UNIT ONE-INTRODUCTION

1.1 Definition and Concept of Regional Planning

1.1.1 Definition, Concept and Types of Region
Some of the common definitions and concepts of region are:
 An area having some characteristics or characteristic that distinguish it from other
areas.
 A territory of interest to people and for which one or more distinctive traits are used
as the basis for its identity.
 A territory that includes many smaller places, all or most of which share similar
attributes, such as climate, landforms, plants, soils, language, religion, economy,
government or other natural or cultural attributes.
 A group of districts, located within a geographic area of a state
In general region is an area with one or more common characteristics or features, which give
it a measure of homogeneity and make it different from its adjoining or surrounding areas.
Types of Regions
A. Formal Regions
 Formal regions are extensive geographical areas that share homogeneous
characteristics on the bases of selected criteria such as nature of physical conditions
(topography, climatic conditions, soil types, and vegetation distribution), economic
structures, etc
 These regions are composite regions in that there is considerable area variation with
regard to the basis of selected characteristic/s.

Types of Formal Regions

1. Physical Formal Region
They are regions identified on the basis of the physical or natural characteristics of areas.
Types of Physical Formal Regions
a. Topographical region
o This is a unique natural region that is homogenous in terms of physical landscapes
such as plains ,valleys, mountains, hills etc.

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 b. Climatic region: This is a geographical region that has the same climatic conditions such
as amount, distribution and reliability of rainfall; the lengths of dry and rainy seasons; the
prevailing winds; the amount and range of temperature and atmospheric humidity in the air.
c. Vegetation region
۩ This is an extensive physical region that has the same natural vegetation cover as Rain-
forest region, the Savanna region, the Alpine vegetation region, etc.
d. Edaphic region
 This is a natural region that has the same type, conditions, and characteristics of soil as
alluvial soil region, swampy soil region, sandy soil region, etc.
2. Cultural Formal Regions
Refers to an area over which the cultural traits of human group may be identified. The culture
and cultural environment of human groups varies from place to place. This variation in
cultural traits results in to variations in human occupation and his organization of space.
The following are some of the cultural regions:
a) Population regions
Population and its demographic attributes constitute an important aspect of cultural landscape.
To delineate an area in to the high density and low density areas is known as population
regions. The age and sex composition, birth, death and growth rate patterns, the literacy,
occupations and patterns of migration may also be delineated. All these are known as
population regions.
b) Language regions
All over the world different social groups speak different languages. The delineation of
different language areas on a map is known as language region. Taking language as a
criterion, the world may be divided in to Indo- European, Afro –Asiatic, Negro language
regions etc.
c)Religious regions
The world may be divided on the basis of religions eg. Regions of Christianity, Islam,
Judaism, etc.
d)Economic regions
The economic region refers to the region having similar economic activities and resources.

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I. Agricultural region: these are vast agro ecological zones in a country having the same
agricultural land use, agricultural practice and its production.
II. Industrial region: this an area of homogeneous manufacturing industrial structure, type
and production

B. Functional Regions
A functional region need not be homogeneous. Instead, it is an area that has been organized to
function politically, socially, or economically as one unit. Functional cultural regions have nodes,
or central points where the functions are coordinated and directed. Functional region is thus an
area tied together by a coordinating system such as law, monetary system, roads, etc. A city,
an independent state, a trade area or a farm is a functional culture region.
C. Vernacular/perceptual regions
Are those perceived to exist by their inhabitants, as evidenced by the widespread acceptance and
use of a special regional name. Some vernacular regions are based on physical environmental
features; others find their basis in economic, political, or historical characteristics. Vernacular
regions generally lack sharp borders and the inhabitants of any given area may claim residence in
more than one such region. It grows out of people’s sense of belonging and identification with a
particular region. Vernacular Region is an area that ordinary people or non-geographers recognize
as a region. For instance The Great Somalia which includes the people of Somali in Ethiopia,
Kenya and Djibouti. It can be based on many different things such as physical environment;
economic, political, historical aspects; and often created by publicity campaigns.

1.1.2 Definition and Concept of Planning and Regional Planning

Although, there is a widely varied opinion among scholars about the definition of planning,
planning consists of goals and means. The goals contained in a plan must be explicit and
coherent and there must be a means available for achieving the goals. Some of the varying
definitions of Planning are:
 Agrawal and Lal (1980) defined Planning as a consciously directed activity with pre-
determined goals and means to carry them out.
 Hall (1974) defined it as an ordered sequence of operations, designed to lead to the
achievement of either a single goal or to balance between several goals..

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  Glasson (1974) define planning as a future oriented problem solving process. That is a
sequence of actions designed to solve current and anticipated problems resulting from
the use or misuse of resources.
Definition and concept of Regional Planning
 Regional planning is considered as a sequence of programmed and coordinated actions
designed to solve current and anticipated economic social, physical problems in a
geographical area.
 It is the projection of economic, social and environmental development in a given
geographic area for a given period of time for the benefits of the region’s population in
addition to and beyond the national benefit to which all regions contribute.
 The objectives of national development are being promoted through regional
development as an instrument of implementation. However strategies must blend and
effectively combined the inputs from central sources with the development based on
local resources, aspirations and action, and they must benefit the region’s people.
 The process which seeks to create spatial balances in socio-economic development is
called Regional Planning.
Regional planning helps to control development
To conserve and enhance the environment and its resources
To avoid regional imbalances
To use resources wisely and effectively
Components of regional planning
a. Environmental Planning
Environmental planners work to enhance the physical environment and minimize the adverse
impacts of development. Some environmental planners focus on scientific and technical
questions while others develop policies and programs to encourage the public to protect
natural resources.
Some planners develop expertise in one aspect of resource management while others attempt
to identify the environmental implications of a range of government policies or proposed land
use changes. Some environmental planners focus on cleaning up polluted areas or resources
while others focus on preventing contamination and the destruction of ecosystems.

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Many environmental planners work to integrate a concern about pollution and the
conservation of non-renewable resources into the plans developed in other substantive areas
like transportation or economic development.
b. Economic Development Planning
Economic development planners work to improve a community or region by expanding and
diversifying the economic activities which support the families living there. Many planners
do so by helping develop plans to attract businesses which create new jobs and provide
additional tax revenues; others work to keep businesses from leaving distressed areas.
Economic development planners at the local level often work to promote the special features
of their community, sometimes by encouraging tourism or additional recreational
opportunities. Some planners develop projects which bring housing and commercial
enterprises as well as jobs into disadvantaged neighborhoods. Some economic development
planners help communities find ways to finance the cost of new development while others
work to overcome regulatory and other barriers to new projects.
Economic development planners often work in conjunction with land use, housing, social and
community planners to address the needs of distressed communities or declining business
districts.

c. Social Development Planning

Many planners practice in these overlapping areas. Housing planners help develop strategies
to increase the supply of affordable housing and expand home ownership among low income
or disadvantaged groups. These planners often try to create incentives and remove constraints
on private home builders or work with public or non-profit organizations to build housing
units for low income families or senior citizens.
Many housing planners try to encourage mixed use developments offering services and jobs
closer to where people live; others promote projects which provide housing opportunities for
people from a mixture of income levels. Planners concerned with the social aspects of a
community often combine their interest in housing with efforts to increase the overall quality
of life in poor or minority neighborhoods.
Many social and community planners work to improve multiple aspects of a targeted
neighborhood, combining many substantive planning skills from economic development to
urban design. For example, community and social planners may work to improve transit

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 service in disadvantaged communities or develop job training programs for unemployed
residents or provide better public health facilities in low income neighborhoods. These
planners often work with land use and transportation planners.

1.4 Levels of Regional Planning

It is true that in many cases the size of the region will be determined by the problem at hand, but it
must be realized that to tackle a problem we have to tackle it at its most appropriate spatial level. It
means that if we want to develop an area through the technique and process of regional planning, we
have to work at a number of spatial levels. In general they are described as follows:
a) International Planning
This is about planning efforts among countries. Such countries may share common boundaries or in
the same ecological zone, and may pool their resources together and agree to solve problems that
threatened national boundaries such as smuggling, illegal migration and armed robberies. Other
countries may agree on a common currency, free movement of people and goods between countries.
b) National Planning
It is a centrally directed allocation of resources to states or regions in order to achieve national
population re-distribution, balanced development, national integration and stable political
atmosphere. The success of National Planning depends on its ability to formulate goals that reflect
the aspiration of the people and achieve the articulated goals more successfully than would
unplanned activity.
c) State Planning
It is planning for separate regions within a nation. It demands exploitation of resources within the
state & channeling of public investment funds and distributing industries, public utilities & social
amenities to the various parrts for balanced development. State planning is a useful component of the
national planning.
d) Local Planning
This involves in the preparation and implementation of consistent plan that will guide the development of
local areas within the regional state. It involves the exploitation of local resources to meet the peculiar needs
and aspirations of the local people. It ensures orderly arrangement of land uses in both urban and rural
communities so as to check incompatible land uses and haphazard developments. It is also concerned with the
detailed layout of the various districts contained in the Urban and Rural Development Plans.

