Attachment J.5- GOE's Ten Years Strategy- Pathways to Prosperity - 2021-2030.pdf

T A B L E O F

CONTENTS

Chapter 1: Past Economic Performance and Its Major Challenges 1

1.1 Economic Growth and Poverty Reduction 2

1.2. Past Development Challenges 4

Chapter 2: Homegrown Economic Reform and Scope of the Ten-Year Plan 7

2.1 Homegrown Economic Reform 8

2.2. The Rationale for Ten-Year Development Plan and Its Features 14

Chapter 3: National Development Vision and Strategic Pillars 18

3.1 National Development Vision, Objectives and Strategic Pillars 19

3.2 Objectives of the Development Plan 20

3.3 Strategic Pillars and Key Priority Areas 21

3.4 Global and Regional Development Commitments 22

Chapter 4: Macroeconomic Plan 24

4.1 Economic Growth and Poverty Reduction 25

4.2 Structural Transformation 27

4.3 Fiscal Policy and Public Finance 28

4.4 Monetary Policy and Financial Sector 32

4.5 Development Financing Plan 33

Chapter 5: Economic Sectors Development Plan 36

5.1 Agricultural Development 37

5.2 Manufacturing Industry Development 40

5.3 Construction Industry Development 41

5.4 Mining and Petroleum Development 42

5.5 Trade Development 43

5.6 Tourism Development 45

5.7 Urban Development 46

Chapter 6: Infrastructure Development Plan 48

6.1 Transport Development 49

6.2 Water Resources Development 51

6.3 Energy Development 53

6.4 Innovation and Technology Development 53

Chapter 7: Demography and Human Resource Development 56

Chapter 8: Gender and Social Inclusion 64

Chapter 9: Justice and Public Services 66

Chapter 10: Peace Building and Regional Development Cooperation 69

Chapter 11: Environment and Climate Change 72

Chapter 12: Implementation Strategies and Monitoring and Evaluation System 74

11.1 Ten-Year Development Plan Implementation Strategies 75

11.2 Balanced Regional and Local Development and Competitiveness 76

11.3 Monitoring and Evaluation System 80

CHAPTER ONE

Past Economic Performance and Its Major Challenges

ETHIOPIA: AN AFRICAN

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Economic Growth and Poverty Reduction

Table 1: Growth in gross domestic product by major economic sectors (%)

Source: FDRE Planning and Development Commission

1.1 During the implementation of the two Growth and Transformation Plans (GTP I and II), Ethiopia has resgisterd rapid and high economic growth. Based on constant basic prices (2015/2016 base year), Gross Domestic Product (GDP) grew on average by 9.2% per year and the volume of real GDP rose from Birr 828 billion in the 2009/10 fiscal year to Birr 1.99 trillion in the 2019/20 fiscal year. Compared to an average of 11% annual growth target during the period, the actual growth performance fell 1.8 percentage point short of the target. When the economic growth performance is disaggregated into major economic sectors, agriculture, industry and services have respectively registered an average annual growth rate of 5.3%, 17.2% an 9.7% (See Table 1).

The agricultural sector, on average, contributed 24% to the GDP growth, where the crops sub-sector contributed 72.7%. Similarly, the industry sector contributed 37.9% of which the construction and manufacturing sub-sectors respectively contributed 77.1% and 22.8% to the overall industry sector GDP growth performance. This shows that the major source of Gross Value Additions (GVA) registered in the industry sector has been the construction sub-industry. On the other hand, the service sector has contributed 40.8% to the GDP growth. The wholesale and retail trade sub-sector had the share of 37.8% within the services sector. In general, the overall economic growth performance shows that construction, crops, and wholesale and retail trade were the main sources of supply side growth, in that order.

Based on current prices, the economy has registered an average growth of 23.9% per year over the last ten years, and nominal GDP increased from Birr 395.9

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Table 2: Share of final consumption expenditure in GDP ( %)

Source: FDRE Planning and Development Commission billion in 2009/10 to Birr 3.37 trillion in 2019/20. From the demand side, total final consumption expenditure contributed 79% to GDP where more than three-quarters of this has been attributed to the private final consumption expenditure (see Table 2). On the other hand, total investment, exports and imports of goods and services, on average, were 35.1%, 10.1% and 25.9% of GDP, respectively.

The share of gross domestic investment (as % of GDP) increased from 31.1% in 2009/10 to 38.4% in 2015/16. However, because of the prevailing political instability during much of 2016/17, domestic and foreign direct investment slowed down, and similarly, government capital expenditure decreased. This brought the share of total investment (as % of GDP) down to 34.1%. Nevertheless, following the political transition that took place in 2017/18, total investment performance has improved during 2018/19 and the share has increased to 35.2%. In 2019/20 , however, due largely to the COVID-19 pandemic, the share of total investment declined to 30.8%.

