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Term Paper – Format, Examples and Writing Guide

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Definition:

Term paper is a type of academic writing assignment that is typically assigned to students at the end of a semester or term. It is usually a research-based paper that is meant to demonstrate the student’s understanding of a particular topic, as well as their ability to analyze and synthesize information from various sources.

Term papers are usually longer than other types of academic writing assignments and can range anywhere from 5 to 20 pages or more, depending on the level of study and the specific requirements of the assignment. They often require extensive research and the use of a variety of sources, including books, articles, and other academic publications.

Term Paper Format

The format of a term paper may vary depending on the specific requirements of your professor or institution. However, a typical term paper usually consists of the following sections:

• Title page: This should include the title of your paper, your name, the course name and number, your instructor’s name, and the date.
• Abstract : This is a brief summary of your paper, usually no more than 250 words. It should provide an overview of your topic, the research question or hypothesis, your methodology, and your main findings or conclusions.
• Introduction : This section should introduce your topic and provide background information on the subject. You should also state your research question or hypothesis and explain the importance of your research.
• Literature review : This section should review the existing literature on your topic. You should summarize the key findings and arguments made by other scholars and identify any gaps in the literature that your research aims to address.
• Methodology: This section should describe the methods you used to collect and analyze your data. You should explain your research design, sampling strategy, data collection methods, and data analysis techniques.
• Results : This section should present your findings. You can use tables, graphs, and charts to illustrate your data.
• Discussion : This section should interpret your findings and explain what they mean in relation to your research question or hypothesis. You should also discuss any limitations of your study and suggest areas for future research.
• Conclusion : This section should summarize your main findings and conclusions. You should also restate the importance of your research and its implications for the field.
• References : This section should list all the sources you cited in your paper using a specific citation style (e.g., APA, MLA, Chicago).
• Appendices : This section should include any additional materials that are relevant to your study but not essential to your main argument (e.g., survey questions, interview transcripts).

Structure of Term Paper

Here’s an example structure for a term paper:

I. Introduction

A. Background information on the topic

B. Thesis statement

II. Literature Review

A. Overview of current literature on the topic

B. Discussion of key themes and findings from literature

C. Identification of gaps in current literature

III. Methodology

A. Description of research design

B. Discussion of data collection methods

C. Explanation of data analysis techniques

IV. Results

A. Presentation of findings

B. Analysis and interpretation of results

C. Comparison of results with previous studies

V. Discussion

A. Summary of key findings

B. Explanation of how results address the research questions

C. Implications of results for the field

VI. Conclusion

A. Recap of key points

B. Significance of findings

C. Future directions for research

VII. References

A. List of sources cited in the paper

How to Write Term Paper

Here are some steps to help you write a term paper:

• Choose a topic: Choose a topic that interests you and is relevant to your course. If your professor has assigned a topic, make sure you understand it and clarify any doubts before you start.
• Research : Conduct research on your topic by gathering information from various sources such as books, academic journals, and online resources. Take notes and organize your information systematically.
• Create an outline : Create an outline of your term paper by arranging your ideas and information in a logical sequence. Your outline should include an introduction, body paragraphs, and a conclusion.
• Write a thesis statement: Write a clear and concise thesis statement that states the main idea of your paper. Your thesis statement should be included in your introduction.
• Write the introduction: The introduction should grab the reader’s attention, provide background information on your topic, and introduce your thesis statement.
• Write the body : The body of your paper should provide supporting evidence for your thesis statement. Use your research to provide details and examples to support your argument. Make sure to organize your ideas logically and use transition words to connect paragraphs.
• Write the conclusion : The conclusion should summarize your main points and restate your thesis statement. Avoid introducing new information in the conclusion.
• Edit and proofread: Edit and proofread your term paper carefully to ensure that it is free of errors and flows smoothly. Check for grammar, spelling, and punctuation errors.
• Format and cite your sources: Follow the formatting guidelines provided by your professor and cite your sources properly using the appropriate citation style.
• Submit your paper : Submit your paper on time and according to the instructions provided by your professor.

Term Paper Example

Here’s an example of a term paper:

Title : The Role of Artificial Intelligence in Cybersecurity

As the world becomes more digitally interconnected, cybersecurity threats are increasing in frequency and sophistication. Traditional security measures are no longer enough to protect against these threats. This paper explores the role of artificial intelligence (AI) in cybersecurity, including how AI can be used to detect and respond to threats in real-time, the challenges of implementing AI in cybersecurity, and the potential ethical implications of AI-powered security systems. The paper concludes with recommendations for organizations looking to integrate AI into their cybersecurity strategies.

Introduction :

The increasing number of cybersecurity threats in recent years has led to a growing interest in the potential of artificial intelligence (AI) to improve cybersecurity. AI has the ability to analyze vast amounts of data and identify patterns and anomalies that may indicate a security breach. Additionally, AI can automate responses to threats, allowing for faster and more effective mitigation of security incidents. However, there are also challenges associated with implementing AI in cybersecurity, such as the need for large amounts of high-quality data, the potential for AI systems to make mistakes, and the ethical considerations surrounding the use of AI in security.

Literature Review:

This section of the paper reviews existing research on the use of AI in cybersecurity. It begins by discussing the types of AI techniques used in cybersecurity, including machine learning, natural language processing, and neural networks. The literature review then explores the advantages of using AI in cybersecurity, such as its ability to detect previously unknown threats and its potential to reduce the workload of security analysts. However, the review also highlights some of the challenges associated with implementing AI in cybersecurity, such as the need for high-quality training data and the potential for AI systems to be fooled by sophisticated attacks.

Methodology :

To better understand the challenges and opportunities associated with using AI in cybersecurity, this paper conducted a survey of cybersecurity professionals working in a variety of industries. The survey included questions about the types of AI techniques used in their organizations, the challenges they faced when implementing AI in cybersecurity, and their perceptions of the ethical implications of using AI in security.

The results of the survey showed that while many organizations are interested in using AI in cybersecurity, they face several challenges when implementing these systems. These challenges include the need for high-quality training data, the potential for AI systems to be fooled by sophisticated attacks, and the difficulty of integrating AI with existing security systems. Additionally, many respondents expressed concerns about the ethical implications of using AI in security, such as the potential for AI to be biased or to make decisions that are harmful to individuals or society as a whole.

Discussion :

Based on the results of the survey and the existing literature, this paper discusses the potential benefits and risks of using AI in cybersecurity. It also provides recommendations for organizations looking to integrate AI into their security strategies, such as the need to prioritize data quality and to ensure that AI systems are transparent and accountable.

Conclusion :

While there are challenges associated with implementing AI in cybersecurity, the potential benefits of using these systems are significant. AI can help organizations detect and respond to threats more quickly and effectively, reducing the risk of security breaches. However, it is important for organizations to be aware of the potential ethical implications of using AI in security and to take steps to ensure that these systems are transparent and accountable.

References:

• Alkhaldi, S., Al-Daraiseh, A., & Lutfiyya, H. (2019). A Survey on Artificial Intelligence Techniques in Cyber Security. Journal of Information Security, 10(03), 191-207.
• Gartner. (2019). Gartner Top 10 Strategic Technology Trends for 2020. Retrieved from https://www.gartner.com/smarterwithgartner/gartner-top-10-strategic-technology-trends-for-2020/
• Kshetri, N. (2018). Blockchain’s roles in meeting key supply chain management objectives. International Journal of Information Management, 39, 80-89.
• Lipton, Z. C. (2018). The mythos of model interpretability. arXiv preprint arXiv:1606.03490.
• Schneier, B. (2019). Click Here to Kill Everybody: Security and Survival in a Hyper-Connected World. WW Norton & Company.
• Wahab, M. A., Rahman, M. S., & Islam, M. R. (2020). A Survey on AI Techniques in Cybersecurity. International Journal of Scientific & Engineering Research, 11(2), 22-27.

When to Write Term Paper

A term paper is usually a lengthy research paper that is assigned to students at the end of a term or semester. There are several situations when writing a term paper may be required, including:

• As a course requirement: In most cases, a term paper is required as part of the coursework for a particular course. It may be assigned by the instructor as a way of assessing the student’s understanding of the course material.
• To explore a specific topic : A term paper can be an excellent opportunity for students to explore a specific topic of interest in-depth. It allows them to conduct extensive research on the topic and develop their understanding of it.
• To develop critical thinking skills : Writing a term paper requires students to engage in critical thinking and analysis. It helps them to develop their ability to evaluate and interpret information, as well as to present their ideas in a clear and coherent manner.
• To prepare for future academic or professional pursuits: Writing a term paper can be an excellent way for students to prepare for future academic or professional pursuits. It can help them to develop the research and writing skills necessary for success in higher education or in a professional career.

