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The Ethiopian developmental state

Christopher Clapham

To cite this article: Christopher Clapham (2017): The Ethiopian developmental state, Third World
Quarterly, DOI: 10.1080/01436597.2017.1328982

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Third World Quarterly, 2017
https://doi.org/10.1080/01436597.2017.1328982

The Ethiopian developmental state

Christopher Clapham
Centre of African Studies, University of Cambridge, Cambridge, UK

ABSTRACT ARTICLE HISTORY

Ethiopia provides one of the clearest examples of a ‘developmental Received 9 February 2017
state’ in Africa. Drawing on a deeply entrenched experience of Accepted 8 May 2017
statehood, the present Ethiopian regime has embarked on an
KEYWORDS
ambitious programme, depending on the central capture of ‘rents’, Ethiopia
to fund a massive expansion especially in communications, education, developmental state
and hydroelectricity. High initial rates of growth have been achieved. Meles Zenawi
However, the political setting is tightly constrained and the state private sector
has not allowed the private sector freedom of action to generate developmental
the required levels of production. Ultimate success will depend on patrimonialism
the capacity to transform a state that has itself been central to the
development process.

Introduction
The level of economic growth in Ethiopia in recent years has been startling. Over the period
from 2000 to 2013, Ethiopia ranked second only to Angola in sub-Saharan Africa (and equal
with Equatorial Guinea) with a gross domestic product (GDP) growth rate of 9.5% a year,
against Angola’s 11.1%, and a sub-Saharan mean of 5.2%; for 2015, Ethiopia’s GDP growth
rate of 9.6% was the highest in Africa and second highest in the world.1 And while growth
in both Angola and Equatorial Guinea can be straightforwardly ascribed to hydrocarbons,
Ethiopia has very little by way of minerals of any kind, 83% of its merchandise exports in
2013 (down from 90% in 2000) coming from agricultural produce. Nor is this a case simply
of capital city-centred growth. Though Addis Ababa is now a megalopolis of some four
million inhabitants, provincial towns have undergone a similar transformation, and way out
into the countryside, gangs can be found at work on the roads and other infrastructural
projects. One study shows how a tiny settlement developed over the 10 years to 2010 into
a small town, with electricity, cellphones, a greatly improved highway and – not least –
changes in the attitudes of the inhabitants themselves.2 This level of change, moreover, is
taking place in a country notorious as a scene of famine and civil war, with an exceptionally
rugged landscape, very poor communications, and little by way of natural endowments,
and also (since Eritrea’s independence in 1991) landlocked.
As a case study in developmental statehood, Ethiopia is therefore both interesting and
important. Along with Rwanda, it provides the most significant attempt to implement the
idea of a ‘developmental state’ in sub-Saharan Africa, and a critical example of the

CONTACT  Christopher Clapham  [email protected]

© 2017 Southseries Inc., www.thirdworldquarterly.com
2   C. CLAPHAM

applicability of this form of governance beyond East Asia. This paper seeks to provide an
overview of the Ethiopian experience, situating it in the longue durée of the Ethiopian state,
the specific circumstances that gave rise to its introduction, and the ways in which it is
proving more and less successful in meeting the massive challenges of ‘development’ in a
country long known as one of the poorest in the world.

Origins
The place to start is that if you are going to build a developmental state, the first thing you
need is a state. Ethiopia has a very long experience of statehood, anchored not just in the
political forms introduced in most of tropical Africa by European colonialism in the late
nineteenth century, but in many centuries as an identifiable political unit, characterised by
entrenched habits of authoritarianism on the one hand, and obedience on the other.
Ethiopian statehood has certainly been problematic in many respects, notably its historical
origins in the northern highland areas of the country, and often-brutal imposition on other
areas of the present national territory. The culture of statehood in Ethiopia has long been
– and remains – hierarchical and intolerant of dissent, and imposes limitations which are
not only responsible for much of the conflict from which the country has suffered, but also
constitute a significant barrier (of which more later) to the development enterprise itself. It
has nonetheless created an idea of the state, spread much more widely through the society,
which makes it possible for Ethiopian governments to conceive and implement projects of
transformation to an extent that is difficult to imagine in much of post-colonial Africa. Though
Ethiopia shares with other African states the difficulty of projecting authority over sparse
populations that Herbst has identified as the key problem of African statehood, it does have
a densely populated core. When taken alongside the East Asian developmental experience,
which has likewise – in Japan, Korea, China and Vietnam – rested on societies with deeply
entrenched projects of statehood,3 the Ethiopian case raises the question of whether devel-
opmental statehood is a plausible option at all in African states where the state itself, and
the social foundations on which it rests, are far more weakly established.
The handful of indigenous Asian states that succeeded in maintaining their independence
through the colonial era generally emerged from the experience with their state machinery
and national self-confidence greatly enhanced by this success, and an intense awareness of
their need to ‘catch up’ with the more developed world. This pressure for ‘defensive modern-
isation’ likewise applied to Ethiopia, save that the base from which the ‘catch-up’ exercise
had to proceed was so low that the models of development that Ethiopia sought to emulate
were found among early modernisers such as Russia and Japan, rather than in western
Europe.4 In this sense, a developmental project has been present in Ethiopia since the reign
of emperor Tewodros (1855–68), though its implementation was impeded by massive phys-
ical and cultural obstacles, the weakness of the state machinery, and the demands of more
pressing priorities. In a sharp contrast to the normal African experience of state creation by
external colonialism, state capacity in Ethiopia has been an indigenous process, driven first
by war and subsequently by revolution. It thus corresponds to the pattern made familiar by
the work of Tilly and Skocpol.5 The organisational capacity that enabled the Ethiopian empire
to defeat nineteenth-century attempts at colonial conquest was subsequently enhanced by
social upheavals that helped to destroy obstacles to state power, starting with the Italian
conquest and five-year occupation (1936–41), which enabled the restored government of
 THIRD WORLD QUARTERLY   3

