Figure 9. Gross Domestic Product (GDP) by Sector, Ethiopian Fiscal Year 1984/85

Accounting for over 40 percent of GDP, 80 percent of exports, and 80 percent of the labor force, agriculture remained in 1991 the economy's most important sector (see fig. 9). Ethiopia has great agricultural potential because of its vast areas of fertile land, diverse climate, generally adequate rainfall, and large labor pool. Despite this potential, however, Ethiopian agriculture has remained underdeveloped. Because of drought, which has persistently affected the country since the early 1970s, a poor economic base (low productivity, weak infrastructure, and low level of technology), and the Mengistu government's commitment to Marxism-Leninism, the agricultural sector has performed poorly. For instance, according to the World Bank, between l980 and l987 agricultural production dropped at an annual rate of 2.l percent, while the population grew at an annual rate of 2.4 percent. Consequently, the country faced a tragic famine that resulted in the death of nearly 1 million people from l984 to 1986.

During the imperial period, the development of the agricultural sector was retarded by a number of factors, including tenancy and land reform problems, the government's neglect of the agricultural sector (agriculture received less than 2 percent of budget allocations even though the vast majority of the population depended on agriculture), low productivity, and lack of technological development. Moreover, the emperor's inability to implement meaningful land reform perpetuated a system in which aristocrats and the church owned most of the farmland and in which most farmers were tenants who had to provide as much as 50 percent of their crops as rent. To make matters worse, during the 1972-74 drought and famine the imperial government refused to assist rural Ethiopians and tried to cover up the crisis by refusing international aid. As a result, up to 200,000 Ethiopians perished.

Although the issue of land reform was not addressed until the l974 revolution, the government had tried to introduce programs to improve the condition of farmers. In 1971 the Ministry of Agriculture introduced the Minimum Package Program (MPP) to bring about economic and social changes. The MPP included credit for the purchase of items such as fertilizers, improved seeds, and pesticides innovative extension services the establishment of cooperatives and the provision of infrastructure, mainly water supply and all-weather roads. The program, designed for rural development, was first introduced in a project called the Chilalo Agricultural Development Unit (CADU). The program later facilitated the establishment of similar internationally supported and financed projects at Ada (just south of Addis Ababa), Welamo, and Humera. By l974 the Ministry of Agriculture's Extension and Project Implementation Department (EPID) had more than twenty-eight areas with more than 200 extension and marketing centersca5 rs. Although the MPPs improved the agricultural productivity of farmers, particularly in the project areas, there were many problems associated with discrimination against small farmers (because of a restrictive credit system that favored big landowners) and tenant eviction.

Imperial government policy permitting investors to import fertilizers, pesticides, tractors and combines, and (until 1973) fuel free of import duties encouraged the rapid expansion of large-scale commercial farming. As a result, agriculture continued to grow, albeit below the population growth rate. According to the World Bank, agricultural production increased at an average annual rate of 2.l percent between l965 and 1973, while population increased at an average annual rate of 2.6 percent during the same period.

Agricultural productivity under the Derg continued to decline. According to the World Bank, agricultural production increased at an average annual rate of 0.6 percent between 1973 and 1980 but then decreased at an average annual rate of 2.1 percent between l980 and l987. During the same period (l973-87), population increased at an average annual rate of 2.6 percent (2.4 percent for 1980- 87). The poor performance of agriculture was related to several factors, including drought a government policy of controlling prices and the free movement of agricultural products from surplus to deficit areas the unstable political climate the dislocation of the rural community caused by resettlement, villagization, and conscription of young farmers to meet military obligations land tenure difficulties and the problem of land fragmentation the lack of resources such as farm equipment, better seeds, and fertilizers and the overall low level of technology.

President Mengistu's 1990 decision to allow free movement of goods, to lift price controls, and to provide farmers with security of tenure was designed to reverse the decline in Ethiopia's agricultural sector. There was much debate as to whether or not these reforms were genuine and how effectively they could be implemented. Nonetheless, agricultural output rose by an estimated 3 percent in 1990- 91, almost certainly in response to the relaxation of government regulation. This modest increase, however, was not enough to offset a general decrease in GDP during the same period.

Data as of 1991