Chapter 5: Rural development Policies and Strategies

in Ethiopia
Introduction
• Ethiopia is one of the poorest nations on earth. From its 90 million
people over 80% depend on subsistence agriculture and more than 40%
live below the absolute poverty line, (CSA, 2007).
• The country has remained to be one of the tragic places where the
worst cases of famine and drought and manmade problems such as
extended civil war and degradations of natural resources have been
observed (EC project proposal, 1998).
• However, the country has a good resource potential for economic
development. 1
• In response to these socio- economic situations, various development policies and strategies have been brought
in to practice by the successive governments that ruled the country which had in most of the cases ended up
with bare minimum impacts in reversing the prevailed development bottlenecks of the country.
• Thus a good part of the poor performance is explained by policy failures of the past regimes generally and the
‘derg’ regime in particular (EEA, 1999/2000) as sited by (Alemayehu, G.2007).
• Thus, after the collapse of the military regime in May 1991, the EPRDF led government adopted various
development policy reforms and structural adjustments that included liberalization of markets, decentralization
of central government authorities to regions, woredas and designed agriculture development led
industrialization strategies.
• Similarly, at the later stages of the period (2002), the government pinpointed poverty reduction as its crucial
development objective which is in consonance with international directions and commitments.

2
 5.1. Policies during the pre-1974

• The imperial government of Haileselasie was the first government to

exercise different development policies as Ethiopia is the first African
state to attempt economic development planning (Georgi. G. 1981).
• But the plans determined only general trends and likely development
rates as they gave an extremely generalized allocation to particular
sectors of the economy as of 1960s (Haile H., 1995).
• During this time, three five-year plans were prepared for the
development of the economy with different targets and area of
priorities. They were:
– The first five year plan (1957-62)
– The second five year plan (1963-67)
3
 First five year plan (1957-62)

• This plan had some targets on the agricultural sector.

• According to the evaluations of the plan targets that was made in the second five year plan, its impact on the

agricultural sector was negligible since emphasis during this plan period was on infrastructure and social

transformation (raising the level of education and the training of technical personnel) for the implementation

of the five year program.

• “No need to bring about fundamental changes in present methods of (peasant) production” and stuck to the

“kind of tools now used”(Dejene (IEG 1957),pg 45.

• Donor’s policy of this period was biased in favor of urbanization vis-à-vis rural development.

• The World Bank for example, by far the largest single source of development assistance to Ethiopia in

recent years, allocated 85% of its total loans to modern roads during the 1950-59 period, and nothing to the
4
 Second five-year plan (1963-67)

• Mainly the priority focus was given to industry (manufacturing), minerals and electric power development,

but, unlike the first five year plan, some attention was given to agriculture.

• In this plan, quantitative targets for the production of agricultural marketable products like cereals, cotton,

cattle, and coffee; and for the rate of growth of agriculture were set.

• To achieve the production targets set in the plan, three main approaches were outlined:

• Execution of land reform, introduction of tools, implements and machinery as well as elementary training

of the producers so as to raise productivity, per capita income and consumption so as to transform the

subsistence economy into a monetized economy. 5

• The organization of farmers' cooperatives

• The organization of commercial farms based on mechanization (IEG, 1962).

• However, in the second five-year plan, agriculture was anticipated to grow at a rate of 2.4 percent, but it

was said to have grown at a rate of 1.9 only,

• It was only 42.2 percent of the investment target that was actually fulfilled because of which

– much of the development programs were not achieved,

– the land reform policy was completely ignored,

– a fact which basically accounted for the failure and above all, there was lack of progress in policy measures and

organizational programs, which were essential for the success of the plan.

• Because of all these, the agricultural sector could not develop as much as it was anticipated in the plan.
6
 The third five-year plan (1968 -73)

• This time exhibited a marked departure from the previous plans.

• It recognized the importance of the agricultural sector and charted out a relatively clear and
well articulated agricultural development strategy.
• The plan argued that modernization of peasant subsistence agriculture in all areas of the
country simultaneously is hardly possible, but no time should be lost in making a start in
strategically selected areas in which good results can soon be seen.
• This being the strategy, two main approaches for the development of Ethiopia agriculture
were indicated in the third five-year plan.
• These were the package program and the development of large-scale commercial farms:
7
 The Package Program

• The package program followed the policy of concentrating development efforts in a given area so as to bring the

required changes in agriculture.

• The practice was to be limited to specific areas since the modernization of peasant subsistence farms in all areas

of the country simultaneously was assumed that it would lead to the dilution of efforts and scarce resources.