emperor Haile-Selassie (1941–74) to start a still-rudimentary programme of ‘modernisation’.

Elements in this programme, such as a belief that lowland areas constituted ‘virgin lands’
suitable for state-directed development, have persisted to the present day. Much more
important, however, was the 1974 revolution, which led to the installation of a Marxist mil-
itary dictatorship, the Derg, heavily backed by the Soviet Union; the nationalisation of rural
and urban land; and the creation of a structure of administrative control that reached down
to the kebelle, or peasants’ or urban dwellers’ association.
The Derg (1974–91) did indeed have a project of transformation, that was pursued with
energy and dedication until its demise.6 This project was, however, fatally undermined by
two basic flaws. First, it took over a Soviet blueprint, complete with Leninist party-state,
five-year plans and state farms, at precisely the moment that its inadequacy was becoming
all too obvious in the USSR itself. Second, it took for granted that its policies could be imposed
from the top down (a longstanding Ethiopian failing), and came up against increasingly
effective guerrilla opposition movements, which sucked its resources into a desperate strug-
gle for survival, to which it eventually succumbed. The Ethiopian case nonetheless confirms
Kohli’s findings that the creation of effective states precedes the emergence of industrialising
economies, and that patterns of state authority are critical to the development process,7 and
draws attention to the importance of an indigenous, rather than colonial, process of state
formation. And although focussed and dynamic leadership is certainly needed to drive this
process, as Henley suggests,8 it is far from clear that this can achieve the desired results
without an effective state structure to back it up.

Meles Zenawi and the EPRDF agenda

A development project geared to a more plausible model had to await the advent in 1991
of a new regime, which drew its ideological inspiration from exactly the same student
Marxism of the early 1970s as the Derg, and derived its origins from a classic Maoist peas-
ant-based insurgency, the Tigray People’s Liberation Front (TPLF). Such regimes have char-
acteristically opted for economically disastrous policies of the kind represented by the
Khmers Rouges in Cambodia, and indeed the TPLF leader Meles Zenawi had, shortly before
coming to power, proclaimed Enver Hoxha’s Albania as his model.9 From this fate, both he
and Ethiopia were saved by three factors. First, Soviet-style state-directed socialism had by
1991 very obviously failed as a developmental blueprint. Second, it was necessary to create
a new political settlement, not only to replace the dead hand of the ousted Soviet model,
but also to address the fundamental weaknesses built into the Ethiopian state, and notably
the inequalities created by the dominance of the peoples of the northern highlands over
the historically exploited peripheries. And, third, Meles Zenawi was a whole lot smarter than
any of his predecessors (or most people worldwide, for that matter), and proved exceptionally
capable of articulating an ideology of development that drew heavily on the East Asian
model, while adapting it to Ethiopian circumstances. Meles’ mindset was fundamentally
shaped by Marxism–Leninism all his life, but he was extraordinarily creative and open-
minded in applying it to changing conditions, and was able to stand back and appraise his
policies, changing them as required, in a way found in very few national leaders. He must
qualify as one of the most remarkable leaders and original thinkers in independent Africa.
The political pressures for development, unlike several of the East Asian cases, were
domestic more than external. The continental settlement represented first by the Organisation
4   C. CLAPHAM