Net export (the difference between export and import trades) has shown a widening gap and the annual average resource deficit were 15.8% per year over the past ten years. This has been mainly attributed to the fact that export performance has been very weak, and the country’s productive capacity to generate export earnings were limited. Moreover, the overall economic growth during the past ten years were largely dependent on import trade.

The rate of gross domestic savings rose from 17.3% of GDP in the 2009/10 to 20.9% of GDP in 2019/20. Similarly, GDP per capita has registered an average annual growth of 10.7% and as a result it increased from USD 389 in 2009/10 to USD 1,080 in 2019/20.

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Poverty headcount ratio at the national poverty lines (% of population) has reduced from 29.6% in 2009/10 to 23.5% in 2014/15. While the poverty rate has gone down from 30.4% in 2009/10 to 25.6% in 2020 in the rural areas, and similarly urban poverty rates fell from 25.7% to 14.8% during the same period. In regards to equitable distributions of growth, Gini coefficient has increased from 0.30 in 2009/10 to 0.33 in 2014/15. Durig this period, the Gini coefficient in rural areas went up from 0.37 to 0.38 while in the urban areas it has increased from 0.27 to 0.28.

On the other hand, urban unemployment rate has shown an upward trend in both sexes. The unemployment rate increased from 18% in 2009/10 to 18.7% in 2019/20. Youth (aged between 15 and 29) unemployment rate was on average 25.7% in 2019/20, and this shows a significant increase when compared to the total urban unemployment rate. When seen in terms of gender decomposition, urban unemployment rate of men in 2009/10 was 11.4% while it was 25.3% for women. The unemployment rate went up for both sexes and reached 12.2% for men and 26.1% for women in urban areas in 2019/20 .

Despite the faster and high economic growth that wasrealized over the past ten years, the economy has encountered several challenges in terms of sustaining the growth and making all citizens equitably benefit from the growth proceeds. The major challenges are identified as follow:

• Failure to ensure quality economic growth: Athough high economic growth has been registered over the past ten years, there were gaps in terms of of creating adequate job opportunities, ensuring equitable distributions, ensuring structural transformations, and creating sectoral linkages and synergies.

• External debt distress: Besides the lack of or limited competitiveness in international markets, our domestic products were not also able to compete with imported commodities. The bulk of Ethiopia’s export commodities come from limitted number of agricultural products without significant value additions. Moreover, domestic productions could not be able to fulfill the demand for input for domestic economic activities and industrialization. As a result, the economy largely depended on import and the demand for imported commodities increased from year to year leaving the gap between export and import trade widened.

Past Major Development Challenges1.2

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• Imbalance between domestic savings and investment: Ethiopia experienced high rate of growth in investment over the past years. However, domestic savings could not be able to satisfy the domestic investment demand, causing large investment-savings imbalance.

• Challenges to stabilize inflation: Although there are numerous factors that can cause inflation, high and persistent inflation is evidently highly associated with macroeconomic instability. The persistently high inflation rate that has been registered over the past years, which exposed citizens to high cost of living, has put the sustainability of the economic growth into question by affecting the sustainability of investment.

• Rise in unemployment: One of the key indicators of a stable macroeconomy is the creation of adequate and decent employment opportunities. In general, the high economic growth registered over the past years could not be able to create sufficient job opportunities, and failed to bring the desired increase in the standard of living for most citizens.

• Sluggish structural transformation and weak sectoral linkages:

Over the past years, the process of transition from low productivity agricultural sector to sectors with high productivity has been very weak. Ethiopia’s export has always been dominated by a few number of agricultural products, and failed to transit to exports led by manufacturing products in order to secure sustainable and reliable export earnings.

• Poor capacity to mobilize domestic resources: Although Ethiopia’s capacity to collect taxes has improved over the past years, the tax to GDP ratio has been dwindling. Government’s commitment to improve the overall public resource management and its efforts to minimize misallocations of public expenditure has also been minimal.

• Limited accessibility of financial institutions: Over the past years, state-owned commercial and development banks have channeled significant amount of long-term loans to state-owned development enterprises with inadequate appraisal and monitoring. This has affected the supply and quality of loans issued by the commercial banks. On the other hand, insurance companies have also been restricted to the provision of traditional services, and their linience in diversifying to other services and products has hampered growth in the insurance industry. In general, although the financial infrastructure has shown growth over the past years, it is not commensurate with the level of growth of the economy and its accesability has also been low.

