In Part III of our three-part blog series on our study on spatial distribution and its implications for inclusiveness development in Ethiopia over the next five years, we will broadly describe four overarching policy solutions to address spatial inequalities in development in Ethiopia.
Expanding productivity in the agricultural sector
An important way to integrate rural populations into the growth process is by improving their productivity in agriculture, the sector in which the majority of people are engaged. When Ethiopia’s GDP was growing at an annual rate of 10.7 percent, the agricultural sector grew at an average annual rate of 7.6 percent and usually accounted for 47 percent of the country’s GDP Systematic Country Diagnostic (SCD).
Agriculture was the largest contributor to GDP until services took over in 2010/2011. Therefore, the story of Ethiopia’s remarkable growth has been linked to strong growth in the agricultural sector, and agriculture will remain critical for a large part of the country’s population in the future. Not everyone will move out of agriculture, so increasing agriculture productivity is key.
Here, our specific policy recommendations consist of modernizing agricultural inputs and improving their access and utilization, increasing the capacity of agricultural extension workers, strengthening small holder agriculture, and more.
More importantly, access to land and land rental markets are key determinants in improving agricultural productivity, and an important policy issue in Ethiopia.
More connective infrastructure to increase market access for farmers
The SCD found that poor market access for farmers is a constraint to the growth of rural incomes, a finding consistent with the WDR 2009 framework that rural connectivity is key to overcoming spatial inequalities. Road infrastructure is a major, but not the only, constraint to market access. Although the national roads network in Ethiopia quadrupled in size from 1997 to 2015, road density in Ethiopia remains the lowest in Africa, while poverty rates increase by 7 percent with every 10 kilometers of distance from a market town.
Efficient markets that allow farmers to purchase inputs at low prices and receive a fair price for the goods they produce and sell, provide incentives for agricultural investment. Addressing the problems arising from remoteness also helps increase rural, non-farm income growth. Both of these can be addressed by strengthening towns in areas with dense rural populations. This will have the effect of increasing market access and opportunities.
Analysis of the continuous effect of connectivity on employment show that well-connected rural woredas perform better economically, highlighting its importance in promoting spatially inclusive growth.
More distribution needed
Ethiopia gains when it strengthens spatially neutral institutions that provide services of equal quality to all populations in all areas through national programs.
It has already made great strides in doing so. As per the WDR 2009, “spatially blind” institutions that will facilitate economic density should be the bedrock of integration policies. And where it is not yet clear which places will be favored by markets, neutrality between places is important.
Spatially neutral institutions involve a range of public sector programs, policies, and expenditure priorities that intend to enable all residents achieve their full potential as individuals—basic education, primary health, safe water and sanitation, access to infrastructure, and security.
Institutions include those that enable markets to function, those that allow businesses to flourish. Studies show that decentralized services in Ethiopia result in stronger citizen engagement, and better outcomes in health and education.
That said, there are many challenges to address that we don’t state exhaustively, particularly around enabling access to services in very remote areas, decentralizing funding allocations from the federal to regional levels, and the formula used to determine them (which is currently being reviewed), and quality of services available.
Actively managed urbanization
Ethiopia’s prospects for spatially inclusive growth critically depend on urban planning and urbanization, a process that facilitates structural transformation and the creation of high productivity jobs. Integrated planning will be essential to ensure urbanization is better managed, as well as improved land management to facilitate investments in infrastructure and services.
Rigid and static land use planning, typical of many countries, is giving way to more market-responsive systems. The current Ethiopian Urban Plan Preparation and Implementation Strategy already signals a positive shift in this direction. In addition, improved urban safety nets can help make the urbanization process more inclusive.
Furthermore, secondary cities can be engines of growth and job creation, particularly if they can facilitate labor-intensive industries. Agglomeration matters for firm performance.
Yet, while cities in Ethiopia already play an important role in the economy, contributing 38 percent to GDP, they only employ about 15 percent of the total workforce. One reason for this is the capital-intensity of production. Rapidly growing cities such as Mekele in Tigray and Sebeta in south-west Addis Ababa, mostly attract firms from medium and high capital-intensive industries, while larger, more well-established economic centers such as Dire Dawa in eastern Ethiopia attract more labor-intensive industries.
These smaller, secondary cities need to be at the forefront of the rural-urban transition, and for that, more labor-intensive industries will be needed by them to increase the possibility of more balanced, spatially inclusive growth.
Data provided by DEC survey unit. Maps produced by the Data Management Unit.
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