This document describes the Plan for Accelerated and Sustained Development to End Poverty (pasdep), Ethiopia’s guiding strategic framework for the five-year period 2005-2010



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Introduction

This document describes the Plan for Accelerated and Sustained Development to End Poverty (PASDEP), Ethiopia’s guiding strategic framework for the five-year period 2005-2010. The PASDEP represents the second phase of the PRSP process begun under the Sustainable Development and Poverty Reduction Program (SDPRP), which covered the past three years, 2000/01-2003/04.

The PASDEP carries forward important strategic directions pursued under the SDPRP – related to human development, rural development, food security, and capacity-building - but also embodies some bold new directions. Foremost among them is a major focus on growth in the coming five-year period – with a particular emphasis on greater commercialization of agriculture and the private sector - and a scaling-up of efforts to achieve the Millennium Development Goals. These directions and their components are described in Chapter I.
The PRSP process is now well established in Ethiopia. At the time the first SDPRP was prepared in 2001, the government already had in place a broad strategy, and the SDPRP largely reflected on-going commitments. The PASDEP represents an evolution towards new policy directions, and is increasingly the over-arching framework for programming and policies. It is important to recognize from the outset that this is a document signaling broad directions. The details of individual sectoral policies and annual programs are still, quite rightly, developed mostly in the context of individual sector planning exercises, and reflected here. Also, since the PASDEP strategy now covers a five-year period, inevitably there is more specificity for the first two years of the program, and directions for the later years are only signaled in broad terms.

The PASDEP process benefited from two rounds of consultations with civil society, non-government actors, and partners. An initial round prior to drafting of the document sought views on priorities prior to drafting of the document, and a second round in December, 2005 sought feedback on the initial draft. The main results of these consultations are reflected in the text at the end of Chapter II and described in detail under Annex ------. The PASDEP benefited from a recent Household Income, Expenditure and Consumption survey, and from the data generated by an excellent series of Welfare Monitoring Surveys, that help describe the current situation of Ethiopian households, and how they have changed over the past 10 years. The outcomes of the 2004/05 PPA also complement the outcomes from HICES and WMS. The strategy was also informed by a number of background papers and studies prepared by government ministries and independent Ethiopian experts, as well as drawing on several major recent studies, including the Millennium Development Goals Needs Assessment for Ethiopia.

To keep the document to a manageable length, the program initiatives have been described in summary form in this main volume, and additional detail is provided in a volume of Annexes.


The PASDEP is structured as follows:





  • Chapter I provides an overview of the development challenges facing Ethiopia, the broad strategic direction Government is adopting to address them, and a summary of the PASDEP program;

  • Chapter II presents the current poverty profile;

  • Chapter III presents a retrospective of the main outcomes and achievements under SDPRP I.

  • Chapters IV and V describe the main sect oral policies, programs, and targets; and those related to cross cutting issues (such as population, gender, the environment, governance and capacity-building, in Chapter V);

  • Chapters VI and VII describe the macroeconomic framework, as well as the costs and financing of the PASDEP program;

  • Chapter VIII covers monitoring and evaluation



And finally a policy matrix summarizes the targets set under the program, as well as the main policy steps.

Chapter I: The Broad PASDEP Strategy: Growth and Poverty Eradication


1.1. Development and Poverty Eradication Challenges

The challenges facing Ethiopia are daunting: the dynamics of population growth, very low productivity, structural bottlenecks, dependence on unreliable rainfall, and being land-locked combine to pose challenges almost unequalled anywhere in the world. Government efforts to accelerate progress as rapidly as possible – including a big push on education, expanding infrastructure, opening the economy, building institutions, and devolving administration– are like those of an athlete running uphill: extra-efforts are required just to keep the pace.

The different mechanisms hindering Ethiopia’s progress are not independent, but rather interact with each other and constitute what can be seen as “poverty traps” – self-reinforcing mechanisms that prevent the country from breaking out from a combination of low income levels and low productivity growth.
Box 1.1: Poverty Traps in Ethiopia

A crucial mechanism, which has perpetuated poverty in Ethiopia, is the interaction of poverty and population pressures with the productive resource base. Unprecedented population pressures has resulted in decreasing plot size (average landholdings declined from 0.5 hectares per person in the 1960s to 0.11 in 1999), making an increasing number of households dependent on inadequately small and unproductive plots, and more vulnerable to the vagaries of unpredictable rainfall, and rendering some traditional farming practices unsustainable. These households are too poor to leave land fallow or invest in it, leading to a progressive deterioration of their asset base. In the past moving onto new lands absorbed this additional population growth, but in many areas the limits of useable land have been reached, forcing farmers onto lower productivity, more fragile lands.

Poverty and low investment in human capital present another type of self-perpetuating dynamic. Investing in education may be prohibitive for poor households, due both the direct costs, as well as the fact that all members need to contribute to the family’s income, including time-consuming tasks such as collecting water and firewood. Even if returns to education are high, the inability to finance that initial investment means that there is under-investment. Without significant increases in productivity it is difficult for capital to be accumulated, so that returns to unskilled labor are unlikely to grow. Poverty and low education, therefore, reproduce themselves in future generations.

Low levels of infrastructure offer another example of perverse dynamics, as they result in underdeveloped markets, high transaction costs and coordination failures. The benefits of exchanges cannot be realized and the economy remains trapped in a largely subsistence-oriented structure. Without basic economic infrastructure, returns to private investment may be too low to spur dynamic growth; while the large, lumpy nature of infrastructure costs makes it hard to make the initial investments to break out of these traps. In the rugged and difficult geography of Ethiopia, many remote areas see their potential for dynamic private sector growth and diversification out of agriculture hindered by the lack of basic infrastructure.

