Some points of the Second Growth and Transformation Plan
Desata Hailu 04-11-17
The second Growth and Transformation Plan (GTPII) aims at putting our country in the lower level middle income country by 2025. The plan is a continuation of the first Growth and Transformation Plan (from 2011-2015) and will elevate the performance of the previous plan to the next level. Here I try to mention some of the points of the plan.
In order to attain this, the plan has put forward the following main directives. And those are maintaining the initiated rapid, sustainable and just economic development; bringing higher development through quality, productivity, and competitiveness; and bringing swift national investor transformation and making them capable forces of development. And strengthening the construction sector, increase the accessibility of infrastructures, and guaranteeing the quality of service are some of the basic directives held within the plan.
In addition to this, making sure that cities put their contribution for the general economy; hastening and guaranteeing human resource development and technology capacity; bringing democratic and developmental good governance by building the capacity of implementation of the government and by strengthening the participation of the people; increasing the capacity, participation and benefit of women and the youth; and building climate resilient green economy were all held in the plan as basic directives. And on this article, we will try to look into the objective of the GTP II with regards to the macro economy by basing on the information presented by the National Plan Commission.
The macro economic development aims at facilitating our country’s renaissance by putting the following goals. And those are; maintaining double digit economic development, bringing economic structural transformation and having a stable macro economy. It especially aims at limiting inflation rate to a single digit, so that there will be a stable macro economy; stabilizing foreign exchange value and enabling conducive environment for competitiveness in foreign market; making the budget deficit lower than 3% of the GDP at average annually; and taking the national income share in the GDP to 18.8% at the end of the completion year of the plan, i.e. 2020. And there is a strategic goal devised to grow our economy by 11% annually in average within the five years of the plan (from 2016-2020). And our past 12 year’s performance shows that this goal is attainable. But, it will take up huge effort and will get difficult from year to year.
Consider this, even during the fastest growth period of our continent; no more than 5% of economic growth was recorded. It is easy to understand how hard the goals that are set in the plan are. When the development is looked from the perspective of each sectors separately, we can see that the agriculture sector is projected to record an 8% growth, whilst the industrial and service sector are expected to gain at least a 19.8% and 10% average growth respectively.
On the other hand, by spreading the results of those farmers with high performance towards to those with lower performance, it is planned to increase the production of grains by two fold. As a result, it is projected that that it will increase the average development of the agriculture sector from 8% to 11%. It is projected that the production of the main crops will grow by 16%. The share of these main crops to the general value-added agricultural products is 40% on average.
However, the second Growth and Transformation Plan is devised based on the basic development option. And during GTP II, the agriculture will continue to be the source of the development. Meaning, agricultural works that bring high value will gain huge attention. So, recording an 11% annual average economic growth during the next plan year (2016-2020) is taken as the basic issue in guaranteeing our country’s Renaissance. And this kind of rapid growth is important in taking the country to lower level middle income status by 2025 – which is the one phase of Ethiopia’s path towards its renaissance. Therefore, In order to finish one chapter of our path to Renaissance successfully, we have no other option but to maintain the rapid growth in the next five years. In relation to this, the rapid and just development will create an even conducive situation for the Renaissance path. Of course, currently, the huge motivation the people are showing and their active participation is already bearing fruits, and they’re benefiting from these fruits.
Thus, the national consensus that is being created around our renaissance path can only be strengthened when citizens see the fruits and benefits of the effort, maintaining the rapid and sustainable development will continue to be the basic direction. The second reason why the rapid development became the basic strategy has to do with strengthening our capability in expanding and providing quality social service and economic infrastructures to citizens. The third reason has to do with the fact that the rapid development has a key role in solving problems of poverty and employment.
Although it is expected that, the 11% average economic growth will be maintained with wide basis; huge transformation that will be recorded in the manufacturing industry sector and transformation that will be seen in the structures of the economy will be its unique identities. The plan takes into account the fact that the manufacturing sector should bring huge transformation through harmonized and organized effort as part of the national vision, so that our country will be the leading African country in light manufacturing and be in the leading category when it comes in manufacturing industry.
So, in order to make sure that the national vision is realized, it is expected huge number of local and foreign investors along with high quality FDI will enter into the manufacturing sector in huge level; and with the people and government giving the most attention to the sector, it is expected that they will participate to solve the major hurdles seen in the sector.
