BY ABEBE WOLDEGIORGIS
In the normative approach, economic development is attained step by step, starting from the primary to secondary and tertiary economic activities i.e it is achieved through a successive transformation from the agriculture to industry and service sectors. In the process, the labor force stranded in the agriculture sector will move to industry and service sectors.
Urbanization also accelerates such process because it facilitates the inflow of labor from rural to urban areas. The availability of better infrastructure in urban centers gives way to the non-agriculture sector to flourish, according to Dr. Shiferaw Adilu, Economics Lecturer at Edmonton University.
As to him, in a country where subsistence farming is dominant, achieving agricultural productivity is difficult. The economic value of agriculture land is lesser than the land in the non-agricultural sector. For example, in the Ethiopian context, a farmer in one-hectare land may produce grain for his family and supply very little to the market but one hectare of land in an urban center can be utilized to establish industry or service firm which create job opportunities for thousands and this shows how the expansion of infrastructure add value on land in urban areas.
Besides, human needs fluctuate and show progress. Food is a basic need for humans but people consume small amount as compared to other needs which are unlimited and diversified. On the other hand, these other needs create demands that can only be met by industrial production and service provision. For this to happen, it is the urban centers that provide a market for industrial and service products and induce economic growth.
According to studies, currently 55 percent of the world population lives in the urban areas but its contribution to the Growth Domestic Production (GDP) is 80 percent.
In Ethiopia Addis Ababa contributes a considerable amount to the country’s GDP which is 50 percent. Other cities contribute less than 10 percent and this indicates that there is an economic imbalance between urban centers and most economic activities are concentrated in Addis Ababa.
In the last three decades, due to the prevalence of ethnic politics and political instability, as well as other economic and infrastructural factors, investors preferred Addis Ababa than other emerging cities for investment. The division between the so-called indigenous and non-indigenous people in various regions prohibited the flow of capital, ideas and technology to other secondary cities. This has significantly limited the contribution of other secondary cities to the country’s economy.
The elite and the educated class also were not attracted to go and work in the regions because of the above-mentioned problem.
The absence of rule of law and functioning institutions to enforce contracts was very challenging as the result, many projects were interrupted. We can mention numerous causes to be mentioned in this regard.
Hence investors instead of going to other regions, they prefer to invest in Addis Ababa as the result the city developed at the expense of other towns and urban centers. Currently, the disproportionate growth between regional cities and Addis Ababa is the outcome of the wrong policy implemented in the past.
Though urban centers play a crucial role in economic growth, they have their own shortcomings. For instance, socio-economic crises are rampant in Addis Ababa. The housing problem has been transferred from generation to generation and this exacerbates land grabbing and corruption.
In urban centers informal economic activities surpass the formal ones and this narrows the government’s tax base. This is a big issue in a developing country like Ethiopia where the government always faces difficulties in internal resources mobilization for development.
Illegal trade is also rampant. In spite of the fact that Addis contributes 50 percent to the GDP, 22 percent of the city’s residents are living in an appalling poverty trap. The other worrying is poverty induced crime rate is higher in urban areas than the other places.
Poisons gases emission from industries, transport, construction and other service sectors have their own contribution to climate change and global warming and in making life difficult in urban areas.
While, 55 percent of the world population lives in urban places, yet urban areas contribute 70 percent of emission gas globally. Poor sewerage system because of unplanned urban expansion poses health risks.
Currently, here in Ethiopia and in other parts of the world, urban centers are vulnerable to epidemics. In the poverty-stricken areas, people live in a congested way and such situation expose them for various transmitted diseases.
If the growth of urban areas is managed properly and in an inclusive manner, it is possible to overcome these challenges and make urban centers hubs of economic growth.
Urban centers are places where people with diversified ethnic, religious and cultural background live together. Division of labor is manifested by the day to day economic activities and people with various professions earn their living through interacting with others and make businesses.
The culture of tolerance developed by communicative personalities make the places relatively stable. The rapid population growth brings market opportunities through connecting both consumers and producers.
Approximately more than 5 million people live in Addis Ababa and this necessitates the expansion of industry and services. Producers can easily get market without going to other places.
No town has more than one million populations in Ethiopia except Addis Ababa. There is no secondary city in the country whose population passes the 500,000 mark.
According to current projects, there is no possibility for the population of Ethiopia’s secondary cities to reach one million. Currently towns such as Bahir Dar, Adama, Hawassa, Jimma, Gonder, Dessie and others have less than half a million people. But more or less, these towns could garner local investment because their urbanism put in economic scale advantages, as to Dr. Shiferaw.
In the urban areas, manufacturing industries and services get loan access from banks; insurance companies also encourage them to build confidence in their business. The availability of skilled labor also supports them to increase productivity. This has been the case for Addis. But the reverse is true for other emerging cities.
For the future development of Ethiopia the inflow of foreign investment is essential. But as compared to other African cities, the inflow of foreign direct investment is limited, with the expectation of Addis Ababa. In fact, Addis is the 24th investment destination city in Africa. It is the 323rd in the world and this indicates that there remains a lot to be done even in the case of Addis.
As in developed economies, there is strong evidence that cities in developing countries bolster productive efficiency. Urbanization has been an essential part of most nations’ development towards a stronger and more stable economy. The countries in the South that urbanized most rapidly in the last 10– 20 years are generally those with the most rapid economic growth.
Most of the world’s largest cities are in the world’s largest economies, which is further evidence of this link between economic wealth and cities. Cities and towns also have important roles in social transformation. They are centers of artistic, scientific and technological innovations, of culture and education.
Generally, cities provide economies of scale, agglomeration, and localisation; they provide efficient infrastructure and services through density and concentration in transportation, communications, power, human interactions, water and sanitation services.
They attract talents and skilled labor that allow specialization in knowledge, skills and management capabilities possible. They can achieve the economies of scale, agglomeration and urbanization.
Hence, Ethiopia should give due attention to the development of its urban centers. It has to specifically give due emphasis to the growth of secondary and emerging cities to share the burden of the capital in many aspects.
The Ethiopian Herald December 25/2020