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1.2 Regional Planning Process
Regional planning process is a series of connected actions designed to collect and analyze
mass of data necessary for the preparation and implementation of a regional plan. The process
can be described in terms of three inter related phases. The information-analysis phase,
programming phase and the implementation phase.
a. Information Phase:
i. Reconnaissance survey: It involves casual observation and preliminary investigation of the
existing situation in a region or sub region before a more comprehensive and detailed research
work is conducted. It enables a planner to have a general knowledge of the region necessary
for proper delineation of the selected areas, appreciation of local problem that can affect the
survey.
ii. Problem identification: It involves proper diagnosis of the nature, causes and effects of
regional problems. In addition, human, material and environmental resources that can be
explored and exploited for regional development can be identified and delineated.
iii. Goal Definition: The broad goal of the regional plan will be defined based on the deep
knowledge of the existing condition, identified problems, and available resources. A goal
must be explicit so as to determine the type of data needed; the method of data collection and
evaluation of alternative course of action.
iv. Formulation of Objectives: A set of objectives is necessary for achieving the broad aim
(goal) of the study. There is a hierarchy of objectives, from general to specific, the abstract to
the particular and from immeasurable to the measurable.
v. Data Collection: This is the gathering of data necessary for the preparation of regional plan that
needs adequate promotion, and series of meeting to be held with the community leaders and
pressure groups so as to attach all possible ideas from all segments of the society, measure their
feelings, and understand their needs and problems. These will make the plan to be relevant,
effective and result-oriented.
vi. Data Analysis: The data collected from be it primary and/or secondary sources must be
thoroughly examined, analyzed, arranged, interpreted and presented in forms of words, tables,
graphs and charts in order to have the clearest picture of the region’s needs, potentialities and
problems within the framework of the objectives of the regional development plan.
b. Regional Plan Preparation Phase:

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i. Plan Generation: This is the process of preparing two or more regional development plans
based on the problems identified, the available resources, and the perceptions of the researcher
and clients.
ii. Regional Plan Evaluation: The plans prepared will be thoroughly examined and evaluated using
sophisticated cost-benefit analysis. It further includes the merits and demerits of each of the
actions in order to select the best fit course of action in line with the resource we have, the need of
the society, the physical environment, etc.
c. Regional Plan Implementation Phase:
i. Regional Plan Implementation:A prepared plan is useless, unless it is implemented, therefore
for a plan to be successfully implemented, the plan must be understood and accepted by many
people, and the planner must communicate both his diagnosis and prescription to those
responsible for implementation. Public participation in project implementation often increases
the enthusiasm and self-confidence of the neglected groups in the community and thereby
encourages them to cooperate with the development efforts.
A properly preferred plan can achieve the desired results, if the government provides the
necessary administrative framework, legal backing and adequate resources for its
implementation.
ii. Regional Plan Monitoring: This is the process of checking and collecting information about
what actually happensto the plan that has been implemented so as to see whether changes need
to be effected in the project overtime.
iii. Regional Plan Review: After a plan has been implemented and closely monitored, unforeseen
problems need to be solved and positive changes need to be made in the plan so as to keep side
by side with the emerging situations, changing values, needs and circumstances.

UNIT TWO
REGIONAL DEVELOPMENT THEORIES
“How do regions grow?” “Why do some regions grow more rapidly than others?” “Why are
differences in levels of social welfare across regions so persistent?”
These central questions of the overall regional development have attracted the attention of a
diverse group of scholars. This growing interest in regional development studies is due in part

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to the recognition that the processes driving innovation and national economic growth are
fundamentally spatial in nature.
The processes that drive to development are appropriate theories or models of development
that need proper attention while choosing a certain theory or model to implement based on the
regional context.
2.1 Theories of Regional Economic Convergence
According to the interregional convergence hypothesis, interregional trade and regional
investment should eventually lead to the equalization of wages across regions and the
equalization of per capita incomes across regions with equal labor participation rates, skill
levels, and investment levels.
2.1.1 Export-Base Theory
The export base model developed in the 1950s by Douglass North and Charles Tiebout.
D.North(1955) argues that regional growth in local political, economic, and social institutions
is largely determined by the region’s response to exogenous world demand. This response
produces growth in both the economic base (export sector) and the non-basic sector which
exists only to serve the basic sector. As a consequence of export sales, income in the region
increases leading to an expansion of non-basic activities, development of external economics
and further regional growth.
Furthermore, D.North points out that regions need not necessarily industrialize to grow, since
a region’s exports may consist of either manufactured goods, service-based goods, or
agricultural goods.
As regions grow, their economy becomes more diversified, due to increases in local
production to serve increasing local per capita incomes and the emergence of new
industries serving export markets. With the increasing diversity of regional export bases and
the mobility of factors of production, production will tend to disperse across regions over
time, and per capita incomes will tend toward interregional convergence.
Some of the main criticisms of the theory are:
 The model ignores the importance of many important supply-side factors that
ultimately affect a region’s ability to support an emerging export base.
 North’s consideration of exports as the sole determinants of regional economic
growth. For example, in regions with populations large enough to affect the worldwide

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 demand for exports, regional growth in per capita incomes may be affected by an
increase in export demand and may affect world demand for exports.
The export base concept is merely an oversimplified version of more sophisticated general
equilibrium (when demand and supply matches) national per capita income models.
2.1.2 Neoclassical Exogenous Growth Theory
The mainstream neoclassical economic view of regional economic growth was developed by
Roy F. Harrod (1939) and Evsey D. Domar (1946).
In contrast to the demand-side approach of export base theory, neoclassical growth theory
models regional growth using supply-side models of investment in regional productive
capacity. Early versions of this theory are often referred to as exogenous growth theory,
because savings rates, population growth rates, and technological progress parameters are all
determined outside the model.

2.2 Theories of Regional Economic Divergence

The concept of convergence, even in its weaker formulation as long-run constant per capita
income growth rates, or conditional convergence, has come under attack from many sides.

2.2.1 Cumulative Causation Theory

This theory was formulated by Gunnar Myrdal (1957) (Prof. in Economics) and it considers
that development of a region is through a process of cumulative causation between the
already developed and underdeveloped regions.
Myrdalargues that underdeveloped regions may benefit from growth in developed regions
through Spread Effects resulting from the diffusion of innovations into a lagging regionand
the growing export markets for lagging region products. However, these benefits will tend to
be counterbalanced by the Backwash Effects resulting from the flow of capital and labor from
the lagging region into the developed region.
This ‘vicious circle’ type theory emphasizes that excessive backwash effects keep a less
developed region poor. Thus, if the BWE(Backwash Effects) > SPE(Spread Effects), there
will be cumulative causation towards poverty and vice versa. Under such circumstances, the
core will continue to experience a circular upward reinforcing trend of favorable effects and
the periphery will have a reverse experience.

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Myrdal believed that If the spread effects are accelerated or sustained further and
backwash effects are resisted or rebounded back to their origin, the pace of economic
development of backward regions or class will be improved in terms of time distances.
Myrdal writes that if the rebound effects are well directed, the spread effects can develop a
region.
Myrdal’s theory is center-periphery model. While the Periphery supplies raw materials and
raw human power to the centre, the centre, in its turn, supplies the technical know-how and
finished output for consumption and inputs. Core activities are at the centre. Subsidiary
activities are in the periphery area. After some time, the activities in the periphery may give
rise to new core regions. This new core region will become the new centre after some time.
Then it will form this place that new peripheral regions will develop.

2.2.2 Growth Pole Theory

Perroux (1950) (French Regional Economist) has developed the Growth Pole Theory of
regional economic growth that places spatial interaction as force view for growth. To him
large economic units are innovative that influence an economy through inter-industrial
linkages.
In Perroux’s original formulation, a growth pole referred to have backward and forward
linkages between firms and industries. Relatively larger firms generate induced growth
through inter-industry linkages as the industry expands its output.
The core idea of the growth poles theory is that economic development, or growth, is not
uniform over an entire region, but instead takes place around a specific pole. This pole is
often characterized by a key (major) industry around which linked minor industries develop,
mainly through direct and indirect effects. The expansion of this key industry implies the
expansion of output, employment, related investments, as well as new technologies and new
industrial sectors. At a later stage, the emergence of a secondary growth pole (the shift of
minor industries into key or major industries) with its own linked industries is possible, and it
proceeds (i.e. Due to inter-industry linkage of the key industry of the growth pole with its
surrounding minor industries, these minor industries will grow to key (major) industries with
their own growth poles making inter-industry linkage with new minor industries, and so on...
to bring the over regional development in such pattern)

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2.3. Structuralist Theories
Another body of theory examines regional development as a process of structural adjustment
both within and outside the region. Rather than view regional economic growth in terms of
the factors pushing regional economies toward or away from some equilibrium rate or
distribution of growth, these theorists view economic growth as a path-dependent evolution
through various stages of economic maturity.

2.3.1 The Sector/Stage Theory

Early perspectives in the structuralist tradition include several different “stage” theories of
regional economic growth. Since many of these theories also include a focus on sectoral
change, some are also referred to as “sector” theories.
Hoover and Fisher (1949) present an early theory of sectoral change through various stages
of regional growth. In the early stages of regional growth, agricultural production
predominates and the economy is largely self-sufficient.
According to sector theory, the process of economic development is accompanied by a
shift in the employment pattern first from primary to secondary sector and later on to
the tertiary sector.
According to this theory, the main focus of an economy's activity is the shifts from the
primary production that predominates the economy as largely self-sufficient; through the
secondary phase of industrialization; and finally to the most advanced stage of tertiary
sector where the region specializes in export production. In this theory, the progression
from self-sufficiency to export producer is largely seen in terms of the internal changes
in the division of labor that produce economic specialization. The process as essentially
positive, and results in increase in quality of life, social security, growing of education and
culture, higher level of qualifications, humanization of work, and avoidance of
unemployment.
It is the three-sector hypothesis of economic theory which divides economies into three
sectors of activity: primary, secondary, and tertiary.
The sector theory is based on the contribution of different sectors of economy at different
levels of development. It places attention on structural changes taking place within an

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economy in contrast to the export base theory, which emphasizes the role of external
relationships.

