Ethiopia’s Five-Year Plan Dispels Nation’s Negative Image

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Once driven by famine, Ethiopia is making giant strides, reports Elissa Jobson

Ethiopia is on the up. Annual GDP growth rates of more than 10 per cent  between 2004 and 2011, a 30 per cent decrease in those living below the  poverty line since 2004/5, and a 40 per cent reduction in child mortality  during the past five years underline the advances that the nation has made.

But these successes have done little to erase the perception of Ethiopia as a  poverty stricken country dependent on foreign aid, a legacy of the widely  reported famine of 1984.

The ruling EPRFD government is determined to transcend this negative  stereotype and has an ambitious plan to become a middle-income country by  2023, achieving food security by 2015. Its five-year Growth and  Transformation Plan, GTP (2010-2015) envisages sustained, rapid and broad-based  economic growth while contributing to the attainment of the UN Millennium  Development Goals.

The GTP sets targets for economic growth, poverty reduction and the  development of sectors including agriculture, industry, mining, energy,  transport, construction, communication and tourism. It also lays out  objectives for education, health, urban and rural development, water,  capacity building and good governance.

Key targets include the building of an additional 10,000 miles of roads and a  1,500 mile rail network; the quadrupling of power generation coupled with  82,500 miles of new power lines; increasing the number of mobile users from  7m to 40m and internet service subscribers from 200,000 to 3.7m; and the  creation of four industrial cluster zones, construction on the first of  which is due to begin later this year. All this and much more is calculated  to be achieved at a cost of US$75-79 billion (£45-50 billion) over five  years.

Lars Moller, lead economist at the World Bank in Ethiopia, believes that the  GTP is showing strong progress. He says the government’s latest annual  report indicates that “they are on target in maybe 90 per cent of the cases.  And when they are not on target, the response is often that ‘then we have to  work harder’. That is admirable because it shows a lot of ambition.”

Moller says there are a number of indicators that the government is on track.  Spending priorities are geared towards the poor and there is substantial  investment in public infrastructure. He also points to high economic growth,  poverty reduction and the success in lowering inflation.

But other analysts feel that the GTP is too ambitious, that its timetable is  unrealistic and that targets are not being met. One says: “You have to  admire the audacity of the government for coming up with a concrete plan and  the commitment it shows to fight poverty. However, the GTP is not based on  rigorous economic analysis. It is by and large a political instrument to  legitimise the government in power.”

The crowding of the private sector is a serious challenge to the success of  the GTP.

“The GTP was built on the Asian Tiger model of state-led development,” says  one European economist. “The big difference is that 1km of road built in  South Korea, China or Thailand had an economic spin-off within the private  sector. In Ethiopia there is no multiplier effect.” But Moller says: “I  think the government is trying to address some of the issues that private  investors are facing.”

The GTP can be said to be a crossroads. The government has acknowledged that  the plan is not going quite to schedule. But it remains to be seen whether  it opts for a wholesale revision of the targets — a politically sensitive  course advocated by some economists — or presses on with the GTP regardless.

Ethiopia’s dam ambition

The $4.8 billion (£3.1 billion) Grand Ethiopian Renaissance Dam, situated on  the Blue Nile river just 40km from the border with Sudan, will, it is hoped,  turn Ethiopia into a power hub.

The dam, which is expected to go online in 2015 and be completed in 2018, will  have a capacity of 6,000MW, making it Africa’s largest hydroelectric power  station.

Three further dams are planned for the Blue Nile, with a combined output of  around 5,700MW. The controversial Gibe III dam, situated in the lower Omo  Valley, will have the potential to generate 1870MW when it comes online at  the end of 2013. Ethiopia currently has 14 operational hydroelectric  facilities.

As well as supplying increasing domestic demand, the Renaissance dam will  provide power to the whole of East Africa. The Ethiopian Electric Power  Corporation says that domestic consumption of electricity has grown by about  25 per cent per annum over the last five years.

Electricity exports of $200-300 million will also be possible, according to a  report in 2011 by Access Capital, an Ethiopia-based economic research  company.

The Ethiopian government will not seek external financing for the dam. Much of  the $277m-plus secured to date has been raised in the sale of treasury bonds.

Potential financial partners like the World Bank and the African Development  Bank have been wary about investing in the dam following their withdrawal,  in 2010, from the Gibe III project as a result of an environmental impact  assessment report.

Egypt and Sudan are in talks with Ethiopia over concerns that their water  supplies will be reduced by as much as 25 per cent during construction of  the Renaissance dam, which will stand 145 metres (476ft) high and 1,800  metres long. It will hold 63 billion cubic metres of water and will take up  to seven years to reach capacity.

Source: Allan Potash Blog