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• Deficient and low quality provisions of social services and basic infrastructure: In the past years, although particular attention has been paid to the expansion of roads, railways, energy, irrigation and various infrastructure development activities, there were still significant deficiencies in thesupply when compared with the demands across different geographies. There were also a wide gap in terms of quality infrastructure provisions. Deficiencies have also been observed in social service provisions, particularly in health and education. Moreover, evidences indicate that the accessibility of social services were very low, and a wide gap in equitable distribution of basic services were observed between urban and rural areas. This has affected attempts to create equal opportunity for all citizens.

• Limited government capacity and widespread malpractices: Over the past years, limitations in government capacity have been observed at the various levels in terms of achieving the development goals set in various sectors. In particular, besides the limited capacity and coordination failures observed in areas of project management, there were also serious resource wastage and corruption. There were no robust system established in order to correct the failures and ensure accountability.

CHAPTER TWO

Homegrown Economic Reform and Scope of the Ten-Year Plan

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Homegrown Economic Reform2.1 The rapid and sustained economic growth that Ethiopia registered over the past years was mainly driven by aggregate demand and it was recorded largely as a result of the expansion of government funded large-scale infrastructure developments.

These public investments were financed through heavy debt and external aid.

The manner in which these public investments were realized and the rapid growth achieved over the years has also caused continouos inflationary pressures. In addition, despite its rapid growth, the economy failed to raise productivity and create adequate job opportunities. Due to the heavy debt burden, it has become challenging to sustain the rapid pace of the growth, calling for a new growth financing approach doing away from the heavy reliance on public spending and debt financing.

The homegrown economic reform (HGER) with the central objectives of sustaining rapid growth, maintaining stable macroeconomic environment by reducing debt vulnerabilities and creating adequate and sustainable job opportunities has, therefore, been domestically initiated. The economic reforms are being translated into action through policy that enhances the suppy side of the economy. The main aim and focus of the HGER is the enhancement of productivity and competitiveness of the overall economy, and a gradual transition from public to private sector-led growth. As a result, stable macroeconomy will be ensured and the economy would be able to generate adequate jobs to arrest the rampant unemployment and the inflationary pressure. The HGER plan was classified into macroeconomic reforms, sectoral reforms, and structural reforms.

Macroeconomic Reforms: In order to eliminate macroeconomic imbalances and create a stable macroeconomy, strict macroeconomic management has been put in place over the past two years. In regards to the overall macroeconomic management, strict monitoring has been put at work, and the following key focus areas have been identified in the macroeconomic reform plan.

• Ensuring fast, sustainable and broad-based economic growth. Reform efforts had been underway across various sectors of the economy to ensure high economic growth that has been slowed over the recent years. The efforts are being implemented in the way that involves several actors in the economy including the private sectors and development partners. Evaluation of past development plans have been thoroughly done in order to learn from past strengths and rectify the weaknesses through the experiences gained from the challenges so as to design and implement inclusive develoment plans in the future. Economic growth perfromance that has been registered over the past years has been assessed in detail and it has been used as an input for subsequent reform measures.

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• In regards to fiscal policy reform process, new operational mechanisms are taking effect to modernize and enhance tax collection capacity as well as citizens’ awareness about tax paying duties and responsibilities, proper public expenditure management and strict reform actions in the public debt management. The operational dimensions of the fiscal reform process mainly focused on making the overall tax administration fair, transparent and accountable. Similarly, strict justice sector reforms and operations have targeted the informal sector and the contraband, which has detrimental impact on domestic income, and the business community. These measures have already started showing encouraging results.

• Moreover, budget adminstration and auditing system has been given due attention. Strict auditing and monitoring system is necessary in order to ensure that the allocated budget is utilized for the intended social and economic purposes by ensuring that development projects designing follows thorough appraisal and feasibility studies. Proper administrations and systems have also been designed to facilitate support, monitoring and accountability so as to complete the projects within the timeline and without leading to waste of resources.

• In regards to the financial sector reform process, the ultimate objective is ensuring financial stability, financial inclusion, and promoting productivity and competitiveness of the private sector and thereby solve structural financing constraints of the economy by encouraging domestic savings and facilitating credit supply for the private-sector investment. In order to achieve this goal, it was found necessary to undertake market-oriented financial sector reform, through which the finacial sector will eventually promote market-based interest rate and foreign currency exhange rate determination, establishing and expanding capital markets, and strengthening the monitoring and regulatory capacity of the National Bank of Ethiopia.

• Several policy reform measures have also been initiated to expand the inflow of foreign currencies. Particular emphasis has been paid to identify structural constraints of export market performance and taking macroeconomic reform actions to improve the diversification of export commodities by addressing the supply side problems of low production capacity and productivity. The reform process has not only targeted broadening the export base, but also creating value additions to export commodities so that the competitiveness of the economy in the regional and global value chains will improve.