2.3.2 Profit/Product Cycle Theories

Vernon’s (1966) product cycle approach views regional development and change in terms of
the evolution of regional industry structures required to sell export goods. Due to low price
elasticity of demand for new products, an innovating firm cares less about small initial cost
differences between regions than about future cost considerations.
Furthermore, in the early stages of a product’s life, locational proximity to suppliers and
research and development firms is important to facilitate the flexible incorporation of product
changes and process innovations. Thus, large urban areas will be preferred locations for firms
producing new immature products. As the product matures and becomes more standardized,
the need for flexibility diminishes, and the need to focus on economies of scale increases.
Once production has been standardized, the firm can employ cheap low-skilled labor, so
underdeveloped regions become preferred locations.
Some of the criticisms of this approach include:
1. The model ignores product differentiation.
2. The assumption of shifts to low-cost labor locations in the final stage of the product cycle
implicitly assumes that cheap labor is the primary cost consideration, an assumption that
is not always true.
3. The model assumes a homogeneous geographic plane on which firms compete.
4. Market cycles may not always be consistent with international product cycles.

2.3.3 Industrial Restructuring Theories

Several new empirical realities began to emerge in the late 1970s and early 1980s that led to
the emergence of new structural explanations of regional growth and development. Among
these trends, the decline of manufacturing and the emergence of the service sector in the
industrialized world, the increasing international mobility of capital and labor flows
(globalization), and the growing interregional disparities in labor conditions across gender
and ethnic lines.

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The “Industrial Restructuring” perspective examines how structural changes in the
organization of industry have affected regional capital and labor markets.
These organizational changes of industries include
i. Internationalization and mobility of capitalist production and its effect on workers
ii. Direct Foreign Investment has disordered traditional labor structures. In the
developing world, frequent dismissals resulting from insecure manufacturing jobs
have created a large supply of female migrant workers, many of whom were
previously employed in the nonwage household sector.
iii. Intensification strategies (seeking to improve labor productivity without substantial
new investments).
iv. Investment and technological change strategies (changing into productive
technology)
v. Rationalization strategies (are those focused on the simple reduction of labor
capacity).
Transformation from a manufacturing-based to a service-based economy among advanced
industrialized nations.

2.3.4 Flexible Specialization and Network Theory

Another theoretical response to these recent changes in the structure of industry has been the
development of a new theoretical approach that focuses on the patterns of interrelationships
found in new industrial districts.
This theory, which is formulated by Piore and Sabel (1984), stresses on a new form of
production designed to permanently and flexibly respond to change through innovation.
These changes that need to flexibly respond should depend on:
 Increasing social unrest,
 Floating exchange rates,
 Oil shocks,
 The international debt crisis,
 Saturation of industrial markets,
 Diversification of consumer demands

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This new Flexible Specialization Theory is based on the use of flexible labor and capital that
can easily be tailored to the needs of changing markets. Firms engaged in flexible
specialization are bound together through highly localized networks where knowledge and
information are shared. This bind is defined by dense social networks based on flexible
specialization and entrepreneurship; and hierarchical integration with firms.
Some of the criticisms of this theory are:
 Oversimplification of network relationships and ignore fundamental structural
relationships within and outside regional networks.
 Failure to acknowledge differences across networks in the structure of competitive
relationships among firms.
 Less emphasis on local competition and focus instead on the collective sharing of
knowledge and information among local firms.

2.3.5 Marxist Theory

Another response to the new structural changes in the international economy, especially the
persistent underdevelopment of regions in the third world, was the emergence of a Marxist
perspective on regional growth and decline.
Marxist theories of uneven growth and spatial differentiation place the roots of the uneven
development crisis merely within the nature of the capitalist system. Capitalist accumulation
proceeds through high progressions, forwarded specific crises on third world regions,
which in turn forces capitalists to search for new spatial modes of production.
They argue that the modern problem of underdevelopment can only be understood in terms of
the historical development of the capitalist mode of production. The trend toward regional
inequality results primarily from the tendencies toward concentration among large-scale
capitalist industries, which leads to the geographic displacement of labor in both the
manufacturing and the agricultural sectors.

2.4 Political Institutions and Regional Economic Development

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Aside from the above theories discussed above, few theories account for the role of politics
and political institutions in economic development. Since local politicians and planners
directly attempt to influence the rate of growth and the location of industry through mixes of
tax incentives, land use regulations, and infrastructure provision policies, ignoring this
dimension is seen as a substantial weakness of existing theory. Here, the following two
perspectives on the role of politics in regional development are reviewed:

2.4.1 Growth Machine Theory

Molotch (1976) argues that regional growth is a unifying imperative among local political and
economic elites. In this theory, the drive to pursue a strategy of regional growth comes not
from structural economic forces or from the equilibrating tendencies created by exports and
trade. Instead, it comes from political coalitions of land-based elites who stand to benefit
from local economic development. Since this perspective treats regional growth largely as the
cause of local political organization, it is more accurately seen as a theory of local politics;
however, if one assumes that growth machine policies are effective, then they should have an
impact on the location economic activity.

This theory links growth machines to economic outcomes. If the growth machine perspective
is to be a useful contribution to the theory of regional economic development, then growth
machines must have an impact on the interregional distribution of economic activities. The
authors conclude that the growth machine perspective is a more useful theory of why political
coalitions form than a theory of how growth coalitions affect regional economic outcomes.

2.4.2 The New Institutional Economics

The new institutional economics is an attempt to incorporate institutions and institutional
change into theories of economic development. A seminal work in the new institutional
economics is the work of Ronald Coase (1937). Coase argues that various forms of internal
economic organization can be traced to the desire among owners to minimize the
transaction costs of production. For transactions that involve substantial uncertainties and for
which contractual monitoring costs are prohibitively high, vertically integrated nonmarket
institutions may have cost savings over market forms of organization.

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North (1991) elaborates on the role of institutions in economic development. North argues
that institutions increase the social benefits of long-term cooperation. The institutions of
capitalism have grown increasingly more complex due to the increasing complexity of
economic exchanges. Institutional adaptation may either promote or discourage economic
development. If the institutions that evolve are incompatible with the transaction cost
demands of private investors, then a region may not grow. For example, if the property rights
structure of a society does not recognize private contracts among economic agents, informal
forms of governance may emerge to facilitate the capture of short-term profits among
established elites while also serving to exclude outside investors. Similarly, large vertically
integrated firms may emerge to monitor wage labor if contracts with external suppliers are not
recognized.

2.5 Emerging Neoclassical Perspectives

This overview of the theoretical literature on regional economic growth concludes with a
discussion of two new perspectives that attempt to address earlier criticisms of the
neoclassical exogenous growth and trade theories:
2.5.1 Endogenous Growth Theory
The new endogenous growth theories modify assumptions of the exogenous growth models to
generate a range of economic predictions, some of which tend toward economic divergence
across regions. However, endogenous growth theory stays true to the neoclassical tradition of
general equilibrium modeling.
The endogenous growth theories make technological change and innovation endogenous to
the model. The process of innovation is largely a race for monopoly control over the stream of
rents from new innovations, which are essentially public goods once introduced. Firms can
gain monopoly power over new knowledge through experience in internal production.
Innovations are modeled as declining costs that are functions of a firm’s previous
investments. If a firm can internalize these costs, they can gain a competitive advantage.
It is a competitive equilibrium model of economic growth. It is based on the crucial
assumption that knowledge exhibits increasing marginal productivity characteristics. In other
words, the production of consumption goods is modeled with a production function that

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includes the stock of knowledge and other inputs. This production function assumes
increasing returns to scale in the production of consumption goods.

2.5.2 The New Economic Geography

Although New Economic Geography is not explicitly a model of regional growth per se, it
does offer static predictions about the forces that lead to the emergence of industry clusters.
Primary contribution is to incorporate external scale economies and increasing returns into
traditional models of interregional trade. It relies heavily on the general equilibrium model of
monopolistic competition.
To minimize the cost of delivering goods to market, firms will choose locations with a large
local demand. This, in turn, is most likely to be where industries have already located,
because firms desire to be close to their workers. The implication is that there is a form of
circular causation at work: once a significantly sized manufacturing belt has been established,
it will tend to stay in existence. In general, a core-periphery pattern, defined as one where all
manufacturing is located in the core and all agricultural production is located in the periphery,
is sustainable with some combination of (1) large internal economies of scale, (2) low
transportation costs, and/or (3) a large share of the regional population that is employed in
manufacturing.
Krugman is generally cited as the originator of the New Economic Geography who puts a
twist on traditional export base theory by arguing that the share of income spent on the local-
serving sector varies with the size of the local market. In other words, as the size of the local
market grows, it becomes more profitable to provide a larger share of goods locally, because
larger plant sizes become more cost effective.

