Ethiopian Economy Research Articles

Credibility of institutions in Addis Ababa (Ethiopia), effects of government policies on real estate developers

Credibility is the measure of how institutions are perceived as a result of autonomous endogenous patterns of interaction and power differences. It is not the tenure security in the sense of neo-classical economics that matters but the perceived security and whether developers have the assurance to retain the fruits of their investment. What matters in performance of institutions is not their form but their functions as it is determined temporally and spatially in terms of economic efficiency, stability and growth. Against this backdrop the paper analyzes how relevant institutions function by taking the case of real estate developers in transitional real estate markets of Addis Ababa. We will determine to what extent institutions are functional and whether the changes taking place lead to the development of more credible institutions or not. In the transition process there is ample space for autonomous endogenous patterns of interactions and transactions among economic actors and citizens. We analyze the process of changing functionalities studied to better understand the existing and changing functions of the relevant institutions, using the analytical framework developed by Ho (2014) and describe the functioning of institutions, while drawing conclusions on the role and credibility of institutions. Despite the adverse environment for real estate companies and a government crackdown on real estate developers the Ethiopian economy continued growing at more than ten per cent per year. Insecure tenure rights did not inhibit economic growth and real estate developers continued to invest.

Linear Programming-Based Cropland Allocation to Enhance Performance of Smallholder Crop Production: A Pilot Study in Abaro Kebele, Ethiopia

Smallholder farmer crop production is a mainstay of the Ethiopian economy. A series of agricultural extension programs have been implemented since the 1950s in an effort to improve smallholder productivity. In this study, we argue that the limited attention that is given to cropland allocation by smallholders is one key driver of low performance of crop production as well as a key factor in environmental degradation. Drawing on data from a household survey of 75 randomly selected households in Abaro Kebele, Ethiopia, combined with focus-group discussions, key informant interviews, and secondary data sources, we use linear programming to highlight the impact of cropland allocation decisions on the performance of rural smallholder crop production systems. We find that under current land use practices households are not able to meet their consumption needs. The average profitability of farms under the current cropland allocation is also significantly below the estimated level of profit that could be realized by reallocating cropland while using linear programming. Additionally, survey results suggest that low crop production performance (in terms of meeting both household food crop production needs and profit goals) is the primary reason why households do not participate in conservation efforts and sustainable resource management practices. This study suggests that linear programming-based cropland allocation modeling might be applied to enhance the profit performance of smallholder crop production, help meet household food crop production requirements, and thereby promote the sustainable utilization of environmental resources.

Skills Gaps and Mismatches: Private Sector Expectations of Engineering Graduates in Ethiopia

This article investigates skills gaps and mismatches of engineering graduates. Sustained growth of the Ethiopian economy has created demand for construction work, yet despite the labour demand and engineering graduates seeking employment, employers identify skills gaps hindering their ability to employ them. The study uses key informant interviews with engineering graduates, lecturers, and private sector employers, and document analysis to collect data on the skills gaps and mismatches. The article argues that, while skills gaps are largely caused by poor design of the higher education curriculum and corrupted recruitment practices, the precarious nature of the construction sector and macroeconomic instability limit graduate employment even further. It suggests that education providers work collaboratively with employers to make the curriculum fit for purpose, and that government both makes more realistic and long-term plans for the construction sector, and increases university funding, with an emphasis on quality and practice-focused graduate teaching and learning experiences.

Modeling and Forecasting Rainfall in Ethiopia

Ethiopian economy is extremely dependent on agricultural sector, which contributes 45% to the Gross Domestic Product (GDP), 85% foreign earnings and provides livelihood to 80% of the population. Ethiopian agriculture is highly dependent on natural rainfall, with irrigation agriculture accounting for less than 1% of the country’s total cultivated land. Therefore, modeling and forecasting the rainfall dynamics of the country has a great importance. This paper aims at examining the rainfall dynamics and fit appropriate model for forecasting Ethiopian rainfall. In this research, we apply Box-Jenkins approach, Seasonal Autoregressive Integrated Moving Average (SARIMA) model in order to forecast monthly rainfall of Ethiopia for the period of twelve months ahead. Monthly rainfall data from 1901 to 2015 were used from world bank group (climate change portal). Appropriate SARIMA model has been identified based on an Akaike information criteria (AIC) and Bayesian information criteria (BIC) for forecasting the amount of monthly average rainfall. Farmers, in general agricultural sectors, policy makers, tourists, and investors engaged in the construction industry are some of the sectors benefited from this result.

