necessary licenses, government still maintains a major role in the economy.14 The democratic developmental state described above should not be seen as the enemy of the market, nor should market forces be seen as an enemy of a strong, effective state. Although the EPRDP government has taken definite steps for economic reform through trade deregulation, liberalisation, privatisation, and an ‘agricultural development-led industrialisation’, the private sector remains relatively small, characterised by small companies, low labour productivity, and a high degree of corruption. The state should seek to harness positive elements of the market towards achieving the critical task of promoting the emergence of a national capitalist class in key sectors of the economy, thereby fostering economic growth and development. 81. Moreover, the desire for a strong role for the state in Ethiopia should not be interpreted as a market vs. non-market issue. Markets are vital but imperfect in the distribution or sharing of the fruits of development. The question is to identify major market failures in any particular context and take corrective measures. Also the issue is not one of the size of the state but of its appropriate role. Although it is important to be cautious over the failures of governmental interventions and the dangers of rent-seeking, there is little doubt that governments can promote sustainable and equitable development. The developmental state was highly successful in East Asia. But there is a need to be wary of a simple, straightforward imitation of East Asian policies. Instead, one has to ask whether and in what way policy lessons can be derived and applied in the different context of Ethiopia and the present-day global economy. What the East Asian examples clearly demonstrate are that the state can fortify the “invisible hand” of the market with great success, especially in the quest for dynamic comparative advantage and technological upgrading. The state can also protect the economy from the risks and vulnerabilities that unfettered markets sometimes impose, such as those that can result from capital market liberalisation. Ethiopia needs to come up with a development plan clearly articulating the appropriate strategic role of the state in economic development. Promoting a Culture of Entrepreneurship 82. 14 Entrepreneurship can play an important role in structural economic change and in improving well-being. Across the world, governments and international The telecommunications sector for instance, is a state monopoly. In addition, according to the constitution, the ownership of land belongs only to “the state and the people”. Citizens can lease land for up to 99 years but are not allowed to sell it. Several sectors of the economy are not open to private investors but instead are reserved solely for the government. Among them are the transmission and generation of electricity, postal services, and weapons manufacturing. Foreign firms are excluded from many areas of the economy including banking, insurance, broadcasting, air transportation that use aircraft with a seating capacity of more than 20 passengers, motels, saw mills, movie theatres, travel agencies, bakery products and pastries for the domestic market, the export of raw coffee, retail and wholesale trade, brokerage services and shipping. - 61 -