29 March 2017

Ethiopia: Make the Most of Demographic Dividend

Ethiopia's population is estimated to be 100 million, making the nation the second most populous country in Africa. According to recent reports, 70 per cent of the population is below the age of 30 and 80 per cent lives in rural areas and hence they are dependent on subsistent farming for their livelihood. The population pyramid is wide at the bottom and narrow at the apex. This clearly illustrates the percentage of the productive age group is very small, whereas the dependent age group are large.

It should be recognized that while death rate has been reduced due to the expansion of medical services, birth rate in Ethiopia is the highest in the world and it has its own positive and negative impact on the economic growth. More population triggers more resources to be consumed with less productivity and hence poverty will be multiplied. In fact, under normal conditions, population growth can be an asset if there are sufficient resources, job and social safety net. Otherwise, population growth can be a burden on the economy.

Early marriage is still the custom in some areas that girls at the age of 12 and 13 are sometimes forcefully engaged in marriage only to fulfill the will of their parents. Still some communities perceive marriage as an opportunity to acquire fortune. Forming extended family is a normal practice and aggravates population pressure in rural areas.

On the other hand, Ethiopia is one of the least urbanized countries in the world as the urbanization rate is only 17 per cent. A multi-sectoral effort is necessary to reduce dependency ratio on agriculture and change the population pyramid.

In the last two decades, the government has made great effort to bring about socioeconomic progress. Besides the key role played by the agricultural sector, the country's successful economic development is attributed to infrastructural expansion such as construction of roads, educational institutions and health centres.

According to the World Bank recent report, the Net Attendance Rate for primary education increased from 30 per cent in 2000 to 62 per cent in 2011. The share of the population aged six years and above with no education declined from 69 per cent to 46 per cent, and the average schooling years of this population increased from 4.0 to 4.5. The Human Opportunity Index report for Sub-Saharan Africa shows that Ethiopia has increased both the scale of education enrolment and the degree to which it is inclusive, favouring disadvantaged groups. Life expectancy has increased from 52 years in 2000 to 63 years in 2011.

In the health front, access to health centres, clean water and sanitation has increased to a recorded level. The proportion of households living five km further from the nearest health facility almost halved between 2005 and 2011, from 56 per cent to 32 per cent.

The human development demonstrated in education and health sector helps to advance the goals of demographic dividend (the accelerated economic growth that may result from a decline in a country's mortality and fertility and the subsequent change in the age structure of the population). People with better education and health service access can be employed in a highly productive economic activities and play crucial role in achieving structural change. That is to say, side by side, this will result in change in the shape of the population pyramid (broadening the productive age group). As a result, the number of working people engaged in the primary economic activities will be reduced in favour of the secondary and tertiary economic activities such as manufacturing and service sectors.

For countries that achieved continuous and sustainable economic growth, the probability of transforming the structure of their economies is high. The experiences of the Asian Tiger Countries and recently emerging economies such as Brazil, Turkey and India tell us that, the shift from economic growth towards economic development should be supported by structural change manifested by change in the way of life that results from transformation of lower economic activities into higher ones. And such a situation necessitates large scale urbanization that requires division of labour and value chaining of products and raw materials.

In the modern way of urban life, education enable people to pursue goal oriented life. People tend to adopt family planning schemes and form manageable family size. Children would be perceived as liability rather than an asset. In such a way, harnessing the fruit of demographic dividend is possible. According to the Central Statistic Authority report, Ethiopia is going through a demographic transition. The labour force has doubled in the past 20 years and is projected to rise to 82 million by 2030, from 33 million in 2005. Creating job opportunities in urban areas will be essential if Ethiopia is to exploit its demographic dividend. Cities already play an important role in the economy, contributing to 38 per cent GDP by employing only 15 per cent of the total workforce.

The government's vision is to reach middle-income status with an estimated gross national income per capita of US$1,560 by 2025. If managed properly, urbanization could be an important catalyst to harness demographic dividend, promote economic growth, create jobs, and connect Ethiopians to the global economy. GTP II also envisions to harnessing demographic dividend through structural change.


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