HARAMAYA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ECONOMICS

A GROUP ASSIGNMENT FOR RURAL DEVELOPMENT

May, 2023

Submitted to Mr. Yezihalem M.

 GROUP MEMBERS

Name Id No.

1. Daniel Tiru 3623/12

2. Dagimawi seyoum 3614/12

3. Dejene Kidane 3646/12

4. Dagim Tekalign 3612/12

5. Dagaga Tamiru 0403/12

6. Hailemariam Tafere 0449/12

INTRODUCTION

Rural development is at the heart of Ethiopia’s national development strategies. Given the size of
the rural population, and the importance of agriculture for Ethiopia’s development, the country’s
efforts to effectively foster rural development constitute as a national development objective.

Rural policy is, however, constantly changing. These changes result from the structural
transformation of rural economies, changes in the national economy and international markets, a
shift in the political system, or a new ideology governing development intervention. For this
reason, understanding the evolution of rural policy is a necessary condition to identify potential
areas for reform. Moreover, this further requires understanding how national development plans
have embedded rural (and urban) development efforts.

Despite its importance, the agricultural sector has not always taken a central role in Ethiopia’s
national development plans. Ethiopia’s political ruling prior to 1991, encompassing the
Monarchy (1941-74) and the Derg period (1974-91), prioritized the industrial sector. This was
done through mixed strategies: export-oriented (mainly during the Monarchy period) and
industrial development-based import substitution, while the agricultural sector was frequently
used as a source of foreign currency.

In 1991, following changes in the political system, Ethiopia’s development strategies

dramatically changed. They went from emphasizing industry to promoting agricultural
development. This led to the establishment of the Agricultural Development-Led
Industrialisation (ADLI) strategy, which promoted small-scale agricultural sector development.
Under ADLI, agricultural sector development and rural areas were placed at the heart of the
national development agenda. ADLI functioned as the main guiding framework for subsequent
national development strategies (SDPRP, PASDEP, GTP I and GTP II). Alongside structural
reforms, the new government also implemented a series of multi-sectoral flagship programmes to
address the multidimensional needs of rural areas. These include large infrastructure and social
protection programmes, which have enhanced rural residents’ access to the nearest
agglomerations, facilitated linkages across small towns and intermediary cities, as well as
reducing poverty. For instance, Ethiopia’s flagship social protection programme, the Productive
Safety Net Programme (PSNP), reaches today almost 8 million beneficiaries (both in rural and
urban areas), and has lifted 1.5 million Ethiopians out of poverty.

This chapter reviews the evolution of rural policy in Ethiopia since 1991. It highlights that,
although ADLI has set the foundations for Ethiopia’s economic success, Ethiopia’s demographic,
economic, and spatial transformations call for an update in the ADLI in order to better reflect
current challenges. Notably, as urbanization plays an increasingly important role for Ethiopia’s
development, policy actions affecting the urban areas will have a second order effect on rural
populations. For this reason, the chapter also looks at the main changes in national urban policies
and calls for better co-ordination between urban and rural policy.

This chapter is structured as follows. The first two sections briefly summarize the changes in
national development approaches across two political systems prior to 1991, and the national
development strategies since 1991. The third section highlights the main government programs
targeting rural areas, while the fourth section describes rural areas’ governance and institutional
frameworks, as well as the roles and responsibilities of subnational governments. To complement
this analysis, the fifth section outlines Ethiopia’s national urbanization plans and the ways in
which urban areas have been embedded into national development strategies. The chapter ends
with a short conclusion.

Monarchy period (1950-74)

Ethiopia’s national development strategy under the monarchy aimed to foster industrialisation.
Export-oriented growth strategies were first adopted in order to attract foreign direct investments.
Due to the unsuccessful outcomes of export-oriented strategies, the monarchy switched to import
substitution industrialization (ISI) strategies in order to develop an industrial sector.