UNIT THREE
REGIONAL DEVELOPMENT POLICIES AND STRATEGIES
3.1 Regional Development Policies and Strategies of Developing Countries
Regional planning is important for developing countries because of the presence of:

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  Economic dualism
 Urban problems
 Diversity of culture
 Uneven distribution of resources
 etc.
Regional planning has four major goals in developing countries:
1. Efficiency Goals: Using all available resources wisely to get maximum possible profit
in sustainable manner.
2. Economic Growth: Increasing the income and standard of living of the national
people.
3. Improving Quality of Life: Improving social services like health care, housing, water
and sanitation, education, communication service, etc.
4. Increasing Community Participation: Raising the involvement of societies in all
sectors at different levels.
Some of the major policies & strategies of regional planning in the developing countries to
achieve the above stated goals and others like balancing growth, urban escalating cost of
living & attracting investment are as follows:
1. Subsidy to Firms: It is influencing the costs and profits of firms through giving some
amount of financial, human as well as material incentives or freeing from some customs
so that the location decision of firms is affected.
There are two types of subsidy:
 Blanket Subsidy: Subsidizing all the existing firms in the region.
 Discretional Subsidy: It is giving incentives for some selected firms. This is
made to subsidize those firms which are identified as very important and
influential for regional growth. It is identifying & subsidizing firms like labour
intensive, & remote area firms.
2. Government Expenditure Policy: It is the involvement in giving loans, supplying the
necessary infrastructures, etc to the areas of underdevelopment so that investors are to be
pulled to such areas to develop them.

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3. Direct Control Methods: It is the direct intervention of governments in controlling the
elastic growth of the relatively developed regions like the metropolis through intentional
imposition of additional tax on firms found in the relatively developed regions, running
down facilities and their maintenance in the core regions, etc to shift growth to the less
developed regions.
4. Accommodation: Selecting and shifting some important firms to the underdeveloped regions
from the center so as to create job opportunities and raise social service development in these
regions.
5. Promoting Factor Mobility: This is freeing the movement of capital and labour to move
wherever there is better return. This can be done through:
 Making market competitive (free) for goods and services
 Allowing the access of information to all citizens
 Skill upgrading like giving training
 Giving incentives for promoting labour mobility
 Supplying infrastructures to pull free movement to the underdeveloped
regions
 Reducing uncertainties and risks like political instability, restrictive
investment policies, effects of natural hazards like flooding, etc.
3.2 Regional Development Policies and Strategies of Developed Countries
The need or the rational for regional planning in developed countries differs from that of the
developing and less developed ones. For the developed countries, regional planning is
important because of:
1. Problems of urban regions like pollution, congestion, etc
2. Expanding urban regions swallowing up agricultural lands
3. The presence of depressed regions due to:
 Exhaustion & depletion in resources
 Change in technology
 Change in political powers
These factors increase unemployment, low income, etc
Some of the major policies & strategies of regional planning in the developed countries are:

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1. The Removal of Barriers to Trade and Factor Movement
This is an integration path for freely moving from one trade area to common market area,
to various degrees of economic, monetary and political union among European
countries.
Its aim was the further elimination of barriers (such as restrictive practices & tariff) and the
creation of a powerful and competitive single market well equipped to compete globally.
It also emphasizes on the ‘centre–periphery’ model of differential regional prosperity.
The central regions tend to have counterbalancing cohesion to aid the development of
problem regions in the Member States.
Key elements in the policy measure included:
 Research into the nature of regional differences to raise awareness,
 Attempts to co-ordinate Member States’ individual regional policies to prevent
unreasonable competition, and
 Topping-up of financial support to problem regions from EU Structural Funds.
This additional funding element has become the dominant feature of the EU regional
policy.
2. Developing Spatial Polycentric and New Urban–Rural Relationship
It is about the development of:
 Polycentric (more than one center or core region)
 Balanced urban system
 Strengthening of the partnership between urban and rural areas,
 Overcoming the out-dated dualism between city and countryside.
Polycentricity seeks to use many centres as a basis for functional complementarity, for the
integration of spatial planning and for political co-operation.
Associated policy options include:
• The creation of dynamic, attractive and competitive cities;
• Indigenous development and diverse and productive rural areas;
• Urban–rural partnerships.
3. Equality of Access to Infrastructure and Knowledge:

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Promotion of integrated transport and communication services which support the
polycentric development of the EU (European Union) territory and are an important
precondition for enabling European cities and regions to pursue their integration.
It further includes:
• An integrated approach for improved transport links and access to knowledge;
• Use of a polycentric model as a basis for better accessibility;
• Efficient and sustainable use of the infrastructure;
• Diffusion of knowledge and innovation (e.g. dissemination of new ICT in all regions).
4. Wise Management of The Natural And Cultural Heritage:
This contributes both to the preservation and deepening of regional identities and the
maintenance of the natural and cultural diversity of the regions and cities of the EU in the
age of globalization.
The strategy considers:
Natural and cultural heritage as a development asset;
Preservation and development of the natural heritage;
Water resources management;
Creative management of the cultural landscape (like grave areas, urban scene,...);
Creative management of the cultural heritage.

3.3 Regional Development Policies and Strategies for Rural areas

Rural areas all over the world are faced with various problems:
 Outdated production techniques in primary sector mainly agriculture,
 Scarcity of production land,
 Inadequate access to social services,
 Uncertainty & exposure for risks,
 Low participation in decision making, etc.
Rural development has been on the agenda for many years and numerous approaches have
been pursued. The problems of rural regions are too much complex to allow for a simple
patent remedy.

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Rural development strategies & rural planning include the followings:
1. Enhancing Food Security
This is securing the agricultural production sustainably through:
 Taking account of community-based and indigenous approaches to sustainable
food production;
 Application of risk-mapping, remote sensing, agro-methodological modeling,
integrated multi-disciplinary crop-forecasting techniques, & computerized food
supply/demand analysis;
 Early warning systems for monitoring food supply and household access to food,
weather insurance schemes for farmers and agriculture related disaster management
programmes
2. Providing Conducive Environment for Agricultural Production and Economic Returns
This strategy is simply facilitating better environment for farmers to let them increase their
production and get better income. It includes:
• Enhancing agricultural productivity and farmer‘s incomes;
• Diversification of agricultural production systems;
• Agricultural reform and measures to secure equitable access to land by both genders;
• Infrastructure development to enhance distribution to markets
3. Reducing Poverty through Rural Development
It is about poverty reduction in rural areas through strategies like:
 Integrating rural development strategies into Poverty Reduction Strategies (prsps) or
other development strategies;
 Empowerment of local rural communities especially those living in poverty;
 Supporting main driving forces for economic growth and social development in rural
areas;
 Improving access to social services and infrastructure in rural areas
4. Reducing the Environmental Impact of Agricultural Production
This strategy considers:
 Programmes to improve soil fertility, environmentally sound agricultural pest control
and improvements in water management in agriculture

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  Improving access to international agricultural markets
 Bilateral, regional and multilateral agreements related to liberalization of agricultural
product markets with focusing on support for other countries to improve regional trade
and economic integration between nations.
To sustain and renew established rural communities and the existing stock of investment in a
way that responds to the various spatial, structural and economic changes taking place, while
protecting the important assets rural areas possess.

3.4 Regional Development Policies and Strategies for Urban areas

Regional Development Policies and Strategies for Urban areas involve the physical and
social development of a city through the design of its layout and the provision of services
and facilities. In other words, it is the unified development of urban areas and their
environments dealing with:
 The regulation of land use and the physical arrangement of city structures (as guided
by architectural, engineering, and land-development criteria),
 The comprehensive guidance of the physical (building, land use, beauty
scene, ...),economic (economy, per capita income, job opportunity, GDP & GNP, ...)
and social (infrastructures, ...) environment of a community.
The Regional Development Policies and Strategies for Urban areas are needed due to the
following some major features of urban areas:
a. Zoning and subdivision controls that specify permissible land uses and densities,
b. Miss-match of the social services and the growing urban population;
c. Traffic flow and congestion;
d. Limited economic environment & their revitalization of depressed urban areas;
e. The disadvantaged social groups; etc
The major goals of urban development policies and strategies include:
i. Reducing poverty and improving quality of life for the most people.
ii. Provision and maintenance of social services
iii. Regulating land use pattern and city structure
iv. Environmental conservation
v. Cultural and historic preservation

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 vi. Providing a predictable process for decision making
Some of the Urban Regional Development Policies and Strategies are:
A. Integrating Urban Areas
In order to play their rightful role in alleviating poverty and addressing the inequities, our
cities and towns must achieve a high level of integration of a wide variety of social and
cultural groups, maintain efficient services and infrastructure, secure and protect democratic
and accountable local institutions of governance, and collaborate effectively with other cities
and political jurisdictions of governance in an increasingly interconnected national and
international urban system.
B. Improving housing and infrastructure
It involves upgrading and the construction of housing, restoring and extending infrastructure,
alleviating environmental health hazards, encouraging investment and increasing access to
finance, social development, building habitable and safe communities, maintaining safety and
security and designing habitable urban communities;

C. Promoting urban economic development

Aims to enhance the capacity of urban areas to build on local strengths to generate greater
local economic activity, to achieve sustainability, to alleviate urban poverty, to increase
access to economic opportunities and to maximize the direct employment opportunities and
the multiplier effect from implementing development programs;
D. Creating institutions for delivery
It is the significant transformation and capacity building of government at all levels and
clarity on the roles and responsibilities of the different government spheres. This will also
encompass a range of institutions, including civil society and the private sector, and require
significant cooperation and coordination among all of these.