• Emphasis has also been paid to other sources of foreign currency inflow.

For instance, in order to increase the inflow of remittances, the reform aims to eventually broaden incentive structure to encourage the diaspora to send foreign currencies through the formal banking system. Moreover, BEACON OF PROSPERITY the promotion of quality foreign direct investment is also vital not just for the inflow of foreign currencies but also for technological transfer and creation of job opportunities. Similar focuses have been paid to reforming the overall foreign currency allocation directives and policies to promote the predictability and efficiency of foreign currency allocations across different sectors of the economy.

• In regards to external public debt, the macroeconomic reform process emphasised two main aspects and these are minimizing the commercial external loans, searching more for concessional loans and rescheduling the existing external public debt.

Sectoral Reforms: The country will follow a multi-sectoral growth approach by diversifying sources of economic growth and job creations by undertaking necessary and substantive policy reforms across the different sectors. In this context, particular attention has been given to the agricultural sector, manufacturing sector, mineral sector, tourism sector and the ICT sector as sources of growth.

• Agriculture: In the past, the agricultural sector has indeed received a particular attention both on the paper and within the broader development narrative, yet the sector is still characterised as the lowest productive. During the HGER process, there has been significant political commitments to improve research and development in agriculture and to improve all-rounded support given to all actors in the agricultural sector. From this perspective, the HGER agricultural sector reform aims to improve the role and participation of the private sector, expansion of small- to large-scale irrigation development, improving supply of inputs and finance, enhancing the productivity of livestock, protecting the environment and natural resources, improving agricultural production methods, reducing post-harvest loss, promoting research-based food security systems, and promoting import substituting major agricultural crop production.

• Mining: based on global and regional experiences, existing mining policies and legal frameworks have been under the reform process so as to create conducive investment climate and attract large number of foreign and domestic investors into the subsector. Particular emphasis have been given to the promotion of geological data and their dissemination for mining investment promotion. As Ethiopia is at the early stage of mining subsector development, the role of the governmnet in terms of infrastructure development and other targeted support in the subsector is vital for boosting private sectors’ confidence and trust.

• Tourism: although Ethiopia is endowed with abundant tourism destinations, the subsector has not fully utilized the available opportunity. As the subsector is naturally characterized with high potential for domestic and foreign revenue generations, and its high potential in terms of job creating opportunities, BEACON OF PROSPERITY the tourism reform has paid particular attention to improving and expanding tourism destinations and related infrastructure, as well as improving the role and participation of the private sector.

Structural Reforms: Although the role of goverment in the economy shall continue, adjustments and reforms will be made based on strategic policy performances and prevailing conditions. It is, in fact, very important that the government plays a role in the economy, and in particular, through public investments and lead the overall economy to a desired direction based on market principles. In order to ensure an efficient government intervention, thorough studies would be conducted to see if there are failures that calls for government interventions, and also to evaluate the feasibility of any government interventions in order to make sure that the necessary capacity and resource is available to implement the identified public project. It should also be noted that any public development projects, whether they are still at inception phase or even after completion, could possibly be handed-over to the private investors through fair and transparent approach, as long as the the private investor has the necessary capacity and resources to take the projects forward.

If projects are to be financed through domestic loans, domestic banks should be sure about the projects’ feasibility before providing a loan. Domestic investment loan allocations to the public development projects should be done in such a manner that it follows basic market principles and do not lead to the crowding-out of the private sector. The reason being that the ultimate goal of government intervention is to create strong private initiatives or investment in the economy, and hence the government intervention process should not crowd-out private investors but it should encourage their participation in the economy. The government should support all development forces including private investors not on the basis of their proximity to political elites or power but based on their merits and performances. Reform processes have been under way over the past two years to correct past failures and to ensure that public or state-owned enterprises are not given prefferential treatment compared to private enteprises of similar status. In line with this, it is important to create a favourable environment where all economic actors are treated fairly and transparently. Broad-based policies and administative interventions has been put in place to encourage the participation of the private sector in all sectors of the economy, and it has been made sure that all future policy reforms and interventions should enhance the private initiatives.

Since the private sector has an indispensable role in creating job opportuities, the government is determined to put the necessary policies and administrative structures in palce to assist the private sector development in priority sectors such as agriculture, manufacturing, mining, torusim and ICT sectors.

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Other focus areas of structural reform processes include:

• Ensuring coordinated transport and logistics services: by reducing the transit time and costs of trade, the the reform is mainly emphasising on the competitiveness of agricultural and industrial products, accessibility of coordinated transport services in order to sustainably support the investment and business activities of foreign and local investors, and improving the quality and effectiveness of transport corridors for import and export activities and improving stations providing dry port services.

