By Mathza

May 19, 2006

On May 9, 2006, Addis Zemen interviewed Ato Lidetu Ayalew on his party’s policies on the economic development of Ethiopia. One of the policies—the subject matter of this writing—is to give equal focus to all economic sectors: agriculture, industry and services. In other words, all economic sectors should be considered priorities. This means no precedence by any order of importance or urgency.

Ato Lidetu’s policy seems to be impractical, especially under present Ethiopian conditions where financial and skilled manpower resources are meager and infrastructure inadequate. With the price of oil skyrocketing, the financial situation is likely to change from bad to worse. This would, obviously, increase the need for setting priorities. Implementing his policy may yet prove overwhelming even if all the required resources were available.

Development plans are formulated taking into account, as much as possible, the optimization of the use of available resources in he solving problems and in the production of goods and services needed by the people as well as for export, when viable. Identifying and prioritizing sectors and sub-sectors is the first stage of the planning process. In Ethiopia, improving the abject poverty of the overwhelming majority should be the determining factor in setting priorities. As every one knows, feeding the hungry is the most basic and urgent need. Production of food, the major component of agriculture, is and should, therefore, be given the highest priority in the near future. This is what the government has done. What good are industrial products when people cannot feed themselves and cannot afford to buy them?

With a population approaching 80 million, the potential market for products and services is high. Because of very low purchasing power, however, the market of the whole country is equivalent to a medium size city in a developed economy. This is a major limiting factor in the development of the industrial sector. It entails setting up factories with small capacities whose products cannot compete with those imported from large factories enjoying economies of scale. This is worse in regard to units producing intermediates (metals and basic chemicals) from basic raw materials (ores, petroleum, natural gas, etc.). In recent years, globalization has seriously undermined the feasibility of developing such industries in developing countries.

Whatever demand there is for industrial products is limited to a portion of the 15% urban population. Access of the rural people (85% of the population) to industrial products is very limited because of grinding poverty. It is apparent that the farmers’ standard of living and therefore their purchasing power would have to be raised to increase demand for industrial products in the country. It is mainly due to lack of adequate demand that foreign investors have been shunning Ethiopia.

How can the standard of living of the farmers be raised? The answer to this question is evident from the priority the government has given to the rural area: agricultural development characterized by increasing productivity. Government provision of extension agents, better farming methods and inputs and access to finance through farmers cooperatives have started to bear fruit. This coupled with continuing and expanding soil and water conservation, innovative water harvesting and utilization, environmental protection and change of attitude of the people to good work ethics is rendering an increasing number of farmers to be self-sufficient. Many farmers are becoming relatively rich and are being emulated as models by others all over the country. In one of my previous articles I said:

“…most of the farmers will come out of subsistence farming; join the successful farmers; and become market-oriented farmers. While adopting market-oriented economy the Chinese have been reported to have said a few Chinese have to be rich before all Chinese become rich. This is what is happening in Ethiopia: some farmers are improving their standard of living and becoming examples for others to emulate so that, at the end of the day, all farmers will benefit.” http://www.aigaforum.com/ACCUSING_THE_GOVERNMENT_OF_IMPOVERISHING_ITS_PEOPLE.htm

From the above, it is apparent that agriculture should take the lead followed by infrastructure. Under present Ethiopian conditions, the promotion and development of both sectors falls largely under the domain of the government. The industrial sector, particularly manufacturing, is better left to the private sector. Here, the government role should be promotion and support. The government could and should, however, develop crucial industries if and when the private sector shows no interest. Gradually the priority should be reversed, with industry eventually occupying its rightful position. If the current development trend continues, it is possible that the shift could take place between the current and next development plans. In the mean time, the government should continue to do its utmost to facilitate the process of industrialization by: (a) ensuring availability of agro-industrial raw materials in the desired quantity and quality for processing and (b) promoting the manufacture of agricultural inputs (fertilizers, pesticides, and agricultural implements and machinery) which deserve priority status in the industry sector. These strategies are in line with the agriculture-led development strategy of the government.

Before closing, I would like to touch upon Ato Lidetu’s repeated concern. He is of the opinion that the economic growth rate in the last three years cannot be sustained because of the country’s dependency on rain-fed agriculture which is affected by recurring drought. I share his view to some extent. However, it seems that he has not taken into account the compensating effect of the thousands of water harvesting and irrigation schemes already in operation, in the pipeline and in the planning stage. He apparently has not taken into account increasing productivity (up to two or three times of traditional yields) as a result of these schemes and use of appropriate farming technologies and inputs as well as minimizing pre- and post-harvest losses by a growing number of farmers. He does not seem to be aware of new initiatives, such as the Ethiopian Drought Insurance Pilot Project, that will minimize the effect of drought on farmers. True, drought would adversely affect economic growth but to a decreasingly limited extent compared to what the farmers and the pastoralists have been experiencing. Its devastating impact will weaken with time, especially with optimizing the utilization of water, including adopting technologies, such as drip irrigation. In fact, because of the ground work done and experience gained in the past and the many successful farmers and districts serving as models (see recent CNN.com video clip on “Ethiopia claims its destiny”), development in agriculture may be expected to occur at a relatively fast rate during the current development plan period.

