JIJIGA MAIN STREET, PHOTO CREDIT: IBNUISAK

SECONDARY CITIES ASSESSMENT PHASE 1 SYNOPSIS REPORT Revised October 19, 2020

Ethiopia Performance Monitoring and Evaluation Service

This publication was produced at the request of the United States Agency for International Development. It was prepared independently by the Ethiopia Performance Monitoring and Evaluation Service (EPMES) activity of Social Impact, Inc., which is contracted by USAID/Ethiopia. ETHIOPIA PERFORMANCE MONITORING AND EVALUATION SERVICE (EPMES) ACTIVITY

Secondary Cities Assessment

Phase 1 - Synopsis Report

Contracted under AID-663-C-16-00010

Prepared for: Awoke Tilahun (COR) United States Agency for International Development/Ethiopia American Embassy Entoto Street P.O. Box 1014 Addis Ababa, Ethiopia

Prepared by: Social Impact, Inc. Bole Sub City, Woreda 13 House # 478, 4th Floor

i | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service TABLE OF CONTENTS

Table of Contents ...... ii

Table of Tables and Figures ...... iv

Tables ...... iv Figures ...... iv

Acronyms ...... v

Executive Summary ...... 1

Methodology ...... 1 Findings ...... 3 Conclusion ...... 4 Next Steps ...... 5

Background ...... 6

Methodology ...... 7

Round One: Core Indicators ...... 8 Round Two: Key Indicators in High Performing Cities ...... 9 Data Collection and Limitations ...... 11

Findings ...... 13

Round One: 27 Secondary Cities Scored Against Core Indicators ...... 13 Round Two: Top-scoring Cities ...... 14 Round Two: Thematic Area Findings ...... 16 The Effect of Adding Urban Geographic Clusters...... 18 Other Findings ...... 20

Conclusions ...... 23

Second Phase of the Assessment ...... 27

Annex I: Round One - Initial City Selection (27 Cities) ...... 28

Annex II: Secondary Cities Assessment Indicator List ...... 29

Annex III: Indicator Revisions ...... 34

Annex IV: Final Secondary Cities Scores ...... 35

Annex V: Findings Presentation Notes ...... 36 ii | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service Annex VI: Secondary Cities Mayor Contacts ...... 44

Annex VII: Assessment Database Overview ...... 45

iii | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service TABLE OF TABLES AND FIGURES

TABLES

Table 1: Core Indicators ...... 8

Table 2: Data Collection Challenges ...... 11

Table 3: Final Indicator List ...... 29

Table 4: Individual and Cluster City Scores ...... 35

Table 5: Database Overview ...... 45

FIGURES

Figure 1: Secondary Cities Round One Scoring ...... 1

Figure 2: Secondary Cities Assessment Scorecard ...... 2

Figure 3: Map of Top Scoring Secondary Cities and Geographic City Clusters ...... 3

Figure 4: Assessment Phases ...... 6

Figure 5: Initial secondary City Selection for phase one analysis ...... 7

Figure 6: Key Indicators and Thematic Areas ...... 9

Figure 7: Thematic Areas and Weights ...... 10

Figure 8: Secondary Cities Round One Scoring ...... 13

Figure 9: Secondary Cities Assessment Scorecard ...... 14

Figure 10: Round Two Individual secondary City Scores by Thematic Area ...... 15

Figure 11: Number of Current USAID Activites in Round Two Secondary Cities ...... 21

Figure 12: Number and Percentage of USAID Activities in Targeted Urban Geographical Areas ...... 22

Figure 13: Map of Top Scoring Secondary Cities and Geographic City Clusters ...... 23

iv | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service ACRONYMS

AT Assessment Team CBE Commercial Bank of Ethiopia CDCS Country Development Cooperation Strategy COR Contracting Officer’s Representative Covid-19 Coronavirus Disease 2019 CSA Central Statistical Agency EG Economic Growth EPMES Ethiopia Performance Monitoring and Evaluation Service FDI Foreign Direct Investment IDP Internally Displaced Persons KII Key Informant Interview LED Local Economic Development MOTI Ministry of the Interior MUDHCo Ministry of Urban Development, Housing, and Construction NYU New York University SAGE Strategic Advisory Group for Emergencies (USAID/Ethiopia) SNNPR Southern Nations, Nationalities, and People’s Region SOW Scope of Work ULGDP Urban Local Government Development Project USAID United States Agency for International Development

v | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service EXECUTIVE SUMMARY USAID/Ethiopia commissioned the Ethiopia Performance, Monitoring and Evaluation Service (EPMES) activity to conduct an Assessment of Secondary Cities in Ethiopia to identify dynamic and investment-ready secondary cities that could best serve as “urban anchors” for surrounding rural areas. By evaluating the current state and future potential of secondary cities, this data-driven Assessment provides USAID with a strategic framework and objective criteria to assist with evidence-based decisions on resource allocation and intentional geographic targeting of activity locations to maximize programmatic impact.

METHODOLOGY The approved Phase One Assessment Design Report established the methodology and criteria for the inclusion of secondary cities in the Assessment, initially identifying 27 Ethiopian secondary cities that met the criteria (see Annex I: Round One - Initial City Selection (27 Cities) for city list). During data collection and review, the total number of Assessment indicators was reduced from 27 to 20 due to unavailability of key data. Despite this, the 20 indicators were broadly representative of the larger pool of indicators initially proposed across seven thematic areas, thus there was no overt negative impact on the overall Assessment findings.

Data was analyzed in a series of two Rounds with those scoring highest in Round One progressing to Round Two for further analysis. Round One city scoring summary can be seen in Figure 1 below.

Figure 1: Secondary Cities Round One Scoring

6

5 Cutoff Score Point to advance to Round Two Analysis

4

3

Round One Score One Round 2

1

0

Dila

Jijiga

Asela

Harar

Jimma

Ambo

Sebeta

Dessie

Adama Assosa

Burayu

Semera

Hosana

Mekelle

Gonder

Nekemt

Hawassa

Bahir Dar Bahir

Dire Dawa Dire

Kombolcha

Arba Minch Arba

Shashemene

Debre Berhan Debre

Debre Markos Debre

Wolayita Sodo Wolayita

Gambela Town Gambela Bishoftu/DebreZeyit High Performing Cities going to Round Two

Low Perfroming Cities dropped in Round Two

1 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service A summary of the Phase One Assessment scores of the top 11 identified secondary cities (including eight cities integrated into four geographic clusters) is presented in the Scorecard below.

Figure 2: Secondary Cities Assessment Scorecard Secondary Cities Assessment Scorecard

TOTAL CITY SCORE CLUSTER: Dire Dawa is a self-governing city with regional capital status; Dire Dawa & export by rail via the Djibouti port; two industrial parks. Economy and Harar 8.3 6.7 10 5.4 8.8 10 10 9.2 governance scores improve when clustered with Harar.

CLUSTER: Hawassa is a regional capital and largest city in the south; has Hawassa &

highest overall score for economy; industrial park has highest Shashemene 7.6 5.0 10 7.9 6.3 10 10 6.3 employment & export volume. Lacks rail transport.

Areas Mekelle is a regional capital & projected largest city in north by 2030; two Mekelle 7.5 3.3 10 4.6 7.5 10 10 8.8 industrial parks & new rail line; largest university and busiest airport outside of Addis Ababa; at high risk for natural disasters.

CLUSTER: Dessie is a multiple market center and has a high Dessie & administrative capacity ranking. Education and transport scores increase Kombolcha 7.3 6.7 10 4.6 6.3 10 10 7.5 when clustered with Kombolcha.

Regional capital & market center; university includes large technical Bahir Dar 7.3 6.7 10 3.8 7.5 10 10 6.7 institute; newly opened industrial park (garment production); highest unemployment among Round Two cities.

Top Seven Geographic Geographic Seven Top Adama & CLUSTER: Adama has industrial park and rail access; multiple market Bishoftu 7.0 8.3 10 7.1 6.3 10 0.0 7.5 center; economy score increases when clustered with Bishoftu.

Jijiga has high administrative capability ranking; low likelihood of climate Jijiga 7.0 3.3 6.7 5.0 10 10 10 5.0 shocks; largest IDP population by far of any Round Two city.

Debre Debre Berhan has high fiscal performance ranking; has new industrial park Berhan 6.6 5.0 10 4.2 6.3 10 10 5.0 but no rail access; lacks major markets.

