Report on Ethiopian Economy, Society, Culture and Political structure

Debre Berhan University Faculty of Business & Economics Department of Economics Mohammed Seid Hussen
meetmame@gmail.com

July 2011

Addis Ababa, Ethiopia

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1.

Introduction

Ethiopia is a land-locked country located in East Africa, and is bordered by Eritrea, Djibouti, Somalia, Kenya and Sudan. With an estimated population of more than 85,000,000, Ethiopia is Africas second most populous country. Although Ethiopias official language is Amharic, there are a variety of officially recognized regional languages which are spoken among Ethiopias ethnically diverse population. According to a census taken in 2007, 34.5 percent of Ethiopians are ethnic Oromo,26.91 percent Amhara, 6.2 percent Somali, 6.07 percent Tigraway, with the remaining percentage divided among the Guragie, Sidama, Welaita,among others. Ethiopia is considered one of the oldest centers of civilization in the world with evidence of hominid habitation of the area from as early as 3.2 million years ago. Ethiopia has been the home of many expansive empires, examples of which include the Dmt in the 8th century BCE, the Aksumite reign in the 4th century BCE, the Zagwe dynasty which ruled from 1137 CE until it was overthrown by the Solomonid dynasty in 1270 CE. The Solomonid dynasty ruled the Abyssinian empire which at that time included almost the entirety of the current geographic areas of Ethiopia and Eritrea. The Solomonids reigned until a Marxist-Leninist military junta, the "Derg", led by Mengistu Haile Mariam, deposed Haile Selassie, the last Emporer of Ethiopia, and established a one-party communist state. The communist regime which was established after the military coup that deposed the last Emperor of Ethiopia in 1974 was plagued by a series of ensuing coups, drought

and famines which contributed to wide-scale population migrations and displacement of populations. In the 1980s, large-scale famines killed 1 million Ethiopians and impacted the lives of 8 million more.

Demonstrations against communist rule began in the northern regions of Ethiopia and Eritrea. In 1990 the Soviet Union completely cut all aid to Ethiopia furthering weakening the rule of the communist leader, Mengistu Haile Mariam. Mengistu fled the country in 1991, and sought asylum in Zimbabwe where he resides to this day. A referendum was held in 1993, in which Eritreans overwhelmingly voted in favor of seceding from Ethiopia, and Eritrean independence was declared on May 24, 1993. Ethiopias first multiparty elections were held in 1995, after a constitution was adopted the previous year. A border dispute with Eritrea resulted in the Ethiopian-Eritrean was that began in 1998 and lasted until June 2000. Ethiopia had an estimated GDP of $70.995 billion in 2008. Despite being a landlocked country in Eastern Africa, Ethiopia has one of the most significant water reserved in Africa due to the 14 rivers that run throughout the country. Despite the large amount of available water, only a small percent (approximately 2.5 percent) is currently being used to generate power, and for irrigation. Agriculture accounts for the largest percentage of Ethiopias Gross Domestic Product, principle exported products include coffee, beans, cereals, potatoes, sugarcane and vegetables, as well as livestock which accounts for approximately 15 percent of GDP. Other notable exports include khat, gold, leather products and flower and plant exports.

2.

Historical Background

Prehistory and Aksum:

Archaeologists have discovered remains of early hominids in Ethiopias Rift Valley, including Australopithecus afarensis, or Lucy, thought to be 3.5 million years old. By ca. 7000 B. C., Cushitic- and Omotic-speaking peoples were present in Ethiopia, after which further linguistic diversification gave rise to peoples who spoke Agew, Sidamo, Somali, Oromo, and numerous Omotic tongues. Initially hunters and gathers, these peoples eventually domesticated indigenous plants, including the grasses teff and eleusine, and ensete, a root crop, kept cattle and other animals, and established agricultural patterns of livelihood that were to be characteristic of the region into contemporary times. By at least the late first millennium B. C., it appears, the Agew occupied much of the northern highlands, whereas the Sidama inhabited the central and southern highlands. Both played important roles in subsequent historical developments.

During the first millennium B. C., Sabaeans from southwest Arabia migrated across the Red Sea and settled in the extreme northern plateau. They brought with them their Semitic speech and writing system and a knowledge of stone architecture. The Sabaeans settled among the Agew and created a series of small political units that by the beginning of the Christian era had been incorporated into the Aksumite Empire, with its capital at Aksum. The Aksumite Empire was a trading state that dominated the Red Sea and commerce between the Nile Valley and Arabia and between the Roman Empire and India. Centered in the highlands of present-day Eritrea and Tigray, it stretched at its height from the Nile Valley in Sudan to Southwest Arabia. The Aksumites used Greek as a trading language, but a new Semitic language, Geez, arose that is thought to be at least indirectly ancestral to modern Amharic and Tigrinya. The Aksumites also constructed stone palaces and public buildings, erected large funerary obelisks, and minted coins. In the early fourth century, Christianity was introduced in its Byzantine Orthodox guise. Although it took centuries before Christianity gained a firm hold, in time Orthodoxy became the embodiment of Ethiopian identity. During the seventh century A.D., Aksum began a long decline. By the eleventh century, the political center of the kingdom had shifted southward into Agau territory, and a non-Aksumite dynasty, the Zagwe, had assumed control. Aksum faded, but it bequeathed to its successors its Semitic language, Christianity, and the concept of a multi-ethnic empire-state ruled by a king of kings.

