BizCLIR

This information comes from the assessment conducted in country for the Ethiopia report, which was published in January 2007.

Although the country has suffered greatly in recent years, most prominently through frequent droughts and the 1998–2000 war with Eritrea, Ethiopia has taken some important steps toward transforming its economy into one that is more competitive and dynamic. The Government of Prime Minister Meles Zenawi, in place since 1994, has fostered increased macroeconomic stability, privatized a significant number of companies, eased constraints on foreign investment, and enacted or reinforced a number of market-oriented laws. Moreover, as enunciated in 2005 in the draft Government’s Plan for Accelerated and Sustained Development to End Poverty (PASDEP), there is renewed resolve in Ethiopia to promote development through a mix of strategies, including a focus on basic human needs for health, sanitation, and education; an emphasis on capacity-building within various State sectors; and broad-based macroeconomic reform.[1] The Government has identified among its primary economic objectives during the period of 2006–2011 “to accelerate the transformation from subsistence to a more business/market-oriented [system of] agriculture.”[2]

On the world stage, moreover, Ethiopia has much to offer. Its fundamental resources include agricultural products for which there is significant demand in wealthy countries (coffee and flowers, for example), the potential for developing far more “value-added” agricultural and industrial exports, underdeveloped tourism potential due to its rich history and environment, and, given significant long-term investment in infrastructure, a vast potential for regional trade.

Notwithstanding this potential, Ethiopia’s reform efforts in recent years have unfolded with a cautiousness that belies the urgency of addressing the country’s poverty. The policy changes to date do not ultimately reflect confidence that, were individuals and firms are not overwhelmed by unnecessary bureaucratic constraints or unfair competition from State and political party actors, their collective dynamism could contribute to significant and sustainable “homegrown development.”[3] 

Equally important, the initial rounds of reform have not sufficiently addressed key constraints to economy-wide productivity, such as access to capital and access to markets. Enhancing the ability of Ethiopian firms to borrow capital represents a critical step in raising the status of the private sector in the global economy from a small, static player to a larger and more dynamic competitor. Similarly, the ability of Ethiopia’s farmers and other business concerns to transport their goods to market, and for those goods to flow smoothly across borders, is of critical concern.

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