To ensure that its resources contribute to the broad, national interest the United States has in promoting sustainable development worldwide and are used most efficiently, the United States Agency for

International Development (USAID) established a set of performance goals. These goals also serve to define the nature and extent of the sustainable development challenge facing a particular country.

Broad-based economic growth, agricultural development and environmental protection are USAID performance goals. In this context, the percentage of Ethiopians living in poverty (46%) is approximately ten percent greater than the level of poverty in other reporting Greater Horn of Africa countries, the countries of Sub-Saharan Africa, and all USAID-assisted countries. It is also approximately twice as high as that of all countries. On the other hand, Ethiopia's agricultural growth rate is on par with that of other Horn and Sub-Saharan countries. However, much of Ethiopia's agricultural growth has come at the expense of its natural resource base rather than through increased agricultural productivity. Ethiopia protects a smaller percentage of its land than the average of other Horn countries and its deforestation rate exceeds that of these countries and all countries by a small margin.

Stabilizing population and protecting human health are also USAID performance goals. In this context, Ethiopia’s total fertility rate of 6.9 is the highest among the Horn countries and 17% above the average for Sub-Saharan countries. It is almost twice as great as the average for USAID-assisted countries. Moreover, Ethiopia's population growth rate exceeds its agricultural growth rate (2.6% vs. 1.9%), portending increasing poverty in the medium- to long-term. With regard to the status of health in Ethiopia, the mortality rate of Ethiopia's under five-year old children (199/1000) is 19% higher than the averaged of other reporting Horn and Sub-Saharan countries, approximately double the average for USAID-assisted countries and three times greater than that for all countries. Given the gap between population and agricultural growth rates, it is not surprising that the percentage of Ethiopian children under five-years of age who are also underweight (47.7%) is substantially higher than that in other Horn, Sub-Saharan and USAID-assisted countries. It is also approximately 2.5 times greater than the percentage of underweight, under five-year olds in all countries. The percentage of births attended by medically trained personnel in Ethiopia is less than half that in other Horn and Sub-Saharan countries, one-third that in USAID-assisted countries and only 19% of that for all countries. Ethiopia's maternal mortality rate, estimated to be 1400/100,000 live births, is substantially higher than those in other Horn and Sub-Saharan countries, about three times higher than in USAID-assisted countries and more than four times greater than in all countries. Finally, the prevalence of HIV/AIDS in Ethiopia is significantly above that in other Horn and Sub-Saharan countries and about six times greater than that in USAID-assisted countries (9.31 vs. 1.57).

Building human capacity through education and training and strengthening democracy and good governance are also USAID goals. Basic education in Ethiopia lags that of other USAID-assisted countries. Approximately 24% of Ethiopia's primary school-age children are enrolled versus the average of 52% in Sub-Saharan countries, 84% in USAID-assisted countries and 91% in all countries. Approximately 51% of the primary cohort in Ethiopia reach grade five versus approximately 70% in Sub-Saharan countries, 79% in USAID assisted countries and 83% in all countries. And, the ratio of female to male primary students in Ethiopia is lower than the average for other reporting Horn, Sub-Saharan and USAID-assisted countries. On the other hand, Ethiopia is as free as all USAID-assisted countries (a score of 2 on the Freedom House Index vs. 2.1), but its civil liberties score, related to the rule of law and human rights, trails that of USAID-assisted and all countries (5 vs. 4.3 and 3.7 respectively).

Given the nature of the development and relief challenge facing Ethiopia, USAID/Ethiopia's long-term strategic goal is to reduce chronic food insecurity including helping to enhance Ethiopia's capacity to respond effectively to emergency food crises with its own resources. The Mission's intermediate-term goals are to increase household incomes and agricultural productivity in a sustainable manner, and to slow Ethiopia's high rate of population growth. To reach these goals, the Mission has chosen to focus on child survival, nutrition, family planning and select infectious diseases, agriculture development, including improvements in agricultural markets, basic education, and governance, with emphases on respect for human rights, the rule of law and the management of public resources. The strategic objectives and intermediate results through which the Mission expects to achieve these goals are summarized, graphically, on the following page. More detailed results frameworks for each objective are presented in Part III. If the Agency and the Africa Bureau expect to achieve the Agency’s performance goals in Africa, then they must maintain a significant development program in Ethiopia given the size of the country and depth of the development challenge.

After the November 1995 elections, which marked the shift from the transition government which replaced the Derg Regime to the current regime, led by the Ethiopian Peoples Republic Democratic Front (EPRDF), the EPRDF laid out its governing agenda in the form of an action plan. The supporting rational for the Government of the Federal Democratic Republic of Ethiopia (GFDRE), is summarized in the following excerpt from the 1995 Action Plan of the Ethiopian Peoples Republic Democratic Front (EPRDF). Ethiopia can have strong popular unity only when it is founded upon the free will of its people. … If Ethiopia is a country of inescapable poverty, endless bloodshed, injustice and oppression; the peoples can never be happy and proud of their national identity as Ethiopians. For all the calls of secessionists to fall on deaf ears and to be able to establish a strong popular unity, we have to ensure continuous growth, lasting peace as well as true democracy. Therefore, for the sake of a strong popular unity, too, we have to ensure fast economic development.

It is impossible to ensure lasting peace without fast economic development and it is equally impossible to have continuous development in the absence of peace. … The absence of democratic and just administration, the national oppression which was dividing the peoples of Ethiopia and the unhealthy relationship with neighboring countries together with poverty and hopelessness were the main causes for the absence of a peaceful condition. Without solving these problems, which are the causes for conflicts, we can not establish a lasting peace and fast economic development. For the sake of peace and fast economic development we have to establish a democratic system in which citizens’ democratic rights are respected. Hence, the government’s fundamental goal is to establish the conditions for continuing peace, unity and stability. Its objectives included rapid, broad-based sustainable economic growth, strengthened systems of democratic and just administration, including an effective judicial system, increased public participation in government, including the decentralization of political authority and responsibility, and expanded access to quality social services, particularly health and education. This agenda is summarized in an USAID-like objective tree graphic, which appears on the following page.

In pursuit of its agenda, the GFDRE developed, initially and in collaboration with donors, a civil service reform program and three sector development programs; health, education and roads. Subsequently, it also drafted a national food security strategy and delegated authority for food security to the regional governments.

Health. The Health Sector Development Program (HSDP), finalized in 1998, is a 20-year program with four five-year phases for implementing the National Health Policy and is designed to contribute to the Government's specific objectives for the health sector. Implementation will coordinate government and donor resources for sectoral development as well as promote the participation of the private sector, NGOs and local communities. The HSDP strives to develop a health system which will: a) improve the coverage and quality of health services, b) be primarily implemented and managed by regional, zonal and woreda level health officials, and c) be financially sustainable.

USAID/Ethiopia participated in the development of the HSDP. The Mission’s proposed new strategy will contribute to the achievement of HSDP objectives by improving access to and quality of the delivery of child survival and reproductive health services (i.e., family planning, maternal health and prevention/mitigation of STI/HIV/AIDS). It will also contribute to the financial sustainability of improved health care its focus on improving the efficiency of health sector resources. Finally, the new strategy supports the implementation, monitoring and evaluation of the HSDP by strengthening the planning and budgetary processes, and data collection through the Demographic and Health Survey (DHS).

USAID/Ethiopia’s on-going program has also supported the HSDP. For example, in response to USAID non-project assistance, public investment in health care increased from 9% of the public budget in 1994 to 17.8% in 1998. Investments in primary and preventive health care alone accounted for 50% of the public health budget in 1998. Since then, public expenditures on primary health and basic education have been negatively impacted by the Ethio-Eritrean border conflict.