The Medieval Period:

From Aksumite times, there began a process of cultural and linguistic fusion between the northern Semites and the indigenous Agew that was to continue over the course of a millennium. This process gave rise to northern Christianized Agew, who formed themselves into the Tigray and Amhara ethnic groups. The Zagwe placed their capital, Lalibala, far south of Aksum and constructed there and elsewhere across their domains a remarkable ensemble of rock-hewn churches. In the late thirteenth century, an Amhara dynasty moved the center of the kingdom still farther south into Shewa in the southernmost part of the northern highlands. During the succeeding centuries, the Amhara kingdom, a military state, was often at war either with Sidama kingdoms to the west or with Muslim principalities to the east.

About 1529 a Muslim Afar-Somali army overran the highlands, and during the 1530s nearly succeeded in destroying the Amhara-Tigray state and Christianity. At almost the same time, the Oromo were in the midst of a decades-long migration from their homeland in the far southern lowlands. The Oromo moved north through the southern highlands, bypasssing the Sidama on the west, and into the central highlands, where they settled in the center and west on land, some of which had formerly belonged to the Amhara. At the beginning of the seventeenth century, the Jesuits arrived to minister to Portuguese soldiers who had helped defeat the Muslims in the early 1540s and who had remained in the kingdom. As part of their mission, however, the Jesuits attempted to convert the Orthodox Ethiopians to Roman Catholicism. They met with some initial success before their crusade set off a religious civil

war in the late 1620s that led to their expulsion and an attempt to keep out all Franks, as the Ethiopians called Europeans.

Early Modern Times:

An era of reconsolidation and cultural flowering ensued during the seventeenth and eighteenth centuries following the founding of a new capital at Gondar. The monarchy eventually become a pawn of regional warlords, however, and it was not until the mid-nineteenth century that Tewodros II reunited the kingdom and sought to restore the power of the throne. Most scholars trace the origins of the modern history of Ethiopia to his reign. Menilek II (18891913) defeated the Italians in 1896 when they sought to invade Ethiopia, although he allowed them to retain the frontier province facing the Red Sea, which they named Eritrea. Menilek, in turn, sent armies to conquer the southern highlands and surrounding lowlands, annexing them to the traditional Amhara-Tigray kingdom to create the present-day nation-state of Ethiopia with its capital at Addis Ababa. He also opened the country to Western influence and technology, for example, by establishing diplomatic relations with several European powers and by authorizing construction of a railway from Addis Ababa to Djibouti on the Red Sea. After serving as regent, Tafari Makonnen, a cousin of Menilek, ascended the throne in 1930 as Emperor Haile Selassie I. French-educated and aware of Ethiopias backwardness, he began to introduce various Western-inspired reforms, but these changes were hardly underway before war broke out with Italy in October 1935. The emperors dramatic appeal for assistance in mid1936 before the League of Nations, of which Ethiopia was a member, went unanswered. Italian colonization lasted from 1936 to 1941. The Italians never controlled large parts of the countryside and at times ruled harshly. Nonetheless, they constructed public buildings, built a rudimentary road system throughout the country, and in general sought to modernize the country.

The Post-World War II Era:

After the war, Haile Selassie pursued a policy of centralization, but he also continued to introduce change in areas such as public education, the army, and government administration. The slow pace of his reform efforts, however, fostered discontent that led to an attempted coup in 1960. In early 1974, a mutiny among disgruntled lower-ranking army officers set a process in motion that led to the fall of the imperial government. The mutineers were joined by urban groups disappointed by the slow pace of economic and political reforms and aroused by the impact of a devastating famine that the government failed to acknowledge or address. Over a period of several months, the rebellious officers arrested the emperors ministers and associates, and in September removed the emperor himself. A group of junior military officers, soon known as the Derg (committee in Amharic), then assumed power and initiated a 17year period of military rule.