Purpose of Term Paper

The main purposes of a term paper are:

• Demonstrate mastery of a subject: A term paper provides an opportunity for students to showcase their knowledge and understanding of a particular subject. It requires students to research and analyze the topic, and then present their findings in a clear and organized manner.
• Develop critical thinking skills: Writing a term paper requires students to think critically about their subject matter, analyzing various sources and viewpoints, and evaluating evidence to support their arguments.
• Improve writing skills : Writing a term paper helps students improve their writing skills, including organization, clarity, and coherence. It also requires them to follow specific formatting and citation guidelines, which can be valuable skills for future academic and professional endeavors.
• Contribute to academic discourse : A well-written term paper can contribute to academic discourse by presenting new insights, ideas, and arguments that add to the existing body of knowledge on a particular topic.
• Prepare for future research : Writing a term paper can help prepare students for future research, by teaching them how to conduct a literature review, evaluate sources, and formulate research questions and hypotheses. It can also help them develop research skills that they can apply in future academic or professional endeavors.

Advantages of Term Paper

There are several advantages of writing a term paper, including:

• In-depth exploration: Writing a term paper allows you to delve deeper into a specific topic, allowing you to gain a more comprehensive understanding of the subject matter.
• Improved writing skills: Writing a term paper involves extensive research, critical thinking, and the organization of ideas into a cohesive written document. As a result, writing a term paper can improve your writing skills significantly.
• Demonstration of knowledge: A well-written term paper demonstrates your knowledge and understanding of the subject matter, which can be beneficial for academic or professional purposes.
• Development of research skills : Writing a term paper requires conducting thorough research, analyzing data, and synthesizing information from various sources. This process can help you develop essential research skills that can be applied in many other areas.
• Enhancement of critical thinking : Writing a term paper encourages you to think critically, evaluate information, and develop well-supported arguments. These skills can be useful in many areas of life, including personal and professional decision-making.
• Preparation for further academic work : Writing a term paper is excellent preparation for more extensive academic projects, such as a thesis or dissertation.

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Everything You Need to Know to Write an A+ Term Paper

Last Updated: March 4, 2024 Fact Checked

Sample Term Papers

Researching & outlining.

• Drafting Your Paper
• Revising Your Paper

Expert Q&A

This article was co-authored by Matthew Snipp, PhD and by wikiHow staff writer, Raven Minyard, BA . C. Matthew Snipp is the Burnet C. and Mildred Finley Wohlford Professor of Humanities and Sciences in the Department of Sociology at Stanford University. He is also the Director for the Institute for Research in the Social Science’s Secure Data Center. He has been a Research Fellow at the U.S. Bureau of the Census and a Fellow at the Center for Advanced Study in the Behavioral Sciences. He has published 3 books and over 70 articles and book chapters on demography, economic development, poverty and unemployment. He is also currently serving on the National Institute of Child Health and Development’s Population Science Subcommittee. He holds a Ph.D. in Sociology from the University of Wisconsin—Madison. There are 13 references cited in this article, which can be found at the bottom of the page. This article has been fact-checked, ensuring the accuracy of any cited facts and confirming the authority of its sources. This article has been viewed 2,234,324 times.

A term paper is a written assignment given to students at the end of a course to gauge their understanding of the material. Term papers typically count for a good percentage of your overall grade, so of course, you’ll want to write the best paper possible. Luckily, we’ve got you covered. In this article, we’ll teach you everything you need to know to write an A+ term paper, from researching and outlining to drafting and revising.

Quick Steps to Write a Term Paper

• Hook your readers with an interesting and informative intro paragraph. State your thesis and your main points.
• Support your thesis by providing quotes and evidence that back your claim in your body paragraphs.
• Summarize your main points and leave your readers with a thought-provoking question in your conclusion.

• Think of your term paper as the bridge between what you’ve learned in class and how you apply that knowledge to real-world topics.
• For example, a history term paper may require you to explore the consequences of a significant historical event, like the Civil War. An environmental science class, on the other hand, may have you examine the effects of climate change on a certain region.
• Your guidelines should tell you the paper’s word count and formatting style, like whether to use in-text citations or footnotes and whether to use single- or double-spacing. If these things aren’t specified, be sure to reach out to your instructor.

• Make sure your topic isn’t too broad. For example, if you want to write about Shakespeare’s work, first narrow it down to a specific play, like Macbeth , then choose something even more specific like Lady Macbeth’s role in the plot.
• If the topic is already chosen for you, explore unique angles that can set your content and information apart from the more obvious approaches many others will probably take. [3] X Research source
• Try not to have a specific outcome in mind, as this will close you off to new ideas and avenues of thinking. Rather than trying to mold your research to fit your desired outcome, allow the outcome to reflect a genuine analysis of the discoveries you made. Ask yourself questions throughout the process and be open to having your beliefs challenged.
• Reading other people's comments, opinions, and entries on a topic can often help you to refine your own, especially where they comment that "further research" is required or where they posit challenging questions but leave them unanswered.

• For example, if you’re writing a term paper about Macbeth , your primary source would be the play itself. Then, look for other research papers and analyses written by academics and scholars to understand how they interpret the text.

• For example, if you’re writing a paper about Lady Macbeth, your thesis could be something like “Shakespeare’s characterization of Lady Macbeth reveals how desire for power can control someone’s life.”
• Remember, your research and thesis development doesn’t stop here. As you continue working through both the research and writing, you may want to make changes that align with the ideas forming in your mind and the discoveries you continue to unearth.
• On the other hand, don’t keep looking for new ideas and angles for fear of feeling confined. At some point, you’re going to have to say enough is enough and make your point. You may have other opportunities to explore these questions in future studies, but for now, remember your term paper has a finite word length and an approaching due date!

• Abstract: An abstract is a concise summary of your paper that informs readers of your topic, its significance, and the key points you’ll explore. It must stand on its own and make sense without referencing outside sources or your actual paper.
• Introduction: The introduction establishes the main idea of your paper and directly states the thesis. Begin your introduction with an attention-grabbing sentence to intrigue your readers, and provide any necessary background information to establish your paper’s purpose and direction.
• Body paragraphs: Each body paragraph focuses on a different argument supporting your thesis. List specific evidence from your sources to back up your arguments. Provide detailed information about your topic to enhance your readers’ understanding. In your outline, write down the main ideas for each body paragraph and any outstanding questions or points you’re not yet sure about.
• Results: Depending on the type of term paper you’re writing, your results may be incorporated into your body paragraphs or conclusion. These are the insights that your research led you to. Here you can discuss how your perspective and understanding of your topic shifted throughout your writing process.
• Conclusion: Your conclusion summarizes your argument and findings. You may restate your thesis and major points as you wrap up your paper.

Drafting Your Term Paper

• Writing an introduction can be challenging, but don’t get too caught up on it. As you write the rest of your paper, your arguments might change and develop, so you’ll likely need to rewrite your intro at the end, anyway. Writing your intro is simply a means of getting started and you can always revise it later. [10] X Trustworthy Source PubMed Central Journal archive from the U.S. National Institutes of Health Go to source
• Be sure to define any words your readers might not understand. For example, words like “globalization” have many different meanings depending on context, and it’s important to state which ones you’ll be using as part of your introductory paragraph.

• Try to relate the subject of the essay (say, Plato’s Symposium ) to a tangentially related issue you happen to know something about (say, the growing trend of free-wheeling hookups in frat parties). Slowly bring the paragraph around to your actual subject and make a few generalizations about why this aspect of the book/subject is so fascinating and worthy of study (such as how different the expectations for physical intimacy were then compared to now).

• You can also reflect on your own experience of researching and writing your term paper. Discuss how your understanding of your topic evolved and any unexpected findings you came across.

• While peppering quotes throughout your text is a good way to help make your point, don’t overdo it. If you use too many quotes, you’re basically allowing other authors to make the point and write the paper for you. When you do use a quote, be sure to explain why it is relevant in your own words.
• Try to sort out your bibliography at the beginning of your writing process to avoid having a last-minute scramble. When you have all the information beforehand (like the source’s title, author, publication date, etc.), it’s easier to plug them into the correct format.

Revising & Finalizing Your Term Paper

• Trade in weak “to-be” verbs for stronger “action” verbs. For example: “I was writing my term paper” becomes “I wrote my term paper.”

• It’s extremely important to proofread your term paper. If your writing is full of mistakes, your instructor will assume you didn’t put much effort into your paper. If you have too many errors, your message will be lost in the confusion of trying to understand what you’ve written.

