Section 1: Domestic Barriers
The Provision of Education and Health Care
Health care in Ethiopia, while slowly improving, remains inadequate for the majority of the population, especially those that cannot afford to pay for health care. One of the problems that Ethiopia faces is that there remains a gap left by the “brain drain.” In 2012, there were more Ethiopian doctors working in Chicago than Ethiopia (Roeder). Because doctors leave Ethiopia to work in developed countries where they will get paid more Ethiopia is seriously lacking doctors and others to provide adequate health care to its citizens. While Ethiopia is currently recruiting, training, and hiring women as paid health workers, they lack the knowledge that fully qualified doctors would be able to provide. Also, Ethiopia faces numerous health problems in terms of malaria, HIV/AIDS, typhoid fever, meningitis, and rabies, among others. This hinders economic growth because a sick employee in Ethiopia has a much more difficult time receiving health care and healing, preventing them from working for a longer period of time. This decreases productivity, which can lower output and therefore GDP. This also hinders development because it hurts the life expectancy of Ethiopians and not working means that people are not being paid, which decreases the amount of money they are able to save and use towards better health care or sending their children to school.
Ethiopia has made many improvements in education over the years, increasing primary enrollment to 17 million in 2011-2012 and reducing the gender
gap for schooling. The Ethiopian government and the IDA are working to increase teacher training and the supply of educational materials in Ethiopia (World
Bank). This should increase economic growth because educated workers can increase productivity, which would increase output and GDP. It would also
increase development because more children are receiving an education, which will help them make healthier choices in the future because they are better
educated and would hopefully allow them to obtain a higher paying job, which would enable them to send their children to school and continue the cycle.
However, Ethiopia does not have a large enough relative wealth to allow for the equal, widespread provision of education, there is a large amount of income
inequality that keeps many of the poorer families from sending their children to school, and high poverty levels, which keep children from attending school
because they are needed to gain extra revenue to provide for the family. This hinders the economic growth and development that would be gained.
The Provision of Education and Health Care
Health care in Ethiopia, while slowly improving, remains inadequate for the majority of the population, especially those that cannot afford to pay for health care. One of the problems that Ethiopia faces is that there remains a gap left by the “brain drain.” In 2012, there were more Ethiopian doctors working in Chicago than Ethiopia (Roeder). Because doctors leave Ethiopia to work in developed countries where they will get paid more Ethiopia is seriously lacking doctors and others to provide adequate health care to its citizens. While Ethiopia is currently recruiting, training, and hiring women as paid health workers, they lack the knowledge that fully qualified doctors would be able to provide. Also, Ethiopia faces numerous health problems in terms of malaria, HIV/AIDS, typhoid fever, meningitis, and rabies, among others. This hinders economic growth because a sick employee in Ethiopia has a much more difficult time receiving health care and healing, preventing them from working for a longer period of time. This decreases productivity, which can lower output and therefore GDP. This also hinders development because it hurts the life expectancy of Ethiopians and not working means that people are not being paid, which decreases the amount of money they are able to save and use towards better health care or sending their children to school.
Ethiopia has made many improvements in education over the years, increasing primary enrollment to 17 million in 2011-2012 and reducing the gender
gap for schooling. The Ethiopian government and the IDA are working to increase teacher training and the supply of educational materials in Ethiopia (World
Bank). This should increase economic growth because educated workers can increase productivity, which would increase output and GDP. It would also
increase development because more children are receiving an education, which will help them make healthier choices in the future because they are better
educated and would hopefully allow them to obtain a higher paying job, which would enable them to send their children to school and continue the cycle.
However, Ethiopia does not have a large enough relative wealth to allow for the equal, widespread provision of education, there is a large amount of income
inequality that keeps many of the poorer families from sending their children to school, and high poverty levels, which keep children from attending school
because they are needed to gain extra revenue to provide for the family. This hinders the economic growth and development that would be gained.