• In accordance with this, the implementation of the program was started in strategically selected areas where

good results were expected in a relatively short period of time.

• At first, the package program took the form of a Comprehensive Package Program (CPP), and later the

Minimum Package Program followed.

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 The Comprehensive Package Program (CPP)

• The CPP aimed at achieving maximum result by focusing on specific high potential areas such
as Chilalo, Wollaita, Ada District, TahtayAdyabo, Hadegti and Humera and established
agricultural development units for each of them.

• This program had the following objectives (Tesfai 1975:41)

– To increase the income of low income small holder farmers and tenants and narrow the prevailing income
disparities in the rural areas;

– To achieve economic and social development;

– To enhance local participation in development;

– To increase employment opportunities; and

– To stress on research, training, and transferability. 9

• The objectives were supposed to be achieved through:
– The provision of extension services; i.e., spreading innovations and organizing demonstration
fields to farmers;
– The establishment of marketing organizations aiming at selling production fairly in
comparison to the cost of production;
– Sale of inputs through marketing organizations which would make high yielding seeds and
fertilizers available to the farmers;
– The provision of credit facilities at a reasonable rate of interest so that the farmers could be
able to purchase the new supplies; and
– Promoting improved water supply system and expansion of education. Health and nutritional
studies were to be established. 10
• In general, the CPP has resulted in the increase of incomes of peasants and

tenants in the project areas.

• The increases in incomes were, however, directly related to the size of the land

holdings and thus it resulted in growing differentiation among the peasantry.

• This and its huge resource requirements led to the re-evaluation of it and

adoption of what is known as the minimum package program.

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 The Minimum Package Program (MPP)

• The comprehensive package projects were found too costly to be duplicated in other parts of the
country.

• It was thus decided to launch a scheme which was thought to be less costly per farmer.

• Thus, in 1972 the minimum package program (MPP) involving only those minimum services
considered critical for rural development (mainly fertilizer and credit) started to be implemented
along all-weather roads.

• The MPP was envisaged to reduce the cost of developing the agricultural sector that in comparison
to the CPP a much wider coverage could be attained.

• Tentative programs were made for the establishment of about ten projects in selected high
response areas each year for thirteen year. 12
According to the program:

• By 1985 it was estimated that one million families or about 20 percent of the total would be reached,

• The MPP was designed to cover 440 woredas out of the 550 woredas of the country and this was to cover

about 70 pre cent of the agricultural population,

• For the implementation of MPP, the Extension and Project Implementation Department (EPID) was

established

• To achieve the objectives, the diffusion of a few proved methods and innovations including improved

seeds, fertilizers and farm implements as widely as possible was envisaged to reach the small farmers in

various parts of the country.

• However, due to shortages of manpower, improved seeds and fertilizers, the MPP was not able to achieve

its objective of coverage of wider areas and the cost of the MPP was not as low as it was envisaged.13
• As a result of these, agricultural production did not increase as much
as anticipated and the standard of living of the majority did not
improve.
• In fact, the programs demonstrated that rural development policy
based on feudal land holding arrangements would tend to worsen the
conditions of the low-income target population.

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 The Development of Large Scale Commercial Farms

• The objectives in establishing large-scale commercial farms were:

• to achieve rapid gains in output both to domestic consumption and
the availability of surpluses for investment,
• to get an increase in agricultural exports or substitution for imports,
• to create new employment opportunities
– this is because of the fact that such farms require big investment
– which was not available from internal sources,
– the implementation of the strategy necessitated a heavy dependence on
foreign capital.

15
• To attract foreign investment, a number of incentives were provided
including:
– Exemption from income tax for five years for investments of Br. 200,000 and
above;
– Exemption from customs duty; and
– Remittance of profits and salaries in hard currency.
• As a result, a number of large-scale commercial farms, mainly owned
by foreigners, such as the Wonji Sugar Enterprise, the SetitHumera
Plantation, and the Tendaho Plantation were quickly established.
• But due to misguided incentives, capital dependent operations and
outflow capital the large farms did not live up to the expectations of the
country.
16
• At the end of the second five years plan, the “Industry First” argument of the 1950s was

being challenged theoretically as post independent Africa’s aspiration for a rapid

industrialization process become increasingly frustrated (Johnston,M [Link] 1961) and

• the major donors made a significant shift in their aid policies in favor of rural development

vis-à-vis urbanization and construction of infrastructure.

• In an attempt to realize this change of policy, donors subjected to Ethiopian government to

strong pressure foreign assistance agencies, particularly the World Bank (IBRD) and

American organizations, advised Ethiopia to give high priority to the agricultural sector

and recommended the package approach concentrating on the more promising regions.

