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
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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
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