• Implementing import substituting development strategy: maintaining the fact that our economic development strategy is outward-looking guided by international integration, extensive domestic support and policy intervention is designed to substitute the import of some strategic commodities that consumes large sums of foreign currencies including food items, edible oil, wheat, and other commodities by domestic productions.

• Reforming the investment and job creation landscape: in order to encourage domestic job creation as well as direct foreign investment, industrial parks that have been established so far and have the necessary infrastructure should be put to maximum capacity utilization by providing the necessary infrastructure.

Furthermore, efforts have been consolidated to improve the overall investment and business environment, eliminate unnecessary bureaucracy and impove the supply of finance under the Ease of Doing Business initiative.

• Increasing the role and participation of the private sector in the economy:

broad-based domestic economic reforms have been under way to thoroughly examine the role that the private sector had in the economy and the challenges it encountered and then to create favourable conditions to enable the sector play the role expected of it in a more appropriate and better way. A lot of endevours are in progress to make the bureaucracy support and encourage, as opposed to hindering or crowding-out, the participation of foreign and domestic investors and improve the country’s business environment. This reform works in line with the reform in the financial and other sectors so as to make Ethiopia a start-up nation in terms of investment promotion and job creations.

• Expediting the privatization of large state-owned enteprises and liberalization of prioirty sectors: once the transfer of selected state-owned enteprises to the private sector as well as liberalization of selected sectors is completed, it is expected to bring about a significant change in the efficiency and quality of economic growth and job opportunities.

• Strenthening Ethiopia’s global and regional partnership: the ongoing negotiation for accession to the World Trade Organization (WTO) as well as the ratification

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of the African Continental Free Trade Area (AfCFTA) proves Ethiopia’s HGER commitment to boost the trade and investment partnership both at the global, continental and regional levels. The significance of linking our economy with that of the continent and the region is so paramount. As a land-locked economy, our domestic reform process will embrace strong partnerships to develop a cross-country development infrastructure and different ports together with our neighbours. Such cross-country parnerships will not only reduce transportation and trade costs, but also ensures shared prosperity.

• Promoting free movement of labour: in order to alleviate the high rate of unemployment in the country, it is necessary to design mechanisms that ensure free mobility of skilled labour both domestically as well as internationally

• Promoting the development of civic societies: domestic reform processes are designed to create a conducive environment for civic societies to play a significant role in economic, social and political activities. Despite the popular misconception about the role and participation of civic societies, promoting the role of civic societies does not stunt the role of the government but facilitates genuine transition to democracy, including for the media, in which ideas and thoughts freely circulate and thereby renders the government effective. This is a way of building a political economic outlook that includes citizens’ political and moral authority. It helps to correct previous challenges and exhaustively utilize the capacity that is created as a result of free expression of thoughts. It is necessary to see all actors as an integrated whole. This, in the main, facilitiates the opportunity to recognize and appreciate the key roles that all stakeholders play and their impacts. It also helps to understand that devlopment does not focus only on incomplete material being but also expands to multifaceted freedoms to have its complete meaning.

• Diversifying Ethiopia’s development partnerships and the sources of development finances: domestic policy reforms that are designed to secure different sources of development finance depends largely on the strong relationship and partnership with multilateral and bilateral development partners. Moreover, the partnership with development partners enourages technical assistance in different areas of capacity building both for government and private sectors. A diversified development parnership is expected to encourage our development partners to, in addition to providing development aid, motivate their investors to invest in our economy. The contemporary practices of the flow of international development finance does not necessarily follow the conventional approach.

Multilateral forums and bilatral financial sources that were previously major sources of development finance for developing countries are dwindling and are being substituted by new bilateral arrangements and agreements. With this understanding, reforms are being domestically tailored to enable Ethiopia properly benefit from the current global supply of development finance.

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The Rationale for Ten-Year Development Plan and Its Features

2.2

The role of a long-term development plan is to provide strategic directions for sustainable development by identifying strategic objectives, goals, and targets so that proper leadership and institutions are built to manage development in the long-term perspective as opposed to short-termism. This means that the long-term development plan lays the roadmap, indicating the objectives and strategic directions that are not time bound, and would enable the country to maintain sustainable growth and achieve structural transformation, as well as attaining equitable distribution of wealth and shared prosperity over the long-term.