Increased investments in primary health have been accompanied by enhanced performance. Successful National Immunization Days have vaccinated approximately 90% of Ethiopian children under five years of age against polio. Approximately 12 million children under five yeas of age were vaccinated during the 1999 NID. A 1998 national knowledge and practice (KAP) study found that 90% of sexually active Ethiopians were aware of the effectiveness of condoms to prevent new infections from HIV/AIDS and other sexually transmitted diseases. Among users, 50% of women, 80% of men, and 90% of commercial sex workers (CSWs) stated they used condoms to protect themselves from HIV/AIDS. The contraceptive prevalence rate increased 25% between 1997 and 1998.

Education. The government’s aim for the national Education Sector Development Program (ESDP) is "to improve overall education attainment of the population while achieving greater social equity and achieve universal education by 2015." The specific objectives for the first five-year ESDP investment plan include a rapid expansion of primary education to accommodate an anticipated increase from 3.1 to 7.0 million primary school pupils. Concurrently, there is to be improved gender equity by improving the enrollment ratio between boys and girls and between urban and rural populations. Institutional development and capacities will be strengthened to improve the efficiency of the primary system, and overall public spending on education will be increased to an anticipated 19% of the national budget or 4.6% of GDP. Additionally, there is to be a concerted effort to improve the quality and relevance of the primary system by providing books and instructional materials and upgrading the skills of teachers.

USAID/Ethiopia participated in the development and implementation of the ESDP. Results to date have been significant. Public investments in education almost doubled between 1994 and 1999, increasing from 1.1 billion Ethiopian Birr in 1994 to 2.1 billion Ethiopian Birr in 1998 (US$138.0 million vs. $260 million respectively at today’s exchange rate) due, in part, to USAID non-project assistance. In 1999, the proportion of the public education budget spent on basic education surpassed 50%. Similarly, primary school enrollments almost doubled from approximately 24% in 1996 to 46% in 1999. Much of this growth was due to increased male enrollments, up from 28% in 1996 to 56% in 1998, but female enrollments also increased to 35% from 19% five years earlier. Despite the increase in female enrollments, the female/male enrollment ratio deteriorated slightly between 1996 and 1999 (0.68 vs. 0.60 respectively). The percentage of children reaching Grade 5 also deteriorated over the past five years, falling to 42% for boys and 44% for girls.

The Roads Sector Development Program (RSDP) is a ten-year, two-phase program designed to upgrade existing national trunk roads and approximately 13,000 kilometers of regional roads. The RSDPs objectives are to reduce transport costs, increase access in rural areas, and link food deficit and surplus areas. Approximately $2.1 billion has been pledged to the RSDP with the primary donors being the World Bank and the European Union. The RSDP includes funds for the construction of roads, institutional capacity building (e.g., increased ability to plan rural road networks and plan for and undertake road maintenance), and policy development (e.g., roads financing and roads safety) at the regional and national level. The program is in its first five-year phase, which focuses on upgrading key roads between major cities and sections of the country. The World Bank has signed thirteen contracts for the required work with international contractors. The contractors are in their mobilization state. USAID/Ethiopia is not a participant in the RSDP, although there is potential for linking Title II food for work programs with regional and zonal level programs where integrated road investment plans have been developed.

In 1996, the GFDRE developed a new national food security strategy consisting of three pillars: (1) increased availability through policies which encourage expanded production while reducing marketing costs and promoting competition; (2) increased access in the chronically food insecure districts (woreda) through expanded employment and income opportunities; and (3) targeted transfers to selected households with special needs. The GFDRE has turned primary responsibility for achieving food security strategy over to the regional governments. Generally speaking, the focus of these regional programs is on bringing chronically food insecure households into the economic mainstream by improving productivity, providing opportunities for diversifying productive activities, and minimizing susceptibility to shocks. The implementation of regional food security programs is still in the early stage.

The FY 2000-2002 Mission Performance Plan (MPP) identifies regional stability as the overriding U.S. national interest in the Greater Horn of Africa. Given the immediacy of the current drought and the expectation that recovery will extend into and possibly beyond 2001, the MPP makes an effective response to the emergency the Mission’s second priority. The MPP notes that Ethiopians see respect for human rights and the rule of law and the evolution of a federal system of government as essential elements of the country’s political culture, and makes support for democracy and governance its third priority. In a departure from previous MPPs, the FY 2000-2002 MPP highlights the issues of health and population, and makes the protection of human health, slowing the spread of infectious diseases, especially HIV/AIDS, and stabilizing population the Mission'’ fourth priority. Its fifth priority is to promote broad-based economic growth. Expanding U.S. exports to Ethiopia, meeting the needs of American citizens in Ethiopia, support for counter-terrorism and environmental protection, in this order, are the Mission’s remaining priorities.

In addition to the general U.S. national interests identified in the MPP, because of its location, the U.S. has more specific interests in Ethiopia through the Greater Horn of Africa Initiative (GHAI). In this regard, the proposed USAID/Ethiopia strategy has been designed to conform to the objectives of the GHAI program. Its long-term goal, to reduce chronic food insecurity, is consistent with the GHAI objective of strengthening African capacity to enhance food security. The Mission’s proposed intermediate results and activities under SO 3, rural household production and productivity increased, and SO 4, family health improved, are consistent with the GHAI emphasis on the availability of, access to, and the utilization of food. Similarly, the Mission believes that its proposed intermediate results and activities under SO 1, quality of justice enhanced, and SO 2, the management of public resources improved, plus those activities under its other objectives which promote broad-based economic growth respond to the particular sources of internal and external conflict faced by Ethiopia and the GHAI objective of reducing the potential for regional conflict. Finally, as noted below, USAID/Ethiopia’s proposed strategy treats information technology and communication as a crosscutting theme, to be emphasized and supported as appropriate under each strategic objective contributing, thereby, to the GHAI objective of improving regional access to analytical information.

USAID/Ethiopia has identified five crosscutting areas where it will try to achieve results under all of its strategic objectives. Teams have been established to define and monitor the impact of each objective on (1) nutrition, (2) gender, (3) human and institutional capacity development, (4) civil participation, and (5) information and communications technology.

In Ethiopia, 64% of children under the age of five years old are stunted. It has been estimated that: (1) 58% of all child deaths are attributable to protein-energy malnutrition; (2) 56% of infants are sub-optimally breast-fed and that 14% of infant deaths are attributable to poor breast-feeding practices; and (3) 44% of children under the age of five suffer from sub-clinical Vitamin A deficiency and that 25% of child deaths are attributable to this problem. Although the data are not as well developed as that for protein-energy malnutrition, or Vitamin A deficiencies, it is reasonable to extrapolate from the relatively high incidence of goiter disease in Ethiopia (estimated at 22%) that Iodine deficiency is another critical problem facing Ethiopia’s children and mothers.

To address these issues, through SO 4, the Mission will undertake activities to significantly improve maternal nutrition during pregnancy and lactation, including the distribution of iodized oil capsules, high dose Vitamin A capsules, and iron-folate supplements. It will also undertake activities to promote optimal breast-feeding practices for children aged zero to 24 months and to distribute Vitamin A supplements to children aged six to 72 months. More generally, it will continue to support immunization programs and parasite control programs and expand its work with regard to malaria control, environmental sanitation, and access to clean water to support imore targeted nutritional efforts. The Mission will also strengthen the nutritional instruction and learning components of its basic education program (SO 5) and support an expanded nutritional research and extension services targeted on women and children through SO 3. Under SO 1 the Mission is addressing human rights and will focus on advocacy for access to food as a basic human right and the implementation of policy dialogue for delaying early marriage for girls and extending maternity leave. The framework on the following page summarizes those elements of the Mission’s program, which contribute to improved food "utilization." Additional detail is provided in the results framework for each contributing strategic objective.

