Ethiopia facing challenges says Global Competitive Report


Ethiopia has been ranked 127th out of 148 countries, on the Global Competitiveness Report 2013. According to the report, the country faces several challenges on what it calls “Pillars” for being competitive globally. The stated pillars include; well functioning public and private institutions, well developed infrastructure, a stable macroeconomic environment, a healthy and literate workforce, the development of more efficient production processes and an increase in quality, which the Report indicates is a stage where competitiveness is driven by higher education and training.
The Global Competitiveness Report suggests that in the case of Ethiopia, the goods and labor markets seem to be deteriorating with more procedures and time required to start a business as well as increasing concerns about the quality of labor-employer relations. The alignment between pay and productivity is also mentioned as another challenge for the country.
Other Pillars mentioned by the report include developed financial markets, the ability to make use of the latest technological developments and the size of domestic and foreign markets available to companies in a given country. Finally, the Report reads, as countries move into the innovation-driven stage, they are able to sustain higher wages and the associated standard of living only if their businesses are able to compete with new and unique products. At this stage, companies must compete through producing new and different goods using the most sophisticated production and business processes, which is one pillar by itself, and innovation, put in the report as another and most important pillar.
Ethiopia, according to the report, also requires significant improvements in the areas of infrastructure, higher education and training and technological readiness. The report classifies Africa’s challenges with being competitive with oil and gas exporters, middle-income economies, non-fragile low-income economies and fragile economies. Ethiopia is placed in the fragile economy section when compared with others.
Surprisingly, other countries that are put in the section of fragile economy include countries that export oil and gas. These countries, the report reads, have performed poorly in 9 out of 12 pillars, calling into question whether their economic growth rates are sustainable.  
On a more positive note for Ethiopia, it was ranked 55th regarding security, which is better than other Sub Sahara countries. The report also says that primary education, with a net enrollment rate of 87 percent, is comparatively good, although the quality of education is very low. It also points out that women account for a high percentage of the country’s workforce, which it says is a big plus.
On a more general note regarding the Sub Sahara region, the report says that it has been showing an impressive growth rate of 5 percent in 2012 and similar projections are made for 2013/14. This growth has largely taken place on the backs of strong investments, favorable commodity prices and practical macroeconomic stances.
Regarding the overall look at the continent of Africa, efforts to foster trade through regional integration will be critical to increasing the region’s competitiveness. Increased cross-border trade can lead to a virtuous cycle of more competition in domestic markets. This will lower the cost of goods and services while increasing their varieties, which will generate more economic activity, such as the development of manufacturing or service sectors.
According to the report, African countries are losing out on billions of dollars in potential trade every year because of the region’s fragmented regional markets and the lack of cross-border production markets that have spurred economic dynamism in other regions, such as East Asia.
Another big challenge for the continent is said to be population growth, which has hit the 1 billion mark and became 15 percent of the world’ total and is projected to increase by 20 percent by the year 2030. The Report reads that in this context, events such as the Arab Spring highlight the tensions that can arise from a growing population. Population growth without accompanying economic and social progress to ensure decent living standards, employment and fair opportunities to better people’s lives, can lead to political unrest.  
Another challenge for the continent remains to be the unemployment rate. It is caused by a combination of the remarkable growth of an increasingly educated youth population and the slow pace of job creation in a formal economy. Africa has the highest number of young people (15–24 years of age) in the world, totaling about 200 million, and it is projected to double by 2045. Projections show that 59 percent of youth (20–24 years of age) will have had a secondary education in 2030, compared with 42 percent today. This translates into 137 million people with secondary education by 2030.
Overall, the report says, a number of African economies continue to trail behind significantly, with 14 of its economies populating the bottom 20 of the rankings. Efforts across many areas are needed to place the region on a sustainable growth and development path, especially in infrastructure, health and basic education, and the adoption of the latest technologies.