The Impact of
Official Development Assistance (ODA) on the Poverty Reduction Programs in Ethiopia
Abstract
In theory, the overall goal of
Official Development Assistance (ODA) is tackling poverty and enhancing the
development efforts of developing countries. In practice, the development
objective of aid is a contested issue. Accordingly, many investigations have
been done on the overall impact of ODA on PR programs or development
constraints of developing countries. However, there is not a clear-cut consensus
on the overall impact of aid on the reduction of poverty and development in
poor countries like
Therefore, the thesis tried to look
at that though the overall impact of ODA in
Using the particular emphasis of TVET
program towards PR as a research strategy, the study found out that TVET
Programs gave practical skills and knowledge to many young trainees and
individuals with little literacy skills that can create employment or self employment
opportunities, which in turn help them to generate income to fulfill and
improve their livelihood. Thus, TVET has a direct impact on the poverty
reducing efforts of the country.
The analysis of the study however
indicated that the majority of financial and material resources for the
implementation of TVET program in the country come from the government budget.
The involvement of donors in this sub sector is still limited. Therefore, it
has found that due to the small magnitude of ODA invested in the sub sector, it
was hard to point out the impact of ODA on PR through TVET program. However,
the study argued that if TVET program has a direct impact on PR, then investing
ODA in TVET program can contribute to the PR efforts of the city and the
country.
Moreover, it has also found many
constraints towards the implementation of TVET program. These included lack of
access to the government and private training program, low efficiency and
effectiveness of the program, inadequacy of material and financial resources,
the training program was not demand driven (labour market driven), and the low
awareness of the society (including the government and private enterprises and
organizations) towards the impact of TVET program towards the PR activities.
These constraints showed us that its impact towards the livelihood of the
trainees was still minimal.
Therefore recommendations like better
organizational structures at each level of TVET/ educational offices, positive
attitude of the society towards the implementation of the education/TVET system
reforms, an integrated (inclusive) educational approach and setting a better
monitoring and evaluation system of the program etc, had been suggested.
The study concluded that as long as
the provision of effective and efficient TVET program has an impact on PR
efforts of
I.
Introduction to the Study
1.1 Introduction to the Research Topic
As
Sarantakos [1998] presents different models for approaching the construction of
theory drawn from quantitative and qualitative approaches, in this section the
main conceptual variables of the study will be explained.
Therefore,
the conceptual framework provides a particular point of view from which the
researcher focused the study. This theoretical perspective helps to identify
the main variables from which particular kinds of hypothetical questions can be
generated. The main interrelated variables that are going to be focused in this
study are Official Development Assistance (ODA), Poverty Reduction Program and
Technical Vocational and Educational Training Program (TVET) and their
interrelation and interaction in Ethiopian context.
1.2 Background to the Study
1.2.1
Historical Origins of Official Development Assistance (ODA)
The US Foreign Minister, George C. Marshall in 1947, made the
first comprehensive proposal regarding ODA (Dengnbol-Martinussen and
Engberg-Pedersen 1998). His basic idea was to give massive aid to European
countries to rebuild them economically after the W.W.II. Moreover, its motives
were driven by US national security agendas and commercial considerations.
Foreign aid
and aid program are the general terms used for the help provided by developed
nations to developing nations, like
According to
·
It has to be undertaken by official agencies
·
Has to have the promotion of economic development and
welfare, as its main objectives.
·
Has to have at least 25% of grant elements.
Therefore, the above definition of OECD is the one that the
researcher will use.
1.2.2 Foreign Aid and
Poverty Reduction Program
The
researcher uses the word “Foreign aid” as a synonym of ODA. Moreover, the
researcher will focus only on bilateral development assistances that flow
through the Ministry of Finance and Economic Development (MOFED). For the
purpose of narrowing the focus of the study, it will look at only one donor
country, Germany Official Development Assistance, which is involved much in
TVET sector.