THE STATUS OF TOURIST GUIDES AND TOURISM MANAGEMENT IN AND AROUND THE CITY GONDAR SINCE 1991.

The economy of Ethiopia has prospered for many years on agricultural products. In recent years, however, the country expands its industrialization and service providing in order to gain further incomes. Tourism is an important strategy of socio-economic development for countries which have rich historical, religious and socio cultural sites. Ethiopia is rich in multidimensional heritages. The main attractions tend to be of a historical and religious nature. The city of Gondar which formerly served as the capital of medieval Ethiopia holds the vestiges of numerous royal castles, including those in Fasil Gebbi, and other ancient churches attracting tourists from different parts of the world. Gondar also serves as a spring board for tourists who have vested interests to visit mount Ras Dashen of Ethiopia and others. The main objective of this paper is to provide a critical analysis of challenges and prospects of tourist Guides in and around the city of Gondar and historical development of tourist guide in the study area, with particular reference to the opportunities and challenges that the industry faces in order to provide future direction for sustainable tourism and community development to the country. The study is analyzed using qualitative method of data collection. The sample includes key informants from tourist guide centers in the city of Gondar and some other local community members and foreign tourists. Semi-structured interviews and focus group discussions were used in addition to review of secondary sources. The results of this study show that the Gondar city administration tried to manage and preserve heritage sites in and around the city of Gondar. However, it is identified that almost all heritage site are in danger of ruin. In any country which needs sustainable development of tourist industry, there should be tourist guides’ controlling mechanism. One of these mechanisms should be licensing and relicensing of tourist guides by putting standards to qualify as a tourist guide through short or long training strategies.

The rise of oligarchy in Ethiopia: the case of wealth creation since 1991

SUMMARYThis article focuses on the political economy of Ethiopia since the ruling party EPRDF came to power in 1991 and argues that the country has seen the rise of oligarchy during this period. The party claims that its development strategy has reduced poverty, but it is evident that the country’s inequality has been growing in the past decade. The briefing identifies the mechanisms of oligarchisation, most notably privatisation, land expropriation, phoney shareholding and corruption. The conclusion is that Ethiopia’s growing inequality is related to the process of oligarchy formation.

Inter-Sectorial Linkage of Economic Sectors and Their Contribution to Economic Growth: A Time Series Evidence from Ethiopia and China

Purpose: The aim of this paper is to investigate the inter-sectorial linkage of economic sectors and their contribution to the economic growth using time series data from 1978-2014 and 1992-2014.
 Design/methodology/approach: This study employed a Johansen cointegration test and Ordinary Least Square (OLS) model.
 Findings: The Johansen cointegration and multiple regression results indicate that all economic sectors have strong, positive and significant long-run and short-run relationship with economic growth during the study period in both countries. The result revealed that MNF giant is an engine for Chinese economic growth while agriculture took the lion-share for Ethiopian economy. The MNF has bi-directional Granger cause with economic growth, agriculture and SRV for China, while GDP and AGR are the only bi-directional Granger causes variables for Ethiopia.
 Implications: Therefore, from a policy perspective, Ethiopian policymakers need to formulate agro-processing industries to ensure the transformation of the AGR to the MNF as well as maintain inter-sectorial linkage and sustain the country’s economic growth.