• If you add or change information to make things clearer for your readers, it’s a good idea to look over your paper one more time to catch any new typos that may have come up in the process.

• The best essays are like grass court tennis—the argument should flow in a "rally" style, building persuasively to the conclusion. Thanks Helpful 1 Not Helpful 0
• If you get stuck, consider giving your professor a visit. Whether you're still struggling for a thesis or you want to go over your conclusion, most instructors are delighted to help and they'll remember your initiative when grading time rolls around. Thanks Helpful 0 Not Helpful 1
• At least 2 hours for 3-5 pages.
• At least 4 hours for 8-10 pages.
• At least 6 hours for 12-15 pages.
• Double those hours if you haven't done any homework and you haven't attended class.
• For papers that are primarily research-based, add about two hours to those times (although you'll need to know how to research quickly and effectively, beyond the purview of this brief guide).

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• ↑ https://www.binghamton.edu/counseling/self-help/term-paper.html
• ↑ Matthew Snipp, PhD. Research Fellow, U.S. Bureau of the Census. Expert Interview. 26 March 2020.
• ↑ https://emory.libanswers.com/faq/44525
• ↑ https://writing.wisc.edu/handbook/assignments/planresearchpaper/
• ↑ https://owl.purdue.edu/owl/general_writing/the_writing_process/thesis_statement_tips.html
• ↑ https://libguides.usc.edu/writingguide/outline
• ↑ https://gallaudet.edu/student-success/tutorial-center/english-center/writing/guide-to-writing-introductions-and-conclusions/
• ↑ https://www.ncbi.nlm.nih.gov/pubmed/26731827
• ↑ https://writing.wisc.edu/handbook/assignments/writing-an-abstract-for-your-research-paper/
• ↑ https://www.ivcc.edu/stylesite/Essay_Title.pdf
• ↑ https://www.uni-flensburg.de/fileadmin/content/institute/anglistik/dokumente/downloads/how-to-write-a-term-paper-daewes.pdf
• ↑ https://library.sacredheart.edu/c.php?g=29803&p=185937
• ↑ https://www.cornerstone.edu/blog-post/six-steps-to-really-edit-your-paper/

About This Article

If you need to write a term paper, choose your topic, then start researching that topic. Use your research to craft a thesis statement which states the main idea of your paper, then organize all of your facts into an outline that supports your thesis. Once you start writing, state your thesis in the first paragraph, then use the body of the paper to present the points that support your argument. End the paper with a strong conclusion that restates your thesis. For tips on improving your term paper through active voice, read on! Did this summary help you? Yes No

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Least Developed Countries: Ethiopia, Term Paper Example

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Words: 2016

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Introduction 

Ethiopia is Africa’s oldest nation, an ancient kingdom whose history goes back at least to the 8 th century B.C.E. The kingdoms that arose during its early history, the Axumite, began chain of successor kingdoms whose rule remained uninterrupted until modern times. Historically, Ethiopia has enjoyed freedom from colonial rule, unlike other countries in Africa, except for a short Italian occupation from 1936 until 1941 (CIA, 2010). Throughout its long history, Ethiopia has had its share of political strife and has defended its borders from multiple invaders.  Yet, throughout it all, it has maintained its unique culture and ancient traditions. Ancient stone cities, such as the giant ancient city of Meroe, and giant stone obelisks still stand to attest to the ancient history and past glories of Ethiopia (Imperial Ethiopia, 2010). Ethiopia is home to two unique forms of religion, the Ethiopian Orthodox Church and the Felasha Jewish communities (Imperial Ethiopia, 2010), and is thought to be home of major crops like coffee, grain sorghum and castor bean (CIA, 2010).

Situated in the northern east coast of Africa, in the African Horn, Ethiopia covers a vast tract of land that has many unique geologic features, most notably the Great Rift Valley, an area of high tectonic and volcanic activity. It is also the headwaters of the Blue Nile. Within its boundaries are vast deserts, lush green river valleys, and high forested mountains. Its geography has influenced the country in many ways, both good and bad. Currently, there are many land areas that are endangered due to desertification, and this has caused a massive amount of poverty and malnutrition. Desertification is the process by which arable land is turned to desert due to drought and overgrazing, which causes the top soil to be blown away and thus be inhospitable to vegetation . Other current environmental issues include deforestation, overgrazing, soil erosion, and drought. Poor water-management due to water-intensive farming has also caused water shortages (CIA, 2010).

As a third world, underdeveloped country, Ethiopia has its share of problems. However, its ancient history and colorful culture make it a unique feature in the African landscape. This religiously and linguistically divers country has a proud people from varying ethnicities that has occasionally caused it internal strife. However, change is afoot in Ethiopia, which has recently seen a switch to democracy and is slowly changing its cultural view and treatment of women. From ancient wonder to modern tragedy, the people of Ethiopia continue to survive in their sometimes harsh and always beautiful ancestral lands.

Demographics

Ethiopia has a large population that continues to grow, by 3.2% as of 2010, due to its high fertility rate. However, it is a young population due to to killers such as AIDS, which over 2% of the population is currently living with, and diseases due to malnutrition and hunger.  Poor education has led to less than half of the adult population being literate. Poverty is a major problem in Ethiopia, where almost 39% of the population lives well below the poverty line.

Table 1: Population statistics from cia.gov, 2010.

Only 2.7% of the population is currently over 65 and the average life expectancy for an Ethiopian is only 55.7  years. The birth rate is double the death rate so despite the harshness of life, the Ethiopian population continues to grow, putting further stress on the already limited natural resources.

Table 2: Age statistics of Ethiopia from cia.gov, 2010.

Since ancient times, Ethiopia has been ruled by a series of kings from ancient lineages. The Lineage of the Solomonic dynasty, for example, dates back to 1268 (Imperial Ethiopia, 2000). Haile Selassie was a modern Ethiopian emperor who could trace his roots back to the beginning of the ancient Solomonic dynasty. However, in 1974, 33 years after Selassie had deposed of the Italians, he was overthrown in a military coup by a socialist regime known as the Derg (CIA, 2010). In 1991, after decades of bloody strife and devastating drought, the regime was overthrown by the Ethiopian People’s Revolutionary Democratic Front (EPRDF, 2010). By 1994, the country had established a constitution and was officially a democracy.

Today the country is officially known the Federal Democratic Republic of Ethiopia and is a federal republic (CIA, 2010). The legal system of Ethiopia is officially based on civil law. There are two types of legislative elections in Ethiopia, woreda (district) and kebelle (village or local). In 2005, these elections were suspended by the regime until 2008. This was a blow to the country’s democracy. Rural villages see the kebelle and woreda elections as the most direct experience of democracy, and when the elections were suspended, it lessened their faith in the democratic system.

Both national and regional courts are located across the country. There are three branches of government, a legislative branch, an executive branch and a judicial branch. All Ethiopians over the age of 18, men and women, have the right to vote in its democratic elections.  Presidents are voted into office on six year terms with a maximum of two terms possible. The country has over 10 recognized political parties that vie for control of the government.  Example of Ethiopian political parties include the Afar National Democracy Party (ANDP), the Argoba Peoples Democratic Organization (APDO), the and the Somali Democratic Forces (SODAF). The party currently in control is the Ethiopian People’s Revolutionary Democratic Front (EPRDF) which is headed by Prime Minister Meles Zenawi (Smith, 2007.)”

Religion and Politics

Ethiopia is a highly religious country. On the Peace Corps website, volunteers are told to expect to witness prayers at public gatherings an meetings, as there is generally now a separation of church and state in Ethiopia (Peace Corps, 2010). Most of the population is part of the Ethiopian Orthodox Church. This sect of Christianity has remained unchanged be developments in the Catholic church as it severed ties with Rome prior to the 11 th century AD. Thus, it practices a unique form of Christianity that has many practices related to ancient Judaism. A unique tradition in the Ethiopian Orthodox church is the veneration for the Ark of the Covenant, a facsimile of which is featured in every church (Imperial Ethiopia, 2000).

The next largest Ethiopian religious sect is Islam.  40% of the nation is Muslims and are of the Sunnis sect (CIA, 2010). There is also a a number of small Jewish communities in Ethiopia, known as the Felasha Jews (Imperial Ethiopia, 2000).

Table 3: Major religions of Ethiopica, cia.gov, 2010.

In her 2007 report to the United States Institute for Peace, Laura Smith notes that 2006 brought rising religious tensions in the country, mostly between people of the Ethiopian Orthodox church and the Muslim community. Historically, Muslims have always been neglected by the government, which was strictly Ethiopian Orthodox Christianity. Since 1991, religious identity has changed since political parties have started to develop with religious connections and this developed with increasing conflict (Smith, 2007). Smith (2007) also notes that “it is likely that at the local level religious identity will continue to be a critical indicator of the success of the democratic transition process.”