of African Unity and then by the African Union has been extraordinarily successful in pro-
tecting weak and artificial post-colonial states against threats to their survival, and Ethiopia
has been among its beneficiaries. The internal situation was, however, deeply problematic.
Not only was the country riven by divisions that derived essentially from its creation through
a process of internal rather than external colonialism, but the TPLF was itself drawn from a
small and unrepresentative region at the extreme north of the national territory, and its
victory bestowed no entitlement to rule the country as a whole. This obliged it to broaden
its political base by creating a federal system based on ethnicity (in emulation, even then,
of the USSR), in which the constituent ethnic groups or nationalities were formally accorded
a right to ‘self-determination, up to and including secession’; it was clear that governance
could no longer just be imposed from the top, and the new political settlement, though
heavily influenced by the TPLF, took the form of a composite party called the Ethiopian
Peoples’ Revolutionary Democratic Front (EPRDF) which in principle at least provided an
integrative mechanism for the country’s major groups.10 In practice, nonetheless, the regime
was widely perceived as controlled by people from the Tigray region from which its initial
leadership derived, and this imposed a need to seek ‘performance legitimacy’ through a
project of economic transformation. This need became all the more urgent after the regime
held reasonably open and competitive elections in 2005, in response to pressures from
donors, and was then shocked by the support revealed for the two major opposition group-
ings. It secured its survival by announcing election results in its own favour, and then forcibly
suppressing the resulting demonstrations. This effectively ended any plausible claim to
democracy. Though a number of opposition parties are permitted to exist, these are effec-
tively restricted to a narrow base within the intelligentsia, and it has become abundantly
clear since 2005 that no significant challenge to the regime would be permitted. In the
subsequent May 2010 elections, only two candidates not affiliated to the ruling EPRDF were
elected, and in the May 2015 elections parties associated with the government (whether as
full members of the EPRDF, or as recognised affiliates) took every single seat. This is a
single-party state in all but name.
Meles’ ideas of economic development were first articulated during the liberation strug-
gle, and subsequently adapted.11 He rejected out of hand the ‘Washington consensus’ model
of development as a ‘dead end’, arguing that this simply bound developing countries into
relations of subservience to already developed states, and that a strong state geared to a
purposive development agenda was required in order to break the stranglehold of depend-
ence. An initial emphasis on ‘agricultural development-led industrialisation’ (or ADLI) was
understandable, given the origins of the regime as a guerrilla movement in one of the most
impoverished and famine-prone regions of northern Ethiopia, and the commitment to
self-reliance that this brought with it. The regime has been thoroughly aware of the impor-
tance of increasing the productivity of peasant agriculture to the East Asian development
model, which it has sought to emulate.12 In practice, however, Ethiopian peasant agriculture
simply did not produce the surpluses needed to make such a policy work. In the EPRDF’s
early years (1991–98), the regime’s key priority was to establish its political base, an enterprise
that called for a decentralisation programme, involving the establishment of regional states
for each of the country’s major ethnic groups, staffed so far as possible by indigenes of those
groups (though always subject to security control by the regime). This was ultimately
counter-productive to the development enterprise, and has been significantly modified in
economic policymaking, though it remains central to political management. A vicious war
 THIRD WORLD QUARTERLY   5

in 1998–2000 against Ethiopia’s northern neighbour, Eritrea, over disputed territories on the
frontier between the two states, then subordinated every other priority, leaving permanently
soured relations with Eritrea that prevented Ethiopian access to the Eritrean Red Sea ports,
and imposed dependence on a single lifeline to the coast through Djibouti.13
The Eritrean war, however, cleared the decks for a more ambitious development policy
in several respects. First, it revealed a level of common Ethiopian nationalism, in place of the
conception of Ethiopia as a mere conglomeration of different ‘nationalities’ that had until
that point guided much of the government’s thinking. Second, it prompted a deep split
within the TPLF itself, from which Meles only narrowly emerged as the victor, but which then
enabled him to sideline rivals in the party, and direct development policy in a much more
personal way than would otherwise have been possible. And third, it drew attention to the
need for a national project, transcending ethnic federalism, on which the country’s internal
integrity and external security would ultimately depend, thus securitising the development
process. This last factor was greatly strengthened by the election crisis in 2005, which inten-
sified the attempt to achieve ‘performance legitimacy’ through the benefits derived from its
developmental success. The articulation of a coherent development strategy therefore
derives from the early years of the new millennium.

The East Asian model and the search for capital

This strategy drew explicitly on East Asian models, with China as the single most important
source of inspiration, but seeking to learn, where appropriate, from other cases, including
South Korea, Taiwan and Japan.14 Although the government continued to promote improved
productivity in peasant agriculture, it now placed its greatest emphasis on providing the
infrastructural conditions necessary for industrial development at the hands of private entre-
preneurs. Though key factors of production, notably land, remain officially in state ownership,
it has left its socialist origins far behind. Three elements in the remarkable investment pro-
gramme that it has put into effect are especially prominent. The first is the expansion of the
communications network, long a major hindrance to development in a country much of
which is mountainous.15 The road network has been expanded and improved beyond all
recognition, and the century-old line of rail to the port at Djibouti has been reconstructed
with Chinese finance. The second is human capital formation, notably the higher education
programme, now with 33 universities, and a characteristically top-down allocation of stu-
dents – 40% to engineering, 30% to other sciences, and 30% to arts and humanities –
intended to provide the skills needed for the new economy; such a massive and rapid
expansion may well have led to a loss of quality, but I have no information on the actual
standards achieved. There has also been a significant expansion in health services. The third
is hydroelectricity, the centrepiece of which is the Grand Ethiopian Renaissance Dam (GERD)
on the Abbay (Blue Nile) close to the border with Sudan, currently under construction, which
after completion (due for 2017) is expected to generate 6000 MW of electricity, making it
the largest hydroelectric power plant in Africa, and eleventh largest in the world. Having
failed to gain external investment for GERD, the government has made a virtue of necessity
by promoting it as a domestically funded initiative. Other hydroelectric dams have been
built, notably those on the Gibe River flowing into Lake Turkana on the Ethiopia–Kenya
border, which (unlike GERD) have also been designed to provide water for irrigated agricul-
ture. Designed not only to meet Ethiopia’s domestic needs, but to export electricity to
6   C. CLAPHAM