Comparative statistics on the relative impact of development on Ethiopian men and women are relatively rare and somewhat dated. As in most countries, Ethiopian women live longer than men do by about seven years, but they have, on average, 57% fewer years of schooling. Female primary and secondary school enrollments lag those of males by about 25%, while female enrollment in higher education is less than a quarter of the male enrollment. Generally speaking, Ethiopian women trail those in all developing countries on these indicators. Illiteracy rates for Ethiopian women hover at just over 70% for women nationally and reach as high as 94% for women in the Afar region. It is estimated that rural women work between fifteen and eighteen hours a day, placing severe constraints on their ability to access training or skill enhancement opportunities.

Traditionally, USAID/Ethiopia has stressed gender equality in its basic education program. This emphasis has taken the form of affirmative action programs to increase female enrollments in teacher training institutes and colleges and to provide a supportive environment for women enrolled in these schools. As a result, between 1995 and 1999, female enrollment and retention in teacher training programs grew 10% in the USAID-focus regions of Tigray and the Southern Nations, Nationalities and Peoples (SNNPR), reaching 40% and 95% respectively. The number of active female teachers increased from 26% in 1994 to 28% in 1999 in the Mission’s focus regions for education. The Mission’s education program also provides small grants to communities which agree to initiate activities designed to enroll more girls and keep them in school longer. As a result, the female dropout rate among 60% of participating community schools in Tigray and 54% in SNNPR is below the national average.

USAID/Ethiopia will continue to emphasize gender equality in its education and capacity building activities, but give increased attention to other aspects of women’s social, economic and political empowerment. For example, agricultural research under SO3 will look for labor saving technologies that can reduce the burden women carry and the home extension service system will be encouraged to transfer these technologies directly to women. Additionally, women will be provided with business skills training and micro-enterprise opportunities for women will be expanded. In order to facilitate these activities rural credit and savings institutions will be supported to directly provide services to women. Ethiopian women face particular problems with regard to nutrition. In response, the Mission has incorporated IR 4.1 to address specific protein energy and micro-nutrient deficiencies (e.g., vitamin A and iron) among pregnant and lactating women and children. And, IR 1.3, the role of courts in the enforcement of human rights, a new area for the Mission’s program, will give specific attention to issues of law which impact on the lives of Ethiopian women. The objectives tree on the following page highlights those aspects of the Mission’s portfolio that contribute to balancing the gender impacts of development. Additional detail is provided in the results frameworks for each objective. These frameworks are presented in Part III of the strategic plan.

Building human capacity through education and training has long been an important Agency goal. This Agency goal compliments and supports the GFDRE’s own emphasis on human and institutional capacity building as articulated in its "Capacity building Strategy and Program Framework." This framework states that "capacity building is central to the on-going socio-economic development and democratization of the country. It is . . . imperative that an overall capacity building program [be] developed." It also notes that "capacity building involves developing human resources, building and strengthening institutions, establishing effective working practices and combining these three aspects." Discussions with the government, including the Prime Minister, have repeatedly stressed the need to develop the formal and informal systems and institutions within Ethiopia needed to expand personal opportunities and improve the abilities of individuals and institutions to contribute to the sustainable political, economic and social development of the nation.

However, Ethiopia has also instituted a policy of regionalization, which involves establishing Regional Councils of Representatives with tax and budgetary authority and devolving real political power and responsibility for social services and development to local government bodies. This responsibility of decentralized administrations for the provision of basic social services at region, zone, and woreda (district) levels envisages a high level of community participation and management. This devolution of responsibility and the expectation of local involvement has greatly complicated and expanded the need for human and institutional capacity development.

Several recent studies have also underscored the need for building capacity, including the recent Public Expenditure Review, which concluded that the critical public resource constraint is utilization, stemming from a lack of capacity. Similarly, the second Annual Progress Review of the national health and education sector development programs in April 2000 reconfirmed a lack of capacity, at virtually all levels, needed for an effective implementation of the programs.

The government is cognizant of the enormity of the challenge, and has instituted a comprehensive Civil Service Reform Program, part of which is designed to address the issue. There remains however, a similar need to develop capacity within the non-public sector, including the capacities of NGOs, community-based organizations (CBOs), and other civil society organizations (CSOs), which can provide leadership and technical skills for the nation’s development.

USAID has been involved in human and institutional development in several sectors since the revival of our bilateral program following the change of government in 1991. USAID will continue to use this key development tool as an integral part of our support program for the coming strategic planning period, using a mix of technical assistance, research, training, and physical strengthening of Ethiopian institutions. Capacity development efforts will remain integral to individual strategic objective efforts, but will emphasize the transformation and improvement of local institutions to enable Ethiopia to sustainably develop its own human capacity. USAID capacity development efforts will emphasize links between tertiary education institutions in Ethiopia, within the region, and with US institutions to provide much needed technical expertise to strengthen Ethiopian institutions and provide a conduit for new ideas, methodologies, and technologies. USAID will utilize the skills provided by the IFESH Teachers for Africa volunteer program in a coordinated way to support those post-secondary training institutions in support of our ISP and proposed strategic objectives as well as to improve the gender imbalance in Ethiopian capacity. USAID efforts will also work to expand access and increase utilization of information and communications technology (ICT) and telecommunications services to enable broad and equitable access to the information required for successful functioning in political, economic, and social spheres. Without such access, individuals, communities and societies will be increasingly disadvantaged in the 21^st century.

SO2, management of public financial resources improved, is essentially a capacity building strategic objective. Training programs for civil servants of government institutions at all levels will be conducted with assistance of TA and regional management institutes. Institutional support to the national civil service college and the regional management institutes will also be provided. Training to senior public sector managers to increase their awareness in the new financial management changes and improvements will be provided both locally and abroad. There will be extensive development of systems that affect the allocation, execution and control of public finances. Procedure manuals that govern the different facets of the management of public resources will be either developed or revised, and put into operation.

SO3 focuses on building human and institutional capacity in several areas related to increasing rural household production and productivity. These include developing skills related to: (1) promote agricultural market competition; (2) better integrate agricultural input and output markets; (3) support micro-enterprise development in rural areas; (4) strengthen agricultural research systems; and (5) to improve the dissemination of technology information. The basic approach is to provide technical assistance and training (both formal and informal) to build individual skills at levels ranging from rural households to professional, and to develop institutional support systems to contribute to the objective. Links via ICT to Ethiopian institutions with the International Agricultural Research Centers (IARCs) and potentially with US and African regional universities and research networks will be facilitated and supported. Particular attention will be given to developing the capacity of women at all levels to contribute to the objective.

A basic theme underlying the health program under SO4 is to enhance government capacity to plan for, mobilize resources and deliver quality health services. To this effect training, commodity procurement and technical assistance are provided at regional as well as national levels. Training is the key component of capacity building. Support is given to training in technical areas (such as pre-service and in service training) as well as in areas related to system strengthening (planning, budgeting and management, HMIS). The objective of training is geared towards human resource development and strengthening the institutions that produce primary care providers. To address the first component, human resource development, the focus will be on creating a pool of trained personnel (under the Regional Training Centers) to improve the skills of service providers as well as planners and managers of health services. The second component, institutional strengthening, will be achieved through support to Health Professional Training Institutes.

