Filename: EDRI NCE Outline 1 Published date: December 18, 2015

Better Growth, Better Climate in Ethiopia Supporting Ethiopia’s development ambitions through green growth

December 2015 – April 2016 A joint project by NCE’s Ethiopia Partnership (EDRI, GGGI and NCE) Request for Proposals

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TABLE OF CONTENTS  

1.  Project rationale and objectives  

2.  Work to be undertaken Output  A:  Green  Industrialization  and  Structural  Transformation  

Output  B:  Defining  Urban  and  Industrial  infrastructure  requirements  

Output  C:  Green  Growth  Macroeconomics  Synthesis  paper    

3.  Project plan  

4.  Stakeholder engagement and outreach  

5.  Request for proposals guidelines  

Annex 1: Ethiopia’s growth and climate context    

 

 

 

 

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1.   PROJECT RATIONALE AND OBJECTIVES

 ABOUT THE NEW CLIMATE ECONOMY AND PROJECT OVERVIEW The Global Commission on the Economy and Climate (GCEC) is a major new international project to understand the extent to which effective economic development and climate action can go hand in hand, aimed at fostering decisions by the world’s governments, business and finance leaders to move to lower carbon and more climate-resilient patterns of economic growth and development. The Commission found that many of the policy and institutional reforms needed to revitalize growth and improve well-being over the next 15 years can also be critical to tackling climate risk. Commissioned by a group of seven countries (Colombia, Ethiopia, Indonesia, Korea, Norway, Sweden and the UK), the Commission is overseen by an International Commission comprising former heads of government and finance ministers and leaders in the fields of economics, business and finance, chaired by former Mexican President Felipe Calderon and Lord Nicolas Stern. More information can be found at www.newclimateeconomy.net. The project is undertaken by a global partnership of 8 research institutes and a core team led by Programme Director Helen Mountford. The Commissions flagship project, The New Climate Economy (NCE), produced its inaugural publication the Better Growth, Better Climate Report, published in September 2014, bringing together evidence from across a range of countries and sectors to demonstrate how economic growth and action on climate change can be achieved together. The report focused on the key sectors of cities, land use, and energy and how economic processes can be used to deliver the innovation, resource efficiency and infrastructure investment to build a low-carbon economy. An Advisory Panel of world-leading economists, chaired by Lord Nicholas Stern carried out an expert review of the work. Following the successful publication of Better Growth, Better Climate: the New Climate Economy Report in 2014, the Global Commission on the Economy and Climate produced a second report in July 2015: Seizing the Global Opportunity: Partnerships for a Better Growth, Better Climate. This report focused on how international collaborative efforts can deliver economic development and reduced climate risk to catalyze international climate action in the lead-up to COP21 in Paris in December. The NCE has acknowledged the importance of low-income economies in Africa in its analysis of the move towards a low-carbon future. Africa is represented on the Commission through Luísa Diogo (former Prime Minister of Mozambique), Ngozi Okonjo-Iweala (former Finance Minister of Nigeria), and Trevor Manuel (former Finance Minister of South Africa). In addition, Ethiopia acts as a commissioning country and the Ethiopian Development Research Institute is a research partner, with the other NCE research partners having extensive experience and on the ground presence in Africa (e.g. the Overseas Development Institute). The Commission was also advised by an Economics Advisory Panel, which again had African representation through Benno Ndulu (Governor, Central Bank of Tanzania). The New Climate Economy (NCE) through its partner institutes is undertaking a program of work between July 2015 and March 2016 to support African decision-makers explore how effective and equitable development can also yield co-benefits for reduced climate risk either through mitigation of GHG emissions or improved climate resilience. The NCE will engage at the highest levels of governments in a small number of African countries to help the region understand the extent economic and social development paths also yield reduced climate risk.

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The NCE plans to use this work, as a starting point for longer-term engagement in low-income countries. This work will be centered around applying the work of wider NCE “special initiatives” to the specific context of low-income countries. This could include further work on economic and structural transformation, finance, and analysis of the systems of cities, energy and land use. The NCE’s “value add” here would be to bring world-class thinking through key partners to key decision makers at the highest political levels. The Global Green Growth Institute (GGGI) are a founding partner institute of the New Climate Economy. In collaboration, the NCE secretariat, the EDRI and the GGGI Ethiopia team will work in partnership with others - including the Department for International Development - to analyze the key opportunities for green growth in Ethiopia to inform the implementation of the countries national development strategy the Growth and Transformation Plan (GTP), and its related strategy related to sustainable development – the Climate Resilient Green Economy (CRGE). The work will focus on a number of areas, specifically linking the ambitions for socially sound and equitable structural transformation and climate change to build a new climate economy, and specifically the role of industrialization. This TOR sets out the background to the work and the proposed outputs and methodology. The work will be carried out to March 2016, whereby the analysis will be presented to key decision makers in Ethiopia and wider stakeholders. ETHIOPIA PROJECT BACKGROUND This collaboration is well placed to support the Government of Ethiopia. The NCE partnership will supplement the work of the GGGI team, and its experiences across its member countries with its global research. The NCE-EDRI-GGGI partnership has worked together successfully in Ethiopia in 2014/15 in identifying urbanisation pathways for sustainable development which was launched in partnership with the Government in February 2015. GGGI has been operating in Ethiopia since 2010, supporting the development of delivery of the Climate Resilient Green Economy (CRGE) initiative as well as wider delivery issues at a sector level. EDRI is an economic think tank established by the Ethiopian Government in 1999 and work on a variety of economic policy issues with relevance to Ethiopia (see section 5 for more details). The Government of Ethiopia in 2015 will publish the Growth and Transformation Plan (GTP) 2, its 5-year national development strategy for 2015-2020. This has bold growth and transformation objectives, with the aim of becoming a low emission and climate resilient middle-income country by 2025 through building a Climate Resilient Green Economy (CRGE) (see Annex 1 for an overview) through socially equitable means. There are some key strategic areas the government have already highlighted as important for achievement of their overall economic aims which are important for growth and structural transformation: Figure 2: Key strategic pillars of achieving middle income status in Ethiopia by 2025

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•   Improving agricultural productivity to maintain agricultural growth: despite significant improvements in recent years, agricultural productivity remains low in Ethiopia and must improve in order to maintain agricultural growth rates.

•   Enhancing exports: Ethiopia has preferential trade access to major markets (namely the EU and US), which must be exploited for development by enhancing quality and better targeting demand in these markets. Strengthening exports also requires improvements in trade logistics and market integration (both regionally in East Africa and Internationally).

•   Supporting non-agricultural employment and developing human capital: transitioning agricultural workers into non-agricultural employment will require support in skill development and training as well as transport to link employees to workplaces. This will also require that the specific needs of women and youth are addressed throughout this process to reduce disparities and unleash growth potential.

•   Developing infrastructure for growth: Critical enabling infrastructure such as energy, water, transport and communications, need to be developing in an integrated manner. The absence of these critical functions acts as a drag on growth.

•   Stimulating industry as a growth driver: historically, agriculture has been the main driver of growth in the economy, stimulating increased demand for services. The next phase of growth requires industry to become a primary driver of growth alongside sustained agricultural performance. Four aspects are important agro-processing; light manufacturing; special economic zones; trade logistics (domestic and export)

•   Stimulate private investment: Growth to date has been driven by public investment, but continued growth will increasingly involve private investment. This is through inward Foreign Direct Investment (FDI) and domestic investment. Improvements in trade logistics will increase the attractiveness of Ethiopia for investment.

•   Maintaining fiscal stability: Sustained growth can only be achieved in a stable macro-economic environment. In particular, this includes reducing foreign exchange expenditure and increasing foreign income (improved balance of payments).

•   Making the most of urbanization: As with most countries, Ethiopia is experience rapid urban growth. This creates both opportunity and risk, which needs to be linked to overall economic objectives.

Based on engagement and joint working from September 2013 to mid 2015 the NCE, GGGI and EDRI worked directly to the National Planning Commission and its ministerial partners to deliver an assessment of possible urban pathways to unlock economic transformation as a key input into GTP 2 process. This report was published as ”Unlocking the Power of Ethiopian Cities”1 and outlines a new “spatial framework” for assessing and maximising the contribution that cities can make to achieving economic, social and environmental objectives and recommended the development of secondary cities which are developed around key economic clusters that will drive industrial development and structural transformation and set out a “preferred scenario” for urban and industrial development. Following this work, the NCE, EDRI, and GGGI have held numerous conversations on how best to support the implementation of the GTP, including with the Ministry of Industry (MoI), the Prime Ministers Office (PMO) and the Ministry of Urban Development. In July 2015 a meeting was held in Addis Ababa on the sidelines of the 2015 Financing for Development Conference between the Chief Economic Adviser to the Prime Minister, Ato Newai Gebre-ab in consultation with Jeremy Oppenheim (Chair of the New Climate Economy Delivery Steering Group and Director at Mckinsey and Co) and Nick Stern (Co-Chair of the Global Commission on the Economy and Climate). These discussions have resulted in a focus to support the government in two interlinked areas which form the structure of the work for this TOR:

                                                                                                                         1  Woldeyes,  F.  and  Bishop  R.  (2015)  Unlocking  the  Power  of  Ethiopia’s  Cities.  A  Report  by  the  New  Climate  Economy  Partnership.  