Gonder is a multiple market center; largest decline in own-source Gonder 6.1 5.0 6.7 4.6 5.0 10 10 5.0 revenue collection; no rail access or industrial park.

Jimma has industrial park and major markets but no rail access; low Jimma 6.1 5.0 10 4.2 2.5 10 10 6.3 unemployment rate; low administrative capability.

Dila has largest increase in own-source revenue collection; low Dila 6.0 5.0 10 3.8 6.3 10 10 2.5 infrastructure score (no rail access, few commercial flights); no industrial park

Debre Debre Markos has highest governance fiscal performance of Round 2 Markos 5.8 6.7 10 3.3 5.0 10 10 2.5 cities; low risk of climate shock; no rail access or industrial park

SCORE KEY ≥ 0 < 3 Vulnerable ≥ 3 < 5 Weak ≥ 5 < 7 Neither Strong nor Weak ≥ 7 < 9 Strong ≥ 9 ≤ 10 Established

2 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service FINDINGS (1) Viewing secondary cities as urban clusters is a more accurate method of assessing their potential as urban anchors. The growth of individual Ethiopian Secondary Cities is not happening in a vacuum. Cities close to one another have the opportunity to share resources, mitigate vulnerabilities of an individual city and coordinate collective growth and development. There is a potential to cluster two secondary cities in close proximity (75km) to be a collective locus for future USAID program investment. Four geographical clusters comprised of two cities each (Hawassa/Shashemene, Dire Dawa/Harar, Adama/Bishoftu, and Dessie/Kombolcha) were identified as candidates for targeted and integrated strategic USAID program investment. Presented in Figure 3, these urban clusters form links in the inter-city “growth corridors” encouraged by the Government of Ethiopia’s Growth and Transformation Plan II.1

Figure 3: Map of Top Scoring Secondary Cities and Geographic City Clusters

In a separate analysis, geographic cluster scores were calculated by taking the maximum performance (score) between the two cities for any given indicator and applying it to the cluster. The scores of already high- scoring cities of Hawassa and Dire Dawa are boosted by the addition of satellite cluster cities. The Dessie/Kombolcha cluster rises substantially in the rankings, due to the two smaller secondary cities’ abilities to share important assets such as a referral hospital and a commercial airport, and their combined economic

1 As cited in Cities Alliance, “Future Proofing Cities – Ethiopian Regional Cities”. 2016.

3 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service power, which includes Kombolcha’s thriving industrial park. In addition, Adama/Bishoftu also gets a score boost from Bishoftu’s proximity to the Eastern Zone industrial park and the Modjo dry port. Assessment results from geographic clustering of these cities is outlined in the map above, with cluster scores depicted in grey and comparative individual city scores in blue. (2) Three other strong scoring secondary cities (Mekelle, Bahir Dar, and Jijiga) can also serve as urban-rural hubs for targeted layered and integrated USAID Ethiopia programming. These three cities have strong overall characteristics and results based on the assessed indicators. All three scored especially well on the governance indicators. Including the four geographic clusters cited above, these three cities bring the number of identified separate urban priority locations to seven (see Figure 2 above for Total Scores).

(3) A large gap exists between the seven top-scoring Ethiopian secondary cities/clusters and the cities at the bottom of the assessed pool. This finding provides strong evidence for USAID/Ethiopia strategically selecting a limited group of locations for intensive program investment.

(4) Industrial parks have not yet had a substantial impact on urban unemployment rates. In fact, secondary cities with the largest industrial park employment also had above average unemployment rates. One possible explanation may be that industrial parks are demographic magnets, attracting rural residents who move to the city specifically to seek jobs in the parks. Some are hired but many more are disappointed, at least initially, with inability to find employment, thus driving up the unemployment rate in those cities. This may constitute a warning signal for fast-growing Ethiopian secondary cities and the potential load on services, infrastructure and the economy.

(5) Among the 27 secondary cities analyzed there appears to be no overt or strong correlation between the current number of USAID Activities per city and the top-scoring secondary cities (see Figure 11). Perhaps a more revealing analysis for the Mission to conduct in the future would be to analyze USAID/Ethiopia dollar investment in these top-scoring cities as a percentage of USAID’s entire Ethiopia portfolio. The Assessment Team did not have access to data presenting USAID activity budgets disaggregated by city to be able to conduct this analysis, nor was this part of the Assessment Scope of Work. While no apparent correlation exists in the assessment data between the highest scoring secondary cities and USAID/Ethiopia’s current activity portfolio, one cannot conclude that the USAID activities aren’t having a positive impact at the city level.

CONCLUSION The Assessment findings show that four two-city geographic clusters (Hawassa/Shashemene, Dire Dawa/Harar, Adama/Bishoftu, and Dessie/Kombolcha) and three individual secondary cities (Mekelle, Bahir Dar, and Jijiga) comprise the most promising high-scoring locations for future targeted USAID/Ethiopia strategic geographic programmatic concentration. These 11 cities are located in seven distinct geographic areas of the country, covering seven of the ten state-level entities outside Addis Ababa (six regions and Dire Dawa).

As for how to structure USAID/Ethiopia program investment, the Assessment data suggest an opportunity exists to organize integrated cross-sectoral programming effectively around the theme of urban governance. The dynamic relationship between urban and rural communities in Ethiopia today depends heavily on secondary cities’ ability to promulgate and enforce well-informed regulations and make available basic services. While integrated programming would involve all USAID sectors, perhaps the best method of

4 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service organizing this programming would be around an urban governance program providing technical assistance to the secondary cities as they grapple with the challenges of rapid in-migration and accelerating urbanization.

While not identical in its objectives or context, the USAID/Philippines SURGE project2 has taken a similar approach and could offer potentially useful lessons for consideration. Establishing partnerships with Ethiopian urban local governments could form the basis of a multi-faceted assistance approach involving multiple USAID/Ethiopia sectoral activities. This cross-sectoral focus, on both the secondary cities and their surrounding rural hinterlands, would strengthen the role of secondary cities as urban anchors capable of meeting the challenges of rapid demographic change.

NEXT STEPS

As part of Phase 1 of the Assessment, EPMES presented and facilitated a virtual presentation and discussion of the Secondary Cities Assessment findings and consideration of potential implications for USAID/Ethiopia programming. Notes from that presentation and discussion on September 22, 2020 can be found in Annex V: Findings Presentation Notes. In order to facilitate future outreach to the top-scoring Secondary Cities, EPMES also consolidated a list of city mayors and contacts (for USAID internal use only) that can be found in Annex VI: Secondary Cities Mayor Contacts.

Phase Two of the Assessment - Database and Interactive Dashboard: Once USAID approved the group of Phase 1 selected secondary cities, EPMES finalized the Database and created an interactive Dashboard (including GIS maps). The Phase Two Database and Dashboard present raw and weighted scores. Raw scores are believed to be useful indicators to USAID when deciding where to locate sectoral programs and projects. The results are formatted to enable empirical comparison of cities across a broad range of indicators. As such, it can serve as a guide toward strategic program integration at the local level and assist USAID/Ethiopia with resource allocation decisions. The interactive Dashboard presents city scores using the Assessment’s default weighting system, with the outlined thematic areas most heavily weighted.

2 Several elements of this approach can be seen in the USAID Philippines project Strengthening Urban Resilience for Growth with Equity (SURGE), which could be a useful model for USAID/Ethiopia to consider. See https://urban- links.org/project/strengthening-urban-resilience-for-growth-with-equity-surge-project/

5 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service BACKGROUND

The purpose of the secondary cities Assessment is to identify Ethiopia’s dynamic and investment-ready secondary cities that serve as “urban anchors” for surrounding rural areas. USAID/Ethiopia can use the Assessment as a tool to guide program investment toward specific geographic locations, thereby achieving the concentration, layering, and integration of activities described in USAID/Ethiopia’s Country Development Cooperation Strategy (CDCS) 2019-2024. By evaluating the current state and future potential of secondary cities in Ethiopia, the Assessment provides USAID with a strategic framework and objective criteria for making evidence-based decisions on program or activity locations to maximize programmatic impact. This Phase One Synopsis Report summarizes the methodological approach to initial city selection, selection and scoring of Assessment indicators, and identifies the secondary cities with the highest potential for strategic geographic targeting for integrated USAID program consideration and investment. Assessment results are presented in a scorecard format that highlights the most viable options in the findings section below. USAID will review and comment on the Findings and approve or adjust the initial identification of the most viable secondary cities before Ethiopia Performance Monitoring and Evaluation Services (EPMES) moves to Phase Two of the Assessment. In Phase Two, the secondary cities database will be incorporated into an interactive dashboard for USAID future use and planning. Phase Three of the assessment will include either an in-person or virtual workshop with USAID to present and discuss Assessment findings, recommendations and potential use. Each Phase is highlighted in

Figure 4 below.