• This idea also was supported by FAO (Nekby, 1971:9). 17

• The third five-year plan largely followed and coincided with the
strategy of what has been known as the Green Revolution (1960s-70s)
and which had its own success story in raising agricultural production
tremendously in (e.g., India, Pakistan, and other Asian countries).
• However, it could not minimize the income gap (in fact it is believed to
have increased it) and benefits were not fairly distributed (many areas
were not included in the program).

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 5.2. The policies of ‘Derg’(1974-1991)

• It is generally acknowledged that the pre-1975 land tenure system in Ethiopia

was one of the most complex in the world and had not been thoroughly studied
• After the 1975 land reform by the Derge has been considered by many as a
radical measure that has abolished tenant - landlord relationships in Ethiopia.
• In order to implement the Proclamation, peasant associations were established at
various levels.
• Following the land reform proclamation, another decree that was knows as
Peasant Associations Organization and Consolidation Proclamation No. 71/1975
was made.
• This was followed by the All Ethiopia peasant Association Proclamation No
130/1977.
• University and high school students were dispatched to rural areas to help the
implementation of the land reform. 19
 5.2.1. Agricultural Development Strategy

• Proclamation No. 31/1005 was not about agricultural production.

• It was about radically changing the tenure system that existed in the country.

• The agricultural development strategy of the Derg period was what was known as
"socialist transformation of agriculture"; that of transforming agriculture along
socialist lines.
• This was to be implemented through the establishment and consolidation of state
farms and producers' cooperatives.
• Thus, producers' cooperatives and state farms became the overwhelming priority of
the government and its implementation was supported by various proclamations and
20
• Implementation of this policy resulted in the existence of two

main types of economic structures in agriculture; namely:

– The small peasant sub sector represented by the overwhelmingly large

number of small farmers; and

– The "socialist" sub sector represented by the producers' cooperatives and

state farms.
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 The small peasant Farms

• In countries like Ethiopia peasant farms have a relatively good productivity record.

• Although they employ traditional technology and hardly use modern inputs, their crop-
yields are often comparatively high, as they make more efficient use of productive
resources than cooperatives or state farms.
• However, small scale agriculture is often considered an obstacle to long-term industrial
development and the creation of more mechanized farms.
• Faced with the choice between a smallholder strategy and a "socialist" approach, based
on collective ownership, group and state farming and governmental control of the rural
economy, the government chose the latter.
22
• The peasant farms continued to be dominant in Ethiopia even at the height of
collectivization year in 1987 by cultivating 94% of the total farmland in Ethiopia.

• Nevertheless, government policy towards small farmers was discriminatory in that it

favored the 'socialist' sub sector.

• Government policy pertaining tax, modern inputs, credit, pricing policies, and extension
services almost completely ignored the small peasants in favour of cooperatives.

• Quota have been set for every peasant association to sell a given amount of their produce
to the Agricultural Marketing Corporation (AMC) at prices fixed by the AMC which
were substantially lower than the open market prices and even lower than the prices fixed
for cooperatives and state farms. 23
• In situation where peasants could not meet the quota, there were incidences where farmers
had to buy from the market at higher prices and sell to the AMC at extremely low prices.

• In spite of all these, however, the smallholders were more successful at absorbing labour,
raising yield and increasing income than producer cooperatives and state farms were.

• Small farmers were resistant to be collectivized, but the government adamantly pushed
forward to strengthen cooperatives unsuccessfully.

• Apart from other concomitant factors, the disappointing performance of the agricultural
sector during the Derg period can be attributed to agricultural policies favoring the socialist
strategy as opposed to a smallholder approach.

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 The Socialist Sub Sector
Producers' Cooperatives

• The Directive for the establishment of producers' cooperatives was

issued in June 1979.
• Accordingly, an agricultural producer’s cooperative was defined as
an economic organization of farmers which is established through
the gradual transformation of individually owned means of
production in to common ownership based on the will and common
interest of the farmers.
25
• The Directive for the establishment of cooperatives was based on the following

principles:

– The principle of voluntarism. This principle indicates that cooperatives shall be

established on the free will of those to be cooperativized.

– The principle of gradualism. According to this, the development of cooperatives shall

proceed from the simpler type to the more advanced types of cooperatives.

– The principle of all round state assistance. The government is expected to provide all

embracing assistance to the establishment and consolidation of cooperatives. 26

• In practice, the principle of voluntarism was violated. In many cases the establishment of
cooperatives was conducted by force as opposed to the principle of voluntary entry.