The transition of an economy from poverty stricken to irreversible prosperity requires a long-term time span. While it is commendable to target the achievement of prosperity at the national development vision level, it yet requires adequate time to identify that the progress is in the right direction. Particularly, in the development process, plans for one-year, five-years, ten-years, or fifteen-years vary according to the tasks to be accomplished. Because general development objectives expressed in terms of low poverty rate, income level expressed as middle or high, educational enrolment at secondary or tertiary level, economic structural transformation, sustainable urban development, improvement of standard of living, equitable distribution of resources, etc. cannot be realized in a short-term and are, therefore, stated in terms of long-term plans. It is often the case that even long-term plans are detailed in short-term and medium-term plans in order to achieve the objectives, goals and targets.

It is possible to divide the development process into three broader stages consisting of creating the capacity to create wealth as pre-conditions, the stage of creating wealth itself, and the stage of ensuring an equitable distribution of the wealth. The capacity to create wealth is ensured through investment, while wealth is created through economic growth, and equitable distribution of wealth is realized through fair distributional policies. The realization of these processes takes different time spans. In a one-year plan, it may be possible to plan about investment and related issues, as well as detailed sectoral activities, while at the policy level, it may be possible to plan about macroeconomic stability. In a five-year plan, it would be possible to plan about the development of infrastructure facilities and rapid mid-term economic development goals. However, it would not be possible to plan about an equitable distribution of wealth, a meaningful reduction of poverty, as well as quality economic growth that would ensure sustainable development and structural transformation within a short-term.

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From this perspective, while long-term plans with durations of ten-years or more are indicators of future directions of development, medium-term plans such as the five-year and three-year plans are detailed instruments through which the major objectives outlined in the long-term development plans are implemented.

A five-year development plan that does not take into account objectives that should and could be achieved in ten-years cannot, in many respects, be taken as a plan that would successfully achieve its objectives. Taking the overall nature of long-term development plans into perspective, a special feature of the ten-year development plan is presented as follows:

• The ten-year development plan preparation has emphasised the proper identification of the linkages between various sectors of the economy. The plan recognizes the high interdependence and interconnectedness of the various productive sectors, particularly, modern agriculture, manufacturing and mining through input-output linkages. Trade and logistics, as well as services, were also closely coordinated in the planning process with the productive sectors of the economy in order to improve their efficiency by linking sectioral products with the markets. Similarly, infastructure development (transport connectivity, energy, irrigation, communications, etc.) were planned in such a way that the development of one sector would serve as the base for the development of other sectors, while human resources and technology, which are decisive factors for ensuring productivity, have been planned in a similar approach so that the coordination would enhance the development of all other sectors.

• While the interlinks among sectors are decisive, during the short-term to medium-term, particular attention will be given to sectors that have high productivity, the capacity to generate significant employment opportunities and to stimulate growth in other sectors, as well as to those sectors that could provide the basis for improving the standard of living of a large number of citizens. While modern agriculture, manufacturing, and mining will be accorded special priority in their roles as productive sectors, the development of these sectors is planned in such a way that they will support each other through the supply of inputs and provision of market outlets for one another.

Moreover, the plan has taken into consideration the fact that Ethiopia, through its tangible and intangible cultural heritages, should strengthen its tourism sector and increase foeign currency earnings to support the expansion of the service sector, the production sector and the development of infrastructure.

As availability of infrastructure plays a key role for the development of these sectors, the development of infrastructures has in most cases been linked to sectoral developments.

• In addition, as development plans are implemented by sectoral institutions, it is understood that these institutions have a better understanding of each sector’s development potentials, underlying weaknesses, as well as future

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development directions. Cognizant of this, the ten-year development plan has, therefore, been prepared with the immense participation of the sectors through a bottom-up planning process for sectoral planning, as opposed to a top-down approach.

• The preparatory process of the ten-year development plan has been participatory and inclusive, and also identified development corridors. The existence of strong institutions that link the execution of development plans at the various levels of administration is very important for achieving a successful development outcome. In addition, creating the necessary capacities and providing adequate resources for government bodies that are responsible for leading development planning at the regional and sub-regional levels will have a positive impact on the success of the planning effort. Similarly, identifying the latent potentials of regions at the various levels and creating an organized system of attracting investment flows based on these potentials will assist the regions to make an effective use of their natural and human resource capacities and contribute to the success of the plans. Accordingly, in the ten-year development plan efforts have been made to tune and coordinate the national and regional development plans in line with their development potentials. Development corridors have also been identified, while infrastructural development plans have been coordinated with selected development centers.