neighbouring states, these are intended to take advantage of the country’s mountainous
topography to turn it into the powerhouse of northeast Africa. Electricity exports to Sudan
and Djibouti are already operating, with power lines planned to South Sudan, Kenya, Uganda,
Tanzania and Rwanda.
Central to the project is the capacity to attract the massive amount of capital required to
build this infrastructure, in advance of any revenues that could be used to defray its cost.
Since Ethiopia lacks any significant source of mineral exports, it was in no position to benefit
from the commodity boom as a potential source of industrial investment capital. It is worth
noting, indeed, how little the windfall profit from commodities appears to have done to
promote industrialisation in Africa. Ethiopia has indeed run a massive balance-of-payments
deficit, with merchandise exports at about 20% of imports. The quest for capital has therefore
derived from three principal sources, the first of which is domestic savings. This has taken
the form of a relentless search for ‘rents’, which for this purpose can be defined as any source
of potential investment income that the government can lay its hands on, and that it is intent
on removing from the control of anyone else. Some of these ‘rents’ would be recognised as
such under the standard economists’ definition of the term, such as the massive profits that
the government is able to extract from its monopoly of telecommunications, which are as
a result both substantially more expensive and less efficient than in comparable countries
such as Kenya which operate a free market, but which in Ethiopia provide essential capital
for infrastructural projects. Further rents are extracted from the private sector, for example
by requiring banks to hold a proportion of their deposits in government bonds, which
amounts in economic terms to a forced loan to the state, at a rate of interest substantially
less than that of inflation. It is likely that much of the speculative building boom, very visible
in Addis Ababa and other major towns, represents a haven for savings that would otherwise
be vulnerable to state exactions.
It is paradoxical, given the government’s own efficiency and success in appropriating
rents, that ‘rent-seeker’ has become a catch-all term of abuse that it used to describe any
attempt, whether by private businesses or by associates of the government itself, to retain
resources that the state seeks to use to promote its own development agenda. The appro-
priation of rents is clearly critical in preventing surplus funds from being wasted in excess
private consumption or the appeasement of social or political interests, in a way that has
been all too evident in those states in Africa and elsewhere that have received massive
amounts of money especially from hydrocarbons or mineral extraction, and have entirely
failed to provide any remotely equivalent benefits in the form of public welfare or long-term
development goals.16 In the Ethiopian case, nonetheless, the constant excoriation of
‘rent-seeking’ raises questions about the role of actors beyond the state in bringing about
the boost in production that must ultimately be at the heart of the developmental
enterprise.
A second source of investment capital, especially for infrastructure projects, has been
external development aid and concessional loans, which Ethiopia has been extremely adept
at attracting, despite its explicit disavowal of the ‘neoliberal consensus’ economic policies
ostensibly favoured by the principal Western donors, and a very evident failure to meet the
‘good governance’ criteria, in terms of multiparty democracy and human rights, that many
donors likewise claim to insist on. This success derives in part from the skilful way in which
Ethiopia has placed itself diplomatically, as a force for ‘stability’ in an unstable region: as a
leading partner in the ‘global war on terror’, a major supplier of peacekeeping forces to help
 THIRD WORLD QUARTERLY   7

control conflicts in neighbouring states, and a generally responsible mediator in disputes

such as those in Somalia and South Sudan. Ethiopia has also been able to make common
cause with Western donors over its poverty reduction programmes, and ability to achieve
a high level of success in meeting the ‘millennium development goals’, which emphasise
measures such as the eradication of extreme poverty, primary education, reduction in child
mortality, and promotion of gender equality. But, equally, Ethiopia has made a reputation
for itself among donors as a reasonably honest and efficient user of the aid that it receives,
and this technical ‘good governance’ in large measure compensates for its shortcomings in
political liberalism. Whatever the formal ideologies of donors, which tend to claim that eco-
nomic liberalism, multi-party democracy, and corruption-free governance are all part of a
single package, at an operational level donors are driven largely by ‘value for money’ criteria
that emphasise the visible returns on their investments. As the head of the UK development
agency, Department for International Development (DFID), in Ethiopia explained:17
It is all about the efficiency and effectiveness of the assistance. … When we looked at Ethiopia, a
country with a large yet poor population, we noted that there is a good experience in the expan-
sion of basic services in the last five to ten years. Though the quality of some of these services
is still in question, which we are helping to improve, our quantitative analysis has shown that
for every pound that we spent we can buy better results. Hence it is good value for our money.
Other donors have reached similar conclusions. As the case of Rwanda also indicates, African
states actually enjoy far greater freedom of action in articulating and implementing their
own development policies than much of the literature that continues to emphasise African
‘dependency’ has been willing to concede.
A further important factor has been the emergence of alternative sources of finance to
the ‘traditional’ Western agencies, and notably China. Unlike many African countries in which
Chinese investment has been prominent, Ethiopia does not possess significant mineral
deposits of a kind that would fuel the Chinese search for raw materials, and its role in the
country can most plausibly be explained in terms of its overall importance in the African
continent (as its second most populous state, fastest growing economy, and diplomatic
centrality as the host country for the African Union and other international agencies), as well
as its ideological affinity. China has invested heavily in infrastructure, including telecoms,
the modernisation of the critical rail link between Addis Ababa and Djibouti, the Gilgel Ghibe
III hydroelectric and irrigation dam in southern Ethiopia, and the Addis Ababa light railway.
The Ethiopian government has insisted on an appropriate level of skills transfer as part of
these investments – staff for the light railway, for instance, were sent to China for training in
everything from ticketing to track maintenance – and China has emerged as Ethiopia’s largest
trading partner.18
The third source of capital has been foreign direct investment (FDI), which has derived
from a wide range of sources, though with Asian companies – ranging across the continent
from Turkey to Japan – to the fore.19 Floriculture was one of the earliest sectors, with initially
Indian and subsequently Dutch engagement, and was particularly suited to the employment
of a large indigenous labour force, mostly women, and to the transfer of expertise to small-
scale Ethiopian entrepreneurs.20 Leather products, notably shoes, are likewise well adapted
to the country’s massive livestock resources, and provide the most visible case of ADLI; the
industry has been able to recover from the initially devastating impact of Chinese compe-
tition by concentrating on areas of comparative advantage,21 and a Chinese shoe manufac-
turer has established a factory in Ethiopia. Textiles are another obvious area of interest,
8   C. CLAPHAM