Three five-year development plans were launched during the monarchy. The First Five-Year
Development Plan (1957-62) promoted improved production of cash crops, including coffee,
which accounted for 70% of foreign exchange earnings (Welteji, 2018). Similarly, the Second
Five-Year Development Plan (1963-67) continued to prioritize industrial development. Large-
scale commercial farms for production of cotton, coffee and sugar were promoted as a source of
income over small-scale subsistence farms, which accounted for 80% of cereal production
(Alemu et al., 2002).
The Third Five-Year Development Plan (1968-73) shifted its focus to the development of the
agricultural sector in order to address the rising problem of food shortages in Ethiopia. The
Integrated Rural Development project was also established to address rural development
challenges and expand the agricultural commercial market system. It predominantly focused on
improving the distribution of agricultural inputs, such as fertilizers and seeds used by
commercial farmers, and expanding rural health services. Nonetheless, the monarchy continued
to envision the development of the non-agricultural sector as the main driver of economic
development (Alemu et al., 2002).

During the monarchy, Ethiopia had a complex land tenure system, with very limited private
ownership of land. The monarchy and the church had strong control over most of the agricultural
land.

A combination of public dissatisfaction, food shortages and the rise of a military government led
to the monarchy to be overthrown in 1974 (Clapham, 2019).

Provincial Rural Development Program”Lemat”(1950s)

• Governors of provinces created development committees (known as “Lemat”) by official

fiats.

• These projects of rural development were without consultation with the population

• The provincial governors assisted by sub-provincial governors and officials, local

“balabats” and leaders

• formation of these committees were informal

• Basic objective of the committees was fund-raising for local development projects.

Chilalo Agricultral Development Unit(CADU)

• established in Chilalo Awraja of Arsi Province in 1967. and later became Arsi Rural
Development Unit (ARDU)

• The aim of the project was to provide a wide range of productive and social services
 • 24 potential Awrajas with high rainfall and good top soils were covered.

• This project was essentially an integrated rural development program,

• Swedish international Development Authority (SIDA) was donor agency including with
expatriates

• The research activities of the project have yielded high yielding wheat and other seed
varieties and high-milking cross-bred cattle.

• CADU’S extension cadres have been effectively reaching a substantial number of barley,
wheat, and dairy farmers through the use of model farmers and demonstration plots.

Wolaita Agricultural Development Unit (WADU)

• established in 1970 in the Wolayta (highland areas of Sodo and Bolosso)

• The goals of WADU have been stated as follows:

➢ to promote a shift from subsistence to cash crop agriculture

➢ To increase the per year income per families

➢ to increase the governments tax revenue

 Like CADU, WADU was:

➢ integrated rural development program (donor agencies)

➢ Aimed to provide productive and social services

➢ succeeded in improved maize varieties and livestock breeding

The Minimum Package Program (MPP-I) =1970

 It was not as comprehensive in its choice of components as CADU and WADU projects.

 Its objective was to provide minimum services needed by farmers which were critical for
rural development: agricultural extension, credit, cooperative development and feeder
roads.
  Its goals were similar to those of CADU.

 Its long term plan was :

➢ to cover half of the geographic area of the country

➢ to involve the entire agricultural population, excluding nomadic pastoralists.

 Each Minimum Package area was divided into extension areas, each having its own
marketing center and a one-hectare trial demonstration plot.

Derg period (1974-91)

The Derg government changed the previous national development strategy, placing the emphasis
on a centrally planned economy. Industry-led development was deployed as the main
development strategy. Rural land and other productive assets were nationalised, and land was
distributed among farmers. Commercial farms were put under GoE control, and land tenancy
was abolished. Furthermore, private commercial labourers and commercial farming were
marginalised, and large collectivisation programmes were promoted through resettlement and
villagisation programmes (Welteji, 2018). The military government maintained an overvalued
currency and implemented marketing and pricing policies; in addition, the GoE established the
Agricultural Marketing Corporation (AMC) to set pricing systems, for agricultural goods and set
quotas for grain production which were significantly lower than market prices (Alemu et al.,
2002).

Following the severe drought of 1983-84, the government introduced the Ten-Year Perspective
Plan. This plan primarily aimed to promote self-sufficiency in food production, as well as surplus
agricultural production. The central government set production targets and utilised the AMC to
increase the production surplus of agricultural resources (Alemu et al., 2002). In 1987, the
government unveiled a mixed economy strategy and the Ten-Year Perspective Plan was partially
changed to focus on the production of staple food crops, until the plan was terminated in 1990.