• Taking institutional weaknesses as the major challenge of the country, the ten-year development plan idenitifies major long-term development goals and targets on the premises of a wholistic institutional transformation over the coming years. It is believed that the economy’s low performance during the growth and transformation plan periods with respect to achieving structural transformation was mainly attributable to institutional weaknesses. Low implementation capacity of institutions, lax system of project adminstration, monitoring and evaluation; absence of accountability; unacceptable behaviours on the part of the private sector and their linkages with corrupt practices of goverment institutions; promoting self and group interest rather than national consensus; and severe disruption of peace and stability have been identified as the major indicators of institutional weaknesses. Having taken these gaps into consideration, the ten-year development plan has identified institutional reform and change as a priority focus area and has, therefore, incorporated new policies, strategies and legal frameworks expected to be implemented during the plan period.

• As mentioned in the previous sub-section, a HGER agenda, which is currently under implementation, has been taken as one of the bases and departure points for the ten-year plan. It is a short-term reform processes which attempts to redress the country’s macreconomic imbalances, institutional weaknesses, BEACON OF PROSPERITY and serious sectoral inefficiencies. It is believed that the ongoing HGER will correct existing macroeconomic imbalances and create a suitable ground that could serve as a springboard for future economic development. Thus, the policy frameworks, focas areas and strategies of structural reform indicated in the HGER agenda have been taken as inputs for the ten-year development plan.

• The ten-year plan idenitifies the private sector as the leader in productivity and growth enhancement, and the promotion of the private sector as the engine of economic growth is expected to strengthen public-private partnership.

The governement’s role in the rapid economic growth of the last fifteen-years was significant. The success stories for the government were mainly in the development of economic and social infrastructures, which were the major sources of growth that resulted in generating aggregate demands. As quality and sustainable economic growth can only be achieved through private sector participation, great hope is pinned on the private sector – particularly domestic investors – that they will engage in priority productive sectors during the implementation of the ten-year plan. For this to happen, it is necessary that the private sector partners well with government in order to achieve the national prosperity agenda. The government will commit to forging genuine partnership and cooperation between the public and private sectors with the objective of addressing and solving as efficiently as possible challenges that the private sector may encounter in the process of development.

CHAPTER THREE

National Development Vision, Objectives and Strategic Pillars

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National Development Vision, Objectives and Strategic Pillars3.1

The ten-year planning process has taken into account the achievability of the development goals, the current development characteristics of Ethiopia as well as the potentials, and the opportunities and challenges that lie ahead. Due consideration was given to foundations such as the development vision of the country, existing and new macroeconomic and sectoral policies and strategies, the ongoing broad-based homegrown economic reforms, experiences, and lessons learned during the previous development plan implementation processes, Ethiopia’s existing bilateral and multilateral development agreements and commitments. Similarly, due considerations were given to the domestic and external factors that could possibly affect the development goals of Ethiopia over the next ten years.

The ten-year development plan lays a long-term vision of making Ethiopia an “African Beacon of Prosperity” by creating the necessary and sufficient conditions. Ensuring high per capita income through rapid economic growth is one of the sources of prosperity, but not a measure of prosperity on its own.

Prosperity is largely defined in terms of happiness, improvement in standard of living and quality of life, and the level of complete satisfaction created by the overall capability we build through economic gain, human and social development by harnessing tangible and intangible wealth, including social capital and natural resource wealth. And hence, prosperity should be defined in terms of the overall human and institutional capability we create over the long-term whose development outcomes can be expressed as follows:

1. Improvement in income levels and wealth accumulations so that every citizen would be able to satisfy their basic needs and aspirations.

2. Basic economic and social services such as food, clean water, shelter, health, education, and other basic services should be accessible to every citizen regardless of their economic status.

3. Creating an enabling and just environment where citizens would be able to utilize their potentials and resources so that they lead quality life.

4. Improvement in social dignity, equality, and freedom where citizens can freely participate in every social, economic, and political affairs of their country regardless of their social background.

Therefore, the implementation of these development plans in the coming years should be able to reliably lead us to our national wholistic development vision.

To ensure the prosperity of our society, on the one hand, the community should

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work towards multidimensional development endeavour and ensure equitable utilization of what has been gained at every level on the bases of its own valuation.

On the other hand, the society must be able to visualize beyond our current circumstance by observing the prosperity level that other nations have achieved and learning from their experiences by avoiding the bumpy development paths they took. Our development plan provides a roadmap by which we could not just be able to improve our per capita income but also become a prosperous nation.

In a nutshell, prosperity can be measured by the capabilities we create to satisfy human needs, improvements in standard of living and people’s perception of the levels of their wellbeing. Variables such as per capita income, equity in wealth distribution, life expectancy, various measures of standard of living, access to justice and overall public services through good governance as well as issues of freedom, and citizens’ level of satisfaction are taken as measures of prosperity.

Accordingly, a composite indicator composed of three major indices would possibly be used as measure of prosperity over the long term. These indices are human development index, multi-dimensional poverty index and perception of well-being index.