UNIT FOUR
REGIONAL DEVELOPMENT POLICY AND STRATEGIES OF
ETHIOPIA

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By all measures, Ethiopia is clearly at a low level of social and economic development. A
large part of the economy is characterized by semi-subsistence agriculture with exceedingly
low incomes and hand-to-mouth livelihoods.

An extended period without appropriate development policies and strategies is one of the
main reasons for this situation. Previous policies did not address the major structural
constraints of the economy and in fact, there even were all too many cases where policies
were detrimental to economic development introducing imbalances that tended to impede
rather than promote economic well-being.

This predicament can only be addressed if we can formulate and put in place an economic
policy that will accelerate economic growth, distribute the benefit of such growth broadly to
the people, and build a system that can progressively grow in strength.
In Ethiopia, the rural development will necessarily form the core of such policy. In addition,
there are identified policies, programs and targets, which will form the Urban Development
and Construction Industry contributions to fulfilling PASDEP and MDGs (Millennium
Development Goals) for accelerated sustainable development to end poverty.
4.1 The Rural Development Policies and Strategies for Ethiopia
4.1.1. The Basic Directions of Agricultural Development
It is the development of the agricultural sector that will provide the basis for rural
development. Hence, our rural development effort will give priority to the implementation of
appropriate strategies for agricultural development. In view of this, it is useful, at this
juncture, to discuss the basic principles that govern agricultural development policy in
Ethiopia.

A. The Labor-intensive Strategy

A basic premise of our strategy, is that accelerated and sustained growth can be brought about
in Ethiopia not through capital-intensive but through labor-intensive production methods.
This is even more so for the agricultural sector than any other sector of the national economy.
It is envisaged to use a heightened productive capacity of the agricultural labor force to the
fullest extent possible. When we say that we should apply labor-intensive methods, we expect

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to promote advanced technology and farming methods that are, nevertheless, not labor
displacing in nature. Such a strategy would include educating and training the agricultural
labor force to build up skills and enhance labor initiative. This strategy is to promote
agricultural development by employing an agricultural labor force that is provided some
training and information. The strategy emphasizes on increasing output and productivity, and
developing the land through irrigation, application of chemical inputs, diversifying
production, etc.

B. Proper Utilization of Agricultural Land

Access and use of agricultural land is one of the most important development issues in
Ethiopia. Indeed, ensuring agricultural development and sustained high rates of growth
depends on the appropriate use of land. A fundamental aspect of the proper use of land is to
guarantee the availability of land to people who seek to make a living out of farming. Another
aspect is its sustainable use; i.e., taking care not to deplete our natural resource base. This is
critical to a viable agricultural sector and to increasing and even maintaining agricultural
productivity. Identifying what land should be used for what type of activity and utilizing land
accordingly is a key issue in the proper use of land in general. Moreover, ensuring a proper
land to population balance is also an important consideration. It is well known that in our
country there are regions when there are large populations but limited land and vice versa.
C. A Foot on the Ground
We can make significant improvements in our productivity by working with the existing,
largely uneducated, agricultural labor force helping it to reach higher levels of productivity.
This is our foot on the ground providing the necessary impetus for moving rapidly ahead.
Similarly, rather than relying exclusively on outside technologies, we will draw on the useful
agricultural experiences, practices in the country, and improve on them as necessary. Hence, it
is necessary to record and pass on to the next generation practical experiences and indigenous
knowledge, and to make effective use of this knowledge in our development efforts.
Thus, our strategy for agricultural development must accomplish two tasks at the same time.
First, we must explore and put to good use all existing resources so that we reap the
maximum growth possible from the available productive capacity. Along with this, we must

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take all necessary action to transit to a higher level of productivity using a more educated
labor force and more sophisticated technology.
D. Taking Different Agro-Ecological Zones into Account
Ethiopia is characterized by the existence of many agro-ecological zones, which differ in
terms of rainfall, soil types, altitude and the like. A very broad categorization finds:
 The eastern and to some extent the southern arid lands where the main livelihood is
cattle herding,
 The western lowlands where there are large uncultivated lands and a small population,
and
 The highlands that are ideal for farming but where farmland is limited and rapidly
being eroded and where population density is high.
It is not difficult to see that the agricultural activities carried out in the different agro-
ecological zones are greatly varied. Clearly, any agricultural development strategy that does
not consider such differences cannot be realistic. Given the variability of agricultural
potential, our objectives for agricultural development can be attained only if we identify the
development opportunities existing in the various agro-ecological zones and specify and
implement strategies that will enable us to take advantage of such opportunities. Therefore, all
efforts will be based on detailed development plans for each agro-ecological region to bring
about the maximum possible growth in each region and thereby accelerate and sustain the
country's overall agricultural development.

E. An Integrated Development Path

Every development effort requires coordinated and integrated management of different tasks.
Likewise, support to agricultural development in Ethiopia requires the coordinated
management of very many activities. First, when we consider agricultural development in
isolation, we observe that it embraces a large number of different products and activities.
Exploring these tasks in detail, identifying the linkages among them and understanding the
opportunity for key linkages and the gains from such linkages all make a significant
contribution to making the resulting growth rapid and sustained over time. Therefore, our
agricultural development efforts will follow a development path that seeks to promote
integrated activities.

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4.1.2 Strengthening the Agricultural Labor Force
It has already been repeatedly mentioned that our overall economic development strategy and
particularly our agricultural development strategy is based on continuously building the
productive capacity of our labor force and employing it intensively in development activities
of all sorts. This actually means focusing on four major issues:
A. Ensuring Industriousness and Work Preparedness
Maintaining diligence by addressing any observable shortcoming and promoting relevant
changes in customs and traditions through a persuasive and democratic ideological struggle
will make a contribution wherever necessary. Also, industriousness will inevitably be
promoted as people progressively improve their standard of living and returns from
engagement in agriculture are increased.
It is recognized that there are thousands of educated youths who, either because of lack of
alternative employment opportunities or for other reasons, are engaged in agricultural
activities. However, a large proportion of the youth show no desire to be farmers or to be
employed in farming after receiving vocational training. The fact that people engaged in
farming suffer from poverty is taken as practical experience that demonstrates the difficulty
and limited results from make a living out of farming.
To sum up, given that our agricultural development strategy relies on a productive agricultural
labor force, an effort should be made to encourage the young educated labor force to be
deployed in agriculture. It is also recognized that an environment must be created where
educated labor employed in agriculture receives an income that is commensurate to the
education.
B. Improving Farming Skills
The present agricultural labor force has had minimal educational opportunities. The
agricultural knowledge and skills it possesses is mostly what has been passed on from one
generation to the other. This knowledge is not to be under estimated. But it is regarding
improvement of farmers' agricultural skills with the priority task of improving the agricultural
practices of the uneducated farming population and thereby to achieve a quick increase in
agricultural production.
Thus, side by side with the task of intensifying efforts towards increasing the productivity of
the uneducated farming population, we need to work hard to replace the uneducated with an

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educated labor force who has attained a level of general education that enables it to
understand and use new agricultural technologies, read and understand what it reads, and
perform its farming activities scientifically through attending at least primary-school-level
education.
C. Ensuring the Health of Farmers
Farmers, whether educated or not, cannot engage themselves in production unless they are
healthy. Hence, ensuring the health of farmers is as a key element in the overall objective of
enhancing the productive capacity of the agricultural labor force.
Our strategy in this respect is to establish a health delivery system that places emphasis on
disease prevention and primary health care. While it is obvious that medical services (curative
care) are also necessary, this cannot be the main health service option under the objective
conditions in the country.
In our strategy for promoting a healthy agricultural labor force and generally ensuring the
health of farmers, the focal institution is the health post, the critical driving force is the health
post worker, and the main executors are the public and kebeleleaders. Unless this strategy is
successfully implemented, no disease prevention effort, including the effort to control the
spread of HIV/AIDS in rural areas, can be successful.
D. Dissemination of Appropriate Technology
A complementary effort that must be considered alongside the endeavor to enhance the
capacity of agricultural labor force is the supply, duplication and diffusion of continuously
improving technology.
While promoting technological change in rural Ethiopia is important, the type of technologies
applied will determine the pattern of agricultural growth. Hence, the dissemination of
technology will not only be expanded but will also be based on careful selection. In order for
our agricultural technology to help us attain our agricultural development objective, it should
have the characteristics described below.
Labor-intensive: Technological change must enable us to both increase production and to
produce high-value products by intensively using labor per unit of land.
Market sensitive: Agricultural technologies promoted should be those which will enable
farmers:
 To produce products which are in demand on the market,

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  To sell these product at competitive prices,
 To benefit from the sales proceeds and
 In the process to widen their market.
Responding to the needs of varied agro-ecological conditions: A technology that works in
one agro-ecological context will not yield the same results in another context. In order that
agricultural production exhibit the maximum growth, we have to make available various types
of technologies each compatible with the different conditions of the country's varied agro-
ecological zones.
Practicality: Technology must be instrumental for solving practical problems encountered by
farmers in the process of production. This should be approached through careful study of the
chain of operations involved from production to marketing and identifying the specific
problems impeding this cycle.