attracting investments from Bangladesh, China, India, South Korea and Turkey. These have
been concentrated in industrial parks, mostly situated near and to the south of Addis Ababa,
on which much of the government’s industrialisation policy has focused.22 FDI inflows have
increased dramatically, from US$279 million in 2012 to $2168 million in 2015, leading to a
doubling of the total FDI stock in just three years.23 A recent book by the special adviser on
industrialisation to the Ethiopian prime minister makes a strong case for an activist industrial
policy, with case studies of three of the major industries, cement, floriculture and leather
goods.24 This found that policies were more successful in promoting development in the
two new industries, cement and floriculture, than in the leather sector where the country
enjoyed the apparent advantages of ample raw materials and a strong indigenous tradition
of leatherwork. The problems lay in the fragmentation of the industry among a large number
of small businesses scattered widely around the country, and in the path dependencies
resulting from established supply chains and modes of operation. In sharp contrast to the
picture of organic growth deriving from ADLI that underlay the government’s initial industrial
policy, it may actually be more effective to start from scratch.
Given the regime’s origins in a peasant-based guerrilla insurgency, it is unsurprising that
improving productivity in peasant agriculture should be a major priority, but this is extremely
hard to deliver. While retaining a smallholder approach to agriculture in areas of historically
high-density ox plough-driven agriculture,25 it has opted for large-scale commercial agri-
culture in what it continues to regard – like its imperial and Derg predecessors – as essentially
virgin lands in the south and west, demonstrating in the process a disregard characteristic
of the Ethiopian state in all its manifestations for the livelihoods of pastoralists and shifting
cultivators. This has been especially marked in the Gambella region adjoining South Sudan
in southwest Ethiopia, where large tracts of land have been allotted at minimal prices to
foreign agribusinesses from Saudi Arabia, India, Japan and elsewhere.26 This process provides
a classic example of the regime’s willingness to override the local self-government ostensibly
granted to indigenous peoples under the federal constitution, given that the negotiations
with the companies concerned were conducted entirely at federal level, but has actually
given rise to extremely limited outcomes. Essentially, the agribusinesses took cheap options
on areas supposedly appropriate for mechanised farming, at a time of global concern over
food stocks and the availability of agricultural land, without adequate appraisal of the envi-
ronmental conditions and the massive infrastructural investment required, and little if any
significant production has actually resulted. Some investors have been stripped of their
concessions, having failed to make the required investments. The massive Kuraz sugar project
in the extreme south of the country, intended to develop over 500,000 ha of sugar production
irrigated by the Gibe dams on the lower Omo river, has also run into the problems charac-
teristic of large state-sponsored projects.27 The Ethiopian case supports the view that small-
holder agriculture provides a far better base than plantations for securing equitable
development.28

The state–private sector interface

The critical challenge facing the Ethiopian developmental state is, however, not the ability
of the state to meet its own obligations in providing the appropriate infrastructure, but
rather the ability of the private sector to provide the productive capacity on which the suc-
cess of the whole enterprise must depend. The government, in a sharp about-turn from its
 THIRD WORLD QUARTERLY   9

