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Ethiopia’s Agricultural Policy Challenges Ethiopia’s Agricultural Policy Challenges

Ethiopia’s Agricultural Policy Challenges - PowerPoint Presentation

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Ethiopia’s Agricultural Policy Challenges - PPT Presentation

Case Study Key Dialogue Questions KDQ Should the lead sector for economic development be agriculture or industry given that Ethiopia is a non oildependent developing country Should more priority be given to smallholder farms or private commercial farms given the context of the agriculture ID: 744567

sector growth agricultural agriculture growth sector agriculture agricultural development large farms scale support expenditure farm smallholder policy ethiopia commercial

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Slide1

Ethiopia’s Agricultural Policy Challenges

Case StudySlide2

Key Dialogue Questions (KDQ)

Should the lead sector for economic development be agriculture or industry, given that Ethiopia is a non oil-dependent developing country?

Should more priority be given to smallholder farms or private commercial farms, given the context of the agriculture sector of Ethiopia?Slide3

Role of agricultural sector in economic development of Ethiopia

Agrarian

and non-oil dependent

developing country

Agriculture is the backbone

of its

economy:

main livelihood for >

85% of the

population;

accounts for about 45 % of GDP;

almost 90 % of exports/foreign exchange earnings originate from agriculture sector;

Main

source of

industrial raw

materials for agro-industries

.

Two

major

sectors of agriculture:

Smallholder

and the large

- scale

farming sectorSlide4

Smallholder sector

Predominantly mixed

crop and livestock semi-subsistence farming

accounting for 83% - 95% of all cultivated land and of agricultural production

low levels of modern inputs use and heavy dependence on rainfall

vulnerable to the vagaries of nature (unpredictable rainfall

& recurrent drought

)

Low productivity, very limited market share and insignificant saving and investmentSlide5

Large -scale

farming

Ethiopia did not inherit colonial commercial farm.

Growth of the sector started with the establishment of farms in the 1950s/60s (by elite, nobility, etc).

The

Derg

/Military regime nationalized the farms to;

Operate as state-owned enterprises after 1975:

A ministry to manage & develop new state farms through the allocation of a large budget

,

Socialist policy (forbid land ownership > 10 ha) retarded growth of large scale private farm sector for 17 years

Post1991 market and price liberalization which resulted in;

the privatisation of many sate farms while the rest are still operating as

parastatal

/public enterprises

Stimulated private investment in large scale commercial farm development by domestic and foreign) and the steady growth of the sector over the past two decadesSlide6

Post 1991 Agricultural Sector policy

Agricultural development -led industrialisation (ADLI

);

Lead-

role of agriculture in development

policy.

Agriculture as the basis in the conceptualisation of growth, policy guidelines and poverty reduction.

The key challenge for reducing poverty and providing the foundation for long-term growth is to ensure rapid and sustained increases in land and labour productivity.

Agriculture is the main source to generate primary surplus that fuel the growth of other sectors notably, industry

ADLI is made the policy in strategic development plan;

Poverty reduction programme (SDPRP) and MDG

Plan for Accelerated and Sustainable Development to End Poverty (PASDEP), for 2005-2009/10

Growth and Transformation Plan (GTP) strategic framework for the period 2010/11 -14/15.Slide7

Agricultural growth strategy

ADLI strategy further refined during PASDEP with Emphasis

on

commercialisation of agriculture,

strong private sector

growth and

intensification of marketable farm

products.

The fundamentals of the GTP strategy include:

A

shift to produce high value crops,

a special focus on high-potential areas,

facilitating the commercialization of agriculture,

supporting the development of large-scale commercial agriculture (where it is feasible

).

PASDEP implementation as the

main instrument for delivering agricultural

growth through strong push for intensification to increase yield and productivity in the smallholder sector. Slide8

Public Expenditure Pattern

A

high share of

expenditure for pro-poor

and development oriented sectors Slide9

Public expenditure

While average

pro-poor expenditure was

approximately

54% of total public

expenditure (2001/02 – 2007/8), expenditure

on agriculture and food security was about 12.6% of

the total.

Strong commitment to continued agricultural growth; about 13 to 17 % of expenditure (far more than the average for SSA).

