DILLA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF PUBLIC ADMINISTRATION
AND DEVELOPMENT MANAGEMENT

Tutorial Course name: Development Management

Compiled by: Endashaw M. (MPA &MBA)

June 10, 2023

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 Chapter : One
Trends in Public Administration Today;
New Public Administration (NPA);
New Public Management (NPM);
Neo-liberalism is often associated with the shift from Keynesian welfarism towards a political
agenda associated with the ‗globalization of capital‘. The push for international competitiveness
and economic efficiency has caused a rolling back of welfare state activities and has favored the
unfettered operation of markets. In some countries – in particular in the Anglo–Americans – neo-
liberalism has caused a shift towards a minimalist state, deregulation and privatization. However,
a probably more common effect is the neo-liberal perception of government which implies a
blurring of distinction between public and private institutions. Since the 1980s a range of OECD
countries have reformed their public services in line with ideas taken from private business and
economic theories developed from modeling private business ( Hood 1995, Sahlin Anderson,
2004, Christensen & Lægreid 2007). This wave of reform is often referred to as ‗New Public
Management‘ or NPM (hereafter).

NPM was born of a technocratic mindset. It has been driven by the demand for enhanced
efficiency and accountability, rather than the need to maximize other values such as fairness,
equity, due process and public participation (Gregory 2007).

Accordingly it has been presented as a politically neutral framework – a framework of general

applicability, advanced as a mean to solve the ‗management ills‘ in many different contexts
across policy fields, levels of government and countries. The idea that efficiency is amenable to
technical solution has been alluring to politicians and senior managers who are facing (more or
less objective) conditions of fiscal constraints. NPM generated hope for greater calculability and
precision in the management of human affairs – not at least in social policy area which is
generally found to be rather uncontrollable and characterized by ‗wicked problems‘ (Rittel og
Webber 1973).

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What this chapter demonstrate, however, is that in its decontextualized and technocratic
approach NPM tend to generate unintended consequences.
By closing the eyes to the specific moral and political contexts NPM reforms tend to conceal the
importance that other values have as source of legitimacy.

CORE ELEMENTS OF NEW PUBLIC MANAGEMENT

The label NPM was first coined by Christopher Hood (1991) as a shorthand name
for a set of broadly similar administrative doctrines which dominated the
bureaucratic reform agenda in many OECD countries from the late 1970s. In his
seminal paper ‗A public management for all seasons?‘ Hood (1991:3) lists seven
overlapping precepts which appear in most discussion of NPM:
1. ‗Hands-on professional management‘ in the public sector
2. Explicit standards and measures of performance
3. Greater emphasize on output control
4. Shift to disaggregation of units in the public sector
5. Shift to greater competition in public sector
6. Stress on private sector styles of management practice
7. Stress on greater discipline and parsimony in resource use

It is important to maintain that NPM is a loose term and the different elements suggested under
this umbrella do not occur in every case. Lacking an element from the list does not absolve a
program from being a NPM strategy. Pollitt (1995) suggested that the elements comprise a kind
of ‗shopping basket‘ for those who wish to modernize the public sector and characteristic
mixtures vary somewhat from country to country. It is often emphasized that NPM is a loose
term – an umbrella concept used to label a shift of emphasized from traditional public
administration to public management characterized by use of markets-type mechanisms and
business style of managements. Even though NPM is not a theoretical coherent program it is
heavily influenced by ideas derived from new institutional economics, especially the emphasis
on the purchaser-provider split, service specifications and contracts (Hardy & Wistow 1998).

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Governments should concentrate less on direct service provision and more on ensuring that
things are done – an approach which Osborn and Gaebler (1992) have famously described as
‗steering not rowing‘

Hood (1991) interpret the origins of NPM as a marriage of two different streams of thought – on
one hand ‗new institutional economics‘ which helped to generate a set of administrative
doctrines built on ideas of contestability, user choice, transparency and focus on incentive
structures. The other partner in the marriage was the latest fashion of business-type
managerialism – which is often based on hybrids of neo-Taylorist approaches stressing strict
control, regulation and supervision and ‗new wave management‘ which has a more optimistic
view of employees as self-motivated workers and managers as potential enabling the creative
potential of their workforce (Clarke et al 1995).

The management movement emphasizes that professional management expertise, being portable
and paramount over technical expertise, require a high degree of discretionary power to achieve
results (free to manage). Stressing the role of managers as NPM represent a shift away from the
traditional bureau-professional way of self-management, and a shift away from the diffuse
‗public ethos‘ or ‗professional ethos‘ and moving instead towards a greater emphasize on
pecuniary-based, specific performance incentives.

THE CLAIM FOR NEUTRALITY AND UNIVERSAL APPLICABILITY

The primary concern of NPM is to rationalize service provision – to do more for less.
NPM proponents aim to create a slim state by increasing the efficiency of public policies by
transferring market principles and business management techniques from the private into the
public sector. The overarching idea of efficiency is not in itself problematic or incompatible with
a public ethos.

On the contrary, one may argue on behalf of citizens as taxpayers that the concern for frugality in
resource use is important for the legitimacy of public administration. Nobody wants a wasteful

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and inefficient state. However, efficiency is not the only and indeed not the primary concern of
public welfare providers and this is exactly the problem of NPM.

NPM doctrines tend to focus on setting clear targets and specify outputs but fail to recognize that
efficiency is a relative concept that is based on context and appropriateness: it is efficiency to
achieve a certain effect with a minimum of resources (Drechsler 2005). If efficiency is made the
only value any kind of activity may be regarded as legitimate. Even inhumane and illegitimate
programs, like the Nazi death camps, may be distinguished as efficient. A highly problematic
aspect of NPM doctrines is that they do not recognize the importance of institutional contexts.
Schools, hospitals and other public agencies are treated as abstract categories, without reference
to the goals and purposes of those organizations.

By claiming to be politically neutral NPM deflect attention away from moral and
political aspects of welfare institutions. Questions concerning who should get
what, when and how much, are silenced. Accordingly they were perceived to be
disconnected from the political and practical world they aim to affect (Vining and
Weimer, 2005).

The generic approach of NPM advocates represented a break away from

established scholarly debates. It had long been a theme among public
administrationist and in the contingency literature in organization theory that
fundamentally different management style, techniques and structures might be
appropriate for different functions or levels (Pollit 1995). It was for instance
acknowledged that organizations operating in contexts characterized by
uncertainty, non-routineness and instability would tend to adapt to these contextual
requirements by delegating authority to front line staff. This knowledge was now
being excluded from discussion.

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As a result NPM doctrines have met with skepticism from scholars of public
administration. NPM was accused of lacking a clear theoretical basis.

Chapter Two

Features of New Public Administration (NPA):

2.1. GOOD GOVERNANCE
Good governance is among other things, participatory, transparent and accountable. It is
also effective and equitable, and it promotes the rule of law. It ensures that political, social
and economic priorities are based on broad consensus in society and that the voices of the
poorest and the most vulnerable are heard in decision- making over the allocation of
development resources.

World Bank (1989) explains the concept of Governance with three parameters;
1. Public Sector Management and Accountability
2. Legal framework for development
3. Information and transparency

Characteristics of good governance

From the above discussion we can spell out some important features of Good Governance.
Good Governance insist on removal of corruption, voices for the minorities,
participation of most vulnerable in decision-making and responsive to the present
and future needs of society.
1. Participation
Participation is either direct or indirect. Informed and organized participation is
emphasized. Such broad participation is built on freedom of association and speech, as well
as capabilities to participate constructively.

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2. Rule of law
Good governance requires fair legal frameworks that are enforced impartially. It entails
protection of human rights, particularly those of minorities; impartial enforcement of laws
which requires an independent judiciary and an impartial and incorruptible police force.

3. Transparency

Transparency is built on the free flow of information. Processes, institutions and

information are directly accessible to those concerned with them, and enough information
is provided to understand and monitor them.
It promotes openness of government action, decision-making processes, and consultative
processes among public sector and all stakeholders.

4. Responsiveness
It suggests that governance must be responsive to the concerns of all stakeholders within a
reasonable timeframe. Institutions and processes try to serve all stakeholders within a reasonable
timeframe.

5. Consensus oriented
Good governance requires mediation of the different interests in society to
reach a broad consensus in society on what is in the best interest of the whole
community and how this can be achieved. It also requires a broad and long-
term perspective on what is needed for sustainable human development and
how to achieve the goals of such development. This needs sensitivity of the
administration to the historical, cultural and social contexts of a given society
or community. In political term it is called as political pluralism.

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6. Equity and inclusiveness
All men and women have opportunities to improve or maintain their well-
being. Good governance must address the issues concerning justice and
equity. None in the society should feel side lined or exploited in the process of
development. Growth should be inclusive and equitable. Mostly the vulnerable
and marginalized must share the fruits of the development and must have
opportunities to improve and maintain their well-being.

7. Effectiveness and efficiency

It means that developmental needs of the society must be achieved by the optimum
utilization of the resources at their disposal. It further suggests sustainable use of
natural resources and the protection of the environment.

8. Accountability

Accountability is a key of good governance. Both public and private institutions along with
civil society organizations must be accountable to the public and to their institutional
stakeholders.

9. Strategic Vision

Leaders and the public have a long-term perspective on good governance and human
development, along with a sense of what is needed for such development. There is also an
understanding of the historical, cultural and social complexities in which that perspective is
grounded.

2.2- EMPOWERMENT
As one author has noted, ‗it is clear that ‗empowerment‘ is used in many ways and
in a wide range of contexts.

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Most definitions focus on supporting the disadvantaged to gain power and control
over decisions and resources that determine quality of life and the deep structural
inequalities that inhibit this. Empowerment concerned with enhancing the
opportunities of those who are socially, politically or economically excluded and
transforming the power relations which lead to such exclusion.

2.3 COMMUNITY PARTICIPATION

Participation is a process whereby policy- making, prioritizing issues, accessibility

to public goods and services and also allocating resources is influenced by key
stakeholders.
It varies from one context to another and subject to different projects and visions.
Participatory processes in a poverty reduction strategy promote information
exchange and transparency in decision-making processes. The World Bank notes
that this, in turn, will improve and, as a result, increase the overall governance and
economic efficiency of development activities.
Generally, public involvement includes three elements or ‗pillars‘:
 Public access to information;
 Public participation in decision-making processes;
 Public access to judicial and administrative redress often termed ‘access to justice’.

Access to information can be passive or active. Passive access is where the public
will get information upon request to government institutions. Active access is
whereby the government is obliged to give and disseminate information. Access to
justice is whereby the procedural rights of the public to information are respected
and guaranteed. This is because for rights to be effective there should be a
corresponding remedy.

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The above pillars are also known in environmental law parlance as third
generation human rights or environmental rights. They are also part of the basic
tenets of good governance.