English

Agriculture is the mainstay of the Ethiopian economy. However, the growth of the sector is constrained by different factors. Low level of technology development, inefficient technology dissemination, low utilization of improved production inputs and shortage of research proven production practices are among the most important factors hindering the growth of the sector. The objective of this study was, therefore, to assess the status of the current agricultural knowledge and technology transfer systems. For this purpose, a combined effort of literature study, expert elicitation and questionnaire based survey were carried out. The results of the study showed that a multitude of factors are constraining the system in the area. Limited economic capacity and awareness of farmers, lack of motivation of stakeholders, lack of motivation and knowledge level of development agents to support the transfer system are within the limiting factors. Weak linkage amongst the concerned actors, negligence of farmers’ indigenous knowledge, and resistance of farmers to newly introduced technologies are also among the main factors hindering the efficiency of the system in their respective orders. Based on the findings of this study, it can be concluded that practicing participatory research approach, capacity building training, and mobilization of farmers are in urgent need for improving the efficiency of the transfer systems. Equipping with knowledge and skill and establishing a motivation scheme for development agents also a central solution to improve the systems. On top of this, timely dissemination of agricultural technologies, and information considering farmers indigenous knowledge needs to get due attention so as to improve agricultural knowledge-information and technology transfer system as well as smallholders’ livelihood. Key words: Agricultural information, agricultural technology, Southern Ethiopia, technology and knowledge transfer.

Subnational Value Added Tax in Ethiopia and Implications for Statess Fiscal Capacity

In most federal systems, state governments are funded through a combination of direct fiscal transfers from the central government, and the revenue they collect directly from locally adopted taxes. Ethiopia is a federal polity, but follows a slightly different path in the case of its most important tax source – value added tax (VAT). As is the case in many developing countries, VAT is a major source of government revenue in Ethiopia, and the tax is levied under central government legislation. However, unlike the more common practice of a central government collecting VAT and then earmarking some of the revenue for transfer to states, collection rights and administration powers over VAT imposed on a portion of the economy in Ethiopia are assigned directly to state governments. The result is a fiscal relationship between central and state governments in Ethiopia that is distinctive in three main respects.

English

Sesame (Sesamum indicum L.) known as queen of oil seed crops is mainly grown for its oil of local consumption, sources of income and great contribution for the national economy of Ethiopia. However, there is a low productivity and production due to environments, genotypes, interaction and management variation. Four sesame genotypes were evaluated for their interactions with environments and seed yield stability analysis at three environments during the 2015 main cropping season. The objectives of the study were to estimate the magnitude and nature of GEI and to identify stable and/or high yielding white seeded sesame genotypes in Abergelle Agricultural Research Center mandate areas, Northern Ethiopia. The study was conducted using a randomized complete block design with three replications at each environment. The combined analysis of variance revealed highly significant (P≤0.01) environment (E), genotype (G) and genotype × environment interaction (GEI). Environment explained 79.84% of the total (G + E +GE) variation, whereas G and GE explained 17.21 and 2.95% of the total variation, respectively. The magnitude of the environment was 4.6 times greater than the genotype, implying that most of the variation in seed yield was due to the environment. The significant genotype by environment interaction effects were further partitioned into two significant interaction principal components using the genotype main effect plus genotype x environment interaction (GGE) biplots model. The first two principal components for seed yield stability of the GGE biplot analysis explained 96.81% of the total variation caused by G+GE of PC1 and PC2 accounted for 90.88 and 5.93% sum of squares, respectively, while 3.19% was attributed to noise. Thus, model diagnosis (fitting) showed that the first two PCs were significant and can be taken to interpret this data. The which-won-where biplot identified one winning genotype in one mega environment. The winning genotype across locations was Humera-1. Thus, the GGE (genotype and genotype by environment interaction) biplot analysis indicated that Humera-1 was considered as the most desirable and stable one’s, therefore, can be recommended for wider cultivation due to better seed yield and stability performance across the test environments in the dry lowland areas of Southeast and Central zones of Tigray region, Northern Ethiopia. Key words: Dry lowland, GEI, GGE biplot, mega environment, S. Indicum L.

The Contribution of Foreign Direct Investment for Economic Growth of Ethiopia: Time Series Analysis

