethiopia)
 Gov’t protection to industries by high tariffs and banning the
importation of commodities
• Gov’t direct investment in high capital costs enterprises (oil
refineries, paper and pulp, glass and bottle, tire, and cement)
 Contd,,,
• But in l963, the gov’t enacted Proclamation No. 5l.
The objective of the proclamation:
 To consolidate other investment policies
 extending benefits to Ethiopian investors (previous
legislation had limited the benefits to foreigners only)
 to create an investment committee that oversee
investment programs.
• by the early l970s, Ethiopia's industrialization policy
formulated in a range of /including:
 fiscal incentives,
 direct gov’t investment, and
 equity participation in private enterprises.
 …Contd,,,
• prior to 1957, when Ethiopia initiated a series of five year
dev’t plans, cottage and handicraft industries met most of
the population's needs.
• But others industry contributed insignificantly due to
factors: Like
 lack of basic infrastructure,
 dearth of private and public investment,
 lack of consistent public policy aimed at promoting industrial
development
• during 1952-54 (excluding Eritrea) it is reported that eight
manufacturing enterprises were established
E.g. Wonji sugar factory, inaugurated on
1954- the first giant factory in history
 …Contd,,,
• By 1954, the total number of manufacturing establishment
in the country (including Eritrea) had reached 154, of which
83, or nearly 54% were in Eritrea
• Most of these enterprises were consumer goods producers
for domestic consumption,
• This industrial dev’t plan has 3 phases:
The First Five-Year Industrial Dev’t plan 1957 -1961
• The strategy was anchored/attached on the dev’t of:
 light industries or
 consumer goods producing industries
 Produces were to the domestic market.
 industries were planted on full use of agricultural raw materials
 …Contd,,,
• substituting imported consumption goods were the
intended objectives of the plan, & succeeded
• Later on there was a remarkable achievement on
exporting- meat, sugar , livestock etc
• Import replacement was also applicable on:
 Traditional agricultural (wooden made) metal made
 Traditional manufacturing(egg modern (cement manufacturing
 cottage industries/ handicrafts machin processing textile Ind.
• textiles and food processing ind. Were the most
successful: b/se of
 natural resource availability
 Favorable market conditions
 …Contd,,,
• The dev’t of the sector during FFYIDP showed the f/g two
important facts:
 industry has bogus/fake to penetrate the structure of
national economy,
 the economy was not yet sufficiently penetrated by
industrialization
• Because: The plan end up with
 weak industrial base to the economy
 weak capacity to generate employment,
 weak level of technology.
 Industrialization during the SFYP
• the SFYP gave priority to the
 development of agriculture (commercial agriculture),
 manufacturing and
 Transport
• 62% investment was financed from aboard:
financial dependency
• during the plan period there were a number of
positive developments,
 employments in manufacturing:
 growth in output,
 investment,
 exports.
• but these changes didn’t bring basic change on
 Industrialization during the TFYP
• gov’t role increased significantly: in the forms of:
 manufacturing investment
 Providing financial source for private investors
 Providing an incentives to attract private capital in to
manufacturing investment
• three broad areas for gov’t involvement: gov’t investment
priority:
1. manufacturing enterprises
2. Commercial manufacturing enterprises,
3. Small manufacturing enterprises, (MSEs)
 Expected to be the seed beds for the dev’t of entrepreneurship
and management
 …Contd,,,
• The overall growth rate of the economy during the TFYP
period was disappointing/low achievement level:
• The major factors were:
 the 1973 drought
 inadequate domestic resource mobilization
 lower capital inflow and
 the land tenure system