Ethnic-Cultural Divisions

One of the major conflicts of the area is a border dispute with the country of Eritrea to  its north. Eritrea is a Muslim country and occupies the thin strip of land that separates Ethiopia from the Red Sea and thus, along with Somalia, keeps it landlocked. “Relations between Ethiopia and Eritrea have deteriorate in certain respects since the Ethiopian elections. The deadlock over border demarcation remains, despite threats and efforts at talks by the Ethiopia-Eritrea Boundary Commission (EEBC) and various international witnesses to the 2000 Algiers Agreement, which brought the war to an end.

Within the country a major concern is the issue of human rights as deserving of a Democratic nation. The federal police are known to use mass detentions and security to forces to punish those who oppose the current regime (Smith, 2007).  Smith writes that after the elections of 2005, “The opposition party leadership in the OFDM has changed repeatedly that security forces are targeting Oromo citizens, carrying out killings and illegal detentions in Weest Wellega zone and elsewhere.” There are a number of ethnic groups within the Ethiopian society and clashes between them and the dominate regime because of politics and religion continues to be a major source of violence and human rights issues in Ethiopia (Smith, 2007).

Table 4: Ethiopia’s ethnic groups, cia.gov, 2010.

The different ethnic and cultural groups within the country speak a number of traditional languages besides Arabic and English which are also taught in schools. A lack of resources has contributed to the distrust and conflict that has broken out between Ethiopia’s various cultural groups.

Table 5: Languages spoken in Ethiopia, cia.gov, 2010.

Women and Development

Women have a very distinct cultural role in traditional Ethiopian society. Especially in rural communities, woman are expected to “cook, clean and do laundry (Peace Corps, 2010).” However, that role is beginning to change as Ethiopian woman make progress in gaining equality in Ethiopian society. In 1993, The National Policy on Women was formulated, “aimed to create appropriate structures within government offices and institutions to establish equitable and gender-sensitive public policies (EthioEmbassy, 1998).” Until the 1990’s, women’s affairs had not ever officially been addressed by the Ethiopian government.

While women have traditionally played an important part in Ethiopian society and economy, their efforts were not appreciated and they have been denied their fair share of the wealth. “The democratic process is able to grow and develop effectively when all people are given equal encouragement to exercise their democratic rights, and when women can experience the benefits of their labor on an equal basis with men (Ethio Embassy, 1998).” While strides towards equality have been made, Ethiopia still has a long way to go towards women’s rights.

As violence and terrorism continue in Ethiopia (Smith, 2007) there is uncertainty as to whether or not its future will be peaceful.  In order for the fledgling democracy to remain free, “civil society and the private press should be supported with resources and international pressure (Smith, 2007).” Continuing conflicts with Somalia and Eritrea will only bring violence to the region. However, a different outcome, according to Smith, is also possible. She writes that (2007) “Ethiopia has a real opportunity to be a force for peace in the region, and it should be encouraged to use its powerful position to this end.” Ethiopia has a rich history, colorful culture and a strong sense of nationality that will, hopefully, ensure its survival and its movement from a third world country to a developing one.

“Ancient Ethiopia” (2009) The Ancient Web Web. Retrieved 4 November 2010 from http://www.theancientweb.com/explore/content.aspx?content_id=10

“Crown Council of Ethiopia” (2000) Imperial Ethiopia Web. Retrieved 4 November 2010 from http://www.imperialethiopia.org/religions.htm

“Diversity and Cross-Cultural Issues in Ethiopia” Peace Corps Journals 25 July, 2010 . Web. Retrieved 4 November 2010 from http://www.peacecorpswiki.org/Diversity_and_cross-cultural_issues_in_Ethiopia

“Ethiopia” (October 27, 2010) CIA World Factbook  Web. Retrieved 4 November 2010 from https://www.cia.gov/library/publications/the-world-factbook/geos/et.html

Smith, Laura (August 2007) United States Institute of Peace Web. Retrieved 4 November 2010 from http://www.usip.org/files/resources/sr192.pdf

“Women in Ethiopia: National Policy on Ethiopian Women” (1998) Ethio Embassy Web. Retrieved 4 November 2010 from http://www.ethioembassy.org.uk/fact%20file/a-z/women-1.htm

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39 The Private Sector in Ethiopia’s Transformation

Mulu Gebreeyesus, PhD, is currently a senior fellow at the Ethiopian Development Research Institute. He was a research fellow at the United Nations University (UNU- MERIT), Maastricht, the Netherlands. He has published widely in the field of development economics, particularly on trade opening and enterprise performance, industrial policy, small businesses dynamics, and the emergence of non-traditional exports. Gebreeyesus obtained his PhD in economics from the University of Gothenburg, Sweden in 2006.

• Published: 11 February 2019
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This chapter examines private-sector development in Ethiopia, focusing on the situation since the incumbent government took power in 1991 and private-sector development became an integral part of Ethiopia’s economic development strategy. Several private entrepreneurs and enterprises have emerged since the reform and are now playing a critical role in the economic development of the country. However, the private sector has not yet made strong inroads into the manufacturing sector and the export market, which are perceived as crucial for industrialization and structural transformation. This chapter thus also seeks to highlight the key constraints impeding private-sector participation in these sectors and to suggest pathways to resolve these challenges.

39.1 Introduction

This chapter examines the development and role of the private sector 1 in the economic structural transformation of Ethiopia. Since the incumbent government took power in 1991, private-sector development has become an integral part of Ethiopia’s economic development strategy. The approach to private-sector development in Ethiopia during this period can be divided into two phases: the reform phase (1991–2001) and the post-2001 period. 2 At the heart of the differences in policy approaches between these two phases is the relationship between state and business and their respective roles. In the reform phase, the private sector was seen as ensuring economic growth and poverty reduction while the state provided the enabling environment. Many market-economy oriented policy reforms were introduced revitalizing the reentry of the private sector but at a slow pace (see Chapter 35 ).

In 2002–3, the government adopted industrial development strategy (IDS) and introduced the language of ‘developmental state’ as its policy principle regarding the state-business relationship. The government has made extensive efforts to support the private sector and implement its vision through a series of consecutive five-year development plans. The country has seen an ever-increasing number of domestic private businesses, particularly in the last decade. It has also become one of the preferred destinations of foreign direct investment (FDI) in Africa. 3

Despite these developments, the private sector has not yet made strong inroads into the manufacturing sector and export market, which are perceived by the government as crucial for industrialization and structural transformation. The private sector instead focuses on the service sector and domestic market where returns are high and quick. As a result, the pace of structural transformation has been slow. For example, manufacturing’s contribution to GDP and to merchandise exports has remained at only 5 per cent and 10 per cent respectively over the last two decades.

The successful industrial transition in Asia (notably in South Korea and Taiwan) in which the private sector has played a prominent role, however, tells us that the manufacturing sector not only grew faster but also more than doubled its share in GDP in about twenty years, accounting for about 30 per cent. Similarly, exports have exhibited rapid growth, reaching 40–50 per cent of GDP. This success was a result of the respective governments’ pursuing selective policies favoring certain sectors that are more productive and offer higher learning possibilities and externalities, which Amsden ( 1989 ) branded as ‘getting prices wrong’ and Wade ( 1990 ) ‘governing the market to over-ride market allocation of resources’.

In light of this, the chapter examines the effectiveness of the policies and instruments instituted by the Ethiopian government to promote the private sector and improve its contribution towards economic structural transformation. It specifically tries to identify key weaknesses and constraints impeding private-sector participation in manufacturing and exports.

In exploring these issues, this chapter relies on different sources. Primary written sources include academic journals and books, newspaper articles, annual reports, policy papers, and other documents from both private and public organizations involved in promoting the private sector. In addition, secondary data sources from Central Statistical Agency (CSA), National Bank of Ethiopia (NBE), World Development Indicators, and others are used to specifically measure performance.

The remainder of the chapter is organized as follows. Section 39.2 reviews policies and programmes promoting the private sector in Ethiopia. We then examine the performance of the private sector and identify key challenges impeding it from unleashing its potential in Section 39.3 . The final section, Section 39.4 , concludes and draws some useful lessons.

39.2 Review of Policies and Programmes Promoting the Private Sector

39.2.1 the reform period transition to market economy (1991–2001).

