Country Session 4: Ethiopia

Chaired by Alemayehu Seyoum Taffesse (IFPRI and IGC), Country Session 4 was opened by Professor John Sutton (LSE) who highlighted the progress IGC has made with reforming the Ethiopian Investment Agency as part of a two-year engagement. Building on the Enterprise Map Project, Professor John Sutton described key accompanying reforms currently being implemented. The first key reform is to refocus attention on making large firms operational. A key statistic was that only 23% of firms with 10 or more employees that were granted licenses became operational last year, while raising this figure to 50% would lead to a doubling in the number of jobs created. The other important reforms being undertaken are recruiting and training a competent professional staff, and building a proactive and personal relationship with companies.

Douglas Gollin (University of Oxford and IGC) raised a puzzling feature of urbanisation particular to Sub Saharan African countries, which is that traditional forms of industrialisation have not accompanied this process. Rather, exports of primary products may play a role in driving this pattern. He tied this phenomenon to that of youth unemployment and underemployment in Sub Saharan Africa, and highlighted that high dependence on export resource rents is not conducive to generating employment. An important policy implication is that economic diversification may be needed to address this issue.

Pramila Krishnan (University of Cambridge and the IGC) went on to focus on discussing whether it is a valuable exercise to undertake an evaluation of the Technical and Vocational Education and Training (TVET) programme in Ethiopia. Using theory and evidence from other evaluations of vocational education programmes, she argued that there is little reason to expect returns to the TVET in Ethiopia, and that a better strategy would be to first explore whether there are indeed skill deficits in the youth labour force that deter firms from either entering or expanding the Ethiopian market, before pursuing an evaluation of the TVET.

Tsegay Gebrekidan Tekleselassie (University of Sussex) added to the discussion on youth unemployment with a thorough description of statistics and trends relating to the Ethiopian labour market. Of particular note, he highlighted that Ethiopia does not have a problem of unemployment; rather, it is that low unemployment is coupled with high underemployment and informal employment. Accordingly, he suggests that structural change towards building a stronger manufacturing sector is a long-term solution to unemployment.