THE ECONOMY OF ETHIOPIA

THE ECONOMY OF ETHIOPIA

Also by Keith Griffin ALTERNATIVE STRATEGIES FOR ECONOMIC DEVELOPMENT THE POLITICAL ECONOMY OF AGRARIAN CHANGE HUMAN DEVELOPMENT AND THE INTERNATIONAL DEVELOPMENT STRATEGY FOR THE 1990s (editor with John Knight) LAND CONCENTRATION AND RURAL POVERTY INSTITUTIONAL REFORM AND ECONOMIC DEVELOPMENT IN THE CHINESE COUNTRYSIDE (editor) INTERNATIONAL INEQUALITY AND NATIONAL POVERTY THE ECONOMIC DEVELOPMENT OF BANGLADESH (editor with E. A. G. Robinson) GROWTH AND INEQUALITY IN PAKISTAN (editor with Azizur Rahman Khan) THE TRANSITION TO EGALITARIAN DEVELOPMENT (with Jeffrey James) WORLD HUNGER AND THE WORLD ECONOMY

The Economy of Ethiopia Edited by Keith Griffin Professor and Chair Department of Economics University of California. Riverside M St. Martin's Press

e Keith Griffin 1992 Softcover reprint of the hardcover 1st edition 1992 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Coun Road, London W I P 9HE. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. First published in Great Britain 1992 by THE MACMILLAN PRESS LTD Houndmills, Basingstoke, Hampshire RG21 2XS and London Companies and representatives throughout the world A catalogue record for this book is available from the British Library ISBN 978-1-349-12724-5 ISBN 978-1-349-12722-1 (ebook) DOI 10.1007/978-1-349-12722-1 First published in the United States of America 1992 by Scholarly and Reference Division, ST. MARTIN'S PRESS, INC., 175 Fifth Avenue, New York, N.Y. 10010 ISBN 978-0-312-07962-8 Library of Congress Cataloging-in-Publication Data The Economy of Ethiopia I edited by Keith Griffin. p. cm. Includes bibliographical references (p. ) and index. ISBN 978-0-312-07962-8 1. Ethiopia-Economic conditions-i 974-2. Ethiopia-Economic policy. I. Griffin, Keith B. HC845.E26 1992 338.96~c20 91-47751 CIP

Contents List of Tables Preface Map of Ethiopia viii xii xiv 1 The Commitment to Socialist Development 1 The Social Revolution of 1974 2 The Ten Year Perspective Plan 6 The Challenge of Resource Mobilization and Accumulation 14 Major Recommendations 19 2 The Next Great Task: Agricultural Growth with Equity 22 Recent Agricultural Performance 23 Modes of Agricultural Production 25 Advantages of Alternative Farming Systems 32 The Legacy of Internal Colonialism: Regional Concentration and Economic Fragmentation 42 Marketed Foodcrop Surpluses and the Means of Distribution 49 The Way Forward 51 Major Recommendations 54 3 Institutional Transformation and Agricultural Development 55 Agrarian Economy in Transition 57 The Question of Economic Surplus 61 Mechanisms of Surplus Extraction 64 Labour in Agriculture 68 Area Expansion and Institutional Change 70 Major Recommendations 74 4 Coffee: The Leading Export Sector 78 Production Problems 81 v

vi Contents Export and Revenue Earnings 87 Major Recommendations 90 5 The Role of Industry 92 Existing Forms of Industrial Organization 94 Alternative Forms of Industrial Development 106 Policy for Small-Scale Production 116 Policy for State Enterprises 120 Summary and Main Recommendations 128 6 A Floor to Poverty: Essential Public Services 132 Primary Health Care 132 Water Supply and Sanitation 142 Nutrition 148 Basic Education 154 Urban and Rural Housing 162 Major Recommendations 166 7 Changes in the Distribution of Income 169 Rural Redistribution 169 Impoverishment Without Growth 174 Urban Poverty 180 Components of a Distributional Balance Sheet 183 Implications for the Ten Year Plan 187 Recommendations 189 8 The Urban Labour Market 192 Urban Employment 193 Unemployment 197 Measurements of Unemployment 201 Vacancies 209 The Operation of Labour Markets in Ethiopia 214 9 Income Generation and Employment Opportunities for Women 222 The Situation of Women in Ethiopia 224 Legislation and Political Organization Affecting Urban Women 234