Accordingly,
only German bilateral aid that was and is given to
Throughout
the 1980s, most bilateral and multilateral donors accepted the World Bank's
leading role in deciding general priorities in aid giving. The latter were
focused on the reduction of poverty. The World Bank, in its report of 1990,
took up poverty reduction as its priority of assistance (WB Report 1990).
Dengnbol-Martinussen and Engberg-Pedersen (2003, p.28) argued that most of the
other bilateral and multilateral donors remained critical in terms of the
amounts they disbursed and the associated conditionality.
The major
trend associated with in 1990s, was the requirement that developing countries
prepare Poverty Reduction Strategy Papers (PRSPs) to get assistance from donors
and international financial institutions. These strategy papers are the means
or guidelines for the poverty reduction programs of poor countries and TVET is
one sub component of the strategies in the Ethiopian Poverty Reduction Strategy
Paper, see the ESDPRP (2002, p. 94).
The
researcher will look at different theoretical dimensions of poverty and poverty
situation in the country in later chapters.
1.2.3 Poverty Reduction Program (PRP) in
It is
useful to set any analysis of poverty in
The
majority of people in
Despite its
difficult topography, the arable areas of
Regarding
the causes of poverty in Ethiopia, it was found that the high-dependency rates,
low level of education, poor access to health and sanitation services, lack of
assets etc. are some of them [http://www.eea.ethiopiaonline.net/Econ- foc/ef
2-5/abesh] [accessed 10th December 2004]. However, they don’t show us why the
household is in this malfunctioned state. Thus, microeconomic evidence would
have to be linked with macroeconomic factors to get the root cause of poverty.
Accordingly,
the Ethiopian government did a lot of efforts to see and analyze the depth and
breadth of poverty in the country. Thus,
at the end of 1990s the government started to prepare its poverty reduction
strategy paper and in July 2002, the country produced the Ethiopian Sustainable
Development and Poverty Reduction Program, (ESDPRP), which is a policy and
strategy framework for both the government and donors to intervene in the
poverty reduction efforts of the country.
Thus in this PR strategy paper, poverty was defined as multi-dimensional,
such as material deprivation, lack of capability, vulnerability or lack of
security, and voicelessness or lack of empowerment (Woldehanna 2004). In addition of these qualitative descriptions
of poverty, there were also quantitative description of poverty, such as
studies that are based on the Household Income and Consumption Expenditure
Survey (HICES).
The ESDPRP
(2002) identified key-pro-poor sectors. These include agriculture, health,
education, water and road sectors; and agriculture is set as the most important
element for reducing poverty of the mass of people living in rural areas. It
assumes that faster economic growth can be achieved by increasing agricultural
productivity through the use of labor intensive and land-augmenting
technological progress. Therefore, to use labor-intensive for increasing of
productivity, the country needs enough skilled workforces and in this regard
TVET program plays an important role.
1.2.4 Education, TVET
Program and Poverty
Artchoarena and Delluc (2001) defined TVET as education, which
is mainly designed to lead participants to acquire the practical skills,
know-how and understanding necessary for employment in a particular occupation,
trade or group of occupations or trades. They further elaborated that
successful completion of such programs leads to a labor market relevant
vocational qualifications recognized by the competent authorities of the
country in which it is obtained.
In 1977, at the annual meetings of World Bank, the President of the Bank, McNamara, outlined the
components of the basic needs that must be met if poverty is to be overcome.
These are food with sufficient nutritional value, shelter and clothing,
education, clean water, and health care. This comprehensive approach to
development brought up the importance of education in three interrelated ways:
as a basic human need, as a means of meeting other basic needs and as an
activity that sustains and accelerates overall development.
In 1980 the World Bank in its 3rd edition of
sector policy paper stated that education has long been recognized as a central
element in development. When the developing countries began their drive for
social and economic development nearly three decades ago, education was
perceived as a means not only of raising political and social consciousness,
but also of increasing the number of skilled workers and raising the level of
trained manpower [Haddad and Habte 1980, p.12].