Figure 4: Assessment Phases

6 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service METHODOLOGY

In the USAID-approved Design Report, EPMES identified 24 cities to be included in the secondary cities Assessment, based on an estimated 2020 population size of 100,000 or more.3 In addition, three regional capitals that did not meet the 100,000 population threshold were also included by virtue of their influential capital status and access to universities, bringing the total cities in this assessment to 27. Further details on the list of cities and the selection process can be found in the Design Report as well as Annex I: Round One - Initial City Selection below. Figure 5: Initial secondary City Selection for phase one analysis

27 Round One Secondary 24 Cities 3 Cities Cities with 100K+ Regional capital with Population university, but less than 100K population

Data was collected for all 27 secondary cities. Each city was scored in two Rounds:

• Round One: Out of 27 secondary cities, the Assessment Team identified the 12 highest performing cities based on six core indicators described in the next section. These are indicators considered to be essential to a city’s future development. Only the highest performing cities in Round One (i.e. the cities that met most or all the indicators with a score of 4.5 or above out of 6) moved to Round Two. • Round Two: The 12 highest performing cities were further assessed based on twenty key indicators resulting in an overall Total City Score. The Assessment Scorecard found on page 14 in this report provides the ranking and performance for these 12 secondary cities. The following methodology sections cover Round One and Round Two indicators and scoring in greater detail. The section concludes with a note regarding key constraints that are important to consider when interpreting the Assessment’s findings.

3 While there is no generally agreed-upon size of a secondary city, the term “secondary cities” typically refers to cities of at least 100,000 in population. See Rondinelli. Dynamics of Growth of Secondary Cities in Developing Countries. Geographical Review, vol. 73, no. 1, pp. 42–57. 1983.

7 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service ROUND ONE: CORE INDICATORS

Core indicators represent those factors considered essential in determining a city’s capability and capacity for growth and investment. Table 1 outlines these indicators. Table 1: Core Indicators

Core Indicators

2020 Projected Population of 100,000 or more

Major Transport Corridor

Center of higher education (university)

Presence of major health center (hospital)

Presence of an Industrial Park

Regional capital / important administrative hub

The six selected core indicators sum up the attributes that make a secondary city a superior urban anchor for its surrounding rural and exurban areas. Not only do a city’s residents rely on the various services and the economic dynamism that derive from a city’s status as a center of trade and transport, higher education, health and public administration and from the market power of a large population base, but so does the wider population of the city’s peri-urban and rural hinterland catchment area . In addition to these attributes, in the Ethiopian context the presence of an industrial park is an important infrastructure asset and a strong indicator of economic growth potential (see Annex III for a detailed explanation).

In Round One, EPMES scored 27 secondary cities against each of the six Core Indicators (noted above). Detailed indicator definitions and the scoring criteria can be found in Annex II: Secondary Cities Assessment Indicator List Since the Round One objective was to identify well-rounded secondary cities, i.e. those with the most of these six core indicators/attributes, each core indicator contributed equally to the Round One index. Thus, the maximum possible score a secondary city could receive was six.

In the Design Report, the EPMES Assessment Team provisionally established that a city with a core indicator score of five or more out of six would move forward to Round Two. After detailed data analysis and data finalization, it was determined that a cut off score of five was too restrictive and would eliminate too many potential secondary cities from inclusion in the Assessment. By lowering the requirement for a city’s advancement to Round Two to a score of 4.5 or higher out of six, the Assessment Team was able to include a more diverse, but high-performing group of secondary cities.

8 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service ROUND TWO: KEY INDICATORS IN HIGH PERFORMING CITIES

Key Indicators, inclusive of the core six indicators noted above, were selected to evidence a secondary city’s (1) growth potential and (2) readiness for intensive, integrated USAID/Ethiopia programming. By including this second round of scoring, the Assessment is able to take a more nuanced look at a city’s performance across multiple thematic areas including geography, demography, economy, governance, health services, education services, and infrastructure.4

Almost 50 indicators were considered and reviewed at the design stage. Based on their importance and the suspected availability, 27 indicators were selected provisionally and included in the Design Report. Due to final data availability, the number of indicators was reduced to 20, in one case an indicator was substituted, and the organization of indicators was adjusted. For more details see Annex III: Indicator Revisions. The 20 key indicators, organized by thematic area, are presented inFigure 6. Figure 6: Key Indicators and Thematic Areas

Geography Demography Economy Governance Health5 Education Infrastructure

Disruptive 2020 Industrial Park Regional / Referral Large Public Climatic Population Rail Network Employment Zone Status Hospital University Event >100,000 (10K+ Students) Major Bank Adminstrative Commercial Transport Growth Rate Presence Capacity Airport Corridor Goegraphic IDP Presence of Financial Clustering Population Major Industrial Park Capability Potential <10% Markets Network Unemployme Own Source (internet nt Rate Revenue & phone)

Each individual indicator in Round Two was scored according to the definition and criteria in Annex II: Secondary Cities Assessment Indicator List. Individual indicator scores were standardized from 0 – 1 point and summed to create an overall score for their thematic area.6

Based on extensive literature review, the Assessment Team weighted more heavily the Infrastructure, Economy and Employment, and Governance thematic areas in generating the final city score (see Error! R

4 Indicators were drawn from a wide variety of sources, including the three World Bank Ethiopia local government Development projects, Cities Alliance, South African Cities Network, and the Ethiopian Ministry of Urban Development Housing and Construction.

5 The Assessment Team experienced some constraints with the availability of proposed indicator data in health and education at the city level. As a result, data for only one indicator was identified for these two thematic areas and able to be included in the analysis. 6 Overall thematic area scores were standardized on a 0 – 10 scale.

9 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service eference source not found.). The recent World Bank Ethiopia Urbanization Review 7 cites jobs, infrastructure, and housing as the three biggest challenges facing Ethiopian cities as urbanization accelerates and they attempt to earn the demographic dividend.8 The indicators included in the Infrastructure, Economy and Employment, and Governance areas emphasize a secondary city’s ability to meet these challenges. Infrastructure (e.g. industrial parks and transport networks) is critical to economic growth as it brings jobs, and good governance can make land more easily available for housing and spur larger investments in infrastructure that supports residential development (roads, water and other services). The indicators included in these three areas emphasize a secondary city’s ability to meet the challenges of rapid urbanization in the Ethiopian context.9 Figure 7: Thematic Areas and Weights

Geography Demography Economy Governance Health Education Infrastructure 10% 10% 20% 20% 10% 10% 20%

These final, weighted scores allowed the Assessment in Round Two to rank the high-performing cities identified in Round One10 and provide a full picture of city performance. Assessment findings are narrated later in this Report.

7 World Bank Ethiopia Urbanization Review, p.16. 8 Demographic dividend, as defined by the United Nations Population Fund (UNFPA) is "the economic growth potential that can result from shifts in a population’s age structure, mainly when the share of the working-age population (15 to 64) is larger than the non-working-age share of the population (14 and younger, and 65 and older)".[1] In other words, it is “a boost in economic productivity that occurs when there are growing numbers of people in the workforce relative to the number of dependents.” [1] 9 Literature review included: New Climate Economy, “Unlocking the power of Ethiopian cities”, 2015; South African Cities Network, “Potential for a better life: nine South African cities”, 2015; and Abebaw Alemayehu (World Bank ULGDP II Technical Team Member), “Why should Ethiopians care about urbanization? Jobs, infrastructure, and formal land and housing”, 2019 10 To ensure the soundness of the approach, the AT also calculated the Round Two scores for Secondary Cities that scored below the cutoff in Round One. Full scoring for all cities for both rounds and explanatory text can be found in Annex III: Indicator Revisions Upon the collection and review of available data the AT made three adjustments to the original indicator list as proposed in the approved Design Report. These include: Reduction in the overall number of scored indicators from 27 to 20 Substitution of one of the core indicators Elimination of the categorization of indicators as “leading” and “lagging” 1. Reduction in the overall number of scored indicators: Simultaneous with the drafting of the Design Report, the AT continued collecting data with which to measure secondary cities’ performance against these indicators. The constraints encountered in the collection of data are detailed in the Data Collection section of this Synopsis Report. By the time the Report was drafted, the AT had been able to collect sufficient data to utilize 20 of the 27 proposed Assessment indicators. In addition, a demographic indicator for Internally Displaced Persons (IDP) population was added. While inclusion of the other seven indicators would have made the Assessment more robust, EPMES is confident that it would not have substantially affected the empirical identification of the top group of secondary cities listed in the Assessment Scorecard.

