Growth vs Development in Ethiopia

Part One – Growth V/s Development w.r.t Ethiopia and Madhya Pradesh

Ethiopia, the second most populous country in Africa, has been exhibiting stupendous and inconceivable set of numbers. With growth rates of double digit, the country is among the fastest growing economies in Africa. Ironically, regardless of its agriculture, mineral and hydrological resources Ethiopia is one of the poorest countries in the world. Irrespective of high economic growth rates, the economic development indicators are yet a matter of concern. HDI as low as 0.4 (HDI report 2014). This dejected story of Ethiopia elucidate that Economic Growth and Economic Development are two contrasting terms.

Mercantilism, a school of economic thought, functioned only for the purpose of economic growth by capital accumulation (mainly gold). On the other hand, Physiocracy, another school of economic thought, believed on agro-based growth. These schools of thought did not know the concept of development. Sooner or later, people began to notice that the growth is not beneficial to all. The theory of ‘trickle down approach’ doesn’t seem to have a great impact. The quantity of capital accumulation was not enough to capture the actual increase in the living standard of the people. Hence, the concept of economic development emerged. Several efforts are made to capture development. One of the prominent was HDI, formed by Mehboob Ul Haq and Amartya Sen. These indicators take into account the necessary variables, which upgrade the life of an individual. Several other development indicators were dformed such as Multidimensional Poverty Index (MPI), which brings out the level of deprivation in the country.

General Mier describes development as “the process whereby the real PCI of a country increases over a long period of time subject to the stipulation that the number below absolute poverty line does not increase and that the distribution of the income does not become more unequal”

Part Two – Country Profile

The Federal Democratic Republic of Ethiopia is located in the horn of Africa. After the civil war against Eritrea, the Ethiopian government went through the following changes as follows:

1. A political transition from totalitarian dictatorship to multiparty democracy.
2. A transition from a socialistic planned economy to a capitalist market economy.

This transition was a crucial change in the country. Post 1991, Ethiopia was struggling with its essentials and was yet to set a strong foundation for economic development, which should be the primary goal of every nation. The major issue faced by Ethiopia was:

• As the country had just come out of a war, health conditions in the country were critical. Malnutrition and starvation was at its peak as resources were used to brace war.
• Illiteracy rate was as high as 90 percent during 1974 and went down to almost 70 percent in 1991. The government had a vast challenge ahead with respect to education.
• Poverty headcount ratio at $2 a day (PPP) was as high as 85 percent of the population. (World bank)
• Inequality in the country was at a constant rise.
• Gender Inequality Index was at its extreme
• Conflicts among religious groups

In 1990, Ethiopia experienced a population growth of 36.33% and 31.91% in 2010. This has not been the case with the growth in wealth and production. Such unequal growth has lead to a decline in the socio-economic condition in the country.

Part Three – Analysis of Economic Growth and Economic Development in Ethiopia

Economic Growth Analysis

1. GDP:

Health

In the least developed countries, such as Ethiopia, health is not only a basic human right but also an urgent prerequisite for broad socio-economic development. Malnutrition and starvation is pre-dominant in the country. Ethiopia faces serious challenges in providing basic nutrition to its citizens. The country is highly depended on the foreign aid for food supply. The problem in nutrition can easily be seen in the Child Mortality and Infant mortality rate.

Ethiopia lacks medical infrastructure irrespective of consistent effort by the government. However, in the urban areas, the issue is much better. Rural areas lack access to such facilities, as connectivity to these majors city remains limited. Moreover, the government has failed to provide proper medical infrastructure in the rural areas.

As shown in the table above, the IMR (Infant Mortality Rate) and CMR (Child Mortality Rate) have decreased over the period of time, but these level remain unsatisfactory.

• 80 percent of the deaths are caused due to preventable communicable diseases.
• The approach of the government to cure rather than preventing diseases is highly criticized.
• Maximum number of births takes place at home, with very few women delivering at a well-equipped clinic.
• Lack of nutrition, as the country faces several drought years and famine condition.

With an increasing population in the rural areas, the task of the government keeps getting tougher. An average woman in the rural areas gives birth to 6 children. The child mortality rate did decrease but was not swift enough to satisfy the government.

Initiatives taken by the government to reduce mortality:

• Increasing child immunization coverage. The coverage reached to the extent of approximately 84 percent.
• Providing education to women with respect to becoming a mother.

Why has the government failed?

The Ethiopian government has been spending on medical infrastructure. It has also been receiving financial aid from western nations to expand and upgrade its medical facilities, but yet the government fails to bring down the IMR and CMR.

Observing the procedure of the Ethiopian government, the following conclusion could be derived.

1. According to researchers, the diseases are caused due to lack of clean drinking water, poor sanitation facilities and lack of nutrition.
2. Health conditions of the mother has a huge impact on the child health.

In order to have a great impact on the child mortality rate, the government should use the direct attack approach. It should focus on improving access to clean drinking water and solving sanitation issues. Building medical infrastructure is definitely necessary, but is the later part of the stage. If the disease is prevented by providing healthy growth conditions, the root cause of child mortality would be eliminated.

Hence, the approach of the government to cure the diseases rather than preventing it with providing clean drinking water and improving sanitation conditions have not allowed economic growth to be converted into economic development.

Education

To build a strong education foundation for its young people, Ethiopia came up with Education Sector Development Program (ESDP). The implementation of this program started with the expansion of primary education, which resulted in a significant increase in access to primary education. The gross and net enrollment rate has seen a tremendous growth. At the beginning of 1991, the gross enrollment rate in primary schools (grades 1-8) was only 32 percent. This figure rose to as high as 95 percent by 2012.