The rationale for public involvement can be discussed from various dimensions.
From a human rights dimension, people have the right to know, to be informed and
participate in decisions that affect them as well as seeking redress. From a legal,
ethical and moral dimension, citizens and government officials are obliged to
ensure good governance. It has been argued that government processes are
improved through public involvement.

2.4- DECENTRALIZATION

Decentralization is the transfer of responsibility from higher to lower levels of decision-

making. In practice it entails the spread of power from higher to lower level units within a
central government, from central to regional and local governments, or from regional to
local ones. It could also mean delegating authority to semi-autonomous, private and
voluntary organizations.

Types of decentralization

Different types of decentralization should be distinguished because they have

different characteristics, policy implications, and conditions for success. There are
basically three types of decentralization within the public sector:

1) Political decentralization.
Political decentralization is the transfer of political power and decision‐making
authority to sub national levels such as elected village councils, district councils and
state level bodies.

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 Where such transfer is made to a local level of public authority that is autonomous
and fully independent from the devolving authority, devolution takes place.

2) Fiscal decentralization.

Fiscal decentralization involves a level of resource reallocation to local

government which would allow it to function properly and fund allocated service
delivery responsibility, with arrangements for resource allocation usually
negotiated between local and central authorities. The fiscal decentralization policy
would normally also address such issues as assignment of local taxes and revenue‐
sharing through local taxation and user and market fees.

3) Administrative decentralization.

Administration decentralization involves the transfer of decision‐making

authority, resources and responsibilities for the delivery of selected public services
from the central government to other lower levels of government, agencies, and
field offices of central government line agencies. The most radical form of
administrative decentralization includes the following.

1. De-concentration, also known as administrative decentralization, is the transfer of

responsibilities, authorities and resources from a center to local units of the center.
De-concentration is the handing over of some amount of administrative authority
or responsibility to lower levels within central government ministries and agencies.
Through de-concentration, powers and responsibilities are transferred to
governmental institutions within the jurisdictional authority of the central
government. Therefore, a local unit which enjoys de-concentrated power is
ultimately answerable to the center; even if it may have certain discretion. De-
concentration may be either general or functional.

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General de-concentration takes place when a variety of tasks are de-concentrated to
local level. Functional de-concentration on the other hand comes about when specific
tasks are de-concentrated to field units of the center.
2. Delegation refers to a situation where decision-making and administrative

authority and responsibility for definite tasks are transferred from a center to an
autonomous sub-national unit. Delegation: transfer of managerial responsibility for
specifically defined functions to organizations that are outside the regular
bureaucratic structure and that are only indirectly controlled by the central
government.
The central government defines the powers which are to be transferred. It also puts
conditions under which the delegated powers are exercised. Moreover, the center
can take back the powers which are so transferred through delegation. Yet, the sub-
national government is viewed as an autonomous entity. Hence, it is left with a
wide range of discretion in the exercising of the powers and responsibilities
transferred to it. The relationship of the central government and the sub-national
government which is entrusted with delegated powers is characterized as a
‗principal-agent relationship‘. Therefore, the central government bears the ultimate
responsibility for the decisions of the local unit.

3. Devolution or democratic decentralization: refers to a situation where a local

level government is constituted legally as a ‗separate governance body‘ and that

power and responsibilities are transferred to such unit on permanent basis. This
form of decentralization is referred to as ―genuine decentralization.‖

Devolution implies the autonomy of the lower level unit. The lower level unit has
distinct and legally recognized geographical boundaries and legal personality.

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The powers and responsibilities are transferred to it through constitutional or other
similar legislative instruments.
Hence, as De Visser states, the power so transferred will become an original power
of the sub-national entity. As a result, the sub-national entities will not be
accountable to the central government for its decisions.

Rondinelli described the variety of ‗objectives‘ or motives for decentralization.

These include:
a) Reduction of central government workload.
b) Overcoming delays in central bureaucracy.
c) Improving responsiveness to local needs.
d) Improving the efficiency and effectiveness of national economic planning.
e) Better and reliable information on local or regional condition.
f) Promoting greater participation, greater equity and greater national.
g) And as a means of creating larger number of skilled administrators and
managers.

2.5- EFFICIENCY& EFFECTIVENESS

Efficiency is the proper use of resources wisely without waste. It demands using
time, energy, money and other resources wisely.
Processes and institutions produce results that meet needs while making the best
use of resources. This characteristic promotes efficient public delivery systems and
quality public outputs. It deals with the amount of public respect the civil service
has.

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2.6. TRANSPARENCY AND ACCOUNTABILITY
Transparency suggest three things; firstly, decisions must be taken and enforced in
proper legal manner, secondly, the information must be freely available and
directly accessible to the affected, and thirdly, complete information in easily
understandable forms and media.
Decision-makers in government, the private sector and civil society organizations
are accountable to the public, as well as to institutional stakeholders.
This accountability differs depending on the organization and whether the decision
is internal or external to an organization. Central to the principle of accountability
is information sharing and transparency which should be promoted by governance
structures. Hence, accountability is hard to achieve especially in the absence of
access to information.

Accountability can be classified in four categories. These are:-

1. public,
2. financial,
3. horizontal and
4. Vertical.
1. Public accountability is the whereby the one actor or organization give
information about their action and the public get information about the
institutions easily.

2. Financial accountability the responsibility of organizations and public

officials to follow financial rules and procedure and being answerable for the
financial expenditure they made.

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3. Horizontal accountability is the relationship between the executive, legislature
and the judiciary.

4. Vertical accountability is whereby one actor reports to another subject to the

interpretation of constitutional provisions. Informal checks on these
relationships are reinforced by the civil society and the donor community.

2.7 PRIVATIZATION

Privatization, or the transfer of State assets to the private sector, is a central

component of downsizing. It refers to the transfer of control and responsibilities for
government functions and services to the private sector – private voluntary
organizations or private enterprises. Privatization in Africa has taken several forms
(Hope, 2002). It has included:
 Commercializing of government services which are contracted out to an
outside agency;
 Joint ventures between government agencies/ministries and private entities;
 Sale of some government services or functions, such as water supply or
telecommunications, to the private sector;
 Management contracts for the private sector to manage specific government
functions or services such as postal services;
 Leasing of government assets that are used to provide public services; and
 Granting of concessions to private entities to operate and finance public
services delivery in part.
Privatization can contribute to fiscal stability in a number of ways. Gains can be
made on the expenditure side by withdrawing subsidies to loss-making companies
and imposing hard budget constraints on the economic decisions of managers.

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Also, the revenue derived from selling state enterprises to the public can help
governments close their fiscal gaps.

Contracting Out
―Contracting out‖ refers to the out-sourcing or buying in of goods and services
from external sources instead of providing such services in-house (Walsh, 1995). It
is a method of privatization that is increasing in popularity due to the emphasis on
efficiency and service delivery.

Contracting may be between a public organization and a private-sector firm or

between one public organization and another. The responsibility of the public
organization is to specify what is wanted and let the private or voluntary sector
provide it.

Contracting out leads to cost saving from inefficient public bureaucracies that are
more intent on satisfying the wishes of producer groups than of consumers.
Moreover, private contractors can be penalized for poor quality, delays and lack of
reliability.

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Chapter 3: Development and Development Concepts:
1.1 Meaning of development; 1.2 Objectives of Development; 1.3 Measures of
Development; 1.4. Instruments of Development and Role of Different Actors (, Government
(State), NGOs, International Donor Agencies, Communities)

“The greatest difficulty lies not in persuading people to accept new ideas, but in persuading
them to abandon old ones”. - John Maynard Keynes

Before First World War More than 75% of the human race lives in the developing
countries. About 35% live in two developing countries: China and India. By the
end of World War II, fewer than 50 countries had claimed to be independent. The
rest of the world was ruled by colonial states that endeavored to prolong an
outmoded imperialist order especially under the British and French regimes during
the 20th century. Today, more than 180 countries claim independence and
membership in United Nations. The UN "millennium summit" in New York
(September, 2000) was attended by 150 heads of these independent states.

The demise of colonialism instigated the greatest structural adjustments of

governments in history. As nations declared independence, their leaders were
uncertain about the type of political, economic, and organizational structures they
were forging for their societies. Independence required substantive adjustments in
all aspects of life. In a spiral, rising expectations fed escalating demands by
citizens for improved standards of living. It demands could not be met without
considerable investments in national development. The state was the vehicle of
choice for initiating and coordinating all elements of the comprehensive
development plans. These plans were mostly conceived as blueprints to guide
activities and maintain focus as the state implemented the development plans.

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1.1 Meaning of Development
The term development may mean different things to different people. At outset the different
perspectives are discussed before a discussion on the objectives and others sections of this
chapter are discussed later.

Political and Administrative Development

The broad development initiatives of the 1950s and 1960s that dominated intellectual debates
and influenced applied public policies were often imprecisely referred to as nation building or
merely modernization policies.

The concepts of modernization and nation building are equated with the application of
rational control over people's physical and social environment (Pye 1962, Black 1967,
Mydral 1968). To achieve such control, the effective employment of advanced technology and
science was considered essential. These perspectives are premised on (1) acceptance of the
nation-state as the prime unit of polity in the country, (2) commitment to secularism and justice
in public affairs, and (3) recognition that implementation of societal change is most effective
when administered by institutions that have the capacity to learn from and adapt to advancements
in human knowledge.

By the 1970s, the literature on nation building and modernization were not found
comprehensive. Similarly, strategies for comprehensive change were criticized for the lack of
definite content, for being 'culture bound and time bound' (Heady 2001) and for "not taking
into account the historical, objective background to underdevelopment in the Third World"
(Sayigh 1991, 44). Many Western writers left little doubt about the underlying political form
against which all others are to be measured. That is democracy, with its secular, liberal,
competitive, and multiparty structures.

Economic Development
Development has traditionally meant the capacity of a national economy, whose initial economic
condition has been more or less static for a long time, to generate and sustain the annual increase

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in its gross national product (GNP) at rates of perhaps 5% to 7%.
A common alternative economic index of development has been the use of rates of growth of
income per capita or per capita GNP.
Economic development is a necessary condition for the improvement in the quality of life that
is development. Without sustained and continuous economic progress at the individual as well as
the societal level, the realization of human potential would not be possible. Rising per capita
incomes, lessening income inequalities therefore constitute the necessary but not the sufficient
conditions for development.
The United Nations 1994 – Human Development Report says the same thing, by referring to
AmartyaSen in this report, asserts – ―Human beings are born with certain potential capabilities.
The purpose of development is to create an environment in which all people can expand their
capabilities, and opportunities can be enlarged for both present and future generations. The real
foundation of human development is universalism in acknowledging the life claims of
everyone.... wealth is important for human life. But to concentrate on it exclusively is wrong for
two reasons. First, accumulating wealth is not necessary for the fulfillment of some important
human choices… Second, human choices extend far beyond economic well-being‖.

