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Economic Growth and Governance in Ethiopia: An Observation

 Professor Desta,  Asayehgn, Ph.D.

Over the past decade (2003 to 2013), Ethiopia has shown a dramatic increase in its economic growth. When compared to the regional average of 5.3 percent, Ethiopia’s Gross Domestic Product has grown at the rate of 10.8 percent per year. In tandem, Ethiopia’s extreme poverty line in both rural and urban areas has also declined from 38.7 percent from 2004-2005 to 29.6 percent in 2009-2010. As planned by the United Nations, Ethiopia has also achieved some of the Millennium Development Goals (MDGs) in areas such as child health services and safe water requirements. Moreover, Ethiopia has also made encouraging progress in gender parity mainly in primary education, as well as in HIV/AIDS, and malaria disease control (Ethiopia/Overview, April, 05, 2015).  Given these dramatic, noticeable improvements, the cardinal question that stands to be answered is: can Ethiopia’s economic growth be attributable to market-enhancing strategies? 

Market-enhancing strategies

The most important indicators that could used to measure market-enhancement include: 1) government effectiveness—measuring the competence of the bureaucracy and the quality of public service delivery; 2) political stability—measuring the likelihood of violent threats to, or changes in, government, including terrorism 3) voice and accountability—measuring political, civil, and human rights; 4) regulatory burden—measuring the incidence of market-unfriendly policies; 5) rule of law—measuring the quality of contracts enforcement, the police, and the courts, as well as the likelihood of crime and violence, and 6) control of corruption—measuring the exercise of public power for private gain, including both petty and grand corruption and state capture ( Kauffmann et al, 2005).  

Neo-Liberal economists generally assert that market-enhancing strategies are the most critical factors that could explain the divergence in performance across developing countries (Khan, August 2007).Though it is possible to generalize, it would be extremely difficult for developing countries to achieve market-enhancing strategies because market-endeavor activities require significant expenditure of public resources and skilled human capital to establish and monitor their implementation effectively.  More particularly, in order to catch up with developed countries, developing countries that are at the early stage of development may not completely satisfy most of the market-enhancing criteria. To achieve these goals in the short run, however, they might attempt to use a combination of market and non-market techniques such as transferring assets and public resources, creating semi-public industries, allocating and appropriating public land and resources for development, direct subsidization, and they even might be involved in prioritizing infrastructure (Khan, August 2007).  Based on the criteria given by Kauffmann's group, let us try to analyze Ethiopia’s market-enhancing conditions.

Government effectiveness:  Ethiopia’s federalism was established in 1995 to maintain unity and diversity and achieve stability. To ensure the threat of disunity that prevailed during the Military Regime, the Ethiopian Peoples' Revolutionary Democratic Front (EPRDF), using Tigrai Region as a model, vigorously redefined the political landscape and restructured the state into the contemporary Federal Democratic Republic of Ethiopia. More specifically, Ethiopia’s polity was sub-divided into nine asymmetrical ethnic-based regional states and two cities that included Addis Ababa and Dire Dawa.  To further assure self-rule and ascertain confidence in the nation and of the people of Ethiopia, each region was assured the unconditional right to self-determination, including the right to secession.

Thus currently, Ethiopia’s Democratic Developmental State is guided by the ruling party known as the Ethiopian Peoples’ Revolutionary Democratic Front (EPRDF). Controlling the government bureaucracy, the EPRDF is entirely under a plan-oriented developmental process. The bureaucracy is managed by civil servant functionaries that are primarily members of the political system. Members of the bureaucracy that are required to serve according to their ethnic affiliation are mainly recruited under political pressure, but are also influenced by the ruling elites. Thus, while the EPRDF ruling party constantly argues that it is applying democratic rules and fair judicial practices, the various opposition groups feel that all election processes that have been conducted since 1995 have been fraudulent and that the EPRDF is using the term “good governance”  just for window dressing purposes.

