CHAPTER FIVE

THE RURAL DEVELOPMENT POLICIES AND STRATEGIES OF ETHIOPIA

5.1. Goals of Rural Development Policy
Rural development policies are designed to improve the conditions under which rural people work
and live. The goals of policies are governed by what people desire, and the measures of policies by
what people think the government can and ought to do to bring about the desired change. This is the
theory of public policy. Changes are desired only when people do not like the way things are going.
Pressure for public action arises when people feel that they, individually, cannot bring about the
desired adjustments. They have in mind some „norm‟, some image of an ideal situation towards
which they strive. These norms become the goals of policy towards which objectives of specific
programmes are directed.
There are two dominant goals of economic policy; first, increasing the national income, and second,
improving the distribution of national income among the members of society. To achieve these,
following goals are to be attained.
i. Priority to agriculture and rural development, with a view to generate adequate productive
employment and eradication of poverty.
ii. Accelerating the growth rate of the economy with stable prices.
iii. Ensuring food and nutritional security for all, particularly the vulnerable sections of society.
iv. Providing the basic minimum services of safe drinking water, primary health care facilities,
universal primary education, shelter, and connectivity to all in a time bound manner.
v. Containing the growth rate of population.
vi. Ensuring environmental sustainability of the development process through social
mobilization and participation of people at all levels.
vii. Empowerment of women and socially disadvantaged groups.
viii. Promoting and developing people‟s participatory institutions like Local Governments,
cooperatives and self-help groups.
ix. Strengthening efforts to build self-reliance.
The above objectives, which seek to achieve „growth with equity‟, need to be seen in the context of
the following four important dimensions.
 Quality of life of the rural population
 Generation of productive employment
 Regional balance
 Self-reliance

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All these objectives seem to be worthwhile, and therefore deserve serious pursuit by policy makers.
However, to be of any use to society, these objectives should be translated into specific
programmes and projects that are manageable under the existing conditions. Many rural
development policies are complex combinations of various goals, different sets of means or
instruments, and are limited by various conditions. To understand such policies, we should divide
them into several programmes or projects. For each Programme, a clearly defined objective may be
designated, which a particular government agency should pursue. The programme measures can
then be identified and appraised as to whether they are appropriate and efficient in serving the
objective, and adapted to the conditions outside the influence of that particular programme. These
conditions are often the decisive factor determining whether or not a certain programme is
administratively feasible.
5.2. Agricultural Development Lead Industrialization (ADLI)
The agricultural development lead industrialization strategy insists that developing economies are
characterized by scarcity of capital and abundance of labor. So any rational and sustainable strategy
must focus in sectors which can make the intensive use of the abundant factor (land and labor) and
must make efficient and selective use of the scarce factor. The good candidate is agriculture, which
makes intensive and extensive use of land and labor and is the major saver of capital.
The application of modern agricultural technology will increase farm production and income. And
the level of increase in both output and income will need less resource in agriculture compared to
other sectors. This is so because of the fact that the shadow cost of land and especially labor which
is intensively used in agriculture is lower than capital. The increase in agricultural production will
stimulate agricultural input producing industries. Moreover, cheap and reliable supply of raw
material and food items will not keep real wages rate and cost of production down, stimulating
other sectors expansion.
So the increased supply of cheap agricultural food and raw material will effectively create the much
need capital to sponsor nonagricultural sector. But the problem of non-agricultural sectors
especially manufacturing is that it needs huge imports of machinery and some raw material from
foreign countries. But foreign exchange will be the major bottle neck on this side. Fortunately the
growing agriculture sector is where developing economies comparative advantage lays. So if they
want to improve their foreign exchange position there is no other sector which can provide the
maximum foreign exchange at least cost, compared to agriculture.
In short, the increase in agricultural production, export and income through technological and
institutional innovation will create a necessary condition for efficient expansion of other sectors and
structural transformation. And the development of each sector will create reciprocal forward and