The incumbent government of the Ethiopian People’s Revolutionary Democratic Front (EPRDF) overthrew the Derg regime in 1991 and has since instituted wide reforms towards a market-oriented economy which envisage a leading role for the private sector. Over the 1990s, the government implemented three phases of IMF/WB-sponsored reform programmes, including liberalization of the trade and foreign exchange regimes, deregulation of prices, and privatization of state-owned enterprises. It also enacted a new investment code in 1992 allowing the private sector to invest in all but a few strategic sectors retained by the government such as utilities and the military. The investment code has been amended several times since then to further liberalize the investment regime. In the early 1990s, the nine state corporations that dominated industry were dissolved to stimulate private investment. Concomitantly, in 1994 the government established the Ethiopian Privatization Agency to facilitate and administer the privatization of publicly owned enterprise.

In 2001, Ethiopia launched its Sustainable Development and Poverty Reduction Programme (SDPRP) covering the period 2000/1 to 2002/3, and poverty reduction became the core development agenda. The focus of SDPRP was on agriculture development and largely concerned smallholder famers, while industry and urban development was underemphasized.

39.2.2 Nurturing the Private Sector under the Developmental State (2002–Present)

39.2.2.1 the industrial development strategy (ids) and private-sector development.

In a clear departure from the neoliberal paradigm, in 2002 Ethiopia launched a comprehensive industrial development strategy (IDS) (FDRE 2002 ). This strategy recognizes the role of the private sector as an engine for the industrialization and structural transformation process. The policy made a distinction between the ‘developmental’ and ‘rent-seeking’ private sectors and the need to support the former while curtailing the latter. It identified two important mechanisms under which the government could engage and promote the private sector: (i) creating a conducive business environment for all; and (ii) providing direct support to strategically selected sectors that include textile and apparel, meat, leather and leather products, other agro-processing industries, construction, and micro and small enterprises (MSEs). Extensive support programmes ranging from economic incentives and capacity building to cluster development and direct public investment were identified to support firms operating in the priority sectors.

The support programmes were further refined and extended to a large number of firms and a wider context with follow-up five-year development plans: the Plan for Accelerated and Sustained Development to End Poverty (PASDEP) (2005/6–2009/10) and subsequent Growth and Transformation Plans (GTP-I and GTP-II).

39.2.2.2 Private-Sector Development Initiatives in the PASDEP Period

The PASDEP builds on the initiatives introduced in the IDS and SDPRP to accelerate the development of the private sector. It gave due emphasis to the improvement of the business environment by way of institutional and regulatory reforms. It also aimed at financial sector reform to increase the availability of capital; progressive withdrawal of state entities from areas that can be efficiently provided by the private sector; continued reforms to establish land tenure security; intensification of infrastructure development; and upgrade of the skills of the workforce through expanded education and technical and vocational programmes. Maintaining macroeconomic stability, a stable exchange rate, and low inflation were all integral parts of the PASDEP plan to accelerate private-sector development (FDRE: MoFED 2006 ). Various institutional reforms have been implemented during this period as a result.

In the PASDEP period, the export-oriented manufacturing sectors continued to receive special attention and support. Moreover, the government promoted private-sector investments to develop commercial agriculture in two directions: (i) private commercial investment in the Highlands with a focus on high-value horticulture products that can be produced on limited land, using abundant labour; and (ii) large-scale commercial investment in areas where there is extensive land but labour scarcity prevails (mainly in the Lowlands).

39.2.2.3 Private-Sector Development Initiatives under the Growth and Transformation Plan (GTP-I and GTP-II)

In 2010, the government launched a new series of growth and transformation plans called GTP. GTP-I (2010/11–2014/15) undertook to continue ensuring macroeconomic stability, improve the business environment, and provide direct support to the private sector willing to invest in priority sectors. In this period, additional support programmes such as twinning, benchmarking, Kaizen, industrial input supply, and skill development programmes were introduced to enhance the international competitiveness of private manufacturing industry. Several sector-based development institutes were set up to strengthen support for the private sector. Currently, there are seven sectoral institutes under the Ministry of Industry (MoI).

In order to institutionalize state–business relations by way of continuous dialogue, in 2010 the government established the Ethiopian Public Private Consultative Forum (EPPCF) by signing a MoU between the then Ministry of Trade and Industry and the Ethiopian Chamber of Commerce and Sectoral Association (ECCSA). This national forum was to be supported by sector sub-committees for those industries identified as priority industries. As a result, several sub-committees representing specific sectors were established.

Private investment in large commercial farming was also emphasized and a major increase in the scale of investment during this plan period was anticipated. Land transferred to large-scale commercial agricultural investors through the federal land bank was expected to increase from 0.5 million hectares in 2011 to 2.8 million in 2013 and 3.3 million in 2015 (FDRE; MoFED 2010 ).

A significant departure of GTP-I from earlier plans was the need to boost investment in state enterprises jointly with the private sector or alone. Despite increasingly privatizing several public enterprises, the government enhanced its engagement through direct investment including in new and expansionary investment projects, which are currently in various phases of implementation. Moreover, two state corporations (Metal and Engineering Corporation and Sugar Corporation), each consisting of a substantial number of existing and newly established public enterprises, were reorganized.

The ongoing GTP-II (2015/16–2019/20) carries further ambitious plans for the development of the economy. A new vision to make the country a leader in light manufacturing in Africa has also been laid out. The plan envisages the private sector playing a key role in achieving its goals. Cognizant of the weak performance of the domestic private sector, on the one hand, the plan proposes a multi-track approach to transform the domestic private sector, in particular redirecting investment from the service and construction sectors towards manufacturing and supporting transition of small manufacturing enterprises to medium and large scale. On the other hand, the plan gives special emphasis to attracting foreign direct investment (FDI) in the manufacturing sector (FDRE: NPC 2016 ).

The most important initiatives undertaken in the GTP-II period to attract investment and improve industrial performance are the aggressive expansion and development of industrial parks and agro-processing zones. The development of industrial parks is seen as crucial to address the production and logistics constraints that impede productivity and competitiveness for both domestic and foreign investors (see Chapter 36 ). To this end, new investment regulations were endorsed in 2012 by Parliament and the Council of Ministers.

39.3 Performance and Key Challenges for the Private Sector

39.3.1 employment and output contribution of the non-farm private sector, 39.3.1.1 employment.

CSA has so far conducted three rounds (1999, 2005, and most recently 2013) of the Labour Force Survey (LFS). According to the CSA 2013 LFS survey report, about 42.4 million people aged 10 and above were employed in Ethiopia. The majority (72.7 per cent) were absorbed by the agriculture sector. This survey report also provides some estimates of the private sector’s contribution to employment. Of the total 6.38 million people employed in urban areas in 2013, about 42.4 per cent were self-employed, 20.5 per cent employed by private business organizations, 18.4 per cent by government (general and SOEs), and 14 per cent were unpaid family workers. This shows that the majority of people in urban areas are in an informal sector, by and large self-employment, while the formal private-sector contribution to salaried employment remains low.

When looking at the manufacturing sector, the 2015 CSA survey estimates the number of manufacturing enterprises that use power-driven machines and tools to be about 124,150, of which 3,150 are large and medium-scale manufacturing (LMSM) establishments that employ ten or more people, while the rest are small-scale manufacturing (SSM). In terms of employment, in 2014–15 the LMSM sector generated about 333,084 jobs, of which the private sector accounted for about 87 per cent. SSM, which is wholly owned by the private sector, is the largest employment generator in manufacturing. According to the CSA 2015 survey report, SSM generated over 660,000 permanent jobs with as many as 1.7 million people employed.

39.3.1.2 Gross Domestic Output

The official data on national accounts from the MoFED and NBE do not distinguish shares of national output by actor, such as public, private-sector, and household. A study (Kolli 2010 ) commissioned by Addis Ababa Chamber of Commerce and Sectoral Associations estimated that in 2008/9 the private-sector share in non-agriculture GDP was 40.1 per cent.

According to various years’ CSA survey reports on LMSM, Ethiopia’s manufacturing gross output (at constant price) grew by an annual average of about 12.7 per cent over the 15 years from 2000/1 to 2014/15, with the private sector contributing hugely towards this. For example, the private-sector share in the LMSM value added increased from 27.7 per cent in 1999/2000 to 71 per cent in 2014/15. 4 The growth in manufacturing output, however, did not keep pace with the growth in other sectors such as services. As a result manufacturing’s share of GDP remained constant at around 5 per cent for an extended period.

39.3.2 Capital Formation: Macro Perspective

39.3.2.1 gross capital formation.