Human Development / Social Development

The Human Development Report (HDR) is an annual milestone publication by the United
Nations Development Programme (UNDP). The report was first launched in 1990. Its simple
goal was to place people at the center of the development process in terms of economic debate,
policy and advocacy. Development was characterized by the provision of choices and freedoms
resulting in wide spread outcomes. Four new indices have since been developed — the Human
Development Index, the Gender-related Development Index, the Gender Empowerment
Measure, and the Human Poverty Index. Each Report has its own focus drawn from
contemporary development debate. The Human Development Report is an independent report,
commissioned by the United Nations Development Programme (UNDP) and is the product of a
selected team of leading scholars, development practitioners and members of the Human
Development Report Office of UNDP. It is translated into numerous languages and launched in
over 100 countries annually.
UNDP (1990) definition equates ''social development'' with ''sustainable human development'',

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which it defines as enhancing human capabilities for enlarging human choices.
The Human Development Index measures a country's combined achievements in life expectancy,
education and literacy, and basic income (Haq, 1995). UNICEF (1991) focuses on children, as
reflected by the child health and educational goals adopted at the 1990 Children's Summit.
Multilateral banks employ a sectoral approach, viewing social development as investment in
social programmes (World Bank, 1993). The Social Summit in Copenhagen prioritized three
aspects - poverty, unemployment and social integration.

Paul Streeten (1992) maps social development as a three -dimensional process: social services
(health, education) and social transfers (social security, safety nets); economic access and
productive returns (livelihood generations and remunerative employment); and social integration
(peace, absence of violence). Every level of society is engaged -the individual, the family, the
community, and the nation State. Social development is holistic, encompassing physical and
psychological well-being, a healthy polity and harmonious social relations - not simply the
abundance of material goods.

Sustainable Development
Sustainable development is a term widely used by politicians all over the world even though the
notion is still rather new and lacks a uniform interpretation. Important as it is, the concept of
sustainable development is still developed and the definition of the term is constantly being
revised, extended and refined. According to the classical definition, given the UN commission on
environment and development in 1987, development is sustainable if it ―meets the needs of the
present without compromising the ability of future generations to meet their own needs. It is
usually understood that this intergenerational justice would be impossible to achieve in the
absence of present-day social justice, if the economic activities of some groups of people
continue to jeopardize the well-being of people belonging to other groups or living in other parts
of the world.

Development of Sectors in an Economy

There are a number of sectors functioning in the economy of a country. Generally speaking
categorized as the three main sectors; the first is the agricultural sector also called as primary

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sector.
The secondary sector named as industrial sector and the tertiary sector which includes the service
sector.
When the government/ state are building priorities in the nation-building processes, it
concentrates on areas covering minimum standard of living for its citizens‘ by providing goods
and services through state interventions. In this process the various sectors generally referred to
is telecom sector as part of the service sector for example; health and education are typical
examples of social sectors. If one considers infrastructure development then telecommunications,
water supply and sanitation, housing, roads, street lighting, power supply, which are considered
as individual sectors in the economic and political policy of the country.

Three Core Values of Development

What constitutes a good life as old as philosophy and human kind? Is it possible to conceptualize
development as sustained elevation of entire society as social system toward a ―better‖ or ―more
human‖ life? The most appropriate answer for developing nations in the first decade of the 20th
century is not necessarily the same as it would have been in previous decades. There are three
basic core values which conceptualize and give a practical guide for understanding the inner
meaning of development. These core values – sustenance, self-esteem and freedom – represent
common goals sought by all individuals and societies. They relate to fundamental human needs
that find their expression in almost all societies and cultures at all times.

1. Sustenance: The Ability to Meet Basic Needs

All human beings require certain basic needs without which life would be impossible. These are
life sustaining basic human needs – food clothing and shelter, health and protection. When any
one of them is absent or in critical short supply, a condition / state of “absolute under-
development” exists. A basic function of all economic activity therefore is to provide as many
people as possible with the means of overcoming the helplessness and misery arising from a lack
of food, shelter, health, and protection.

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 2. Self-Esteem: to be a Person
A second universal component of the good life is self-esteem – a sense of worth and self-respect,
of not being used as a tool by others for their own ends.
All people and societies seek some basic form of self-esteem, although they may call it
authenticity, identity, dignity respect, honor, or recognition.
The nature and form of this self-esteem may vary from society to society and from culture to
culture. However, with the proliferation of the modernizing values of developed nations
many societies in developing countries that have had profound sense of their own worth suffer
from serious cultural confusion when they come in contact with economically and
technologically advanced societies. This is because national prosperity has become an almost
universal measure of worth. Due to the significance attached to material values in developed
nations, worthiness and esteem are nowadays increasingly conferred only on countries that
possess economic wealth and technological power – those that have ―developed‖. Goulet quotes:
―there relevant post is that underdevelopment is the life of the majority of the world‘s population
as long as esteem or respect was dispensed on grounds other than material achievement, it was
possible to resign oneself to poverty without feeling disdained.

Conversely, once the prevailing image of the better life includes material welfare as one its
essential ingredients it becomes difficult for the materially underdeveloped to feel respected or
esteemed…. Nowadays the third world seeks development in order to gain the esteem which is
denied to societies living in a state of disgraceful ―underdevelopment‖… development is
legitimized as goal because it is an important, perhaps even an indispensable, way of gaining
esteem‖.

3. Freedom
A third universal value has a meaning of development is the concept of human freedom.
Freedom here is to be understood in the sense of emancipation from alienating material
conditions of life and from social servitude to nature, ignorance, other people, misery,
institutions, and dogmatic beliefs, especially one‘s poverty is one‘s predestination. Freedom
involves an expanded range of choices for societies and their members together with a
minimization of external constraints in the pursuit of some social goal – development.

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W. Arthur Lewis stressed the relationship between economic growth and freedom from servitude
when he concluded that the advantage of economic growth is not that wealth increases
happiness, but that it increases the range of human choice‖.
Wealth can enable people to gain greater control over nature and the physical environment (e.g.,
through the production of food, clothing, and shelter) than they would have if they remained
poor. It gives freedom for leisure, more goods and services or to deny the importance of these
material wants and choose to live a life of spiritual contemplation. The concept of human
freedom including, but not limited to personal security, the rule of law, freedom of expression,
political participation, and equality of opportunity.

Some reasons which explain why development in developing countries are discussed and
debated by everyone both in developed and developing nations are as follows:

(1). For some developing countries, including Sub-Saharan Africa and most of the LDCs,
development experience since about 1980s has often been of decline in incomes and living
standards rather than of advance. In many cases, the declines have been and usually more
sustained than anything experienced by people in the industrial countries during the Great
Depression of the 1930s.

(2). The wide and sometimes still widening gaps between developed and developing countries in
many measures of economic and social progress. Though some of the gaps in the main human
indicators have narrowed over the last two or three decades, especially between the industrial
and better-off developing countries, the gaps between the poorer developing countries and the
industrial countries have still been widening by most measures. In 1960, the economic gap
between the richest 20% of the world's population and the poorest 20% was 30 to 1. By the early
1990s, this gap had grown to over 60 to 1. Meanwhile the share of the poorest 20% of the world's
population in global income had fallen from 2.3% to 1.4%, while the share of richest 20% had
risen from 70% to 85%. Such experience fuels a reluctance to put too much emphasis
internationally on the extent of the progress made as opposed to the distance yet to travel.

23
(3). Colonialism and imperialism, though felt to be part of distant history by many industrial
countries, are still widely felt within developing countries to be the basis of the continuing
inequalities between the developing and industrial countries within the world today.

This justifies and sustains the repeated emphasis on inequalities within the international
economic and political system, and supports some of the political solidarity among the
developing countries.
(4) For virtually all developing countries, development remains one of their main national
objectives. However, the basic objective, in the sense that development is never really
‗‗achieved‘‘, it none the less serves to define a widely felt ambition, even if one which ultimately
may prove to be more a political ambition of being classed as one of the powerful, industrial
countries than an economic and social objective.

John Maynard Keynes over sixty years ago wrote about Britain development - ''We are suffering
now from a bad attack of economic pessimism. It is common to hear people say that the epoch of
enormous economic progress which characterized the 19th century is over; that the rapid
improvement in the standard of life is now going to slow down - at any rate in Britain; that a
decline in prosperity is more likely than an improvement in the decade which lies ahead of
us....... I believe that this is wildly mistaken interpretation of what is happening to us. We are
suffering, not from the rheumatics of old age, but from the growing -pains of over rapid changes,
from the painfulness of readjustment between one economic period and another. The increase in
technical efficiency has been taking place faster than we can deal with problem of absorption
(Keynes, 1930).

With hindsight, it is clear Keynes was right, both for Britain in the 1930s and for other industrial
countries. We need to adopt today a similar long-term perspective of confidence and vision with
respect to the development prospects and possibilities of developing countries.

1.2. THREE OBJECTIVES OF DEVELOPMENT

Development is both physical reality and a state of mind in which society has through some
combination of social, economic, and institutional processes, secured the means for obtaining a

24
better life. Whatever the specific components of this better life, development in all societies must
have these basic 3 objectives as follows:

1. To increase the availability and widen the distribution of basic life-sustaining goods
such as food, shelter, health and protection.

2. To raise levels of living, including in addition to higher incomes, the provision of

more jobs, better education and greater attention to cultural and human values, all
of which will serve not only to enhance material well-being but also to generate
greater individual and national self-esteem.

3. to expand the range of economic and social choices available to individuals and
nations by freeing them from servitude and dependence not only in relation to other
people and nation-states but also to the forces of ignorance and human misery.

Adopted by the United Nations in 2001 as key targets for the developing world,
the Millennium Development Goals (MDGs), simply put, seek to free men, women and children
from the dehumanizing conditions of extreme poverty. These goals are also commonly
accepted as a framework for measuring development progress. The Eight Millennium
Development Goals are as follows:
01. Eradicate extreme poverty and hunger
02. Achieve universal primary education
03. Promote gender equality and empower women
04. Reduce child mortality
05. Improve maternal health
06. Health combat HIV/AIDS, malaria, and other diseases
07. Ensure environmental sustainability
08. Develop a global partnership for development

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MDGs Targets to be achieved by the countries in the year 2015
Goal 1 targets: Halve, between 1990 and 2015, the proportion of people whose income is less than one
dollar a day. Halve, between 1990 and 2015, the proportion of people who suffer from hunger.
Goal 2 targets: Ensure that, by 2015, children everywhere, boys and girls alike, will be able to complete
a full course of primary schooling.
Goal 3 target: Eliminate gender disparity in primary and secondary education preferably by 2005 and to
all levels of education no later than 2015.
Goal 4 target: Reduce by two-thirds, between 1990 and 2015, the under-five mortality rate.
Goal 5 target: Reduce by three-quarters, between 1990 and 2015, the maternal mortality ratio.
Goal 6 targets: Have halted by 2015, and begun to reverse, the spread of HIV/AIDS. Have halted by
2015, and begun to reverse, the incidence of malaria and other major diseases.
Goal 7 targets: Integrate the principles of sustainable development into country policies and programs
and reverse the loss of environmental resources. Halve, by 2015, the proportion of people without
sustainable access to safe drinking water. By 2020, to have achieved a significant improvement in the
lives of at least 100 million slum dwellers.
Goal 8 targets: Develop further an open, rule-based, predictable, non-discriminatory trading and
financial system. Address the Special Needs of the Least Developed Countries. Address the Special
Needs of landlocked countries and small island developing states. Deal comprehensively with the debt
problems of developing countries through national and international measures in order to make debt
sustainable in the long term. In cooperation with developing countries, develop and implement strategies
for decent and productive work for youth. In cooperation with pharmaceutical companies, provide access
to affordable, essential drugs in developing countries. In cooperation with the private sector, make
available the benefits of new technologies, especially information and communications.