The Low-Risk/Low Return Trap: Small farmers, who constitute the bulk of the population, are often caught in production of low-risk/low-return food grains. With insufficient cash funds, and unpredictable outcomes, they cannot afford to take the risk of diversifying from subsistence food production into potentially higher-return activities (such as growing cash crops for market), or of spending their limited cash on purchased agricultural inputs, because if they fail – either because of crop failure, price collapse, or failure of demand, they will not have either the basic food they would otherwise have produced, nor the cash to purchase it, and their families will go hungry.

The Early-Childhood Trap: Nutrition offers a similar story, with malnutrition very early in life affecting long-term mental and physical development, and thus limiting lifetime potential and productivity, and creating a low-income, low-consumption household in the next generation.

Income poverty is widespread and deep. Some 31 million people live below a poverty line equivalent to 45 US cents per day1; and between 6 and 13 million people are at risk of starvation each year. There is also extreme vulnerability, with consumption rising and falling dramatically from year to year as the result of drought, ill health, or other family shocks. As a result, many families who are not currently poor are at constant risk of falling into extreme poverty, and can never accumulate enough assets to break out of poverty.

Despite improvements in the past few years, sustaining long-term growth remains a challenge. Economic growth averaged about 5% p.a. over the period 1999/2000 to 2004/05 adjusting for population growth average per capita incomes rose only by about 2.1 % per annum. Major disruptions and shocks in the 1970s and 80s resulted in economic decline, and the relatively good performance of the 1990s and early 2000s has just recently helped to reverse and brought incomes to rise. In 1994 the Government adopted a strategy of Agricultural Development Led Industrialization, with an emphasis on agriculture as the generator of primary surplus, taking advantage of backward and forward linkages to fuel the transition of a more modern economy. The approach remains basically sound, it places an appropriate emphasis on raising the incomes of the rural population, who constitute 85 % of the population, and over 90% of the poor, and who are almost exclusively engaged in agriculture. However, the full potential of agricultural growth has not yet been realized, and intensification of the strategy is needed. More broadly, the overall growth performance has not yielded the hoped-for poverty-reduction results over the long-term. The time is now right to mount a major effort to accelerate growth, and this forms the main thrust of the PASDEP.

There has been encouraging progress in recent years in improving some basic aspects of life in Ethiopia. Since 1996 the literacy rate has increased by 50%, the rate of malnutrition has fallen by 20%, the share of the population with access to clean water has risen to 38% and according to the WMS there has been a steady decline in the reported incidence of illness. Nonetheless, human development indicators in Ethiopia still remain at low levels in the world. 2 Most Ethiopians lead lives of unrelenting hardship: the majorities of households live on small plots of relatively unproductive land, and rely almost entirely on hand-cultivation of basic food grains to survive. More than 15% of children die before their fifth birthday; 47% of children are malnourished in some form or another. Maternal mortality, at 871 per 100,000 is about the highest in the world. Some 48 million people do not have access to clean water, and only 17 %( 2004/05) of the population has electricity. Attacking the non-income elements of poverty is thus at the core of the government’s strategy. It has underpinned much of the thrust of the SDPRP, and is now the focus of a massive scaling-up effort to reach the MDGs. This represents the second prong of PASDEP.

Rapid population growth remains a major barrier to poverty reduction. The addition of almost 2 million persons per year puts tremendous strains on Ethiopia's resource base, the economy, and the ability to deliver services. It is much more difficult to make progress in creating sufficient employment, or in raising agricultural productivity to keep up with food needs, when approximately 38,000 people are being added to the population each week. There is also the direct cost of providing additional services: for example over a third of the massive cost of reaching the MDGs in education is accounted for by expected population growth. Finally, the high number of pregnancies (average 6 per woman) has a debilitating impact on women and children’s health.
While there have been significant improvements during the past 10 years, the level of infrastructure coverage remains remarkably low compared to elsewhere in the world, as demonstrated in the following table:

Table 1.1: Main Indicators of Infrastructure Availability




Access to Improved Water

(% of popn.) 2000



Road Density

(km/1000 pop) 1999



Electric Power (kW Installed Capacity per 1000 persons)

Electricity Consumption

(kwh per capita)2001



Telephone Lines (per 1,000 persons) 2002

Ethiopia


24%

0.48(2002/03)

8

24(1998/99)

5

Average of Developing Countries

79%

0.14

272

938

100

Sub-Sahara África

58%

0.07

105

456

15

Low-Income Countries

76%

0.18

..

317

28

The Emerging Urban Agenda: Ethiopia is currently one of the least urbanized countries in the world, with only an estimated 16% of its inhabitants living in urban areas. The contribution of urban areas to the Ethiopian economy can be approximated with the share of industry and services in GDP, as those are generally located in urban areas. In Ethiopia in 2003 urban areas were contributing 55% of GDP, against an 85% estimate for Sub-Saharan Africa and 75% for low-income countries. While such contribution seems low, it still represents a significant increase over the previous decade. The development of a balanced urban system offers the opportunity to increase market integration by facilitating exchanges and the division of labor, as well as facilitating diversification in the non-agricultural sector. Further, cities offer the opportunity to deliver services more cheaply and can act as poles of growth, thereby playing an important role in poverty reduction.


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