This article is
intended for those who would like to read a different perspective on GTP.
Consider my assessment as a modest attempt to understand the nature of GTP on
the basis of two approaches. The first approach is based on the framework of my
policy suggestion which I called Green Revolution and Industrial Decentralization.
My assessment of GTP along this line of thought is based more on theoretical
justification rather than on pragmatic experiences. My academic approach,
however, helps to adopt a standard industrial policy menu to the unique
conditions of Ethiopia. The second approach is based on my intention to judge
GTP on its own merits (on its own good and bad points using techniques of
evaluation) and this approach is supposed to contain some action-oriented
advice. Common to both approaches is the premises that the Ethiopian state and
society is undergoing changes. For the past twenty years the country is not
marked by fixed and settled structure rather than by some sorts of change. Between
the two approaches there is, however, difference in understanding the nature of
those changes and in explaining them how and why they occurred in the way they
did. I hope this will be clear in the course of the discourse.
Analyzing
GTP on the basis of Green Revolution and Industrial Decentralization Policy Framework
By
looking at the nature, size, speed and need of the driving force unfolding in
rural and urban areas of the country and reviewing the capacity of current
government policy to counter the negative effects of the pressure drivers, I
suggested green revolution and industrial decentralization as policy options to
keep up with the race (for details see http://aigaforum.com/articles/GreenRevo_Industrial_policy_Ethiopia.pdf
(part one) and http://aigaforum.com/articles/Green_Revolution_PartTwo.pdf).
Green revolution means
introducing agriculture technology in rural areas for the purpose of ensuring
food security. GTP appears to continue with its experiences and style of green
revolution which is based on the promotion of smallholder agriculture in
Ethiopia. GTP aims to “ensure the food
security at the family, regional and national levels” and this is done by
doubling the domestic agricultural production. As with the previous development
programs the provision of improved technology to small holder farmers and commercialization of small scale farming is the basis of the growth
plan. Unlike before when agriculture depends on rain, there will be now an expansion
of small scale irrigation. More focus will be given to encourage farmers to
emulate model farms with best practices and this may double the agricultural
growth.
As I
have repeatedly mentioned in previous postings my view is that small farms cannot be the engine of agricultural growth at a time
when labour force growth is characterized by young age and household types of
higher consumption requirements. In the rural areas there are not sufficient
conditions of drivers of improved technology use and commercialisation: there
is lack of asset accumulation, a low per capita production, and a lower degree
of urbanization. Child-rich households do not have saving to adopt the
technology and their primary livelihood strategy focuses on meeting basic needs
and not producing for the market.(see
Green_Revolution_smallholder.htm
and Labour_Force_Growth.pdf)
On the
contrary, GTP’s push for further intensification of
smallholder agriculture and commercialization of small scale farming may plunge
households into fertilizer debt and sale of assets in an expanding informal
land market. This phenomenon is already noticeable in the highlands of Ethiopia
causing migration to towns. I am afraid that the unintended effects of GTP will
serve as push factors for rural-urban migration (as opposed to desirable market-driven
labor migration). GTP’s road construction will accelerate this internal
rural-urban migration and this can sever the food problem in the urban areas. Currently,
the annual urban population growth rate was 4,3%, while for Africa is 3,3%. Even
if the level of urbanization in Ethiopia is low by African standard, the rates
of urbanization in Ethiopia are exceptional (see Table). I
suspect that in the next five years we will witness much accelerated urban
growth.
Table
1: Urban growth rate comparison between Ethiopia, Africa, Western Africa, Kenya
and Ghana, 1960-2010
|
|
Urban annual growth rate
(%)
|
|
|
|
1960-1965
|
1965-1970
|
1975-1980
|
1980-1985
|
1985-1990
|
1990-1995
|
1995-2000
|
2000-2005
|
2005-2010
|
|
|
Africa
|
5.10
|
4.65
|
4.43
|
4.30
|
4.16
|
3.87
|
3.52
|
3.38
|
3.31
|
|
|
Ethiopia
|
5.87
|
5.16
|
3.57
|
5.04
|
5.21
|
5.22
|
4.20
|
4.09
|
4.29
|
|
|
Kenya
|
6.32
|
6.96
|
7.65
|
5.34
|
4.92
|
3.90
|
3.44
|
3.60
|
3.99
|
|
|
Western Africa
|
6.46
|
5.26
|
5.22
|
4.99
|
4.80
|
4.48
|
4.31
|
4.01
|
3.77
|
|
|
Ghana
|
5.07
|
4.13
|
2.70
|
4.45
|
4.94
|
4.70
|
4.20
|
3.90
|
3.48
|
|
|
Source: Tsegaye Tegenu and Bo Malmberg (forthcoming), Urbanization
in Ethiopia: Study on Growth, Functions and Development Policy Options. Department
of Human Geography, Stockholm University
|
How is the government
going to feed a growing urban population and at the same time be able to cover
the food deficit in the rural areas? My view is that the government should be
prepared to undertake green revolution on behalf of small holder farmers in
Ethiopia (see earlier posting) and I see no other options.
Another area of difference between my growth/transformation
model and GTP is in the priorities and management of industrialization in
Ethiopia. My proposal and the government’s GTP agree on the principle of assigning
key role to government in industrialization policy and on the strategy of import-substituting
industrialization. Closer examination of the backgrounds of the so called BRIC
countries (an abbreviation for Brazil, Russia, India and China) shows that
governments have played a central role in industrialization. There is however a
difference between my proposal and GTP.