10 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service DATA COLLECTION AND LIMITATIONS

DATA COLLECTION

This Assessment took place during COVID-19 pandemic related restrictive operating environment where travel and social restrictions were in place in Ethiopia. This has constrained in-person interview and data collection opportunities and due to this constraining factor, the Assessment primarily made use of administrative secondary data. These data were collected between late-June 2020 and early August 2020. Data collection efforts were suspended during widespread protests, internet shutdown across Ethiopia, and closure of the Government of Ethiopia (GoE) offices from late June through mid-late July 2020. The methods employed as part of data collection for this Assessment included direct data requests to government, donor organizations and academic sources as well as retrieval and utilization of publicly available data on relevant indicators.

LIMITATIONS

In the course of data collection, the Assessment Team faced several challenges while collecting a robust and complete set of Assessment indicators for analysis. A synopsis of these challenges is presented below in Table 2. Table 2: Data Collection Challenges Data Collection Challenges GoE data not disaggregated to city or zonal level. Sometimes only regional level data were available (e.g. 1 foreign direct investment and bed capacity of hospitals) thus city-level indicator unable to be included. GOE city data not stored at national level. Thus, some important city-level data (such as business and 2 property tax collection amounts / rates) were not available for collection during Covid restrictions. GoE reports contain outdated data. For example, the latest MUDHCo urban database report contains 3 data from 2012 and earlier. Internet shutdown in Ethiopia for 4 weeks (29 June to 23 July, 2020) in response to widespread protests 4 in the aftermath of the assassination of Hachalu Hundesa, a famous Ethiopian activist singer. Lack of GoE data available online or digitized. In some cases, EPMES team members had to upload data 5 from hard copy or collect and code data from interviews with department heads (e.g. market data received from the Ministry of Trade and Industry)

2. Substitution of a core indicator: It was not possible to collect sufficient data during the Assessment period to adequately verify secondary cities’ scores for the core indicator “home of a major and/or fast-growing industry”. Instead, the indicator “presence of an industrial park” has been substituted as a core indicator. EPMES’ research during the Assessment has suggested that while industrial parks do not yet provide the majority of Ethiopia’s economic production, their central position in the GoE’s strategy for achieving middle-income status and their rapid growth in the past few years justifies this emphasis. Also, the presence of an industrial park in a secondary city is closely linked to the rapid in- migration of rural residents seeking wage employment in the industrial parks. 3. Elimination of the categorization of indicators as “leading” and “lagging”: Two factors contributed to this decision: lack of available data for certain leading indicators, and for other indicators, lack of multi-year data that would allow examination of trends. Examples of dropped leading indicators are: Amount of business income tax collected, past five years Amount of foreign direct investment (FDI), past five years Number of mobile subscribers as % of population aged 15-64 Annex IV: Final Secondary Cities Scores

11 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service GoE data websites often not functioning, even after internet access was restored e.g. GoE Ministry of 6 Urban Development, Housing, and Construction website has been off-line since Assessment data collection began and continues to be unavailable at the time of this Synopsis Report submission. 7 Covid-19 related travel / social contact restrictions throughout the Assessment data collection period. Collection period coincided with regional states’ annual planning / budgeting cycle, reducing the level 8 of responsiveness of GoE officials and offices to the Assessment requests for data. Request from USAID to expediate submission of the Phase 1 Synopsis Report. EPMES accommodated 9 the expedited request, reducing the overall time frame for data collection.

In general, the EPMES Assessment Team adapted to these collection constraints by identifying strong proxies to replace unavailable data. However, in some thematic areas, most notably education and health which have been key areas of program investment for USAID/Ethiopia, data for only one indicator was identified and able to be included in the analysis. This lack of readily available city-level data constricts the Assessment’s ability to focus on and highlight variation in cities’ performance in these thematic areas in Round Two as explained further in the Findings section below.

12 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service FINDINGS

This section is divided into the two Rounds of scoring as described in the Methodology section above. In Round One, the assessment analyzed 27 secondary cities and identified 12 high-performing cities (with a minimum total score of 4.5 out of 6 maximum), based on the six core indicators. In Round Two, those 12 high-performing cities were further assessed across seven thematic areas covering 20 indicators with their performance detailed and ranked in a scorecard.

ROUND ONE: 27 SECONDARY CITIES SCORED AGAINST CORE INDICATORS

All 27 cities were scored on six core indicators including population, transport corridor, presence of a large public university (with 10,000 or more registered students), referral hospital, industrial park, and their status as a regional or zonal capital.

All cities were located in a major transport corridor and the majority of cities were either a zonal or regional capital with a population over 100,000. Key differentiating factors in Round One scoring were the presence of an industrial park, large public university (with 10,000 or more registered students) or referral hospital. Out of the 12 high-performing cities selected to advance to round two, all had a referral hospital, and almost all had a university with at least 10,000 students. In addition, seven of the 12 had a planned or operational industrial park compared to just four of the 15 cities not selected for advancement. Figure 8: Secondary Cities Round One Scoring

6

5 Cutoff Score Point to advance to Round Two Analysis

4

3

Round One Score One Round 2

1

0

Dila

Jijiga

Asela

Harar

Jimma

Ambo

Sebeta

Dessie

Assosa

Adama

Burayu

Semera

Hosana

Mekelle

Gonder

Nekemt

Hawassa

Bahir Dar Bahir

Dire Dawa Dire

Kombolcha

Arba Minch Arba

Shashemene

Debre Berhan Debre

Debre Markos Debre

Wolayita Sodo Wolayita

Gambela Town Gambela Bishoftu/DebreZeyit High Performing Cities going to Round Two

Low Perfroming Cities dropped in Round Two

13 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service ROUND TWO: TOP-SCORING CITIES Figure 9: Secondary Cities Assessment Scorecard Secondary Cities Assessment Scorecard

TOTAL CITY SCORE CLUSTER: Dire Dawa is a self-governing city with regional capital status; Dire Dawa & export by rail via the Djibouti port; two industrial parks. Economy and Harar 8.3 6.7 10 5.4 8.8 10 10 9.2 governance scores improve when clustered with Harar.

CLUSTER: Hawassa is a regional capital and largest city in the south; has Hawassa &

highest overall score for economy; industrial park has highest Shashemene 7.6 5.0 10 7.9 6.3 10 10 6.3 employment & export volume. Lacks rail transport.

Areas Mekelle is a regional capital & projected largest city in north by 2030; two Mekelle 7.5 3.3 10 4.6 7.5 10 10 8.8 industrial parks & new rail line; largest university and busiest airport

outside of Addis Ababa; at high risk for natural disasters. phic phic CLUSTER: Dessie is a multiple market center and has a high Dessie & administrative capacity ranking. Education and transport scores increase Kombolcha 7.3 6.7 10 4.6 6.3 10 10 7.5 when clustered with Kombolcha.

Regional capital & market center; university includes large technical Bahir Dar 7.3 6.7 10 3.8 7.5 10 10 6.7 institute; newly opened industrial park (garment production); highest unemployment among Round Two cities.

Top Seven Geogra Seven Top Adama & CLUSTER: Adama has industrial park and rail access; multiple market Bishoftu 7.0 8.3 10 7.1 6.3 10 0.0 7.5 center; economy score increases when clustered with Bishoftu.

Jijiga has high administrative capability ranking; low likelihood of climate Jijiga 7.0 3.3 6.7 5.0 10 10 10 5.0 shocks; largest IDP population by far of any Round Two city.

Debre Debre Berhan has high fiscal performance ranking; has new industrial park Berhan 6.6 5.0 10 4.2 6.3 10 10 5.0 but no rail access; lacks major markets.