Accordingly, as Tadesse and W/Giorgis quoted Hogendorn, (www.Ethiopianreporter.com) (accessed on 18th December 2004)
it was pointed out that
No highly
educated and well-trained population is poor, but almost all populations with
poor education and limited skills suffer from low income. Gross deficiencies in
education and training may have the particularly bad result that they prevent
workers and managers from absorbing the technologies that could increase
growth.
Therefore, the researcher will focus on education
particularly TVET not only as a means to ODA to enhance the poverty reduction
efforts of the country but also as an end that it helps the poor to improve
their socio-economic status and contribute to the economic development of the
country.
TVET is understood similarly by different donor agencies and
social scientists that are involved in helping developing countries. For
instance, in
The
Eade (1997) again explained
vocational and other forms of training as activities that are often designed to
raise the incomes of poor people, on the assumption that with new and
marketable skills they will be able to find work or set up enterprise of their
own.
However, he stated that skill
trainings would not create favourable conditions such as creating jobs, markets
or economic gains for the poor, by themselves. Therefore, he put many crucial
points that have to be taken in to consideration. These include the trainees’
real or potential work opportunities to check whether these are commercially
viable and sustainable; organisational management skills that are ranged from
leadership such as knowing how to hold and minute meetings, negotiating
contracts etc, to personnel, financial and business management, information and
stock control systems, and marketing expertise.
The above analyses and understandings
of TVET shows us that it is becoming one of the most important sub sector of
education and with the assumption that it has positive impact towards poverty
reduction efforts of developing economies.
I also think that this is why, most donors, like the above ones, are
emphasising their sector policy of programs towards TVET Program. This was
proven by an Independent Review of poverty reduction and development assistance
of 2000 as that education in general is a weapon in the fight against poverty,
opening up access to knowledge and skills and helping to break down barriers
that exclude the poor and marginalized people from political and economic life
(Randel 2000).
Similarly, realising the positive
role that education has in the development of a society and reducing poverty,
the Ethiopian government has adopted a new education and training policy (ETP)
in 1994. This was due to the challenges that existed in the educational system
of the country. These include mainly low enrolment ratios, rural areas and
girls are not well served, the low quality of education, inefficient education
system, inadequate funding and weak capacity for planning and management.
Therefore, to address these problems,
the Ethiopian government adopted this new ETP that have been translated in
1997/98 in to a general education strategy and an action plan, which again
termed as Education Sector Development Program (ESDP). This program translates
the policy statement in to action and it covers the first five years of the
20-year program that matches with the universal primary enrolment (Millennium
Development Goal) by 2015 (MOE 1999).
The goal of this policy is to
restructure and expand the education system to make it more relevant to the
present and future needs of the economy. Thus, its focuses (MOE 1999) are
expanding equitable access to primary and vocational education to meet the
demands of the country and the economy, restructuring the education system,
changing the curriculum to increase the relevance of education to communities,
and improving the quality of education throughout the system.
After the launching of ETP, the
Ethiopian government has paid attention to the TVET program. Since then it
appeared one component of the ESDP that embraces activities like employer and
market surveys and encouraging private sector participation in the design of
TVET programs and in the provision of training[2].
Thus, the government, NGO’s and private sectors started to offer this program.
The study will take TVET as a means
for acquiring skills for those people who are not able to continue their
tertiary school and for those who are educated to some level but are unemployed
or unable to secure their livelihood and are dependent on others or government
or donor assistances.
1.3 Rationale for choosing the Topic
Many
investigations have been done on the overall impact of ODA on Poverty Reduction
Programs or development problems of developing countries, for example, Cassen,
On the other hand, Cassen argued that the majority of aid
succeeded in terms of its own objectives and obtained a reasonable rate of
return (1994, p.2). Cassens’s authoritative study of the effects of aid
concluded that aid has contributed positively to a long series of results
(1994, p.224). For instance, raising food production in South Africa;
experimental rural education programs in Africa, infrastructure investment
(power, roads and railways, ports, communication), rural development, self-help
schemes; strengthening developing country institutions, family planning and so forth.