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Area 1: Supporting green industrialization. Linked to the industrial development vision provide input into the design of clustered Special Economic Zones (SEZ’s) and industrial parks to attract private investment and promote sustainable development.

Area 2: Linking industrial and urban infrastructure. Link the infrastructure needs for urbanization and industrial development through the Ethiopian National Urban Development Spatial Plan (NUDSP). The work will produce a policy focused, research report to deliver to Ethiopian policymakers in March 2016 summarizing the results of this analysis. Area 3: Building a new climate economy in Ethiopia. The analysis in area 1 and 2 will be underpinned by a third area, an assessment of the opportunities for Ethiopia’s future economic transformation and the role of green growth. This will form part of a short synthesis report drawing together the NCE research in Ethiopia to date (i.e. this work, the urbanization work published in February 2015) to highlight the opportunities in Ethiopia for economic growth, structural transformation and climate compatible growth to inform the GTP and CRGE processes. The linkages between the existing and planned NCE Ethiopia partnerships work and its link to strategic economic development are outlined in Figure 2 below: Figure 2: NCE country analysis and approach to understand better growth, better climate

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The steps previously undertaken by the partnership and which will form key inputs into this project include:  

1.   Step 1: Key strategic policy priorities. Thorough review of the key pillars of Ethiopia’s GTP and CRGE to ensure strategic relevance of key issues for growth and transformation to the NCE partnerships work. This process was undertaken with the Government of Ethiopia in discussions in 2013-2014.

2.   Step 2: Urban development and transformation. Identifying the role of urban development in delivering green growth and structural transformation in Ethiopia. This analysis was undertaken and published in February 2015.

The following will be undertaken in this project to March 2016:

3.   Step 3: Validate and confirm the spatial development vision of the GTP. Based on discussions around the GTP 2 process and input in Step 2 this step will revalidate the spatial urban and economic development scenario envisaged by policy makers to underpin the economic, social, and environmental performance of Ethiopia to 2025. This work identified identified a number of urban economic clusters, Special Economic Zones (SEZ’s) and industrial parks in Ethiopia which will be critical to its future economic, social, and environmental performance.

4.   Step 4: Industrial development and transformation. Given the proposed development of industry and its location, analyze how to promote sustainable development of this industry within urban economic clusters, SEZ’s and industrial parks. This includes the role of “green growth” to achieve this transformation – taking into account resource productivity and climate impacts (such as the availability of water).

5.   Step 5: Draw out the infrastructure demands and linkages between industrial and urban development. Building on the preceding analysis draw out the required infrastructure requirements and interlinkages between urban and industrial infrastructure to ensure a consistent strategic approach for sustainable development. This will include the infrastructure links both within industrial urban corridors and between them.

6.   Step 6: Set out the implications of the combined NCE research for the CRGE and GTP. This will look at the work from the NCE partnership in Ethiopia to date and synthesize key findings and policy implications, and really place a heavy emphasis about the links between the GTP and CRGE strategies.

The remainder of this note set outs the objectives, activities and work plan to achieve this support effectively. OBJECTIVES    Given the context above, the aim of the project is threefold: 1. Linked to the proposed location of Ethiopian industry to 2025, develop an “industrial transitions assessment” to strategically guide Ethiopia’s industrial development sustainably, specifically through the development of industrial parks. In recent years, structural transformation from an economy dominated by agriculture (a sector with lower productivity) to industry (a sector with higher productivity) is critical for Ethiopia. Currently Ethiopia’s economy is dominated by agriculture with a 42% contribution to GDP and 72% contribution to employment in 2013. Since the 1990s, the overarching development strategy has been focused on agricultural development to feed into early industrialization. An Industrial Development Strategy was formulated in 2002 that emphasized the importance of linkages with the agricultural sector,

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export orientation, labor intensive industries, and development of industrial zones. However, despite some promising industrial development (e.g. in cut flowers) there is still a need for improved industrial development from the current low industrial base in Ethiopia. In 2013, the industrial sector contribution to GDP was 13% with only 7.4% of the employment. In particular, the contribution of the manufacturing sector has been very low (around 5% of GDP). In Ethiopia women make up 47.9% of the economically active population with 73.5% off those women working in the agricultural sector2. Of note, 68.5% of economically active women are unpaid family workers while another 24.8% were informally self-employed.3 A transition from an agricultural to an industrial economy would need to consider the particular needs of women in this shift to ensure equitable growth and redistribution of employment opportunities, especially since it is expected that through GTP II, the manufacturing sector will double the number of jobs for women and youth4. The GTP 2 of Ethiopia, following the Industrial Development Strategy, aims to develop industries that are linked with the agricultural sector, and are export-led. It also focuses on labor intensive industries. The manufacturing industries that have been given due attention are starting with agro- processing industries, textile and clothing, food and beverage industries, tannery and leather goods, pharmaceutical industries, chemicals and chemical products industries, paper and paper products, plastic industries, building materials, glass and glass products, and metal and metal engineering. A key pillar of the industrial development strategy is the development of industrial parks, which will aim to attract private investment and be the driving force behind economic activity. The establishment of the parks is inextricably linked with other sectors of the economy including the domestic industry and urban development in terms of supplying inputs and labor to the industries and creating an economically, socially and environmentally sound urban and industrial development around IPs. To this end, the Industrial Park Development Corporation (IPDC) has been set up in 2014. The corporation will have the mandate to prepare a industrial park master plan in line with nation’s spatial development master plan and develop and administer industrial parks. At the request of senior policymakers, EDRI has been undertaking a study to look into the administration and organization of industrial parks examining best practices.5 The work proposed in this project will highlight how to develop the industrial clusters to effectively promote economic development and attract private investment. It will do by exploring the following four issues: •   Validation and assessment of the current industrial development plan of Ethiopia and the role

of special economic zones, economic clusters, and industrial parks •   Identify key pathways and options for developing economic clusters, special economic zones

and industrial parks to support private investment. •   Qualitatively assess the economic, social (ensuring adequate attention to the impacts on

women and youth) and environmental net benefits of these options to identify preferred development, including carbon benefits/costs

•   Identify key barriers to effective green industrial development and provide recommendations to policymakers.

                                                                                                                         2  http://www.fao.org/docrep/013/i2050e/i2050e.pdf  3  http://www.ibtimes.com/ethiopian-­‐case-­‐study-­‐sheds-­‐light-­‐what-­‐really-­‐holds-­‐back-­‐gender-­‐equality-­‐national-­‐economies-­‐1558256  4  http://utna.org/index.php/news/115-­‐ethiopia-­‐s-­‐development-­‐and-­‐the-­‐growth-­‐and-­‐transformation-­‐plan-­‐ii  5  The IPDC has established some industrial parks (e.g. Bole Lemi I with 186 hectares) and is also in planning phases to set up more covering different parts of the country. In addition to the industrial parks development by the IPDC, there are planned industrial parks to be developed by the private sector (e.g. George Shoe and Huajian Group).  

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2.   To develop an integrated infrastructure implementation plan linking urban and industrial strategies to shape structural transformation. The NCE Ethiopia partnerships report “Unlocking the Power of Ethiopian Cities” showed that for Ethiopia to achieve its desire for middle income status by 2025 then urbanisation presents a major challenge and opportunity for the country, and that unlike many middle and high income countries Ethiopia has an opportunity to shape its urbanisation path at an early stage. The report showed there is a need to link the strategic pillars needed to achieve the GTP with a range of urban development choices that define what urban development means for the economic geography of Ethiopia. The study acted as a starting point for linking economic and urban development goals in the National Urban Development Strategy (NUDSP). The “preferred scenario” is presented below in figure 3 and has a number of specific features:

•   Unlocking the potential of secondary urban growth centres by harnessing the economic efficiencies offered by enlarged ‘second cities’ that can diversify and accelerate growth. To ensure future balanced growth, the Government needs to invest in a network of cities distributed across regions that will improve links with international and regional markets. This will diversify the economic activity and distribute wealth across the country.

•   Agglomerating and connecting economic functions. Clustering economic activity brings additional value to economic activity, and the location of these clusters should help to strengthen the value chain (raw materials, manufacturing, supply chains and trade)

•   Targeting the development of a compact, connected and resilient urban network. As outlined in the NCE’s wider work, well managed urban growth based on dense, mixed-use urban neighborhoods improves economic efficiency, improves climate and environmental performance and enhances resilience, all at a lower cost. The same principle applies to the national urban plan and highlights the value of key supporting infrastructure in delivering Ethiopia’s Climate Resilient Green Economy.