Ethiopia has exhibited double-digit economic growth, accompanied by a remarkable growth in capital formation, over the last decade. As can be seen from Figure 39.1 , Ethiopia’s gross fixed capital formation (GFCF)-to-GDP ratio increased from 24 per cent in 2007 to about 39 per cent in 2015, much higher than the average ratio in regions such as sub-Saharan Africa (20.2 per cent) and least developed countries (23.5 per cent). 5 Ethiopia’s capital formation is, rather, comparable to that of the East Asian Tigers, such as South Korea and Taiwan, at their take-off stage. For example, the GFCF-to-GDP ratio of Taiwan increased steadily from about 11 per cent in the 1952 to 30 per cent in 1980 (Taiwan 2006 ). Similarly Korea’s GFCF to GDP ratio about doubled between the 1960s and the 1980s, rising even higher to reach about 35 per cent in the mid-1990s (Korea Development Institute 1997 ).

Ethiopia: Gross fixed capital formation and saving

39.3.2.2 Public versus Private Capital Formation

Gross fixed capital formation by the private sector in Ethiopia has also increased in recent years, reaching about 25.4 per cent of GDP in 2015. Despite improvements private-sector investment, crowded out by the public sector, remained low, accounting for about half of the gross capital formation. Ethiopia has the third-highest public investment in the world, but the sixth-lowest private investment (World Bank 2016 ). The private-sector and donor community often complain that credit is not made sufficiently available to the private sector partly due to priorities given to public investment. According to World Bank ( 2015 ), SOEs are estimated to account for about 62 per cent of credit stock. Private-sector credit to GDP is only about 9 per cent of GDP, compared to more than 20 per cent in sub-Saharan Africa. Crowding out is also an issue in relation to foreign exchange allocation, again due to the priority given to public projects as well as a general national shortage of foreign exchange.

The government and others counter-argue (i) that the private sector is not even coming forward to use the available credit, and (ii) that public investment is largely on infrastructure and human capital development to address the historic infrastructure deficit in the country. Ethiopia has achieved substantial expansion in energy, road, railway, and telecommunications infrastructure, which is a prerequisite for private-sector development.

In principle, public infrastructure investment can augment private capital formation (crowd-in). But this assumes efficient allocation of resources. The literature on the impact of public investment in developing economies including Ethiopia gives mixed results on whether it complements or crowds out private investment. According to the governments’ own admission, many large public investment projects suffer from poor project planning and management as well as inadequate monitoring and evaluation. As a result, the costs of many projects have been reported as substantially escalating through time.

39.3.2.3 Investment–Saving Nexus

Figure 39.1 also shows that Ethiopia’s gross domestic saving-to-GDP ratio has sharply increased since 2010 and reached about 21 per cent in 2015. But it has not grown with the pace of investment. As a result the saving–investment gap not only remained large but also increased slightly from 11.8 per cent in 2007 to about 17.5 per cent in 2015. Ethiopia’s savings pattern contrasts with the successful experiences of Korea and Taiwan where rapid investment was accompanied by higher growth in domestic savings. Both countries achieved above 30 per cent of saving-to-GDP ratio in the 1960s, 1970s, and 1980s (Taiwan 2006 ; Korea Development Institute 1997 ).

The low level of domestic saving in Ethiopia means a significant proportion of the investment has been financed through foreign savings. A high dependence on foreign saving raises issues not only of access to finance but also of sustainability. The 2015 IMF report on debt sustainability analysis (DSA) raised Ethiopia’s risk of external debt distress from ‘low’ to ‘moderate’ following a surge in debt-to-GDP ratio from 42 per cent of GDP in 2014 to an estimated 54.2 per cent in 2015/16. The debt-to-GDP ratio was only 18 per cent of the GDP in mid-2012. High debt-to-GDP ratio can lead to higher uncertainty and low private-sector investment.

39.3.3 Private Investment Flows: Low Conversion Rate from Investment Licence to Operations

This sub-section examines in detail Ethiopia’s private investment flow patterns over the last twenty-five years (1992 to 2016) using the Ethiopian Investment Commission (EIC) database. Table 39.1 reports investment flow by project status and ownership type. In the last twenty-five years, about 85,603 private investment project requests were approved, of which the majority (94 per cent) were submitted by domestic private investors. Recent years have seen a surge of both domestic and foreign investment. For example, nearly 50 per cent of investment projects licences were issued in 2011–16 alone.

Despite the large number of investment project approvals, the implementation rate has been very low. Out of the 85,603 investment projects approved in the last twenty-five years, only 10,269 projects (12 per cent) have become operational, which have injected about 166 billion birr and generated permanent employment for nearly half a million people. The implementation rate of domestic approved projects has been far too low (9.5 per cent) when compared to foreign projects (51.3 per cent). This means about 90 per cent and 49 per cent of, respectively, registered domestic and foreign private investment projects has not yet translated into actual investments on the ground.

Next we try to highlight the likely cause of the alarmingly low level of investment license conversion into operation among domestic investors. We start by examining the broader business environment, which is one key ingredient for successful participation of the private sector. According to the World Bank’s index reports on the ease of doing business, Ethiopia’s rank deteriorated from 101st out of 155 countries in 2006 to 159th out of 190 countries in 2017. A closer look at the reports shows that Ethiopia had the worst score (above 159) in some critical elements, such as starting a business (179), dealing with construction permits (176), protecting minority investors (175), getting credit (170), and trading across borders (167).

A recent EDRI study (Gebrehiwot, Gebreeyesus, and Woldeyes 2017 ) examines why the prevailing investment conversion rate is so low and what major constraints to proceeding beyond the licensing stage to start production are faced by domestic private investors. Unlike previous studies which rely on existing firms, this study gathered information on the major constraints not only from successful investors but also from those who were discouraged. The qualitative survey looked at forty-two firms (investors) in Addis Ababa, mostly in manufacturing. The main finding is that the key barriers to investment relate to land, finance, regulatory and institutional inefficiency, poor infrastructure, particularly power, and lack of skills. These are basically consistent with World Bank reports and other previous studies and suggests that the poor business environment is not only undermining exiting firms but also discouraging new investments and transition from project to operations.

39.3.4 The Bulk of Private Domestic Investment Is Outside the Productive Sector

Table 39.2 reports the sectoral breakdown of operational investment projects in the last twenty-five years, again based on the EIC database. In terms of the number of operational projects, agriculture, manufacturing, and the service sector respectively account for about 20 per cent, 30 per cent, and 43 per cent. In terms of capital investment, however, out of the nearly 165.9 billion birr investment made over the last twenty-five years, about 50 per cent was invested in the manufacturing sector, while agriculture and the service sector respectively accounted for 22 per cent and 18 per cent. 6

Table 39.2 further shows a big difference between domestic and foreign investors in terms of sector focus. FDI’s focus has been on manufacturing, accounting for 52 per cent and 81 per cent of respectively operational projects and capital investment for foreign firms. The restriction by the government on FDI in many of the service sub-sectors might have helped to channel most of the FDI towards manufacturing. Unlike foreign investors, the focus for domestic private investment has been largely on the service sector. Over the last twenty-five years, only 25 per cent of the total number of operational projects and 21 per cent of capital investment by domestic investors was channelled to the manufacturing sector. In contrast, nearly 45 per cent of the operational projects and 30 per cent of capital from domestic investors was invested in the service sector.

Above we have pointed out GTP-II put certain strategies in place to redirect domestic investors from the construction and service sector towards manufacturing. To examine whether this strategy has brought the expected result in the domestic sectoral investment allocation, we compared the two years prior to GTP-II and the first two GTP-II years. As can be seen in the last two columns of Table 39.2 , in terms of number of operational projects the agriculture and manufacturing sectors’ shares show a declining rather than rising trend. In contrast, the service sector share increased from 45.8 per cent in the two years prior to GTP-II to more than 62.3 per cent in the first two GTP-II years. Surprisingly, the majority of investment within the service sector comes from the real-estate and rental activities sub-sectors, where the share of investment in operational projects in all sectors increased from 31 per cent to nearly 60.5 per cent. This suggests that the service and particularly the real-estate sector remained attractive for domestic investment despite the government’s plan to redirect investment towards productive sectors such as manufacturing.

There are various explanations as to why the incentives designed to redirect investment towards the productive sectors are not producing the expected outcomes. First and foremost is that the system creates larger rents in the service sector (for example, the real-estate and rental, construction, trading, and banking sectors), leading to very high and quick profits in these sectors. For example, the profitability of banking remains very high, with returns on equity (ROE) at about 44.6 per cent by the end of March 2014, which is more than double than the SSA average (17 per cent) at the end of 2013 (World Bank 2015 ). Although there are no exact figures, the profitability of the real-estate sector and of wholesale and retail trade are among the highest. In contrast, the profit margin in the productive sectors such as manufacturing and agriculture, particularly in the export market, remained very low. The service and non-traded sectors in Ethiopia are highly protected from international competition, while manufacturing and agriculture operate in a more competitive environment. As a result, private investors, particularly domestic ones, are not interested in investing in less profitable sectors, such as manufacturing, and in the export market. This implies that the government has either not been able to limit the excessive rents created in unproductive sectors largely emanating from the non-competitive environment and/or has not provided sufficient incentives for the productive sectors.