To achieve the national long-term plan of making Ethiopia an African beacon of prosperity, the following major development objectives are identified:

1. Building a prosperous country by creating a pragmatic market-based economic system and enhance the role and participation of the private sectors.

2. Maintaining macroeconomic stability, ensuring rapid and sustainable economic growth, and creating decent jobs.

3. Ensuring structural economic transformation by promoting overall productivity, and competitiveness.

4. Creating an enabling environment where every citizen would become the owners and beneficiaries of the development endeavour by ensuring the quality and accessibility of basic social services and the provision of infrastructure.

5. Ensuring competent, independent, and quality civil service system by building the capacity of the government and establishing good governance.

6. Building strong and inclusive institutions that would ensure peaceful society, access to justice and upholding the rule of law and human rights.

Objectives of the Development Plan3.2

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The overall development goal is to achieve improved welfare of the society by improving the standard of living and quality of life that are captured in the broader national prosperity vision. These development vision and objectives will be achieved through the following key strategic pillars which are primarily focused on addressing the deep-rooted macroeconomic, sectoral, and structural bottlenecks of economic, social, administrative, and institutional development of the country. Some of the key strategic pillars are interlinked, yet for the reform and policy intervention emphasis, some of the central pillars are recognized on their own. The key strategic pillars of the ten-year development plan are:

1. Quality Economic Growth and Shared Prosperity,

2. Economic Productivity and Competitiveness,

3. Technological Capability and Digital Economy,

4. Sustainable Development Financing,

5. Private Sector-led Economic Growth,

6. Resilient Green Economy,

7. Institutional Transformation,

8. Gender and Social Inclusion,

9. Access to Justice and Efficient Civil Services, and

10. Regional Peace Building and Economic Integration.

From the national prosperity vision, development objectives and strategic pillars, a set of overarching priority areas are identified as follows for the efficient allocation of resources, as well as the effectiveness of reforms, policy initiatives and implementation actions. The priorities are set for the medium-term to provide substantial milestones for the long-term development plan against which progress will be measured. These key priority areas are the basis for the homegrown economic reforms and policy direction at the macroeconomic and sectoral levels.

These key priority areas are:

1. Multi-sectoral and Diversified Sources of Growth and Job Opportunities,

2. Sustainable and Inclusive Financial Sector Development,

3. Harnessing the Demographic Dividend,

4. Quality and Efficient Infrastructure Development,

5. Sustainable Urban Development, and

6. Peace, Justice, and Inclusive Institutions

Strategic Pillars and Key Priority Areas3.3

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Ethiopia has made commitments at both international and regional levels in the areas of investment, trade, and regional co-operation. Ethiopia will pursue these commitments in the interest of its citizens. In particular, the commitment of Ethiopia to the United Nations 2030 Agenda for Sustainable Development is vital in terms of ensuring people-centred development goals. Ethiopia’s national vision for prosperity builds on the achievements of the past and embarks on a new horizon of development opportunities. The ten-year development plan has properly identified past development deficiencies and challenges and set clear plan for future sustainable development goals in all forms – economic, social, environmental, administrative, and institutional. The national vision and the ten-year development goals by and large are interlinked with the 17 goals and the associated 169 targets that are identified in the SDG 2030. An effort has been

Global and Regional Development Commitments3.4

Figure 1: Strategic Development Pillars and Key Priority Areas

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made to integrate most SDG goals and targets that are aligned with the national development vision and Ethiopia’s domestic characteristics. The ten pillars of Ethiopia’s ten-year development plan are aligned with the SGDs as follows.

Table 3: Alignment of the national ten-year development plan with the SDGs

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Ethiopia is committed to achieving these SDG goals and targets and proper indicators have been included in relevant sections of the ten-year development plan.

Similarly, Ethiopia’s commitment to African Continental Free Trade Area (AfCFTA) and Agenda 2063 is vital in terms of strengthening partnerships and cooperation for shared regional development and prosperity. Each goals and targets in these regional commitments has been clearly integrated and analysed in the context of the ten-year national development vision, strategic pillars, and key priority areas.

CHAPTER FOUR

Macroeconomic Plan

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Economic Growth and Poverty Reduction4.1

The central focus of the macroeconomic plan is the attainment of the overarching national vision. Accordingly, it aims at creating a stable macroeconomic environment, ensuring availability of sustainable development finance, guaranteeing high, stable and sustainable economic growth, and bringing about substantial structural transformation of the economy.

The Gross Domestic Product (GDP) is projected to grow by an annual average rate of 10% during the period from 2020/21 to 2029/30. This growth rate, if realized and sustained, was considered adequate enough to reduce poverty level from 19% in 2020/21 to 7% in 2029/30.