The World Bank again in its 1998 report stated that ODA in
different times and in a number of places has been highly effective, totally
ineffective, and everything in between. Moreover, perhaps that is to be
expected in a complex endeavor that has spanned half a century, with scores of
countries, donors, a hundred countries as recipients, tens of thousands of
specific activities, and nearly US $1 trillion in finance (1998 b: 2) but the
change in poor countries is very small.
Having the
above different understandings of different researchers about the overall
impact of Foreign Aid (ODA) in relation to the development endeavors of
developing countries, there appears no clear-cut consensus on understandings of
the impact of aid on the reduction of poverty and development in poor countries
like
My own
personal interest in this area arose, from my working for one of the biggest
government institutions, the Ministry of Finance and Economic Development,
which formulates the development policies of the country. I work in the
Department of Bilateral Cooperation that mobilizes external resources from
number of donor countries to
The reason why the study gives particular emphasis on TVET is
that; despite its great contribution to the reduction of poverty and economic
development of the country, most donors and local government gave little
attention to it. For instance, the
Education Sector Development Program (ESDP) II in its Program Action Plan (PAP)
of 2002, it was stated that the development of the TVET sub-sector of education
in
Moreover,
most donors, governments to Ethiopia focuses their assistance on basic
education mainly to primary education, which has more of academic nature than
skill training that helps individuals to have ways of creating employment
opportunity or self-employment. As to my working experience in the Ministry of
Finance and Economic Development (MOFED) most donors, like USA, Ireland,
Sweden, Canada are giving their assistance to education sector mainly to
primary education only the German government mainly and few other European and
Asian countries, like Italy, Japan, China, South Korea recently allocate their
assistance to TVET program.
Besides,
the WB report (1988) on education in Sub-Saharan Africa argued that greater
emphasis has been given on greater investment in primary education. This is
because based on several studies the WB explained greatest returns came from
primary rather than higher levels of education as basic education is closely
ties to achievements in other sector like as health, empowerment of women,
poverty reduction, etc. However, as
Therefore,
the study will try to explore if the assistances of rich countries that are
directed towards education and particularly to TVET program, might help the country’s
effort in reducing poverty in the country.
1.4 Aims and Objectives of the Study
1.4.1 Aim
of the Study
The study
will try to explore the impact of ODA on the development efforts of
1.4.2
Objectives
Therefore
it will look at:
ODA as a
factor of reducing poverty in
- How ODA is integrated in to the TVET program (special emphasis
will be given for selected government TVET centers in
- How the TVET program is
formulated and considered by the Ethiopian government policy?
- The aid related activities
(such as aid coordination between the government and donors) in relation
to the reduction of poverty in the field of TVET program.
- The changes that have been
brought to the lives of the TVET trained people. For example, are they self-employed?
Or serving the private sector enterprises (small-scale and micro
enterprise)? How many are successful and not successful in their skill
career?
- Poverty situation of the
country and particularly the study area due to lack of TVET skills
1.5 Research Questions
Based on
the overall assumptions and the above objectives of the research, the following
research questions have been developed:
- What role does ODA play in
TVET program of
- ODA as a factor of reducing
poverty; how education, particularly the TVET program, serves as a
mediator or linkage factor of ODA to the reduction of poverty
(ODA positive impact on education
(TVET) poverty reduced?)
- What is the impact of ODA on
TVET in relation to:
- Resource availability of the
Ethiopian government
- Education policy formulation
- Poverty reduction, i.e.
living standard improvements
of participants
II.
Literature Review
2.1 Introduction
Barrientos
(1998) argued that any kind of research or investigation in policy is going to
involve, at some level, a study of the relevant literature that supports our
own research project. Therefore, a literature study involves the process of
critically assessing and evaluating written materials in order to develop our
own analytical approach and/or relate it to new aspects of inquiry.