The first difference is on the choice
of industrial sectors and products. The industrial policy of GTP intends to
scale up already predefined industrial sectors including garment/ textiles
production, leather products, agro-processing and construction. In the first
phase of industrialization, I suggested establishment of chemical/fertilizer
industries (for example using the potash in the Afar-Danakil region for
fertilizer purpose), iron and steel industries for the purpose of raising domestic
production of consumption and capital goods. Import-substituting
industrialization of GTP focus on consumer goods, while my suggestion focus on
import substitution of raw material and semi-finished goods. Since 2003/4 the
percentage of the value of import of raw material, semi-finished and capital
goods has increased compared to the value of fuel. In 2009/10 the country has trade deficit estimated to
reach US $7.5 billion (see FDRE
(2008), The Federal Democratic Republic of Ethiopia: Selected Issues and
Statistical Appendix, July 2008, Table 1). My feeling is that in
addition to creating a number of economic locomotives (say development of steel
market intermediaries), strategically the country could save more foreign
currency if priority is given to fertilizer, iron and steel industries.
I think the government is aware of this
problem and would like to balance the deficit by expanding the export base of
the country. Garment/ textiles production, leather products, flower and sugar
industries can raise the countries global export market share by attracting
foreign investment. The government thinks how it finances the project (the
means and process of industrialization), while I focus mainly on the objectives
of industrialization (creation of productive employment). I have to admit that I have not yet studied on
ways of financing industrial decentralization and green revolution. If I do so I
may end up attacking the current government budget lines. I am wondering if there
seem to be a difference between academic theory and pragmatic practical
experience.
Few words on
structural transformation: a process by which countries change what they
produce and move from low-productivity, low-wage activities to
high-productivity, high-wage activities. Basically what GTP intends to do is a
scale up process. My question is can a scale up process (quantitative ambitious
growth targets) bring about fast and intense structural transformation (a
qualitative change in labor productivity)? Reproducing oneself on a larger
scale may not bring about structural transformation. The essence of structural
transformation is the introduction of technology to dramatically change the output
and employment structures. Historical facts show that systematic introduction
of green revolution and industrial decentralization significantly increases the
level of labor productivity.
Assessing
GTP on its own merits
I will try now to briefly
evaluate GTP on its own good and bad points without using my policy framework
suggestion (for an insight into my evaluation concept, see my old website www.epmc.se). GTP clearly states the program
objectives and the respective outputs (numerical targets) without any
confusion. According to my view the plan is very comprehensive and the absence
of one dimension may lead to a different outcome. There is, however, a question
of how much can realistically be achieved with available resources. Since this issue
has been discussed exhaustively I would like to reflect on set of core factors
that can set the stage for growth.
GTP contains factors
that enhance growth: expansion of education and training and expanding health
service (section 2.3.4), capacity building and good governance (section 2.3.5);
and improving the capability and benefits of women and the youth (sections 2.3.6
and 7). What is missing in this ingredient is the factor of macroeconomic
stability, which is crucial to trade. An unstable macro environment can hamper
growth by distorting prices and incentives. Without price stability it is
difficult to expand trade. GTP does not state how the government intends to
achieve price stability in the coming five years. In the PASDEP document high
inflation and balance of payment problems were considered as challenges. In the
GTP there is no focus on how to meet this challenge. What are the measures to
be undertaken to bring about low inflation, sound public finance and
well-managed exchange rate which set the condition for sustained growth? The
recent devaluation of birr caught many of us by surprise.
A significant
challenge for GTP will be implementing the program objectives. The
organizational structure of GTP, particularly that concerns the
industrialization sector, has not come out very clearly. It seems that industrialization
is going to be implemented in “command and control” structure of a
traditional organization. The engineering, energy and sugar corporations are
directly accountable to the Prime Minister. This may be an appropriate
organizational structure in the Ethiopian context, given the problems of capacity
and corruption. However, the modality in the allocation and co-ordination of
responsibilities among the different corporations, concerned ministries and the
Prime Minister Office has to be carefully designed considering the objectives
of GTP and the functions to be performed. Given the previous practice of
top-down decision, it seems to me that the channel of communication and
co-ordination is going to be strictly vertical. Matters that might have been
resolved among decision makers in the different corporations or departments at
the same level would be referred upwards. To avoid such possible vey high
gradient management structure, it is necessary to introduce from the outset the
following two complementary changes:
While I underline the
necessity of a unified management structure, according to my view, the
particular functions of the Prime Minister Office should be described at least
under four broad headings:
·
To clarify laws and legislations which facilitate the
co-ordination and integration of industrialization activities,
·
On the ground establishment of state-business partnership,
·
To identify gaps and encourage public and private sectors to
effectively implement the plan within available resources,
·
To serve as a central monitoring and evaluation unit for the
industrialization program, until such time of introducing an independent
evaluation institute, and
·
To give guidance on strategic planning.
The second aspect of
change should be in establishing team management which can provide the
different corporations and levels with initiatives, ideas and capacities that
go far beyond what would be produced by top-down decision making. The
management team can be made up of representatives of all relevant ministries
and corporations serving the industrialization system.
If GTP is successfully
implemented my guess is that by the end of the five year plan Ethiopia will experience
migration-led urbanization. Large scale migration of rural labour to towns and
urban centres has positive impact on development of the employment based economy.
At the same time it creates demand for more services: housing,
education, health, sanitation, transport, communication, energy and business
services. By then the government will be forced to design an urban-based growth
strategy, a move to industrial decentralization through backdoor.
The author can be
reached at tsegaye.tegenu@epmc.se