SO 6 strives to ensure that the Ethiopian government is capable of mitigating potential human and other costs of natural and man-made crises in a sustainable manner. Through the Strengthening Emergency Response Ability (SERA) Project, USAID has already enhanced the capacity of the Ethiopian Disaster Prevention and Preparedness Commission (DPPC) to prepare for and respond to emergencies. Activities undertaken in this regard include assistance to develop vulnerability profiles of selected major food insecure regions in Ethiopia, the provision of computers and other equipment along with the necessary skills training to the personnel in charge emergency responses. . In addition, the Famine and Early Warning System (FEWS) office at USAID provides technical assistance to strengthen the DPPC’s early warning unit in terms of information management and monitoring system. Similarly, early warning information provided by non-governmental organizations working with DPPC and USAID/Ethiopia has helped build the capacity of these organizations to respond to emergencies also. SO 6 will continue to undertake such capacity building activities.

I.D.4. Civil Participation.

Ethiopians have a rich tradition of organizing to address community problems. It has been estimated that there are about 200,000 organizations in Ethiopia. The most common form of organization is the iddir. Iddirs are usually formed among villagers, business groups, extended family members or neighbors to share burdens associated with death and bereavement. Another common form of association among individuals is the ikub. Typically, ikubs function as "savings clubs" whose members make regular, voluntary contributions. A member’s total contribution is returned as a lump-sum payment on a regular, cyclical schedule, thereby enabling members to meet extraordinary financial needs. Iddirs and ikubs serve to meet the needs of their individual members and tend to be relatively informal organizations. Another set of organizations intended to serve the needs of unique sets of individuals are those which follow ethnic lines, such as the Amhara Development Organization, the Orominya Development Organization or the Tigray Development Association. These groups tend to be larger, more formal, registered with the Ministry of Justice, and include members living outside the home regions of these groups as well as overseas.

There are also a number of organizations formed to address the needs of their communities. Such groups include committees formed to petition government for roads, schools, clinics and other community services. While many such groups are formed on an ad hoc basis in response to a particular problem, others have a more permanent function. Local school committees, for example, are recognized by the community, school administration and teachers as having a role in school management. Another common community-oriented organization is the "council of elders" or schimagelis. The structure, membership and authorities of elders councils vary by region and group in Ethiopia, but the essential function of all such groups is to manage or resolve conflict within and among families in a community and between communities. In modern Ethiopia, elders councils are linked to the judicial system which uses them as neutral arbitrators in select family law/commercial dispute cases.

In the post-Derg period, the strong organizational base of Ethiopian society coupled with Constitutional provisions encouraging free association to foster the emergence of new groups addressing individual and/or community needs. The term "civil society" occurs with increasing frequency in the public discourse of representatives of government, the private sector, and non-governmental organizations. The second action plan of the EPRDF, covering the period 2000-2005, recognizes the "key role in enhancing the democratization process" of "peoples organizations or civil society" and contains a commitment to encourage people to "participate in professional organizations, mass organizations and non-governmental organizations with a view to getting their interests addressed." It also contains a commitment to creating the legal and political climate for such organizations to be established and to maintain their independence.

Foremost among such groups are the re-structured farmer cooperatives. Under the Derg, farmers were to be formed into producer cooperatives whose members were to receive preferential access to credit, fertilizer, improved seed and a variety of consumer items. Producer cooperatives were not favored by farmers and, after ten years of promotion by the Derg regime, only 255 such organizations were registered. However, under Proclamation No. 147 promulgated by the current government in 1998, more than 300 farmer cooperatives have been reformed according to principles of good commercial practice and democratic management. These cooperatives and a growing number of cooperative associations are rapidly becoming effective suppliers of agriculture inputs and farmer services, a significant market force, and good sources of dividend income for members. In this way, they are serving the economic needs of individual members as iddirs and ikubs have done for generations of Ethiopians. USAID/Ethiopia supported development of the Proclamation 147/98 and has provided technical assistance and training to help re-structure farmer cooperatives along commercial and democratic lines. Its support for cooperative restructuring will be expanded under its proposed new SO 3 and IR 3.2.

Other social organizations that have gained vitality in the post-Derg period are Ethiopian Non Governmental Organizations (ENGOs). Some of these, such as the Relief Society of Tigray (REST), Tigray Development Association (TDA), or the Endowment Fund for the Rehabilitation of Tigray (EFFORT) have their roots in the struggle against the Derg and enjoy close relations with regional governments, while others operate at a greater distance from the government. Some ENGOs are quite large and well organized. Others, such as HUNDEE (Oromo Grassroots Development Organization) and Propride, are relatively new and face organizational challenges. The larger ENGOs manage what are essentially integrated community development programs. Some of the newer and smaller ENGOs target their efforts on a smaller range of community services such as family planning or non-formal education.

USAID/Ethiopia has supported the institutional development of ENGOs through capacity building technical assistance, training and commodities and small program grants to build their implementation skills. It has also supported ENGOs in their dialogue with the government about their role, rights, and responsibilities within Ethiopian society. USAID/Ethiopia expects to continue to support ENGOs in their dialogue with the government under its new strategy and to utilize their services, as appropriate, achieve its strategic objectives. This means that future ENGO capacity-building and program support grants will be directly related to specific strategic objectives and funded accordingly. This will be especially true with regard to the role of ENGOs in improved family health (see IRs 4.2 and 4.5) and basic education (see IR 5.3). ENGO capacity-building, under the Mission’s strategic objectives, will include training and support in such generic areas as project design and management, strategic planning and management, financial management and fundraising techniques to enhance the capacity of ENGOs to be effective service providers.

Within the ENGO community, in response to the government’s emphasis on human rights and public participation, a sub-set of organizations concerned with government policy has also emerged. This sub-set includes professional organizations such as Ethiopian Women Lawyers Association, business groups such as the Addis Ababa Chamber of Commerce, labor groups such as the Conference of Ethiopian Trade Unions, academic groups such as the Ethiopian Economics Association, think tanks such as the Forum for Social Studies, and human rights advocacy groups such as the Peace and Development Committee and Ethiopian Human Rights Council. Such groups have in common the desire to give voice to the voiceless whom they represent within the framework of Ethiopia’s new constitution. USAID/Ethiopia’s proposed strategy will look for ways to support the right of these groups and the individuals they represent through appropriate participation in the policy process and strengthening the role of courts in the enforcement of human rights (see IR 1.3).

A fourth group of social organizations to receive increased attention under USAID/Ethiopia’s proposed strategy is those based within individual communities. Under its prior strategy, USAID/Ethiopia gained some experience with community-based organizations (CBOs) through its community school grants program. This program was designed to encourage greater community involvement in the management of local primary schools as a means to increase female enrollments and completion. It has proven successful in that female enrollments in participating communities are, on the average, 5% higher than the average of non-participating communities. USAID/Ethiopia will seek ways to expand this program. It will also look for opportunities to use a similar community grants program to address other issues, such as the management of natural resources, the prevention and/or treatment of HIV/AIDS, or the improvement of basic education (see IRs 3.4 and 3.5, 4.4, 5.3, and 6.3).

Finally, USAID/Ethiopia recognizes the program funding constraints faced by ENGOs as well as the importance to new organizations of sharing experiences and lessons learned. Accordingly, as appropriate, the Mission will explore ways to expand competitive grant funding mechanisms for such groups and support networking activities among ENGOs, CBOs and other components of Civil Society.