The Derg pursued a socialist agenda but governed in military style, and it looked to the Soviet Union as a model and for military support. It nationalized rural and urban land and placed local control in the hands of citizen committees; it also devised controversial policies of peasant resettlement in response to another devastating drought in 198485 and of villagization, ostensibly to improve security. A Somali invasion in 197778 to capture the Somali-inhabited southeast lowlands was repulsed with Soviet aid, but thereafter resistance against the Derg arose in all parts of the country, most notably in the north. In Eritrea the Eritrean Peoples Liberation Front (EPLF) pursued a campaign against the 1962 annexation and eventually sought separation from Ethiopia. In Tigre, the Tigray Peoples Liberation Front (TPLF) sought regional autonomy and the overthrow of the Derg. In the late 1980s, the TPLF and other Ethiopian ethnically based resistance groups formed the Ethiopian Peoples Revolutionary Democratic Front (EPRDF), and, together with the EPLF, administered defeats on a demoralized Ethiopian army that led to the collapse of the Derg in May 1991.

The EPRDF Regime:

The EPRDF coalition set up a provisional administration in Addis Ababa under the TPLFs leader, Meles Zenawi. The Oromo Liberation Front and the (Somali) Ogaden National Liberation Front soon withdrew and resorted once more to armed insurgency. In April 1993, the Eritreans voted for independence, a decision the TPLF leadership and many Ethiopians reluctantly accepted. The EPRDF committed itself to multi-party democracy and to economic reconstruction, for which it relied on international donor assistance. The constitution of the Federal Democratic Republic of Ethiopia was adopted in 1994. National elections in 1995 and 2000 produced EPRDF victories but were widely boycotted by opposition parties. Meles Zenawi has remained effective head of government. From 1998 to 2000, Ethiopia and Eritrea fought a bitter war over their common border. Despite international arbitration, the status of the border in mid-2005 remained stalemated and relations between the two nations, hostile.

3.

Geographical Location of Ethiopia

Location:
Ethiopia is located in eastern Africa in the southern Red Sea region. It borders Sudan on the west, Eritrea on the north, Djibouti and Somalia on the east, and Kenya on the south.

Size:
The total area of the country is 1,127,127 square kilometers.

Land Boundaries:
Ethiopias borders total 5,328 kilometers. Bordering countries are: Djibouti (349 kilometers), Eritrea (912 kilometers), Kenya (861 kilometers), Somalia (1,600 kilometers), and Sudan (1,606 kilometers).

Topography:
Ethiopias topography consists of a central high plateau bisected by the Ethiopian segment of the Great Rift Valley into northern and southern highlands

and surrounded by lowlands, more extensive on the east and southeast than on the south and west. The plateau varies from 1,500 to 3,000 meters above sea level and features mountainous uplands separated by deep gorges and river valleys, especially in the north. The highest point is Ras Dashen at 4,620 meters in the northern highlands. In the east, the Denakil Depression, part of the Rift Valley, is in places 115 meters below sea level and is one of the hottest places on earth. A chain of lakes lie in the southern Rift Valley, but the largest inland body of water is Lake Tana in the northwest. The diversity of Ethiopias terrain determines regional variations in climate, natural vegetation, soil composition, and settlement patterns.

Climate:
Rainfall and temperature patterns vary widely because of Ethiopias location in the tropics and its diverse topography. In general, the highlands above 1,500 meters enjoy a pleasant, temperate climate, with daytime temperatures between 16C and 30C and cool nights. In areas below 1,500 meters, such as large river valleys, the Denakil Depression, the Ogaden in the southeast, and parts of the southern and western borderlands, daytime temperatures range from very warm (30C) to torrid (upwards of 50C), sometimes accompanied by high humidity. Precipitation is determined by differences in elevation and by seasonal shifts in monsoon winds. The highlands receive by far the most rainfall, most of it between mid-June and mid-September, whereas lower elevations receive much less. In general, relative humidity and rainfall decrease from south to north and vary from scant to negligible in the eastern and southeastern lowlands. As the most mountainous country in Africa, most of Ethiopia is dominated by rugged peaks, highlands and plateaus that are dissected north-east to southwest by the East African Rift Valley. Elevated areas are surrounded by lowlands, fertile plains and semi-desert. Ethiopia has a varied climate due to its diverse landscape and elevation, with temperatures ranging from 0C to 50C, over three climatic zones. Most of the year is dry with a rainy season from midJune to mid-September. Ethiopia has experienced ten major drought-famine periods in the last forty years. Recent droughts are drastically affecting Ethiopias agriculture and causing severe food shortages.

Natural Resources:
Ethiopia has small reserves of gold, platinum, copper, potash, and natural gas. It has extensive hydropower potential. Time Zone: Local time in Ethiopia is Greenwich Mean Time plus three hours.