The MDGs:

 synthesize, in a single package, many of the most important commitments made separately at
the international conferences and summits of the 1990s;
 recognize explicitly the interdependence between growth, poverty reduction and sustainable
development;
 acknowledge that development rests on the foundations of democratic governance, the rule of
law, respect for human rights and peace and security;
 are based on time-bound and measurable targets accompanied by indicators for monitoring
progress; and

26
 Bring together, in the eighth Goal, the responsibilities of developing countries with those of
developed countries, founded on a global partnership endorsed at the International Conference
on Financing for Development in Monterrey, Mexico in March 2002, and again at the
Johannesburg World Summit on Sustainable Development in August 2002.

OBJECTIVES OF SUSTAINABLE DEVELOPMENT

Economic Objectives: - Growth; Efficiency and Stability
Social Objectives: - Equity, Social Cohesion, Social mobility, and Participation
Environment Objectives: - Healthy environment for humans; Rational use of renewable natural
resources and Conservation of non-renewable natural resources

1.3. MEASURES OF DEVELOPMENT

Countries are unequally endowed with natural capital. For example, some countries benefit from
fertile agricultural soils, while others have to put a lot of effort into artificial soil amelioration.
Some countries have discovered rich oil and gas deposits within their territories, while other
countries have import most fossil fuels. In the past a lack or wealth of natural capital made a big
difference in countries development. But today a wealth of natural capital is not the most
important determinant of development success. High income countries such as Japan and
Republic of Korea, their high economic development allows them to use their limited natural
resources much more productively (efficiently) than would be possible in many less developed
countries. The productivity with which countries use their productive resources – physical,
capital human capital and natural capital – is widely recognized as the main indicator of their
level of economic development.

Theoretically economists comparing development of different countries should calculate

how productively they are using their capital. Such calculations are extremely challenging
because of the difficulty of putting values on elements of natural and human capital. In practice
economists use gross national product (GNP) per capita or gross domestic product (GDP) per
capita for the same.

27
These statistical indicators are easier to calculate provide a rough measure of the relative
productivity with which different countries use their resources and measure the relative material
welfare results from good fortune with respect to land and natural resources or superior
productivity in their use.

Gross Domestic Product (GDP) and Gross National Product (GNP)

GDP is calculated as the value of the total final output of all goods and services produced in a
single year within a country‘s boundaries. GNP is GDP plus incomes received by residents from
abroad minus incomes claimed by nonresidents. There are two ways of calculating GDP and
GNP:
1. By adding together all the incomes in the economy – wages, interest, profits and rents.
2. By adding together all the expenditure in the economy – consumption, investment,
government purchases of goods and services and net exports (exports minus imports).
In theory, the results of both calculations should be the same. Because one person‘s expenditure
is always another person‘s income, the sums of expenditures must equal the sum of incomes.
When the calculations include only incomes received or expenditures must equal the sum of
incomes. When the calculations include only incomes received or expenditures made by a
country‘s citizens, the result is GNP. When the calculations are made of all incomes (or all
expenditures) that originated within a country‘s boundaries, including those of foreign citizens,
the result is GDP. GNP may be much less than GDP if much of the income from a country‘s
production flows to foreign persons or firms.
GDP GNP can serve as indicators of the scale of country‘s economy. But to judge a country‘s
level of economic development, these indicators have to be divided by the country‘s population.
GDP per capita and GNP per capita show the approximate amount of goods and services that
each person in a country would be able to buy in a year of incomes were divided equally. That is
why these measures are also often called ―per capita incomes‖.

Purchasing par parity (PPP) conversion factor shows the number of units of a country‘s
currency required for buying the same amount of goods and services in the domestic market as
one dollar would buy in USA. By applying this conversion factor, one can, for example convert a
country‘s nominal GNP per capita (expressed in US dollars in accordance with the market

28
exchange rate of the national currency) into its real GNP per capita (an indicator adjusted for the
difference in prices for the same goods and services between this country and the USA and
independent of the fluctuations of the national currency exchange rate). GNP in PPP terms thus
provides a better comparison of average income or consumption between economies.

Although, GNP per capita and GDP per capita have numerous limitations when it actually comes
to measuring the people‘s actual well-being - they do not show how equitably a country‘s
income is distributed. They do not account for the pollution, environmental degradation, and
resource depletion. They do not register unpaid work dome within the family and community or
work done in the shadow (grey) economy.
Some of the common Social Indicators
1 Population related Indicators
Life Expectancy at Birth
The number of years‘ new born children would live if subject to the mortality risks prevailing for
the cross-section of population at the time of birth.

Under-Five Mortality Rate (UMR)

Number of deaths of children under five years of age per 1,000 live births; more specifically, this
is the probability of dying between birth and exactly five years of age.

Infant Mortality Rate (IMR)

Number of deaths of infants under one year of age per 1,000 live births; more specifically, this is
the probability of dying between birth and exactly one year of age.

Crude Death rate (CDR)

Annual number of deaths per 1,000 populations
Crude Birth Rate (CBR)
Annual number of births per 1,000 populations
Maternal Mortality Rate (MMR)
Number of deaths of women from pregnancy related causes per 100,000 live births.

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Total Fertility Rate
The number of children that would be born per woman if she were to live the end of her child-
nearing years and bear children at each age in accordance with prevailing age-specific fertility
rates.
Health related Indicators
Underweight
Moderate and Severe categories of underweight
Moderate - Below minus two standard deviations from median weight for age of reference
population. Severe – Below minus three standard deviations from median weight for age of
reference population.

Access to health services

Percentage of the population that can reach appropriate local health services by the local means
of transport in no more than one hour.

3 Education related Indicators

Literacy
The United Nations Educational, Scientific and Cultural Organization UNESCO has drafted the
following definition: "Literacy is the ability to identify, understand, interpret, create,
communicate and compute, using printed and written materials associated with varying contexts.
Literacy involves a continuum of learning to enable an individual to achieve his or her goals, to
develop his or her knowledge and potential, and to participate fully in the wider society."
The standards for what constitutes "literacy" vary, depending on social, cultural and political
context. For example, a basic literacy standard in many societies is the ability to read the
newspaper. Increasingly, many societies require literacy with computers and other digital
technologies
There is debate about the way in which the term "literacy" can be extended. In the United States,
have added "visually representing" to the list of communicative competencies that are considered
to constitute literacy. Similarly, in Scotland, literacy has been defined as: "The ability to read
and write and use numeric, to handle information, to express ideas and opinions, to make
decisions and solve problems, as family members, workers, citizens and lifelong learners."

30
These definitions of literacy are not universally embraced. Many scholars speak of literacy in
terms of the ability to "read, write, spell, listen, and speak." Many policy analysts consider
literacy rates a crucial measure of a region's human capital. This claim is made on the grounds
that literate people can be trained less expensively than illiterate people, generally have a higher
socio-economic status and enjoy better health and employment prospects. Policy makers also
argue that literacy increases job opportunities and access to higher education. Recent researchers,
however, argue that correlations such as the one listed above may have more to do with the
effects of schooling rather than literacy in general. Regardless, the focus of educational systems
worldwide, include a basic concept around communication through text and print, which is the
foundation of most definitions of literacy.
Adult Literacy Rate: Percentage of persons aged 15 and above who can read and write.
Gross Enrollment Ratio (GER) or Gross Enrollment Index (GEI) is a statistical measure used
in the education sector. The GER gives a rough indication of the level of education – primary,
secondary, and/or tertiary – amongst residents in a given jurisdiction. The GER is calculated by
dividing the total number of students enrolled at each level (regardless of age) by the population
of the age group that should be enrolled at that level at the start of the academic year.

Primary and Secondary Enrolment Ratios

The Gross Enrolment Ratio is the total number of children enrolled in a schooling level –
whether or not they belong to the relevant age group for that level- expressed as a percentage of
the total number of children in the relevant age group for that level. The Net Enrolment Ratio is
the total number of children enrolled in a schooling level who belong in the relevant age group,
expressed as a percentage of the total number in that age group.

Human Development Index

The Human Development Index (HDI) is a comparative measure of life expectancy, literacy,
education, and standards of living for countries worldwide. It is a standard means of measuring
well-being, especially child welfare. It is used to determine and indicate whether a country is a
developed, developing, or underdeveloped country and also to measure the impact of economic
policies on quality of life. The index was developed in 1990 by

31
PakistanieconomistMahbubulHaq and has been used since 1993 by the United Nations
Development Programme in its annual Human Development Report. The HDI measures the
average achievements in a country in three basic dimensions of human development:
A long and healthy life, as measured by life expectancy at birth.
Knowledge, as measured by the adult literacy rate (with two-thirds weight) and the
combined primary, secondary, and tertiary gross enrollment ratio (with one-third weight).
A decent standard of living, as measured by gross domestic product (GDP) per capita at
purchasing power parity (PPP) in USD.
Each year, UN member states are listed and ranked according to these measures. Those high on
the list often advertise it (e.g., Jean Chrétien, Former Prime Minister of Canada), as a means of
attracting talented immigrants (economically, individual capital) or discouraging emigration. An
alternative measure, focusing on the amount of poverty in a country, is the human poverty -
Human Poverty Index.

The social scientists tend to disagree among themselves about the characteristics of development.
However, the development measures may be categorized into quantitative and qualitative
measures. Some of the quantitative measures are above discussed include the GDP, GNP, per
capita incomes, purchasing power parity, life expectancy, crude birth rate, death rate, infant
mortality rate, adult literacy rate, gross enrolment rate, underweight and so on. The focuses of
social and economic indicators in a country / organization, which have a qualitative nature
include:

1 Justice and Equality- justice provided equally to all types of citizens – national and non-
residential; access and affordability to the justice forums;

2 Utilization of modern technology – like information communication technology, industrial

technology and change, access to such technology and utilizing various technology for economic
activities as well as service delivery systems in administrative systems

3 Criteria of rewards based on achievement rather than ascription – the personnel systems
– including the civil service and public sectors, which follow the merit based rewards in the form

32
of refresher courses and other training, periodic promotion systems, including perks and benefits
according to the performance of the employees.