Rural development was not part of the overall development agendas of either the Derg
government or the monarchy. Investment in the agricultural sector was primarily used to manage
foreign exchange earnings or capital accumulation for investment in the industrial sector.
However, by the end of the period of the Derg government, and with the formation of the new
government, national development strategies had shifted focus.

The Minimum Package Program (MPP-II) =1980

 the Minimum Package Project II (MPP-II) was developed with funding from The World
Bank, International Fund for Agricultural Development (IFAD) and SIDA.

 The MPP-II aimed to improve crop and livestock productivity, increase the production of
agricultural raw materials for domestic use and for export, enhance soil and water
conservation activities, establish various farmer organizations, and construct rural roads,
grain stores and agricultural offices.

Peasant Agricultural Development Programmes (PADEP) 1989 – 1990)

• focused on accelerated agricultural development in high potential areas of the Ethiopian

highlands.

• General objectives of PADEP were mainly to:

• increase food production to the level of self-sufficiency;

• support the production of cash crops for export;

• develop agricultural production along basic principles of conservation of resources, and

to generally raise incomes to a higher standard of living.

• Encourage decentralization of policies, structures and decision-making processes

• strengthen regional institutions

Ethiopian People’s Revolutionary Democratic Front (1991 to present)

The Ethiopian People’s Revolutionary Democratic Front’s (EPRDF’s) rise to power in 1991
resulted in a considerable shift in national development strategies. The EPRDF moved Ethiopia’s
development vision away from the previous centrally planned industrial development and
towards a new agricultural-led development approach. Many of the previous governments
policies were reversed, agricultural price controls were removed, and state farm assets were
privatised. In addition, the new government adopted an export-oriented development strategy
and implemented structural adjustment programmes (SAPs). In 1994, the home-born ADLI was
launched as the foundation for national development, with the main objective of attaining food
self-sufficiency by increasing agricultural productivity and output

Ethiopia’s policy frameworks for national development since 1991

The ADLI has functioned as the guiding framework for national development

Under the ADLI, the GoE envisioned agricultural sector-driven economic transformation. The
programme entailed three main strategies: expansion of agricultural technologies; investment in
agricultural infrastructure, including inputs; and boosting rural non-agricultural sectors. The
programme aimed at boosting agricultural productivity by improving the use of fertilisers and
seeds, with the aim to boost agricultural production to serve as input and drive industrial
development (Dercon et al., 2019).

The ADLI also encompassed wider socio-economic development programmes, including

investment in infrastructure such as roads, telecommunication, and electricity grids. Furthermore,
the plan aimed at enhancing the flow of finance, local governments’ administrative capacity, and
the development of agro-processing industries (Mellor and Dorosh, 2010). A series of investment
plans were made under the ADLI, including rural technical and vocational education and training
services (TVETs), the development of water resources (hydro power and irrigation),
improvements in microfinance institutions, improvements in the marketing of agricultural
products, and the restructuring of smallholder co-operatives.

The GoE heavily invested in extension programmes and introduced the Participatory
Demonstration and Training Extension System (PADETES). PADETES was used to distribute
fertilisers, seed and credit, as well as to spread information on better agricultural practices, to
smallholder farmers. The ADLI remains the key pillar and guiding framework for other
successive development plans, including the SDPRP, PASDEP, GTPI, and the current GTPII.

The SDPRP (2002-05) affirmed agricultural development as a key sector for poverty
reduction

The SDPRP was the first poverty reduction strategy to be introduced by the EPRDF, and covered
the period between 2002 and 2005. While the ADLI constituted as one of the four pillars of the
SDPRP, the programme also encompassed wider sectoral reforms, including the reform of the
justice system and civil service, decentralisation, and empowerment and capacity building in the
public and private sectors. SDPRP objectives included poverty reduction, food security and
macroeconomic stability (MoFED, 2002).