The figures exhibited look stupendous. But the reality looks totally different. Despite such large number of enrollment, the national literacy is still as low as 36% (UNDP) in 2011.

Following are the hindrances in converting this economic growth into economic development:

1. While sustaining the successful effort of high enrollment, the country also needs to pay greater attention on improving the quality of primary education. The schools built, especially in rural areas are not adequately equipped. This act as a barrier to a good quality education. One of the reasons could be lack of trained teachers. A sharp drop could be noticed in the period between year 2009 and 2010. (Refer appendix)
2. Several parts of the country do not have proper access to schooling. Several children have to walk miles to for gaining handicapped education.
3. The gender gap in enrollment ratio still persists. Girls are often pulled out of school to get married.
4. Male children are pulled out to help the family work in fields.

These are the factors that have created a barrier from converting the growth of high enrollment rate to be converted into an economic development for the country.

Poverty

By the end of 1991, approximately 45.5 percent of the population was living under poverty. This figure dropped down to 27.8 percent by the end of 2012. Ethiopia has successfully been able to reduce poverty but would definitely want to reduce this figure as much as possible. Ever since a new government was formed in 1995, majority of schemes and policies have been pro-poor. The government has looked at poverty eradication seriously.

80 percent of the population is dependent on agriculture as a source of living. In order to bring out people of poverty, the government needs to generate enough jobs in the country. Migration rates have been high as pay and living conditions are far better. This has led to brain drain in the economy as qualified Ethiopians left the country for self-benefit.

The HDI of the country is 0.435, one of the lowest in the economy. The growth story of Ethiopia has been amazing when it comes to numbers. The economy has been posting double-digit growth rates but yet remains one of the poorest countries in the world. The high growth were an indication of inequality rising in the country. The Gini Index is 33.6.

Gender Inequality

Ethiopia is a patriarchal society that keeps women in a subordinate position. There is a belief that women are docile, submissive, patient, and tolerant of monotonous work and violence, for which culture is used as a justification.

• Gender disparity are largely seen in primary education enrollment
• Girls are forced to marry at an early age, against the legal age of marriage.
• Female Genital Mutilation (FGM) is still practiced in the country.
• Health of women in the country is critical, particularly of women who are expecting a baby.
• FGM is also vulnerable to diseases in the long run

Women in Ethiopia are suppressed due to social, religious and other reasons. The government has undertaken several policies and program for their betterment. Yet the key issues are not looked upon as follows:

• Empowering women through access to education as well as providing them with physical and financial resources is crucial to the long-term development of the country.
• Proper education would help in resource allocation and also adequate decision such a delayed marriage (generally not in the hands of the girl child)
• Adequate education would also enable the girl child to be an efficient mother as it would gain knowledge with respect to health.

International Relation

Foreign Aid

A free financial aid will always be welcomed, but it also does have consequences if not used wisely. The challenges that an economy faces in receiving financial aid are as follows:

• Investment in favor of greater/mass consumption.
• With such large amount of money entering the economy, these cash flows are highly inflationary.
• As the aid comes in the form of foreign currency, this appreciates the value of local currency, making export more expensive in the international market. (Ethiopia highly depends on its export of coffee)
• Aid increases inflation, which leads to even more poverty and unemployment. To support this issue, the government asks for more aid which keeps on concentrating the issue.

However, there are benefits of aid seen in the country. The government has been able to implement several of its policies with the help of such aid. A recently built highway to the capital, or be it the controversial dam in construction; the aid has contributed significantly to the nation. These aids also come as the rescue to the Ethiopians in situations of drought and famine.

Foreign Direct Investment

Due to lack of local investors, Ethiopia had to look for foreign investments. The Ethiopian government has not opened up the economy in all sectors as the banking system is still with the local authorities. FDI has become a major aspect of globalization.

The major investment is seen in the land-leasing scheme launched by the government. The Ethiopian government has given out large part of lands to foreign companies in lease for agricultural purposes, without any restriction on the agricultural produce.

• Approximately as large as 6,00,000 hectares of land has been leased out to foreign companies
• Locals are being displaced in order to meet the requirements of these investors.
• Displaced locals are finding it difficult to sustain living.

The benefits of these schemes are as follows:

• The foreign investors have brought in latest technology for agriculture, which the Ethiopians lacked.
• People were hired to work on the leased lands generating employment.

The objective behind this scheme look relevant, however, the investors have exploited the scheme heavily and the government seems to have no control over it. Moreover, the scheme allows these investors to lease the land for really long periods, which wasn’t necessary. A shorter duration would have had the same impact to the economy. Also to make the scheme more citizens friendly, the government should’ve come up with better displacing techniques and improving the condition of living.

The land-leasing scheme has increased the exports of the country as the investors export the produce to get better price than the local markets. This growth on the other hand has impacted the HDI of the economy as displaced population is facing serious issues. Several people have already fled away to neighboring countries as the government is leasing of land without consent.

Bibliography

1. Ethiopia Country Report- BTI 2014
2. Global Financial Crisis Discussion Series, Ethiopia Phase 2- Overseas Development Institute
3. The Political Economy of Growth in Ethiopia, Chapter 4 of volume 2,-Alemayehu Geda
4. Millennium Development Goal Report of Ethiopia- UNDP report
5. Ethiopia Country Data-World Bank

Appendix