Contents vii Legal Status of Women 235 Education 236 Mechanisms of Representation of Women's Interests 238 Recommendations 240 10 Employment Opportunities for Women: Prostitution, The Last Resort 244 History and Growth 244 The Extent and Nature of Prostitution 245 Problems of Definition and Attitudes Towards Prostitution 249 Reasons for Becoming a Prostitute 250 Recommendations and Conclusions 254 11 Education in a Socialist Society 259 Secondary Education 261 Technical and Vocational Training 267 Higher Education 268 The Demand and Supply of Skilled Manpower 271 Major Recommendations 274 12 Population Policy: Two Issues 275 Growth of the Population and Labour Force 276 Family Planning and Fertility Control 279 Internal Migration 281 Major Recommendations 287 13 Summary and Conclusions 289 Accumulation and Cooperation 290 Infrastructure and the Social Services 292 State Farms 293 Industrialization 294 Foreign Exchange 296 Urban Labour 297 Index 301

List of Tables 2.1 The contribution of agriculture to the gross domestic product 23 2.2 Trends in agricultural growth, 1974-5 to 1979-80 24 2.3 Peasants Associations, service co-operatives and producers' co-operatives, 1982 26 2.4 The employment intensity of state farms 28 2.5 Criteria for ranking the three modes of production 33 2.6 Average size of holding by province, 1979-80 43 2.7 Intensity of cultivation 44 2.8 Crop yields, 1979-80 44 2.9 Administrative regions ranked by land productivity compared with rank of size of holding and cultivation intensity 45 2.10 Production of cereals and pulses by region, 197~9 47 2.11 Regional contribution to the national output of cereals and pulses 47 2.12 Regional pattern of production (cereals and pulses) 48 2.13 Foodcrop production per capita by administrative region, 197~9 48 2.14 Actual and potential yields for some major crops 53 3.1 Relative importance of the three types of production units, 1976-7 to 1981-2 58 3.2 AMC purchases of agricultural products by sources of supply, 1981-2 60 3.3 AMC sales of agricultural crops by types of buyers, 1981-2 60 3.4 AMC purchases of agricultural products by region, 1981-2, from sources other than state farms 63 3.5 Tax rates on agricultural incomes exceeding 600 birr per annum 65 3.6 Cost of production, prices and terms of trade, Arussi, 1981 67 3.7 Distribution of chemical fertilizers 69 3.8 Labour requirements of crop production on a 2-hectare farm in Arussi, 1981 71 4.1 Coffee exports, 1961-81 79 viii

List of Tables ix 4.2 The regional pattern of supply to government inspection and grading centres at Addis Ababa and Dire Dawa (1961-2 to 198{}-1 average) 81 4.3 Government coffee purchases and exports 81 4.4 Output, yield and revenue of state coffee farms in the south-western region 85 4.5 Government and producers' share of coffee value 89 5.1 Output and employment in industry, 1979-80 95 5.2 Small-scale private manufacturing (HASIDA Survey, 1979-80) 98 5.3 Ministry of Industry: Employment, output and fixed assets in public enterprises, 1979-80 98 5.4 Capital, labour and value added in manufacturing industries, 1978-9 100 5.5 Distribution of permanent employees in selected industries, public and private, by income groups, 1979-80 101 5.6 Ratio of administrative, technical, clerical and office workers to permanent, seasonal or temporary workers, by industry group, public and private, 1979-80 102 5.7 The foreign exchange component in investment 105 5.8 A comparison of Ethiopia with a middle-range developed country (the UK) 109 5.9 New urban jobs required by 1992-3 109 5.10 Manufacturing industries by administrative regions, summary data, 1979-80 112 6.1 Medical and health facilities and personnel by administrative region, 1977-8 140 6.2 Average intake of calories and nutrients as percentage of daily minimum requirements in 11 administrative regions 150 6.3 Housing types in Addis Ababa and 17 other major towns, 1978 163 7.1 Inter-regional price differences for six crops, 1981 173 7.2 Marketed surplus of foodgrains 176 7.3 Warranted and actual growth rates, 1974-5 to 1979-80 178 7.4 Economic performance and Plan targets 180 7.5 Urban poverty lines, 1976-82 181