• As for the gradualism, the directives provided for a gradual progress of cooperatives from
simple to advanced types.

• Cooperatives would start in the form of 'malba', a type of cooperative where members
pool their land together (except their backyard) but keep their production implements and
animals privately; they would then proceed to 'welba', where land, production implements
and animals become communal property and a small plot is kept as a backyard.

• 'Weland' was a kind of higher cooperative made by a number of 'malbas' and/or 'welbas'.

27
• With regard to all round state assistance, the government gave priority to
cooperatives at the expense of smallholder peasants.
• Once they were established, Privileges not offered to peasant cultivators, or
even to state farms were given to cooperatives.
• They paid less tax per head than individual peasants and modern inputs like
fertilizer, pesticides, etc. were provided to them at subsidized prices and
bank interest rates were comparatively lower.
• They were also given priority on extension services and had access to
additional labor from peasant and youth association members. 28
• With all these however, the process of collectivization was still very
much at an embryonic stage and in the eve of total collapse.
• Producers' cooperatives were tilling 2 percent of the total farmland in
1987.
• The marketed surplus of cooperatives and individual farms were also
about equal in that the average that both were selling was about 20
percent of their harvest, and the rest was consumed at home (68 per
cent) while 12 percent was reserved as next season’s seed.
29
• However, the cooperativization drive ended in complete collapse
largely because of the lack of farmers' willingness.
• Good evidence is what happened when the government was forced
by circumstances to issue the 'Mixed Economic Policy Reform' of
March 1990.
• Although the government intended to reorganize and strengthen
them, over 95% of the producers' cooperatives disintegrated with in
three months after the declaration of the policy reform. 30
 B. State Farms
• State farms are farming enterprise that are owned, managed and undertaken by the government.

• Most state farms were privately owned commercial operations before 1975.

• According to the March 1975 land reform proclamation, all large-scale farms shall be organized, as state farms,

and the government shall administer these farms in any manner found it fit.

• In addition to these, many state farms were also established during the Derg period.

• The chief aims of state farms were to help alleviate the countries food problems, Contribute to export earning

and employment generation.

• However, their performance had been very disappointing due to the following main reasons:

• Management inefficiency: Lack of appropriate management in the sate farms resulted in misutilization of

resources.

• Highly centralized management system curtailed the exercise of managerial autonomy at farm levels. 31
• Problems of Planning and Implementation: Farms were not given the right of preparing their own plans.

• Plans were prepared at enterprise or corporation level, and each farm was ordered to implement the plan,
which may not reflect the objective conditions in the farm.

• The establishment of state farms was not conducted on the basis of proper study and analysis.

• Inadequate Controlling Systems: State farms, as in other public firms, had little managerial freedom to
plan and to control.

• Even the cost-benefit analysis was worked at higher levels and each farm is evaluated based on the grand
balance sheet of the enterprise or corporation.

• Disguised Unemployment: Every farm was over populated.

• There exist unnecessary labour imposing additional costs to the farms. Unnecessary structures were
formulated deliberately to absorb more employees.
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 Resettlement and Villagization
Resettlement

• Prior to the 1974 revolution, resettlement was started out on a small

scale as a result of individual initiatives by local governors and aid
agencies with a variety of motives and objectives.
• By the time of the revolution, a mere 7,000 household heads had
been established in 20 settlement sites at a cost of 8 million US
dollars.
• Resettlement was seen as a means of addressing a range of issues.

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 – From an ecological perspective, it reduced population pressure in the highlands;

– from an economic standpoint it was believed that resettlement could help to

increase productivity and make use of under-utilized fertile lands; and
– from a social point of view, resettlement was seen as a way of providing land to
those with out it, to settle paternalists, and remove unwanted urban
unemployment.

• Resettlement continued at a small scale in the first decade of the

military rule so that in total some 46,000 households, comprising
150,000 people had been resettled on 88 sites in 11 regions. 34
 Villagization

• Villagization is a process by which rural households were moved from

scattered dwellings into nucleated villages as part of a governmental
attempt to modernize rural life and agricultural production patterns.
• Villegization in Ethiopia began as a regional operation in Bale during the
Ethio-Somalia war in 1977/78.
• One of the main objectives of the program at that time was to guarantee
the safety of the local inhabitants from invading Somali troops during the
war with Somalia.
35
• Six years later in December 1984, the program was extended to the
adjusting region of Hararghe, again chiefly for security reasons.
• In June 1986, a National Villagization Coordination Committee was set up to
undertake villagization work as an economic policy to improve rural life.
• By mid-1987, the government claimed that 12 million people (about one
third of the rural population) were villagized.
• The highest number of newly established villages were built in Shewa and
Hararghe.
36
• The objectives of this program were the creation of a conducive situation that
would facilitate the dissemination of improved agricultural inputs and services.
• However, this program, like the other programs, was not successful because it
was not done on the basis of the participation of the people to be villagized and
they were largely unwilling to be villagized.
• Moreover, it was poorly planned and implemented.