After finalizing this writing I had the opportunity to listen to the final parliamentarian debate on the five-year plan. Some of the comments by the opposition seemed appropriate while others did not. One example of the latter is a strange way of measuring growth rate of the industry sector. The number of new industrial establishments is expressed as percent of the number of existing ones. This is unheard of and does not make sense. Another example vehemently attacked the policy of utilizing fertilizers as a “futile bankrupt policy.” There are two main methods of increasing food production: bringing virgin land under cultivation and raising productivity using fertilizers. The former whose availability is limited will eventually require fertilizers as the plant nutrients in the soil will be exhausted in a matter of a few years. Of course, no alternative solutions were suggested on the shrinking size of agricultural plots and the dwindling yield of crops all over the country which will, surely, expose the people to conditions worse than at present.

Previous articles by the author:
1- OPPOSITIONS DURING EPRDF ETHIOPIA: POLITICS AND DEMOCRACY --
http://www.aigaforum.com/mathza0403.htm (aiga forum, March 25, 2004)

2- OPPOSITIONS DURING EPRDF ETHIOPIA: SOCIAL AND ECONOMIC DEVELOPMENT – http://www.aigaforum.com/mathza0404.htm (aiga forum, April 6, 2004)

3- OPPOSITIONS DURING EPRDF ETHIOPIA: POLITICS AND DEMOCRACY

Brief Response to Reactions of Some Oppositions – www.aigaforum.com/mathza-response.htm (aiga forum, April 2004)

4- REMARKS ON MR. DOUG MCGILL’S ARTICLE TITLED “AGAIN AND AGAIN” – http://www.aigaforum.com/mathza04-09.htm (aiga, 09/29/04)

5- PHENOMENALINCREASE IN RENT OF GOVERNMENT PREMISES RENTED TO BUSINESS – http://www.geocities.com/hmbashaa/Phenomenal_BusinesIncrease.htm

6- IN SUPPORT OF THE BLUE NILE FUND http://www.aigaforum.com/mathza0503.htm (hmbasha, 03/21/05)

7- IN SUPPORT OF VOTING EPRDF http://www.geocities.com/hmbashaa/Support_VotingEPRDF.htm (aiga forum, 03/29/05)

8- DEMONIZING EPRDF AND HOODWINKING THE ETHIOPIAN PEOPLE (hmbasha, April 2005)

9- CUD LOSES CREDIBILITY AS ITS SCAPEGOAT STRATEGY FAILS http://www.ethio.nl/comments/cud_basted.html (2005)

10- EPRDF REVIEWING AND CORRECTING ITS SHORTCOMINGS http://72.14.207.104/search?q=cache:GQZQKi6NnZ4J:www.ethioindex.com/medrek2/viewtopic.php%3Fp%3D125320%26highlight%3D+EPRDF+REVIEWING+AND+CORRECTING+ITS+SHORTCOMINGS&hl=en&gl=us&ct=clnk&cd=2

or http://www.ethioindex.com/medrek2/viewtopic.php?p=125320&highlight=

11- QUESTIONING THE IMPARTIALITY AND CREDIBILITY OF EU-EOM http://www.hmbasha.net/EU_ImpartialityCredibiltyQuestioned.htm (Hmbasha, September 14, 2005)

12-: APPEAL TO THE ETHIOPIAN DIASPORA http://www.hmbasha.net/Apeal2EthioDiaspora.htm (hmbasha, September 28, 2005)

13- CULTURE OF LYING – http://www.aigaforum.com/CULTURE_OF_LYING.htm

14- ACCUSING_THE_GOVERNMENT_OF_IMPOVERISHING_ITS_PEOPLE

http://www.aigaforum.com/ACCUSING_THE_GOVERNMENT_OF_IMPOVERISHING_ ITS_PEOPLE.htm (hmbasha, October 11, 2005)

15- NOW OR NEVER -- http://www.aigaforum.com/NOW_OR_NEVER.htm (hmbasha, November 14, 2005)

16- TRUTH WILL TRIUMPH – http://www.aigaforum.com/truth_will_triumph.htm (hmbasha, December 19, 2005)

17- BREAKING THE MONOPOLY OF MISINFORMING/MISLEADING MEDIA OUTLETS-- http://www.hmbasha.net/BreakingTheMonopoly.htm (Hmbasha, February 12, 2006)

18- CUD: STOP YOUR FUTILE PURSUANCE OF A DESTRUCTIVE AGENDA –http://aigaforum.com/Mathza0603.htm (Aiga, March 09, 2006)

19- URGENT NEED FOR RECONCILIATION BASED ON CONFESSION AND ATONEMENT,

PART I -- http://www.hmbasha.net/UrgentNeed4Reconciliation2.htm (Hmbasha, March 29, 2006)

PART II -- http://www.hmbasha.net/UrgentNeed4Reconciliation2.htm (Hmbasha, April 5, 2006)

20- ACCUSING EPRDF ON ERITREAN ISSUES IS A FARCE http://www.hmbasha.net/AccusingEPRDFonEritrea.htm (Hmbasha, April 21, 2006)