Figure 3: Recommended spatial scenario for Ethiopia’s urban development

The recommended scenario highlights the pattern of economic clusters and corridors that could be enhanced to support the continued growth of – and remove pressures on – Addis Ababa. Each of

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these has a particular economic function and will require key infrastructure investment and transport connectivity to support the movement of people and goods. The key clusters and corridors proposed were:

•   Addis Ababa National Capital Area •   Lake Tana Development Area •   Mek’ele-Kombolcha Industrial Corridor •   Dire Dawa-Jigjiga International trading cluster •   Hawassa Southern Economic Cluster •   Jimma Agricultural Commodities Hub •   Gambela Regional Export Hub •   Degeh Bur – Kebri Dehar Corridor

The specialisation of each cluster, or even cities within clusters, is particular to that cluster. These clusters are diverse in economic rationale and function, incorporating services, commercial activities and elements of an industrial base; for example the North West Development Area might have opportunities to develop the tourism sector around Lake Tana and draw in the benefits of sesame processing. Similarly, each cluster will also have different social, language and cultural attributes which will depend on the locations of incoming rural migrants.

As a follow up to the urbanization report, the NCE partnership in Ethiopia prepared a paper for the Ethiopian national planning commission and key Ministers to highlight how to unlock the power of urbanisation and support structural transformation. 6 It makes a number of important recommendations. This paper highlights the cross cutting nature of urbanisation and the need to draw links between sectors which are traditionally governed separately – with a key link being between industrial development and urbanisation. This is because strategic growth corridors linked to targeted economic functions and industrial development is inextricably linked to the number and hierarchy of urban centres, and the infrastructure demands that support this including power, water, information and transportation.

The central government strategy to draw out these links is the NUDSP. This national level spatial planning project reviews the current status of urbanisation and options to improve spatial planning to accommodate a growing population and increased economic activity. It is supported by a deeper planning exercise on some key growth areas tagged for development but is missing an integrated approach to key infrastructure and the links between urbanisation and industrialisation. It takes infrastructure and industrial development as a ‘given’ rather than working with these policy makers to adapt plans to make the most of the opportunities. By supplementing the NUDSP with analysis of the links between industry and urban issues - urban, industrial and infrastructure plans could be reviewed together to explicitly build the evidence and rationale for decision making on the following issues:

•   Clustering and agglomeration of urban activities into development corridors •   Phasing and sequencing of development plans creating an infrastructure pipeline for donor

support and government investment •   Integration of Special Economic Zones, infrastructure and urban development •   Connecting key interdependent cities or clusters with appropriate transport links •   Diversifying port access to build resilient international trading options •   Improving connections to regional economies on multiple borders •   Balancing growth and reflecting regional strengths and opportunities •   Assessing the built environment from a gender and social perspective to analyze how it

                                                                                                                         6  This  paper  is  an  internal  NCE  working  document  that  was  presented  to  Ethiopian  policymakers  in  early  2015  and  is  entitled  “unlocking  the  urbanization  opportunity  –  a  synethesis  paper  for  Ethiopian  decision  makers”.  

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respond to the needs of everyday life •   Supporting the macro urban structure with a network of market towns and villages to

connect rural economies and improve rural – urban linkages. Here the work proposed in this project will link the urban and industrial infrastructure plans of Ethiopia to inform better planning. It will do by exploring the following issues: •   Validating the “preferred scenario” using the GTP 2 document and discussion with key

policymakers. •   Linking the “what” of proposed economic development and link to the ‘how and where’ these

activities are distributed key infrastructure requirements. •   Assessing the NUDSP and other policy processes in Ethiopia for linkages between urban and

industrial infrastructure and the extent it will promote green growth. •   Assessing the NUDSP and other policy processes in Ethiopia for their potential gender/social

impacts to ensure planning recommendations improve livability for those living in urban centers and feeding into the industrial zones.

•   Drawing on research from research undertaken in earlier NCE work in Ethiopia set out key experiences from comparator countries including Korea, Brazil, Indonesia, and other countries as appropriate.

•   Providing recommendations for policymakers on how to improve both planning and implementation related to industrial and urban infrastructure, to maximize economic, social, and environmental performance, including reducing emissions.

 3.  To assess the opportunities for Ethiopia’s future economic transformation and the role of

green growth.

The NCE’s global research has resoundingly shown that actions that there are a plethora of actions that promote positive economic outcomes, at the same time provide benefits in terms of reduced emissions and improved climate resilience.7 Through its global work the NCE developed a “Growth and Climate framework” for understanding the interaction for economic development and climate risk, presented below.8 Figure 4: New Climate Economy Growth and Climate Framework

                                                                                                                         7  The combination of both emissions reduction and improved resilience to climate is referred elsewhere in this note as reduced climate risk.  8  Global  Commission  on  the  Economy  and  Climate,  2014.  Better  Growth,  Better  Climate.  and  Global  Commission  on  the  Economy  and  Climate,  2015.  Seizing  the  Global  Opportunity.  Partnerships  for  Better  Growth  and  a  Better  Climate.  This  diagram  has  been  adapted  to  include  industry  which  was  not  part  of  the  original  framework.    

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From an economic perspective, recent years have seen a strong revival of interest among Ethiopian policy makers and researchers in structual transformation - the shift of economic activity, employment and resources from low to high productivity activities and sectors - as a central element in development. The African Union’s long-term vision for African development in its Agenda 2063 report, for example, aims for “Economies [that are] are structurally transformed to create shared growth, decent jobs and economic opportunities for all”.

Ethiopia is at an early stage of development in its bid to realize its long-term development ambition set out in its GTP and has put structural transformation as the key path for achieving longer term prosperity. To assess green growth opportunities in the context of structural transformation there is a need to understand the sectoral issues, but also the multi-dimensional cross cutting aspects of policy. The work highlighted above in objectives 1 and 2 has shown the importance of integrated thinking and to take a dynamic view of the economy, rather than a static one. To ensure that the implications of structural transformation and climate change issues derived from the previous NCE partnership research can be fully integrated into the governments strategies for the CRGE, the NCE will produce a short synthesis paper drawing on existing literature covering the following issues:

•   The visions of the CRGE and GTP, and highlighting key areas that will deliver the overall aims. •   An overview of progress to date in delivering the CRGE and GTP strategies, including

institutional leadership and financing strategies (e.g. through the CRGE Facility). •   An overview of the gender and social implications of proposed strategies and policy

recommendations for ensuring the GOE’s commitment to advancing gender equality and ensuring a sound future for youth are supported through GTP II.

•   Highlighting the key barriers to economic development and structural transformation, and the extent green growth offers an opportunity and risk to delivering that development.

•   Offering a synthesized collation of key policy recommendations from the NCE partnerships reports and setting out key next steps for public policy.

ETHIOPIA GOVERNMENT CLIENT

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The proposed project will be a key input to the Government of Ethiopia’s macroeconomic, urban and industrial strategy development, emphasizing its link to the CRGE. This will be delivered directly to the Chief Economic Advisor to the Prime Minister, and will involve cross ministerial engagement including the Ministry of Industry, the Industrial Park Development Corporation, the Ministry of Urban Development, Housing and Construction, the Ministry of Environment and Forest and the National Planning Commission and to the Ministry of Women, Children and Youth Affairs. The final outputs will be discussed with high level government officials through high-level representatives of the partner institutions (e.g. the Director General of GGGI) and including relevant members of the Global Commission on the Economy and Climate.

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2.  PROPOSED ACTIVITIES AND SCOPE OF WORK STRUCTURE OF WORK In the context of the three objectives and areas of work, matched to them are three outputs. Output A: A policy/research paper analysis effective green industrialization for structural transformation. The component will highlight progress to date with Ethiopia’s current industrial strategy, the links between different visions for industrial development and the development of Ethiopia’s “industrial parks” with other sectors of the economy. This will include an assessment of how Ethiopia’s policy of “industrial parks” is linked to the infrastructure needed for energy, the urbanization process, and the shift of employment from agriculture, drawing especially on the NCE partnerships previous work on urbanization in Ethiopia. Output B: A policy/research paper outlining key urban infrastructure and financing requirements for structural transformation. This work will analyze Ethiopian plans for key urban and industrial infrastructure and assess the extent which they are consistent with that required for enhancing economic, social, and environmental performance and structural transformation. This includes the plans related to urbanization, industry, and energy to assess their compatibility for delivering government development ambitions and building a socially equitable new climate economy. Output C: A short high level green growth macroeconomic synthesis paper to inform green growth planning and implementation in Ethiopia. Ethiopia has clearly defined development targets. This component will look at the countries development ambitions with a focus on the required structural transformation needed to deliver the countries middle-income ambition by 2025, the key constraints to low carbon, climate resilient growth, and the particular role of industry in supporting the required transition. It will also link this development ambition to how low-carbon and climate resilient growth may offer better alternatives than a ‘conventional’ growth path.  This analysis will draw on analysis of the Ethiopian structural transformation, analysis of development pathways and draw extensively on the CRGE analysis that has been undertaken in Ethiopia. The method will be a synthesis of existing literature and new data analysis. A detailed proposed methodology with accompanying outputs is elaborated below. The exact scope of the deliverables will be confirmed in the inception phase through dialogue with the government and other key stakeholders.  OUTPUT  A:  GREEN  INDUSTRIALISATION  AND  STRUCTUAL  TRANSFORMATION    Tasks To inform these questions the work would focus on unlocking strategic industrial development There are various questions about the role of industrial parks as a way of delivering structural transformation. There are choices to be made with regards the optimal development of the industrial strategy. There is a need to understand the strategic objectives of industrial parks and how they link to the Ethiopian development agenda, different policy choices around models, management, the extent they can force in both international investment and locally and to the extent they can be developed sustainably.