Ready access to information, be it knowledge of improved production technologies, health practices, education, adequate resource allocation, or, data for producing timely drought and famine predictions, is fundamental to increasing food security. Accordingly, USAID/Ethiopia will support increased use of information and communication technologies (ICT) through each of its strategic objectives. The flowchart (upper section) and matrix (SO activities) on the following page illustrates how it plans to do so.

The matrix shows common ICT themes across all SOs and charts specific contributions or conditions for achieving their stated objectives. The most important commonalities across all SOs are the need for networking, internet access and the provision of data processing hardware, software and training. These issues will be addressed by each objective in the following ways.

SO 1 and SO 2, for example, place a heavy emphasis on building human and institutional capacity quickly. Accordingly, these objectives will exploit ICT to promote professional networking and the exchange of information. SO 1 will also explore ways to use ICT to manage conflict. Specifically, it will explore the development of a communications system that could link ethnic elder groups with remotely sensed range conditions allowing for common allocation decisions to be made, and transmit their authority and decisions to the pastoralists in the field.

A rapid expansion of applied agricultural research and extension is a necessary condition for the success of SO 3. Hence, this objective will explore the feasibility of additional electronic communication linkages in the research and extension sectors. In collaboration with SO 6, it will explore a national version of something similar to IRI’s Drought Monitoring Center to map the micro-climates and diverse range of afro-ecological zones in Ethiopia needed to improve disaster forecasting and by extension agricultural research planning. This initiative is in line with the phase IV FEWS design to increase support for national data collection, analysis and information dissemination that assists public and private decision-makers in planning and implementing appropriate emergency responses.

SO 4 will expand its use of ICT to deliver reproductive health messages and train health professionals. It will also explore ICT as means to public health institutions permitting, thereby, a greater sharing of health information and diagnostic skills. SO 4 will also help upgrade the networking capacity the 33 NGO members of the Consortium of Family Planning. SO 5 will consider expanding the Southern Peoples Region Health Management Information System nationally and add outside, electronic linkage.

SO 5 will provide computer equipment and training to network teacher institutes and colleges throughout Ethiopia. It will also support an on-line working group and web-site dedicated to curriculum development and a more effective national examination system. It will continue its support to for a LAN network within the Ministry of Education used to monitor the performance of the Education Sector Development Program (ESDP). It will experiment with digital radios use for interactive in-service training and for English language and mathematics instruction at the primary level. SO 5 will also facilitate Ethiopian participation in the Leland Initiative’s Association for the Development of Education in Africa Connectivity Project

The success of all such activities, however, depends upon a more favorable policy environment. Although reforms are underway, currently, the GFDRE owns and operates the only public ISP in Ethiopia. It is limited to one node and can service a maximum of 2,500 subscribers in limited areas of the country. As a result, costs are high and accessibility is severely limited. Legislation has been passed providing for private ISPs, but implementation is in limbo pending the development of a supporting regulatory framework. The GFDRE has also funded a program to install 300 vsats in county seat towns linking them to the telephone system. USAID/Ethiopia will support GFDRE efforts to develop an appropriate regulatory environment by:

• using available mission and central resources for necessary studies;
• engaging in high level discussion with the GFDRE; and
• taking leadership and coordinate donors and other interested parties to discuss options for accelerating progress.

Other donors have expressed a high level of interest in expanding ICT in Ethiopia. In 1998, the UNDP signed a partnership agreement with the GFDRE to provide equipment and training for additional nodes throughout the country. Implementation of the UNDP agreement, however, has been slow. ECA initiate an email dial-up system, serving 3000 customers, but the Ethiopian Telecommunications Corporation (ETC) shut down this system in 1996. After discussions with the ETC, ECA was recently allowed to resume the service and is currently developing a business plan for further ICT activities including networking, demonstration center, distance learning. The World Bank is assisting in the networking of the Civil Service College departments. Up and running are full internet and video conferencing operations in Addis. There are also plans to extend one-way video learning to 10-14 regional centers in the next few years. Longer-term plans are to extend internet and two-way conferencing to the regional centers.

The FAO is currently designing a National Agricultural Information System that will link federal, regional, zonal and some county agricultural and selected food security departments via an intranet/WAN using vsats, leased lines and dial-up. The British Council, through Zonal governments, is experimenting with dial-up and on-site cyber cafés. Although the service seems to be popular, it is constrained by bandwidth and legal limitations.

Over the course of its national formation, Ethiopia has been shaped by conflict originating from both domestic and international sources. At times, these sources have reinforced each other. Regardless of the source, conflict deflects domestic resources from development investments into police and/or military expenditures. The goal is to use development resources in ways, which reduce police and military expenditures.

Until 1990s, domestic conflicts were largely the result of repressive, central political regimes, such as the Derg. More recently, they reflect competition among diverse social groups. For example, in the Southern Nations, Nationalities and Peoples Region (SNNPR), the members of three language groups protested the use of a new language synthesized from their languages, as the medium of instruction in the schools. The protest turned deadly when local police fired upon students. It was resolved when the federal government, specifically, the Prime Minister, acknowledged Ethiopians have a right to learn and work in their individual languages, and admitted the effort by local officials to enforce the use of a new language without full consultation with and the consent of those effected was a mistake. The incident served to reinforce the sanctity of national identities and rights as a cornerstone of post-Derg Ethiopia and the willingness of the federal government to intervene at the local level to ensure this principle. Many Ethiopians who witnessed these past repressive regimes and have thought about how to achieve internal harmony among all Ethiopians now believe the threat of domestic conflict can be reduced through reforms based on the following principles.

(1) A More Inclusive and Open Society: This is the belief that all Ethiopian citizens share a common set of rights, and that all social, economic and political institutions are accessible to and serve all citizens equally regardless of the individual’s identity as a member of a particular nation, nationality or people indigenous to Ethiopia or their gender. The Constitution of the Federal Democratic Republic of Ethiopia guarantees fundamental human rights based on international covenants. Among the rights guaranteed are equal protection under law and equality before the law; freedom of speech, expression and association; freedom of religion, belief and opinion; and the right to hold property. In short, the Ethiopian Constitution establishes the basis for a new social contract and the evolution of new social, economic and political institutions. Constitutional principles, however, must be converted to laws and Ethiopians must be aware of and able to express their rights under law if Ethiopian society and its institutions are to become more inclusive and open.

1. A Greater Reliance on the Rule of Law: Fundamental human and civil rights are preserved through the rule of law and enforced by an impartial judicial system. During the Derg Regime, the judicial system was made subservient to political ends and basic rights were ignored. The Constitution of the Federal Democratic Republic of Ethiopia, on the other hand, establishes the judiciary as an independent branch of government at both the federal and regional (state) level. As such, it acts as a countervailing power to the executive and legislative branches of governments.
2. Federalism: That is, a representative political system with responsibility for social and economic development progressively devolved to elected regional and local governments with corresponding authority to raise and manage public resources for these purposes.
3. Economic Growth: The development of a market-based, private-sector led economy to ensure broad-based and participatory growth. Subsequently, elected governments added expanded access to education and health care to promote more rapid economic growth and to address critical social inequities and open opportunities for more Ethiopians to participate in a more open economy and society.

In the short-term, internal harmony depends upon two factors, increased respect for human rights and the rule of law, on the one hand, and, on the other, the success of democratic federalism. Respect for human rights and the rule of law depends upon the evolution of an independent and efficient judicial system as intended by the Ethiopian Constitution. Through its proposed SO 1, the quality of justice enhanced, USAID/Ethiopia will assist in the growth of an independent and efficient judicial system. Similarly, federalism depends on the perception, by Ethiopians, that public resources are allocated fairly among and within regions, and that the regions use available resources in ways that benefit all citizens equitably.