original socialist inclinations, now recognises that its own role must be limited, and that it
needs to encourage both FDI and Ethiopian entrepreneurship if its policies are to succeed.
There remains a significant level of direct state ownership, including public utilities of which
the telecoms sector is the most controversial, and the extremely successful Ethiopian Airlines.
In addition to the state’s engagement in infrastructure, with the Grand Ethiopian Renaissance
Dam as the flagship project, it is also involved in sugar and fertiliser production. The Metals
and Engineering Corporation, Metek, which originated as a supplier of defence equipment
to the armed forces, has now expanded its role into civil engineering capabilities, such as
building the locomotives for the expanded rail network, which the indigenous private sector
is unable to meet. Metek retains its close linkages to the armed forces, providing for example
management positions for retired officers, which gives it a certain clout vis-à-vis other areas
of government.
Two other major enterprises, though falling into the private sector, retain close links with
government that give them a privileged position. The first are the endowment companies,
formed in close association with the constituent parties of the EPRDF, by far the most impor-
tant of which is the Endowment Fund for Tigray, EFFORT, which is examined in some detail
by Gebremichael and Vaughan.29 EFFORT’s pre-eminence is explained by its very close links
with the TPLF, the dominant party in the governing coalition, and the one that drove the
guerrilla war that brought it to power. It is a conglomerate, with 16 companies operating
across the range of the modern Ethiopian economy, including transport, cement, construc-
tion, agro-processing, textiles, industrial engineering and banking. Several of these, notably
cement and construction, are in areas with heavy state involvement, and although govern-
ment sources insist that EFFORT is legally a private enterprise like any other, it would be
implausible to suppose that it did not derive considerable advantage from its political
connections. The Amhara region endowment fund, TIRET, has also been growing in
importance.30
Another potential contender for the role of an Ethiopian chaebol is the MIDROC group,
owned by the Saudi entrepreneur Mohammed Al Amoudi, whose mother is believed to have
been a Moslem Oromo from the Welo region, and who thus qualifies as quasi-Ethiopian.
MIDROC owns a range of enterprises, including the Dashen bank, cement, real estate, and
commercial agriculture, and is best known for owning Ethiopia’s most luxurious hotel, the
Addis Sheraton, as well as the country’s largest gold mine, at Lega Dembi. It has become
rather less prominent since Meles’ death in 2012, but whether this reflects a decline in political
influence, or simply a relatively lower share of a rapidly expanding economy, I am in no
position to say.
Conspicuously lacking, however, is the alliance between government and the domestic
private sector that has been identified as a key driver of Asian developmental states. Like
China, but unlike other Asian developmental states, the Ethiopian government has looked
to FDI more than to domestic entrepreneurs as the main engine for growth, a priority partly
explained by the historical weakness of indigenous business, which has been dominated
by Moslem small traders and a single small group, the Gurage, who derive from an area
southwest of Addis Ababa.31 One critical constraint facing Ethiopian businesses is a shortage
of capital, due not least to the government’s success in hoovering up any source of funds
within the domestic economy to support its infrastructural drive.32 Foreign businesses, which
bring in external capital, do not face the same problems. The government has also made
considerable efforts to attract remittances from the large Ethiopian diaspora community,
10   C. CLAPHAM

especially in North America, which have boosted small and medium enterprises within the
country, as well as boosting household consumption and helping to relieve pressure on the
balance of payments. Remittances increased by 27.7% a year between 2004/05 and 2012/13,
from $US400 million to $2500 million.33 Beyond that, however, and despite the regime’s
formal recognition of the need for the private sector to assume a dynamic role in expanding
the economy, its underlying attitudes remain instinctively statist, and correspondingly sus-
picious of private businesses, which are subject to an uncertain regulatory environment and
readily targeted as ‘rent-seekers’. Ethiopia ranks no higher than 114th out of 132 states in
the 2016 Global Entrepreneurship Index, though it is slightly above the median for sub-
Saharan Africa.34 At the time of the contested elections of 2005, the indigenous business
community tended heavily towards the more nationalist of the two principal opposition
parties, the Coalition for Unity and Democracy (CUD), which favoured a markedly more
liberal approach to the economy than the EPRDF, and a government still heavily imbued
with Marxian attitudes to the relationship between economy and politics can only view it
as potentially threatening. Foreign investors are more politically controllable.

The political bases of development

Kelsall has argued that one of the four prerequisites for the long-horizon rent centralisation
that must form the basis for a developmental state is a ‘constrained yet inclusive political
system’,35 on the grounds that the unconstrained political environment created by multiparty
democracy makes it virtually impossible to prevent the diversion of rents into political
patronage. The Ethiopian political structure certainly exhibits the constraints, but it is far
less evident that it provides the inclusivity. The internal operation of the regime is charac-
teristically byzantine, like that of all Ethiopian governments before it, and although there is
an evident factional politics, of a kind that is likewise characteristic of closed governance
structures, it is not at all clear how, or to what extent, political agendas arising from the base
can be transmitted to central decision-making level. At a formal level, the major constituent
elements in the EPRDF – the parties for the Amhara, Oromo, Tigrayans and Southern Nations
– are not only given extensive control over the government of their own home regions, but
are also represented by deputy prime ministers at the central level, working with the prime
minister who, under the Ethiopian constitutional system, is the effective head of govern-
ment.36 In practice, both the historic trajectories of the Ethiopian state and the conduct of
the present regime have been heavily top-down in nature, and it has taken a major shock
to the system, of the kind provided by the 1998 Eritrean war and the 2005 elections, to bring
the need for change to the attention of central government. Nonetheless, the succession
after Meles Zenawi’s death in 2012 of his designated deputy, Hailemariam Desalegn, was
remarkable, not only in that a peaceful change of leadership has been virtually unprece-
dented in Ethiopia over the last century and a half, but even more in that Hailemariam is a
Welayta from southwestern Ethiopia and a Protestant Christian, strikingly at variance from
the historic domination of the state by Orthodox Christians from the Amhara and Tigrayan
highlands. He is likewise quite exceptional among the leaders of states derived from a ‘lib-
eration struggle’, ranging from China to Cuba, in that he has no ‘struggle’ credentials, and
represents an emphasis on technocratic expertise rather than membership of an in-group
of former fighters and their descendants. Part of the price to be paid for this is that he evi-
dently does not possess the level of personal authority and control that Meles was able to
 THIRD WORLD QUARTERLY   11