Designing financial adjustment by federal states could be very viable to ensure that more equal living standards are maintained among its subunits. To maintain the necessary foundation for fostering economic competition and to enhance competitive efficiency, however, local governments of the federal system need to be endowed with adequate resources in order to collect taxes and administer fiscal policy. If the ability of the local government is constrained, however, it is the duty of the federal government to play cooperatively toward bringing about fair allocation of resources among the federal subunits. In short, democracy and local governance should be strengthened with fiscal decentralization without diminishing the benefits that may arise from coordinated action at the center. Therefore, the lesson that needs to be learned by local governments in Ethiopia is that it needs to maintain equality between resource-endowed units and resource-poor units. That is, local officials need to support their constituents and diligently deliver the required public services instead of levying exuberant rental income tax to prove to their superiors that their units are self sufficient. Thus, it would be ethical for local officials in Ethiopia to calculate rental income not according to fictitious figures but instead use the actual rental incomes, subject to random auditing, acquired from both tenants and landlords.

Political stability: To rekindle Ethiopia, which was on the brink of a colossal failure both during the centrist feudal monarchy and the unitary military dictatorship, the current Ethiopian federal structure needs to grant some rights to all its citizens.  To put it mildly, the Ethiopian environment now seems to be reasonably stable except that some Ethiopians in the diaspora are articulating their dissatisfaction and concern that the EPRDF government has denied its citizens free media, freedom of expression, and are hoping that the political space that has been constricted since 2005 be widely opened. As a result, some splintered opposition groups and militants groups located in some of the neighboring countries are in the process of triggering some form of violence. 

Voice and Accountability: At the local level, local residents are hardly empowered and they have not been able to participate meaningfully in selecting their representatives.  Except being involved in a shameful form of election, the local people are not given the right to choose their leaders. Though in name they are supposed to be autonomous, the zone governors, mayors, and killel leaders are carefully chosen from the hard core cadres of the ruling party. A case in point is this. During the last election in 2015, some of the federal members of parliament never went to their local areas to tell their agendas for the future. To add insult to injury, some of the nominal candidates never cared to listen to some of the concerns that their constituents had. Being faithful and accountable to their political party, as the cadres got endorsed; a green signal was given to the constituent units to elect them.  As persuasively argued by Araia, the EPRDF does not demonstrate accountability to the Ethiopian people. What we have in Ethiopia is a mono-party rule that refused to reconcile democracy and government (2013).

Regulatory Quality:  In theory, non-partisan, professional public service is a prerequisite to a developmental state. Given this, the EPRDF has formulated various regulations that permit and promote private sector development in the country. But by any stretch of the imagination, it could be said that there does not seem to exist any interface between the ruling party cadres and the private sector.  In short, the ruling bureaucracy seems to be far removed from the corporate sector. Despite the very lauded opinion that foreign investments could be crowding out domestic investors, more recently, the Ethiopian Government has been very busy awarding virgin farmlands, and has been giving special investment deals such as tax holidays, tax relief on imported capital etc., to attract foreign investors. 

Rule of Law:  The current Ethiopian constitution was enacted in 1994 and was fully adopted in 1995. In tandem, the Ethiopian justice system was overhauled to allow citizens to seek and obtain an affirmation of their rights as embodied in and guaranteed by the new democratic constitution.  In addition, to adjust to the demands of the changing world economy, the judicial system has been re-tailored several times (Federal Democratic Republic of Ethiopia, February, 2005). Given this, it is sad to note that neither the litigants nor the practicing attorneys seem to have confidence in the Ethiopian justice system. The judges are generally assigned to the court bench not because of their training and experience but in order to fulfill the country’s quota system. Given this, the court systems in Ethiopia are manned by inexperienced judges who have no desire to stay for a long time, and are widely known for being given court appointments that do not last more than six months. Most of the current judges seem to be using their experience to market themselves when later they become private attorneys or business consultants. No wonder why a number of current attorneys are quick to note that they have been judges.

Given this, the justice system in Ethiopia can be characterized by delays in dispensation and it lacks institutional capacity in both enforcement and the judiciary. In 2004, the Ethiopian Government was supported by the World Bank to enhance the effectiveness of law-making organizations and improve the effective delivery of justice. This could help achieve transparency and accountability through increased access to justice information so that court judgments and proclamations could be published. However, despite several revisions, the Ethiopian justice system has turned from bad to worse. As illustrated by the World Bank:

Some of the most crucial problems in the justice system included severe shortages of trained professionals and qualified personnel; lack of essential facilities in institutions of justice, the inability of law schools to produce competent lawyers in the desired number; outdated and inefficient methods and procedures of the system in delivering justice; court congestions and delays…and inefficient system of law enforcement (May, 3, 2010).