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backward linkages. Over long time, given inelastic demand for food items and agricultural goods
and decreasing income elasticity of demand with income increase: the relative importance of both
service manufacturing will dominate agriculture in the long run. So the development of agriculture
needs to be processed in order to create a fertile ground for development of other sectors (especially
industrialization) in most cost effective and sustainable manner. This is a strategy commonly known
as the Agricultural Development Lead Industrialization (ADLI).
The focus of the strategy is to make the engine of the economic development on agriculture because
the fuel (resource) that is needed to initiate motion is less costly in agriculture. But other sectors
need to follow the lead of agriculture until their capacity is improved so they can take the lead by
themselves.
1. Is it possible to increase agricultural production?
2. Is it possible to create increasing demand for agricultural production?
3. Is it possible to create increasing demand for non-farm sector?
But in Ethiopian context two factors also need clear understanding. These are:
4. Is it possible to create productive employment for the increasing labor force in agriculture?
5. Is it possible to relay on static comparative advantage or do we need to think about dynamic
comparative advantage in terms of product cycle and technological gap?
The answer to these questions can‟t be the same everywhere; as one shoe can‟t fit all the foot, but
the logic behind these questions need to be explained at this point. Questionone is important
because given fixed land the only way we can increase output in sustainable manner is through
technological progress. But the implicit question is related to the fact if it is possible to replicate the
green revolution in countries like Ethiopia. But technological progress needs to be institutionalized,
because what is needed is attained in face high output in sustainable manner? Question two is
important because the agricultural demand is price inelastic means technological treadmill works
fast and harshly in agriculture. 1% increase in output will result more than 1% decline in price
means total revenue will decline when farmers adopt new technology. The only way out is if there
is increase in non-farm income to shift the demand curves upward continuously. Given low per
capital income, increase in income will result in tremendous increase in demand, which can
affectivity counter the effect of technological treadmill.
The agriculture sector has very weak backward linkage. This is because chemical fertilizers and
insecticides are very capital intensive so are not economic to produce them in domestic economy.
The little backward linkage that can be extorted into elementary farm implements can‟t be expected
to sponsor the industrialization process. So the forward linkage toward industries which produce
consumer goods using labor intensive technology must be strong, if structural transformation is

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going to be initiated and sustained. The fourth point is related to declining land-labor ratio and asks
if it is possible to initiate sustained output and market surplus increase from the very tiny land that
families must depend on. And this is related to the first question. But most importantly the fifth
question focus on the theoretical issue and application of comparative advantage.
Most of the successful stories of the 21st century was not only using their comparative advantage
but was also creating their own new comparative advantage in line with dynamic comparative
advantage theories of product cycle and technological gap theories. So it is logical question to ask
can we create our comparative advantage or comparative advantage is something we follow and
have no say on it?
5.3. Policy Within Agriculture
Any development effort which bypasses the poor will lead to raise instability, chaos and wars,
which can destroy the economic dynamics of any economy as observed in many African countries.
So the poor must benefit from any economic development and this can be done by using capital
intensive technological improvements at high potential areas and subsidize the development of
others which fail to benefit (bi-modal approach to rural development). But the lack of capital to
invest in mechanization and to pay subsidy for the poor will make such strategy basically
impractical. But an alternative strategy which augments the productive capacity of both labour and
land of the small scale farmers can increase agricultural production, and this increase in output
will directly benefit the farmers and indirectly the whole economy (uni-modal). So the strategy
focuses on uni-modal approach to agriculture and rural development.The agricultural strategies are
discussed below:
5.3.1. Land Policy
This strategy agrees that proper use of the scarce land can be made by granting the use and
inheritance right on land for all individuals who want to have a small scale agrarian life. The land
will be owned by the people and administrated by the state governments as representative of the
people. Moreover, whenever land is reclaimed for whatever purpose the users have the right to
demand compensation for the investment they made on the land. But also they will have the right
to demand alternative land or financial compensation for alternative livelihood. This will avoid the
concentration of holding among small rich farmers, will increase efficiency and will save the scarce
capital. At the same time, security of tenure will be also improved since farmers have the right to
demand compensation for their investment made on land. But additional measures also need to be
used to make the land more productive. These include the use of irrigation facilities mainly in
moisture stressed areas, application of proper natural resource management and the allocation of