exercise, at least in his last decade in office, but he has been able to maintain a consensual
form of rule that is equally far from the normal ‘big man’ emphasis of Ethiopian governance.
In practice, this has meant that Hailemariam has concentrated on economic policy, while
ceding the initiative on security issues to a security establishment in which Tigrayans con-
tinue to play a prominent role. How sustainable this will prove to be remains to be seen, but
it has at least worked over a period of nearly four years, and does not appear to be under
immediate threat.
A further significant consequence of Ethiopia’s quest for development has been in its
external relations. The Horn of Africa region is justly known for a very high level of external
as well as domestic conflict, indicated by civil wars, extensive (if often covert) intervention
by governments in support of armed opposition movements in neighbouring states, and
the fact that all three of the principal states in the region have been split, as the result of
successful secessionist movements establishing states of their own, with the independence
of Eritrea from Ethiopia and South Sudan from Sudan, and the 25-year-old but still unrec-
ognised separation of Somaliland from Somalia. Ethiopia has been at the core of all these
conflicts, whether as a result of its own internal divisions or of its frequently bad relations
with its neighbours. Although Ethiopia’s relations with Eritrea remain frozen, as a result of
the 1998–2000 border war between the two countries, and are likely to stay that way for as
long as President Isayas Afewerki remains in power in Asmara, a remarkable transformation
has taken place elsewhere. In perennially fractured Somalia, Ethiopia has maintained good
relations with Somaliland and the autonomous Puntland administration, while helping to
support the still-feeble regime in Mogadishu. It has worked extremely hard to stabilise and
if possible resolve the conflict in South Sudan, albeit without much success, while contrib-
uting key peacekeeping forces in the contested Abyei zone between South Sudan and Sudan.
And, most significant, it has used the Grand Ethiopian Renaissance Dam, which might have
been expected to foster conflict with the downstream states of Sudan and Egypt, as a means
of promoting rapprochement with them.37 These can all be ascribed to the new importance
of development as a driver of Ethiopian policy, and the resulting need for good relations
with the country’s neighbours, not least since the loss of Eritrea’s ports has deprived it of
direct access to the sea.
This in turn helps to explain the second key question arising from Ethiopia’s governance
structure: the startling absence of any reaction, especially from Western states, to its very
poor democratic and human rights record. While the presence of China as a potential coun-
terweight is obviously one factor, Ethiopia’s success in positioning itself as a force for stability
in a highly unstable region is also a critical element. With Eritrea locked into an isolated
dictatorship, continued domestic conflict in South Sudan, and Islamist movements threat-
ening both Kenya and Somalia to the south, and Yemen across the Red Sea, Ethiopia’s capac-
ity both to maintain domestic order (albeit at a cost in repression) and contribute to regional
conflict management is extremely welcome, both continentally (where Ethiopia also benefits
as the headquarters state of the African Union, and effectively diplomatic capital of Africa),
and in the world as a whole.

Conclusion
Ethiopia clearly ranks as one of the clearest examples in Africa of the application beyond
East Asia of the idea of the developmental state, and meets Kelsall’s criteria for what he
12   C. CLAPHAM

terms ‘developmental patrimonialism’. The patrimonial elements in the Ethiopian state,

though still represented by the continued prominence of individuals associated with the
TPLF’s liberation war, have been supplemented by the emergence of a technocratic class
without evident political connections, most clearly represented by the new Prime Minister.
Kelsall’s conclusions, which cite Côte d’Ivoire under Houphouet-Boigny, Kenya under Jomo
Kenyatta, and Malawi under Kamuzu Banda as cases of long-horizon centralised rent
management, suggest, however, that successful development depends on policies that rest
essentially in the hands of the leadership, and may therefore be applied to virtually any
state, even within a continent in which the imposition of statehood has been as recent, as
external, and indeed as partial, as in much of tropical Africa. Although Kelsall’s conditions
likewise apply to Ethiopia, this is a case that at least raises the question, highly relevant to
the East Asian comparison, of whether underlying social and cultural factors, which also
reflect a history of independent statehood long preceding colonial rule, are an equally
important variable.
It is also important to note that the undoubted successes of the Ethiopian developmental
state, up to this point, have been achieved in precisely those areas in which a top-down and
at times frankly autocratic state enjoys its greatest advantages: Ethiopia has done the things
that a state can do, notably in the maintenance of order and the provision of infrastructure.
Even there, it has at times been hindered by its reliance on a directing core with a very limited
capacity to listen to alternative voices or take popular reactions into account. The critical
challenge that it faces is whether it can make the transition to a very different kind of state,
in two key respects: first, to an economy in which the major initiatives come from the private
sector, and depend on a level of adaptability that states are inherently ill-equipped to pro-
vide; and second, and still more problematically, to a political system in which the state itself
becomes liable to a level of accountability that no Ethiopian regime has yet been able to
tolerate.

Disclosure statement
No potential conflict of interest was reported by the author.

Acknowledgements
My thanks are due to William Davison, Dereje Feyissa, Elsje Fourie, Tegegne Teka and Sarah Vaughan
for commenting on a draft of this paper, and providing very helpful suggestions and information.

