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Development Progress Report attests Ethiopia's multidimensional growth

Belete Meshesha

09-20-15

Ethiopia has been working for the last decade with the aim of reaching the middle-income status in first quarter of this century. Under a committed leadership and well-crafted policies of a developmental state, a double-digit annual GDP growth has been registered since 2003 under the PASDEP and the preceding poverty reduction plan.

Doomsayers have been casting doubt on Ethiopia's developmental path and the results achieved. However, now and then, Ethiopia's socio-economic stride have been bypassing expectations and delivering tremendous results. The latest testimony came this week from is the Development Progress “Material wellbeing, education and employment” Case Study Report prepared by Overseas Development Institute (ODI).

In the report, produced by the London based ODI, involved scholars and researchers such as Amanda Lenhardt (ODI),  Andrew Rogerson (ODI), Francesca Guadagno (formerly  ECPDM) and Tom Berliner (ODI), Kate Bird, Susan Nicolai (both ODI) and Bruce Byiers (ECDPM) among others. Accompanied by more than 30 interviewees from government, the private sector, civil society organizations, donor agencies, and academia who gave their time and expertise to inform the study.

The report is part  of a four-year research project  that aims to better understand, measure and communicate  what has worked in development and why. Indeed, Ethiopia's experience is vital in this regard.

A recent report tracking progress towards meeting the MDGs in sub-Saharan Africa found Ethiopia to be among the ‘trailblazers’ of the subcontinent. Ethiopia has seen one of the largest declines in extreme poverty in sub-Saharan Africa, from 63% in 1995 to 37% in 2011. Unlike most countries in sub-Saharan Africa, Ethiopia is projected to be on target to meet MDG 1 of halving the proportion of people in extreme poverty by 2015.

At the same time, amid outstanding economic growth, Ethiopia has managed to maintain one of the lowest levels of income inequality in the developing world, its Gini coefficient declining from 0.40 in 1995 to 0.34 in 2011. Furthermore, a panel survey conducted in Ethiopia between 1989 and 2009 found positive change in people’s subjective wellbeing, with the proportion of people perceiving themselves as poor declining from 33% to 11% over the 20-year period.

Progress in education has also been exceptional. Ethiopia has seen an unprecedented acceleration in access to primary education, from just 26% gross enrolment in 1994/95 to 95% in 2012/13. Secondary enrolment is also on the rise, reaching 34% in 2013; that Ethiopia is now approaching the sub-Saharan African average is impressive considering it started with one of the lowest rates in the region. Ethiopia has also made remarkable progress in employment quantity and quality, with urban unemployment decreasing from 26% in 1999 to 16.5% in 2013 and overall underemployment dropping from 48% to 28% between 1999 and 2005, though substantial challenges in achieving stable, high-quality employment remain.

Let us take a brief view of the report. As is now widely recognized that development means much more than simply economic growth and rising incomes. The Human Development Index, the Multidimensional Poverty Index and, indeed, the Millennium Development Goals (MDGs) are all testaments to this recognition. However, while much thinking has been devoted to analyzing and measuring disparities that overlap and thus lead to deeper deprivations in wellbeing, the inverse – multidimensional progress – has received considerably less attention.

Integrating policies across sectors, government ministries and varied groups of stakeholders is often easier said than done. Tensions between development goals can easily arise, such as in the allocation of government resources, and planning for mutually reinforcing gains from sector specific policy initiatives is rarely straightforward. There is much yet to be understood about the positive linkages between progresses in different sectors and how this can be capitalized on to achieve developmental outcomes greater than the sum of their parts.

However, Ethiopia's socio-economic stride shows an effective government policy on a single unifying goal – poverty reduction – and a multidimensional approach can begin to encourage ministries to work more comprehensively and consistently. It also shows the importance of integrating social sectors into broader economic planning and those high rates of pro-poor spending benefit the economy.

Indeed, Ethiopia exemplifies how long-term planning and a clear division of responsibilities can build the foundation for broader transformation. Although the country has not yet reached the level of change needed, a clear strategy is in place and the ‘stepping stones’ are being laid."

