A Pole-Position in an Intangible Economy

Ethiopia’s lackluster achievement in information technology is rarely pointed out. When it comes to policy-making, investment and public opinion, much of the oxygen is devoted to manufacturing.

One can see this overwhelming predisposition toward the manufacturing sector in the inauguration ceremonies of three mega projects attended by Prime Minister Abiy Ahmed (PhD) in the past month. The Adama Industrial Park, Rib Irrigation Project and the Omo Kuraz III Sugar Factory are symbolic of the government’s priorities of economic structural transformation toward high-productivity and labour-intensive industries.

Indeed, Ethiopia’s economy does seem to be receptive to a large manufacturing base if allocation of resources into the industry is efficient. The nation has a disproportionately high number of low-skilled workers that suits it well for industries like manufacturing that require large amounts of cheap labour.

Given a weak currency and the government-directed redistribution of resources, raw materials can be sourced cheaply, the infrastructure to attract investors can be built and the long-held ambition to establish manufacturing as the leading industry in the economy can be realised.

In as far as the industry can help the nation transit from low to middle-income, or even a high-income economy, this policy is wise, given the large population and the dearth of capital and a skilled workforce.

Despite these merits, however, the nation’s economic policy over the last decade has critically failed to update itself and retain relevance to the realities of the early 21st Century. Manufacturing is still an essential determiner of the wealth of nations, but the onset of information technology has changed the face of almost every single market, sector and economy.

Over a 12-month period ending in May 2018, the Open Technology Institute, Google Open Source Research and Princeton University partnered to collect data on 163 million internet broadband speed tests in 200 countries. The data was compiled to measure accessibility and quality of broadband, still the most widely used form of internet access, in terms of average download speeds.

While European nations dominated the top ranks, it is Singapore that holds the number one spot on the survey. Countries in Sub-Saharan Africa are disproportionately concentrated in the bottom rungs, bar Madagascar, a country which landed the 22nd ranking, primarily attributed to an underwater high-speed bandwidth fiber optic cable.

Just as impressive is Kenya’s ranking in 64th place. The typical download time for a five-gigabyte file in the East African nation is a little over an hour. In Ethiopia, ranked 183rd behind Afghanistan and Sudan, the same size file will take over 10 hours to download.

Information technology is transforming food production, manufacturing, learning, logistics and healthcare, and it will continue to do so for decades to come. It will change how humans interact with their environment, change societies, alter economies and shape politics.

Ideas and concepts of automation, artificial intelligence (AI) and robotics have found more use in science fiction in the past decades than in economics journals. But the rapid advancement in technology since the turn of the millennium has meant that voices warning against job losses have grown louder. The worry has been that technology can make machines cheaper and more efficient than unskilled labourers.

Indeed, Ethiopia’s manufacturing industry does not absorb much of the labour force to be threatened by substantial job losses at this point. Currently, around two-thirds of the labour force is still employed in the agriculture sector.

There is also an argument to be made that automation will not rival cheap labour in cost-effectiveness for the next couple of decades. This is more true for manufacturing processes that require specialised motor skills that only humans have adapted to through evolution.

Nonetheless, none of these projections can be used to debate against the importance of gaining an early foothold in information technology. It has advantages that complement the economy, including contributing to productivity, bringing efficiency to supply chains and improving incomes.

The significance of long-term planning to utilise the potential of any industry cannot be underestimated, and it should have been evident from the nation’s experiences with manufacturing so far.

Despite some prevailing attitudes that automation and AI are indulgences to the nation with no relevance to contemporary times, that they would be major components in tomorrow’s economies is inarguable. Given that these are industries of the future that require highly-skilled labour and proper infrastructure, none of which can be realised in the short term, the foundation has to be laid now.

Currently, there is an ICT Village, Lemi Valley, which is under construction, as well as multiple other initiatives to get more young people interested in coding and computer programming. But these efforts cannot be expected to move the industry at faster than a snail’s pace.

A primary place to start would be to integrate information technology into the education curriculum. Coding and programming should be compulsory beginning from elementary school, equipping children with computational training when they are more malleable. Although current accessibility to technology and infrastructure would create wide disparity, the state should also in the long-term consider including subjects relating to information technology in college entrance exams.

An even more critical assignment for the government is to broaden and improve the means by which knowledge, information and technology become diffused in society. It has to develop policies to create an ecosystem that lends software, hardware and the internet to be universally available. The latter is crucial, but unlikely to take root given the capacity and efficiency of current infrastructure and Ethio telecom, the sole provider of internet access.

Aside from outsourcing some of its fixed-line services, the corporation is still a state-sanctioned monopoly. It generates billions of Birr in revenue each year, but its infrastructure is hard-pressed to operate efficiently and properly provide its services to the current 16.4 million customers. The country, measured by international standards, can only be said to make use of the internet intermittently.

Liberalising the telecom sector will be an ideal means of increasing competition, which can help reduce prices as well as improve the quality of services. Updated and current technology of internet services, improved accessibility and the diffusion of knowledge and technology to remote parts of the nation are also more likely to be realised if the private sector is involved.

The government should also continue to invest in fibre-optic networks, which mean the difference between slow and fast internet connections, which in turn can stimulate efficiency in the workplace.

Much like the industrial revolution, information technology will come to determine which countries will be poor and dependent, with the rewards going to those who entered the race ahead of everybody else. Ethiopia is poor because it has never been able to industrialise in time. It does not have to be the same with the Fourth Industrial Revolution, for which a seat close to the front row is still available.

It is up to policymakers to help Ethiopia catch up by setting the proper environment that is conducive to innovation, commercialisation, creativity and finally – yes, eventually – promogulating the laws that regulate this intangible economy.

Published on Nov 03,2018 [ Vol 19 ,No 966]



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