Economic growth of countries is one of the fundamental questions in economics. Most African countries are opening their economies for welcoming of foreign investors. As such Ethiopia, like many African countries took measures to attract and improve foreign direct investment. The purpose of this study is to examine the contribution of foreign direct investment (FDI) for economic growth of Ethiopia over the period of 1981-2013. The study shows an overview of Ethiopian economy and investment environment by the help of descriptive and econometric methods of analysis to establish empirical investigation for the contribution of FDI on Ethiopian economy. OLS method of time series analysis is employed to analyse the data. The stationary of the variables have been checked by using Augmented Dickey Fuller (ADF) Unit Root test and hence they are stationery at first difference. The co- integration test also shows that there is a long run relationship between the dependent and independent variables. Accordingly, the finding of the study shows that FDI, GDP per capita, exchange rate, total investment as percentage of GDP, inflow of FDI stock, trade as percentage of GDP, annual growth rate of GDP and liberalization of the economy have positive impact on Ethiopian GDP. Whereas Gross fixed domestic investment, inflows of FDI and Gross capital formation influence economic growth of Ethiopia negatively. This finding suggests that there should be better policy framework to attract and improve the volume of FDI through creating conducive environment for investment.

Explaining differing perceptions of employees’ skill needs: the case of garment workers in Ethiopia

AbstractThe Ethiopian economy has grown significantly and the government has prioritized industrial skills development and expanded technical and vocational education and training (TVET). However, mismatches between the skills available and the skills required are widespread and the unemployment rate for TVET graduates is high. Little scholarly effort has been made to empirically identify the exact types and domains of skills in which these supply–demand mismatches happen. The present study relies on interviews with 30 vocational trainers, 19 employees, 13 factory managers and 3 garment industry experts. To measure the perception gaps between the supply and demand sides of worker skills and explain why mismatches occur, we conducted an assessment in which assessors from among the factory managers and vocational trainers along with the three industry experts concurrently graded the garment‐manufacturing vocational skills of the same workers. For this purpose, we developed a unique instrument that captures the knowledge and skills of workers in real work environments. The analysis reveals that TVET trainers expect students to have comprehensive skills and grade the skills of workers more generously, whereas factory managers expect not variety but quality, and score workers’ performance more critically. Differences in the educational backgrounds and practical experience of assessors contribute to these gaps. The evidence from this study suggests that the vocational skills assessment instrument we have developed for our research is valid and can serve as a basis for future large‐scale performance assessments.

Evaluating the Quality of Coffee Product on Marketing Performance of Ethiopian Commodity Exchange (ECX) Hawassa Branch

Ethiopia is the birthplace and is the largest producer of Arabica coffee in Sub-Saharan Africa countries and it is ranked the fifth largest coffee producer in the world next to Brazil, Vietnam, Colombia, and Indonesia by contributing about 7 to 10% of total world coffee production. Coffee is the most important to the Ethiopian economy with about 15 million peoples has been directly or indirectly deriving their livelihoods from coffee product. Coffee is still Ethiopia’s number one export item. It accounts for 45 to 50% of Ethiopia’s total export earnings. A marketing system that coordinates better, that links faster, and that protects the interests of both sides of the trade. It is time for a marketing system that is transparent, efficient, and innovative, that will take Ethiopian agriculture into the new Millennium. Ethiopia, once a commercial trading hub in antiquity linking markets of East and West, can again claim a place in the global market arena. Coffee is the main cash and export crop in Southern Ethiopia as well as in the whole Ethiopia. ECX Hawassa branch is one of the 19th branches of, which carry out a new method of exchange and a safer one for all who trade on products. Though different researchers describe different factors on how and what impacts put on the quality of coffee products, however, no one describe clearly what factors are put effects on the Ethiopian, perhaps especially , the Hawassa branch ECX coffee quality product and market performance. The researcher, therefore, set objectives and planned schedule to investigate and in turn solve this vague issue as well as motivated to identify what and how factor particularly put effect on this issues. The researcher had designed and had used suitable and different methodologies and passed through it. The researcher used the responses of respondents sampled from 60 coffee suppliers which were sampled from 150 total suppliers. The researcher, finally come up with the result, of Less quality coffee and the decreasing the market performance which are mainly associated with poor adoption of improved technology, oldness of coffee trees and poor pruning and recycling system, climate, harvesting process like sorting , roasting ,shipping were among the major problems. Adoption of improved technologies is one of the most promising ways to increase productivity and production in Ethiopia. the researcher, at last, provides different set of recommendations in how and when as well as by whom and for whom should have to be done at chapter five and he dedicatedly advised that the concerned body had to have applied so as to end up with the problems observed in coffee production, control the factors, and in turn provide good quality of coffee products as well as good market performance in the ECX Hawassa branch in particular and the country at general.