Capital City: Addis Ababa

4.
Population:

Socio Cultural aspect of Ethiopian people

As of early 2004, the United Nations estimated Ethiopias population at more than 70 million and growing at rates estimated as between 2.1 and 2.5 percent per year. Density averaged about 62 people per square kilometer but varied widely from region to region. The population is concentrated in the northern and southern highlands, the lowlands in the southeast, south, and west for the most part being far more sparsely inhabited. Only about 15 percent of the population is urbanized, making Ethiopia one of the least urbanized countries in the world. There is little internal migration, but the government is in the midst of relocating some 2 million highland farmers to land at lower elevations to address problems of population pressure and exhausted farming plots, a plan similar to the much larger relocation effort that the military government undertook in the 1980s for the same reasons. During the last three decades, tens of thousands of Ethiopians, many young and educated, have emigrated to Europe and the United States. At the end of 2003, Ethiopia was host to some 112,000 refugees, most of them Sudanese, whereas an estimated 19,000 Ethiopians were refugees or seekers of asylum, most of them residing in Kenya, Europe, or the United States.

Demography:
According to the U.S. Population Reference Bureau, in 2003 the number of births per 1,000 population was 41, the number of deaths, 18. The infant mortality rate per 1,000 live births was 104.5. Life expectancy at birth was 46 years (47 years for females, 45 years for males). According to the United Nations Population Division, Ethiopias population in 2000 fell into the following age-groups: ages 114, 45.9 percent; ages 1559, 49.5 percent; and ages 60 and older, 4.6 percent, making Ethiopia a typical sub-Saharan country with a large proportion of its population under 15 years of age and a large proportion of women within the reproductive years of 1549 years of age. For the years 20002005, the average number of children per woman was estimated at 6.1.

Ethnic Groups and Languages:

Ethnic classification in Ethiopia is difficult because people categorized on the basis of one criterion, such as language, may be divided on the basis of another, such as ethnic identity. Language, however, often is used to classify various groups of peoples. At least 70 languages are spoken as mother tongues, but several predominate. Most belong to the Semitic, Cushitic, or Omotic families of the larger Afro-Asiatic super-language family; a small number belong to the Nilo-Saharan family of languages. The largest Semiticspeaking groups are the Amhara, who speak Amharic, formerly the official language that is still quite widely used, and who constitute perhaps 25 percent of the population; and the Tigray, who speak Tigrinya and account for perhaps 14 percent of Ethiopias people. The Amhara occupy the center of the northern highlands, the Tigray, the far north. Both are plow agriculturalists. Smaller groups include the Gurague, Hareri, and Argobba. Cushitic-speakers include a large number of groups, most of whom live in the southern highlands. Among them is the largest and most widespread of all of Ethiopias ethnic groupsthe Oromo, perhaps 40 percent of the population, who live in the center-west and in the central southern highlands. Some are agriculturalists and others pastoralists. The Oromo language consists of a number of dialects. The Somali occupy the southeastern lowlands; they are pastoralists and are organized into clans and lineages. North of the Somali are the Afar or Denakil, pastoralists who inhabit the hot lowlands between the Red Sea and the northern highlands. In the southwest southern highlands are several groups who speak related languages sometimes called Sidamo languages. The largest of these are the Sidama and the Hadya-Libido, cultivators of ensete and coffee. Finally, in the northern highlands are several small groups known as the Agew, Cushitic-speaking agriculturalists who successfully preserved their ethnic identity in the face of Amhara acculturation during the last two millennia. In 1970 they numbered upwards of 125,000. Among these Agew-speakers are the Awi, Kimant, and Beta Israel (Felasha).

In the far southwest on both sides of the Omo River are perhaps 80 groups of Omotic-speakers, of whom the Welamo are the most numerous. They are hoe cultivators; some specialize in craftwork and weaving. In the far southwest and western borderlands with Sudan are groups who speak Nilo-Saharan languages. They are hoe cultivators and cattle keepers. In the south are the Anuak and the Nuer, who are the most numerous. Farther north are smaller groups, such as the Gumuz and the Berta, and, in western Tigray, the Kunema.

Religion:
No reliable statistics exist on religious affiliation in Ethiopia. Still, clearly, by far the largest faiths are Orthodox Christianity and Islam. Each is thought to constitute perhaps 40 to 45 percent of the population. Orthodoxy was introduced to the ancient Aksumites from the Byzantine world in about 340 A. D., thereafter slowly spreading southward into the northern highlands. Islam was introduced a few centuries later by merchants from Arabia to peoples along the Red Sea coast, spreading thereafter into the center and south. Orthodoxy is most strongly represented among the Tigray and Amhara, Islam among the Somali, Afar, Oromo, particularly those in the southern highlands, Gurague, and Sidama in the southwest. Merchants in major towns also tend to be Muslims. In the east and to an extent in the south, Muslim peoples surround Orthodox Christians. Protestants number perhaps 11 million, constituting up to 10 percent of the population. Smaller groups include Roman Catholics (about 500,000), Eastern Rite Catholics, and Ethiopian Jews (Felasha). A large number of foreign missionaries are active, especially in the south and southwest borderlands. Some Ethiopians still adhere to traditional religious practices and beliefs.

