Ethiopia

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