Gonder is a multiple market center; largest decline in own-source Gonder 6.1 5.0 6.7 4.6 5.0 10 10 5.0 revenue collection; no rail access or industrial park.

Jimma has industrial park and major markets but no rail access; low Jimma 6.1 5.0 10 4.2 2.5 10 10 6.3 unemployment rate; low administrative capability.

Dila has largest increase in own-source revenue collection; low Dila 6.0 5.0 10 3.8 6.3 10 10 2.5 infrastructure score (no rail access, few commercial flights); no industrial park

Debre Debre Markos has highest governance fiscal performance of Round 2 Markos 5.8 6.7 10 3.3 5.0 10 10 2.5 cities; low risk of climate shock; no rail access or industrial park

SCORE KEY ≥ 0 < 3 Vulnerable ≥ 3 < 5 Weak ≥ 5 < 7 Neither Strong nor Weak ≥ 7 < 9 Strong ≥ 9 ≤ 10 Established

14 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service The twelve highest-performing Secondary Cities advanced from Round One to Round Two. In Round Two, these cities were further assessed based on analysis of their performance across 20 key indicators. In addition, four out of the 12 cities were grouped with another proximal (located within 75km or less) secondary city to form secondary city clusters for strategically targeted program investment. Dire Dawa was clustered with Harar, Hawassa with Shashemene, Dessie with Kombolcha, and Adama with Bishoftu. Total scores for the 12 cities, highlighting the seven top-performing geographic areas (3 secondary cities and 4 two-city clusters) analyzed under Round Two are presented in the Figure 9 Scorecard above.

Prior to geographic clustering, which is described further in the section below The Effect of Adding Urban Geographic Clusters, each of the 12 highest-performing cities identified in Round One were examined individually. Individual city scores by thematic indicator area are presented in detail in Figure 10 and narrated below. Figure 10: Round Two Individual secondary City Scores by Thematic Area Geography Demography

10.0 10.0 10 10 10 10 10 10 10 10 10 10 8.0 8.0

6.0 6.0 6.7 6.7 6.7 6.7 6.7

4.0 5 5 5 5 5 5 5 4.0

2.0 3.3 3.3 2.0

0.0 0.0

Economy Governance

10.0 10.0 10 8.0 8.0

6.0 6.0 7.5 7.5 6.7 6.3 6.3 6.3 6.3 4.0 5 4.0 5 5 5 5 4.6 4.2 4.6 4.6 4.2 4.6 3.8 3.8 2.0 3.3 3.3 2.0 2.5 0.0 0.0

Health* Education

10.0 10.0 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 8.0 8.0

6.0 6.0

4.0 4.0

2.0 2.0 0 0.0 0.0

15 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service Infrastructure Total Score (Weighted)

10.0 10.0

8.0 8.8 9.2 8.0 7.5 7.5 6.0 6.0 7.3 7.3 7 7 6.3 6.7 6.3 6.6 6.6 6.1 6.1 6 5.9 5.8 4.0 5 5 5 4.0 3.8 2.0 2.0 2.5 2.5 0.0 0.0

* Lack of variation in the Health and Education scores is caused by: (1) each is reliant on a core indicator present in almost all cities; and (2) detailed city level data for other health (e.g. size of catchment area per hospital) and education indicators (e.g. graduation rates) were not available in the required Assessment time frame. The lack of variety in scores does not diminish the importance of the two core indicators.

ROUND TWO: THEMATIC AREA FINDINGS

GEOGRAPHY

The Geography indicators measure three vital characteristics of a secondary city’s location: access to trade corridors (major roads); proximity to other secondary cities in order to share resources (clustering potential); and susceptibility to negative climatic events (environmental shocks).

All secondary cities in Round Two had access to major roads and so the variation in scoring on this indicator is driven primarily by climatic events and clustering potential.

Overall, high-performing cities like Hawassa and Mekelle are still susceptible to instances of drought or disruptions from earthquakes. Investments in most regions, even those high performing on a number of other measures, will need to account for potential climatic shocks that could strain finances or deter investment. The proximity of cities like Dire Dawa, Hawassa, Dessie and Adama to other secondary cities with important assets (e.g. industrial parks, airports) increases their ability to share resources. This factor is explored further in the section on The Effect of Adding Urban Geographic Clusters below.

DEMOGRAPHY

Demography indicators cover total population size and growth rate, and internally displaced persons as a portion of total population. All Round Two cities had populations over 100,000 with positive growth rates. Internally displaced persons presence is minor except in Gondor and Jijiga, where it is above 10 percent of the total. This could signal potential strains on housing availability, education and health services, and employment.

ECONOMY

Economy indicators measure industrial park employment, availability of financial services (banking), unemployment rates and major market presence. Except for banking, performance was highly variable among the 12 cities. Hawassa is the only secondary city among the 12 cities currently with a high level of industrial park employment. Unemployment rates vary widely between the top 12 secondary cities assessed under

16 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service Round Two of this Assessment, from a high of 26.8 percent in Bahir Dar to a low of 12.6 percent in Jijiga. Adama, Bahir Dar, Gonder, Mekelle, and Dessie benefit from the presence of major markets. These markets are connected to the rural economy of each city’s surrounding hinterland and reflect the predominant agricultural activities found there. While most of the cities were market centers for cereals, fruits and vegetables, several cities benefitted from the presence of specialized markets: coffee and livestock in Harar, fish in Bahir Dar and Dessie, honey in Mekelle, oils and pulses in Gonder, and sugar cane in Adama.

GOVERNANCE

Governance indicators in this Assessment include center of public administration (regional or zonal capital); administrative capability and fiscal performance (World Bank Urban Local Government Development Project II (ULGDP II) scores)11; and increase in own-source revenue collection over a three year period. All 12 highest scoring cities are either a regional or zonal capital. Three cities – Bahir Dar, Jijiga and Dila – had more than a 25 percent increase in own source revenue12 from 2018–2020. (Note: Own-source revenues are funds collected directly by a city such as taxes, rates and fees, under authority delegated to them by the regional, national or state government.) Administrative Capacity and Financial Capability indicators were pulled from assessments conducted under the World Bank ULGDP II which ended in 2018 and in which all 27 secondary cities in this Assessment participated. Dessie, Debre Markos, Mekelle and Jijiga had the highest combined scores on the World Bank project indicators. Jimma scored well below average for both indicators.

HEALTH

Health was scored on just one indicator, the presence of a referral hospital. Other health indicator data such as hospital capacity, maternal and child mortality, or contraceptive use, were not available within the required time frame or were not available from Ministry of Health at the city level. As a core indicator, also included in Round One, all secondary cities in Round Two have referral hospitals and, therefore, received a score of 10/10 on this indicator. This should not be interpreted to mean that all 12 secondary cities perform well on a range of health outcomes. Access to health care including modern contraceptive, antenatal care and overall health outcomes such as maternal, neonatal and infant mortality varies greatly by region and between rural and urban populations and associated programming would need to take those factors into account.13

With this caveat, a city’s ability to serve as a referral hospital for the surrounding population is still a significant attribute and, therefore, should not be discounted when evaluating this indicator and its contribution to an overall city’s selection.

11 World Bank. (2020). Urban Local Government Development Project II. Data provided August 14, 2020.

13 Berhane, Y., et al. (2019). Evidence Synthesis Based on DHS Key MCH and Nutrition Indicators. Addis Continental Institute of Public Health. Addis Ababa, Ethiopia.

17 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service EDUCATION

Due to time and data collection constraints Education was also scored on just one indicator – the presence of a large public university (over 10,000 students). As this indicator was also a qualifier for Round One, and all but one (Adama) of the 12 Round Two cities meet this criterion, there is little variation among Round Two city scores for the Education thematic indicator. As with health, additional data such as enrollment and progression rates, and numeracy and literacy levels of the city’s population would provide addition nuance and insight into a city’s readiness for investment, particularly in this sector. In the absence of this data, the presence of a large public university serves as a proxy for local demand and resources in the education sector.