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labor optimally on all kinds of land. The last point imply use of small scale farming in densely
populated areas but resettlement and leased access to private investors in areas with idle land.
5.3.2. Labor Policy
This implies labor policy have to deal with creating optimal allocation of labor on land. This is use
of small scale farming on densely populated areas, resettlement when possible and use of private
sector commercial farming on areas with low population density. After that the motivation to work
is created, its productivity need to be increased. The last point calls for generation and diffusion of
new technology.
The strategy assumes that “basically these days citizens engaged in agriculture do not think of the
existence of alternative jobs and they basically practice traditional farming methods inherited from
their ancestors. They are fully prepared to be engaged in agriculture. This preparedness is not only
because of absence of other alternatives but also love and appreciation of the profession, which has
been inherited from generation to generation, is not under estimateable. Therefore, the traditional
farmer possesses adequate interest to be engaged in agriculture. It is possible to assume that work
preparedness of the farmer is assured”. The main problem is retention of education youth in rural
areas.
5.3.3. Policy on new technology
The fact to use different approaches toward different zones with different ecology, population
density and way of living (pastoral and sedentary) is clearly understood on the strategy. The use of
land for its comparative advantage will have to be made possible by developing different extension
packages which can be applied in different areas by choice of the farmer. In this way specialization
and diversification can go side by side. But at the same time the policy states that in order to
mitigate the impact of risk and to enable efficient utilization of labour and land throughout the year,
farmers should also produce different crops. The idea is that farmers need to specialize in few
crops in given time. But given the fact that with change in season, the crop which can give a
maximum output (revenue) will normally change, this fact will enable them to driest their
production between different periods. But given wide ecological diversity within the country
different crops will be produced in given point of time and this will result on diversification at
national level.

This is clear from the following policy statement of the strategy:

“the packages we provide and the training we conduct to accelerate agricultural development should
include division of labor is mainly based on agro-ecological and other differences in which each
area focuses on activities that enhance production and growth through area specialization.
Regarding production of many outputs simultaneously, it is being practiced by producing different

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outputs simultaneously within the areas of specialization mentioned before. We follow the direction
of agricultural product diversification based on area specialization. Different packages that are
suitable for different areas, those that contain different activities to be performed simultaneously,
and those that are wide in their scope should be prepared; and our extension and agricultural skills
training programs will be based on them. It is a basic direction that enables us to bring about rapid
and sustainable growth by making each area produce the maximum development possible and by
utilizing our labor power and land continuously throughout the year”.
5.3.4. Settlement Policy
The policy clearly states that there are five wide ecological setting in the country. These are
drought prone areas, high potential areas, pastoral areas, densely populated areas but with fertile
land and enough moisture, and sparsely populated areas.
Special works needs to be done in drought prone areas to generate productive employment from
farm and off farm sector. But given the lower potential in other alternative, most of the work has to
be done in agriculture Proper management of water, proper use of land and other natural resources,
with introduction of new technology can solve the problem in the long run. But until then we have
to use drought relief and other welfare measures to achieve food security. And use of food for work
in environmental conservation practices expect for those who are not able to work can reduce the
dependence problem and can improve their livelihood in the long run. Another option on the table
is resettlement. However, resettlement programs can be effective if they:
 are done within the same region
 are with full consent of the individual
 are gradual starting with head
 approached in integrated manner
 full care is given for sustainable utilization of natural resource.
This will solve the food insecurity of the resettles directly. But the area that is left by re-settlers
will also benefit first due to decrease in labor land ratio and second due to remittance that can be
sent from re-settlers to their family. Moreover, the integration of agro-forestation (which can
generate income), livestock husbandry and other activist like expansion of honey bee can be
effective. But there is need to improve the local breed‟s productivity by crossbreeding, improve the
availability of vaccination and animal feeder. But there is also an urgent need for effective
utilization and management of the available water, with technical help of the government and
improved access to credit. These will enable farmers to produce goods that are highly demanded on
the market like cash crops and animal feeder from their fragmented and small land.
In high potential areas with adequate water supply the government focus will be on intensive
farming using rain water so to produce surplus products which are important for food security. But
private incentives for irrigation will be encouraged but they will not government focus. Note that
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livestock and natural resources management in addition to irrigation are needed in these places too.
But the urgency is not as drought prone areas. Moreover areas with small land but reliable water
the focus should be on cash crops but government will not force them then helping them technically
and financially to choose that path.
In pastoral areas the first emphasis should be on provision of water for both animal and human
population. This will reduce the concentration of animal population in few areas where there is
better access to water and grazing land currently. This in turn will cause associated natural resource
depletion observed in these areas. As the emphasis is on livestock production a livestock extension
system and animal health services must be provided explicitly recognizing the nomadic nature of
their livelihood. Moreover the use of elected and traditional leaders for coordinating sustainable
livelihood and sustainable natural resource management should be emphasized. Additionally the
production extension must fully recognize the local knowledge and must work harder to improve
the local knowledge.
However, real improvement in pastoral community quality of life on the long run needs permanent
settlements. The settlement of pastoral community to sedentary agriculture is hard business. This
is so because it does not only need change in location but also change in culture. But sedentary
agriculture among pastoral community needs irrigation facility which is expensive to build on low
lands. Additionally it needs to be not only with in the same region but also with in the same tribe.
In sparsely populated areas, the settlement of large scale private farms with integrated supply of
infrastructure and social services is needed to benefit from the high potential areas. And with
conscious understanding between sending and receiving regions interregional settlements can be
implemented in the long run, too.
5.3.5. Integrated development strategy
The rural and agricultural centered development will be integrated approach not only on injecting
new and more productive technology but also on promotion of human development, infrastructure
building, market development and others.
5.3.6. Reflection on policy within agriculture
The main interesting point of the labor policy is in its focus on „integrated‟ solution to problems of
low labor productivity.
On land policy, we saw that small scale farmers are more efficient than large scale farmers as they
will use intensively the most abundant factor (land and labor) and will save the scarce capital (in
line with uni-modal theory). So it is preferable in country like Ethiopia if land concentration is
avoided. So collective ownership of land will make sense if farmers are granted use right but not
transfer right (by sale). But the problem is related to.