4 Political and administrative modernization – political and administrative modernization

represents the use of technology by various sectors, propelling their use through various
government led policies, programs and projects and reaching out to the poor in the remotest parts
of the country. The political will of the country is yielding the economy to use these technologies
for nation‘s multi-dimensional growth and development.

1. 4. Instruments of development and role of different actors

There are different arguments between and among development theorists and politicians
concerning the questions of major role players and the instruments of development. In many
literatures, a list of development agents like the government, NGOs, international organizations,
civic organizations, and the community at large are enumerated with their limitations and
strengths and with extreme pro and against views.

(a) Government (State): Although many commentators have pronounced their beliefs against
the role of government in the development process, a number of others strongly argue in support
or recognition of the role of government.

Chambers (1993:106), postulated recommendations made by development theorists on what the

role of the state in the years ahead ought to be ―…….The state besides being the protector and
provider, should also be liberator and enabler for the poor, permitting and promoting for them
both diversity and choice‖.

Friedman (1992) criticized the doctrinal belief of ‗alternative development‖ which define the
state as the enemy, bureaucratic, corrupt and unsympathetic to the needs of the poor, and which
assumes community actions as distinctly sufficient for the practice of development. According to
him, although alternative development must begin locally, it cannot end up there. Since the
eventual objective of development is said to be creating social equity and well-being, the state is
considered as the main instrument to ensure this objective.

33
Above all state exists with multi-dimensional social responsibilities one of which is its welfare
concern, the concern towards bringing social equality. Therefore, the state should carry on the
responsibility to play major roles in development activities.

Unless the state continues to play a major role, the lot of the poor cannot be significantly
improved. For this reason, Friedman argued that development should not be understood
and implemented in isolation or by excluding the government. Schroeder (1995:73) on
his part remarked, ―Development is not an autonomous process independent from cultural
and political factors. It always occurs in the context of the state system and political
leadership committed to development‖.

Rondinelli (1993:159) also supports the above argument by expounding the fact that all
actors of development are not beyond the scope of politics. He noted, ―No system of
development can be effective that ignores or discounts the political dimension of
decision-making. Ultimately, all development plans are political statements and all
attempts to implement them are political acts……‖.Menedez (1991), after explaining the
three major actors in development or poverty alleviation initiatives (governments, NGOs
and multilateral and bilateral organizations), gave more emphasis to the role of
government and said, "governments can alleviate the worst aspects of poverty by
directing public expenditure to the most vulnerable groups and by creating an
environment within which the initiative of other actors can develop ad flourish" (vi)
In spite of the fact that actors like NGOs are generally acknowledged for having several
advantages in poverty alleviation and developmental activities, the role of government
cannot be disregarded even within the framework of the activities of such actors.
However, these commentators didn't deny the weaknesses of the state in development.
Rather cognizant of the limitations, they have clearly spelt out the necessity to
compromise between the level of government intervention and the degree of freedom in
the operation of development projects.

Besides most pundits agree in that development can be successful only when there‘s the
right balance between government intervention and particular interests of the people

34
(b) Non –Governmental Organizations (NGOs) people who underestimate the role of
government in development, for instance, try to justify their argument simply by referring to the
failure stories of government interventions rather than clearly showing why it failed so. Some,
however, present their arguments still loosely for why government is not an appropriate
development actor. For such people, government has broad functions and is often overwhelmed
by several commitments that share its limited resources. Because of such commitments
government set priorities and procedures for resource allocation that in turn make it to remain in
capacity constraint and commitment dilemma.

For the proponents of a ―state free‖ development approach, NGOs are the best actors of
development. Many of those who favor NGOs suggest that they are the type of
development agents‘ best suited to the new paradigm. Fowler (1988) noted that NGOs
have better ability than governments and identified two distinctiveness features of
―comparative advantages‖ in ensuring development. The first advantage is their relations
with the intended beneficiaries on the basis of voluntarism principle rather than
controlling method. Secondly unlike the government, NGOs are organized in non-
bureaucratic structure with the guiding principles of flexibility, responsiveness,
experimentation, and learning-by doing process. However, some people like Kurten
(1987) are reluctant to accept the overriding advantages of NGOs to governments in real
developments activities.

(c) International donors though still debatable, a number of writers also acknowledged the role
of aid agencies, particularly those multilateral donors, which have disbursed an increasing
proportion of development assistance.

(d) Unless the roles of multilateral donors are in place, it could be very difficult to undertake
development in poor countries since government budgets often allocated for the implementation
of development projects are limited. Therefore, these institutions can be considered as important
actors in the changing climate of development options (Irvin, 1978).

35
(e) On the other hand, there are practical reasons, which uncover (expose) the limitations of
donors as requirement, prerequisite, or eligibility criteria for aid or loan provision restrain both
the implementations of projects and their effectiveness in meeting the target.

(d) Communities Another major actor of development is the community itself. Advocates of
this approach believe that without the involvement of local people development activities cannot
achieve the goal of poverty alleviation. It has been proved that governments at all levels have
limited capacities to provide full-fledged program solutions to development. Therefore, the rising
idea of local level development as an option for poverty alleviation considers the community as a
unit of solution. It is generally based on the belief that problems in communities have solutions
in communities so that people should participate in matters that affect them at the grassroots
level (UNDP, 1997:6, Checkoway:3-4).
None the less, others who have different views and experiences challenge this notion.
From the conventional thinking or point of view of planners and officials, the cost of
involving the public in development activities is very high since the process takes too
much time, energy and resource to negotiate, convince and get their commitment.
Extremists also consider the villager (local community) as lazy, apathetic, non-
resourceful, irresponsible, ignorant and inexperienced while the professional is the expert
ad knows everything to bring development. Therefore, in view of such people, the role of
the local community in development is minimal.

36
Chapter 4: Development Administration: Concepts and Practices:
3.1 Meaning of Development Administration, 3.2 Applications of Development
Administration – Institution Building, Manpower Planning and Development, Human
Development.

4.1 Meaning of Development Administration

As the major burden of development work would naturally fall on the public sector (the state), a
high degree of public administrative efficiency is vital for the successful implementation of
development plans and efforts in nation building. This has become recognized with the
emergence of a new approach to administration known as ―development administration‖.

Development administration both as a concept and practice appeared with the emergence of the
Cold War that divided the world into two categories on the basis of ideology known as ―bi-polar
division‖. The conceptualization and elaboration of the concept of development administration
was done by the western academicians, especially American scholars to protect the newly
independent countries from joining communism. This has been done mainly by providing
development assistance. The development assistance in turn required a different form of
administration capable of formulating and implementing short, medium and long-term
development plans.

Therefore, the term ‗development administration‘ was coined and came into use in 1955 to
represent those aspects of and changes in administration, which were needed to carryout policies,
projects and programs as well as to implement the same so as to improve the socio-economic
conditions of the newly independent countries. In other words, the concept development
administration has almost exclusively been used with reference to the developing nations of
Asia, Africa and Latin America that all embarked the process of nation-building and rapid social
transformation following their independence.

Development administration is a simple and clarifying way of distinguishing the focus of

administration on the support and management of development from the administration of law
and order. In some aspects, it is the counterpart or equivalent of the term ―development

37
economics‖. According to Gant (182:21), ―development administration is the term used to denote
the complex of agencies, management systems and processes a government establish to achieve
its development goals. It is the public mechanism set up to relate the several components of
development in order to articulate national socio-economic objectives. It is adjustment of the
bureaucracy to the vastly increased number, variety, and complexity of government functions
required to respond to public demands for development. Development administration is the
administration of policies, programs and projects to serve development purposes‖.

Landau (1970:15) defined development administration as a ―directive and directional process,

which is intended to make things happen in a certain way over intervals of time‖. Others
perceived it as a means of improving the capacities of governments to deal with problems
created by modernization and change. In this understanding, development administration would
be the instrument for transforming traditional societies.
As it was stated in the previous section, the two major elements of development goals (nation-
building and socio-economic progress) constitute the keynote of development. as RumkiBasu
(1994:49) stated, it is now acknowledged that development administration is public
administration with difference. ―Development administration is an action-oriented, goal oriented
administrative system‖ – Edward Weidner. Structurally, development administration is
concerned with the organization of new agencies for development or refashioning of established
agencies along changes in procedures.

4.2 Applications of Development Administration

Development administration studies took off in all direction into modernization, nation building,
social change, industrialization, cultural anthropology, urbanization, political ecology, and
anything else that seemed to promise help policy makers in less developed countries. The
result was that development came to mean virtually anything anybody wanted it to mean, with
attendant confusion among scholars and development experts alike. Development administration
switched its emphasis from administrative development of less developed countries to include
those aspects of public administration that focus on government-influenced change toward
progressive political, economic and social objectives and the qualitative advance of living
conditions.

38
Its interest ranges from philosophical speculation about the nature of development administration
objectives to techniques / applications for inducing peasants to adopt improved seeds, fertilizers
and mechanical tools. The development administrator in not only program formulator, manager
and implementer but also assumes the role of a policy maker and adviser, interest aggregator and
articulator, political communicator, adjudicator, and socializer.

National Planning and Budgeting

The developing countries with few resources available for development cannot afford to waste
them. They need a plan of national priorities and means to channel resources into productive
projects. Similarly donors of foreign aid want reassurance that their contributions will not be
squandered and need some objectives criteria by which to judge requests for assistance. Between
them they devise machinery for planning and accelerating material development, relying largely
on government direction, national planning or similar forms of central guidance and budgetary
instruments in determining investment priorities and assorted policy packages. Implementation
has provided most of the pitfalls. The very conditions also which make countries poor handicap
effective and meaningful national planning and budgeting. They lack adequate financial realities
in conditions of scarcity contradict planning needs and permit considerable seepage and
corruption.

Institution Building

Where the recipients of technical assistance have no ability to conduct development activities for
themselves, donors have to build the requisite administrative infrastructure from scratch. This
involves changing traditional beliefs and values, restructuring economic, social and political
systems, and reutilizing innovative activities. Not only have laws and trust in the legal profession
have to be developed. Not only do physical structures have to be built, but people have to be
taught how to build and maintain them. Political activities, private enterprise and community
development have to be encouraged and in some cases, a new governmental system. New public
organizations and new public services have to be constructed. In short, government system is
responsible for sustaining and promoting an industrial revolution, for carrying on other public
utility services, and for regulating and distributing essential commodities.

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Manpower Planning and Development deals with the cultivation of technical, professional and
managerial skills for running public institutions.

Manpower development is the building and enhancement of human resources through formal
education and training. It is, therefore, an important prerequisite for national development.
Realizing the importance of manpower development, African countries have expended a
significant part of their meager resources in planning, development, and utilization of human
resources. Along with manpower development goes manpower planning and the mobilization of
human resources in order to achieve desired outcomes. This entails the number of people to be
educated and/or trained within a given time frame for specific job performance. Such plans are at
times politically motivated and may lack the vision and zeal to improve the lot of the larger
population in a specific society or fail to narrow the gap in social inequalities. Furthermore,
manpower planning is "beset by data constraints, limited organization capability of planning
units, and limitations of methodology."