The Extent and Quality of Infrastructure
A major setback in Ethiopia’s development is its lack of infrastructure. Ethiopia has one of the lowest road densities in Africa and the quality of the existing roads, and their maintenance, in Ethiopia is severely lacking (World Bank). Ethiopia depends greatly on primary product export and therefore adequate roadways are essential, especially because Ethiopia is landlocked and cannot ship exports out of the country. This lack of adequate roadways hinders potential profits of exports due to the fact that Ethiopia is not exporting at its maximum efficiency because of the lack of roads available for transporting goods out of the country. Not only does this prevent goods from reaching potential buyers, but it also hinders public transportation that would allow for children to get to school and adults to travel to the market, all of which hinder economic growth and development because producers are not receiving the benefits/profits that they could be making and some children are not receiving an education, which hurts development and productivity.
Ethiopia’s other biggest problem in terms of infrastructure lies in its power. A further 8,700 megawatts of generating plant are needed over the next ten years, which implies a doubling of Ethiopia’s current capacity (World Bank). In terms of electricity production, Ethiopia is ranked 124th in the world, far from the more developed countries (CIA). The availability of electricity is extremely important for preserving food and cooking, both important in maintaining the health of Ethiopia’s citizens. This factor greatly hinders economic development because the public utilities are not at an adequate level to maintain the health and well-being of Ethiopians.
Financial Services/Banking System
While Ethiopia’s central and commercial banks are relatively stable and service the nation, Ethiopians are not very willing or able to actually put money in the banks. The country has a very low savings rate. Ethiopia saved only 2.3% of its GDP in 2009, while its neighbors, Kenya and Sudan, who are still developing nations, just like Ethiopia, saved 9.7% and 25.7% of their GDPs in 2009 (Davison). This emphasizes just how little Ethiopia saves. The central bank wants individual savers too help raise that low savings rate. However, the Ethiopian citizens are not saving. This is due to the fact that most Ethiopians have low paying jobs and must use their income to provide for their families, leaving them little, if any, money to save and invest. This keeps them trapped in the poverty cycle and forces children to stay home from school and work to provide additional support for the families, hindering economic development and also growth because no one has the money to invest and spend to help boost GDP. However, they do provide micro-loans, which would especially help women increase growth and development.
Legal System
Ethiopia’s legal system has suffered a lot in the past and recent years. The legal system has caused many Ethiopians to lose confidence in the system and their rights guaranteed to them in the constitution because of the long delays in the system and the lack of law enforcement (Justice). Also, there has been believed to be corruption in the allocation of land, along with nepotism and other forms of fraud. The state owns all of the land, so the citizens can only get long-term leases (CIA). If the people in charge give family or people they owe favors to the best land for yielding crops, the majority of the poor will suffer and not be able to have great yields, which would increase development because they would have more money to send their children to school and pay for better health care for themselves.
Political Stability
Ethiopia is actually a pretty stable in terms of its political stability in the short-term, but the party in power is corrupt. The ruling party is the Ethiopian People’s Revolutionary Democratic Front (EPRDF) and is largely authoritarian. The party has consolidated its power across every level of society and government, therefore getting rid of political opposition in government. However, choosing to have a long-term successor to the Prime Minister, Meles Zenawi, is expected to expose the tensions within the ruling party (Lyons). In the long-term, this would most likely decrease foreign direct investment (FDI) because it would increase the political instability faced by Ethiopia because investors do not want that risk involved in their investments. This would hurt economic growth and development in the long-term because Ethiopia would be receiving less money, which would lessen growth, and therefore less money could be used towards essential services like education and health care that would increase development.
Extent of Corruption
As stated above, Ethiopia has faced and still does face corruption in its political and legal spheres, depicted by nepotism, fraud, and others. Corruption is
especially prevalent in politics. Although technically people can vote in elections, the ruling party, the Ethiopian People’s Revolutionary Democratic Front (EPRDF), is largely authoritarian and has a tight grip on all of its opposition, effectively eliminating any opposition. In past elections, this has been depicted by almost all of the votes going to the EPRDF (Lyons). This dishonest exploitation of power for personal gain hurts economic growth and development by reducing trust in the economy. Both the citizens in Ethiopia and foreign investors often do not want to take that risk, so FDI is given to less corrupt countries. This decreases Ethiopia’s economic growth because they are receiving less money and hurts development because then a smaller amount of funds can be diverted to essential services that would benefit Ethiopian citizens, such as the provision if education and health care.
