Ethiopia’s Economic Prosperity Vision-Strategy: Challenges of Old and New Recommendations

Tsegaye Tegenu, PhD
September 14, 2021

To be economically prosperous, Ethiopia needs a formal vision-strategy document that reflects the consensus of the people. The dominant sectoral approach and policy thinking did not bring about the desired development effects and achieve the goals of economic growth and transformation. The lesson is that policy thinking of sectoral and macro approaches of plaining should start from identifying the environment, crafting of goals, (“what should be done), and choice of actions (“how to do it”). In other words, vision strategy must come first before policy framework and the vision should be homegrown formulated through a process of popular participation.

The beginning of the Ethiopian New Year is an appropriate moment to assess the vision-strategy thinking and practice that existed in the country over the past six decades. During the period of 1955-1992, there never was vision-strategy thinking. There were economic plans designed to address emerging crises and actions were evaluated by judging against outcomes rather than strategy principles.

The idea of strategy came into being in the planning experience since 1993. These included:

1. MOFED (1993), An economic development strategy for Ethiopia: A comprehensive guidance & a development strategy for the future, Government of Ethiopia, Addis Ababa
2. The EPRDF’s five-year National Development Plan for 1996-2000 was another initiative aimed at alleviating poverty in general and meeting the basic food requirements of the country in particular.
3. EPRDF’s five-years National Development Plan for 1996-2000
4. Ethiopian Industrial Development Strategy (2002)
5. Sustainable Development and Poverty Reduction Program (SDPRP), which covered the years 2002/03 – 2004/05)
6. A Plan for Accelerated and Sustained Development to End Poverty (PASDEP), that ran from 2005/06 to 2009/10
7. Growth and Transformation Plan (GTP I), for the period 20 I0/ II – 2014/15
8. Growth and Transformation Plan II (GTP II), for the period 2015/16-2019/20

The emergence of strategy thinking coincided with the period of fast population growth in the country. Probably the earlier plans did not have that environment. Even if the strategies since 1993 had contexts for their emergence, the strategy-based development plans did not transform the economy and bring about sustained growth as declared.

The 1990s strategies focused on health, education, and rural population. After ten years of implementing the strategies, rural poverty declined relatively, while urban poverty increased by a given percent. Urban poverty is related to the absence of productive employment which shows a lack of economic structural transformation.

The next poverty reduction strategy of 2002-2010, was a strategy copied from IMF and World Bank. If you copied a strategy you are distracted from alternative opportunities that better fit your developed capabilities and endowment structure. Not only that; the poverty reduction strategies required continuous financial inputs from IMF and World Bank, leading to a ‘dependency syndrome’ –, the country becoming increasingly dependent on foreign aid and loan and losing any idea of self-reliance.

The formulation and launching of Growth and Transformation Plans (GTP I and II), 2010-2020, did not change the slope of economic growth. GTP increased government intervention and control in the economy in the name of the developmental state. Currently, the state economy has expanded to such an extent that its institutions have literally become inefficient.

Old economic strategies were either copied, diffused, or captured by the state. What drives options were ideological changes and planning needs. Everyone is now aware of these shortcomings of the previous strategies, but there is generally no agreement yet on the kind of vision and strategies that should replace them.

Recommendations from an online discussion include jumping to the Fourth Industrial Revolution, tourism promotion, human capital development, demographic dividend. These recommendations are spatial blind to local variations, differences in urban growth, functional areas, and availability of natural resources.

Context matters for vision-strategy formulations (see figure 1). They influence the rationale for the adoption of a particular strategy block. Contexts define what a strategy/policy is and aimed at. They are the reasons for adopting a particular vision strategy.

There are four contextual factors affecting or influencing the choice of strategy and policy:

1. Rapid population growth and the growing demand for basic needs is one contextual factor affecting choices. In Ethiopia, the population grows 3% annually, it’s doubling time is 25 years, and the age structure is dominated by children and young adults.
2. There are different stages and processes of economic development, each with a different set of economic characteristics (Porter 1990). Different growth factors play different roles at different stages of development. Ethiopia finds itself now at a factor-driven stage, in which competitive advantage is based exclusively on endowments of labor and natural resources.
3. Ethiopia’s economy is structurally dependent on the behavior of other country’s economy and politics. It is necessary to reduce the country’s dependency on imports and strengthen from within and create a national economy based on domestic production.
4. Strategy and policy suggestions should not be blind to spatial variations and level of local economic development: the character of uneven and unbalanced growth of towns, differences in overlapping markets or functional areas, a network of economic flows, the concentration of surplus labor and unemployment, regional income inequality, availability of natural resources, etc. It is therefore necessary to consider comprehensive geography of functional economic areas.

To sum up, a given recommendation is considered as a strategy if it addresses basic need gaps, reduces economic dependency, and has large spillover effects and if it provides a substantial infrastructure for local economic development.

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