INFRASTRUCTURE

A city’s infrastructure can signal opportunities for investment and increased ability to accommodate growth. Four Round Two cities located in the north and east part of the country include access to a railway or have a railway network under construction (Mekelle, Dire Dawa, Dessie and Adama). The five highest performing cities with the best overall performance across all thematic areas all had commercial airports with frequent flights to and from Addis Abba (Mekelle, Hawassa, Bahir Dar, Dire Dawa, Jijiga) and the majority of Round Two cities included an operational industrial park or one that is under construction at the time of this Assessment. A secondary city’s ability to grow may be limited by inadequate investment in vital infrastructure such as its water system. While not included as an indicator in the Assessment due to lack of complete data in the secondary cities analyzed under this Assessment, secondary cities’ water coverage, i.e. the easy availability of potable water to residents, varied widely, from a high of 79% in Kombolcha to a low of 49% in Mekelle.

THE EFFECT OF ADDING URBAN GEOGRAPHIC CLUSTERS

The above thematic scores are those received by individual Secondary Cities. However, the growth of individual Ethiopian Secondary Cities is not happening in a vacuum. Cities close to one another have the opportunity to share resources and coordinate development. Consequently, it is useful to see these cities as urban clusters, and to target existing or future programming accordingly. i.e., opportunities for programmatic synergy among cities in close proximity. These urban clusters form links in the inter-city “growth corridors” encouraged by the Government of Ethiopia’s Growth and Transformation Plan II.14 Indicator #3 in the Geography Thematic Area, Geographic Proximity Clustering Potential, defines a cluster as any two or more Secondary Cities within 75 km of each other15 and contributed to the cities overall Round Two

14 As cited in Cities Alliance, “Future Proofing Cities – Ethiopian Regional Cities”. 2016. 15 Before researching this indicator, EPMES proposed a maximum 50 km distance between cluster cities. Upon examination of the data 50 km appears to be too limiting. Other analysts such as Cities Alliance and New Climate Economy use a broader definition of urban clusters, with the boundaries of clusters typically stretching 100-150km and in some cases as much as 250km. For the time horizon of USAID programming we believe the stricter definition of 75 km for an urban cluster used here is more appropriate. See Cities Alliance, “Future Proofing Cities – Ethiopian Regional Cities”. 2016, pp. 10-13, and Ethiopian Development Research Institute (EDRI) and Global Green Growth Institute (GGGI), “Unlocking the Power of Ethiopian Cities”, 2015, p. 9.

18 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service Score. Using this criterion, this Secondary Cities Assessment identified four clusters for further analysis:16 Dessie and Kombolcha17 (21 km); Hawassa and Shashemene (24 km); Adama and Bishofu (44 km); and Dire Dawa and Harar (52 km). In an analysis separate from individual city scores, geographic cluster scores were calculated by taking the maximum performance (score) between the two cities for any given indicator and applying it to the cluster. The scores of already high-scoring cities of Hawassa, and Dire Dawa are boosted by the addition of satellite cities. The Dessie/Kombolcha cluster rises substantially in the rankings, due to the two smaller secondary cities’ ability to share such important assets as a referral hospital and a commercial airport, and their combined economic power which includes Kombolcha’s thriving industrial park. In addition, Adama/Bishoftu gets a score boost from Bishoftu’s proximity to the Eastern Zone industrial park and the Modjo dry port.

While viewing proximate secondary cities as clusters reveals many advantages, it also exposes potential obstacles to coordination and cooperation. This is particularly evident in cities that, while close enough to share economic assets, are subject to governance by different regional states. For example, the urban cluster of Harar and Dire Dawa encompasses two regional-level administrations and a hinterland governed by a third region. Also, Hawassa and Shashemene share economic advantages but are located in different regions. Cooperation to take advantage of clustering depends on overcoming the inevitable administrative hurdles that these jurisdictional differences present.

The Secondary Cities Assessment results after adding geographic clustering of these cities can be found in the Figure 9 Scorecard in the section above.

16 Secondary cities located closer to Addis Ababa than to another selected secondary city were excluded from this Geographic Proximity Clustering analysis. 17 Geographic Proximity Clustering pulls into consideration several secondary cities originally excluded in Round One including Kombolcha, Shashemene, Bishoftu and Harar.

19 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service OTHER FINDINGS

1. None of the three smaller secondary cities added to the initial pool by virtue of being regional capitals with universities scored high enough to advance to Round Two. These positive urban factors did not outweigh their relative weakness in the areas of Economy and Infrastructure. When these cities’ final scores against all 20 Assessment indicators were calculated, they finished at the very bottom of the pool of 27 secondary cities (24th, 26th and 27th respectfully).

2. No positive correlation between a city’s industrial park employment and its unemployment rate. In fact, while the data are thin, the opposite appears to be true. Bishoftu has an active workforce of less than 120,000 and an industrial park with approximately 15,000 employees, yet its unemployment rate of over 27% is the second highest among the 27 selected cities. Hawassa, which boasts the largest industrial park employment of nearly 22,000, still has an unemployment rate of 20%, a bit above average for the 27 cities. One possible explanation may be that industrial parks are demographic magnets, attracting rural residents who move to the city specifically to seek jobs in the parks. Some are hired but many more are disappointed, at least initially, driving up the unemployment rate.

3. No evidence of a strong correlation currently exists between the highest scoring secondary cities and the location of USAID/Ethiopia’s current portfolio of activities. There was no directive in the SOW or the Design Report to consider the relationship between the Assessment results and the location of current USAID programming. However, since the aim of the Assessment is to serve as an empirically driven tool to assist USAID/Ethiopia toward identification of a strategic program approach to targeting, layering and intentional geographic urban clustering (where appropriate), the Assessment Team compared the location of current USAID activities18 with the list of highest performing secondary cities based on the analyzed indicator data available and found little correlation between the two. Perhaps a more revealing analysis for the Mission to conduct in the future would be to analyze USAID/Ethiopia dollar investment in these top-scoring cities as a percentage of USAID’s entire Ethiopia portfolio. The Assessment Team did not have access to data presenting USAID activity budgets disaggregated by city to be able to conduct this analysis, nor was this part of the Assessment Scope of Work. While no apparent correlation exists between the highest scoring secondary cities and USAID/Ethiopia’s current activity portfolio, one cannot conclude that the USAID activities aren’t having a positive effect at the city level.

The results of this analysis are presented in Figure 11 below.19 No strong correlation currently exists between the highest scoring secondary cities and current USAID activity locations. This is to be expected, since previous USAID/Ethiopia program location decisions were not made with intentional geographic targeting in mind. It is noteworthy, however, that the three USAID economic growth sector activities are located in the empirically identified highest-performing Round Two cities of

18 USAID programming data was constructed from a file of current USAID/Ethiopia projects provided by the Mission. It excludes programs implemented nationally as the Activity data provided by USAID did not further disaggregate the national-focused programs into city-level locations. 19 By definition this tally does not include national level programs which nonetheless may have an important impact on the secondary cities.

20 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service Hawassa and Bahir Dar. As USAID Ethiopia moves to a more geographically targeted investment strategy, these activities may serve as a base for strategic programmatic expansion. Figure 11: Number of Current USAID Activites in Round Two Secondary Cities

In addition to examining the correlation between city scores and USAID activities, EPMES also looked at the proportion of activities taking please in the seven recommended geographical areas (Figure 12). As of June 2020, 43 percent of USAID’s activities (ranging from 11 – 35 percent per location) took place in the recommended geographical areas. This count excludes any activities conducted at the national level or exclusively in Addis Ababa.

21 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service Figure 12: Number and Percentage20 of USAID Activities in Targeted Urban Geographical Areas

% of total USAID activites per location

Hawassa & Shashemene 29 35%

Adama & Bishoftu 27 33%

Dessie & Kombolcha 25 30%

Dire Dawa & Harar 19 23%

Bahir Dar 19 23%

Mekelle 10 12%

Jijiga 9 11%

0 10 20 30 40 50 60 70 80 90 100

# of Activities Total # of USAID Activites (June 2020)

20 Some activities take place in multiple cities. For example, “Strengthening Institutions for Peace and Development II” takes place in Bahir Dar, Hawassa, and Dire Dawa among others. For this reason, the percentage of total USAID activities per location should be considered by each location in isolation, not summed across locations which would risk double counting activities. In total (not shown in graph) there are 35 unique USAID activities taking place in the seven targeted geographic areas, covering 43% of USAID’s activity profile as of June 2020 (excluding national level activities or those only taking place in Addis Ababa).