With this, it is planned to guarantee manufacturing industry led economic structural transformation by increasing the share of the sector to the GDP by four fold in the next ten years. As a result, it is planned to take the share of the manufacturing industry to the GDP from 4.5% in 2015 to 18% in 2025.
Even though the manufacturing industry grow in a fast pace as mentioned above, as its basis is narrow, its share to the GDP at the end of the transformation and sustainable development work (2020) will be about 8%. Thus, it is expected that the 11% rapid economic growth we will have in the next 10 years will help bring economic transformation being led by the manufacturing industry sector after hugely increasing the investment and productivity of the sector.
Considering the narrow basis of the manufacturing sector, it should be underlined and stressed that it will take a life and death struggle to reach the set goal with regards to the sector’s share to the GDP within the two five years plan. With regards to the economic structural change, the agriculture share to the GDP will be 36% at the end of the growth and transformation plan. And in 2025, this share will be no more than 31%. On the other hand, as the industrial sector grows at faster pace than to the rest of the sectors, its share to the GDP at 2020 will rise to 23%, and then to 28% in 2025. The service sector share will be the remaining number from the agriculture and industry sector. With regards to import export trade, the plan is ambitious. The important macroeconomic issue in our current rapid and sustainable development is export trade balance.
During previous years, the trade deficit has been expanding. As closing down this gap is important to the sustainability of the development, it is believed that expanding export output, tourism and air transport is the way to go. Expanding export output not only guarantees foreign exchange gain, but it also helps the suitability of the rapid growth by importing important equipments and commodities.
It also helps in breaking free from foreign grant and aid, securing the competitiveness of the economy and in getting huge market that is not limited to internal market. However, during GTP I, the export performance was weak. And looking how the rapid development we are aiming for demands huge reserve of foreign exchange, it shows how much important it is to attain our export goals. Our export goal, just like the manufacturing sector is important to our path to renaissance and will demand relentless effort from our part.
So, we should be making our export revenue grow by 29% annually within the next plan duration. This means we should be looking to gain close to 14 billion USD from export trade by the end of the next five year plan. Agricultural, industrial and mining products share to foreign trade is 7.7 billion USD, 4.2 billion USD and 2 billion USD respectively. This takes into account that import will increase close to the economic development.
During the plan years, it is planned to not only increase the amount of export revenue, but also to change its makeup as well. With regards to this, it will create a situation where manufacturing products play a huge role in the export trade.
Especially leather products, textiles, agro-processing products and sugar are getting the attention to expand and be the main export items. And within the mining sector, new export products will be expanded. And from the agriculture sector, vegetable, fruit and horticultural products will have huge role in increasing export revenue. In addition to this endeavor of expanding export with new items, it is also planned to expand the already established export products, both in quantity and quality. With regards to this, there will be huge efforts made to increase our share and revenue in the global market by expanding coffee, grain and oil seeds products in quality.
By installing a much needed support and oversight mechanism in the mining sector, it is planned to expand new mining products like Potash, and increase the amount of gold that is put out to the market from smaller and large companies.
There will also be huge efforts exerted to gain huge amount of foreign exchange from the tourism industry – a sector which is known to have huge potential. With regards to this, by fully implementing the leadership and organization improvement works and policies that are initiated with an aim to hasten the tourism industry, the sector will be made to be one of the sources of foreign exchange gain.
We should pull in all our effort to further utilize those suitable situations that were created for the development of the tourism industry within past years – lasting peace, positive image of the country, infrastructure and human resource development. In general, the successful promotion and image building works will be made to continue strongly. Thus, in order to realize our strategy of expanding export and changing its makeup, many works will be done on the following. The first issue is making the foreign exchange evaluation an encouraging prospect to the export trade. By closely following the foreign exchange evaluation, it will be made sure that export products production is profitable. With regards to this, in order to stabilize the inflation rate, the necessary macro-economic policies will be implemented.
To sum up, as seen in some points of the Plan, we can easily understand that aim is to develop the macro-economic sector enables our country to reach lower level middle income status. And there is no doubt that this will lay a firm basis for the important path ours developmental and democratic government together with our people is taking to ensure Ethiopia’s Renaissance. This is because a government that involves the whole people in its development aspirations will successfully realize its goals.