A major setback in Ethiopia’s development is its lack of infrastructure. Ethiopia has one of the lowest road densities in Africa and the quality of the existing roads, and their maintenance, in Ethiopia is severely lacking (World Bank). Ethiopia depends greatly on primary product export and therefore adequate roadways are essential, especially because Ethiopia is landlocked and cannot ship exports out of the country. This lack of adequate roadways hinders potential profits of exports due to the fact that Ethiopia is not exporting at its maximum efficiency because of the lack of roads available for transporting goods out of the country. Not only does this prevent goods from reaching potential buyers, but it also hinders public transportation that would allow for children to get to school and adults to travel to the market, all of which hinder economic growth and development because producers are not receiving the benefits/profits that they could be making and some children are not receiving an education, which hurts development and productivity.
Ethiopia’s other biggest problem in terms of infrastructure lies in its power. A further 8,700 megawatts of generating plant are needed over the next ten years, which implies a doubling of Ethiopia’s current capacity (World Bank). In terms of electricity production, Ethiopia is ranked 124th in the world, far from the more developed countries (CIA). The availability of electricity is extremely important for preserving food and cooking, both important in maintaining the health of Ethiopia’s citizens. This factor greatly hinders economic development because the public utilities are not at an adequate level to maintain the health and well-being of Ethiopians.
Financial Services/Banking System
While Ethiopia’s central and commercial banks are relatively stable and service the nation, Ethiopians are not very willing or able to actually put money in the banks. The country has a very low savings rate. Ethiopia saved only 2.3% of its GDP in 2009, while its neighbors, Kenya and Sudan, who are still developing nations, just like Ethiopia, saved 9.7% and 25.7% of their GDPs in 2009 (Davison). This emphasizes just how little Ethiopia saves. The central bank wants individual savers too help raise that low savings rate. However, the Ethiopian citizens are not saving. This is due to the fact that most Ethiopians have low paying jobs and must use their income to provide for their families, leaving them little, if any, money to save and invest. This keeps them trapped in the poverty cycle and forces children to stay home from school and work to provide additional support for the families, hindering economic development and also growth because no one has the money to invest and spend to help boost GDP. However, they do provide micro-loans, which would especially help women increase growth and development.
Legal System
Ethiopia’s legal system has suffered a lot in the past and recent years. The legal system has caused many Ethiopians to lose confidence in the system and their rights guaranteed to them in the constitution because of the long delays in the system and the lack of law enforcement (Justice). Also, there has been believed to be corruption in the allocation of land, along with nepotism and other forms of fraud. The state owns all of the land, so the citizens can only get long-term leases (CIA). If the people in charge give family or people they owe favors to the best land for yielding crops, the majority of the poor will suffer and not be able to have great yields, which would increase development because they would have more money to send their children to school and pay for better health care for themselves.
Political Stability
Ethiopia is actually a pretty stable in terms of its political stability in the short-term, but the party in power is corrupt. The ruling party is the Ethiopian People’s Revolutionary Democratic Front (EPRDF) and is largely authoritarian. The party has consolidated its power across every level of society and government, therefore getting rid of political opposition in government. However, choosing to have a long-term successor to the Prime Minister, Meles Zenawi, is expected to expose the tensions within the ruling party (Lyons). In the long-term, this would most likely decrease foreign direct investment (FDI) because it would increase the political instability faced by Ethiopia because investors do not want that risk involved in their investments. This would hurt economic growth and development in the long-term because Ethiopia would be receiving less money, which would lessen growth, and therefore less money could be used towards essential services like education and health care that would increase development.