1.   Objectives and situational analysis for industrial development. The vision for industrial development and an assessment of the current starting point for supporting industry in Ethiopia.

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•   A brief overview of industrial trends and main drivers to date, including the current economic make-up of Ethiopian industry economically and mapped geospatially

•   Collate evidence to date on Ethiopia’s plans for industry and any key constraints, including the definition of spatial layout of such industries including setting out defined economic clusters, special economic zones and industrial parks. This will include a review of the key strategic industries identified by the Ethiopian government and again also setting this out geospatially.

•   Based on existing evidence (i.e. government strategies and wider evidence) define dynamic comparative advantage of Ethiopian industry i.e. based on productive know-how, skills, and natural resources, what industries could form the basis of sustained industrial growth over the next 15 years (using approaches such as the Haussmann tests). This will include setting out the key strategic markets in East Africa and globally based on sectors in which Ethiopia has a potential dynamic comparative advantage.

2.   The options for delivering effective green economic clustering and industrial parks in

Ethiopia with qualitative assessment of their economic, environmental and social impacts. •   Discuss the different “models” or “types” of industrial development including the role of

SME’s and larger investment in adding value in key sectors. This will take a systemic approach of how different industrial parks both within and between special economic zones and industrial clusters will operate.

•   Highlight the key strategic options available to Ethiopia as they look to build out their economic clusters and industrial parks sector including the development of key sectors.

•   In highlighting options draw on relevant lessons from the country experiences of other historic industrialization paths in achieving middle-income status, highlighting the role of climate change in this. Please note this can draw extensively from EDRI research into foreign industrial development and the wider work of the NCE on economic transformation

•   Identify a range of scenarios for economic clustering and industrial park development in Ethiopia. This should incorporate and provide thought of the different stages in industrial development that Ethiopia will need to go through.

•   Analyze the scenarios based on their economic, social (including impacts on women and youth) and environmental outcomes for Ethiopia, drawing on previous multi-criteria approaches used by NCE, EDRI, and GGGI, recommending a preferred way forward.

3.   The role of climate change and wider green growth concerns for industrial development.

•   Given the different options for industrial park and special economic zone development discuss the role of green growth considerations. This should include both climate impacts (particularly the role of water availability) and different emissions profiles

4.   Overcoming growth barriers to deliver sustainable economic clusters and industrial parks. Setting out the key constraints to growth and how to overcome them. This could include answering the following: •   Identify the key barriers to industrial parks specifically that need to be overcome, and the

key players to unlock this growth. •   Describe the mechanisms for operating effective industrial parks in Ethiopia and the key

constraints for Ethiopia, which should include: ensuring links to agriculture, promoting agglomeration effects, drawing out implications for trade logistics, overcoming key constraints to attracting FDI overcome and also attracting domestic finance.

•   Providing an overview of key issues for “green industrial development” and sustainability, also covering how well does the current CRGE strategy incorporate issues of sustainable industrial park development?

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5.   Recommendations for policy makers. These interventions could be a combination of economic and non-economic policy instruments, access to international finance and additional areas such as the need for further analysis or institutional reforms.

OUTPUT   B:   DEFINING   INDUSTRIAL   AND   URBAN   INFRASTRUCTURE  REQUIREMENTS    This component will be linked to and enhance Component A. Building on the work of the previous NCE partnership analysis and its assessment of key gaps related to effective urban development in Ethiopia it will look at identifying the linkages between industrial development and urbanization (jobs, housing, services, etc) to successfully deliver on the preferred scenario and the integrated infrastructure requirements associated with this To make increased use of key infrastructure as Ethiopia’s national spatial structure takes shape will require phasing decisions about which elements of the strategy are strategic high-priority elements that warrant short term action and which elements can and should be implemented at a later date. Simultaneous growth of all economic development areas is unlikely nor desirable given resource limitations. Organic growth will be a function of population density, maturity of infrastructure, availability of economic opportunities and budgetary constraints of the Federal Government. Phasing also implies decisions about asset lifecycles e.g. you may wish to select a cheaper, short build time transport infrastructure options (e.g. modern LPG bus routes using existing road infrastructure) in some regions first and plan upgrades to a higher volume mass transit or freight once a number of feasibility criteria are met. Alternatively, a strategy of infrastructure-led development may be adopted by prioritising corridors and growth centers by connecting these with a view to incentivizing development. Tasks The work in this component will undertake the following

1.   Validate the Ethiopian government’s spatial development strategy, using the preferred scenario from NCE (2015) as an input to discussions with policymakers. To inform future infrastructure development and linkages between the urban and industrial economies there is a need to understand the proposed future spatial make-up of Ethiopia envisaged. This will be confirmed before proceeding with analysis. These scenarios should incorporate climate change and green growth issues.

2.   Set out the key urban and industrial plans against the preferred spatial development strategy: This will include an assessment of the current plans related to infrastructure in Ethiopia based on urban, energy and industrial development and possibly others such as transport and trade. This should build on the strategies assessed in urban (NUDSP) and industry (GTP and Industrial development strategies) and assess these vis-à-vis the preferred scenario. This will allow an assessment of gaps, and the extent to which current trajectories and policy development is “green”.

3.   Assess the urban and industrial infrastructure and financing requirements related to the preferred future vision of spatial development. This may require an assessment of infrastructure requirements in a number of “phases” to take into account current data and future uncertainty. This should be based on the following three phase assessment all of which should take into account climate change and green growth considerations:

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•   Phase 1: Identifying areas that are developing strongly without extensive spatial planning guidance and incentives. Seek to manage and improve the quality of growth plus deliver key infrastructure connections between them.

•   Phase 2: Formulating plans for new growth areas that show clear potential but need to be stimulated through policy or infrastructure. This phase should include an assessment of both sectors predominated by women as well as the potential for increasing or reducing gender- and youth-related disparities of all proposed growth areas. Corridors and clusters may emerge through the association of proximate cities at this stage. Asset cycles and affordability of infrastructure is important for these.

•   Phase 3: Identifying growth clusters/ corridors that may support a specific future industry or need in future. The infrastructure needs of these areas may be unclear until a later date.

4.   Recommendations for policy makers related to enabling and implementing an integrated

National Infrastructure Plan to support structural transformation. Based on the analysis above, recommendations for key areas of policy reform will be provided to enable delivery of the plan. •   These interventions could be a combination of economic and non-economic policy instruments,

improving access to domestic and international finance for infrastructure, and additional areas such as the need for further analysis or institutional reforms. This should include the following:

•   An assessment of the policy reforms in other countries who have successfully linked urban and industrial policy (e.g. Korea, Brazil, UK). Therefore any recommendations should be guided by successful planning responses used in other countries, and again be ground in the Ethiopian context.

•   The preparation of the key elements of a National Planning Policy Framework which should build on the GTP and CRGE strategies to guide practical development at national and local levels for integrated infrastructure development. This should be guided by current institutional responses and suggest potential reforms to the current powers provided to urban centres.

•   An assessment of the capacity to act. This would provide an assessment of the national ‘capacity to act’ on the emerging plan in terms of (i) national infrastructure governance – including horizontal and vertical governance; (ii) national planning policy; and (iii) national and regional policy for industrialization.

This should also assess the extent to which the plans would support green growth, and prepare the outlines of a financial strategy for financing capital projects. OUTPUT  C:  A  GREEN  GROWTH  MACROECONOMIC  SYNTHESIS  PAPER   Through the work in outputs A and B, and also through its previous work in Ethiopia, the NCE partnerships is looking to address a range of key – interrelated – questions that are important for Ethiopian policymakers:

•   What are the drivers of current economic growth and development and are they driving long-term structural transformation?

•   What future growth path will deliver sustained, equitable economic growth, structural transformation and poverty reduction? What are the key factors acting as a break on growth and how can they be overcome?

•   What laws and policies need to be in place to support the equitable engagement of women and youth in the labor force?

•   How will the impacts of current climate variability and future climate change impact future economic and social development?