Second, the effectiveness of the incentives is substantially constrained by the lack of efficient bureaucracy and a coordination problem among different public institutions. This has made it difficult to ensure investors in priority sectors have proper access even to the limited level of existing incentives. This is largely due to low capability and motivation as well as increasing rent-seeking practices by civil servants.

Third, limited monitoring by the civil service has further encouraged rent seeking and the diversion of incentives by the private sector to other uses. Many investors take out investment licences in the productive sectors (manufacturing and large-scale manufacturing) with no intention of investing and abuse the incentives or divert the resources to other sectors. Gebrehiwot, Gebreeyesus, and Woldeyes ( 2017 ) show that several so-called investors that received land for manufacturing activity misused the land by using it for warehouses, renting (transfer) to other actors (or activities), or leaving it idle over a long period.

The dismal performance of the large-scale commercial farming sector, despite high expectations, is another example of rent-seeking behaviour by private investors. UNDP ( 2013 ) shows that out of the total 440,163 hectares of land transferred from the federal land bank by the end of GTP-I, only 42 per cent was converted to production. It further argues that the sector’s poor performance is partly caused by deliberate abuse of land investment licences or land lease agreements. With very low land lease rates, in some cases land has been taken for speculative purposes or to take advantage of tax and financial privileges.

Notwithstanding the dismal performance of the large-scale farm in general, Ethiopia has achieved remarkable success in the flower industry. The major success factor for the emergence of the floriculture industry is the shared vision for the sector’s development and strong collaboration between government and the private sector (Gebreeyesus and Iizuka 2012 ).

39.3.5 Poor Export Performance and Underlying Causes

Ethiopia has long recognized the role of exports in economic growth and development. Ethiopia’s exports have been dominated by the private sector since the government’s withdrawal from the trading sector in the command economy regime of the early 1990s. Various export incentives and capacity-building programmes have been devised and implemented to encourage the private sector into exports. Exports have grown moderately over the last two decades but have not kept pace with the growth in imports. For example, Ethiopia’s exports grew around tenfold between 1995 and 2015, reaching US$3.8 billion. However, merchandise imports grew even faster (nineteen-fold) in the same period, widening the trade deficit to over US$11.4 billion. This has resulted in a critical shortage and rationing of foreign exchange (Gebreeyesus and Kebede 2017a ).

A related concern is that Ethiopia still relies heavily on primary and agricultural exports. In 2015/16, for instance, the five major export items (coffee, oilseed, gold, chat, and pulses) accounted for nearly 70 per cent of total export values. In contrast, manufacturing’s share in total merchandise exports remained very low (below 10 per cent), with no sign of improvement (NBE 2016). The majority of firms in manufacturing sector have focused on the domestic market. According to the 2015 CSA LMSM survey report, only 5 per cent of manufacturing firms participated in exports and the share of exports in total sales of the sector was only 4 per cent.

Gebreeyesus and Kebede ( 2017a ) examined the factors behind the poor export performance, particularly in the manufacturing sector, in the face of extensive efforts to promote exports. They specifically look at the relative attractiveness of the domestic market versus export markets and seek to measure the anti-export bias arising from tariffs and overvaluation of the exchange rate. In their disaggregated industry-level anti-export bias estimates, they found a wide difference among industries in the manufacturing sector. With about 35 per cent nominal duty rate, the export-oriented sectors such as textiles, apparel, leather, and footwear are the most protected within the manufacturing sector. The anti-export bias estimates suggest that the value added obtainable in the domestic market vis-à-vis exporting is 150 per cent greater for leather and footwear and more than 70 per cent for textiles and apparel. This study also shows that the overvaluation of the exchange rate further aggravated the disincentive to export. The implication is that tariff and exchange rate policies are not consistent with the export promotion of the country.

According to the 2015 World Bank ‘Doing Business’ report, Ethiopia stands at 168 out of 189 countries in terms of ease of trading across borders. Exporting a standard container of goods in Ethiopia takes on average about 44 days and costs US$2,380. Gebreeyesus and Kebede ( 2017b ), on the other hand, revealed that the anti-export bias arising from non-tariff trade barriers (trading costs) such as time delay caused by logistics inefficiency and customs procedures has been greater than the anti-export bias from tariffs.

The low level of productivity is another factor in poor export performance (see Chapters 36 , 37 ). Ethiopia lags in terms of total factor productivity behind its peer countries in Africa such as Côte d’Ivoire, Nigeria, Zambia, Kenya, Tanzania, and South Africa (World Bank 2015 ). Low productivity in turn is caused by a multitude of factors—among others low labour productivity and skill shortage, lack of supply of inputs, and poor business environment and infrastructure service. For example, the CSA (2015) survey of MLSM enterprises revealed that more than half are working below capacity mainly due to shortage of raw materials, lack of demand, and power shortages.

Gebreeyesus and Demile ( 2017 ) examined the effectiveness of existing export incentives in reducing the anti-export bias. They found that the mediocre additional incentives provided for exporters are insufficient motivation for the private sector, taking into account not only the anti-export bias created by the existing policies but also the investment incentives available to all investors including firms producing for the domestic market. More importantly, the study found that the effectiveness of the export incentives is substantially constrained by the lack of efficient export bureaucracy and coordination problems. This has made it difficult to ensure exporters have access even to limited export incentives, which has encouraged diversion and rent seeking by the private sector.

39.4 Concluding Remarks

The aim of this chapter was to examine the development of the private sector in Ethiopia and identify the key challenges hindering it from unleashing its potential to realize economic structural transformation in the country. Ethiopia has seen a surge of private investment (both domestic and foreign), particularly in recent years. Once associated with famine and war, Ethiopia’s image is changing and the country is portrayed as the future hub of manufacturing investment in Africa.

This study shows that despite these developments, Ethiopia’s domestic private sector has not yet vigorously entered the productive sectors (e.g. manufacturing and agriculture) and the export market, which are perceived as critical pathways towards industrialization and structural transformation. Instead most domestic private investors are increasingly concentrated in the service sector or/and domestic market where returns on investment are large and rapid. This study highlighted the following key weaknesses and constraints hindering the domestic private sector from robustly entering the productive sectors and export market.

First, several studies, including the present one, have pointed to the poor and deteriorating business environment as one cause for the underperformance of the private sector. The attention of the government in this regard seems currently to be focused on improving the business environment within the industrial parks. It is true that the industrial park scheme is one critical route toward industrialization, and improving the business environment in these parks would greatly help attract investment. It is also relatively easier and more manageable to provide efficient services to firms in the parks than those outside parks. But unfortunately, not all manufacturing firms, let alone other businesses, are going to be located in the parks. Improving the business environment in the industrial parks cannot, thus, be a substitute for improving the overall national business environment. The implication is that government needs to also quickly address the deteriorating overall national business environment.

Second, the most important policy issue concerns rent creation and management, which is the hallmark of industrial policy (Khan and Blankenburg 2009 ). Although the government would like to see investment flow to the productive sectors, the large rents are created in other sectors, notably in the service sector which includes real estate and rental, construction, trading, banking, etc. With substantial and rapid returns from these sectors, private investors are not interested in investing in less profitable sectors such as manufacturing and in the export market.

Government can address this problem at least with the following complementary mechanisms. First, closing or narrowing down the routes through which large rents are created in the non-productive sectors. This is because the large rents in these sectors are not created in a competitive market environment but by and large are due to distortions, inefficiency, and the protection of the domestic market. Second, using different innovative instruments to transfer sufficient rents from the less preferred to the favoured industries in order to make the latter financially attractive for the private sector. Third, managing such rents, however, requires a capable and efficient civil service. This chapter highlights that one of the main reasons why the various government incentives are not producing the expected results is bureaucratic red tape and the incompetence of the civil service. Moreover, with weak monitoring systems, the rent-seeking behaviour of the private sector is increasingly unchecked. Hence, building a civil service that will shoulder its responsibilities is of paramount importance for the proper implementation of policies and incentives, and hence the enhancement of the transformative role of the private sector. Fourth, Ethiopia’s economy is currently suffering from two imbalances: an export–import gap and a savings–investment gap, both of which are adversely affecting private-sector development. Ethiopia’s fast economic growth has been accompanied by an increasing trade deficit. As a result, private businesses are increasingly constrained by the shortage of credit and foreign exchange, both of which are crucial for investment, production, and sustained growth. This chapter also shows that poor export performance is caused by the misalignment of certain macro policies (for example tariffs and exchange rates) with the export promotion currently pursued by the country. Moreover, the low real interest rate is thought to contribute to the low level of domestic savings, hence to credit rationing. Integrating macro and trade policies with sectoral policies is, thus, critical for the way forward.

