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Addressing inequality of opportunities can ensure equitable growth in Ethiopia

Olansis Mulugeta Wolde's picture
Farmers sort tomatoes in Ethiopia. Photo: Stephan Bachenheimer / World Bank


In 2016, World Bank Ethiopia launched a Blog4Dev contest inviting students to share their ideas for how Ethiopia can reach middle-income country status without leaving anyone behind. This is the third of three winning entries.
 

In the two past decades, Ethiopia has shown a remarkable performance in diversifying its economy and building essential infrastructures that helped the economy to boom. Ethiopia is now one of the fastest growing countries in Sub-Saharan Africa and the country has earned a fair amount of recognition from international organizations like the IMF and the World Bank.
 

This remarkable growth however, has brought some pressing challenges that must be addressed if the country is committed to reach middle income country status without leaving anyone behind. One of the challenges the country is facing now is the problem of inequality of opportunities in important sectors like agriculture, energy, and manufacturing. Hence, it is imperative that policymakers come up with solutions that are pragmatic and feasible to address the inequality of opportunities. In the meantime, we can explore potential solutions that might serve as an input for policy makers and leaders.

AGRICULTURE

Agriculture is the backbone of Ethiopian Economy. More than 75% of the population lives in rural area and is comprised of small scale farmers. In order to achieve the desired goal, I believe the following changes in policies and strategies are imperative; and if implemented, they can bring the desired impact in lifting millions of farmers out of poverty and achieve a middle income country status. These changes can include:-

  • Revising the rural land ownership and lease policy and replacing it with a better policy that gives more rights to farmers and not the state.
  • Liberalizing the market and minimizing government intervention in fixing prices for agricultural products.
  • Abolishing state-controlled fertilizer supply and replacing it with a liberal system that invites private companies to engage in fertilizer supply business.
  • Facilitating financial provisions like loans and banking services for small scale farmers.
  • Working with NGOs and other international organizations for capacity building of small scale farmers.
  • Strengthening existing farmers unions and creating unions for small scale farmers where there is none.
  • Utilizing science and technology to provide farmers with better seeds that are immune to local diseases and pests.     
  • Establishing a framework that enables small scale farmers to leave traditional way of farming and embrace modern agricultural technologies.

ENERGY

When development is at stake, energy is everything. Without a sustainable generation of electric power and other forms of energy, it is almost impossible to sustain small businesses and even be the favorite destination for foreign direct investment (FDI). Ethiopia has a big problem when it comes to power generation; that is why I believe the following steps, if taken, could revolutionize power generation in Ethiopia. These steps include:

  • Liberalizing energy production and distribution including electric power generation.
  • Building modern power generation plants with maximum efficiency.
  • Modernizing the national electric grid
  • Investing on clean energy solutions like solar energy in Afar region.
  • Increasing electricity coverage to rural parts of the country esp. in Oromia region.

MANUFACTURING

Currently, Ethiopia’s economy is mainly based on agriculture. However, manufacturing has to be the next big thing if the country wants to achieve its goal of becoming a middle income status country. Although Turkish and Chinese firms have started entering the manufacturing sector, there is still a long way to go to make manufacturing the main driving force of the economy. Given the above premises, I believe the following changes in the manufacturing sector could serve as a turning point to prop up the infant sector.

  • Liberalizing financial institutions and opening up the finance sector to foreign firms.
  • Privatizing state controlled industries to private bidders.
  • Facilitating smooth import/export by working with the private sector.
  • Cutting taxes for big industries that use vast human labor.
  • Providing small businesses with financial and technical incentives.
  • Creating a business friendly environment for foreign direct investment (FDI).
  • Providing incentives for agro-industries.
  • Building industry zones and other infrastructures that boost the manufacturing sector.  

Given Ethiopia’s rooted political and economic problems, these solutions are just the tip of the iceberg. However, if implemented with a rigorous commitment, the country could set its course in the right direction to achieve a middle income status within foreseeable timeframe. 

Read more from the Ethiopia Blog4Dev series: 

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