Determinants of Entrepreneurial Expansion and Sustainability Among MSEs in <i>Wolaita and Dawro Zones, Ethiopia</i>

The future of the Ethiopian economy in the urban area depends to a great degree on the success of Micro and Small enterprises (MSEs) as in many other developing countries since MSEs are important to economic growth and considerably essential to generate employment. However, Ethiopian MSEs are facing a series impediments emanating from external and internal factors that have sign if i can’t adverse effects on their performance, growth and sustainability. The purposes of this research are to explicitly enquiry and consider aspects that are hampering the performance, growth and sustainability of MSEs in Wolaita and Dawro Zones. The study was utilized causal research design to achieve the research objectives. The target population under study is all enterprises in the five developmental sectors in five towns from both Wolita and Dawuro zone Administrations. The study was conducted between June 2016 March 2017. In this study, primary and secondary data types and sources were used. The instruments to collect primary data were questionnaires. Sample size was 347 which determined by using Yamane (1967) formula and individual informants were selected via stratified random sampling technique. The data collected was analyzed quantitatively and qualitatively by the aid of Spss. V.16. The finding of the study showed that the variables (financial, marketing, working premises, technological, political-legal, entrepreneurial and managerial factors affecting enturprenual growth and sustainability both in Wolaita and Dawuro zones which were explained the variance of 34% and 66% of the variance was explained by other factors which are not the part of this study variables.

Adoption of renewable energy technologies in rural Tigray, Ethiopia: An analysis of the impact of cooperatives

With the increasing pollution of the biosphere, the development of renewable energy (RE) has become a major societal challenge. Though increasing the share of RE is high on the policy agenda, the general public has been slow to adopt it. In Ethiopia, the dissemination of RE has been limited due to lack of institutional capacity, among others. The purpose of this article is to empirically test the impact of cooperatives (institutions taking an active role in the Ethiopian economy) on RE adoption in rural Tigray, Ethiopia. To this end, we use the treatment effects model in a bid to address the potential problem of selection bias in observational studies. Findings show that co-op members invest about 1198 more birr (birr = Ethiopian currency: 1 birr ≈ 0.05 USD) in RE than non-members.

Economic determinants of Greenhouse gas emissions in Ethiopia: Bounds testing approach

This paper aims at investigating the main economic determinants that contribute to greenhouse gases emissions in Ethiopia. By applying the bounds testing approach, the long and short-run impacts of economic growth, trade openness, and industry on air pollution in Ethiopia are estimated. The data set used in the estimation process covers the period (1981-2013). The study also attempts to find out whether the Environmental Kuznets Curve (EKC) hypothesis applies to the Ethiopian economy or not. Results indicate that both trade liberalization and industry, when they interact together, have adverse impacts on the environment in Ethiopia. Furthermore, there are still no evidences to support the existence of EKC in Ethiopia. Key words : Bounds testing approach, EKC hypothesis, Ethiopia, Greenhouse gas emissions, Economic growth, Foreign Trade, Industry.

Seasonal predictability of Kiremt rainfall in coupled general circulation models

The Ethiopian economy and population is strongly dependent on rainfall. Operational seasonal predictions for the main rainy season (Kiremt, June–September) are based on statistical approaches with Pacific sea surface temperatures (SST) as the main predictor. Here we analyse dynamical predictions from 11 coupled general circulation models for the Kiremt seasons from 1985–2005 with the forecasts starting from the beginning of May. We find skillful predictions from three of the 11 models, but no model beats a simple linear prediction model based on the predicted Niño3.4 indices. The skill of the individual models for dynamically predicting Kiremt rainfall depends on the strength of the teleconnection between Kiremt rainfall and concurrent Pacific SST in the models. Models that do not simulate this teleconnection fail to capture the observed relationship between Kiremt rainfall and the large-scale Walker circulation.