The report explores the factors behind Ethiopia’s multidimensional progress over the past decade through a threefold approach that explores the gains the country has made in terms of: simultaneous progress in three dimensions of wellbeing: material wellbeing, education and employment, how this progress across the three dimensions has been mutually reinforcing and the broad-based activities that have driven progress in a multidimensional way.

Let us briefly see the three important findings of the report.

1. Progress in material wellbeing

Material wellbeing is a broad concept encompassing household income, consumption, and assets, among other indicators of welfare. In its simplest form, material wellbeing can be measured by household income or consumption, from which poverty lines are calculated. Ethiopia’s national absolute poverty line is set at 3,781 birr per capita (US$224 in 2011 prices). The poverty line indicates the minimum money required to afford enough food to sustain the minimum required caloric intake (set at 2,200 kilocalories per adult) and additional non-food items.

However, there are important distinctions to be made between different measures of material wellbeing. It is possible, for example, that while household incomes rise, average consumption decreases (which could be the result of inflation or an external shock, such as a widespread drought) or that household assets increase without an associated increase in incomes (perhaps through government transfers). Distinctions between these different measures of material wellbeing are important in distinguishing the various causes of observed changes in material wellbeing in the Ethiopian context.

Ethiopia has experienced some of the fastest improvements in poverty reduction in the world, albeit from a very high base. GDP per capita has steadily climbed over the past 10 years from a low of $110 in 2002 to $498 in 2013, more than quadrupling in 11 years. Dramatic drops in income poverty, particularly in rural areas, combined with impressive progress in other dimensions of wellbeing, such as nutrition, child mortality, access to improved drinking water, sanitation and electricity, are indications that material wellbeing in Ethiopia is on a very positive trajectory.

What is unique about Ethiopia’s poverty reduction is that income inequality has for the most part been maintained at low levels, while many other countries undergoing rapid poverty reduction and high economic growth have seen inequality increase. In China, for example, where the largest poverty headcount reductions have been achieved, the Gini coefficient has increased from 0.32 in 1990 to 0.37 in 2011. In Ethiopia, the Gini has declined during this period of significant poverty reduction and high economic growth, from 0.40 in 1995 to 0.34 in 2011.6 This implies that material gains have been made even at the lower end of the income distribution; gains among poorer Ethiopians can be highlighted in the analysis below.

2. Consumption and asset building

In 1982, when Ethiopia’s poverty headcount ratio was first calculated, the country stood out as one of the poorest in the world, with 69% of the population living below $1.25 per day. This placed Ethiopia slightly below the low-income-country average of 67% and well above the sub-Saharan African average of 53% in 1981. In 1995, when Ethiopia’s poverty rate was next surveyed, very little progress had been made with only a 6% decline over those 14 years to 63%.

But between 1995 and 2011 dramatic changes were seen. This period saw Ethiopia’s poverty rate fall faster than both low-income-country and sub-Saharan African averages. Poverty reduction in rural areas has been particularly impressive, and Ethiopia’s rural poverty rate is among the lowest in the East Africa region. 

The Ethiopia Rural Household Survey reveals an increase in household assets in rural areas, which, as noted above, may indicate not only improved household welfare, but also increased resilience of households in the face of shocks. Nearly 50% of households owning oxen in 2009, a near quadrupling from 13% in 1994, and 86% of households owning hoes, an increase from 59%, showing a strong increase in the ownership of productive assets by farm households. Nearly 50% of households also owned a radio by 2009 – a significant increase from 7% in 1994.

3. Progress in education

There have been huge improvements in primary enrolment in the past 20 years, and these have been evenly distributed, both spatially and in terms of gender. Numbers in secondary education have also boomed in absolute terms, but enrolment rates have not matched government targets, partly because of a lack of secondary schools in rural areas and a high dropout rate at primary completion stages. Enrolment in tertiary education has also increased rapidly, with a high proportion of vocational and technical courses.

In terms of primary education access, Ethiopia was one of the lowest enrolment rates in the world in the 1980s and early 1990s. Now, Ethiopia has managed to expand access to primary education at an extraordinary rate, leaving the country on course to achieve universal primary enrolment within the next few years.