x List of Tables 7.6 Households and employment by income classes, 1976 to 1979-80 182 7.7 The incidence of urban poverty 182 7.8 The minimum wage and minimum food costs 183 7.9 Kebele and open-market prices of foodgrains in Addis Ababa, 1979-80 and 1981-2 185 7.10 Procurement and sales prices of grains, 1981-2 186 7.11 Warranted and target growth rates in the Ten Year Plan 188 8.1 Estimated urban employment for 1978 193 8.2 Estimated urban unemployment rates by sex and age-group, 1978 194 8.3 Estimated future urban labour force (economically active) 194 8.4 Employment in large establishments, 1981 196 8.5 Sectoral employment in large establishments, 1981 196 8.6 Occupational distribution in large establishments, 1981 197 8.7 Registered job-seekers by educational level, 1978-9 203 8.8 Percentage of job-seekers classified as illiterate 203 8.9 Change in the number of registered job-seekers with educational levels of grades 7-8 and 9-12, 1978-9 to 1981-2 205 8.10 Registered job-seekers by age, 1978-9 205 8.11 Percentage of registered job-seekers by marital status 207 8.12 Occupational breakdown of vacancies 212 8.13 Vacancies as a percentage of numbers employedall establishments 212 9.1 Economically active rural population and proportion engaged in agriculture, by sex, 1970, 1978 and 1979 9.2 Economically active female population by type of 226 occupation and province, 1969-70 9.3 Marital status of employed female population, Addis 227 Ababa and 17 towns, 1976 and 1978 229 9.4 Estimated urban employment, by sex and industry, 1978 9.5 Estimated urban employment, by sex and 230 occupational group, 1978 231 9.6 Work status of urban workers, 1970 and 1978 231 9.7 Employed population by sex and income distribution for 16 tow.ns, 1978 232

List of Tables xi 9.8 Employed persons by sex and income group, per week, Addis Ababa, December 1976 232 9.9 Employment and salaries in manufacturing, 1976-7 to 1979-80 233 9.10 Student enrolment by sex and grade, 1973--4 to 1975--{i and 1980-1 237 9.11 Higher education: Enrolment of men and women in Addis Ababa University, 1975--{i to 1979-80 237 9.12 Trainees in vocational training institutions, by sex, 1974-5 238 10.1 Distribution of monthly income by prostitute type, and total population of prostitutes for 22 towns 251 10.2 Reported reasons for becoming a prostitute, 1974 251 10.3 Marital status of prostitutes 252 10.4 Distribution of education by age-group of prostitutes 254 10.5 Age and duration in occupation, by prostitute type 254 10.6 Age breakdown of prostitutes not wishing to change jobs 257 11.1 Supply of skilled manpower 273 12.1 Population size and density, 1982 276 12.2 Rural, urban and total population by sex and agegroup, 1982 277 12.3 Population projections, 1980-90 278 12.4 Labour force projections, 1980-90 279 12.5 Annual rates of growth of the population, 1980-9 285 13.1 Expenditure and savings ratios 290

Preface In 1982 I led a team of seventeen economists and other social scientists to Ethiopia. Our task was to prepare a study of the economic problems of the country and to make policy suggestions. Unfortunately, the political situation in Ethiopia in the early 1980s made it impossible to publish the report in the usual way. Indeed shortly after the report was completed the country was struck by two blows, a massive famine and intensified civil war. Despite the political problems, drafts of the report did circulate both inside the country and abroad, albeit among a restricted audience. Circumstances have now changed, the intensity of the debate on economic policy has abated somewhat and the study can be made available to a larger readership. I believe the original analysis retains much of its validity and that the data, largely unobtainable elsewhere, are still useful. Ethiopia of course remains one of the world's poorest countries and for that reason alone is likely to be of interest. Responsibility for this edited volume is entirely my own, as is the decision to publish. The writing, however, was a collective effort and initial drafts of chapters were prepared by the following members of the team: Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Chapter 10 Chapter 11 Chapter 12 Chapter 13 Keith Griffin and Andrew Graham Roger Hay and Keith Griffin Ajit Ghose Roger Hay Andrew Graham, Roger Opie, James Pickett and Teshome Mulat Manzoor Ahmed Ashwani Saith and Vali J amal Derek Robinson Sheila Smith Peggoty Graham Keith Griffin and Sheila Smith, assisted by A.K. Andoh Keith Griffin Keith Griffin xii

Preface xiii The initial drafts of chapters were then edited and modified by myself. I have tried to resist the temptation to alter the text of the original study. Only minimal changes have been made. The work of the team was greatly assisted by a large number of Ethiopians, in Addis Ababa, in the six provinces we visited (Arussi, Bale, Kefa, Gojam, Hararge and Eritrea) and in many districts where we conducted local investigations. Staff members of the University of Addis Ababa, government officials and ordinary citizens were generous in providing information, sharing their experience and reacting to our ideas. Although Ethiopian informants must remain anonymous, I am very grateful to them. KEITH GRIFFIN

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