Effectiveness of Commodity Futures in Curbing Spot Volatility

This study examines the impact of introduction of futures trading on the spot price volatility in the commodity market. The paper considers the United States of America, South Africa and Ethiopian economies. Three commodities i.e. coffee, maize and wheat from New York Mercantile Exchange, South African Futures Exchange and Ethiopian Commodity Exchange are analyzed. ARCH LM test is used to check for heteroskedasticity and GARCH and EGARCH are used to check for the behavior of volatility for the pre- and post-futures periods. For all the three economies, the results indicate presence of the ARCH effect in the log returns. For conditional and unconditional variances; spot price volatility for coffee has decreased after futures trading across all the economies and the EGARCH has also shown reduction in persistence of volatility in the post-futures period in the three economies; while that of maize has reduced for the Ethiopian economy but increased in both the US and South African economies. For wheat, the conditional variance has been found to rise in the post-futures period in all the three economies. These results imply that more positive feedback from futures trading is bound to be seen for maize in the less developed economies as opposed to the developed economies as opposed to the other products. This paper has focused on the overlooked factor by earlier researchers, i.e. of economic-gap amongst countries, in looking at the impact of the futures trading on the spot price variation.

The Role of Climate–Forest–Agriculture Interface in Climate Resilient Green Economy of Ethiopia

Though the problem of climate change is global its effect on the developing countries like Ethiopia are very significant, because of less capacity to reduce and reverse the problem. Ethiopia has always suffered from great climatic variability; that causes for various socio-economic and environmental problems. This review paper examines why and how climate, forest, and agriculture interfaces matters to the climate resilient green economy of Ethiopia. Different researchers explain that, Ethiopia has lost accumulative level of over 13% of its agricultural output between 1991 and 2010. And if no adaptation measures are taken, climate change may reduce Ethiopia's GDP by up to 10% by 2045. Considering this the government of Ethiopia is working to build green economy development policies with a view to climate change, which is considered as necessity as well as an opportunity ,but there are controversies among the risk in a changing climate, demand for economic development, reduction of agricultural productivity, and natural resource. So, Climate Resilient Green Economy (CRGE) approach needs to follows the principle of harmonizing these controversies. The highest bases of Ethiopian economy and source of energy are agriculture and forests respectively, plus to this both sectors are source of more than 80% Green House Gas (GHG) emission in the country. Therefore CRGE strategy which based mainly on agriculture and forest developmental policy is very important but the efforts so far have done on the two sectors are facing some challenges due to the strong interferences among Climate-Forest-Agriculture and related factors such as population growth, high dependency of national energy on fuel wood, lack of good governance, changing growing seasons, lack of real public policy discussion and policy contradiction like investment and settlement. Therefore taking in to account the role of climate, forest and agriculture interfaces in the effort to build Climate Resilient Green Economy and solving the related challenges is very important to achieve the CRGE strategy of Ethiopia.

Structural change in Ethiopia: is the country catching up or lagging behind?

Attaining a sustained economic growth is the prime objective of any nation in the entire world. Some countries potentially tackle this challenge and can register an extensive economic progress. However, this is true for some developed countries only. In many developing countries achieving a persistent economic growth is a big challenge. Similarly, Ethiopia has been struggling for alleviating different macroeconomic instabilities. The country is suffering from the problem of food security, income inequality and BOP deficit. But recently the country has launched a new approach to economic growth, the growth and transformation plan (GTP). Primarily, this plan is envisaged to transform the country in the class of lower middle income countries with zero level of carbon emission in 2025. However, still the country is still challenged by different macroeconomic maladjustments. Inflation and significant level of unemployment are currently characterizing the country’s economy. But, some reports of still the country’s government stated that the country is going on the correct path of development. This calls an investigation on the nature of structural change in the country. Therefore, this study tries to explore structural change in the economy. It is also aimed on identifying in which sector the country achieves structural change. By using the kaldor verdon coefficient, shift share analysis, and Thrwill’s law as a measure of structural change, this study revealed that, the country has show a structural change in its economic progress. Indeed, the study also indicates that, within the period between 1990 and 2013 the country is notably not far from the world economy and it is in the process of catching up. The estimated coefficient of Kaldor- Verdroon for Ethiopian economy from 2005 to 2013 is greater than 0.5, therefore the country’s manufacturing sector is operating in the dynamic economies of scale and the country have a potential of catching up in the future. Key words: Structural change, kaldor- verdroon coefficient, GTP, Thrwill’s law