Agricultural transformation is a backbone of the economic transformation It is well recognized that agriculture, the mainstay of Ethiopian economy of course, is a key contributor to economic growth in several ways as it is useful in bolstering employment, income generation, food security, industrial development, export growth, among others.
Taking this essence in mind, The Ethiopian Herald had a stay with Hundaol Mekonnen, an agro economist graduated from Dilla University, to seek a professional point of view regarding the firm association among agriculture sector and economic growth as well as industrial expansion.
He said, “As far as employment is concerned, a strong agricultural sector can lead to employment growth in other sectors. Since it is well recognized that countries with strong agriculture have higher per capita incomes, Ethiopia needs to well embark on the agriculture sector to benefit the same. As agriculture is critical for ensuring food security and improving nutrition, it has to be given due emphasis, too.”
He said that many countries that have achieved high-income status started with agriculture and went through an economic transformation. For example, economic growth in GDP can be instrumental in coming up with agricultural transformation in our country.
He said, “One of the central goals of every developing country like Ethiopia is to reach high-income status. Agriculture plays a critical role in transforming economies to reach the goal, along with achieving other essential development goals like ensuring food security and improving nutrition. Therefore, in order to end hunger and under nutrition while accelerating economic growth, agricultural transformation must be made a reality thereby helping the nation move steps forward in all aspects.”
Economic transformation—also called structural transformation—means a country’s shift in the relative contribution of its technology and sectors to its overall Gross Domestic Product (GDP)—From traditional technology to modern technology and from agriculture to industry and manufacturing, and then to a high-income service economy. For this process to be successful, the agricultural sector must be modernized, he underlined.
He said, “Agricultural modernization prepares conditions for industrialization by boosting labor productivity, increasing agricultural surplus to accumulate capital, and increasing foreign exchange via expanding exports and initiations of import substitution. Modernization also helps achieve humanitarian goals by raising incomes and productivity of poor farmers, lowering food prices, and improving nutrition.”
As to him, increased agricultural productivity and income increases consumers’ ability to purchase manufactured goods and invest in the modernization of agriculture. As agriculture becomes more productive, excess labor moves from rural farm jobs to urban manufacturing jobs.
There are two key areas to make agricultural transformation a reality. One, it is critical to make modern technologies available. While modern agricultural technologies can come from private and public sectors, national governments need to play a big role in investing in agricultural research and development. This is due to the difficulty for a private enterprise to fully capture the benefits of developing such technologies.
Two, agricultural transformation can be fostered by adoption of modern technologies, as farmers may not use such technologies even if they are available. Many technologies such as high-yielding seeds require stringent conditions for water, inputs, and knowhow. Therefore, the government must prepare conditions including irrigation and improved market infrastructure for farmers to access these inputs and sell their agricultural produce. The government will also need to build human capital to ensure a skilled labor force to master new technology, handle logistics and boost each node of the value chain.
“Economic development is a process of structural transformation, and agriculture is the essential engine to jumpstart the process. Defeating poverty, ending hunger and under nutrition as well as ensuring food security are also important goals of agricultural modernization and for economic transformation. Crop production is also a key component of economic development, especially in rural areas, and can help to reduce poverty,” he added.
Agriculture can be a driver of sustainable economic and social development. Furthermore, the share of agriculture in GDP is rising over time although there are a number of ups and downs that need to be well dealt with. This may be because as agriculture becomes more successful, its importance in the overall economy decreases, he underlined.
The major ways that crop production can contribute to economic development via modernization—the agricultural and food sectors need to be modernized to meet the growing demand for food. As far as productivity is concerned, improving output is important, and public and private investment in agriculture is important, but has not been given due emphasis.
Agriculture is a source of both labor and capital for non-agricultural production. Improving the production capacity of agriculture in developing countries through productivity increases is an important policy goal where agriculture represents an important sector in the economy, he added.
Undeniably, the agricultural sector provides livelihood directly and indirectly to a significant portion of the population of Ethiopia he added, especially in rural areas, where poverty is more pronounced. Thus, a growing agricultural sector contributes to both overall growth and poverty alleviation.
Within the context of growth in food and agriculture in Ethiopia, emphasis is placed on productivity and public investments also promote technology adoption, stimulate complementary on-farm investment and input use and are needed for marketing the agricultural goods produced, as to Hundaol.
Agricultural economics, or agro-economics, is important because it helps people understand how to produce and distribute food in an efficient way and decision-making of farmers, agricultural economics research can help us understand how farmers make decisions about adopting new technologies, and how to design crop insurance policies.
Besides, understanding the role of agriculture in economic development has come to the front line as the sector can help understand how a country’s economic development is affected by the role of agriculture in its economy, he said.
According to Hundaol, agricultural economics can also help understand how to bridge the gap between market-oriented development and development goals like poverty reduction and climate change adaptation.
In the case of nonfood agriculture, competition from industrial substitutes grows as investment and innovation lower the price of industrial goods and services relative to agricultural raw materials.
Hundaol said Population growth, the effects of which are often exacerbated by a highly unequal income distribution, has sharply reduced both the per capita benefits of increased food production and the associated increases in per capita income. This paradox of poverty in the midst of plenty has long plagued popular understanding of the role of agriculture in economic development. On the one hand, it has led to a sense of hopelessness about the world’s malnourished; on the other, to technological overconfidence. Over anxiety about food crises has alternated with taking agriculture for granted.
As far as agricultural expansion is concerned, it is the process of converting non-agricultural land to agricultural land, such as turning forests into crops or grasslands into pastures. Furthermore, trade liberalization has also increased global agricultural trade and expanded opportunities for exporters of agricultural products.
True, improvements in agricultural technology can free up labor from agriculture, which can be crucial for industrialization. Besides, industrial expansion can be used to monitor livestock welfare in real-time, which can lead to higher yields and healthier livestock. Balance between agriculture and industry—if agriculture expands without a parallel expansion in industry, transportation, and other parts of the economy, the increased agricultural output could pile up or drive prices down.
In a nutshell, agriculture is a key component of economic growth and development, and can contribute to economic growth in a number of ways via, for instance, job creation—agriculture can create jobs and income, and integrate the unemployed, young people, and poverty groups into the economy; and food security—agriculture is essential for food security and nutrition. Plus to that agriculture can provide a surplus that can be used to fund industrial development, such as building roads and purchasing industrial equipment.
Agriculture can be a sustainable part of economic development if it is ecologically sustainable and socially equitable. The sector and industrial expansion are closely linked in economic development, and there are many factors to consider when analyzing the relationship between the two sectors: Agricultural productivity and industrialization.
All things considered, improving agricultural productivity can be a catalyst for industrialization, and sustainable industrialization can accelerate economic growth and social development by reallocating resources from labor-intensive to capital- and technology-intensive activities.
BY MENGESHA AMARE
The Ethiopian Herald December 15/2014
