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Industrial policy in Ethiopia

The ‘Africa Rising’ narrative means different things to different people. Yes, Africa has performed better in the last decade. But views diverge on the drivers of growth and on its sustainability, and on whether this growth will translate into structural transformation. For instance, the recent fall in oil prices has laid bare the vulnerability of some African economies, suggesting lack of diversification. At the very least, growth has been uneven among regions and countries. The ‘Afro-euphoria’ of recent years is as removed from reality as its equally over-wrought predecessor, blanket ‘Afro-pessimism’.

To get a truer picture, one has to look at specific sectors and policies in a single country. This is what I have done, with the eyes and ears of a policy-maker who has taken time out to undertake detailed research. Ethiopia is widely regarded as one of the poster children of Africa’s renaissance and economic transformation. With more than 90 million people, it is the second most populous country in Africa. Its economy has been growing at about 11 per cent over each of the past 12 years, primarily driven by agriculture, and without any resource boom such as oil or minerals. GDP per capita has increased four-fold, the number of people living below the poverty line has halved, and life expectancy has increased by 19 years to 64. The country has achieved this after facing down many of the woes that have beset the continent ‒ and fuelled Afro-pessimism ‒ for decades: totalitarian military rule, famine, civil war. On top of all this, it is landlocked. Yet it remains a beacon of change in an unstable ‘bad neighbourhood’.

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Image credit: Walking to the market, Ethiopia, by SarahTz. CC BY 2.0 via Flickr.

What has changed to make this possible? Is this growth trajectory a blip or will it really lead to catch-up? Perhaps it is too early to say. But clues lie in the government’s single-minded focus on developing and transforming agriculture as a foundation for economic take-off. This has enabled Ethiopia to now shift focus to manufacturing with a view to becoming the leading manufacturing powerhouse in Africa by 2025 through a carbon neutral strategy. The manufacturing sector will have to grow by 25 per cent annually if the overall vision is to be achieved, and manufacturing exports will have to expand dramatically.

To encourage manufacturing to expand and play its distinctive role in economic development, the government has put enormous emphasis on publicly funded infrastructure. Currently, Ethiopia spends more than 55 per cent of its federal budget on infrastructure and skills development. This includes building Africa’s largest hydro-power project, funded entirely through domestically mobilized resources; an electric  railway system, the first of its kind in Africa; and the ongoing transformation of universities and technical vocational systems so as to support the productive sectors.

The Ethiopian experience shows that learning by doing is just as important in policymaking as in production. Ethiopia has been making bold experiments, based on looking at what works and what does not. With each experiment and experience, policymaking capacity gradually improves. There is no short-cut alternative to learning-by-doing. The key question for many countries is whether they can experiment in the absence of policy independence? Ethiopia has exploited its available policy space, and has consistently followed its own development path. In many ways, its development path has been unique in Africa, diverging from the normal prescriptions of international financial institutions. However, blueprints and naïve ‘lessons from’ approaches are unlikely to work. Ultimately, what determines a country’s catch-up is not geography, ethnic homogeneity, and culture, or ‘good governance’ indices. It is a compulsion to change, and persistence in implementing a strategy while at the same time adapting in the face of mistakes and a shifting context.

Headline image credit: ‘Ethiopia, Eastern Omo-river’, by Rita Willaert. CC BY-NC 2.0 via Flickr.

Recent Comments

  1. Alem

    The timing of this article follows a book on the same theme just published by the author. The author here contends that “to get a truer picture, one has to look at specific sectors and policies in a single country.” Truer? Not really. One also needs to at least compare policies and their implementations in the preceding two governments – if not with economic sectors of similarly positioned countries. Since Ethiopian economy is in large part the function of foreign aid the author’s argument that the economy was “growing at about 11 per cent over each of the past 12 years, primarily driven by agriculture, and without any resource boom such as oil or minerals” is simply misleading.

    The author in this article failed to articulate coherently or to provide empirical evidence for his statements;
    a/ is Ethiopia “poster child for African renaissance?” Who says so? How is the author going to explain his party’s hold on power and 100% win in elections 2015? [Compare to 99.6% win in 2010!]
    b/ Life expectancy, author says, increased by 19% to 64 years since his party took over power; poverty was halved; higher education on the way to transformation. He may have to tell us if each of these statements are in his mind or are borne by reality on the ground. I am afraid it is the latter. For one, education quality was so decimated that now the government he leads are in the hands of individuals with phony diplomas.
    c/ Is Ethiopia really a “beacon of change in unstable bad neighborhood?” Of course such value judgments are relative; the author cannot be unbiased in this. One needs to compare Ethiopia to neighboring Kenya, for example [the author earlier had said a “truer” picture is to not compare; now he just does that because it suits his thesis. Is it Kenya or Ethiopia that has greater freedom of the press? greater private enterprises? greater out-migration? Probably the only comparison in the level of corruption in the two countries. In the case of Ethiopia, corruption now was unimaginable in the previous two governments combined.

    Here is how the author concludes this write-up: “Ultimately, what determines a country’s catch-up is not geography, ethnic homogeneity, and culture, or ‘good governance’ indices.” He says rather “It is a compulsion to change, and persistence in implementing a strategy while at the same time adapting in the face of mistakes and a shifting context.” There we go. Compulsion. Persistence in implementing. In other words, his party is the only party with that responsibility; citizens either have to agree with the “correct” party policy or go to jail or leave the country.

    Finally, why is Dr. Arkebe doing this now? I can see few reasons.
    a/ He and two members of his ethnic Tplf have been “deputies” and “special advisers” to Hailemariam. Hailemariam was hand-picked by the late-Meles who divided his own party so much so that on his demise a Tplf could not be agreed on. Now Arkebe is presenting himself as that person. And having studied at U of London he may be lobbying the British to endorse his candidacy. Very sad because Ethiopians are not part of the process to chose their leaders. The British talk about human freedoms but all the same fund tyrannical rule everywhere.
    b/ Hailemariam’s recent statement on VOA is instructive. Hailemariam talked about extremism, ethnic and religious and how some groups have monopolized power in politics and the economic sector. It is interesting he did not name Tigrayans but Amhara and Oromo groups. His not mentioning Tigrayans came across as the loudest part of his speech.

    I have one simple request. Since Dr. Arkebe and his party have told the world in so many words and ways that their leadership has moved Ethiopia from backwater to the forefronts of development would they now allow independent foreign journalists to verify unimpeded? This is only fair and good PR!

  2. Rahel

    Ethiopia’s industrialization policy is still in its infancy. As an Ethiopian, it gives me great comfort to know that we have a government and policy makers who are committed to designing and implementing policies that are specifically tailored to Ethiopia, thereby taking full responsibility for shaping our own destiny, and their willingness to continuously learn from their experience/mistakes. Thank you Dr. Arkebe Oqubay for all you’re doing for our country. Millions of us appreciate the hard work you put in everyday.

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