Human Development which would involve changing the very attitude and temperaments of
people to adjust with changing realities in societies or the economies. This contributes to the
improved standard of living in communities both rural and urban, availing better services like
educational, basic services and so on.
The management of development has been the central focus of development administration. It
connotes planned institutional capacity to accomplish the specific goals of development through
the formulation of appropriate policies, programs and projects and their successful
implementation. Participative, responsive and accountable management constitutes the essence
of development administration. George Gant has once again aptly said, development
administration is characterized by its purposes, its loyalties and its attitudes such that:
i) The purposes are to stimulate and facilitate defined programs of social and economic
progress, change and innovation as well as to apply policies and to conduct programs of
development specified by the people;
ii) In terms of loyalties development administration has to be goal-oriented, client-oriented,
accountable and responsive to public wishes and demands.
iii) In terms of attitudes development administration has to be persuasive rather than restrictive,

40
 outward reaching rather than inward looking, flexible and adaptable rather than adherence to
traditional norms and forms and result oriented rather than process oriented.

Riggs also views development administration as goal-oriented administration as administration,

which is engaged in the task of achieving progressive political, economic and social goals. In this
context, he developed the concept of ‗administrative development‘ that refers to the increase in
the capabilities of an administrative system to achieve the prescribed goals. Inherent in
development administration is the idea of decentralization and people‘s involvement in all
aspects of development. Another area of academic interest is the close link of development
administration with political process. When trying to secure trying equity, there would be a
conflict between the haves and the have-nots.
It means also creating opportunity for power distribution.
Development policy formulation is vitally connected to the political process of a society.
Therefore, to divorce development administration from politics would be shortsighted and
incomplete. Briefly, the present and future priorities of development administration are as
follows:
a. With the increasing functions of state, the role of administration will continue to expand
in the development sphere; the government becoming the principal planner, organizer,
promoter, and director of developmental efforts.
b. With increasing diversification of governmental functions, administrative activities will
gradually become complex and ethical.
c. There will be greater need for planning, coordination and control of all governmental
activities connected with development.
d. The administrative reforms and improvements will have to be greatly emphasized.
e. Personnel structure and training will have to be geared to development tasks, rigid rules
and regulations will have no place, decision-making in organizations will have to be
flexible.
f. There is a need to redesign public bodies to enable collective decision-making and
promote collaborative problem solving.
g. There will be an increasing decentralization to enable developmental agencies at field
level to operate more autonomously.

41
h. There should be adequate working partnership, between the political and executive wings
of administration.
i. Commitment and dedication on development agents, especially on the parts of political
leadership and bureaucracy, will be the first and most essential on the parts of political
leadership and bureaucracy, will be the first and most essential prerequisite for
development administration
j. The active participation and cooperation of the people should be forthcoming for the
success of development programs.

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 Chapter Five
Ethiopia and certain aspects on Development
5.1. Agricultural Development Led Industrialization (A D L I),
Country Profile Ethiopia
Ethiopia is found in the horn of Africa covering an area of1.14 million square kilometers.
Ethiopia is boarded by Sudan on the west, Djibouti on the east, Eritrea on the north and Kenya
on the south. The country is characterized by varied topography such as rugged mountains, flat-
topped plateaus, deep river canyons, rolling plains and lowlands. The climate of Ethiopia is
pleasant mainly being temperate with average temperatures rarely exceeding 200c (680F).
Ethiopia is the seventh largest country in Africa and third populous from the continent with an
annual population growth of 2.7 (1990-98) and GNP per capital of $100. The country has a long-
standing history of diverse cultural heritage resulting from the diverse tribes. Ethiopia has its
own script, called Amharic which is also the national language with English being the working
language. The country has ample arable land, estimated at about 66 per cent of the 111.5 million
hectares of total area of which 22 percent is said to be under cultivation. The major river basins
with abundant potentials for fisheries, irrigation and hydropower development have not yet been
harnessed. The country has an immense livestock resource which is believed to be one of the
highest in Africa. There also exists an untapped mineral resource, which has high potential for
foreign exchange. About 85 percent of the population lives in rural areas, 50 percent of the total
population is found between the productive age groups of 14-60. Christianity and Islam are the
main religion practiced in Ethiopia.

Overall Development Policy and Strategy of Ethiopia

Ethiopia's primary development goal is to eradicate poverty and promote sustainable and
equitable development. The country's long-term development objective is structural
transformation of the economy in such a way that the relative weights of agriculture, industry
and services change significantly in favor of the latter two. This is to be achieved through what is
called the Agricultural Development Led Industrialization (ADLI) strategy, which entails
structural transformation through high growth of agriculture superseded by growth of industry.

43
The Government has issued several policies, and strategies, that have firmly established the
transfer from centrally planned economy towards a more liberal market-oriented and
decentralized economic system in which the private investments could play a dynamic role in the
economy. Quite a number of structural and fiscal reform measures, such as deregulation of price
controls, devaluation of exchange rate, removal of restrictions on private investment, reduction
of tariffs rate, measures to raise revenues and establishment of active interest rates were
undertaken to streamline the macroeconomic management as well.

The overriding development objective of the Government is to attain relatively fast, broad-based
and more equitable economic growth with macroeconomic stability. An additional and equally
important objective is relative price stability to protect the poor from the ills of inflation and
thereby encourage saving and long-term investment. A rapid increase in the production of
smallholder is expected to be the cornerstone of economic development and poverty alleviation
that support the rural development program and upgrade infrastructure and provide adequate
social services. The overall economic policy of the GOE has the following objectives:
1. Replacement of the command economy by an economic system driven by market forces
2. Participation and ownership of the people in the national economic reconstruction and
national and regional administration
3. The need for transforming the existing economic structure and the attainment of self-
sufficiency
4. Putting peasant farmers and pastoralists as the corner stone of the development process by
giving them special support
5. Ensuring appropriate links between agriculture and industry

Agricultural Development-Led Industrialization (ADLI)

The Government adopted a strategy in September 1993, "The Agricultural Development Led
Industrialization (ADLI)", which establishes a link between agriculture and industry. The ADLI
as an economic policy notes that an industrial development program of the country should be
based on extensive use of the country's resources contributing to an inter-dependent
development of the agricultural and industrial sector.

44
This inter-dependent situation between industry and agriculture is envisaged to create an
enabling environment for the attainment of the long-term economic objectives. Because of its
manpower requirements this industrial development strategy will open up employment
opportunities. It would also use available agricultural raw materials and expand the domestic
market for goods and services.
Recognition is made of contributions of agriculture constituting the basis of the country's foreign
trade. The ADLI also gives broad strategies for the major sectors such as agriculture, industry,
mining, population growth, technological progress, economic and social infrastructure, etc. With
regard to agriculture, improvement of the peasant farmers and pastoralists and establishment of
large-scale farms are given high priority. In doing so, the supply side of agriculture that is the
production of export products, food and raw material and the demand side which is the creation
of market for domestically produced good are given serious consideration.

In this respect, effective implementation of these development policies and strategies so as to

achieve the envisaged development objectives mainly relies on the methods and approaches of
new product development and partnership principles. A number of comprehensive macro-
economic and structural reforms have taken place following the approval of ADLI. Among the
reforms that are important to PDP are:
1. Selling of public enterprises and parastatals
2. Issuance of new investment, labor and public enterprise laws
3. Elimination of direct price control
4. Liberalization of agricultural prices and marketing
5. Decontrolling of internal marketing, transport and trade
6. Liberalization of restrictions on external payments
7. Easing of market entry for new privately owned financial institutions
8. Enhanced security of land tenure in the rural areas
9. Introduction of a market oriented land lease system
10. Promotion and increasing the role of the private sector and private investments in general,
etc.
All these reforms were aimed at giving the private sector the center stage to play a crucial role in
the economic development of the country.

45
About 175 government enterprises have been privatized and preparation is underway for about
114 large industrial firms and state farms that have a more complex divestiture processes
(Agricultural and Development Department, 2002).
Other significant measures to encourage private sector participation include the recent decision
to allow foreign participation in the telecommunication and power sector. A further revision of
the investment code is envisaged also to remove minimum size requirements for foreign
investors in the engineering metallurgical, pharmaceutical, and chemical and fertilizer industries.
In the agriculture sector, the private sector was expected to play crucial role in irrigation
development, commercial farming, input marketing and distribution. The role of the private
sector in these areas however, is limited. Only a limited proportion of the production, marketing,
other services and agricultural activities are being undertaken by the private sector

5.2. NGOs, Voluntary organizations, cooperatives and development in

Ethiopia
A non-governmental organization (NGO) is a non-profit group or association that acts outside
of institutionalized political structures and pursues matters of interest to its members by
lobbying, persuasion, or direct action. The term is generally restricted to social, cultural, legal,
and environmental advocacy groups having goals that are primarily noncommercial. NGOs
usually gain at least a portion of their funding from private sources. Because the label "NGO" is
considered too broad by some, as it might cover anything that is non-governmental, many NGOs
now prefer the term private voluntary organization (PVO) or Private Development Organization
(PDO).

A 1995 UN report on global governance estimated that there are nearly 29,000 international
NGOs. National numbers are even higher: The United States has an estimated 2 million NGOs,
most of them formed in the past 30 years. Russia has 65,000 NGOs. India has 2 million NGOs.
Dozens are created daily. In Kenya alone, some 240 NGOs come into existence every year.

In Ethiopia, there are more than 700 NGOs.]Involvement of organizations such as farmer‘s
association, cooperative societies, women‘s organizations, and organization of various other
interest groups can be considered as NGOs at local, national and international levels .It is the

46
will of the people which brings them together and motivate them to form an organization.
Through these organizations they try to improve the standard of living of the people. And this is
done by action oriented participatory programmes. These programmes have significant influence
on a variety of people, encompassing divers‘ areas, like health education, agriculture, small
industries, women, etc.

Thus , the government shares responsibilities with these organization that represent various
interests in society and that are initiated and operated by members of those organizations .

5.2.1. NGOs in Ethiopia

The first organizations in Ethiopia which can be defined as NGOs were traditional self-help
systems. They existed in the country for centuries before they started to develop some sort of
structure. In time developing further, some were registered as proper organizations and today
they are better known as Community Based Organizations (CBOs). Some of these early self-help
systems were the Debo and Afarsata which were systems providing mutual aid and
reconciliation. Today the commonly known self-help systems are Ekub and Edir which is a
rotating saving and credit system.

In 1960 both foreign and local NGOs were established when these self-help groups could no
longer suffice to support the needy of the country. The first NGOs as we know them today, that
were established in the country were the Ethiopian Red Cross and Swedish Save the Children.
Following this and the famine of 1973 and later of 1984, the number of NGOs increased and
these were mostly international. Later on with the change in government in 1990 a more
conducive environment was established further encouraging the growth of NGOs in Ethiopia.
This time as their numbers increased more local NGOs flourished. Today 90% of NGOs
operating in the country are local.