22 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service CONCLUSIONS

This Assessment concludes that viewing secondary cities as urban clusters (one or more individual cities grouped with neighboring cities in close geographic proximity) could have more significance and relevance for USAID/Ethiopia integrated program impact, than viewing and engaging secondary cities individually. It reveals the powerful synergies available to secondary cities when they can share resources, mitigate individual city vulnerabilities and coordinate growth and development as a collective cluster.

Based on the analysis of available indicator data, the 27 secondary cities fall into four main categories. The seven top-scoring geographic areas (three individual secondary cities and four two-city clusters), noted in the first two conclusion categories below, demonstrate the strongest potential for USAID investment and are summarized in the map in Error! Reference source not found. below:

1. Secondary cities with strong overall characteristics and above-average results

Three individual cities – Mekelle, Bahir Dar, and Jijiga – had high overall total city scores, in addition to above-average scores in most of the thematic areas. Each city had one low score in a thematic area, for instance, Mekelle and Jijiga in Geography because of potentially troublesome climate effects (e.g. Mekelle has earthquake risks, Jijiga has challenges with desert locusts and risk of flooding and associated flood-related IDPs), and Bahir Dar in Economy due its exceptionally high unemployment rate of almost 27%. On the other hand, all three cities scored highly on the governance indicators as there was strong reported year-on-year increase in the past four years of revenue, in addition to strong fiscal performance. Figure 13: Map of Top Scoring Secondary Cities and Geographic City Clusters

23 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service 2. Secondary cities assessed within a geographic proximity cluster

Four geographical proximity urban clusters - Hawassa and Shashemene, Dire Dawa and Harar, Adama and Bishoftu, Dessie and Kombolcha - have well above-average overall scores and also score consistently well across each of the assessed thematic areas. In fact, all four clusters outscored or tied the “stand-alone” top-scoring individual cities of Bahir Dar, Jijiga and Mekelle. The lower scores of individual cities on some indicators are overcome through the clustering effect, i.e. sharing strengths and mitigating vulnerabilities across the two proximal Secondary Cities.

3. Secondary cities with some important characteristics but below-average results

Five cities – Debre Berhan, Jimma, Debre Markos, Dila, and Gonder – scored less well than the other secondary cities in Round Two. Debre Berhan benefitted from a recently opened industrial park, but otherwise scored low in Economy and Infrastructure. Jimma had middling scores except for governance, which was the lowest score of any city. Debre Markos and Dila also had middling scores and scored poorly on the Infrastructure indicators. Gonder’s ranking was pulled down by mid-range scores and the burden of a very large IDP population (accounting for 11% of the total city population).

4. Secondary cities lacking two or more core indicator characteristics

The other cities were all eliminated at the end of Round One analysis and scoring due to low overall/total city scores. All lacked at least two of the core indicator characteristics – Population greater than 100,000, Major Transport Corridor, Presence of Industrial Park, Presence of Referral Hospital, Presence of a Large University, and Regional or Zonal Administrative City. Furthermore, even if these cities had been moved to Round Two, all would have scored below the higher-ranked cities or city clusters (See Annex IV) and would not, therefore, have been included in the final list of top-performing secondary cities for USAID/Ethiopia consideration of targeted, strategic program investment. IMPLICATIONS FOR USAID/ETHIOPIA PROGRAM PORTFOLIO

This Assessment was designed “to identify Ethiopia’s dynamic and investment-ready secondary cities that serve as ‘urban anchors’ for surrounding rural areas.” (Secondary Cities Assessment, Scope of Work).

Rapid urbanization has both positive and negative implications for Ethiopia. As a recent comprehensive World Bank review noted, “In Ethiopia, pull factors may be a strong driver of migration. For example, migration to urban areas is positively correlated with labor market conditions at the destination.”21 The secondary cities that ranked highly in this Assessment are magnets for rural migrants in large part because they offer jobs and the hope of a better life through the services and opportunities either perceived or actually available. On the other hand, rapid and massive in-migration creates unsafe and unhealthy conditions for migrants, and potential civil unrest if cities are unprepared to provide serviced land for housing, not to mention health, education and other social services. It can also have a converse negative effect of high unemployment rates if the expectation of available work does not result in gainful employment for the rural migrants who flock to these cities. “If not managed proactively, rapid urban population growth may pose a demographic challenge as cities struggle to provide jobs, infrastructure and services, and housing.”22

21 World Bank Ethiopia Urbanization Review, 2016, p. 2 22 Ibid., p.xii

24 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service USAID can help Ethiopian cities get ahead of this demographic wave by mounting effective, integrated programs in the secondary cities best able to partner in their implementation. These activities could be designed to not only strengthen secondary cities’ ability to cope with arriving migrants, but also benefit rural residents through the extension of infrastructure and basic services. Secondary cities are in a position to extend beyond their boundaries services that rural communities cannot afford to provide on their own. A good example is solid waste pickup, which requires expensive capital equipment beyond the fiscal reach of towns and villages.

A critical component of this layered, integrated programming is governance. Programs focused on local government performance, particularly as it applies to making available serviced land for housing (including land titling and regularization of informal settlements), are critically important. Other donor organizations, notably the World Bank, are active in this sector, but there are significant gaps in their programming that USAID could consider filling. Some of these gaps relate to the urban-rural interplay that is central to the purpose of this Assessment.23

A good example is the matter of urban expansion. Paradoxically, as Ethiopian cities grow in population, they become less dense. The rapid growth in population is not taking place in the center of a secondary city but at its periphery. Informal settlements, often without basic services, make space for urban-rural migrants and IDPs. One possible link to these informal settlements could be USAID/Ethiopia’s linkages to the rural activity portfolio. It may be useful for USAID/Ethiopia to assess its future highland and lowland resilience implementation locations relative to these secondary cities and consider potential strategic program linkages between these cities and their rural hinterlands in such a way that both urban and rural locations benefit from targeted and interlinked program approaches and the interplay between their connected populations.

World Bank projects such as ULGDP I and II and the ongoing UIIDP focus on the existing area of the city: slum upgrading, the paving of existing roads, construction of drainage, etc. The urban periphery, however, gets relatively little attention. What is needed is a comprehensive cross-sectoral program to support the management of peripheral growth. This would include technical assistance in spatial planning and capacity building aimed not only at ULGs but also at the regional administrations which exercise considerable policy and regulatory control over secondary cities.24 Moreover, a focus on secondary cities can encompass other existing and planned USAID programs outside of the governance sector. These high-performing secondary cities may be ideal places to extend USAID programs in other sectors and subsectors, such as land reform. Through the Feed the Future Ethiopia Land Governance Activity, USAID Ethiopia is already promoting structural reforms and strengthening institutional functions like the land information system, as well as piloting the systematic adjudication and registration of urban land.25 This activity could be extended to all the high-performing secondary cities identified in this Assessment.

23 Several elements of this approach can be seen in the USAID Philippines project Strengthening Urban Resilience for Growth with Equity (SURGE), which could be a useful model for USAID/Ethiopia to consider. See https://urban- links.org/project/strengthening-urban-resilience-for-growth-with-equity-surge-project/ 24 Small demonstration projects like the Urban Expansion Initiative, which targeted the four secondary cities of Hawassa, Adama, Mekelle and Bahir Dar have suggested the efficacy of this approach. See Lamson-Hall et al, “A new plan for African cities: The Ethiopia Urban Expansion Initiative”, Urban Studies Journal 1-16, 2018 and accompanying video, 2020, at https://drive.google.com/file/d/1zTQRdnumTbg3OS8Mb2TJWNxUFQlWxQYc/view 25 https://www.land-links.org/project/feed-the-future-ethiopia-land-governance-activity/

25 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service In another example, the Livelihoods for Resilience program could be targeted at the rural catchment areas of high-performing secondary cities. This could not only slow the rate of in-migration to these cities from the countryside, but also ease the strain of inevitable growth of informal settlements. USAID/Ethiopia’s rural activity portfolio could be linked by concentrating highland and lowland resilience implementation in the catchment areas of these high-performing secondary cities. Resilience projects could further link up with urban governance activities to improve service delivery in these fast-growing peripheral zones. Similar synergies may be found elsewhere in USAID Ethiopia’s portfolio, either in programs targeting youth and IDPs or in the health and education sectors. The Assessment points to these seven urban locations (cities and city clusters), in distinct geographic areas around Ethiopia, as the best locations for the targeted, layered programming USAID envisioned in its current CDCS. The data suggest that these secondary cities are most ready to meet the attendant demands of rapid urbanization. As such, collectively they represent the best opportunity for USAID to target its future programming to achieve maximum results. In a 2015 USAID DCHA Case Study in Democracy, Human Rights, and Governance (DRG) Cross-Sectoral Programming, one of the strong conclusions was that “USAID/Ethiopia exhibits ambitious, often impressive Mission efforts at DRG integration in a challenging country environment. In a closed political space, however, the value- add of integration tends to be localized and modest; as huge gains are hard to come by. A major challenge remains in finding ways to more adequately include “thinking politically” in project design, across sectors.”26 In today’s Ethiopia the “value-add” of integrated cross-sectoral programming is an opportunity waiting to be seized.