4.1.3. Proper Use of Land

Utilizing land in a manner that is sustainable and that accelerates our agricultural development
is another foundation on which our efforts in this sector are based.
A. Land Ownership
While it is not the practice in most countries to specify issues of land ownership in the
constitutional, in Ethiopia, this issue has been made a constitutional matter on account of the
special role land plays in the economic and social life of Ethiopian society.
The policy is that every Ethiopian who wants to make a livelihood from farming is entitled to
have a plot of land free of charge. Furthermore, private investors, who wish to engage in
large-scale agricultural activities, have a right of access to land on a long-term lease basis.
The government, as a custodian of the land, is responsible for land distribution and has the
right to re-distribute existing holdings whenever it needs to do so to ensure access by all who
require land as a means of engaging in an agricultural livelihood. It can also utilize land not
being used by farmers for various purposes, as it deems necessary.
Because land is publicly owned, it cannot be sold, exchanged for other property or mortgaged.
Farmers do not have the right to sell land. Nor do they have the right to have it held in credit
or to use it as collateral for bank loans.

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C. Water Resources Utilization
A reliable water supply and management system is essential for accelerated agricultural
development. Depending on rainfall for agricultural production fail to practice all-year-round
cropping and thus lose potential output.
Although our major water development strategy focuses on the use of labor-intensive methods
and on the active participation of farmers as well as the public at large in undertaking
different water development projects, the participation of both foreign and domestic investors
in water development projects mainly the construction of hydroelectric dams and irrigation
dams is highly encouraged.
Improving water development policies and directives and their proper implementation,
educating and training the necessary manpower, engaging farmers in water development and
conservation practices, and encouraging private-sector participation in large scale water
resources development projects are the main strategies through which we plan to develop our
water resources.

4.1.4. Preparing Area Compatible Development Packages

Our efforts towards agricultural development need to be consistent with the particular
conditions prevailing in each region of the country. Diversity in agro-ecological zones as well
as other reasons that will be discussed below requires that this should be a basic consideration
of our strategy.
A. Combining Efforts towards Diversification and Specialization
The diversity in agro-ecological zones means that a variety of agricultural products can be
produced in different regions. It also means that regions vary in the type of output that they
can most efficiently produce. Regional specialization based on regionally compatible
technology packages is a key element of our agricultural development strategy.
This implies specialization of production according to the conditions in each agro-ecological
zone. Such specialization will maximize the benefits accruing to farmers and contribute to
overall economic development.
B. Development Efforts in Drought-Prone Regions

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Some regions, such as the drought-prone areas where millions of people are becoming
increasingly vulnerable to hunger and where desertification is posing a serious danger to
agricultural livelihoods require special attention.
A major feature of drought-prone regions in Ethiopia is intermittent or inadequate rainfall.
They are also constrained by considerable soil depletion due to years of imprudent land use
that has caused soil erosion over an extended period of time. Although food insecurity is
experienced in practically all parts of Ethiopia, it is in these regions where it is most intensely
felt.
Accordingly, our development efforts in these regions will be centered on ensuring food
security through the following mechanisms.
i. Emergency Assistance
The strategy has to concentrate on reducing, in the long and medium term, these drought
prone regions' vulnerability to drought and other natural calamities. Our strategies for water
resources development and utilization, natural resources protection and improvement in
agricultural technology will all help to reduce these vulnerabilities. In the mean time, effective
emergency response and disaster prevention is required to reduce the exposure of our people
to dangers arising from production losses due to drought.
The salient features of the emergency response include:
a) It is essential to ensure that vulnerable groups receive assistance without being
displaced.
b) For those who are able to work, the assistance should be in the form of payment for
regional and community development work, while those who cannot work may
receive assistance freely.
ii. Land Settlement as Part of the Solution
Resettling a certain number of people living in the drought prone regions in areas where there
is enough land and rainfall is a strategy that we will implement to expeditiously realize the
objective of food security.
Most of the lands available for settlement are found in the lowland areas where basic
infrastructural facilities are incomplete. Therefore, it is inconceivable to implement settlement
programs in these areas without first providing the necessary transport, health, potable water
and educational facilities and services.

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iii. Natural Resource Conservation and Development of Animal Resources
Although insufficient and intermittent rainfall is the chief characteristic of drought-prone
regions, the depletion and degradation of natural resources, deforestation, soil erosion and
inappropriate hillside farming are also serious concerns in these areas. By reducing the
pressure on land, the settlement programs will contribute to more sustainable utilization of
natural resources as well as to environmental protection.
Animal husbandry is an activity that does not require abundant rainfall and can also be
managed on average soils. Thus, it can be adapted to conditions of the drought-prone regions
that suffer from lack of adequate rainfall and soil erosion. Some activities, such as poultry and
bee keeping, do not even require a lot of land another important constraint in these regions.
iv. Improving Water Resources Utilization
Although the drought-prone regions suffer from inadequate and intermittent rainfall, there is,
nevertheless, sufficient rainfall that all agricultural activity is not abandoned. Furthermore,
there is a considerable amount of surface and underground water in these regions. Thus, the
main issue is not the lack of water but its ineffective utilization. Thus water resources
development in these regions will be accorded the highest development priority.
This water resources development includes water conservation carried out by farmers on
small holder plots, medium-size irrigation dam construction and river diversion through
community participation at the kebelelevel, and other water utilization methods.
v.Soil Conservation
Special attention has to be given for protecting the soil fertility and significantly increasing its
proper exploitation in the drought prone areas. Priority will be given to biological methods
that are believed to contribute to the protection of soil fertility within a short time.

C. Development Efforts in Regions with Reliable Rainfall

Accelerating agricultural development in regions of adequate rainfall is therefore important
both for ensuring the incomes of populations in these regions as well as the availability of
food in food deficit regions. In many respects, agricultural development envisaged for regions
with adequate rainfall is similar to that of the drought-prone areas.
Natural resources development, agro-forestry and animal resources development are areas that
can be greatly expanded. From the perspective of national food security, and also their

34
comparative advantage, it seems appropriate for these regions make crop production their
major development priority without, however, neglecting natural and animal resources
development.
D. Development in Pastoral Areas: Approaches and Programs
Food insecurity and poverty are as pervasive and deep in pastoral communities across the
country as they are in the traditionally drought-prone locations where sedentary agriculture is
practiced. It is true that in these areas there are a number of places with dependable surface
and underground water supply. But it is well known that rainfall in these areas is too scanty
and too intermittent to support rain fed crop production.
Therefore, rapid and sustainable economic growth that will ensure food security is strongly
linked to livestock development. Livestock development strategies and approaches elaborated
elsewhere are also applicable for the development of pastoral areas.
It is imperative and strategic that in the pastoral areas the focus of attention must be placed in
the development of:
 Water sources both for human and livestock use together,
 Improving pasture land protection and management,
 Improving livestock marketing system of the herders,
 Increasing awareness among herders to make livestock raising market-driven,
 Animal health care services,
 Educating the herders on proper raising of animals, and
 Designing and implementing programs that are relatively better suited to the herders
and family members' movement pattern.
E. Development in Areas Having Large, Unutilized Agriculturally Suitable Land
There are large tracts of unutilized land, particularly in the western lowlands stretching from
north to south, which are suitable for irrigated agricultural development. Developing these
areas will have a very significant positive impact on the country's overall economic
development. Some of the more fundamental approaches to agricultural development in these
areas are elucidated below.
 The first point of emphasis is transforming the areas into economic growth poles or
centers.

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  Realizing accelerated and sustainable development in these centers through the
necessary infrastructure facilities and ensuring an adequate supply of labor.
 Implementing appropriate settlement programs and creating enabling environment for
private investors to set-up large-scale commercial farms.
4.1.5. Working towards Market - Led Agricultural Development
A. Driving Agricultural Development by Market Forces
In order for the standard of living of farmers to improve, they should be able to have excess
production to be able to consume essential goods and services, which they cannot themselves
produce. Further, they need surplus production to buy improved tools, agricultural equipment
and productivity increasing inputs such as fertilizers and seed.
It should be realized that it will take quite a while for such a production and market system to
develop and mature. The extent to which the country will be able to penetrate external market
and improve its market share for its agricultural products will be a major determinant of rapid
and sustainable agricultural growth. It should be underscored that widening the market base
and diversifying export sources to increase foreign exchange earning is essential for the
country's overall growth.
B. Tuning Agricultural Sector to Produce Goods Having Demand in the Market
The desire for agricultural development that is market-driven, the ambition to penetrate the
international market, and the assertion that accelerated and sustainable agricultural
development cannot take place in the absence of such a development strategy which is
guiding principles and bases to transform the agriculture sector. It is to mean that every
agricultural production activity should aim at producing marketable output of acceptable
quality and should be competitive in the international market.
The marketing strategy should be inventive, proactive and research oriented. This also calls
for following closely market developments and selecting and producing high-priced products
without which competitiveness may be compromised.
C. Building an Agricultural Marketing System
All efforts will be in ineffective if a marketing system that is capable of delivering the
production at the right time in the right place and price is lacking. If the marketing system is
inefficient, high marketing costs may make the product uncompetitive thereby negatively
affecting sales revenue and farmers' income. Therefore, a marketing system that is efficient