Regions vary widely in their capacity to plan and implement development programs. For historical reasons, those with the greater capacity constraints are the Somali, Afar and Benshangul-Gumuz regions. Those with greater capacity are Amhara, Oromiya and Tigray, but, even in these regions, trained and experienced officials are in short supply. Hence, in the short-term, although resource allocations may be reasonably fair, results, because of varying capacity constraints, are less likely to so leading to a perception of an imbalance among regions. Accordingly, USAID/Ethiopia has adopted a strategic objective related to the efficient utilization of public resources, and has included capacity-building intermediate results into each of its other objectives.

II.D.6.a.2: Longer-term Opportunities.

Over the longer-term, broad-based economic growth is expected to "expand the resource pie" and lessen economic competition among Ethiopia’s social and ethnic groups. The GFDRE has adopted a strategy it describes as agriculture-led, industrial development. This strategy is based on the fact that approximately 85% of population derives its livelihood from agriculture, and other sectors will not progress until the agricultural growth rate is increased. The government also recognizes that broad-based economic growth is a matter of getting policies right and expanding the private sector. However, private sector development is at its nascent stage, and the government has not yet fully aligned its laws and regulations with a market-led strategy. Hence substantial involvement of the government still exists. Moreover, privatization of previously state owned institutions is moving slowly. There is also uneven access to markets and the provision of privileges, which creates tension and leads to unfair competition between the different players in the sector. The so-called politically affiliated companies dominate certain markets. There is also a regional imbalance of investment within Ethiopia. Despite the clearly stated objective of the government to undo regional imbalance in economic growth, new investment is still attracted to areas where sufficient infrastructure is available and the demand for goods and services is more concentrated. These issues apparently figure more in investors’ decisions about where to locate their projects than tax and other incentives.

Accordingly, USAID/Ethiopia has adopted an objective to increase the incomes of rural households through policy reforms at the national and regional levels and the dissemination of new technologies intended to increase household production and productivity and the efficiencies of agricultural markets. With regard to private sector development, USAID proposes to support the establishment of business oriented agricultural cooperatives that will have a strong hold in the agricultural market. To avoid the risk of establishing monopolies, agricultural input retailers will be supported to be viable business entities through training programs in modern business skills. In other areas of Mission assistance, e.g., health, the Mission also supports policy research to identify constraints to private sector investment.

Ethiopia is currently engaged in a conflict with Eritrea about the demarcation of the countries’ shared border and associated issues including cross-border trade. Historically, Ethiopia’s borders have generated open conflict, particularly between and among groups that have traditionally had access to resources on both sides of a border. Given that the border areas shared by Ethiopia and its neighbors are among the least developed and occupied by social groups (e.g., tribes, clans) with loyalties which cross borders, border areas lend themselves to conflict.

The Transition Government of Ethiopia, which followed the Derg Regime in 1991, recognized that peace and harmony within Ethiopia depended upon Ethiopia’s peaceful coexistence with its neighbors. The Ethio-Kenya Joint Commission, established in 1964, has enabled both governments to address cross-border issues in the southern part of Ethiopia in a relatively peaceful manner. Although post-Derg Ethiopian governments have tried to establish similar groups within the context of existing joint commissions with other neighboring countries, no other Ethiopian borders have lent themselves to a similar relationship. Nevertheless, Ethiopia maintains a de facto relationship with Somaliland as one means of reducing the potential for conflict along the undemarcated border shared by these countries. And, through its participation in the conflict management initiatives of the Inter-governmental Development Association (IGAD), Ethiopia has engaged in discussions directed towards the peaceful resolution of the civil wars in Somalia and the Sudan.

In the longer term, the potential for border conflict can be reduced by development programs which improve the quality of life of those living in the border areas and create incentives for the peaceful resolution of disputes. In the short term, the risk of violent conflict can be reduced by strengthening and/or restoring traditional methods of conflict management, including mechanisms that involve parties from both sides of the border.

USAID’s proposed strategy includes two programs designed to reduce the threat of border conflict. The principle underlying both of these programs links development activities to government-to-government consideration of cross-border solutions.

In the case of the Ethio-Eritrean conflict, USAID/Ethiopia has proposed a "border development fund" jointly managed by USAID/Ethiopia and USAID/Eritrea with the participation of Ethiopian and Eritrean government officials and funded with regional monies. The purpose and activities of this fund are described more fully under SO 6, IR 6.3.

II.D.7: HIV/AIDS.

As is the case in many subsaharan African countries, the GFDRE’s development plans and priorities are at risk of being lost if the HIV/AIDS epidemic continues unabated. The Ethiopian Government recently has taken a number of key steps in support of a comprehensive, nationwide HIV/AIDS prevention program. In April 2000, the President’s office announced the composition of the AIDS Council and the chief of the AIDS Directorate. Both the Council and the Directorate will be under the responsibility and organizationally will be a part of the President’s office. The donors believe that these are positive initiatives on the part of the government, which indicate its commitment to the battle against HIV/AIDS in Ethiopia. The Mission’s program (see SO 4) also includes a strong HIV prevention component to specifically address the epidemic. In addition, LIFE initiative funds have become available to Ethiopia, both through the Mission and through Centers for Disease Control (CDC). CDC has already sent an assessment team to learn about the AIDS problem and the current responses in Ethiopia, and develop its own program of HIV/AIDS prevention to be implemented in collaboration with the Mission.

For a socio-economic perspective, the reader is referred to Annex C of this strategy statement, "The Economic Impact of AIDS in Ethiopia."

The USAID/Ethiopia country strategic plan for the period 2001-2006 represents the intersection of USAID’s performance goals with the developmental priorities of the GFDRE. This matching of priorities helps ensure: (1) the potential contribution of USAID/Ethiopia supported activities to the achievement of the Agency's performance goals; (2) their compatibility with the stated priorities of the GFDRE; and (3) their likelihood, based on prior Mission experience in Ethiopia and the Agency's worldwide experience, of achieving a significant and sustainable impact.

Rationale: Most borders of the Greater Horn countries were drawn through areas inhabited by lowland pastoralists, dividing ethnic groups and pasture lands. The Somali were carved up into five states, the Afar three, the Beja and Boran two.

The economic viability, social integrity and political efficacy of pastoral society were gravely impaired as a result, and pastoralist groups were gradually relegated to a marginal position, alien and alienated in a changing world. The decline of pastoralism and endemic conflict in the lowlands of the Horn are closely related phenomena.

Though there is some flexibility given by governments for cross-border grazing and watering, constraints placed on the mobility and migratory patterns of pastoral communities over the last century have severely limited the land available for grazing. National and provincial borders, designated grazing zones, wildlife sanctuaries, and the rapid proliferation of land under cultivation have combined to reduce the room for the movement of animals to new pastures, igniting conflicts over increasingly valuable land and water. These conflicts are fed by generations of rivalries between major pastoral groups.

Sometimes these inter-communal disputes feed into larger contexts of national war, such as the Baggara Arab and Dinka in Sudan, as well as the Isaaq and Ogadeni in Eastern Ethiopia, Somaliland and, during Siad Barre’s reign, Somalia. Agriculturalists also battle pastoral groups, such as southward-moving Ethiopian cultivators and pastoralists from the lowlands, the Afar Liberation Front and its historical disputes with highlanders, and the Baggara Arab pastoralists and the settled communities in western Sudan.

Conflict has been most prevalent in areas with more limited natural resources that are consistently neglected by the state or whose inhabitants are not part of the ruling group. These pastoralist regions are usually so deprived that the inhabitants’ very existence is threatened.

