The three pillars of the economy, such as agriculture, industry, and services, play a pivotal role in achieving growth. Agriculture created employment opportunities for almost 80 percent of the labor force, contributes for foreign exchange earnings, supplies food to the market at least at a subsistence level, and raw materials to the manufacturing sector.
Tourism, hotels, and trade, categorized as service sectors, also play a crucial role in creating jobs and generating income.
Solomon Zegeye, an economist working as a consultant for various firms, says that currently the sector contributes 45 percent to the nation’s Gross Domestic Product (GDP). For the two-digit economic growth registered in the past two successive decades, the sector played a significant role, and the utilization of modern agricultural inputs such as fertilizer, pest and herbicides attribute to increasing of production.
He also said that, even though it is the mainstay of the nation’s economy, currently its contribution to the GDP is in decline, and this indicates that the nation is experiencing structural change and the contribution of manufacturing and service to the GDP is growing.
Textiles and garments, leather and shoes, and agro business are the backbone of the manufacturing sector. The textile industry is essentially creating job opportunities for thousands, but it is also dependent on the importation of cotton. It supplies its products mainly to the foreign market and garners hard currency.
The leather and leather product subsectors, in addition to creating jobs, export their products to foreign markets. The agribusiness subsector also plays a key role in processing agricultural products and producing food supplied to the local market. Although it has the potential to transform the economy to a higher productivity rate, it is still in its infancy level. The sector is dependent on imported inputs and spare parts, faces power interruptions and other shortcomings.
The outdated logistic system, insufficient warehouses, and dilapidated roads from the border to the port of Djibouti incurred heavy transaction costs. As a result, industries are forced to reduce their production volume.
The service sector, mostly manifested by hotels and entertainment, is flourishing in the urban centers. It created job opportunities for tens of thousands and heavily utilizes locally produced agricultural products and created link with the sector.
Tourism is one of the service sectors that play a pivotal role in job creation and foreign currency earnings. But currently, due to some security reasons, the sector earns less than what it expects.
The government is aggressively working on the expansion of lodges and parks, which can attract local and foreign visitors, and has allocated a huge amount of budget for the development of tourist sites.
The availing of parks and animals zoo in the city further stimulate the sector.
As to Solomon, in his view the Growth and Transformation program, which was implemented before the coming to power of the current reformist government, had its own weakness because it had tried to implement an imported economic plan beyond the nation’s context.
As the result, it was unable to achieve structural change which was targeted to be achieved by 2020 GC.
As to him, the 10 years perspective economic development plans introduced by the current government go in line with the reality on the ground and has a potential to attain structural change. It is prepared based on the actor institutions implementing capacity in the bottom up approach.
To lay ground for industrialization, the agriculture sector must ensure the nation’s food self-sufficiency so that citizens’ productivity and creativity will be enhanced, which in intern drive the economy in the right track. But if it is not, the nation will continue to import food and other agricultural products from abroad and will continue to spend its meager resources for importation.
The expansion of manufacturing changes the economy driven by low economic performance into higher productivity, creates job opportunities, boosts exports, supports import substitution, creates linkages with agriculture, and attracts both local and foreign investment.
However, to attain sustainable development, the state of the nation’s macroeconomy should be healthy. Some of the indicators of the macroeconomic situation of the nation are the total employment, national fiscal policy, government revenue and expenditure. Money supply, interest rate, and the nation’s foreign currency earnings capacity are the backbone of the economy.
The fiscal aspect of the nation also can be mentioned as a major indicator of the macro economy status of the country. Whether the total budget of the country is covered by local sources or not, or part of it is covered by foreign loans or aid, determines the healthiness of the economy.
Whether the nation is financing its mega projects by local sources or not defines the characteristics of the macro economy.
As to Solomon, policymakers, before talking about economic development, should think about how to feed the population. When there are shortfalls in meeting the basic needs, aspiring to big things remains a daydream.
When food price goes cheaper citizens’ income will rise. A person who earns 10 thousand birr per month and spends five thousand birr for house rent and the rest four thousand birr for food and other expenses, we can say that, he lives in a hand to mouth income brackets. If the majority lives in such a situation, the society will be vulnerable to various economic shocks.
Therefore, to stabilize the living situation of the society, agricultural productivity must be increased.
However, as mentioned above though agriculture is the main stay of the nation’s economy, it is subsistence, venerable to extreme climate variation, land fragmentation due to population pressure. In addition to these, as farmers lack sense of ownership of land raising productivity is a challenge.
Asked whether there are possibilities to overcome the mentioned problems and uplifting the farming sector Solomon told that, despite the sector being subsistence adopting technology and utilizing more agricultural inputs can be taken as a way out.
He further said that countries which have predominantly arid areas proved the possibility of raising agricultural productivity through adopting better technology.
But as to Solomon, utilizing cutting edge technology requires huge amount of money which Ethiopia ill affords.
To achieve structural change, planning a strategy to relocate the stranded labor force in the rural part to the urban center and get employment in manufacturing and service sectors is essential. Moving the labor force from farming to non-farming helps to establish extensive farm which utilizes modern farm inputs that helps attaining raising productivity.
Currently the practicing of farming in a collective way by smallholder farmers proved the possibility of improving productivity.
As to Solomon, in Ethiopia there is abundant natural resource which can be used as input to agriculture but due to the absence of finance, technology and skill, the nation is unable to tap the resources.
Currently the sector utilizes less in put with less output as the result, it remains subsistence. If the situation is changed to the better the probability of ensuring food security in the near future will be high.
To that end exploring and exploiting the water resources of the country is essential. The government endeavor in this regard is appreciable.
According to the report by the Ministry of Irrigation and Lowland, Ethiopia only utilized five percent of its water resources for irrigation and the arable land that can be used for extensive farming particularly found in the law land parts of the country remained idle.
Modern irrigation farms were introduced in Ethiopia by a Netherlands company in the 1960s GC. Large extended farms were cultivated in the upper, middle, and lower Awash River valley. Sugarcane is used as an input for the sugar factory located in the Mattahara town, which is still continuing its production. In the lower Awash Valley, cotton plantation was cultivated, and the product was supplied to local and export markets, but now it has ceased to exist. Large-scale farms also flourished in the northwestern parts of the country in the areas of Humera and Mattama towns since 1960. The farms produced oil seeds and supplied their products to local and foreign markets.
The dry season wheat irrigation farm cultivated by small-scale farmers through a clustering system could bring tremendous results in meeting the local wheat demand. Some of the products were also exported to the neighboring countries and supported the nation’s hard currency earning capacity.
Such achievement can be taken as a showcase that the nation has the potential to raise agricultural productivity and ensure food security.
BY ABEBE WOLDEGIORGIS
THE ETHIOPIAN HERALD SUNDAY EDITION 11 MAY 2025