From 1991 to 2007, Ethiopia achieved an average increase of 3.1% annually in the net primary enrolment rate. Nearly four out of five primary school- aged children were not in school in 1992, but today this has fallen to under one in five, a remarkable achievement in just two decades.

Over the course of the 1990s and the early 2000s Ethiopia managed the fastest increase in primary enrolment rates of any country in Africa. This is a remarkable feat for a country emerging from famine and conflict in the 1990s.

The same progress is achieved in terms of Secondary access. The rapid rise in primary enrolment and a subsequent improvement in primary completion rates are helping to fuel an increase in secondary enrolment. Secondary education has been slower to develop, however, and in 2012/13, the GER for secondary education (Grades 9 and 10) was still just 38.4%.

This is a long way from the government’s current goal of achieving universal completion of lower secondary education by 2025. In absolute terms, Ethiopia has still managed to increase enrolment in secondary education from less than half a million in 1996/97 (EFME, 2005) to just under over 21.9 million in 2012/13.

The expansion of primary and secondary education access was accompanied by gender equity. Ethiopia displays one of the highest rates of improvement in gender disparity in primary enrolment globally. The gender parity index, measuring the ratio of girls to boys enrolled, has improved from just 0.66 in 1991 to 0.94 in 2012/13.

In Grades 9 and 10 girls, actually outnumber boys, thanks to better primary school completion rates. In Grades 11 and 12, however, boys outnumber girls again. A dearth of female teachers at this level, as well as the long distances and associated difficulties of travel required to attend secondary schools, continues to limit accessibility among girls.

Furthermore, prevailing gendered social norms make girls less likely to have access to formal education and more likely to be married as children. However, a recent surge in the proportion of Grade 11 places awarded to girls, from 27% in 2007/08 to 44.4% in 2012/13, suggests the gap may be closing.

With regard to tertiary education, technical–vocational education and training (TVET) and university education systems in Ethiopia have expanded rapidly keeping up with the greater numbers leaving Grade 10 and Grade 12,. In 2012/13, over 700,000 students were enrolled in university undergraduate programs, though enrolment was highest among men (70%), and there were over 300,000 TVET students in the country, with enrolment largely equal between men and women.

The achievement of near-universal primary enrolment in Ethiopia, despite still-rapid population growth, and with regional and gender equity is a remarkable success story. This is now allowing for much more widespread enrolment in secondary and tertiary education. Yet rural–urban divides and quality concerns still serve to hamper progress in expanding higher tiers of education to all of Ethiopia.

3. Progress in employment

As in material wellbeing and education, Ethiopia’s progress in employment began from a low starting point. However, some significant gains have been made, including a 10% decrease in urban unemployment, the maintenance of a particularly high labor force participation rate, a near halving of the informal share of urban employment and a near halving of youth underemployment. A number of challenges remain and economic transformation is still far from complete in Ethiopia, but recent trends show a positive trajectory according to most measures of employment.

Ethiopia has made remarkable progress in employment quantity and quality. In rural areas, unemployment has been reduced through new training programs and the introduction of the Productive Safety Net Program, in particular its public works component. Although the main goal of the PSNP is to improve food security in poor rural areas, the program has created numerous job opportunities (albeit low paying), with an estimated 1.2 million workers employed annually.

Public works programs, especially public housing, spurred job creation in urban areas.30 The Integrated Housing Development Program, aimed at mitigating a growing housing problem, created new job opportunities and stimulated micro and small enterprises (MSEs) in the construction sector. By ensuring monthly salaries, public works programs also contributed to the large reduction seen in the proportion of working poor in the population.

Additionally, since the mid-1990s, the Ethiopian government engaged in a number of infrastructure projects, mainly in transport and energy, such as the Road Sector Development Program and the Renaissance Dam project. The size of some of these projects is so large that they are commonly referred to as ‘mega-projects’. These programs not only created employment and improved living standards, but also had a number of spillover effects.

4. The drivers of Ethiopia's socio-economic stride

The above-summarized findings are just a cream of the extensive assessment of ODI's report. Even though entitled “Material wellbeing, education, and employment,” it does not stop there. It provides insight into how Ethiopia's socio-economic stride became a reality.