In 1998 it was reported that around 240 local and international NGOs were registered in
Ethiopia. Currently, the number has risen above 350. Considering this number we can say that
the NGO sector in the country as compared with Sudan, Eritrea, Djibouti and Somalia is large.
However, when compared to other countries in Africa this is small.

47
The history of NGOs in Ethiopia began by providing relief services, which lasted for a long time.
With an improvement in the situation after the famine, the focus of NGOs shifted towards
rehabilitating people in need. This was then gradually followed by NGOs involvement in
development programs.
Although a large majority of the NGO sector undertakes development programs today, because
of recurring drought in certain pocket areas of the country, there are NGOs which undertake
relief activity alongside their development programs. A further improvement in their
development work is the establishment of few advocating NGOs. Today, NGOs advocate on
different policy issues that have implication on their work and/or beneficiaries.

5.2.2. GENERAL OVERVIEW OF VOLUNTARY ORGANIZATIONS

The term‖ voluntarism” is derived from the Latin word „volutes‟ which means will. The will
assumes various forms of impulses, passions, and appetites or desires .It is the will that may
produce some of the social evils, of which the unfortunate sections of the society are the victims.
That has to be eradicated.

Inequality among individuals is a perennial source of motivation for voluntary action in every
society‘s‘ services are initiated to eradicate the inequality and to uplift the under privileged. The
term volunteer is normally used to denote someone who offers unpaid service to a good cause;
every voluntary effort is the product of the blood, sweat and toil of a few individuals.
Philanthropy appears to be essential motivating factor in the voluntary action. When a sense of
social responsibility is being inculcated in the individuals, they take up various steps to improve
the condition of the people all around. The term voluntary association is variously defined.
Michael Baton defined it as a group organized for the pursuit of one interest or of several
interests in common. David [Link] identified it as a group of persons, organized on the basis of
voluntary membership without state control, for the furtherance of some common interest of its
members. Lord besiege has defined a voluntary organization as ―one which, whether its workers
are paid or unpaid, is initiated and governed by its own members without external control.‖

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There are four essential elements in any voluntary association:
a) Method of formation which is voluntary on the part of a group of people,
b) Method of government, with self-governing organization to decide on its constitution, its
servicing, its policy and its clients,
c) Method of financing, with at least some of its revenues drawn from voluntary sources and
d) Motives of profit excluded. Organizations having all the four elements are rare and perhaps
are only the ideal forms.
It is necessary to point out that voluntary organization and –official organizations are not one and
the same. There are several differences between-the two voluntary agencies are spontaneous in
their origin and sometimes oriented towards a specific situation. This is their strength. They
bring in high motivation, better management skills, and greater sensitivity to fired problems. On
the other hand, the non-official agencies may be state sponsored and last as long they receive
support, finances etc., from the state. This is initiated by the state. Therefore, all non-official
organization need not necessarily be included in the category of voluntary organizations. But in
both these organizations there is a scope for involvement of enlightened individuals who are
involved to serve the cause.
Further, voluntary agencies are supposed to be potentially superior to official agencies in
the following respects;
i) Their workers can be more sincerely devoted to the task of reducing the
suffering of the poor than government staff;
ii) They can have better rapport with the rural poor
iii) Since they are not bound by ridge bureaucratic rules and procedures, they can
operate with greater flexibility;
iv) Their efforts are more economical; and
v) They can motivate more public participation in developmental efforts than the
government departments.

ROLE OF VOLUNTARY AGENCIES

There is no doubt that voluntary agencies have been playing a pioneering role in rural
development activities. They have also exhibited the qualities of flexibility of service, personal
touch and proximity to the clientele. In addition, they have demonstrated the capacity to initiate

49
and experiment with new programmes and showed sensitivity to meet difficult problems in ways
that cannot be adopted by the state. However, it is necessary to envisage the following role for
these bodies in the context of community base organizations.
a) The voluntary agencies have to supplement and not to compete with government efforts.
The government should not consider their activities as duplication.
b) They act as eyes and ears of the people at the rural level and act as a source of reliable
feedback to government so that it can design the policies and programmes accordingly.
c) It is possible for the voluntary agencies to reach a large number of people and set an
example for others.
d) Dissemination of information is another potential area in which the voluntary agencies is of
immense use. If is quit often seen that information regarding various schemes, programmers
projects etc, do not reach the rural poor .Information is power and the role of the voluntary body
is to distribute such power and make it accessible to the rural poor.
f) Voluntary sector has been in the forefront in utilizing rural skills and talent. Further, it
is possible to minimize the dependency syndrome through various methods and a sense of self-
reliance has to be instilled among the villagers.

5.2.3 Cooperatives and Development

[Link]. CONCEPT OF CO-OPERATION
The concept of co-operation existed ever since the existence of human life. However, in the
primitive societies, its necessity was limited since the life of an individual was simple with few
wants. In those days, co-operation was mostly related to cultural, religious and social aspects. It
was more of an informal nature. Thus in primitive society, co-operation had become an integral
part of the society.
The concept underwent an enormous change from ancient times till today. The needs of the
individual and the society increased. Modern person is dependent on nature and fellow-being. In
addition, independence has become a way of life. It is the co-operation through which it is
possible to achieve peace and prosperity.
The modern concept of co-operation is the result of Industrial Revolution which brought in a
series of changes in the method of production in Europe, especially in Great Britain. The
Industrial Revolution paved the way for the division of society into classes, namely, the capitalist

50
class and the working class. In its freed for more profits, the owners of the industries started
exploiting the laborer. They were paid lower wages. They were used for producing money and
more money. They were bei8ng treated inhumanly.
It was during this time that social reformists like Robe Owen gave thought to the formulation of
anew philosophy which ultimately led to the birth of co-operative movement.
Robert Owen (1771 – 1859) was a British Industrialist and Philanthropist and he was the pioneer
of the co-operative movement.
The Co-operative movement is an economic concept and is of a formal nature. At earlier time, it
is a distinct thinking from the business activity in which people have primacy whereas a
secondary role is assigned to the capital. Thus, the Co-operative movement provides an
opportunity to the economically deprived sections to live in better conditions.

DEFINITION
Co-operative movement is a broader phenomenon which means different things to different
people. Hence, it is very difficult to here a precise definition. There is no unanimity about the
definition of co-operation since conditions and circumstances differ from place to place.
Since it is a dynamic concept which has evolved with time and experience, there is no single
definition which provides all the necessary ingredients of the Co-operative movement. However,
we will attempt a few which all provide us with some broad idea of Co-operative movement.
According to Lambert ―a co-operative society is an enterprise formed and directed by an
association of users, applying within itself the rules of democracy and directly intended to serve
both its own members and community as a whole . ―It is a broad definition of Co-operative
society which seeks to achieve member‘s welfare and which also works for the betterment of the
community, as a whole.
The International labors Organization states that ―Co-operative society is an association of
persons, varying in number, who are grappling with the same economic difficulties and who,
voluntarily, associate on a basis of equal rights and obligations, endeavor to solve those
difficulties manly by conducting at their own risk an undertaking to which they have transferred
one or more such of their economic functions as correspond to their common needs, and by
utilizing the undertaking in joint co-operation for their common material and more benefits .
―This definition is considers to be the most comprehensive definition on co-operative society

51
since it consists of most of the principles of co-operation. Now let us, explain briefly, the
objectives of co-operative movement.
Objectives of co-operatives
The essential objectives of co-operatives include:
( i ) The provision of goods and services of high quality at low prices;
( ii ) Elimination of the middleman (unnecessary profits in trade and commerce );
( iii ) Prevention of exploitation of the weaker members of society (e.g. by money lenders);
( iv ) Protection of the rights of the people, both as producers and consumers;
(v) Promotion of education and mutual understanding among their members, and
(vi)Promotion of social and economic well-being of their members, in the long run, among all
people,
[Link]. Cooperative Principles
The cooperative form of business has been in use for about 160 years. In 1995, the International
Cooperative Alliance adopted the following set of principles which are intended to articulate
guidelines by which cooperatives put their values in to practice.
1. Voluntary & Open Membership
Cooperatives are voluntary organizations open to all persons able to use the co-op‘s goods &
services and willing to accept the responsibilities of membership.
2. Democratic Member Control
Cooperatives are democratic organizations controlled by their members. In general, members
have equal voting rights (one member, one vote).
3. Member Economic Participation
Members contribute to and democratically control the capital of their co-op. They receive
limited compensation, if any, on capital contributed as a condition of membership. Profits are
allocated to reserves and /or are used to benefit members in proportion to their transaction
with the cooperative.
4. Autonomy & Independence
Cooperatives are autonomous, self-help organizations. Democratic control by the members
must be maintained in all contracts the co-op enters into.
5. Education, Training & Information

52
 Cooperatives provide education and training for their members and staff to help them fully
participates in the democratic control and development of the cooperative.
6. Cooperation Among Cooperatives
Cooperatives serve their members most effectively and strengthen the cooperatives
movement by working together through local and national groups.

7. Concern for Community

While focusing on member needs, cooperatives work for the sustainable development of their
communities.
[Link]. Benefits of Cooperation
People buy stock in a non- cooperative business to make money on their investment. The more
of the company you own, the more benefits (stock appreciation and dividends) you will realize if
the business succeeds.
The benefits of being a cooperative member differ in two ways. First, the advantages are more
numerous. Second, they are distributed on the basis of how much use you make of the
cooperative, rather than your equity stake. Here are some benefits of cooperative membership
and how they relate to use.
1. Access to quality supplies and services at reasonable cost: By banding together and
purchasing business supplies and services as a group, individuals offset the market power
advantage of firms providing those supplies. You can gain access to volume discounts and
negotiate from a position of greater strength for better delivery terms, credit terms, and other
arrangements. Suppliers will be more willing to discuss customizing products and services to
meet your specifications if the purchasing group provides them sufficient volume to justify
the extra time and expense.

The larger the group purchasing supplies and services through the cooperative, the greater the
potential for savings. And the more each individual member uses the supply operation, the
more he or she may save over doing business elsewhere. Another option for cooperative
members is to manufacture their own supplies and hire experts directly to provide essential
services. This gives members even more reliable sources of supply and greater control over
the types of products available, the cost and the quality of the services received.