Dress:
Western-style clothing is commonly worn in cities. In rural areas traditional clothing is more common and traditional dress is usually made from an Ethiopian cotton cloth. Men and womens clothing usually covers most of the body. Men and women, even with Western clothing, wear traditional shawls. Some women also wear a traditional headscarf called a shash, which is a cloth that is tied at the neck. This is common among both Muslim and Christian women.

Food:
Regional, ethnic and tribal differences contribute to dietary variation, and eating beliefs and rituals throughout Ethiopia. Some religions also dictate prohibitions concerning food (including pork and other animal products like dairy) and promote fasting at certain times of the year. Ethiopians eat with their right hands rather than with utensils and before eating will wash their hands at the table using a jug of water and a small basin. Generally, the Ethiopian diet (in times of prosperity) consists of: Meat cow, sheep or goat, chicken and fish (from lakes) Vegetables onions, kale, pumpkins, potato, sweet potato, cauliflower, cabbage, red beets and tomatoes Fruit lemons, bananas, pawpaw and oranges Legumes chickpeas, peas, lentils and broad beans (whole, split or as flour) Grains teff, corn, barley, wheat and millet spices and oilseeds and Milk cows milk. Injera is a kind of bread usually made from teff seed, and is described as a sour pancake. Injera forms the major portion of the Ethiopian diet and is eaten with most meals. Pieces of injera are torn off and used to scoop up food. It is seldom eaten on its own. Common drinks in Ethiopia are tela (a local variety of beer), tej (fermented honey wine or mead), tea and coffee. Coffee is one of Ethiopias most abundant crops and is therefore a more common drink. It plays an

important role in social interactions, particularly between women in the village who drink it when they gather together. It is used in a ceremony and marks friendship, respect and hospitality.

Ethiopian Calendar:
For centuries, Ethiopia has followed a calendar, which is based on the Julian calendar as opposed to the Western Gregorian calendar. The Ethiopian year is on average 365.25 days long, causing the calendar to gain a day about every 134 years. The Ethiopian year consists of 365 days, divided into twelve months of thirty days each, plus one additional month of five days and six in leap years. The Ethiopian/Eritrean New Year begins on 11 September and ends the following 10 September. The Ethiopian year also runs almost eight years behind the Western Gregorian year. For example, the Ethiopian year 1983 began on 11 September 1990, according to the Western (Gregorian) calendar, and ended on 10 September 1991. However, Ethiopia has substantially adopted the more universal Gregorian calendar for business and official use.

5.

The Economy of Ethiopia

Ethiopia is one of the poorest countries in the world, with a gross domestic product (GDP) of roughly US$6 billion, a per capita annual income of about US$100, and chronic trade deficits in the early 2000s. The basis of the economy is rained agriculture, which means that crop production fluctuates widely according to yearly rainfall patterns, leaving the country subject to recurrent and often catastrophic drought. Droughts have increased in severity since the 1970s in step not only with shortfalls in crop production but also with burgeoning population growth. Indeed, the increase in population has outstripped the productive capacity of the agricultural sector, creating a structural food deficit even in times of normal or superior production. Services,

including retail trade, public administration, defense, and transportation, constitute the second largest component of the economy. Manufacturing and mining are a distant third and fourth. Within the budget, defense outlays have been high since the early 1990s, most recently because of war with Eritrea from 1998 to 2000, although they have declined since then. The budget has been in deficit since at least the late 1990s, with expenditures regularly exceeding revenues. Shortfalls have been covered by grants and loans from international lending institutions. Ethiopia is heavily dependent on international donor largesse, particularly in times of drought.

Gross Domestic Product (GDP): In 20023 GDP was US$6.5 billion. Per
capita GDP amounted to US$94.0, among the lowest in the world. In 20023 GDP per sector was estimated as follows: agriculture and fishing, 39.4 percent; industry, 11.9 percent; and services, 48.7 percent.

Government Budget:

Largely because of the long-term demands of economic and social development and the short-term impact of recurrent drought, government expenditures have regularly exceeded revenues since the early 1990s. Much of the difference has been made up by foreign assistance. Government revenue has been rising steadily since the late 1990s, reflecting, among other measures, recently improved tax-collection procedures and the substitution of a value-added tax in January 2003 for the former sales tax on transactions of larger enterprises. On the spending side, there has been a marked shift in funding from defense to economic and social programs since 2000 and the conclusion of the war with Eritrea. For 20034, revenue and foreign grants were estimated to have reached ca. US$1.7 billion, up from ca. US$1.5 billion in 20012; spending was estimated at ca. US$2.2 billion, up from ca. US$2 billion in 20012. For 20045, revenue was projected to increase by almost 20 percent, reflecting further rises in both domestic revenues and foreign grants, whereas spending was expected to increase by 14 percent, reflecting increases in outlays for regional administration, infrastructure, and poverty alleviation. Deficits for 20034 and 20045 were in the range of ca. US$500,000.