The first factor is social and political stabilization. As the report elucidates, Ethiopia’s near unprecedented growth rate can be attributed to a number of factors, including the country’s social and political stabilization in the mid-1990s, a favorable investment climate relative to many neighboring countries and conducive government policies facilitating this growth while also encouraging diversification with an eye towards structural transformation. According to the International Monetary Fund, among countries with over 10 million people, only China and India will have grown faster than Ethiopia between 2011 and 2015.

The second factor is the focus on Agricultural Development. In line with the Ethiopian government’s overarching goal to reduce poverty, much of its growth strategy has been centered on its Agricultural Development Led Industrialization (ADLI) strategy, with a view that the country’s poorest people are concentrated in this sector. A recent study by the World Bank confirms the efficacy of this strategy by finding that the agricultural sector has contributed more than any other sector to poverty reduction since 1996. It estimates that agricultural growth led to reductions in poverty of 4.0% per year on average between 2005 and 2011.

The government has also invested heavily in its agricultural extension (advisory services linked also to input supply) program and maintained a strong presence of government extension agents across the country. Between 2004/05 and 2009/10, 61,785 agricultural extension agents were trained and 9,265 farmer training centers were established, one in every village. Although some finance for agricultural extension has been contributed by donors, the Ethiopian government has provided a large share of the investment from its own resources. This means that the government has been able to maintain a great deal of independence over its agricultural extension programs, whereas most other African countries saw their extension programs retreat under the terms of market liberalization.

Ethiopia stands out in terms of investments in agriculture in Africa. Agricultural spending in Africa as a whole has declined since 1990, from 5.9% of GDP in 1990 to 2.7% in 2013. In 2003, African governments signed the Maputo Declaration, agreeing to allocate at least 10% of national budgetary resources to agriculture and rural development policy implementation within five years. Only 14 countries have met or exceeded this commitment, and Ethiopia is among the seven countries that have exceeded the target most years (Benin and Yu, 2012). Since 2005, Ethiopia has consistently allocated over 15% of total national expenditure to agriculture.

A third point interrelated point is pro-poor growth direction. A suite of government policies have targeted inefficiencies in the agricultural sector, not just in terms of improving productivity, but also in facilitating the flow of benefits from agricultural growth towards the poor. With access to markets being one of the primary constraints faced by smallholder farmers, rural road construction is one of the main pillars of the ADLI strategy and the government has invested heavily in expanding the rural road network across Ethiopia. The country’s road density has increased from 29 to 44.5 km per 1,000 km2 between 2000/01 and 2009/10, and the average time it takes to reach an all-weather road has been reduced from about 7 hours in 2000/01 to 3.7 hours over the same time period.

Support for small and micro enterprises can be considered as a forth factor. Discussing urban socio-economic situations, the report pointed out that although urban poverty reduction has been comparatively slow, and progress has been made since 2005 in reducing the proportion of urban households in poverty. Although the services sector has been the fastest growing sector in urban areas, recent studies have found that growth in services is strongly correlated with growth in agriculture. So although services do not appear to be poverty reducing independent of growth in agriculture, by combining with agriculture they have in fact contributed to poverty reduction.

Growth among small and medium enterprises (SMEs) has also been identified as a key driver of poverty reduction in urban areas. Again, growth in SMEs has been found to be strongly correlated with growth in agriculture. According to the World Bank’s recent poverty assessment, 64% of businesses were established using funds from agricultural production and these businesses were most active in the months of harvest and immediately thereafter.

Indeed, Ethiopia has not only achieved tremendous progress in the areas of material wellbeing, education, and employment, but also simultaneously addressed multiple challenges in wellbeing at an accelerated rate compared with other countries in Africa.

As the report attested:

One of the key factors contributing to Ethiopia’s progress in multiple dimensions of wellbeing over the past 20 years has been the single unifying principle of poverty reduction, which is at the core of government planning. A strong statement on poverty reduction...resonates through all government strategies.

Ethiopia exemplifies how long-term planning and a clear division of responsibilities can build the foundation for broader transformation. Although the country has not yet reached the level of change needed, a clear strategy is in place and the ‘stepping stones’ are being laid."

 


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