Therefore,
this part will try to critically asses the relevant literatures and studies
that have been done so far in relation to the conceptual variables those are
developed in this study. First it tries to look at the impact of ODA on PR, ODA
in education and the different theoretical and research arguments about ODA in
reducing poverty.
Secondly,
it will give emphasis on the theoretical and different debates and concepts of
skill development and TVET; and its role in PR.
Moreover, it will look at the content and reform process of TVET program
in
Thirdly, it
will look at ODA in
Lastly, it
will look at the different concepts of poverty and features of urban poverty
and relates it to the study area,
2.2 Official Development Assistance (ODA) and
Poverty Reduction (PR)
There is often confusion about the overall goal of international
development assistance. The source of this confusion, as explained by Fowler
(1997), is the mix-up between means and ends, fed by multiple agendas and
institutional competition. For instance, the International Financial
Institutions (IFIs) like the World Bank and IMF promote that market capitalism
as the main global economic model. This means that they believe that efficient
markets producing broad based growth can be equated with development
itself. Accordingly, they set their
agenda with regard to the purpose and content of their international assistance
based on this premises, that is liberalized market brings economic growth that
in turn helps in reducing poverty. However, Fowler (1997) argued that growth is
not always equivalent to development that brings a better condition for
countries, especially for the developing countries. Therefore, if the final
goal of aid is to bring development that reduces poverty the preconditions set
for development assistance of IFIs should consider more of the local realities
than the broader preconditions, such as liberalized market policy, for economic
growth.
The UNDP on
the other hand (1990) take a position in the aid system emphasizing human well
being as the goal of markets and development. The UNDP takes people, as at the
centre of development and that they and their values are the means, ends and
judges of development. Under this
approach, markets are in service of human kind. This is a more
holistic approach to development unlike that of the IFIs. According to some
commentators, like Fowler (1997) and White (1996) there is a general consensus
about the over all long-term goal to be achieved by development assistance.
In
discussing aid from the perspective of development theory and intention of
development agencies, one of the main questions is whether aid to developing
countries can be justified theoretically? And can it be claimed on the basis of
existing growth and development theory that foreign aid has an impact on the
reduction of poverty and promotes development in some more narrowly defined
way? Can national economic growth and development in broader context be
achieved with out foreign aid (Martinussen and Pedersen 2003, P.18)? The impact
of aid depends on several other factors and potential incentives. Therefore,
the theoretical problems are both in formulating foreign aid’s general impacts
and efforts and to reveal the circumstances that cause the impact and effects.
There
is a large body of literature on the impact of foreign aid on development and
poverty reduction, of which only the most summary description will be presented
here. I am providing this summary to show
the location of this study in the broader discourse and to critically analyze
the relationship between aid and poverty reduction.
The
discourse on aid and development has taken place both on theoretical and
practical levels and in a number of disciplines.
The
first approach tends to be more theoretical and considers that the impact of
aid is primarily function of the broader economic and political context where
it is provided. The second approach, instrumental approach, is an analysis of
the impact of aid on development based on the available evaluations, studies
and other empirical materials; such as Baulch (1996), Wangwe (2001) and White
(1996) etc.
With
in the contextual approach, there are different theories of impact of aid on
development including dependency theory, deconstructionist theories and others,
such as neoclassical and conventional (classical) aid theories, which reveal
the contested issues about the impact of aid on PR.
2.3 Official
Development Assistance (ODA) in Ethiopia
The
government of
As an
additional source of finance, ODA is expected to fill the financing gaps needed
to implement priority development projects and promote development in
Table-2 Financing ESDPRP in’000 birr
|
No |
Sectors |
Program costs of PR sectors for the 3 years
(2002-2005) |
Total available Expenditure Resources for the identified sectors (2002-2005) |