Extent of Corruption
As stated above, Ethiopia has faced and still does face corruption in its political and legal spheres, depicted by nepotism, fraud, and others. Corruption is
especially prevalent in politics. Although technically people can vote in elections, the ruling party, the Ethiopian People’s Revolutionary Democratic Front (EPRDF), is largely authoritarian and has a tight grip on all of its opposition, effectively eliminating any opposition. In past elections, this has been depicted by almost all of the votes going to the EPRDF (Lyons). This dishonest exploitation of power for personal gain hurts economic growth and development by reducing trust in the economy. Both the citizens in Ethiopia and foreign investors often do not want to take that risk, so FDI is given to less corrupt countries. This decreases Ethiopia’s economic growth because they are receiving less money and hurts development because then a smaller amount of funds can be diverted to essential services that would benefit Ethiopian citizens, such as the provision if education and health care.
Project and Initiatives
![Picture](/uploads/1/7/1/2/17128406/9620940.jpg)
Ethiopia Promoting Basic Services Project
The objectives of the Promoting Basic Services Program (PBS) Project are to expand nationwide access to basic services, including education, health, water supply, sanitation, rural roads, and agricultural extension services and also improve the quality of these services. PBS funds block grants to help ensure adequate staffing and operations and to strengthen the accountability, capacity, transparency, and financial management of the
government at both regional and local levels. PBS obtains funding from the government of Ethiopia, the World Bank, the African Development Bank, and other European partners. The project is currently in its third phase.
The program goes a long way towards helping increase economic development. For example, since the beginning of the program, over 100,000 primary school teachers have been hired (World Bank). As the objectives are met, economic development will increase because improvements in health care and education will allow people to increase their standard of living and more children are living longer and entering adulthood. Increased access to public budget information in order to increase transparency has resulted in better budget and literacy training. Also, new rural roads will increase growth because rural farmers will be able to export their products at a smaller expense.
General Education Quality Improvement Project
The main objective of the General Education Quality Improvement Project (GEQIP) is to improve the quality of general education throughout Ethiopia. There are five phases or components that make up the GEQIP, including curriculum, textbooks, and assessment, a teacher development program, a social improvement program, a management administration program, and lastly program coordination, monitoring, and evaluation. The program is financed by many European companies and corporations and also a few European governments, along with funding by the Education for All – Fast Track Initiative (World Bank).
An increase in the provision and quality of education will improve the role of women in society because education will empower women, improve levels of health due to better and more knowledgeable communication about sanitation and disease, and in general increase standard of living and economic development.
The objectives of the Promoting Basic Services Program (PBS) Project are to expand nationwide access to basic services, including education, health, water supply, sanitation, rural roads, and agricultural extension services and also improve the quality of these services. PBS funds block grants to help ensure adequate staffing and operations and to strengthen the accountability, capacity, transparency, and financial management of the
government at both regional and local levels. PBS obtains funding from the government of Ethiopia, the World Bank, the African Development Bank, and other European partners. The project is currently in its third phase.
The program goes a long way towards helping increase economic development. For example, since the beginning of the program, over 100,000 primary school teachers have been hired (World Bank). As the objectives are met, economic development will increase because improvements in health care and education will allow people to increase their standard of living and more children are living longer and entering adulthood. Increased access to public budget information in order to increase transparency has resulted in better budget and literacy training. Also, new rural roads will increase growth because rural farmers will be able to export their products at a smaller expense.
General Education Quality Improvement Project
The main objective of the General Education Quality Improvement Project (GEQIP) is to improve the quality of general education throughout Ethiopia. There are five phases or components that make up the GEQIP, including curriculum, textbooks, and assessment, a teacher development program, a social improvement program, a management administration program, and lastly program coordination, monitoring, and evaluation. The program is financed by many European companies and corporations and also a few European governments, along with funding by the Education for All – Fast Track Initiative (World Bank).
An increase in the provision and quality of education will improve the role of women in society because education will empower women, improve levels of health due to better and more knowledgeable communication about sanitation and disease, and in general increase standard of living and economic development.