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•   What is the role of national economic and climate change policies - both in encouraging low emissions growth and reducing climate risk - in delivering the growth and transformation required by Ethiopia, and where are the key trade-offs?

•   What growth principles would optimise economic and climate related outcomes? The work to date has sought to answer some of the questions – and to bring together and synthesize this analysis a short paper will produced to ensure that the combined analysis leads to clear policy recommendations for Ethiopia to promote structural transformation and green growth. Tasks The tasks for the work will cover the following issues in a short 15-30 page paper:

1.   Set out Ethiopia’s high-level development vision related to both the GTP and CRGE: An assessment of the existing broad economic strategy and related visions of development including the GTP and other sectoral strategies underpinning this. This will set out briefly the broad strategy for development (e.g. export led growth, shift to manufacturing, role of extractives and mining, etc): •   Economic. A review of the distribution of and drivers of proposed economic growth and

key elements of the strategy. •   Social. A review of current social issues and ambitions including poverty incidence,

gender and youth disparities, water and energy access, and health outcomes. •   Environmental: Covering the current plans and ambitions on climate change and wider

environmental sustainability as set out in the CRGE and other strategies of the Ministry of Environment and Forest.

2.   An overview of progress to date in delivering the GTP and CRGE. This will draw on analysis

of existing overview of the performance of the Ethiopian economy (e.g. through the World Bank annual country assessments and the annual GTP updates). It will also set out the progress made in terms of strategy and implementation development of the CRGE through institutional reform, donor support, financial resources devoted to green growth but also on the ground delivery.

3.   Highlight the barriers and opportunities from green growth in Ethiopia: Drawing on existing literature, a review in more detail of the national growth and development drivers, future growth projections, and key constraints to growth with a focus on structural transformation and poverty reduction. The review would briefly cover both a dynamic view of future economic development, the key barriers and how climate change are incorporated. This will draw heavily on the CRGE strategies and the GTP, and the work of the NCE partnership from previous analysis. §   The long view - future direction of economic development and key opportunities for

structural transformation. A review of the aspirations and key sectoral opportunities for medium term growth. This analysis should focus on:

−   A critical assessment extent of which historic sources of growth and related changes in the economy will be sustained in the future (i.e. is economic development sustainable?)

−   A sectoral description of Agriculture, Exports and Services, Industry, and Extractives covering the structure of the sectors, a breakdown of the labour force, key markets and opportunities for future development.

−   A review of cross-cutting issues such as finance, trade and infrastructure, human capital investment, and political governance.

−   A view of the regional, gender, and other group distinctions as appropriate §   Key challenges for economic development. The key strategic challenges for the Ethiopian

economy and key constraints to realizing development vision. This will include an assessment of 4-8 key barriers that are crucial to long-term economic development. These factors could be cross-cutting or along sector lines:

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−   A number of cross cutting factors such as macroeconomic management, infrastructure development, public utility management, investment climate, access to finance, constraints to export led growth, competiveness, skills, etc

−   A number of sectorial factors in agriculture (e.g. availability of secure land), manufacturing (market integration), services, and extractives.

−   A number of cross cutting factors such as macroeconomic management, infrastructure development, public utility management, investment climate, access to finance, constraints to export led growth, competiveness, skills, etc

−   A number of sectorial factors in agriculture (e.g. availability of secure land), manufacturing (market integration), services, and extractives.

•   The role of climate change in key development pathways. Ethiopia are vulnerable to climate impacts and have also committed to reducing emissions and therefore need to build reduced climate risk into their development planning. This should summarize the existing work on climate impacts in Ethiopia and the emissions analysis in the Green Economy strategy and link to the wider economic issues.9

4.   Recommendations for policy makers. Based on the NCE partnerships analysis in Ethiopia, recommendations for key areas of policy reform will be provided to ensure a collated and synthesised view.

The purpose of the paper as well as providing a short integrated narrative for Ethiopian policymakers thinking about green growth, it will also act as a tool to share the lessons of the Ethiopian experience to other countries.

                                                                                                                         9  See  GoE  (2011)  and  related  climate  resilience  strategies  in  Agriculture  and  water  and  energy:  GoE  (2015)      

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3.  PROJECT PLAN TIMELINE AND OUTPUTS The key outputs and dates will be: 1.   Inception engagement to finalize scope of work in this TOR (this will not be covered by

external consultants). Initial engagement visit to discuss the work and finalise key questions (December 2015), and including a small number of targeted meetings to engage on the content of the work and develop data. This will result in a finalized TOR and be jointly led by NCE staff and GGGI and EDRI staff in Ethiopia.

2.   Inception phase. Interim reports to set out detailed methodology for outputs A and B. An interim covering key aspects of the methodology and analytical approaches and emerging findings (January 2015). This includes detailed discussions with EDRI, GGGI, NCE and wider counterparts for feedback. This will define the exact scope of the deliverables through dialogue with the government and other key stakeholders. This dialogue will be facilitated by the NCE partnership

3.   Initial report and validation workshops for outputs A and B. A workshop to validate

findings and discuss outputs as a final stage to input into the work. These workshops would be led by GGGI, EDRI and NCE and involve engagement with experts (end of March 2016).

4.   Draft final reports for outputs A and B, and output C summary paper. Draft final papers for

final sign off by NCE, GGGI, EDRI and other project partners and then subsequently to be presented to the GoE. This will include a short discussion paper highlighting next steps for policy reform. (End April 2016).

5.   External launch of the report. These reports will be presented to the Government of Ethiopia

at a public event and/or through bilateral discussions with senior policymakers, and potentially involving members of the Global Commission and/or Delivery Steering Group. The date of the final presentations will be determined at the conclusion of the analysis. (between April and July 2016)

TEAM AND ROLES A consortium of partners will lead the work as part of a ‘hybrid team’ mode of delivery. The parties involved in the work will be the NCE core secretariat, GGGI and EDRI team members, and consultants to carry out the detailed analytical work. The key contacts for each partner are Russell Bishop (NCE, Senior Economist), Nick Godfrey (Head of Policy and Urban Development), Robert Mukiza (GGGI Country Representative, Ethiopia), and Firew Woldeyes (EDRI, Associate Researcher)

The work will be overseen by the NCE partnership in Ethiopia, and in the context of the GGGI and EDRI wider work programs with the NCE secretariat in a supporting role. Based on the historic experience and successful partnerships the roles and responsibilities of GGGI, EDRI and NCE are described below.

The EDRI and GGGI team will: −   Lead the relationships with the GoE and be responsible for the ownership of the work outputs

in the government

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−   Lead the engagements with stakeholders in Ethiopia related to the Climate Resilient Green Economy work and related insistuions

−   Provide strategic oversight of the analysis and act as expert reviewer of the outputs of the work

−   Ensure the outputs are well aligned to its overall work program in Ethiopia and will inform effective green growth planning and implementation in Ethiopia given GGGI’s wider knowledge of this work

−   Identify and link the analytical team to relevant Ethiopian technical experts and civil servants.

The NCE team will: −   Lead the technical outputs of the work, and ensure the successful delivery of the analysis

through NCE partners and external consultants. −   Provide staff time to undertake the research in collaboration with other hired consultants. −   Undertake any procurement and administrative duties in undertaking the work outputs

described −   Support coordination and foster teamwork across the NCE, EDRI and GGGI to best deliver

the required results. −   Provide technical input to the work and guide the analysis, including making available

supporting NCE background documents. −   Link the NCE’s wider work on economic transformation in low-income countries to this work

and use members of the Global Commission on the Economy and Climate to support the work.

RESOURCES REQUIRED

The work has a provisional budget of $400,000 USD. For exceptional proposals, an additional $25,000 could be considered. The indicative split across components is as follows:

•   Component A: $175,000 •   Component B: $200,000 •   Component C: $25,000

FUNDING The funding for this work will be from the NCE core budget to fund EDRI staff time and the work of external consultants, with in kind contributions from GGGI Ethiopia.