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 1. Land improvement which is critically needed at current age of population explosion will
not happen unless some form of land security is created.
2. The land tenure institution which grants use right for adults is behind the population
explosion problem, itself.
3. Factor mobility of both land and labor is hindered and this will have series negative
consequence on economic efficiency
4. The fourth question is related to the fact that if farmers need any nanny or patron (state) to
tale them how they should live their life.
The strategies promotion of farming and technology development, which reflects the special
condition of the area, is a very interesting diversion from current practice. And will probably solve
the central problems of the current practice on technology dissemination and adoption. The main
problems of the extension package which are applied in Ethiopia are two kinds. First the
technology is provided as blanket technology to be applied in all areas although it does not work
everywhere.
Second, when we see the „integrated‟ nature of the rural development policy, it is hardly possible to
call it integrated. It is integrated in sense different problem are solved at the same time. But the
inter linkage effects are very different on different areas. As result the needed priorities are not the
same in all areas. In such reality providing similar social services in all areas does not make the
strategy an integrated strategy. If in some areas agriculture is productive but the problem is related
to health sector; but in other areas alternative employment and education is needed more than health
care, providing the same level of school and health service does not make it an integrated solution
than egalitarian solution (from crude sense).
5.3.7. Marketing policy and reflection on it
The strategy insists that „most agricultural products can be widely used for the producer‟s own
consumption. The producer sells what is left. Rather, under the real conditions of our country, the
far larger portion or our agricultural products is consumed by the producers themselves. Even the
majority of the farmers do not produce enough for their own consumption. Therefore, substantial
parts of the initial result of agricultural development will not need any market since it will be used
to fulfill the requirement of the producer‟s demand for consumption. Substantial amount of
additional agricultural product will be used this way. However, satisfying the producer‟s demand
for consumption alone cannot serve as a basis for rapid and sustainable agricultural development”.
But to improve farmers quality of life by consuming different goods and to purchase farm inputs
and implements which can augment his/her output he/she needs to produce behind his/her own
consumption needs. This way the farmer can contribute to the national development in addition to

