Ethiopia’s economy and the livelihoods of its population are highly dependent on agriculture. The livelihood of about 84% of the population is directly depends on agriculture. Agriculture has also been contributing a lion's share of foreign currency earnings and it also contributes about 47% of the country's GDP (CSA, 2015). Moreover, Ethiopia is endowed with abundant agricultural resources and has diverse agro-ecological zones. Out of the total land area /111.5millon ha/ of the country about 74.3 million hectare is suitable for annual and perennial crop production (MoA, 2009). However, the sector is still in its traditional and subsistence stage dominated by small scale holding and farming resulting in low productivity of the land. The key bottlenecks related to low productivity of agriculture in Ethiopia include declining size of holdings/ farm plots, low farm input supply, poor extension service, lack of credit service and farm machinery service and poor market service and others. The Government of Ethiopia (GOE) has embarked on a ten-year economic development plan (2021-2030) where agriculture is on the top of priority sectors. As a response to the challenges of agricultural productivity, government also has identified key priority intervention areas to increase productivity of smallholder farms and expand large-scale commercial farms. Government’s political willingness and commitment to make meaningful changes in the agriculture sector is immense and various efforts have already done so far. Especially, since mid1990's the government has been promoting large scale agricultural investment as a key strategy to improve food security, to improve job opportunities and as a means to increase foreign exchange earnings at the national level and as a means (Keeley et al., 2013).. Furthermore, in recent years government has been encouraging, farmers and small-scale entrepreneurs to work on contractual modalities of farming to fulfill the high demands of agricultural inputs, outputs for market demand and boost collateral works. It is also believed that well-organized contract farming would appear to offer an important way in which smaller producers can farm commercially. Similarly, it also provides investors with the opportunity to guarantee a reliable source of supply, from the perspectives of both quantity and quality.
The government’s strategy to shift into large-scale agriculture and contractual farming is mainly intended to encourage Foreign Direct Investment (FDI) with the purpose to export and earning foreign currency and domestic investments. It is also to promote the productivity of smallholder farmers and to secure their linkage by value chain processes. It is also important as import substitution strategy which would, at the same time, help to modernize the agricultural sectors so that a sufficient amount of export items and inputs to local industries could be produced. The government has also used a range of mechanisms to attract FDI including offering incentive schemes such as tax exemption for foreign investors who wish to invest in land available in different regions of Ethiopia such as Amhara, Gambella, and Benishangul Gumuz. As part of its commitment to encourage private sector to engage in the agriculture sector, large tracts of land (above 3.5m ha) suitable for LSAI was identified from all over the country and available in the land bank. Approximately 2.4 m ha of land has already been allocated to about 6.000 both to foreign and local investors Moreover, international and national organizations have been attempting to promote the endeavors of the governments by formulating enabling guidelines, principles, and standards to guide agricultural investments nationally and internationally. The guidelines, principles, and standards are expected to lead the investment towards meeting the advantages of large-scale agricultural investment such as job creation, technology transfer, infrastructure development, safe environment, and source of foreign currency can only be realized. In addition through contractual farming, small holders' productivity and linkage with markets are expected to be improved. The African Union, the World Bank, and Food and Agriculture Organization have developed different guidelines to protect the local community interests and create responsible agricultural investment. The VGGT and RAI principles developed by FAO and CFS and other international organizations jointly are the leading frameworks to promote responsible agricultural land governance which also be referred to and contextualized while promoting agricultural investment (FAO, 2012b) and (CFS, 2014). The frameworks have been developed based on the reference on global documents like UN declarations on human rights, Rio declaration on the environment, ILO declarations on fundamental principles and rights at work, etc. Fundamentally, 7 VGGT and RAI Principles aim to recognize and protect legitimate rights to land for all (in particular for those women and men who live on and from the land) and to ensure that public and private claims, needs, and interests are addressed. Furthermore, FAO, USAID and GIZ, and other international organizations have tried to develop and introduce responsible contractual farming as an inclusive model of agricultural investment as a tool to support endeavors of smallholder and investors linkage. International experiences also show that implementation of responsible agricultural investment and contract farming as an inclusive model of agricultural investment enables to ensure sustainable socio-economic growth and environmental safety and particularly ensures food security. Understanding the importance of the sector and the challenges associated to the implementation of LSAI, GIZ has been implementing a program – S2RAI in Ethiopia since 2015 to support the implementation of agricultural investment in Ethiopia. However, critical assessment on the status of the implementation of internationally recognized RAI principles and contract framing as an inclusive model of agricultural investment in Ethiopia has not been made yet. Hence, the GIZ S2RI-II project has initiated this study to critically assess and evaluate the implementation of RAI principles and contract farming in Ethiopia by taking cases from Amhara, Benishangul Gumuz, and Gambella regional states. This study is primarily aimed to identify and document the successes and critical bottlenecks and put possible recommendations as means to solve the problems.
