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Policy Brief - How they did it Vol. 1 Issue 2 - Ethiopia: Lessons from an experiment

28-Aug-2017

The recent “African Rising” narrative is detached from reality and lacks the perspective that growth should be underpinned by structural transformation. Ethiopia has sustained rapid economic growth since 2003, and has practiced industrial policies to achieve structural transformation. Embedded in structural transformation perspectives and based on a comparative review of three export-oriented and import-substitution industries, this brief discusses Ethiopia’s experiment with structural transformation and industrial policies. The Ethiopian experiment shows that structural transformation and industrial policies can work and thrive in low-income African countries such as Ethiopia. However, it also shows that structural transformation and catch-up are colossal challenges. The Ethiopian experiment reveals that industrial policies matter, and the state can and should play an activist developmental role to foster catch-up and structural transformation. Furthermore, performance and policy outcomes have been uneven, highlighting the importance for policymakers to have a comprehensive understanding of the dynamics and interaction among industrial structure, maximization of linkage effects, and politics/political economy. The experiment emphasizes policy learning, the vital role of learning-by-doing as the prime means of mastering policymaking, and policy independence as a key ingredient. The Ethiopian experiment suggests that structural transformation and industrial policy perspectives are principal points of departure for catch-up by African countries.

Keywords: Ethiopia, Africa, structural transformation, industrial policy, industrialization, policy learning, linkages, political economy

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