The SDPRP recognised the need for a multisectoral, rural development strategy to expand
beyond an agricultural sector focus. It built on the ADLI principles and policies of labour-
intensive agricultural sector development as a way of reducing poverty and improving food
security and growth. It promoted the expansion of the agricultural sector into international
markets by increasing commercialisation and intensive farming through improved technologies
and access to microfinance institutions. In addition, the SDPRP aimed to expand education and
training programmes such as TVET, and to strengthen rural co-operatives in order to further
develop the links between small-scale farmers and the non-agricultural private sector (MoFED,
2002).

The PASDEP (2005-10) tapped into the role of urban areas for poverty reduction while
agriculture remained a national priority

The PASDEP was Ethiopia’s second poverty reduction strategy, covering the period between
2005 and 2010. The plan mainstreamed and built on the ADLI’s main objective of attaining food
self-sufficiency by increasing agricultural productivity and output. However, the PASDEP
altered its approach to agricultural growth, changing from a focus on small-scale subsistence
farming alone to larger-scale farmers; in addition, it called for “specialisation, diversification and
commercialisation of agricultural production” (MoFED, 2006[).
The PASDEP promoted agricultural specialisation and diversification by encouraging farmers to
focus on agricultural activities with the highest comparative advantage. The plan was aimed at
increasing agricultural diversification by establishing high-value and niche markets, such as
floriculture, production of spices, horticulture and mining. In addition, the PASDEP created a
long-term programme of private sector engagement in the agricultural sector in order to facilitate
the state’s long-term progressive withdrawal from the sector (MoFED, 2006). Moreover, under
the PASDEP, the GoE promoted the provision of capacity building in technology use, and other
skills training for farmers.

The PASDEP differed from previous poverty reduction strategies in that it focused on urban
areas and promoted rural-urban linkages. Moreover, it widened its focus beyond rural areas and
agriculture to include urban areas, and it emphasised their role in industrial and rural
development. The plan highlighted the need for rural-urban linkages, and for small cities and
towns to create these linkages. As such, the plan called for the development of 600 small towns,
each with 20 000 inhabitants, as a way of promoting rural-urban linkages (MoFED, 2006). By
2012, the number of towns in Ethiopia with up to 20 000 inhabitants had exceeded 700 (EGIS
International, 2015).

The PASDEP contained a series of urban development-related objectives, including

infrastructure development (such as road, market infrastructure), the creation of urban
employment and the development of low-cost housing. It embedded the goals of the National
Urban Development Policy, which was launched in 2005 (MoFED, 2006).

GTPI (2010-15) widens the national development agenda towards industrialisation

GTPI was the third national development plan covering the period between 2010 and 2015.
GTPI advanced the Ethiopian national agenda towards becoming a lower middle-income
economy by 2025. Regarding agricultural sector growth strategies, GTPI highlighted the need to
identify and scale up smallholders’ best agricultural practices. It introduced new agricultural
technologies aimed at helping to improve soil productivity, and it provided support to small-scale
farmers through training and fertiliser provisions. In addition, GTPI promoted the production of
high-value crops and set sector-based targets (MoFED, 2010).
GTPI built on the PASDEP and widened its remit to include industrialisation as a way of
creating structural transformation. The plan recognised the importance of urban areas and
industrial development for structural transformation and for creating employment for Ethiopia’s
growing population (MoFED, 2010). It promoted investment in labour-intensive micro and
small-scale enterprises (MSEs), as they provide significant opportunities for processing of
agricultural goods. The plan envisioned labour-intensive manufacturing MSEs as a strategy for
creating linkages with the rest of the economy (including the agricultural sector), as well as a
strategy for an import substitution and export-oriented industrialisation programme. GTPI also
promoted investment in urban infrastructure, employment creation and promotion of low-cost
housing (MoFED, 2010).

GTPII (2015-20) continues the industrialisation agenda, and taps into the potential of
urban areas

GTPII builds on the main objectives and pillars of GTPI. GTPII continues to operate within the
framework of the ADLI and Ethiopia’s agenda of becoming a lower middle-income country by
2025. Smallholder agriculture remains considered “the single most important source of economic
growth” (NPC, 2016, p. 82).