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improvement of his own life to do so, he/she needs to produce goods which are needed in the
market. Currently production is for farmer‟s own consumption so the issue of quality is not serious
but it needs proper focusing. Moreover the marketing of some leading commodities like coffee is
important at international level, so proper attention should be given to marketing.
In long run, the strategy states that, the farmers will specialize and will create reciprocal demand for
each other. But in short and medium term the towns of the country must create the demand. And
given the low urbanization and per capital income, breaking in to international market will be
needed if the full potential of agriculture is to be realized. So agriculture production must be
domestic market lead in short run and international market lead, in medium and long run. So
production decision must be done by observing market demand first and the producer must have the
capacity to adopt his production pattern to very unstable international market. The farmer needs to
produce goods which generate high consumer value at a least cost and acceptable selection of
outputs that can be produced at acceptable quality, but also includes the use appropriate farm
management and post-harvest management like processing, packaging and marketing.
But to make sure that the farmer is producing to supply consumer value, the extension package
need to include all necessary inputs from production to post production and marketing activities,
which can generate him/her high income. If he/she is provided with this complete package he/she
will adopt the technology and will produce goods which possess a higher consumer value. “The
main thing here is that the research and extension system should be able to develop an attitude and
capacity leading to a market, especially international market-led agricultural development”.
Moreover, “establishing efficient marketing system which enables to maintain the quality and
competitiveness and improving the system continuously is important to ensure rapid and sustainable
agricultural development”.
An important element in the market development is the need for national standards based on
international standards (for those products which are new at international market, we can introduce
our own grade) which does not only increase market penetration capacity but it also reduces the
transaction cost of marketing. Moreover, the dissemination of marketing information and the
establishment of commodity exchange which facilitate spot and future (forward) markets are
critical.
But the establishment of service or general cooperative is given the higher priority on the strategy.
The strategy states that “if there are strong cooperatives in country, there can be a high rate of
agricultural development and growth and improvement of agricultural marketing system, whereas it
will not be an exaggeration to say high rate of agricultural development, growth and improvement
of agricultural marketing system is impossible without cooperatives”. This is related to consolidated

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sell to reduce marketing cost and high bargaining power of the farmer which can save them from
any exploitive middle man. But cooperatives need to be created by free will of the members to
solve their problem. There is need for financial, technical, managerial (through hired professionals)
and other support in addition to promotion of cooperative formation by persuasion. But there is
need to avoid political intervention by government official.
But the strategy calls for complementary than competitive role of private sector with cooperatives.
It states that in “saying that cooperatives will and have to play decisive role in our agricultural
marketing system does not mean that this will be done by them alone or that the private investors
will not have any key role in this respect. Rather, unless the key role of the private investors is
included, the system may not work at all because there are many holes that cannot be closed by the
cooperatives. This role may express itself in the form of retail and whole selling as well as in
collecting agricultural products and processing them in factories.” Although for efficient value
chain management cooperatives have to take the lead role, the private sector can also play its own
complementary role in retail and other miner activities. Moreover private sector can participate in
wholesale trade between cooperatives and final consumer or input producers and cooperatives. For
exported products the use of brand name and promotion by internationally proclaimed companies is
critical in order to enjoy the high price that come with branded product.
Reflection on marketing policy

