How to launch Ethiopia's tech and innovation lift-off

22 November 2019

UNCTAD review shows how improved use of science, technology and innovation policies can build innovation capacity, upgrade technologies and accelerate Ethiopia's development process.

Ethiopia’s ambitious development plans have propelled it to become one of the fastest-growing economies in the world.

It has recorded an average real gross domestic product growth of 10% annually over the past decade and attracted foreign direct investment inflows worth US$3.3 billion in 2018.

The country also reduced extreme poverty from 37.2% of the population in 2004 to 27.3% in 2015, thanks to its bold and ambitious economic development strategy.

However, Ethiopia’s progress in technological learning and innovation must be strengthened to underpin future progress in sustainable development and support structural economic transformation, says UNCTAD’s science, technology and innovation policy (STIP) review of the country.

Launched in the capital, Addis Ababa, on 22 November, the review evaluates innovation capacity, policies and institutions in Ethiopia and suggests how the government and other key stakeholders can better harness innovation, technology and science to accelerate development and achieve the Sustainable Development Goals.

“Through our home-grown economic reform and 10-year strategy, Ethiopia aims to become a middle-income economy. Innovation and technology are the main drivers for attaining this goal, and the STIP review will help us towards this objective,” said Getahun Mekuria, the country’s minister of innovation and technology at the launch of the report.

The STIP review contrasts Ethiopia's rapid economic growth with much slower growth in technological learning and innovation capacity as a major obstacle to sustaining this impressive performance and achieving more sustainable development.

It shows that on paper, Ethiopia has most of the policies, regulations, background studies and roadmaps necessary to kick-start a successful process of technological learning, innovation and technological upgrading.

However, in reality the country faces challenges in policy implementation across public institutions related to capacity constraints and sub-optimal allocation of efforts and resources.

“Innovation ultimately takes place at the firm-level, but the state plays a key role as a facilitator of the national innovation system,” said Shamika N. Sirimanne, UNCTAD’s director of technology and logistics division during the report’s launch in Addis Ababa. “The state is the glue that holds the innovation system together.”

UNCTAD prepared the policy review at the request of the government to support the technology ministry in preparing a new science, technology and innovation (STI) policy.

The review process is timely, taking place at a critical juncture in the country’s development.

The report finds that hurdles to technological progress are largely due to deficiencies in design processes, in particular with implementation and evaluation, rather than a lack of policies, strategies and institutions.

Improved policy coordination and greater coherence across key areas of development policy are needed, according to the review.

Building productive capacities

The STIP review notes that Ethiopia needs to build its productive capacities to add greater value, produce a wider range of products, diversify the economy and generate higher income.

Like other least developed countries, Ethiopia’s productive capacity must be reinforced.

Policy action in recent years has enabled the country to initiate a process of productive capacity-building, driven by intensive public-sector investment in targeted areas that has powered recent growth.

Production linkages are not sufficiently developed, reflecting a private sector that is still emerging, and insufficient technological capability and manufacturing production capacity.

In September, the government launched an economic reform agenda aimed at boosting private investment, creating productive jobs and enhancing the role of the private sector in the economy.

Science, technology and innovation are critical for the achievement of these objectives.

The country’s progress has been greatest in ‘productive resources’, particularly transport infrastructure, with significant improvements in road and railway networks.

The report suggests that Ethiopia’s next STI framework should build on this progress and reinforce entrepreneurial and technological capacities as well as production linkages.

From technology transfer to innovation

The current Ethiopian STI policy gives priority to technology transfer, mainly referring to acquisition of technologies from abroad.

Implicit in this approach is the assumption that acquired technologies will be automatically assimilated in the local economy through learning, linkages and demonstration effects.

The report recommends that the next STIP framework should shift the focus of the national STI policy to the dynamic processes of ‘technological learning and innovation’, which are aligned with Ethiopia’s current economic reform agenda.

The focus of the new STI policy framework should be on technological learning and upgrading, and building strong innovation capacity through inter-firm linkages, including between local firms and foreign enterprises, particularly those operating in the country's industrial parks.

The STIP review offers specific recommendations to assist the government to create mature and effective systems to support innovation, with UNCTAD’s help.

Sectoral case studies

The STIP review also provides an in-depth analysis of two sectors as case studies for understanding how STI policy can stimulate technological upgrading and innovation and thereby improve the performance of industries identified as important for Ethiopia's development.

They are the apparel and textile sector for resource-based labour-intensive exports and the pharmaceuticals sector for knowledge-intensive import substitution.

The STIP review is based on fact-finding missions to Ethiopia conducted in December 2018 and March 2019, which included interviews with government ministries, public sector agencies, private sector firms, universities, research institutes, international organizations and other key stakeholders.

UNCTAD’s STIP reviews contribute to the development of innovation capacity and upgrading of technologies along with STI policy capacity so that science, technology and innovation policies can better contribute to development strategies.

The reviews evaluate science, technology and innovation capacity, policies and institutions from a neutral and independent perspective, offering suggestions for policy action to harness them for sustainable development.

So far, UNCTAD has completed 16 STIP reviews in 15 countries, in which the reviews have often ignited a renewal in STI policy, raised the profile of STI policy in national development strategies and facilitated the inclusion of STI activities in international cooperation plans.