USAID Ethiopia is interested in broadening it’s programming to include the southern tier of the country. The target area is along the borders of Ethiopia, Kenya and Somalia where pastoralism is the predominant lifestyle and livestock production is the predominant source of household food and income. Food insecurity is relatively high in this area where 70% of children under 6 years of age are stunted, i.e. height to age ratio is substantially below average. Food insecurity and the competition for the land and water resources necessary to support livestock contribute to the relatively high level of conflict in the area, and increasing levels of environmental degradation. These factors further increase the competition for resources. Therefore, efforts to help pastoralists use available resources more efficiently will contribute to increased food security, lower the potential for conflict, and reduce environmental degradation.

The program is multi-faceted. It aims to increase food security by increasing family incomes. In this region most family incomes are linked directly to the sale of livestock or livestock products. Accordingly this program focuses on increasing the value of the livestock and improving marketing systems for livestock and livestock products. As part of improving marketing systems, the program also includes activities to expand non-traditional income generating opportunities, especially those for women who are increasing engaging in small-scale livestock sales to highland areas and grain and other consumables marketing to pastoralist areas. It is expected that the activites proposed in this framework will have direct impact on prevention of environmental degradation through improved value of rangeland management (bush clearing and burning for improved livestock (and wildlife) pastureland. Further, that improved (increased and stabilized) household incomes will improved nutrition.

This program will undertake activities at various levels--from the individual to an entire marketing region--to improve pastoral livelihoods and thereby, mitigate poverty, improve food security, enhance animal quality and production, reduce environmental degradation, and contribute to regional economic development and stability.

ANNEX C

by

Lori Bollinger

John Stover

Eleni Seyoum

September 1999

The Futures Group International

Research Triangle Institute (RTI)

The Centre for Development and Population

Activities (CEDPA)

AIDS has the potential to create severe economic impacts in many African countries. It is different from most other diseases because it strikes people in the most productive age groups and is essentially 100 percent fatal. The effects will vary according to the severity of the AIDS epidemic and the structure of the national economies. The two major economic effects are a reduction in the labor supply and increased costs:

Labor Supply

• The loss of young adults in their most productive years will affect overall economic output.

• If AIDS is more prevalent among the economic elite, then the impact may be much larger than the absolute number of AIDS deaths indicates.

Costs

• The direct costs of AIDS include expenditures for medical care, drugs, and funeral expenses

• Indirect costs include lost time due to illness, recruitment and training costs to replace workers, and care of orphans

• If costs are financed out of savings, then the reduction in investment could lead to a significant reduction in economic growth.

The economy of Ethiopia is primarily based on agriculture, which in 1997 accounted for 56% of GDP. Its main crops are teff, wheat, barley, sorghum, millet and maize. Its main exports are coffee, which accounted for 67% of its export earnings, raw hides and skins.

The economic effects of AIDS will be felt first by individuals and their families, then ripple outwards to firms and businesses and the macro-economy. This paper will consider each of these levels in turn and provide examples from Ethiopia to illustrate these impacts.

The household impacts begin as soon as a member of the household starts to suffer from HIV-related illnesses:

• Loss of income of the patient (who is frequently the main breadwinner)
• Household expenditures for medical expenses may increase substantially
• Other members of the household, usually daughters and wives, may miss school or work less in order to care for the sick person
• Death results in: a permanent loss of income, from less labor on the farm or from lower remittances; funeral and mourning costs; and the removal of children from school in order to save on educational expenses and increase household labor, resulting in a severe loss of future earning potential.

• In Ethiopia, a study of 25 AIDS-afflicted rural families found that the average cost of treatment, funeral and mourning expenses amounted to several times the average household income. Net farm income varies from 270 to 620 birr, depending on the region. Many times these expenses were paid for by selling productive assets, especially livestock.

• Unlike other countries, where cooperation among households assists families with AIDS patients in coping with its impact, the vast majority of households in this survey, over 86%, reported not extending any support to other households. This probably reflects the fact that the households are too poor to be able to extend any material support.

• Due to the status of women in Ethiopia, women who are widowed as a result of AIDS may often have to resort to commercial sex work in order to support their families, further increasing their risk of HIV infection, if they are not already infected.

• It is estimated that by the year 2000, the number of children orphaned as a result of AIDS will be 156,150.

• A survey of 100 households throughout Ethiopia was performed in 1994 to assess the impact of HIV/AIDS on women and children. As shown in the table at the left, the workload of women who either had HIV/AIDS or lived in a household that was affected by HIV/AIDS, or both, were significantly different than the workload of women who lived in households that were not either afflicted or affected. The mean hours spent in agricultural tasks varied between 11.6 and 16.4 hours for households with HIV/AIDS, while women in non-AIDS households were able to spend 33.6 hours in the fields every week. The most significant difference can be seen in child care duties; women in non-AIDS households spent 25.7 hours per week caring for their children, while women in AIDS households spent between 1.9 and 13.1 hours per week. Clearly the difference in workload was due to the amount of time the women spent nursing the afflicted at home and outside the home.

Agriculture is the largest sector in most African economies accounting for a large portion of production and a majority of employment. Studies done in Tanzania and other countries have shown that AIDS will have adverse effects on agriculture, including loss of labor supply and remittance income. The loss of a few workers at the crucial periods of planting and harvesting can significantly reduce the size of the harvest. In countries where food security has been a continuous issue because of drought, any declines in household production can have serious consequences. Additionally, a loss of agricultural labor is likely to cause farmers to switch to less-labor-intensive crops. In many cases this may mean switching from export crops to food crops. Thus, AIDS could affect the production of cash crops as well as food crops.

• In Ethiopia, the male head of the household is responsible for special tasks, such as oxen cultivation, harvesting, threshing and farm management. One study found that the effect of an AIDS death varied by region: it would have the most severe effect on harvesting teff in Nazareth, on digging holes for transplanting enset plants in Atat, on ploughing millet fields in Baherdar, and on picking coffee in Yirgalem. Women are generally responsible for other tasks: leveling, weeding, harvesting minor crops, transporting produce, and household duties. The death of the wife to AIDS can make it difficult for other household members to carry out these tasks, in addition to caring for children. The death of a family member because of AIDS also leads to a reduction in savings and investment. The stock of food grain can be depleted to provide food for mourners. When families cannot afford oxen, crop choices are limited.

• In some areas, land can be leased when the family cannot use all of its land in a productive way, which then contributes to the financial resources of the household. This varies by region, however, where in some areas, this tenure system is not legal.

• Both yields and areas under cultivation decreased when a death occurred, or when a household was headed by a female. Over 83% of female-headed households report teff yields of less than 6 quintals/hectare, while only 66% of male-headed households report such low yields. When a death occurs, only 5.6% of households reached over 9 quintals of teff per hectare, while nearly 22% of households not experiencing a death reached production levels of that magnitude.

AIDS may have a significant impact on some firms. AIDS-related illnesses and deaths to employees affect a firm by both increasing expenditures and reducing revenues. Expenditures are increased for health care costs, burial fees and training and recruitment of replacement employees. Revenues may be decreased because of absenteeism due to illness or attendance at funerals and time spent on training. Labor turnover can lead to a less experienced labor force that is less productive.