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and capable of ensuring the quality and price competitiveness of goods is essential for
attaining the objective of accelerated and sustainable agricultural development.
This can be made through:
o Grading Agricultural Production
o Provision of Market Information
o Promoting and Strengthening Cooperatives
o Improving and Strengthening the Participation of Private Capital
(Entrepreneurs) in Agricultural Marketing
4.1.6. Improving Rural Finance
The Agricultural Development Strategy in Ethiopia is based on the building of the productive
capacity of the people, making the maximum use of the enhanced capacity, and innovative
application of the country's inadequate financial resources. Shortage of finance is particularly
acute among the millions of farmers. The credible solution for this seems to improve vastly
farmers' access to rural financial services, notably credit.
The existence of a strong financial system is essential not only for increased agricultural
investment, but also for a strong agricultural marketing system. The effort to accumulate
capital from the agriculture sector will be frustrated without having a strong rural finance base
that places the focus of attention on increasing rural saving and expanding access to credit for
small farmers and the cooperatives.
There is a strong justification to attach considerable weight to the strengthening of institutions
engaged in rural finance and create new ones. The strategy includes improving the Banks and
the Rural Financial System (intermediary institutions like cooperatives), Rural Banks
(rural-based micro enterprises) and Cooperatives. In short, all have an important function
not only in facilitating services rendered by financial institutions but also in filling any gaps
that commercial or development banks are unable to address.
4.1.7. Towards Promoting Private Sector Participation in Agricultural Development
Private investors are already making a significant contribution to agricultural development.
The key actors in the agricultural sector's development will be relatively large-scale private
investors. The strategy can be sustained through:
A. Attracting Foreign Investors to the Agricultural Sector
There are two major investment sectors include:

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  Developing the unutilized vast land with high irrigation possibility mostly located in
the lowland areas of the country.
 Producing high-value agricultural products (e.g. flowers, vegetables).
The country's demand for participation in both areas is immense, and assurances are given
that government institutions at all levels will do their level best to facilitate and assist foreign
investors. Therefore, while underlying the importance of encouraging domestic private
investment through well-conceived incentives, the focus of attention should be on attracting
foreign investors.
Hence, attention should be given to overriding the provision of infrastructures, improving
labor supply and facilitating land acquisition in order to attract private capital. In addition, the
organization, management and financial resources to establish connections with
internationally known companies and consult with them on matters related to what should be
done to encourage them to invest in the country.
B. Agricultural Training and the Participation of Private Investors
A large stock of personnel trained in agricultural development at various educational levels is
required to establish and expand modern commercial farms. Maximum effort is to be made to
train agricultural researchers, the extension personnel, animal health experts, and cooperative
expert all geared towards increasing government capacity to upgrade agricultural production
methods and technologies farmers employ.
Agricultural training institutions are expected to identify skills and expertise in short supply
for commercial farming through consultations with private investors and prepare suitable
training programs to effectively address the shortage.
C. Linkage between Private Investors and Smallholders
In fact, there can indeed be links that can maximize benefit for both partners, i.e. for farmers
and private sectors, and contribute meaningfully to make agricultural development efforts
more effective. Although the system may have several dimensions and facets, the basic tenet
hinges on the practice of farmers supplying agricultural produce to a private investor on pre-
agreed terms and conditions. Such contractual system linking private capital and farmers
could be useful and perhaps strategic in the densely populated highlands of the country, since
it could address the land shortage often encountered by entrepreneurs wishing to engage in the
production of high value products particularly exportable products.

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Let us, for example, take a private commercial farmer who grows flowers on his own land
using hired labor. He may have contractual relations with local farmers around him. He may
make flower seeds or seedlings available to the farmers. He may give them training on how to
grow the flowers, i.e., he may regularly give them agricultural advice and technical services.
He will tell them in advance at what price he is going to buy their flowers, and the farmers
undertake to sell their flowers to him. Sometimes, private entrepreneurs may carry out similar
operations without having land holdings of their own simply by coordinating and employing
farmers.
4.1.8. Expansion of Rural Infrastructure
The availability of social and economic infrastructures is essential both for agricultural and
rural development. It is not possible to attain rapid and sustainable agricultural or overall rural
development where there is a lack of services in the fields of: education, training, health, rural
road and transport.
A. Expansion of Educational and Health Services
It has already been indicated that the development strategy the government is pursuing is
based on increasing the productive capacity of the people; that in doing so the expansion of
educational and health services play a crucial role; and as such one of the government's
development tasks in accelerating rural development is to expand these services.
Recognizing the underlying mission of education in general to produce people who should
become reliable productive agents, the content of education at all levels should be made to
reflect this basic objective. The expansion of education should be seen as a reflection of the
improvement of the standard of living of the people and a desirable outcome of development
in general. The government is doing all it can to expand education in general and provide
primary education for all its citizens on the principles outlined above.
Good health makes to create productive citizens. The government attempts to fulfill the
objective of health for all citizens through the expansion of primary health care and
preventive medicine, as these are the strategies which are consistent with the resources of the
country.
B. Expansion of Rural Road and Transport Services
It is inconceivable to realize market-based agricultural development in the absence of efficient
road and transport services. The supply of various development services to rural areas is

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possible only when there is an efficient road and transport system. Hence, the expansion of
road and transport services is one of the key development measures that must be taken to
promote accelerated and sustainable agricultural development.
Rural roads become significant only when they can connect various regions to important
national political and economic centers and to the global market in general. While the Federal
Government builds main roads that connect all regions of the country to important political
and economic centers and to the global market in as equitable manner as possible, regional
administrations on their part should construct (rural roads which connect rural areas to these
main roads.
C. Improvement of Drinking Water Supply
Supplying enough potable water to the rural population is one of the primary development
tasks that should be carried out in order to ensure health services based on prevention and,
thereby, create healthy and productive citizens. The supply of clean water to the rural
population should be high on the list of government development priorities.
In order to expand the supply of potable water in rural Ethiopia as expeditiously as possible,
there is need to employ labor-intensive methods that do not require huge amounts of capital
expenditures. In this respect, improving springs, digging water holes that are rather shallow,
and purification of river water and the like are alternatives that need to be considered.
D. Expansion of Other Rural Infrastructural Services
Although the issue of expanding telecommunications and electricity services will be gradual
and costly, it is a development task that must be addressed with resolve. The priority here is to
provide telecommunications and electricity services to woreda development centers and
towns, as is being done at present.
Telecommunication and electricity services should reach these centers in order to motivate the
workers and enable them to perform their duties properly. Efforts will, therefore, be made to
develop a basic database, improve the flow of information upwards and downwards and use
this information as a basis for the preparation of development plans. With regard to electricity
services, although new technologies (e.g. solar energy, wind-driven electricity generation,
etc.) which can expedite the expansion of electricity services in rural areas are being
developed, it is relatively more difficult to expand these services.
4.1.9. Strengthening Non-Agricultural Rural Development Activities

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A. The Need for Non-Agricultural Rural Development
When the EPRDF Government says that agriculture is the focus of rural development, it
should not be construed to mean that there is no need for development outside agriculture, or
that no priority need be given to non-agricultural rural development. In the process of
development activities, it is inevitable that non-agricultural development initiatives will in due
course become important elements of rural development. Focus on agriculture should be
understood to mean seeking accelerated and sustainable agricultural development to end the
predominance of agriculture in the national economy.
Education, health, trade, marketing, finance, etc., are all technically outside of agriculture, but
all are critically important to agricultural development. Expanding and strengthening these
services in the rural economy means developing non-agricultural sectors and increasing the
member of people employed there in which it is another factor for assisting development.
Very often, the labor force employed in non-agricultural sectors has higher labor productivity
compared to agriculture. Because of this, the work force in non-agricultural sectors earns
higher income. Hence, the development of non-agricultural sectors in the rural development
concept means improvement of income of the rural population and, therefore, its standard of
living. This is yet another justification for giving immediate priority to non-agricultural
sectors as part of the overall rural development.
B. Full Utilization of Development Opportunities Created by Rural Development
When agricultural support services are centralized and rendered from one development center,
the likelihood is high that with people with high income will be pulled to that center. This
pool is bound to cause additional investment in various fields giving a tremendous impetus to
the overall development.
Another source of growth among the non-agriculture sectors is education. It is clear that out
of the rural youths who complete primary education, the vast majority will be employed in
agriculture. On the other hand, there will be students who will progress to secondary
education and be employed in non-agricultural activities. There will also be students who
complete their primary education, but do not progress to secondary education, who will be
employed in occupations other than agriculture after receiving the necessary technical
training. This opportunity should be used to develop nonagricultural rural development
activities. In addition to training masons, carpenters, junior technicians and accountants, etc.,

41
and employing them in various rural development institutions, youths may be encouraged to
set up small-scale enterprises, which can produce goods and services to meet farmers' demand
for various types of products. The availability of credit facilities will be important in this
regard.
Another point that should receive special emphasis is the task of increasing the value-added of
farm products. There is urgent need to prepare and package agriculture products with the
intent to reduce transportation and marketing costs. Small-scale agro-processing enterprises
should be encouraged to emerge and grow. Cooperatives can also play an important role in
running such enterprises.
C. Strengthening Rural-Urban Linkages
Agricultural development contributes to the expansion of non-agricultural sectors not only in
rural areas, but also in urban areas. The main agro-processing activity is carried out not in
rural but in urban areas. The main marketing, financial and transport centers are also found in
urban areas. Urban areas should be organized and developed in such a way that they
effectively serve agricultural and rural development. Likewise, urban centers should be
organized to enable them attain rapid development, taking advantage of the benefits which
accrue from rural development.
Towns and cities should be given standards on the basis of the services they render for the
acceleration of rural development, and the advantages they obtain from rural development,
and they should be expanded to render the expected services according to well-formulated
town development plans.
4.2 The Urban Development Policies and Strategies for Ethiopia
Currently, about 16 percent of the country’s total population i.e. 11.7 million people live in
urban areas. The urban population of the country is growing at a rate of about 4.3% per
annum or increasing by more than half a million people per annum. The total urban
population of the country will be 17.8 million by 2015 and 22 million by 2020. The
combination of urban growth that is amongst the highest in the world with the high prevalence
of urban poverty suggests a rapidly growing number of urban poor.
Ethiopia’s urban centers are characterized by a poorly developed economic base, a high level
of unemployment and a worrisome incidence of poverty and slum dwelling. Urban