Agriculture, Forestry, and Fishing:

Agriculture is the most important sector of Ethiopias economy, constituting nearly 40 percent of gross domestic product. The sector provides by far the largest percentage of exports and employs up to 80 percent of the population. About 20 percent of potential arable land is actually cultivated, almost all of it dependent on rainfall. Farming is in the hands of peasants, who cultivate individual plots. All land belongs to the state. In the highlands, grains (barley, corn, teff, and wheat) as well as pulses and oilseeds are the major crops; at lower elevations, sorghum and sugarcane are favored. Ethiopia is home to an estimated 7 million pastoralists who tend a large number of livestocka survey in 2003 counted 35 million cattle, 25 million sheep, and 18 million goats. A large portion of them are found in the dry lowlands of the east, southeast, and

south that are suited to pastoralism but not farming. Two bush crops flourish in the southcoffee, the major export earner, in the southern highlands, and chat, a mild stimulant that is also exported, in the southeastern lowlands. The government has announced plans to boost both grain and livestock production in an effort to address the problem of chronic food shortages. Ethiopia has no significant fishing or forestry industries. Deforestation and destructive farming practices have led to increasing soil erosion and degradation during the last 30 years, especially in the northern highlands. Recurrent droughts and livestock disease have had a severe impact on pastoralism in the southeast and south.

Mining and Minerals:

The mining sector is quite small in Ethiopia. The country has deposits of coal, gemstones, kaolin, iron ore, soda ash, and tantalum, but only gold is mined in significant quantities. In 2001 gold production amounted to some 3.4 tons.

Industry and Manufacturing:

This sector constitutes about 4 percent of the overall economy, although it has shown some growth and diversification in recent years. Much of it is concentrated in Addis Ababa. Food and beverages constitute some 40 percent of the sector, but textiles and leather are also important, the latter especially for the export market. A program to privatize state-owned enterprises has been underway since the late 1990s.

Energy:
Aside from waterpower and forests, Ethiopia is not well endowed with energy sources. The country derives about 90 percent of its electricity needs from hydropower, which means that electricity generation, as with agriculture, is dependent on abundant rainfall. Present installed capacity is rated at about 650 megawatts, with planned expansion to 1,330 megawatts. Less than one-half of Ethiopias towns and cities are connected to the national grid. Plans are afoot to exploit natural gas reserves in the southeastern lowlands, estimated at 4 trillion cubic feet. Petroleum requirements are met via imports of refined products, although some oil is being hauled overland from Sudan. Exploration for gas and oil is underway in the Gambela region bordering Sudan. In general, Ethiopians rely on forests for nearly all of their energy and construction needs; the result has been deforestation of much of the highlands during the last three decades.

Services:
Aside from wholesale and retail trade, transportation, and communications, the services sector consists almost entirely of tourism. Developed in the 1960s, tourism declined greatly during the later 1970s and the 1980s under the military government. Recovery began in the 1990s, but growth has been constrained by the lack of suitable hotels and other infrastructure, despite a boom in construction of small and medium-sized hotels and restaurants, and by the impact of drought, the war with Eritrea, and the specter of terrorism. In 2002 more than 156,000 tourists entered the country, many of them Ethiopians visiting from abroad, spending more than US$77 million.

Labor:
In mid-2002 the United Nations reported that Ethiopias labor force totaled more than 30 million workers, of whom 24.5 million were engaged in agricultural pursuits. A national survey in 1999 gave an unemployment rate of 8 percent for those aged 15 years and above, certainly a misleading figure, given what are high rates of unemployment and underemployment in both rural and urban settings.

Foreign Economic Relations:

Ethiopia has long maintained commercial relations with its immediate neighbors, Sudan and Yemen, and with West European countries, notably Britain, Germany, and Italy. Recently, however, trading relations have broadened somewhat. As of 2002, Ethiopias most important markets are in Europe, especially Germany, Italy, and the United Kingdom, now joined by Japan, all of whom purchase large quantities of coffee, plus Djibouti and Saudi Arabia. In the past, Ethiopias imports came mostly from Europe, especially Italy and Germany, and from India. By 2002, China had become a major source of imports, along with Italy and India, but Saudi Arabia, supplying fuel and refined petroleum products, is by far the largest supplier, providing nearly 29 percent of total imports in terms of value, followed by China and Italy at 6 percent each

and India at 5 percent. Since about 2001, Sudan has begun to supply small volumes of petroleum. In the decade after the return to civilian rule in 1991, Ethiopia established new relationships with international financial institutions, securing funding from the World Bank for economic recovery and reconstruction and implementing structural adjustment programs with the International Monetary Fund (IMF). After slackened funding during the war with Eritrea from 1998 to 2000, the IMF and World Bank resumed assistance aimed broadly at poverty reduction and financial reform, with aid disbursements tied to defined benchmarks. In 2002 the government produced a five-year framework to guide economic development, reform, and poverty reduction that received US$3.6 billion in support from the international donor institutions for the period from mid-2002 to mid-2005. Under these programs, Ethiopia has made substantial progress in shifting expenditures from defense to social and economic sectors and in reforming its banking system, and the government has taken steps to deal with poverty. Important hurdles remain, however, in achieving further financial reforms and fostering sustainable economic growth, and progress to date has depended on large infusions of international funding to cover huge budget deficits.