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4.  STAKEHOLDER ENGAGEMENT AND OUTREACH There are three types of stakeholder engagement activities; (i) to engage with key institutions and experts within Ethiopia to inform the analysis; (ii) to engage with key institutions and experts outside Ethiopia to inform the analysis; (iii) to launch the work formally and disseminate the findings both nationally and internationally. NCE PARTNERSHIP AND STRATEGIC ADVICE IN ETHIOPIA The work will be delivered from within the NCE partnership of which EDRI and GGGI are founding research institutes. The NCE-EDRI-GGGI partnership has worked together before in Ethiopia in identifying urbanisation pathways for sustainable development. Today a little over half of the world population lives in cities and it is expected that the number of people living in urban areas is going to increase rapidly. Most of the increase is expected to take place in developing countries. The expected scale of urbanization presents an opportunity that can play a vital role not only in improving growth but also for the environment and quality of life in general. Ethiopia, relative to more developed countries, is currently at a low level of urbanisation, as one in five people live in urban areas. As the Ethiopian economy grows, so will the rate of urbanization, which presents a vast challenge to policymakers. In light of this, the Ethiopian Development Research Institute and the Global Green Growth Institute in collaboration with the Global Commission on Economy and Climate has recently carried out a study to strategically align economic planning, urban development, and environmental issues in Ethiopia. GGGI have committed long term presence in Ethiopia to ensure longevity to support policy implementation. GGGI has been working in Ethiopia since 2010, supporting the government on the development of its green growth strategy. This culminated in the CRGE Strategy being launched at the Durban Conference of the Parties in December 2011. In 2012, GGGI helped to develop a climate resilient strategy for the agriculture sector. In 2013, GGGI set up a new country office and designed the Sectoral Reduction Mechanism (SRM). GGGI are now working on planning and implementation for the CRGE. GGGI work closely with a range of organizations in Ethiopia. The primary partners are the Ethiopian Government. Within the government, we work with the Ministry of Environment and Forest (MEF), the Ministry of Finance and Economic Development (MOFED), the National Planning Commission (NPC), the Prime Ministers Office (PMO) and the Central Statistics Agency (CSA). We also work with a number of line ministries including the Ministry of Agriculture (MOA), and the Ministry of Energy & Water (MOEW). GGGI also work closely with a number of multilateral and bilateral partners including UNDP, the World Bank, DFID, Norway and Denmark. It is also expected that the Ministry of Women, Children and Youth Affairs be engaged.  Ethiopian Development Research Institute (EDRI). As one of the commissioning partners in the NCE, the Ethiopian Development Research Institute (EDRI) was established in 1999 by the Ethiopian government with the mission to:

•   Conduct rigorous research and policy analysis that provide knowledge-based inputs to policymaking and policy implementation, and

•   Disseminate its research outputs and findings to the policy and research community, academia, the development community and other stakeholders.

In seeking to achieve its objectives and goals, EDRI is guided by the principles that research engagement is needs-based and responsive, and undertaken with a scientific and independent

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mindset. Its research is carried out in partnership with diverse national and international partners and stakeholders to ensure quality and relevance, and to strengthen national capacity. EDRI and its partners strive to work in close collaboration with stakeholders at national and regional levels in identifying research areas and disseminating research results. It has a long track record of policy analysis and influence in Ethiopia. It has a number of studies looking at macroeconomics, climate change, industrial development. For example in 2015 EDRI is been working on lessons by looking at other countries to study the administration and organization of Industrial Parks which will act as an input into the work. ENGAGEMENT WITH DOMESTIC PARTNERS AND EXPERTS The findings of the report will be of interest to practioners in Ethiopia, both those who are involved in implementation (in addition to planning). This presents an overview of the key stakeholders in Ethiopia – and the NCE outputs will be of interest to them – thus ensuring the findings can have impact. Ministry of Finance and Economic Development (MoFED). MoFED was established to help coordinate and deliver economic development in a sustainable and equitable way. MOFED is responsible for preparing the Federal Government budget and making disbursements against that budget. Furthermore, MoFED is the author of Ethiopia’s Growth and Transformation Plan (GTP), which has the key objectives of achieving broad-based, accelerated and sustained economic growth so as to eradicate poverty in Ethiopia. Ministry of Industry (MoI) promotes and expands the development of industry by creating conducive enabling environment for the development of investment and technological capacity of the industry sector by rendering efficient support and services. The Ethiopian Industrial Parks Development Corporation (IPDC) was established in 2014, as one of the public enterprise. IPDC is becoming an engine of rapid industrialization that nurture manufacturing industries, to accelerate economic transformation, promote and attract both domestic and foreign investors. It avails serviced industrial land, pre-built sheds equipped with all-encompassing utilities and infrastructural facilities that fit international standards, with no compromise on workers’ security and environmental safety. Indeed, it is important to note, that IPDC, in collaboration Ethiopian Investment commission and Ethiopian Revenue and Custom Authority and more institutions provides one-stop-shop service for investors investing in designated industrial parks. Ministry of Environment and Forest (MEF). Newly established in August 2013, MEF has the mandate for coordination of the CRGE at the federal level, to manage and protect forests and the natural environment. It also provides information on the environmental status, natural resources, and environmental regulations of Ethiopia. Its mission is to enhance good environmental governance. MEF plays a core role in developing the CRGE plan and therefore will be interested in the outputs of the NCE – the state minister of MEF has been informed of the work that is to be undertaken. Ministry of Women, Children and Youth Affairs (MWCYA) was established to ensure that women and youth participate in and benefit equitably from economic, social and political spheres, as well as to protect children’s rights and security. The Ministry is responsible for ensuring the implementation of international conventions and national laws pertinent to women, childen and youth, and for conducting research and studies to inform policy and guidelines. The Ministry also collaborates with organizations working on women and youth issues and supports capacity building activities to ensure that women are able exercise their rights .

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The CRGE Ministerial Steering Committee. EDRI currently leads the CRGE’s Ministerial Steering Committee through its Executive Director H. E. Newai Gabre-ab who is also the Chief Economic Adviser to the Ethiopian Prime Minister. Civil society. Civil society organizations have been involved in the CRGE initiative since its inception. The Ethiopian Civil Society Network on Climate Change (ECSNCC) acts as a forum for convening views and inputs into the CRGE process.

Private sector. The Ethiopian Government plans to involve the private sector in the CRGE initiative in two ways. First, the government expects the private sector to have an important role in delivering some of the investment activities identified by the SRM. Second, the government is also planning to leverage private sector investment to finance the proposed activities. GGGI will continue to engage with the CRGE Facility and the private sector in Ethiopia to help them play this role. The focus for this will be working with the new Climate Innovation Centre (CIC) which is being funded by the UK Government and will incubate businesses working on green growth.  Technical partners. Some international organizations offer technical advice rather than funding. These will be consulted on the work. Four examples are below (but the list of organizations is wide). §   Africa Governance Initiative is working with the Ethiopian Prime Ministers Office on strategy

development for industry in Ethiopia. §   United Nations Industrial Development Organization and UNHABITAT have been assisting the

GoE with industrial park development and the role of urban development and are working on a number of practical implementation issues in Ethiopia and assisting in the development of a number of industrial parks.

§   Climate Development Knowledge Network (CDKN) is a global program, funded by the UK and

Netherlands, to support climate policy making in developing countries. They have recently established a team in Ethiopia, which offers discrete technical advice to the CRGE. They are also undertaking analysis around “green industrialization” focused on a small number of sectors.

§   United Nations Development Program (UNDP) have been a key partner in the CRGE initiative since its inception and will be interested in this from both a climate and development perspective.

§   Africa Climate Policy Centre is an Africa-wide policy think-tank on climate change affiliated with

the UN Economic Commission for Africa. •   World Bank. The World Bank’s portfolio, in sectors relevant to CRGE such as energy, water and

agriculture, exceeds $1 billion. They also offer large amounts of technical advice to the Ethiopian government. The NCE should plan to engage the WB advisors across all areas of focus.

•   Environment for Development. A research institute that undertakes policy related to environment and its role in development. They also host the Climate Change Research Centre in EDRI (formally the Environmental Economics Policy Forum for Ethiopia) who will be an important contributor to the analysis from the EDRI perspective

•   Addis Ababa University. AAU have academic expertise in economics, climate change,

environmental protection and public policy. •   Development partners. There are several partners delivering development in Ethiopia and are

involved in the CRGE initiative. These include GIZ, SNV, etc.

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5.  REQUEST FOR PROPOSALS: GUIDELINES

Please indicate your initial expression of interest by January 7th 2016 to russell.bishop@newclimateeconomy.net and w.firew@edri-eth.org

If you wish to submit a formal proposal the deadline for submission is Thursday 14th January 2016 (13:00 CET); see below further information on completing the proposal. Clarifications on technical and administrative questions should be sent by 7th January 2015 – all questions received with answers will be shared with all bidders.

Proposal guidelines and requirements

This Request for Proposal document is dated 18th December 2015. The proposal must contain the signature of a duly authorised officer or agent of the company submitting the proposal.

The price you quote should be inclusive. If your price excludes certain fees or charges, please provide a detailed list of excluded fees with an explanation of the nature of those fees.

Interested bidders should look to form a consortium to deliver this work given the close synergies between components. Enquiries by interested bidders related to expertise aligned more closely with the the individual components should be directed to Russell Bishop.

If the execution of work to be performed by your organisation requires the hiring of sub-contractors you must clearly state this in your proposal. Sub-contractors must be identified and the work they will perform must be defined.

The New Climate Economy project has allocated a provisional budget of $400,000 for this piece of work (this may be subject to change and the final budget will be confirmed with interested bidders).

This work will feature input by a variety of stakeholders and will be subject to NCE’s high standards for peer review and publication. All deliverables will be NCE-branded, with any exceptions considered on a case-by-case basis.