GTPII promotes agricultural sector development by encouraging the production of selected crops,
including high-value crops, and the production of both industrial inputs and export commodities.
In addition, GTPII recognises the wider developmental needs of rural areas. For example, under
the new plan, the GoE aims to strengthen land rights through the provision of land use
certificates for 7.2 million rural male- and female-headed households. Additional plans also
include an increase in irrigation development, enhanced agricultural research programmes,
increased private sector participation, and capacity building for rural workers (NPC, 2016).

Under GTPII, the GoE envisions Ethiopia to become the leading light manufacturing hub in
Africa. In this regard, urban development is an important feature of GTPII, as urban areas are
projected to grow and play a key role in Ethiopia’s industrial development. In return, it is
expected that industrial development will propel urbanisation even further, and the plan
advocates the development of urban infrastructure and an integrated housing development
programme to meet the expected housing demand increase (NPC, 2016).
The changes and progressions across Ethiopia’s national development strategies reflect the
changes in the socio-economic dynamics of the country, since 1991.

The Rural Development Policy and Strategy (RDPS) prioritised agricultural sector
development

Prior to 2003, Ethiopia did not have an explicit targeted plan for rural development. The new
Rural Development Policy and Strategy (RDPS), launched by the MoFED, was the first
comprehensive development plan specifically aimed at rural areas and at the well-being of rural
populations. The plan was designed to address persistently low agricultural growth, food
shortages, and disproportionately higher levels of poverty in rural areas (MoFED, 2003).

The RDPS echoes Ethiopia’s national development plans and establishes agricultural
development as the main catalyst for overall rural development. Agricultural sector development
is set to address some of Ethiopia’s most important development objectives. These include
ensuring rapid and sustained economic growth, enhancing population well-being, eliminating
food dependency, and promoting market-oriented economic development. The plan also
highlights the importance of developing the financial infrastructure to improve rural finance, and
calls for the establishment of a clear institutional framework to manage and co-ordinate rural
development strategies (MoFED, 2003).

The RDPS also highlights the need to follow an integrated development path and take into
account the role of small towns and cities in fostering rural development. It highlights the need to
integrate agricultural sector development plans with wider industrial development plans as well
as investment in public services and infrastructure. It is acknowledged that urban areas play a
key role in supporting rural development through their involvement in processing agricultural
goods, as well as providing sources of non-agricultural employment for rural youth (MoFED,
2003).
REFERENCES

➢ Alemu et al. (2002), ““Agricultural Development Policies of Ethiopia since 1957””,

South African Journal of Economic History, Vol. 17/1-2, pp. 1-24,
[Link]

➢ Alemu, G. (2011), Rural Land Policy, Rural Transformation and Recent Trends in Large-
Scale Rural Acquisitions in Ethiopia, Overseas Development Institute, German
Development Institute, European Centre for Development Policy Management, [Link]
[Link]/erd/report_2011/documents/dev-11-001-11researchpapers_alemu.pdf.

➢ Bekele, Y. and D. Kjosavik (2016), “Decentralised Local Governance and Poverty

Reduction in Post-1991 Ethiopia: A Political Economy Study”, Politics and Governance,
Vol. 4/4, p. 1, [Link]

➢ Clapham, C. (2019), “The Political Economy of Ethiopia from the Imperial Period to the
Present”, in Cheru, F. (ed.), The Oxford Handbook of the Ethiopian Economy, Oxford
University Press, [Link]

➢ EGIS International (2015), National Urban Development Spatial Plan: Existing Situation
and Diagnostic, EGIS International, Ministry of Urban Dvelopment, Housing anf
Construction.

➢ Endale et al. (2019), “Financing social protection in Ethiopia: long term perspective”, No.
15, OECD, Paris, [Link]

➢ MOA (2017), Rural Job Opportunity Creation Strategy, Ministry of Agriculture and
Natural Resources, Addis Ababa.

➢ MoA (2015), Agricultural Growth Programme II, FDRE Ministry of Agriculture, Addis
Ababa.