Note on Contributor
Christopher Clapham is Professor Emeritus at the Centre of African Studies at Cambridge
University. He is a specialist in the politics of Ethiopia and the Horn of Africa and was for-
merly editor of The Journal of Modern African Studies. His books include Transformation and
Continuity in Revolutionary Ethiopia (1988); Africa and the International System: The Politics of
State Survival (1996); and, as editor, African Guerrillas (1998).
 THIRD WORLD QUARTERLY   13

Notes
1. World Bank, World Development Indicators 2015, table 4.1. African economic statistics are rightly
subject to all manner of caveats, and World Bank figures are used where possible; Ethiopian
government assessments are generally higher.
2.  Harald Aspen, Rural Land and Urban Aspirations: Future Orientation in a Time of Change,
unpublished ms.
3.  See Vu, “Studying the State.”
4. This is a theme that I have explored in Clapham, “Ethiopian Development.”
5. Tilly, Coercion, Capital and European States; Skocpol, States and Social Revolutions.
6.  See Clapham, Transformation and Continuity in Revolutionary Ethiopia.
7.  Kohli, State-Directed Development.
8.  Henley, Asia–Africa Development Divergence.
9. This enthusiasm is best accounted for by Albania’s role as an example of self-sufficient
development independent especially from the USSR (which supported the Derg regime against
which the TPLF was fighting).
10. Conspicuously excluded from the EPRDF are the pastoralist peripheries of lowland Ethiopia,
largely it would seem on the ideological ground that their peoples are not ‘peasants’, and
cannot be fitted into a Marxian class structure; for an excellent survey and analysis of politics
in the periphery, see Markakis, Ethiopia: The Last Two Frontiers.
11. See de Waal, “Theory and Practice of Meles Zenawi,” with subsequent critique by René Lefort
and rejoinder by de Waal in African Affairs.
12. See Lefort, “Free Market Economy.”
13. See Jacquin-Berdal and Plaut, eds. Unfinished Business; Negash and Tronvoll, Brothers at War;
de Guttry et al., The 1998–2000 War.
14. Fourie, “China’s Example for Meles’ Ethiopia.” The Chinese example both replicated the central
role of the Leninist party-state, and lay outside the Cold War framework that arguably affected
the other three East Asian cases.
15. The road network, for example, is reported to have expanded from 36,496  km in 2004 to
85,966 km in 2013; UNDP, National Human Development Report Ethiopia 2014, 83, table 6.6.
This report provides the most recent comprehensive data on the Ethiopian economy, though it
should be noted that it was prepared in collaboration with the Ethiopian government, which is
likely to have imposed its own views on the findings: the discussion of democracy and human
rights, for example, is notably anodyne. The figures for roads come from the Ethiopian Roads
Authority. See also International Monetary Fund, Federal Democratic Republic of Ethiopia.
16. For a striking case, see Soares de Oliveira, Magnificent and Beggar Land.
17. Cited in Feyissa, “Aid Negotiation”; see also Furtado and Smith, “Ethiopia: Retaining Sovereignty”;
and Fantini and Puddu, “Ethiopia and International Aid.”
18. See Feyissa, “Aid Negotiation,” 808–9.
19. According to United Nations Conference on Trade and Development (UNCTAD) figures, FDI, while
varying significantly from year to year, rose from US$135 million in 2000 to $953 million in 2013. See
http://unctadstat.unctad.org/wds/TableViewer/tableView.aspx
20. See Kelsall, Business, Politics and the State, 108–10; and Melese and Helmsing, “Endogenisation
or Enclave Formation?”
21. See Kelsall, Business, Politics and the State, 110–1; and Gebre-Egziabher, “Impacts of Chinese
Imports.”
22. See Rosen, “Made in Africa.”
23. UNCTAD, World Investment Report 2016, Country fact sheet Ethiopia.
24. See Okubay, Made in Africa.
25. See Lefort, “Powers – mengist.”
26. See Ojulu, Large-Scale Land Acquisitions.
27. See Kamski, “Kuraz Sugar Development Project.”
28. See Mosley, “Two Africas?”
29. Gebremichael and Vaughan, “Ethiopia: Rent Seekers and Productive Capitalists.”
14   C. CLAPHAM

30. Oqubay, Made in Africa, 70–2, makes a case for the endowment funds, which should, however,
take account of his own position in the Ethiopian government.
31. The Siltie, a largely Moslem group previously included with the Gurage, voted in 2001 to form
a separate nationality; see Smith, “Voting for an Ethnic Identity.”
32. Ethiopia ranks 132nd out of 189 worldwide in the World Bank’s Ease of Doing Business index
(www.doingbusiness.org), and 14th out of 47 for sub-Saharan Africa, but much lower, at
165/189, for access to credit.
33. UNDP, National Human Development Report Ethiopia 2014, 19, figure 2.5.
34. https://thegedi.org/global-entrepreneurship-and-development-index/
35. Kelsall, Business, Politics and the State, 147.
36. This system, unusual in Africa, is probably best ascribed to Meles Zenawi’s complete lack of
interest in the theatrical elements of power represented by being head of state.
37. See Gebreleul, “Ethiopia’s Grand Renaissance Dam.”

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