All publications produced for this project will include on the inside cover an acknowledgement of funding from UK Aid from the UK government.

Please use the following as a guideline to format your proposal:

Length and Font Size: Please use fonts no smaller than 10 point. Maximum proposal length including title page, cover letter, proposal, qualifications and budget should not exceed 20 pages.

Cover Letter: Please ensure it is signed by the person or persons authorized to sign on behalf of the organization (1-2 pages).

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Title Page: Please include your organization’s name, address, web site address, telephone number, fax number, e-mail address and primary contact person.

Proposal: Discuss your proposed methodology, including the staffing model, workplan, timeline and deliverables (4-6 pages).

Qualifications: Provide the information requested in the qualifications section (6-10 pages).

Budget and Fees: List budgets as requested.

Qualifications

The proposal should include: a description of your organisations experience that is relevant to this project; a description your firm’s organisational capacity to deliver this work; information on the team that will be assigned to this project, including each person’s role and what proportion of their time will be dedicated to this (please include a brief background summary for each key staff member assigned to the project); your proposed plan for delivering on the requirements, including a staffing model, workplan and timeline; your terms and conditions of engagement.

Staff resources and integration

This piece of work is an important element of and will need to integrate with the Africa workstream of the New Climate Economy. Please also briefly describe how you intend to communicate and coordinate with the team at NCE.

To support this piece of work, NCE will provide approximately 2 days a week of staff time to assist with the project. NCE expects the applying institutions to dedicate full-time analyst (s) and a Project Director to oversee the work with relevant expertise.

Evaluation Criteria

The following criteria will form the basis upon which New Climate Economy will evaluate proposals with an equal weighting for each criteria.

Major Criteria Details & Sub-Criteria

Country knowledge and presence of Ethiopia and wider African region

Experience and organizational presence in Ethiopia, as well as the wider region.

Green growth and and industrial development

Demonstrated practical, substantive work on the macroeconomics of green growth, structural transformation, and industrial development, including work advising developing and emerging market country governments, as well as understanding the economic and social context of adaptation and mitigation activities.

Urbanisation Demonstrated practical, substantive work on the economics and financing of sustainable urbanization and urban infrastructure at the national and city level

Work plan and understanding of

Quality of the proposed work plan corresponding to the terms of reference, including the organization and selection of tasks, cooperation with EDRI, GGGI and country government staff, milestone

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project requirements planning, and how to maximize synergies between components etc.

Qualifications of team Qualifications and experience of professional staff and consultants, including general qualifications, project-related experience and overseas/country experience.

Policy reform and capacity building

Experience building the capacity for policy reform in developing countries, as well as working with major NGOs or international organizations

Value for money Any fees quoted for support represents value for money.

Contract Terms

The NCE project will negotiate contract terms upon selection. All contracts are subject to review by the legal counsel of the New Climate Economy’s partner institutes. A project will be awarded upon signing of an agreement or contract, which outlines terms, scope, budget and other necessary items. The work will be subject to

Closing date

The closing date for submission of proposals 14th January 2016 (13:00 CET). Proposals will be evaluated immediately thereafter. Contracting and work is expected to commence w/c 18th January 2016.

Any queries should be directed to Russell Bishop, Senior Economist at the NCE russell.bishop@newclimateeconomy.net and Firew Woldeyes, Research Associate at EDRI w.firew@edri-eth.org

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ANNEX 1: ETHIOPIA’S GROWTH AND CLIMATE CONTEXT

BACKGROUND TO ETHIOPIA’S DEVELOPMENT AMBITIONS Ethiopia is one of the fastest growing countries in the world. Its recent track record shows that in can achieve double-digit growth (between 2005 - 2010 real GDP grew by 11%), and the government aims to maintain this strong growth rate over time. This growth rate, which was accompanied with large increases in foreign direct investment, was driven by investment in infrastructure, increases in agricultural land and crop yield, and increased tourism. However Ethiopia remains one of the poorest countries in the world. Its current GDP per capita is at approximately $400 USD which classifies it as a low-income country, which puts it in the bottom 10% of all countries in terms of income per head. The countries Growth and Transformation Plan (GTP) sets out its aim to achieve lower middle-income status by 2025 ($1000 USD per capita), which will serve to counter poverty reduction. The increase in GDP is expected to come from an increase in major food crops, crop yield, livestock exports, light manufacturing, cement manufacturing and in medical products. Agriculture is a core part of current GDP but also from a livelihood perspective. Agriculture dominates economic life in Ethiopia, accounting for about 80% of employment (with women constituting 45% of those employed in the agriculture sector), 75% of exports, and 44% of GDP. Coffee is the principal export crop. Other important export commodities are oilseeds, chat, live animals, flower and pulses10. Coffee and oilseed makes up 41% of the total export in 2011/12 (26% for coffee and 15% oilseed) showing the reliance on agricultural commodity for meeting the export needs of the country. This is a main feature of many low income countries. Ethiopia’s development agenda is through a process of Agricultural Development Led Industrialization. This is the country’s vision for structural transformation of its economy that foresees development starting with Agricultural development and then shifting to Industry (with Industry as catch-all for non-agricultural sectors (Services, Manufacturing and Industrial). The country is focused on economic transformation and the eradication of poverty in line with the Millennium Development Goals (MDG’s). This transition will require transformations in the economic make-up of the country, infrastructure investment, building solid and resilient export income, amongst others. Ethiopia’s development is in the context of opportunities and challenges. Ethiopia has substantial opportunities for economic growth and poverty eradication linked to it geographical location, natural resource potential, access to markets (e.g. the middle east) and strong development vision. In its development transition Ethiopia must deal with vulnerability to climate (which impacts agricultural output and poverty), food security, the impact of increasing prices for food and fuel imports, providing employment in the context of rapid population growth (a population of 90m will rise to over 120m in the next 30 years). Ethiopia’s development strategy includes unleashing the potentials of the country's women. Despite moderate progress, unemployment continues to be a challenge in Ethiopia, particularly in urban areas, where unemployment is almost 17 percent and more than twice as high for urban

                                                                                                                         10  MoFED,  2013.  Annual  Progress  Report  for  Fiscal  Year  2011/12  Growth  and  Transformation  Plan.  Ministry  of  Finance  and  Economic  Development.    

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women compared to urban men.11 The second iteration of the countries Growth and Transformation Plan (GTP) aims to double the number of jobs for women and youth in both the agricultural and industrial sectors. The country recognizes the link between environmental concerns and economic development. Impacts such as floods, droughts and soil erosion follow from climate variability of rainfall. These impacts are felt by the most vulnerable in society and will hinder Ethiopia meeting middle-income status, thus there is a need to create an economy that is ‘climate resilient’. Ethiopia has also recognized the need to contribute to grow in a low-carbon way and decouple increases in economic growth from emissions and natural resource depletion to grow sustainably. This will reduce the financial burden from importing fossil fuels that currently accounts of 4% of GDP itself acting as a drag on growth. To this end Ethiopia aspire to create a ‘green economy’ where it aims to achieve its economic growth with no increase in net emissions from today’s level, decoupling its economic development from GHG emissions. The alignment of environmental, social and economic goals led to the launch of the Climate Resilient Green Economy (CRGE) initiative. Through a process led by the Ministry of Environment and Forest (MEF) – formerly the Environmental Protection Authority – The Prime Ministers Office, and The Ethiopian Development Research Institute, the CRGE ‘Vision’ was launched in 2011. This has been followed by strategic analysis on how to realize low-carbon development (the Green Economy Strategy), and how to build climate resilient growth. In addition the CRGE’s implementation vehicle, the Sector Reduction Mechanism (SRM) seeks to match strategic and transformative action to pooled finance through the CRGE Facility, housed and managed in the Ministry of Finance and Economic Development (MOFED). ETHIOPIA’S VISION FOR CLEAN AND RESILLIENT DEVELOPMENT CRGE Strategies. The first phase of the CRGE initiative has been to draft two national strategies. The Green Economy (GE) Strategy was developed, with support from the Global Green Growth Institute (GGGI). The GE Strategy quantifies the opportunity presented to Ethiopia by green growth, identifying over sixty priorities for investment that will enable Ethiopia to both grow its economy while minimizing emissions. A Climate Resilience (CR) Strategy has been published in August 2015 for the critical Agriculture and Water and Energy sectors with inputs from GGGI. The CR Strategies identify the risks and costs of climate change and prioritize investments at the sector level to reduce vulnerability. The CRGE will move from strategy to implementation in the coming two years. The integration of the CRGE into core development planning (the GTP) is important so the CRGE is not a parallel process to the main development path. This is important for the following reasons:

−   Activities to build climate resilient and low-carbon growth overlap substantially with existing development activities: nearly 70% of Ethiopia’s economy is CRGE relevant (Green Economy Strategy, 2011).