• A recent study evaluated the economic impact of HIV/AIDS in 15 different establishments. The HIV incidence was 0.58% of the workforce, and was concentrated mainly in manufacturing, and transport and communication industries. It was not possible to quantify the effects of HIV/AIDS on productivity, but firms were experiencing a certain amount of absenteeism. To date, the estimated cost of AIDS-related medical treatment was fairly low, between birr43,179 (US$5,5553) and birr34,7072 (US$44,639). In the future, however, these costs, as well as the costs of funeral and death benefits, which are provided by all of the companies surveyed, are expected to have a greater impact on costs. The number of AIDS-related illnesses was 53% of all reported illnesses, totaling 15,363 incidents over a five-year period. Out of 19 individuals interviewed in detail, 11 lost 30 days over one year due to HIV/AIDS-related illnesses, 7 lost on average 60 days, while one person said he was absent for 240 days because of HIV/AIDS.

For some smaller firms the loss of one or more key employees could be catastrophic, leading to the collapse of the firm. In others, the impact may be small. Firms in some key sectors, such as transportation and mining, are likely to suffer larger impacts than firms in other sectors. In poorly managed situations the HIV-related costs to companies can be high. However, with proactive management these costs can be mitigated through effective prevention and management strategies.

AIDS will also have significant effects in other key sectors. Among them are health, transport, mining, education and water.

• Health. AIDS will affect the health sector for two reasons: (1) it will increase the number of people seeking services and (2) health care for AIDS patients is more expensive than for most other conditions. Governments will face trade-offs along at least three dimensions: treating AIDS versus preventing HIV infection; treating AIDS versus treating other illnesses; and spending for health versus spending for other objectives. Maintaining a healthy population is an important goal in its own right and is crucial to the development of a productive workforce essential for economic development.

• A 1994 study estimated the health care costs in Ethiopia due to AIDS for the period of 1994 under two scenarios, low and high. Under the low cost scenario, total outpatient treatment would equal US$34 million, at a cost of $42.80 per patient, per year, and inpatient treatment would equal US$79 million, at a cost of $42.45 per patient, per year. The total preventive cost was estimated to be US$70 million, and the total direct discounted cost during this time would be US$184 million. Under the high cost scenario, for the same time period, total cost for outpatient treatment was estimated to be US$206 million, at a cost of US$258.10 per patient, per year, while inpatient costs would be $369.44 per patient, per year. The total year cost of treatment per patient was estimated to be US$627.50, which is more than five times greater than the per capita income of US$120. Under the high cost scenario, the preventive cost would be the same as under the low cost scenario.

• Transport. The transport sector is especially vulnerable to AIDS and important to AIDS prevention. Building and maintaining transport infrastructure often involves sending teams of men away from their families for extended periods of time, increasing the likelihood of multiple sexual partners. The people who operate transport services (truck drivers, train crews, sailors) spend many days and nights away from their families. Most transport managers are highly trained professionals who are hard to replace if they die. Governments face the dilemma of improving transport as an essential element of national development while protecting the health of the workers and their families.

• Of the 233 AIDS cases in one 1994 study, 109 (46.78%) were in the transportation sector. Of those 109 cases, 70 (64.22%) were transport equipment operators. In the same study, 80.73% of AIDS cases employed in the transportation and communication sector came from one coordination station of the Ethiopian Freight Transport Enterprise, which required long distance travel and a significant amount of time away from home.

• Mining. The mining sector is a key source of foreign exchange for many countries. Most mining is conducted at sites far from population centers forcing workers to live apart from their families for extended periods of time. They often resort to commercial sex. Many become infected with HIV and spread that infection to their spouses and communities when they return home. Highly trained mining engineers can be very difficult to replace. As a result, a severe AIDS epidemic can seriously threaten mine production.

• In Ethiopia, however, the country is heavily dependent on agriculture, with very little of the GDP coming from mining activities.

• Education. AIDS affects the education sector in at least three ways: the supply of experienced teachers will be reduced by AIDS-related illness and death; children may be kept out of school if they are needed at home to care for sick family members or to work in the fields; and children may drop out of school if their families can not afford school fees due to reduced household income as a result of an AIDS death. Another problem is that teenage children are especially susceptible to HIV infection. Therefore, the education system also faces a special challenge to educate students about AIDS and equip them to protect themselves.

The macroeconomic impact of AIDS is difficult to assess. Most studies have found that estimates of the macroeconomic impacts are sensitive to assumptions about how AIDS affects savings and investment rates and whether AIDS affects the best-educated employees more than others. Few studies have been able to incorporate the impacts at the household and firm level in macroeconomic projections. Some studies have found that the impacts may be small, especially if there is a plentiful supply of excess labor and worker benefits are small.

There are several mechanisms by which AIDS affects macroeconomic performance.

• AIDS deaths lead directly to a reduction in the number of workers available. These deaths occur to workers in their most productive years. As younger, less experienced workers replace these experienced workers, worker productivity is reduced.

• A shortage of workers leads to higher wages, which leads to higher domestic production costs. Higher production costs lead to a loss of international competitiveness which can cause foreign exchange shortages.

• Lower government revenues and reduced private savings (because of greater health care expenditures and a loss of worker income) can cause a significant drop in savings and capital accumulation. This leads to slower employment creation in the formal sector, which is particularly capital intensive.

• Reduced worker productivity and investment leads to fewer jobs in the formal sector. As a result some workers will be pushed from high paying jobs in the formal sector to lower paying jobs in the informal sector.

• The overall impact of AIDS on the macro-economy is small at first but increases significantly over time.

• A macroeconomic simulation model of the Ethiopian economy found that, although there would be a significant demographic impact from HIV/AIDS in Ethiopia, there would be very little overall macroeconomic impact. Instead of growing at around 2.95 percent per year, which was the rate in the base year, the population growth rate will be about 1.6 percent by the year 2000, and may even be negative by the year 2010. The model does not, however, indicate an effect on overall GDP, per capita GDP, or government revenue. The only macroeconomic impact was found to be a negative effect on savings and thus capital formation, reducing the capital-labor ratio from about 2.14 in 1995 to 1.64 in 2010 in the low variant of the simulation model.

• As of October 1993, the highest prevalence rate by occupation was 14.2% for government employees; the second highest rate was found in the military, at 13.8%. Both of these sectors employ skilled and trained workers, who will be difficult to replace. After the military was disbanded in 1991, most soldiers returned home to the rural areas, bringing the HIV virus with them.

• Design major development projects appropriately. Some major development activities may inadvertently facilitate the spread of HIV. Major construction projects often require large numbers of male workers to live apart from their families for extended periods of time, leading to increased opportunities for commercial sex. A World Bank-funded pipeline construction project in Cameroon was redesigned to avoid this problem by creating special villages where workers could live with their families. Special prevention programs can be put in place from the very beginning in projects such as mines or new ports where commercial sex might be expected to flourish.

• Programs to address specific problems. Special programs can mitigate the impact of AIDS by addressing some of the most severe problems. Reduced school fees can help children from poor families and AIDS orphans stay in school longer and avoid deterioration in the education level of the workforce. Tax benefits or other incentives for training can encourage firms to maintain worker productivity in spite of the loss of experienced workers.

• Mitigate the effects of AIDS on poverty. The impacts of AIDS on households can be reduced to some extent by publicly funded programs to address the most severe problems. Such programs have included home care for people with HIV/AIDS, support for the basic needs of the households coping with AIDS, foster care for AIDS orphans, food programs for children and support for educational expenses. Such programs can help families and particularly children survive some of the consequences of an adult AIDS death that occur when families are poor or become poor as a result of the costs of AIDS.

Perhaps the most important role for the government in the fight against AIDS is to ensure an open and supportive environment for effective programs. Governments need to make AIDS a national priority, not a problem to be avoided. By stimulating and supporting a broad multi-sectoral approach that includes all segments of society, governments can create the conditions in which prevention, care and mitigation programs can succeed and protect the country’s future development prospects.

Backnotes