 Control of corruption: From an ethical point of view, corruption is an integral part of an ailing economy. It is reprehensible and socially undesirable because it fosters rewards for unproductive private and government employees. In addition, powerful interest groups use corruption to bribe government officials into making decisions in their favor and bypass their competitors. Though not visible, there are open claims by government officials and consultants that some government officials in Ethiopia are utilizing public power to fatten their pockets by capturing a large share of a nation’s income.  Actually, a number of state-owned companies in Ethiopia have been and are being auctioned nowadays at below market prices (See Desta, 2014).  Though too late, the government of the Federal Democratic Republic of Ethiopia (FDRE) is using its command and control strategies to combat this socially undesirable hideous acts which might hinder development and the proclaimed “good governance” endeavors. As a result, the FDRE has established the Federal Ethics and Anti-Corruption Commission of Ethiopia (FEACC) to investigate the various forms of rent-seeking endeavors.  Let us pray that it works.


Over the last decade, Ethiopia’s economy has flourished. From being labeled as a poor country during the Derge’s era until the present, Ethiopia has ascertained itself not only as a political stable country in Africa but is also an emerging powerhouse because it has undertaken rekindling strategies to strengthen export-performance through improved competition. A number of Ethiopian youngsters who do not seem to have a concern to pay 250 birr for a plate of lunch are very optimistic about the future of their country. This being observed, it is probable impossible that the now flourishing economy is not likely to be sustainable because it is resting on an unmanageable and ineffective government structural base.

In actuality, Ethiopia is governed under a centralist form of government though its adherents claim and give the impression that Ethiopia is guided under a democratic developmental state. The citizens of the country are not allowed to democratically elect their representatives. Some political cadres who barely have allegiance to the country are dragging the country into a bottomless grave. The country’s court system is engulfed with injustices and delays in dispensation and above all, it is short in its capacity for fair law enforcement and judicial process.  Thereby, it has created obstacles in the promotion and protection of human rights. What is more, though corruption or rent-seeking behavior is reprehensible and socially undesirable, being very rampant, it is ailing the country’s economy by undermining the income of the country and fostering rewards for unproductive private and government employees. Therefore, if some serious, innovative, economic ideas are not integrated into the governance structure, the government’s call for accountability and transparency is likely a moot issue. In short, if the Ethiopian government turns a deaf ear to the activities of the court system and the rampant corruption that is ailing its economy, the current flourishing economy is likely to become passé. It is sad to forecast that Ethiopia may not endure ethical, sustainable development (economic, social, and environmental) in the long run.      


Araia, Ghelawdewos (2013). Ethiopia: Democracy, Devolution of Power, and The Developmental State. New York: Institute of Development & Education for Africa (IDEA).

Desta, Asayehgn (2014). Economic Dependency and Stagnation to Developmental State. Essays on the Socio-Political and Economic Perspectives of Ethiopia. Trenton, New Jersey: The Red Sea Press.

F ederal Democratic Republic of Ethiopia (February 2005). Comprehensive Justice System Reform Program  BASELINE STUDY REPORT: Ministry of Capacity Building Justice System Reform Program Office.

Kaufmann, Daniel, Aart Kraay, and Nasimo Mastruzzi (2005).  Governance Matters IV: Governance Indicators for 1996-2004. World Bank, Washington, DC.  

Khan, Mushtaq H.  (August 2007). Governance, Economic Growth and Development since the 1960s, Economic &Social Affairs. DESA Working Paper No. 54 ST/ESA/2007/DWP/54.

World Bank, (April, 2015). Ethiopia Overview.  http:/worldbank.org/en/country/Ethiopia. Retrieved, August 10, 2015.

World Bank, (May 3, 2010)  “Reforming Ethiopia’s Justice System.” Retrieved, August 12, 2015.