• The above development policy reforms of the Derg’s Military government was
a result of the ties made with the East Socialist states such as Russia and other
east European countries that had an ideology of command economy system.37
 5.3. The post-1991 policies

• The 1991 economic policy document of the TGE declared

collectivization and villagization as undesirable and liberalized both
agricultural markets.
• The overriding objective of the government was given as attaining
fast broad based economic development.
• An economic reform program was initiated, which took the form of
structural adjustment program(SAP) under the auspices of the World
Bank and IMF. 38
5.3.1. The National Development Policy and the Five-Year Development Plan (1995-1999)

• In the fiscal year of 1995, the establishment of the first federal government
structure in the country, it was then possible to attract the attention of the
western developed nations.
• The development policy was well recognized in this period and it was
successful enough to become one of the African nations which were
nominated for the Sasakawa Global 2000 Agricultural Extension
Intervention.
• Although this extension model was introduced to the country at a pilot level
39
in late 1993, it was widely adopted in all the regions.
• Towards the end of this period, the macroeconomic policy of ADLI was
supplemented by new policies for the sector development programs (SDP) that
include education, health, HIV/AIDS and other important sectors (EU Country
Strategy Paper, 2002).
• The other development strategy adopted with in the context of ADLI by the
government of Ethiopia in 1996 was the National Food Security Strategy.
• Following to the adoption of this strategy, the National food security Program was
established in 1998 by targeting food insecurity in four regions.
• The implementation of these programs was interrupted by the boarder conflict that
occurred with Eritrea in the same year. 40
 5.3.2. The Poverty Reduction Strategy (PRS) and the Second Five Year
Development Plan (2000-2004)

• The overall objective of this strategy was to encourage the external resource/capital inflow and to increase
aggregate output level (IPRSP, 2000).

• It can be said that the Ethiopian government have took an initiative to prepare the IPRSP soon after the end of
the Ethio-Eriteria border war

• On the other hand, the government has adopted poverty reduction as the core objective for development by
arguing that economic growth as the principal, but not the only means to the development of Ethiopian economy.

• The main objective is to solve the multidimensional nature of poverty through a comprehensive and integrated
way of intervention in which the number of people who live on less than one dollar a day will be halved by the
year 2015.

• Accordingly, the Ethiopian government envisages the growth of the economy at an average rate of 5.7% per
annum until 2015 to reduce poverty by half from its current level 41
 Current Ethiopian governments’ rural development policies and strategies

• As has already been emphasized, rural development cannot be confined

to agricultural development.
• Nevertheless, in the Ethiopian context there is no question that the two
are closely linked. Indeed, it is the development of the agricultural
sector that will provide the basis for rural development.
• Hence, our rural development effort will give priority to the
implementation of appropriate strategies for agricultural development.
42
43
 Basic directions of agricultural development

1. Building human resource capacity and its extensive use

» Ensuring Industriousness and Work Preparedness
» Improving Farming Skills
» Ensuring the Health of Farmers
» Dissemination of Appropriate Technology
2. Creating market led agricultural development
» Agricultural Development not Driven by Market Forces Cannot be Rapid and Sustainable
» Tuning Agricultural Sector to Produce Goods Having Demand in the Market
» Building an Agricultural Marketing System
3. Improving the rural finance system
» Banks and the Rural Financial System
» Rural Banks
» Cooperatives
4. Encouraging private investors to participate in agricultural development sector
» Attracting Foreign Investors to the Agricultural Sector
» Agricultural Training and the Participation of Private Investors
44
» Linkage between Private Investors and Smallholders
5. Expanding rural infrastructure
» Expansion of Educational and Health Services
» Expansion of Rural Road and Transport Services
» Improvement of Drinking Water Supply
» Expansion of Other Rural Infrastructural Services

6. Strengthening non-agricultural rural development movement

» The Need for Non-Agricultural Rural Development
» Full Utilization of Development Opportunities Created by Rural Development
» Strengthening Rural-Urban Linkages
7. Rural development management

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 THANK YOU SO MUCH
THE END OF THE COURSE !!!
I WISH YOU ALL THE BEST!!!

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