Exports:
Coffee is Ethiopias major export, accounting for 60 percent or more of average annual export earnings, but its value fluctuates widely depending on worldwide production. Other important exports are hides/skins/leather, the leaves of the chat bush (a mild stimulant popular in Somalia and Yemen), gold, and oilseeds. In 20002001, the National Bank of Ethiopia estimated the largest principal exports by value as: coffee, US$174.7 million; leather and leather products, US$74 million; chat, US$61 million; oilseeds, US$30.7 million; and gold, US$28 million. In 19992000 total exports were valued at US$486 million. In 2000 2001, they dropped to US$441 million, but by 20023 they had rebounded to US$468 million, variations caused largely by fluctuations in world coffee prices. Ethiopias most important markets are in Europe, especially Germany, the United Kingdom, and Italy, and in Japan, all of whom purchase large quantities of coffee. Djibouti and Saudi Arabia are other outlets for Ethiopias exports.

Foreign Aid:
During the post-World War II era, Ethiopia received small amounts of economic development aid from such countries as the United States and Sweden. Such aid disappeared under the military regime except for food aid during the mid1980s. Large aid inflows began in the early 1990s aimed at reconstruction and political stabilization but declined during the war with Eritrea. The post-2000 period, however, has seen a resumption of large disbursements of grants and loans from the United States, individual European nations, and Japan, and from the World Bank, the European Union, and the African Development Bank. In 2001 these funds totaled US$1.6 billion. In 2001 Ethiopia qualified for the World Bank-International Monetary Fund-sponsored highly indebted poor countries (HIPC) debt reduction program, which is designed to reduce or eliminate repayment of bilateral loans from wealthy countries and international lenders

such as the World Bank. In Ethiopias case, the program aims to help stabilize the countrys balance of payments and to free up funds for economic development. A noteworthy advance toward these goals came in 1999, when the successor states to the former Soviet Union, including Russia, cancelled US$5 billion in debt contracted by the military government in and after the later 1970s, a step that cut Ethiopias external debt in half. HIPC relief is expected to total almost US$2 billion.

Fiscal Year:
Ethiopias fiscal year (FY) begins on July 8 and ends on July 7.

Civil Aviation and Airports:

Ethiopia has two international airports in Addis Ababa and Dire Dawa and some 40 airfields elsewhere. Bole International Airport in Addis Ababa handles 95 percent of all international air traffic and 85 percent of domestic flights. A major renovation and expansion of Bole was completed in 2002. In 20002001, Ethiopian Airlines carried nearly 1 million passengers.

6.

Political structure

The Constitution of the Federal Democratic Republic of Ethiopia was adopted by the countrys transitional government in December 1994 and came into force in August 1995. At that time, power also was formally transferred to the newly elected legislature, the Federal Parliamentary Assembly. The constitution provides for a parliamentary form of government and an administration based on nine states. It enshrines the separation of church and state and basic human rights and freedoms, and guarantees that all Ethiopian languages will enjoy equal state recognition, although Amharic is specified as the working language of the federal government. Ethiopia has a tradition of highly personal and strongly centralized government, a pattern the Ethiopian Peoples Revolutionary Democratic Front (the present government) has followed despite constitutional limits on federal power.

Constitution:

Ethiopias present constitution was created and ratified in 1994 by a constituent assembly. The constitution establishes Ethiopia as a federal republic with a parliamentary form of government

Branches of Government:
The legislative branch is made up of a bicameral parliament; the upper chamber is the House of the Federation (108 seats); the lower chamber is the House of Peoples Representatives (548 seats). Members of the upper chamber are elected by the states parliamentary assemblies, whereas members of the lower chamber are elected by popular vote. All recognized national groups are guaranteed representation in the upper house; representation in the lower chamber is on the basis of population, with special set-asides for minorities. Terms in both chambers are five years, with elections last held in May 2000 and scheduled next for May 2005. Legislative power is vested in the House of Peoples Representatives. The executive branch includes the president, prime minister, Council of State, and Council of Ministers. The president is elected by both legislative chambers for a six-year term. The leader of the largest party in the lower chamber becomes prime minister, who submits cabinet ministers for the chambers approval. All ministers serve for the duration of the legislative session. Executive power is in the hands of the prime minister, who is also the commander in chief of the armed forces. The current president is Girma WoldeGiorgis, who has served in that position since 2001. The current prime minister is Meles Zenawi, who has served since August 1995. The judicial branch is composed of federal and state courts. The Federal Supreme Court is the highest court and exercises jurisdiction over all federal matters; lesser federal courts hear cases from the states. The president and vice president of the Federal Supreme Court are recommended by the prime minister and approved by the lower chamber of the legislature.

