10 June 2018

Ethiopia: Market Economy Boosting Investment

The type of political structure of a given country decides the type of economic system it applied. Following the coming of the military junta into power in 1974 Ethiopian political map was totally shifted and its economic structure was also changed. The previous market led economy was replaced by command system. All private firms were nationalized. Individual capital was limited.

In the final periods of Dergue the command economic structure was also shifted into mixed one. Before the implementation of command economic system there were some private firms that had been operational in the county. However, with the change of political structure they were nationalized and private investors were discouraged from investing their capital.

However, with the downfall of the military regime the economic structure of the country was also changed. The mixed economic system that was started at the dusk of Dergue regime took the place and it gradually pave the way to free market economy system.

With the introduction of market economic system several local and foreign investors were attracted to spend their capital in Ethiopia. Several private firms started to flourish all over the country. This market led situation has created investors an opportunity to gain more profit.

The shift in economic structure has strengthened the national economy in several ways. It has dramatically affected the overall economy of the country. Almost all economic sectors have benefited from it. Job opportunity is created and investment is promoted.

Following the implementation market structure selected economic sectors became open to local and foreign investors. Various big and medium economic sectors which had been under the government were transferred into private investors.

As to Amin Abidela, a member of Ethiopian Economist Association, Policy Research Institute, about 44 governmental firms has privatized until 2015. This has brought change in human resource development and productivity. The implementation of market economic system and privatization has encouraged several investors to spend their capital. It has also created healthy market competition.

He said, in times where the country was guided by command economic system one USD had been exchanged by two ETB. This rate was increased to five birr in the latter periods where market economy took the place.

Dr. Birihanu Deno, lecturer at Addis Ababa University Department of Economics says that the market economy which is implemented in the country for the past two decades has created economical freedom for the private sector. It has also motivated investors. But it does not mean that all the paths of market economy system are smooth and perfect.

Dr. Birhanu also said that, beside the free market system several incentives from the government has attracted private investors to spend their capital in the country Excise free permits, tax holiday, land grant and other factors has encouraged private investors to be more active players of the economy.

At the beginning of GTP II 22,097 local investors with 212.74 billion capitals have got investment license. Out of which 186 projects whose capitals are about 4 billion birr are under construction and about 262 projects with 3.948 billion birr capital have already started production.

For that reason, the introduction of market economy into the country has also positively impacted job opportunity. In addition to local investors the coming of foreign investors has created job opportunity for millions of Ethiopians. According to Aklilu wibet, lecturer of economics at Addis Ababa university, when the country opened its doer for foreign investors FDI has increased and market economy has opened job opportunity for Ethiopians. The FDI is increasing every time and this is a good indicator of the effectiveness of market economy which has increased from 3.27 billion dollar in 2016 into 4.2 billion dollar 2017.

This does not mean that all the paths of market economy are perfect. There are challenges, says Aklilu. "Even if the government has rules and regulations to create comfortable situation for the private sector, there are gaps on implementation. There is no always success without challenge. In order to be successful the private sector has to pass through some challenges."

Akililu also commented that establishing an institution with a mandate of researching and facilitating necessary conditions for the private sectors is necessary.


Research enhancing agricultural productivity

The agricultural sector is the mainstay of the economy. The sector is taken as a springboard towards economic transformation. Besides supporting the industrial sector advancement by providing raw materials, the sector has several advantages to all economic sectors of the growing economy of the country. The presence of fertile land and active working force are some of the opportunities of the sector.

However, the sector is not free from challenges. Absence of proper technology to support the sector is one of the bottlenecks of the sector. Despite its multi-sectored role to the national economy, the sector has been still struggling to increase productivity with poor technology. Traditional way of farming and lack of extensive research activities are some of its challenges.

Most researchers in the area agree that proper investigation and research activities in the rural farming land will reveal a positive result to the sector. Researchers have common stand that proper scientific research activities will increase production and productivity. This is specially true for soil research activities. If this proper research is conducted and the expected result will be register and the country could be self reliant and food security will be ensure.

One of the main goals of Green Development Strategy is the use of improved technology. Several Ethiopian researchers are doing their best to bring about change in the area of agricultural production and productivity. Remarkable results are also being witnessed.

Most researchers and soil scientists agreed that due to the reason that the highland part of the country is exposed to over population its productivity has diminished in that 40 percent of the land has become acidic. They also agree that for the past three decades over population in the highland areas have caused soil degradation. This has influenced the soil to lose its fertility which has decreased productivity.

Senior researcher, Dr. Getachew Agneghu who is currently working at Ethiopian Institute of Agricultural Research (EIAR) and he is among those researchers who believes the claim that soil fertility is affecting due to overpopulation and unwise use of sol.

He said that due to over use and over cultivation the soil has lost its nutrients. According to him, the original nutrients cannot be replaced by fertilizer. Poor awareness of farmers about farming soil and failure to leave the residual has also put pressure on the soil.

With some exceptions there is no trend to leave the residual in the soil. 85 percent of the remaining is used for animal manure and the reset will be used for construction and other purposes. This has a side effect on soil fertility.

He said that it is a good indication how unwisely the soils are being used believing that Ethiopian scientists and researchers are also responsible in protecting the soil from damage. Research activities have to be done to preserve productivity of the soil.

He indicated that almost 50 percent of agricultural productivity has direct link with soil fertility. When there is fertile soil there is better product.

He stressed that researchers and farmers have to be hand and gloves. One cannot function without the presence of the other. Mutual understanding between the two will reveal positive result.

According to him, agricultural productivity and proper research activities are two sides of a single coin. Whenever there is proper research activity productivity will increase. This is witnessed within the last 15 years. In times where research activities were weak production was poor.

However now, with the increase in research activities productivity has increased. But, this does not mean that we have done our assignment. When we take the experience of other countries we have a lot to do in area of soil fertility and increase productivity. (Translated from Addis Zemen Amharic Daily)


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