touched me.

Another perhaps subtle reason for its overambitious strategy is that there is no way of proving the government wrong. All official statistics is collected through a centralized system by CSA, and the government can cook the data as and when it wants. It is difficult to prove this point, but a number of recent incidents seem to indicate this. A good example is what happened during the release of the most recent population census (regarding the population of the Amhara region). Another incident is related to the accuracy of CSA’s agricultural production figures. In a recent paper entitled “In Search of a Strategy: Rethinking Agriculture-led Growth in Ethiopia”, a group of authors find that, according to official figures, Ethiopia have achieved substantial increase in agricultural productivity that even supersedes the achievements of the Asian green revolution. They, however, find in the data no substantial change in input use or technology that seems to explain this. This forces them to request the reexamination of the data by CSA. Considering the fact that the government appoints strictly party-affiliated people to all offices, and especially to important ones such as CSA’s, it is easy to imagine that cooking numbers would not be that difficult for them.

The most important thing, however, is the fact that the government has enough reasons to work towards achieving economic growth. Despite of the lack of transparency and the possibility of being inflated, positive figures of economic growth are not also harmful to promoting and selling the country for investors. The important question related to this strategy is, therefore, can it really be achieved?

I can mention two reasons why it cannot be achieved. True, the strategy might set the foundation for the future transformation of the country, especially with respect to investments in public infrastructure. However, transforming the economic structure of the country in 5 years is wishful thinking for a number of reasons.

Beginning with agriculture, the first challenge is of course the commitment to invest enough towards improving the technology of small holders and the capability to successfully coordinate various policy efforts towards improving productivity throughout. That has been lacking so far. Despite its focus on agriculture, the government hardly succeeded to its commitment of spending a minimum of 10% of its budget on agriculture. Even if production could be improved, sustainably transforming the economy requires successfully shading extra labor from agriculture towards industry. The most significant challenge to ‘transforming’ the country is related to this process of labor allocation. Improving agricultural productivity permanently and transferring the huge agricultural labor (which stands almost at 85% of the population) towards industry requires not only a concomitant increase in the industry sector, but also training and education on the part of the human resource that will be reallocated towards industry. This naturally happens over decades of years when younger generations of people are educated and move to the urban area for industrial employment. It is thus impossible to surpass this process in a time as short as 5 years.

The final big challenge which makes the strategy overambitious is the challenge to increase share of the industrial sector. Ethiopia has no industrial sector to speak of (it stands at 13% of total GDP as of now which is far below the African average). Due to extremely low per capita income and very low saving rate, local investment is not big enough to transform such a large country. Unfortunately, the government is not doing enough to attract foreign investment in manufacturing. True, there are growing investment ventures into this country from Turkey (in textile), China on a number of areas, and from India (mainly in agriculture), and to a small extent from other countries such as Egypt. However, this scale of investment is not significant enough to transform the country.

In addition to unfavorable conditions related to the country’s poor political institutions and its unstable geopolitical position (bordering rogue states such as Eritrea, Somalia and Sudan is no advantage), the governments ideology itself is the biggest obstacle in the country’s effort to attract large foreign investment. Recent episodes of economic transformation in Asia have shown us the significant role of export-based manufacturing, which can be driven by foreign investment. FDI in manufacturing from countries in Asia where labor is becoming increasingly expensive could spill over to Ethiopia and save the country as it deed for other East Asian countries. But the country can benefit from such opportunities only if the government is ready to make sweeping reforms in several areas. To become a dynamic hub of FDI, the country needs very efficient banking and communications sectors, and a less distorted market. That needs the (gradual) liberalization of the banking and telecommunications sectors and joining the WTO. However, the government is either overtly opposed to such moves or is heading at a very sluggish pace towards them. Without these changes to dramatically change the business environment into a more vibrant and open one, I don’t expect substantial change in Ethiopia’s industry.

Another perhaps reason for its overambitious strategy is that there is no way of proving the government wrong. All official statistics is collected through a centralized system by CSA, and the government can cook the data as and when it wants. It is difficult to prove this point, but a number of recent incidents seem to indicate this. A good example is what happened during the release of the most recent population census (regarding the population of the Amhara region). Another incident is related to the accuracy of CSA’s agricultural production figures. In a recent paper entitled “In Search of a Strategy: Rethinking Agriculture-led Growth in Ethiopia”, a group of authors find that, according to official figures, Ethiopia have achieved substantial increase in agricultural productivity in amounts that even supersede the experience of the Asian green revolution. They, however, find in the data no substantial change in input use or technology that seems to explain this which forces them to request the reexamination of the data by CSA. Considering the fact that the government appoints strictly party-affiliated people to all offices, and especially those of important ones such as CSA’s, it is easy to imagine that cooking numbers would not be that difficult for them.

The focuse given to power generation could be achievable as there is potential and experience in the power generation.