Food security nonetheless remains a key challenge as a large share of the sector budget goes to the Productive Safety Net Program (PSNP) & HH Asst Building

Prog

(HABP)

GoE

& DP realised that success in long-term food security will require complementary efforts to enhance agricultural growth, and thereby reduce food prices and diversify rural livelihoods.

Thus, PADETES program for the intensification of smallholder agriculture during 1996/97 – 2004/05 EFY was allocated a

large share of

the agricultural growth expenditure. Slide10

PADETES program and performance

To achieve strong push for intensification

Three major Program components which are;

Regular

extension packages

: for cereal crops which are mostly seed and fertilizer;

Minimum packages

: emphasizing natural resources management with traditional crop management); and

Household packages

: providing farm households a menu of technology (water harvesting, dairy, apiculture, and horticultural production

).Slide11

PADETES Program

PADETES capacity to deliver extension services

Roughly 8,500 Farmer Training Centres (FTCs) have been created throughout Ethiopia,

Development Agents (Das) trained increased from 2500 in 1995 to 63,000 (45,000 placed already in

woredas

/districts),

Built DAs and

woreda

/district

staff; trained with technical skills, and are as specialists,

The development agent (DA) to farmer ratio had risen from 1:5000 to 1:800 Slide12

Efficiency

of

Spending (PADETES)

The

program reached about 40% of the roughly 10 million farm households

Succeeded

in boosting input use (improved seed and fertilizer use increased by about 50 and 30%, respectively, from 1995 to

2005.

Increased

use of improved inputs/fertilizer rate (higher than the African

average).

But

no

change in average per capita agric. GDP and per capita grain

production (results achieved are not as expected).Slide13

Large – scale commercial farm

Government support

for the sector;

Tax

incentives/exemption

from custom duties

Infrastructure development (access road, power, other utilities, etc)

Small

land

tax and grace

period

for payment

Growth Performance of the large – scale sector

FDI

inflow into

agric. fluctuated between

US$545mn

& US$265mn/year from 2004-2007,

From 2000 - 2005, floriculture/horticulture

sector was the main focus of

FDI

Ethiopia

is

the 2nd

largest flower exporter in Africa,

(next

to Kenya

)

Agricultural investment was about 15% in 2010.Slide14

Total capital of domestic and foreign investment projects approved, mill Birr

(

1992/03 - 2010/11) Slide15

Total agricultural investment capital of approved

projects (

2006/07 - 2010/11) Slide16

Impacts of large – scale farm growth

Environmental concern and ‘land grab’

Critics on the motives of FDI inflow, lack of long term growth impact;

Primary aim to secure the food demand in the investors’ countries

Financial returns instead of the traditional motives of efficiency and market-seeking

Lack of technology transfer and spill-over effect on domestic/smallholder farmers (Out-growers?)

Least impact on domestic market growth

Evidence unavailable to justify government support (e. g., tax incentives) to sector growthSlide17

Conclusion: KDQ

KDQ1: Is ADLI

appropriate

?

Key arguments to increase the support for agriculture;

Is the major contributor to GDP

Has strong impact on poverty as it is source of livelihood

Generates the major share of foreign exchange

Provides raw materials for industry

Comparative advantage (land and labour) to produce surplus production and generate capital to finance industrial growth

Studies often show that growth based on agriculture makes a stronger contribution than industrial growth b/z

agriculture has greater multiplier effects

benefits from agricultural growth shared more equallySlide18

…. Continued KDQ

Key elements of the argument to increase support for industrial development are;

the perception that support for agriculture has not been as effective as hoped.

not clear yet whether public support for industry would experience challenges of a similar scale or nature to those experienced in the agricultural sector.

the view that industrial development will create more employment (absorb the excess labour in agriculture and also reduce urban unemployment)

others (create markets and demand for surplus supply of agricultural producesSlide19

…. Continued KDQ

KDQ 2: Should more priority be given to smallholder farms or private commercial farms, given the context of the agriculture sector of Ethiopia?

strong M&E systems to evaluate the performance of support for both smallholders and large farms.

Policy analysis to judge based on;

The costs of support, including both the cost of delivering services and the loss of revenue arising from any tax incentives offered to investors in commercial farms

The impact of the programmes on the production of crops and livestock, implications of changes in production and prices on the exchange rate and the effect of this on consumers.

The implications of this for changes in the margins enjoyed by farmers, input suppliers and those involved in marketing produce

.Slide20

THE END