Entrepreneurship 6 classifications, these are; High income, Low

Entrepreneurship
in developing or emerging countries is a fairly untouched topic that has little
research in comparisons to many other topics. What this essay will do is to
evaluate the institutional environment of a less developed country for
entrepreneurship and deliver the findings within a report. The country that
will be discussed is Ethiopia.

“Entrepreneurship is the process of
assembling necessary factors of production consisting of human, physical, and
information resources and doing so in an efficient manner” Lazear, P, E. (2005). The name
“entrepreneur” is subsequent from the French verb enterprendre that means “to
undertake” (Desai, 1999).

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Federal
Democratic Republic of Ethiopia is a developing country in north-east Africa.
Ethiopia’s neighbouring countries are Kenya, Republic of Sudan and Somalia
which make up the horn of Africa. Ethiopia is situated inland and it is 1.14
million square kilometres of land (Asfaw, 2018), because of this, goods usually
pass through Djibouti which is a smaller country that is situated next to the
Red sea and the Indian Ocean (Pohl, K. 2009). Within Ethiopia there are nearly
107,000,000 people who live there (Worldometers, 2018) making them the second
most populated country in Africa.

Although
Ethiopia has fastest growing economy in its area, they are also one of the
poorest countries per capita with having average of just $660 making them fall
into the low income level (Worldbank, 2018). The World Bank has 6
classifications, these are; High income, Low & middle income, low income,
lower middle income, middle income and upper middle income. The World Bank
class low income countries who have a GNI per capita of $1,025 or less. It is
clear to see that Ethiopia have a very low GNI in comparison to if they were to
try and achieve the next level of ‘lower middle-income’ who’s income is between
$1,026 and $4,035. Such countries who are classed as having a lower
middle-income is; Tunisia, Zambia and Cambodia. However, the Ethiopian government
said that they aim to be in this income status with Zambia by 2025 (World Bank,
2018).

It
is believed that one of the reasoning’s for Ethiopia having such a low GNI is
down to the fact of a week business environment within Ethiopia caused by low
productive firms who account for a large proportion of employment (Brixiova, Z.
2013) along with years of political and economic problems (IKED. 2006, p.4). Many
of Ethiopia’s working population work on their own small farms or on
plantations. The government owns the plantations with their biggest crop being
the coffee bean. Because farming is such a large contribution to the country’s
GDP, everyone relies heavily on crops being produced not just to export but to
have for the citizens of Ethiopia. Poor farming practices and lack of rain has
led to famine in Ethiopia causing major disruption across the country leading
to 13 million people to dying in 2003 because there just was not enough food
being produced let alone being produced to be exported (Campbell, A. 2006
p.12). The growing of the coffee bean is Ethiopia’s most important industry and
source of income. About 15 million Ethiopians grow this coffee bean to make a
living but many factors can disrupt this process including; having too many
animals, government not putting in drivable roads so things can be transported
through the country to reach to those who need, competition from other
countries, climate change and drought periods. Ethiopia could lose a massive
59% of its current coffee growing areas because of climate change (Columbus, C.
2017) obviously leaving a massive problem for Ethiopia.

To
overcome these problems arising The World Bank (2010) identified that it was
beneficial for developing countries to have networks and support frames within
their countries to help with innovation. Innovation is usually defined as the
predominant process of translating an idea or notion into a good or service
that creates value or for which customers are willing to pay (Aubert, 2005,
p.6). Such support frames were to have the right procedures, correct policies
and to market innovation so that it would appeal to Ethiopians. Ethiopia has
received many different aid forms through the years including; Emergency aid,
debt relief and trade justice. The biggest emergency aid they received was
during the 2003 famine crisis but some Ethiopians stress that its more
beneficial to have long term aid such as providing the farmers with better
seeds and tools. In 2005 the 8 richest countries met and decided to cancel all
of Ethiopia’s debt so that they could have more money in their economy because
in 2002 Ethiopia spent more money just paying their interest off from the debt
rather than paying the actual debt off. More importantly they spent more paying
back the interest than on healthcare or education in 2002 so by having their
debt cleared off it should have dramatically helped the country from being so
poor but it hasn’t made much progress in 13 years. The third aid was trade
justice where the western governments such as the UK need to stop subsidies
that they give to their own farmers to produce more than what is even needed.
Also western countries need to remove the trade barriers because it makes it
difficult for countries such as Ethiopia to sell their goods there (Campbell, A.
2006 p.17).