Ethiopia’s location gives it strategic dominance as a jumping off point in the Horn of Africa, close to the Middle East and its markets. With more than 112 million people (2019), Ethiopia is the second most populous nation in Africa after Nigeria and the fastest growing economy in the region. Ethiopia aims to reach lower-middle-income status by 2025, a document of World Bank in Ethiopia stated.
Ethiopia’s economy experienced strong, broad-based growth averaging 9.4 percent a year from 2010/11 to 2019/20. Its real Gross Domestic Product (GDP) growth slowed down to 6.1 percent in 2019/20 due to COVID-19 (corona virus pandemic). Industry, mainly construction, and services accounted for most of the growth. Agriculture was not affected by the COVID-19 pandemic and its contribution to growth slightly improved in 2019/20 compared to the previous year. Private consumption and public investment explain demand-side growth, the latter assuming an increasingly important role.
The consistent higher economic growth brought with it positive trends in poverty reduction in both urban and rural areas. The share of the population living below the national poverty line decreased from 30 percent in 2011 to 24 percent in 2016. This figure, according to Ethiopia Economic Outlook was projected to decline from 23.5 percent in 2016 to 19 percent by end of 2020. The government has launched a new 10-year perspective plan which will run from 2020/21 to 2029/30. The plan aims to sustain the remarkable economic growth achieved under the Growth and Transformation Plans, while putting more emphasis on the private sector.
The World Bank is helping to fight poverty and improve living standards in Ethiopia. Goals include promoting rapid economic growth and improving service delivery. The upcoming 6th national election remains only few weeks to take place so that debates on various political, economic and social issues are underway among various political parties. During the debates aired via broadcast media outlets, the debaters said that they are optimist the nation’s economic landscape will be improved in the coming years.
On one of the occasions, Minister of Finance Ahmed Shide, reflected on the political and economic policies of the ruling Prosperity party in line with its achievements and plan to do in the coming five years. In addition, he gave responses to questions raised by the facilitator of the debate. With regard to the construction sector, he said that his party recognizes the role of the sector in stimulating the economy through creating value chain between various sub sectors Such as cement factories, metal and iron suppliers, wood works and transport sub sector among others.
Considering these, the government that is led by the prosperity party strives to resolve the bottle necks and misconducts which hamper the sector’s various activities, he said. In addition, to modernize the sector through creating conducive environment for knowledge and technology transfer, efforts are exerted to encourage foreign companies to involve in the sector. Side by side with these, attention is rendered to the local companies to be competent in the construction business.
As to him, acknowledging the crucial role that local and foreign investments can play to achieve the economic growth, various measures have been taken based on research and study to attract new foreign investments. The country’s experiences bear witness that such kind of measures can be taken as tool to stimulate the nation’s economy.
He further explained that Provision of basic infrastructure and services like water, electric power, banking, custom and tax services in one place is a key task to facilitate the rapid growth of both manufacturing and agribusiness in the industrial parks that are under expansion.
Attracted by this development, investors both from local and foreign have shown interest and being involved in the sector and play pivotal role in job creation, value chaining, enhancing export earnings and import substitution. The experience of the Asian tiger countries’ economy indicates that the expansion of industrial parks is instrumental in attracting foreign investment, raising their export volume, transferring technology and laying fertile ground for the establishment of sustainable innovation based economy.
In due process, the role of the private sector in the economy being evolved from premature to the dominant level with stiff competition, deserve recognition. With such unprecedented achievement, the country could transform its economy from agrarian based to the world manufacturing power house. However, as to the Minister, both the local and foreign investors should consider the local communities that reside in the surroundings of the newly installed firms to get priority of employment in accordance with their experience and skills. In addition, it has to be taken into account that these investment ventures should be environmentally friendly.
The government on its part creates enabling environment to attract investors by providing infrastructures such as constructing roads, providing energy and financial support and facilitating conditions for efficient import and export transactions. It also formulates and implements industry policies, rules and regulations to enhance their competitiveness locally and internationally. Taking the advantage of these legal frameworks, the private sector needs to take the lion’s share in expanding industries.
As to Ahmed, the government has been engaged in tackling bottlenecks that hampered the sector’s progress for the last three years. As a result, some improving measures that make the sector more accommodative have been taken. The ongoing privatization of public owned enterprises; the new investment proclamation; the introduction of new trade law and the financial reforms along with the provision of helpful technology to improve the lively hood of the pastoral communities can be mentioned in this regard. In addition to these measures, the government is determined to dedicate its resource and time to increase the number of middleclass people which in turn play pivotal role in enhancing the economic growth.
On top of bridging the gap between saving and investment aiming to trigger local investors, efforts will be exerted to attract more foreign investors via opening the economic landscape more widely so that more actors will be engaged and benefited more as well. Regarding improving the situation of livestock, Ahmed said that culture and religion related new policy is formulated and now being implemented taking in to account the pastoral communities’ and sedentary farmers’ way of life.
During the last successive three regimes, the pastoral communities were neglected and marginalized from the nation’s development endeavor. But today they are enjoying their own free regional governments which serve self-rule. To change their life for the better, the ongoing government support will continue, he assured.
To meet the goal that aspires reaching middle income countries, more energy generation from various sources such as wind farm, hydropower, solar energy, biogas and geothermal will continue. This can be successful only with the wholehearted involvement of the private sector that loosens government’s burden. Therefore, mobilizing loan from foreign sources and attracting Foreign Direct Investment with minimum requirement has been taken as a way out. To this end, exploitation of various energy sources is undergoing through private public partnership.
For the last two decades the nation has constructed various hydropower dams in many parts of the country and many of them are generating electric power. Such efforts elevated the nation’s power generation capacity to the higher level. The Grand Ethiopian Renaissance Dam (GERD) hydropower project nearing completion expected to generate 6,450 megawatt after its completion is hoped will provide much needed electricity for industrial development.
When it enters generating electric power with its full capacity, it serves to boost the hard currency earning of the country by exporting energy to the neighboring countries apart from easing local power shortage. Djibouti and Sudan already began to enjoy the Ethiopian energy. Stretching electric line towards Kenya is also underway.
The GERD project is running to completion despite internal and external challenges with dedicated effort of the reformist government. The construction work is undergoing rapidly and reached at promising level at the moment resolving the problems inherited from the past. The second water impoundment scheme will be conducted as per its plan in the coming months and two turbines will begin the experimental electric production. This again gives additional capacity to speed up the nation’s economic growth, he stressed.
BY ABEBE WOLDEGIORGIS
The Ethiopian Herald June 9/2021