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unemployment is estimated to be 26% and up to 40% in the larger urban centers, including
Addis Ababa. Nearly 40% of the nation’s urban dwellers are living below the poverty line.
Thus, the Urban Development Policies and Strategies are to identify the policies, programs
and targets which will form the Urban Development for fulfilling the PASDEP and MDG
goals for accelerated and sustainable development to end poverty.
In a number of areas urban policies and programs involve other Federal Ministries; for
instance water services, land management, rural development, environment, etc. For this
reason, the Ministry of Works and Urban Development will propose the establishment of an
inter-Ministerial coordination mechanism for implementation of the urban component of
PASDEP.
4.2.1 Urban Development Objectives
Of particular importance and a priority of the federal authorities will be to ensure regional
equity in terms of programs developed and funds provided. The main objectiveis to achieve
the goals of the national Urban Development Policy of making Ethiopia’s cities:
 Provide efficient and effective public services to residents,
 Compliment and facilitate rural development,
 Are models of participatory democracy and
 Build accelerated economic opportunities that create jobs.
This objective is supported by the following six guiding principles used to develop an urban
development strategy and supporting actions for PASDEP:
1. Cities are enabled to effectively facilitate and compliment rural development;
2. Cities actively support rapid economic development as market, service and where
appropriate, as industrial centers;
3. Cities promote models of participatory democracy and inclusiveness;
4. Cities ensure residents and other investors have access to land, services and facilities and
decent housing. This guiding principle contributes to building global competitiveness of
Ethiopia’s cities;
5. Cities provide attractive, healthy and sustainable living environments; and
6. Federal, regional and city public authorities have the capacity to fulfill their mandates.
These six guiding principles link the Urban Development Policy objective to the urban
strategy and to supporting action areas to achieve PASDEP and MDG goals. The urban
strategy has three main supporting action areas and these are:

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  The policy, legal, regulatory, institutional framework;
 Capacity building for federal, regional and city authorities; and
 Result oriented performance, monitoring, evaluating and
reporting system.

4.2.2 The Urban Development Strategy

The urban strategy will involve an approach that integrates initiatives:
1. With the aim of reducing urban unemployment to below 20% of the economically
active population: support small & micro enterprise and accelerate the creation of
urban based employment, particularly where this compliments rural linkages and
delivery of housing and basic services;
2. With the aim of reducing slum areas in Ethiopia’s main cities by 50%: launch a
national integrated housing development program that scales up Addis Ababa’s
initiative, based on lessons learned, that integrates public and private sector
investment with micro enterprise development and provision of basic services;
3. With the aim of increasing access to land and basic services: Ensure that there is
sufficient access to land for the poor, for small and medium enterprise and for formal
private sector industrial investment;
4. A specific initiative to strengthen urban-rural and urban-urban linkages by
consolidating efforts in the larger towns and launching a small town’s development
program.
There are four pillar urban development strategies in Ethiopia that form the main areas in
which programs will take place and targets are set to achieve results that accelerate
sustainable development to end poverty through achieving PASDEP and MDG goals.
A. Support for Micro &Small Enterprises and Job Creation
Strengthening the focus on micro and small enterprises is a program to ensure the adequate
serviced land provision for formal and informal business and industrial development. Access
to micro credit, for both micro and small enterprise development as well as housing
improvement will be developed.
The government’s support is mostly channeled through the Federal Micro and Small
Enterprises Development Agency (MSEDA), and increasingly through Regional MSEDAs,

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whilst implementation is through the municipalities. The Ministry of Works and Urban
Development will work closely with the MSEDA to ensure that its activities to promote urban
development are integrated with, compliment and build on their policies, and programs and
contribute to their targets.
This urban development strategy contributes to reducing unemployment and creating jobs by:
1. Developing vocational and technical training programs linked to provision of shelter
and basic services that will create sustainable jobs.
2. Designing and implementing community-based & labor-intensive urban public work
programs.
3. Expanding micro-finance institutions that are focused on the needs of the urban poor.
4. Providing market support to micro- and small enterprises sustainably.
5. Promoting self-employment generating schemes in collaboration with organizations like
NGOs.
6. Development of low-cost serviced working premises
7. Promoting micro- and small business opportunities that generate employment.
8. Establishing community based rehabilitation programs for women, children & vulnerable
groups.
9. Ensuring adequate serviced land for large, medium, small and micro enterprises.
B. Integrated Housing Development
It is all about improving the lives of slum dwellers that require a substantial effort from the
public sector supported by private sector and community participation. The government’s
housing objective, in terms of provision of housing and basic services, will focus only on
lower middle and lower income households. The government’s objective, in terms of housing
for upper middle and upper income households, is to ensure adequate provision of and access
to appropriately planned and serviced land, advance finance and a supporting legal and
regulatory framework for condominiums and cooperatives.
The major objectives of this strategy include:
 Reduction of slums,
 Integrated urban upgrading and regeneration,
 Urban infill (the development of vacant areas between existing buildings, especially
as part of a planned growth or urban renewal program),

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  Achieving high density development,
 Reduction of urban sprawl and
 Reducing the cost of infrastructure provision
The above stated objectives can be attained by:
1. The Development of a national Integrated Housing Development Program. The
approach to integrated housing development will involve combined initiatives in four
main areas: housing, slum upgrading, job creation through small and micro
enterprise development, and business development.
2. A new instrument for housing finance development will be created – the Housing
Development Fund. The Housing Development Fund will be accessible by Regional
States to support city level development of integrated housing programs.
3. Ensuring that the private sector has adequate and ease of access to land, building
materials and finance and is encouraged to develop the urban residential housing
market.
4. Development of low cost housing technologies, including: designs, materials,
prefabricated building technologies that reduce costs and speed-up construction time.
Addis Ababa’s experience in this area will be replicated and scaled up to regions.
C. Improved Access to Land, Infrastructure and Services
Improving access to land, infrastructure, services and facilities includes both administrative
(institutional) aspects and physical delivery. The administrative aspect is addressed under
supporting action areas. Delivery of land, infrastructure and services will take place within a
spatial and development planning program that identifies need, resources, and funding for
provision of residential, commercial, industrial, recreational and mixed use land.
Roads, water, transport, solid/liquid waste collection and disposal (including public health),
street lighting, traffic management, and market development are the main targets of PASDEP
investments in urban infrastructure and land development. Consideration will also be given to
needs for provision of emergency services and disaster preparedness.
This urban development strategy will contribute to creating jobs, access to serviced land and
provision of urban infrastructure and services by:
1. Designing infrastructure programs and experimenting with alternative standards and
management approaches. Constructing and upgrading various types of infrastructure, such

46
 as water supply, electricity, access roads, drainage lines, sewerage systems, waste
management and urban markets.
2. Addressing the issues of land acquisition, delivery, allocation, administrative systems, and
real property market functioning. This is to address these issues and develop an action plan
to simplify regulation, ensure adequate land is serviced and delivered, ensure effective and
efficient management of land and develop a healthy and dynamic real property market.
3. Financing and Delivery of Regional Infrastructures. These infrastructure services covered
include water, roads, drainage, sanitation and solid waste management.
4. Proper preparation and implementing of management systems to address a wide range of
infrastructure and service delivery areas. These include manuals for: water supply, solid
waste management, sanitation, urban drainage, fixed asset accounting and inventory
control, roads and access, contracting construction works and services, hygiene education
and practice, infrastructure project packaging, asset management, assessing capital
condition and maintenance strategies, infrastructure partnerships, market upgrading and
management, labor-based construction and maintenance and multi-year infrastructure
investment planning.
5. Improving land management system that contributes directly to informal and semi-formal
settlement regularization, revenue enhancement and household capital formation through
increased security of tenure.
6. Addressing comprehensively the integrated development of infrastructures to resolve
exhaustion of resources.
7. Determining the design and construction criteria, providing cost effective technical
alternatives and options, to put in place eco-friendly and efficient liquid as well as solid
waste management systems that cover a significant proportion of industrial, commercial
and residential development.
D. Promoting Urban-Rural and Urban-Urban Linkages
This urban initiative is to promote urban-rural and urban-urban linkages and provide the
spatial and development planning framework and services. This program will aim to enhance
the capacity of a large number of small towns to fulfill a role as effective rural service centers
as well as attract increased private sector investment.

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This strategy of urban development contributes to urban-rural development linkages, job
creation and provision of basic services through:
1. Addressing the smaller towns in order to support urban-rural linkages and scale up
sustainable development for poverty reduction beyond the larger urban centers. In
developing the small towns’ development program, Ministry of Industry and Urban
Development will work closely with woredas authorities, regional planning and capacity
building institutions and integrate the program with Regional development planning
initiatives.
2. Scaling up up-to-date digital mapping system for cities.
3. Preparing and implementing urban upgrading and renewal, structure plans, local
development plans, integrated urban infrastructure and services plans, urban transport
planning and traffic management, local economic development strategies and social
development strategies for urban vulnerable groups.
4. Developing market infrastructure and services. The small town development program
will have a particular focus on the development of market infrastructure and rural
support services including market management systems that support rural livelihoods
and participation.

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