![Picture](/uploads/1/7/1/2/17128406/415264.jpg)
Section 2: International Barriers
Trade Barriers
Over-Specialization on a Narrow Range of Products
Ethiopia depends greatly on agriculture and the export of primary products to support its economy. Ethiopia’s major export crop is coffee. The agricultural sector is responsible for employing 85% of the labor force in
Ethiopia (CIA). If the price of coffee rises, it will be beneficial for Ethiopia, increasing the rate of economic growth. Additionally, if the extra revenue is used for essential services like education, health care, and infrastructure, economic development will increase and it could start a positive cycle of future development.
However, if there is a fall in coffee prices, Ethiopia will experience deteriorating terms of trade. The current account deficit would most likely increase, making it even more difficult for Ethiopia to finance current expenditures and pay for imports that are necessary. Therefore, Ethiopia will find it very difficult to gain growth through international trade because it is so dependent on such a narrow range of products, specifically coffee, unless it can change its pattern of export trade. Ethiopia is especially vulnerable to not necessarily a fall in coffee prices, but to a decrease in supply, due to the poor cultivation methods and frequent drought in Ethiopia. This would also decrease revenue from exports and hinder economic growth and development. Overall, a narrow range of products increases vulnerability and uncertainty in the market, causing the resulting growth and development to become uncertain as well.
Trade Barriers
Over-Specialization on a Narrow Range of Products
Ethiopia depends greatly on agriculture and the export of primary products to support its economy. Ethiopia’s major export crop is coffee. The agricultural sector is responsible for employing 85% of the labor force in
Ethiopia (CIA). If the price of coffee rises, it will be beneficial for Ethiopia, increasing the rate of economic growth. Additionally, if the extra revenue is used for essential services like education, health care, and infrastructure, economic development will increase and it could start a positive cycle of future development.
However, if there is a fall in coffee prices, Ethiopia will experience deteriorating terms of trade. The current account deficit would most likely increase, making it even more difficult for Ethiopia to finance current expenditures and pay for imports that are necessary. Therefore, Ethiopia will find it very difficult to gain growth through international trade because it is so dependent on such a narrow range of products, specifically coffee, unless it can change its pattern of export trade. Ethiopia is especially vulnerable to not necessarily a fall in coffee prices, but to a decrease in supply, due to the poor cultivation methods and frequent drought in Ethiopia. This would also decrease revenue from exports and hinder economic growth and development. Overall, a narrow range of products increases vulnerability and uncertainty in the market, causing the resulting growth and development to become uncertain as well.
Price Volatility of Primary Products
The price elasticity of demand for coffee and the price elasticity of supply for coffee on the world market tend to be relatively inelastic. Therefore, any change in demand or supply for the coffee will lead to pretty large fluctuations in the world market. For example, Ethiopia experiences frequent droughts. A drought would greatly decrease the supply of coffee, therefore raising the price, although Ethiopia would be able to export less. These great fluctuations would significantly impact the export revenue of Ethiopia.
This volatility in price and the following volatility in export revenue makes it difficult for everyone involved to plan for the future, including the Ethiopian government and the coffee producers. This uncertainty impacts investment in companies because people do not want to invest in such a risky, uncertain market. As a result, there is decreased or less investment in Ethiopia, decreasing economic growth. A decrease in economic growth decreases the amount of money that the government can spend on essential services, such as education, health, and infrastructure, hindering economic development in Ethiopia.
Trade Strategies
Trade Liberalization
Trade liberalization, the removal or reduction of goods and services, in Ethiopia started in 1992 when the Structural Adjustment Program (SAP) was implemented. The SAP re-structured the Ethiopian economy through reducing tariff and non-tariff barriers. Also, import restrictions were then limited to only clothes and harmful drugs (Aredo). This trade liberalization should increase world trade and allow Ethiopia to concentrate on the production of goods and services in which they have a comparative advantage.
