Ethiopia Advised to Restructure Private Sector Policy, Work Toward Middle-Income Status

Ethiopia Advised to Restructure Private Sector Policy, Work Toward Middle-Income Status

According to a report by Business Day Live, Ethiopia’s economy is expected to show 10 percent growth in the fiscal year ending July 2013. Still, the world bank is advising the country to focus on making financial resources available for private industries and businesses. This strategy, the report noted, will take a bit of pressure off of Ethiopia’s agriculture sector.

The progression of sectors such as banking and telecommunications is limited as their economies are state controlled. As a result, 10 percent of Ethiopia’s GDP currently stems from industry economies, according to Business Day Live.

“For this country to continue to grow, I strongly believe industry has to take a much bigger role because there is no other country that I’m aware of, aside from these resource-rich countries, that can go to middle-income status with still 50% of GDP on agriculture,” Ethiopia’s world bank director Guang Z. Chen told Business Day Live.

He says that adjusting state policies that affect sectoral economies is imperative and will help influence positive economic stimulation. By world bank standards, middle-income nations are those with $1,025 of gross national income per capita. In 2011, the report states, Ethiopia’s per capita gross national income was a meager $370 in comparison. The world bank would like for the nation to achieve middle-income status by 2025.

“Making credit available for the private sector is certainly one area the government can do more on,” Chen added. “The trend that worries us is that while the public investment as a share of GDP is increasing, the private investment as a share of GDP is decreasing.”

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Despite a focus on increasing private industry credit and implementing flexible policy, necessary infrastructural projects that develop Ethiopia’s transport, energy and railway industries is eating away at the country’s annual output.

According to Business Day Live, of the estimated $33 billion national output, 19 percent went to state energy and transport improvement. In 2012, the world bank also calculated an 8 percent decline in private consumption — now down to 77 percent from 85 percent in 2007.

Chen sees Ethiopia gaining a financial push from Brazil, Russia, India, China and South Africa — known as the Brics countries.The report concluded that the Brics investment will help jump-start private industry growth and  aid the country in decreasing  agricultural reliance.