The first problem of the marketing strategy is that it assumes a fairytale that the first increase in
output will be for home consumption that for market. Based on that assumption, the policy argues
that the first few round increases in output will not need any market development or market at all.
In real world of Ethiopia, first if there is subsistence farmer isolated from the market, it is an
exception than a norm. Second the increase in agricultural production is to be made by using
science based modern inputs which have to be bought in the market. Commercialization on input
side which by itself needs market development will also need commercialization on output side to
cover the financial needs of modern inputs. So technological progress or technological adoption and
market development can‟t be isolated from one another at any level.
The second short coming of the policy is related to grade and standards. If customer can
differentiate 40 to 45 grain qualities, how are you going to enforce 10 or 15 grades of grain? This is
like forcing all Ethiopian people to dress traditional cloth in order to attract foreigners. But people
have a much larger life than getting truest money beings a show case of a foreigner. In order to
encourage export of Teff you need grades which meet international standard but this have no real
relationship with domestic grades, how can you force such grades into the economy? If we know
there are 5 types of maize how are you going to convince me there are only 2 types? The right path
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was to understand the scientifically. This may lead to 40 or 45 grades, but over time introduce
HVY which have most of the necessary characteristics. If these grains can fetch higher price (given
they have all the good quality) and are cost effective (due to R & D done on them) they will be
accepted by both customer and producer. Over time few grains will be able to dominate all other
grain varieties and the economy will end up with few grains will be able to dominate all other grain
varieties and the economy will end up with few grains will be able to dominate all other grain
varieties and the economy will end up with few grades and standards. This is the pattern of grade
and standard formation followed on more developed economies. These economies started from
large number of grade and standards. But now we are trying to adopt such grades in to domestic
economy without considering the local reality. In short run export of grain can be done by using
international standards but you can‟t force it to domestic economy. It is neither needed nor
possible.
One cooperatives side, even though cooperatives are an institutional solution to some market
failures they are not a magic formula which corrects all market failures. The problems need to be
seen from the development of appropriate institutions by choosing from the different menu of
institutions than simply focusing on one institution. Second to create efficient cooperatives and to
make sure they are efficiently managed the existence of competition on all levels and voluntary
membership are necessary. But the strategy even though accepts voluntary membership it pushes
for complementary than competitive role by the private sector. But the efficiency of the
cooperatives is conditioned on the existence of competitive private sector to serve as check on their
inefficiency and vise verse.
5.3.8. Policies on NGO’s and community development, and reflection on it
The policy does not have any deep analysis about role of NGO (Civil society) in rural development.
It simply insists that the NGO (civil society) could be used in fund raising and implementing
projecting projects selected by kebele but which are behind their capacity. NGOs (civil societies)
have to fit themselves into the priority of the kebeles decision. They are assumed as instrument to
access funds and complement kebeles.
There is need to attract foreign investors to participate on agricultural production and marketing,
according to the strategy. This will enable us to benefit from their advantages related to market
access, agronomic knowledge and capital. Their resource and knowledge can be effectively used in
high potential areas with extensive ideal land to produce crops. Even in other areas their expertise
and resource can be used in production and export of horticulture and flowers, too. Although
domestic investor can possibly participate in these areas, they are in comparative disadvantage
compared to foreign investors. Furthermore, special training of workers of the private sector and

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direct extension of training given to farmers could also help the efficiency of the private sector and
direct extension of training given to farmers could also help the efficiency of the private sector.
Moreover, the trains must be able to establish their own enterprises. To do so that they will need
have access of finance, land and entrepreneur skill.
Moreover, vertical coordination of farming and marketing by using contract farming can improve
the market failure that farmers face in extension, credit, inputs, insurance and output market. And it
should be done with clear contractual agreement between both parties. “Even though the
relationship is only between the two independent parties, that is the farmer and the investor, the
government can play a major role in a way that will not violet the major principle. It can and
should make the two parties meet by looking for interested investors and coordinating farmers. It
can advise to make the contract keeps the benefits of both; it can prepare model contact for this
purpose. It must clarify for both parties the obligation of each one of them has according to the
contract and strengthen their readiness to implement the contract. If any one of the parties proves to
be a defaulter, it must make legal measures to be taken quickly. It must also make them have prior
understanding on this”.
Reflection:
The two important issues that need to be assessed are that the use of social capital and role of NGO.
Social capital and its importance for coordinating development are appreciated on pastoral areas
only. But we can‟t assume that social is to be found in pastoral areas only as there is large number
of social capital that can be used for development purpose on other areas, too. The second problem
is related to role of NGO and general civic society which is defined as additional source of finance
and safety net for the kebeles (their administrates). After kebele‟s made the decision of what to do
civic society are supposed to help them on areas which the kebeles are lacking capacity. This is like
wasting a valuable resource, when you made value oriented, professionals and flexible workers
under kebele officials, which are simply no more than lower level politicians! But we know that all
civic societies are not efficient compared to state. When you think about value orientation in
dynamic sense it is highly possible wage oriented individuals society performance could be needed
if necessary but can‟t define all civic society to be inefficient and put them in secondary role after
kebeles.

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