53
2. Increased clout in the marketplace: Marketing on a cooperative basis, like purchasing
supplies and services, permits members to combine their strength while maintaining their
status as independent business people. They can lower distribution costs, conduct joint
product promotion, and develop the ability to deliver their products in the amounts and types
that will attract better offers from purchasers.
A cooperative can also serve as a vehicle for people selling goods and services to work with
their customers to promote industry research, reduce regulatory burdens, and develop markets
for their products. The cooperative can help create a ―win-win‖ situation for the entire
industry, a business environment where both producers and buyers have more income.
3. Share in the earnings: Some people talk about non-cooperative firms operating ―for profit‖
while cooperative operate ―at cost.‖ This isn‘t totally accurate. Most cooperatives generate
earning. They differ from non-cooperative firms in how they allocate and distribute their
earnings.
A non- cooperative firm retains its earnings for its own account, or perhaps pays part of
them out to shareholders as dividends, based on the amount of stock each investor owns. In a
cooperative, earnings are usually allocated among the members on the basis of the amount of
business each did with the cooperative during the year.
4. Political action: Growers, small business owners, and other rural residents have to realize
that no one gives you a favorable law or regulatory ruling just because you think you deserve
it. You have to build your case and argue your point convincingly.
A cooperative gives people a means to organize for effective political action. They can meet
to develop priorities and strategies. They can send representatives to meet with legislators
and regulators. These persons will have more influence because they will be speaking for
many, not just for themselves.
They can also form coalitions with other groups having similar views on issues. The larger
the voice calling for a specific action, the more likely that the system will respond with the
policy you desire.
5. Local economy enhanced and protected: Having its businesses owned and controlled on a
cooperative basis helps your entire community. Cooperatives generate jobs and salaries for
local residents. They pay taxes that help finance schools, hospitals, and other community
services.

54
 When a business is a cooperative, a town is less likely to lose those jobs and taxes.
A business owned by one person, or subsidiary of a big company, can easily be moved to
another community. When many local people share the ownership of a cooperative, no
individual or company can take it from your area or simply close it. Only the membership as a
whole can make such decisions.
[Link]. Cooperatives Vs. Other forms of Business Enterprises
Basically, there are three categories of private business firms: individually owned, partner-
ships and corporations. Cooperatives are a type of corporation. Recently, a new business
structure, referred to as the limited liability company, have appeared in some countries (e.g.
USA). This section explains the similarities and differences between cooperatives and the
other business forms.
i. Individually owned businesses
The individually owned business is the oldest and most common form. One person owns,
controls, and conducts the business. Characteristics of individually owned businesses include:
 Control. The owner is responsible for management, makes all the major operational
decisions and sets the business policies
 Capital. The owner supplies the equity and is responsible for all debts.
 Earnings. Profits belong to the owner.
 Taxes. Profits are taxed once, as income of the owner.
 Life. The life of the individually owned business is tied to the one owns it. It continues
until the owner sells the business, retires or dies. At that point the business is either taken
over by a new owner or discontinued.
ii. Partnerships
Partnership consists of two or more people who jointly own, control and operate a business. The
responsibilities of each are usually based on a partnerships agreement. Characteristics of
partnerships include:
 Control. Partners usually share management and make policy decisions by mutual
agreement or majority vote. Some agreements provide for senior partners whose votes
may carry greater degrees of weight.
 Capital. Partners provide the equity capital. Usually, each partner is personally liable, up
to the value of all the property he or she owns (both within and outside the partnership),

55
 for the debts of the partnership. Some partnerships have ―limited‖ partners, who
relinquish any voice in managing the business in exchange for a limit on their personal
liability.
 Earnings. Profits (or losses) are shared by the partners in accordance with the terms of
the partnership agreement. This is usually determined by the amount of capital invested
and the nature of the work performed by each partner.
 Taxes. Earnings are taxed once, as income of the partners.
 Life. The life of the partnership as a business is determined by the partners, but if one
dies or leaves the organization, it often must be dissolved and a new partnership formed.
iii. General business corporations
Most businesses that have more than a small number of owners are organized as corporations.
Corporations are legal entities, authorized by law to act much like an individual person. A
corporation has the right to provide services, own property, enter in to contracts and is liable for
its own debts. A general business corporation operates as a profit making enterprise for its
investors, who are also referred to as stock-holders. Their characteristics include:

 Control. Management is controlled by a board of directors and officers who are elected
by the stockholders. Each stockholder usually has as many votes as the number of shares
of voting stock he/ she owns. Business decisions and policy are made by the board and
officers. The directors have no obligation to use the firm‘s products or services and may
have no contact with the firm outside of board meetings.
 Capital. Equity is raised by selling shares of stock to investors for their profit-making
potential. The corporation is responsible for its debts. If the business fails, each owner of
stock can lose only the amount invested.
 Earnings. Profits are distributed to stockholders as dividends according to the number of
shares of stock owned or used to expand the business. The timing and amount of such
dividend distributions are decided by the board of directors.
 Taxes. Earnings are taxed twice, as income of the corporation when earned and as
income of the stockholders when distributed as dividends.
 Life. A corporation enjoys a continuing existence, regardless of changes that may occur
in the ranks of its shareholder owners.

56
 iv. Limited liability company
A new form of business gaining widespread attention is the limited liability company (LLC).
It combines the single-tax treatment of a partnership and the limited personal liability of
owners of a corporation. Characteristics of an LLC include:
 Control. The owners, called members as in a cooperative, may share management and
make policy decisions by mutual agreement or majority vote, or turn the management
over to nonmembers. The operating agreement among the members determines voting
rights of each member.
 Capital. Members usually provide the equity capital. Liability of the members is usually
limited to their investment in the corporation.
 Earnings. Profits (or losses) are shared by the members in accordance with the terms of
the operating agreement. This is usually based on the amount of capital invested and the
nature of the work performed by each member.
 Taxes. Sometimes once and sometimes twice.
 Life. An LLC may have a perpetual existence, or the members may chose to be
governed by the partnership rules.
The LLC is still developing as a business structure. It is already proving a useful vehicle for
organizing joint ventures among established corporations, including those involving
cooperative and non-cooperative firms. Whether it can be used to organize a number of
individuals, who may want the flexibility to join and leave the venture a will, is undermined at
this time.
v. Cooperative
A cooperative is also a state-chartered business, organized and operating as a corporation under
applicable state laws. Cooperative attributes are:
 Control. Management is controlled by a board of directors who are elected by the
members. One unique feature of a cooperative is that each member usually has only one
vote in selecting directors, regardless of the amount of equity that member has in the

57
 cooperative. Another is that all or most of the directors must be members of the
cooperative. Thus, the leaders are regular users of the firm‘s products or services.
 Capital. Equity comes from the members, rather than outside investors.
It is obtained by direct contributions through membership fees or sale of stock, by
agreement with members to withhold a portion of net income based on patronage, or
though retention of a portion of sales proceeds for each unit of product marketed. If a
cooperative fails, the liability of each member is limited to the amount he/she has
invested.
 Earnings. Earnings (or losses) on business conducted on a cooperative basis, often called
margins, are allocated to the members on the basis of the use they made of the
cooperative during the year, not on the basis of equity held. The allocations may be
distributed in cash or retained as additional equity. Members usually receive a
combination of cash and an allocation of equity.
 Taxes. Earnings from business with members are taxed once, either as income of the
corporation when earned or as income of the members when allocation of equity.
 Life. A cooperative usually has a perpetual existence. Members can routinely join or
resign without disrupting ongoing operations.

[Link]. CLASSIFICATION OF COOPERATIVES

Cooperatives are regularly described by a number of classification schemes. The more important
ways to categorize are by the geographical territory served, the governance system and the
functions they perform.
a. Geographic territory served
One factor determining cooperative structure is the size of the area served. Cooperatives are
loosely categorized as local, super local, regional, national and international.
Local cooperatives operate in a relatively small geographic area or an area within a radius of 10
to 30 miles. The usually have a few facilities from which to serve members.
Super local cooperatives operate in two or more local areas (e.g. woredas), often with several
branch facilities.
Regional cooperatives serve an area comprising numerous local areas (a number of woredas), an
entire State or region or a number of States or regions.

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National cooperatives serve a major portion or most of a country.
International cooperatives operate in more than one country, with headquarters in one country

b. Governance system
Cooperatives can also be classified based on membership structure, as centralized, federated or
mixed.
Centralized cooperatives have individuals and business entities (including partnerships and
family corporations) as members. Virtually all locals and super locals are centralized. Regional,
national, and international cooperatives may also be centralized. A centralized cooperative has
one central office, one board of directors elected by its members, and a manager (chief executive
officer) who supervises all operations. Business may be conducted through numerous branch
stores or offices staffed by employees responsible to the central management team.
Federated cooperatives have other cooperatives as their members. Each member of a federated
cooperative is a separate cooperative that owns a membership share entitling it to voting rights in
the affairs of the federated. Local cooperatives commonly form federated to perform activities
too complex and expensive for them to do individually, such as manufacturing production
supplies, tapping major financial markets, and marketing on a national or worldwide scale.
Each member of a federated typically has its own board of directors, manager, employees and
facilities to serve its members. The federated has its own hired management and staff and a
board of directors elected by and representing its member cooperatives.
Mixed cooperatives have both individuals and other cooperatives, which are usually given voting
rights representative of their own membership.
c. Functions performed
Cooperatives may perform one or more of three core functions: marketing products, purchasing
supplies and providing services.
Marketing cooperatives assist members maximize the return they receive for goods they
produce. Most cooperative marketing activity involves either agricultural products or those of
producers in related industries such as forestry, aquaculture and horticulture. New marketing
ventures are developing in such diverse industries as handicrafts, professional services and
information technology.

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Some marketing cooperatives limit their activity to negotiating prices and terms of sale with
buyers. Growers of fruits and vegetables for processing and dairy farmers are primary users of
these cooperatives, called bargaining associations. Other marketing associations assemble
member production into large quantities for sale to further processors, wholesalers or retailers.
This first-handler role is common for cooperatives of grain growers and producers of fruits and
vegetables for the fresh produce market. Other such associations add further value to member
production by processing or manufacturing member products into other, more valuable products.
These may serve as ingredients in further processed products or be sold to institutional buyers
and restaurants for their direct use, to grocery chains for resale as private label products, or to
brand-name companies for resale under their brand .Cooperatives that process dairy products,
fruits, vegetables, grain, fish, and lumber exemplify these value-added processing activities. Still
others put member products right on the grocery store shelf under their own brand name.
Marketing cooperatives enable members to extend control of their products-and realize
additional margins- through processing distribution and sale. Agricultural marketing
cooperatives are the best examples.
Purchasing cooperatives were first used by farmers to gain access to affordable, quality
production supplies such as feed, fuel, fertilizer and seed. These early efforts often because
businesses having full-time managers and warehouses to handle other production supplies and
services such as farm chemicals, animal health products, fencing, building supplies, construction
contracting, automotive accessories, etc. Examples may include farm producers‘ cooperatives,
housing cooperatives, and consumers‘ cooperatives.
Service cooperatives provide services to their members which may include credit or financial,
rental of working equipment, technical and business advices and consultancy services, crop
harvesting, electric supply, health services etc. Examples are credit unions or saving and credit
cooperatives, cooperative banks, agricultural service cooperatives etc.

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