Removing and reducing tariffs would cause Ethiopians to import more foreign goods at lower prices. This would enable them to spend less money on necessities and be able to save money that could then be invested in their future, like for education or their health. This would increase economic development. It would also increase economic growth because by focusing goods, like coffee, in which Ethiopia has a comparative advantage, Ethiopia can gain more revenue than if it tries to produce other goods at a higher cost. This additional revenue, which not only increases growth, could also be used for development by using it to provide essential services.
Export Promotion
In order to increase revenue, and therefore GDP, the government in Ethiopia, under the Export Promotion Department, has indicated under the National Export Development Strategy, that an Ethiopian Export Promotion Agency (EEPA) be created. The vision of EEPA is to improve“the international
competitiveness of Ethiopia’s export commodities in the international market.” The EEPA also ensures development that is sustainable through working with
exporters and also provides training, improved service of delivery system, current trade information, and product and market research (Export).
This export-led growth, an outward-oriented growth strategy, bases itself on openness and increased international trade. Ethiopia concentrates on exports to increase export revenue. This should lead to an increase in the GDP, which should in turn lead to higher incomes. Subsequently, growth in domestic and exporting markets should follow. This can be seen through the liberalized trade that Ethiopia is pursuing, depicted in the example above. An increase in export revenue consequently should increase GDP, which increases economic growth. This increase in economic growth could then be used to increase economic development through the provision of essential services like health, education, and infrastructure.
The price elasticity of demand for coffee and the price elasticity of supply for coffee on the world market tend to be relatively inelastic. Therefore, any change in demand or supply for the coffee will lead to pretty large fluctuations in the world market. For example, Ethiopia experiences frequent droughts. A drought would greatly decrease the supply of coffee, therefore raising the price, although Ethiopia would be able to export less. These great fluctuations would significantly impact the export revenue of Ethiopia.
This volatility in price and the following volatility in export revenue makes it difficult for everyone involved to plan for the future, including the Ethiopian government and the coffee producers. This uncertainty impacts investment in companies because people do not want to invest in such a risky, uncertain market. As a result, there is decreased or less investment in Ethiopia, decreasing economic growth. A decrease in economic growth decreases the amount of money that the government can spend on essential services, such as education, health, and infrastructure, hindering economic development in Ethiopia.
Trade Strategies
Trade Liberalization
Trade liberalization, the removal or reduction of goods and services, in Ethiopia started in 1992 when the Structural Adjustment Program (SAP) was implemented. The SAP re-structured the Ethiopian economy through reducing tariff and non-tariff barriers. Also, import restrictions were then limited to only clothes and harmful drugs (Aredo). This trade liberalization should increase world trade and allow Ethiopia to concentrate on the production of goods and services in which they have a comparative advantage.
Removing and reducing tariffs would cause Ethiopians to import more foreign goods at lower prices. This would enable them to spend less money on necessities and be able to save money that could then be invested in their future, like for education or their health. This would increase economic development. It would also increase economic growth because by focusing goods, like coffee, in which Ethiopia has a comparative advantage, Ethiopia can gain more revenue than if it tries to produce other goods at a higher cost. This additional revenue, which not only increases growth, could also be used for development by using it to provide essential services.
Export Promotion
In order to increase revenue, and therefore GDP, the government in Ethiopia, under the Export Promotion Department, has indicated under the National Export Development Strategy, that an Ethiopian Export Promotion Agency (EEPA) be created. The vision of EEPA is to improve“the international
competitiveness of Ethiopia’s export commodities in the international market.” The EEPA also ensures development that is sustainable through working with
exporters and also provides training, improved service of delivery system, current trade information, and product and market research (Export).
This export-led growth, an outward-oriented growth strategy, bases itself on openness and increased international trade. Ethiopia concentrates on exports to increase export revenue. This should lead to an increase in the GDP, which should in turn lead to higher incomes. Subsequently, growth in domestic and exporting markets should follow. This can be seen through the liberalized trade that Ethiopia is pursuing, depicted in the example above. An increase in export revenue consequently should increase GDP, which increases economic growth. This increase in economic growth could then be used to increase economic development through the provision of essential services like health, education, and infrastructure.