Successful East Asian countries provide great lessons in all the above respects: creating and managing rent, building a capable and disciplined civil service, and the alignment of macro and industrial policies.

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The private sector can simply be defined as non-state business activity seeking profit whether by production of goods or services and/or commercialization. However, smallholder farmers are not considered here due to the scope of this study.

Gebreeyesus ( 2013 ) gives an extensive review of the history of Ethiopian industrial policy.

According to a recent UNCTAD ( 2017 ) report, Ethiopia was the largest recipient in Africa of FDI amounting to US$3.2 billion in 2016, which is a rise of about 46 per cent in comparison to the previous year.

Table not reported to save space.

The source of data for Ethiopia as well as the other regions is World Bank, World Development Indicators database.

The fact that the share of manufacturing in the number of projects is low but in terms of capital is high suggests high capital intensity of manufacturing in comparison to other sectors.

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Based on secondary and primary source materials, analyze the postcolonial development trajectory of Ethiopia about its environment background. Using a political, environmental perspective, the paper should interrogate modern discourses regarding the relationship between resources and development in that context. Though it may concentrate in a particular dominant economic area or natural resource dynamism, it should explore an overview of the country’s advancement trajectory, including all vital sectors, and take into consideration the fundamental cultural, political, social and geopolitical factors at play

Ethiopian economy

Ethiopia being a landlocked country has faced a myriad of challenges in its postcolonial development over the years. This started from the traditional political scene and dictatorship that has been witnessed in the political arena that has also been the major drawback to the economic development. The political volatility has resulted from the long-standing political conflicts that have increased insecurity in the nation. The political direction the country has taken resulted from the previous one-party state that the country was in in the years 1995 has made the arena give birth to a new phase of leadership transformational process (Abbink and Hagmann). The rebels that emerged over the years against the empire that ruled for a long time facilitated the introduction of the revolutionary democratic state through the political party of Ethiopian people;s political Front (EPRDF).; The birth of the multi-party state pushing away the traditional empire system has made a good step in the economic growth of the nation.;

Growth has been witnessed in the agriculture sector which is one of the primary source of funds for the nation. Agriculture has been enhanced through the availability of funding system for the cash crops and those produced for domestic consumption. The flourishing construction sector is another economic step that the country has been able to realize over the years. The manufacturing industries and the service sector also play a significant role in the economy and are evidently some of the key pillars of the national cake and competitiveness of the nation in the sub-Saharan region. Despite the proceeds, they have resulted from the revolution, poverty and famine are still killer issues affecting the country following the conflicts that exist in the neighboring countries that it could trade. This paper will analyze the postcolonial developments that exist and the emergence of the new democracy in the nation to its economic wellbeing.

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Ethiopian Revolution against the Feudal Systems

The traditional leadership system that was based on empire system had its challenges that faced the nation. The dictatorship that emerged saw economic progression to digress massively, and poverty went high with increasing alarm. The mismanagement of the state positions through the biased policies made the people have much of the state tax converted to suit independent interests. The location of the country favors famine and drought that for a long time was never addressed and people were forced to live in such harsh conditions helplessly. As a result, people were directly exposed to shocking severe weather that also deterred economic growth.;

The workers and peasants had to strike on many instances to force the state to take actions through resistance to state orders. Some of the strong reasons cited for the revolution was the state increasing and expensive tax system despite the law pay at which they were being compensated for labor offered at the firms and in the service industry. The effect of the strike led to deaths and sufferings to many, and many people were rendered homeless when the country went on strike in the 1970s. The loyal positions to the Empire also started to defect, and a revolution was built the empire over the years that gave birth to the modern democracy and the development that has resulted in the recent past.;

The Derg became the replacement to the Haile Selassie regime. The rebirth of the nation started from the impositions of the slogans that promised development and peace. The new system gained power since their policy was to implement a new regime that favored peace and love in the nation. The land was to be given back to the tiller, and the peasants were to gain rights in their respective areas of work. In response to building relationships and increasing direct trade with other nations, the country under the Derg rule formed alliances with the US and the United Kingdom;s that for a long time gave donations and support for the nation-building until some treaties were signed with the USSR that made the donors withdraw their support. Oppositions grew in this regard, and marginalized parties rose to represent the rights of the minorities. Increasing famine and repression among others were some of the factors encountered in the fight with the Somalis in the Ogaden province (Hagmann and Korf 205). Opposition against Derg governance rose as the people were rendered squatters for their agricultural lands and the relationship that was formed with the USSR made the country have no gain in the newly formed Revolution.;

New Federal Arrangements

The increasing humanitarian disaster resulting from poor governance and famine increased the instability in the country. The military was the only organ that had a party, and the growing ethnical splits and tension made the situations turn to worse. The political climate worsened when the USSR stopped their initiative to provide support for the country. Internal feuds rose, and poverty and famine eat the country into ashes. The oppression rose mainly from the students, and most of the elites fled to escape the bad ruling of the revolution. Education tuned worse as the only standing higher learning institution was that established during the Selassie regime. The service that could be offered in the manufacturing and process industry could not meet the standards, and the economy deteriorated further. Democratization and state building became a complex endeavor to handle, particularly because the nation was young. The increasing strain from ethnical clashes and those emerging from neighboring groupings claimed the independence of the country. The military dictatorship was also another reason that made many people flee the nation lowering the education standard of the nation and the economic wellbeing of the country.;;

Challenges of Democratization in Ethiopia

The political change was first witnessed in the early 90s after the democratic election of the new government in Ethiopia. The new government that was formed was based on the democratic and peaceful representation of all. Many small sub ethnic groupings felt that indeed they were represented in the national cake. This gave birth to the present democratization that is seen in the country. The fall of the dictatorial leadership of the military gave birth to the inclusion leadership where rights and social justice could be practiced in a nation that was for a long time far from receiving democracy for its people (Debelo 24). The main solution that the new government brought with it was the desire and the fight to address the social injustice that was brought about by the poor tax system in the country and the discriminatory ownership rights that were sparsely distributed in the nation.;

One of the main factors that have been able to promote peace and social wellbeing is the introduction and acceptance of the ethnical language groups for various populations. Language use has helped the nation to promote recognition that has made people from various backgrounds to feel the worth of democracy and presence of acceptance to share leadership roles. Language represents the heritage of a country that symbolizes cultures that a country represents. Acceptance of all common and uniform language that would be easier for the people to use in public places enhanced peace. Integration and intermarriage have since been practiced, and trade has improved from the good relations and ties made freely in the nation.;

The democratic governance made the people of the nation have strong belief in their systems, and a great sense of positive change has made the trade to be positively thought of, a process that has enhanced prosperity. The use and the practice of the pluralist democracy have over the years been the symbol of modern democracy seen in the landlocked country that has also given it a unique identity. The pronouncement of the new constitution has also played a major role to the people of Ethiopia. The constitution has been able to hold the people together by making them believe in a common goal that fosters leaving together and working towards improving the economy of the nation while basing upon the free will and consent of the people (McMichael 247.). In addition to the constitution rights and privileges that the people have been able to enjoy, the pronouncement of the referendum of the long fought for the province of Asmara has been able to help the country secure an economic base. The base is for its agricultural produce that plays a significant role in the development of the national gross domestic product, the national cake. This referendum bid saw the people secure their rights that relaxed ties for economic growth by reducing the tension with the Eritrean government and the local population.;

The devolution of power and the use of democratic government system has enabled the nation to have various roles acted upon by all people uniformly. This has promoted the regional balance between different locations of the country thus fostering the equity agenda. Devolution of power has also helped in giving birth to leadership roles from states that exist within the country and giving people the chance to select representatives that they have belief would bring economic product to them. This has played a critical identity in the structural development of Ethiopia and the nation building also resulted from the transformative developments in agriculture and service industry. The desire to overcome the long-term challenges of drought and famine, poverty and economic underperformance has been the key pillars for the nation building.

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ADDIS ABABA UNIVERSITY SCHOOL OF COMMERCE PROJECT MANAGEMENT Practices of Project Manager Selection in Ethio Telecom

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