−   Without CRGE plans being ‘mainstreamed’ into the countries core development plans it risks

non-implementation, and the CRGE is labeled a subsidiary ‘environmental’ issue rather than a vehicle for smarter and more accelerated development.

The CRGE Facility is a core part of the delivery of the CRGE. The implementation of the CRGE Strategies will require investment, from domestic, international public and private sources. To help attract and manage these resources effectively, the Ethiopian Government has established the

                                                                                                                         11  http://www.prb.org/pdf15/demographicdividend-­‐ethiopia-­‐early-­‐insights.pdf  

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CRGE Facility. The Facility allows Ethiopia to aggregate climate resources from a range of sources, and deploy appropriate instruments in a strategic and effective way. Funds and support will be pooled within the Facility and allocated to prioritised investment, aiming to leverage the impact of limited public funds on broader development investments. The CRGE Facility’s mechanisms is to be aligned fully with Ethiopia’s national budgeting process within Government. Sector Reduction Mechanism. The Sector Reduction Mechanism (SRM) is the formal process of strategic planning, prioritization that will bridge the high level CRGE Strategies and the deployable finance in the Facility. It will establish a process of strategic planning for the delivery of the CRGE using existing planning and public policy processes. Secondly, the SRM systematically builds the Ethiopian Government’s capacity to generate and implement climate compatible development. STRUCTUAL TRANSFORMATION AS MEANS OF DEVELOPMENT IN ETHIOPIA The country has a strong vision of development. As discussed above Ethiopia has a strong ambition to achieve simultaneous economic growth through Agricultural Development Led Industrialisation. As set out in the Growth and Transformation Plan, the Government of Ethiopia’s development goal is to eradicate poverty through broad based, equitable, and sustainable economic growth. Over the past decade, Ethiopia have made substantial progress toward this goal through the Sustainable Development and Poverty Reduction Program (SDPRP), the Plan for Accelerated and Sustained Development to End Poverty (PASDEP), and the first phase of the Growth and Transformation Plan (GTP I). The government's growth plan aims to maintain double-digit growth rates to reach middle-income status by 2025 ($1,045 USD per capita). This is an ambitious target, in the context of a growing population (2.3% over the past decade). The county aims to deliver poverty reduction through economic growth and pursuing structural transformation. The core pillars of the GTP are “growth”, that is economic growth, and “transformation”, that is economic, labour market and export transformation to achieve its overall ambition. This is not economic growth at any cost, but a development model that looks to benefit the poor as the economy grows; and to reinvest growth to drive poverty reduction.

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Ethiopia’s economy has grown rapidly and consistently over the past decade. Ethiopia’s economic output (in GDP), steadily increased between 2003/04 and 2012/13, averaging 11% annual growth (real GDP). At this rate, the economy is doubling every seven years in real terms. This growth has been accompanied by significant reductions in poverty. The good progress needs to continue with a focus on structural transformation. To continue to remain on track for reaching middle-income, the next phase of the GTP (GTP II) aims to maintain this historic economic growth rate, which will require significant transformation of the economy in several areas:

•   Composition. A change in the share that each sector contributes to the economy is needed because:

o   Agriculture has been the main driver of the economy, growing consistently over the last decade. However, agricultural growth rates are forecast to slow down. Agriculture currently makes up around 43% of GDP (MOFED, 2014), a share that has been steadily reducing.

o   Maintaining overall growth rates will require a continued acceleration of industry, particularly manufacturing, to increase the non-agricultural share of GDP by around 1% per year (current shares of Services and Industry are 45% and 12% respectively).

o   The sectors of services and industry are more “productive” in that there is a higher return for a unit of labour in these sectors relative to Agriculture.

•   Labour force. The transformation in the economy in turn requires a shift in labour away from Agriculture:

o   Labour productivity needs to increase, which indicates a shift away from agricultural employment to higher productivity non-agricultural employment, particularly in light manufacturing.

o   Currently 78% of the workforce is employed in agriculture (CSA, 2014) and in rural areas. The shift in employment towards other sectors will result in rural to urban migration as employment in new sectors is in urban centres.

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•   Export base. Maintaining growth rates requires an increase in exports. o   Current export income is around 14% of GDP (MOFED, 2014) but relies on a small

number of export transactions and has significant growth potential. o   This can be achieved through continued diversification of the export base to more

crops and expansion to non-crop exports. Increased exports also improve macro-economic stability by strengthening the balance of payments position.

o   Import substitution can also play a role in stimulating domestic manufacturing, creating jobs and reducing Ethiopia’s import bill.

Alongside this economic transformation, continued improvements in health and education are critical to social transformation and eradicating poverty.

There are a number of key areas that are strategically important to this structural transformation. There are some key strategic areas the government have already highlighted as important for achievement of their overall economics aims. We define these as the GTP II national priorities:

1.   Improve agricultural productivity to maintain agricultural growth: despite significant improvements in recent years, agricultural productivity remains low in Ethiopia and must improve in order to maintain agricultural growth rates.

2.   Stimulate industry as a growth driver: historically, agriculture has been the main driver of growth in the economy, stimulating increased demand for services. The next phase of growth requires industry to become a primary driver of growth alongside sustained agricultural performance. Four aspects: agro-processing; light manufacturing; special economic zones; trade logistics (domestic and export)

3.   Enhance exports: Ethiopia has preferential trade access to major markets (namely the EU and US), which we must make the most of by enhancing quality and better targeting demand in these markets. Strengthening exports also requires improvements in trade logistics.

4.   Support non-agricultural employment and developing human capital: transitioning agricultural workers into non-agricultural employment will require support in skill development and training as well as transport to link employees to workplaces.

5.   Infrastructure for growth: Critical enabling infrastructure such as energy, water, transport and communications, need to be developing in an integrated manner. The absence of these critical functions acts as a drag on growth.

6.   Maintain fiscal stability: Sustained growth can only be achieved in a stable macro-economic environment. In particular, this includes reducing foreign exchange expenditure and increasing foreign income (improved balance of payments).

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7.   Stimulate private investment: Growth to date has been driven by public investment, but continued growth will increasingly involve private investment. This is through inward Foreign Direct Investment (FDI) and domestic investment. Improvements in trade logistics will increase the attractiveness of Ethiopia for investment.

8.   Make the most of urbanization: As with most countries, Ethiopia is experience rapid urban growth. This creates both opportunity and risk, which needs to be linked to overall economic objectives.

The CRGE aims to support the achievement of the GTP objectives by strengthening climate resilience and through a more sustainable low-carbon growth pathway. There are two major elements of the CRGE: Climate resilient growth (CR): Ethiopia has a highly variable climate and is one of the most vulnerable countries to the impacts of climate change. Unless Ethiopia create an economy that is ‘climate resilient’, these impacts will stand in the way of Ethiopia becoming a middle-income country by 2025. Estimates shows that as a worst-case scenario, in 25 years, Ethiopia could have only half the potential GDP it could have attained12. We therefore define climate resilience as the continued ability to meet our development objectives (both economic and social) in the face of climate variability and climate change.

Green Economy (GE): Ethiopia has a relatively low level of greenhouse gas (GHG) emissions, but these are likely to grow rapidly if the country follows a conventional development path. The Ethiopian government has committed to growth that creates a carbon neutral ‘green economy’. This is for four distinct reasons. The first is to avoid over-exploitation of natural resources to ensure their long-run economic contribution and avoid them acting as a drag on growth. The second is to increase macro-economic stability by reducing the foreign exchange cost from importing fossil fuels (which already amounts to 4% of GDP). The third is to avoid future costs of GHG emissions that might be incurred as other countries respond to climate change. The fourth is to contribute towards the global mitigation of greenhouse gases (GHG) to avoid dangerous climate change. The Ethiopian government sees that growth and transformation and tackling climate change are mutually supportive. Tackling climate change is not a cost, but a fundamental part of maintaining strong economic performance. The Green Economy (GE) Strategy showed that GHG emissions in Ethiopia would rise from 150 MtCO2e per year in 2010 to 400 MtCO2e in 2030 under a conventional development path (‘business as usual’). The GE Strategy identified and prioritised more than 60 initiatives, which together enable

                                                                                                                         12  FDRE  (2015)  Ethiopian  Climate  Resilient  Strategy  for  Agriculture  and  Forest  

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us to achieve our development goals while limiting GHG emissions in 2030 to today’s levels. These options can be seen as ‘no and low regrets’ offering positive return on investments and therefore directly enhancing economic growth. The GE Strategy is built on four pillars, these are:

•   Agriculture. Improving crop and livestock production practices for higher food security and farmer income while reducing emissions

•   Forestry. Protecting and re-establishing forests for their economic and ecosystem services, including as carbon stocks.

•   Renewable energy. Expanding electricity generation from renewable sources of energy for domestic and regional markets.

•   New and efficient technologies. Leapfrogging to modern and energy-efficient technologies in transport, industry, and buildings.

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