Administrative Divisions:
Ethiopia is divided into nine ethnically based states: Afar, Amhara, Banishangul/Gumuz, Gambela, Hareri, Oromiya, Somali, Tigray, and Southern Nations, Nationalities, and Peoples, as well as two special city administrations: Addis Ababa and Dire Dawa. The states are subdivided into zones, districts, and sub-districts.

Provincial and Local Government:

Each of the nine states has its own parliamentary assembly, which elects representatives to the upper chamber of the federal parliament, the House of the Federation. Each has taxing powers and its own budget, but in practice, the assemblies have had to rely on the central government for funding.

Electoral System:
Elections for state assemblies and for the House of Peoples Representatives are by universal suffrage at age 18 and secret ballot. A National Election Board prepares and conducts elections for federal and state offices. According to international and local observers, the 2000 national elections were generally fair and free in most areas.

Mass Media:

Radio and television remain under the control of the Ethiopian government. Nine radio broadcast stations, eight AM and one shortwave, are licensed to operate. The major radio broadcasting stations (all AM) are Radio Ethiopia, Radio Torch (private), Radio Voice of One Free Ethiopia, and the Voice of the Revolution of Tigray. The single television broadcast network is Ethiopian Television. In keeping with government policy, radio broadcasts occur in a variety of languages. Print media, because of high poverty levels, low literacy rates, and poor distribution outside of the capital, serve only a small portion of the population. The paucity of distribution is mirrored by a scarcity of diversity in the official press. Since 1991 private newspapers and magazines have started to appear, and this sector of the media market, despite heavy-handed regulation, continues to grow. Major daily newspapers include Addis Zemen, the Daily Monitor, and the Ethiopian Herald.

Foreign Relations:
Ethiopia has engaged in international diplomacy with its neighbors since at least the mid-seventeenth century and with the European world since the midnineteenth century. It was a member of the League of Nations and a founding member of the United Nations (UN). Under Haile Sellassie I, the Organization of African Unity, now the African Union, and the UN Economic Commission for Africa located their headquarters in Addis Ababa. Ethiopia participated in UN missions in Korea (195053) and Congo (196064) and, more recently, in Burundi, Liberia, and Rwanda. Since 1991, and leaving aside Eritrea and Somalia, Ethiopias relations with the African and European communities in general have been constructive and stable. Relations with Eritrea have been hostile since the peace agreement that ended the 19982000 war over their border. An international commissionthe Eritrean-Ethiopian Boundary Commissionproposed a demarcation of the border in April 2002, but Ethiopia has requested modifications of the findings, a position Eritrea rejects. In an effort to develop a regional bloc, Ethiopia settled a long-lasting border dispute with Sudan, returning some land in order to secure access to Port Sudan as an alternative to Djibouti. In Somalia, Ethiopia continues to support groups opposed to the transitional government, and it has sent its forces into the country to track down Ethiopian dissidents and to support friendly factions. Ethiopias relations with Djibouti, which has handled all of Ethiopias land commerce since the loss of Eritrean ports, are by necessity close, despite disagreements over transit fees and policy toward Somalia. Ethiopia, Egypt, Kenya, Sudan, Tanzania, and Uganda are currently engaged in talks about a new agreement to share the waters of the Nile.

Membership in International Organizations:

Ethiopia is a member of the following organizations for international cooperation: the Inter-Governmental Authority on Development, the International Civil Aviation Organization, the International Criminal Police Organization, the International Federation of Red Cross and Red Crescent Societies, the International Fund for Agricultural Development, the International Labor Organization, the Nonaligned Movement, the Organization for the Prohibition of Chemical Weapons, the United Nations (UN) (including subsidiary

UN agencies such as the Conference on Trade and Development, the Food and Agriculture Organization, the United Nations Educational, Scientific, and Cultural Organization, the United Nations High Commissioner for Refugees, and the World Health Organization), and the World Trade Organization. Ethiopia is also a member of the following international lending institutions: the International Bank for Reconstruction and Development (World Bank), the International Development Association, the International Finance Corporation, and the International Monetary Fund. Finally, Ethiopia is a member of the following multilateral African organizations: the African, Caribbean, and Pacific Group of States, the African Development Bank, and the African Union.