26 USAID/Ethiopia Study in Cross-Sectoral Programming, 2015.

26 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service SECOND PHASE OF THE ASSESSMENT

Once USAID reviewed and accepted this Secondary Cities Assessment Phase 1 Synopsis Report, the EPMES Assessment Team proceeded with Phase 2 of the Assessment during which the Assessment Database was finalized, Summarized City Profiles for the 11 top-scoring cities (3 individual cities and 4 geographic clusters with 2 cities each), and an interactive Dashboard (including GIS maps) was created.

The Assessment Database and Dashboard present both raw and weighted scores. Raw scores are believed to be useful indicators to USAID when deciding where to locate sectoral programs and projects. The results are formatted to enable empirical comparison of cities across a broad range of indicators. As such, it can serve as a guide toward strategic program integration at the local level and assist USAID/Ethiopia with resource allocation decisions. The interactive Dashboard presents city scores using the Assessment’s default weighting system, with the outlined thematic areas most heavily weighted.

Finally, as part of Phase 1 of the Assessment, EPMES presented and facilitated a virtual discussion of the Secondary Cities Assessment findings and consideration of potential implications for USAID/Ethiopia programming. Notes from that presentation can be found in Annex V: Findings Presentation Notes. In order to facilitate future outreach to the top-scoring Secondary Cities, EPMES also consolidated a list of city mayors and contacts (for USAID internal use only) that can be found in Annex VI: Secondary Cities Mayor Contacts.

27 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service ANNEX I: ROUND ONE - INITIAL CITY SELECTION (27 CITIES)

Estimated Annual Projected # City Zone Region Population Growth Population 2017 Rate % 2020 1 Dire Dawa Dire Dawa Dire Dawa 466,000 2.28 498,607 2 Adama East Shewa Oromia 361,391 4.13 408,042 3 Gonder Central Gondar Amhara 327,661 3.94 367,936 4 Mekelle Mekelle Special Tigray 319,766 4.52 365,116 5 Bahir Dar Bahir Dar Special Amhara 308,877 3.94 346,843 6 Harar Harari Hareri 246,000 2.02 261,211 7 Hawassa Sidama SNNPR 226,721 6.04 270,334 8 Dessie South Wollo Amhara 216,384 3.94 242,981 9 Jimma Jimma Oromia 180,965 4.13 204,326 10 Bishoftu East Shewa Oromia 155,802 4.13 175,915 11 Jijiga Fafan (Jijiga) Somali 153,461 2.71 166,279 12 Shashemene West Arsi Oromia 150,287 4.13 169,687 13 Sebeta South West Shewa Oromia 149,469 4.13 168,763 14 Kombolcha South Wollo Amhara 130,858 3.94 146,943 15 Nekemt East Wellega Oromia 112,533 4.13 127,060 16 Wolayita Sodo Wolayita SNNPR 111,826 6.04 133,338 17 Arba Minch Gamo Gofa SNNPR 110,104 6.04 131,284 18 Debre Markos East Gojam Amhara 105,378 3.94 118,331 19 Hosana Hadiya SNNPR 102,922 6.04 122,721 20 Asela Arsi Oromia 100,639 4.13 113,631 21 Burayu Finfine Special Oromia 95,829 4.13 108,200 22 Debre Berhan North Shewa(R3) Amhara 91,280 3.94 102,499 23 Dila Gedio SNNPR 86,976 6.04 103,707 24 Ambo West Shewa Oromia 88,333 4.13 99,736 25 Gambela Town Gambela Town Gambela 55,394 8.03 69,839 26 Semera Zone 1 (Awsi Rasu) Afar 38,796 6.62 47,022 27 Assosa Assosa Beneshangul Guma 32,972 7.69 41,179

Initial City Selection Explanation Notes: 1. 2017 estimated population data: obtained from USAID/Ethiopia (23 secondary cities are over 100,000 population) 2. Annual growth rate: obtained from CSA, Population Projections for Ethiopia 2007-2037 (2013) 3. City of Ambo was included because its 2020 projected population is very close to 100,000 and the next largest Ethiopian secondary city is considerably smaller in projected population. 4. Cities of Gambela Town, Semera and Assosa were included despite their smaller population size, as they are Regional Capitals with universities.

28 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service ANNEX II: SECONDARY CITIES ASSESSMENT INDICATOR LIST

Table 3 below outlines the final indicators selected and utilized in the Assessment and clarifies any deviations from the initial list of indicators presented in the Design Report. More information on indicator construction and data sources can be found in the Assessment Database under the Metadata tab. Table 3: Final Indicator List Thematic Area Category Indicator Scoring Status Geography Climate and environmental Occurrence of drought, flood, 2 = none Included – Extreme shocks: Drought, Flood, major seismic event, or 1 = any one of these Heat Event removed 0 = any 2 or more from Indicator Desert Locust, Earthquake presence of desert locust event of more than three days that has occurred since 2014. City’s relation to major Distance by road from city 2 = <10 km Included transport corridors and center to major highway 1 = 10-25 km 0 = > 25 km inter-city transport patterns Clustering potential Close proximity to other 2 = < 75km from 2 or more secondary Included – secondary cities included in the cities Revised cluster 1 = < 75km from one secondary city proximity cutoff from Selection pool 0 = none 50km to 75km Demography Population size Population, 2020 estimate 1 = yes Included >100,000 0 = no

Population growth rate Projected rate of pop. growth, 1 = over 100% Included – Measured 2020 to 2030 0 = under 100% at the regional (rather than city) level IDP population Total number of IDPs 1 = less than 10% of city population New compared to city population 0 = more than 10% of city population Physical Transport networks Percent of rural population in 2 = > 50% Dropped Infrastructure connecting the city to catchment area connected to 1 = 25%-50% 0 = < 25% surrounding rural areas city by paved (all-weather) road Availability of rail transport Connection to rail network 2 = operational network Included 1 = under construction 0 = not funded or under construction

29 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service Thematic Area Category Indicator Scoring Status Availability of air transport Presence of airport with 2 = Existing airport with more than 7 Included – Revised commercial flights commercial flight per week cutoff from 5 to 7 1 = Existing airport with 7 or fewer commercial flights commercial flights per week 0 = No weekly commercial flights or commercial airport Presence of industrial park(s) Industrial park within 20 km. of 3 = 1 or more parks operational Included city center 2 = Under construction 1 = Planned 0 = None planned Adequacy of water services % of households served by 2 = > 75% Dropped – City level municipal water service 1 = 50-75% data was not available 0 = < 50% for all cities27 Adequacy of communications Reliable, high speed access to 1 = city 95% covered by cell phone and Included services mobile phone and WIFI WIFI reception 0 = city less than 95% covered by cell networks phone and WIFI reception

Economy Major economic sectors / Presence of major economic / 2 = 2 or more major facilities Dropped – Complete industries and significant industrial facilities for 1 = one major facility data could not be 0 = none found value chains production and processing

Industrial parks, including Employment in industrial parks 2 = > 10,000 employees Included private and agro-industrial 1 = < 10,000 employees 0 = no industrial park parks Industrial parks, including Exports value in $million per 2 = > $1 million Dropped – Complete private and agro-industrial month, 2019 1 = < $1 million data could not be 0 = none found parks Trade activity levels Presence of major markets 2 = 5 or more Included – Exchanges 1 = 3-4 have been dropped,

27 The International Benchmarking Network (IB-NET) contains data regarding city water and sewage services for a large proportion of cities and may serve as a resource for future investigation: https://ethiopia.ib- net.org/countries_results?ctry=10&years=2019,2018,2017,2016,2015&type=report&ent=country&mult=true&report=1&table=true&chart=false&chartType=co lumn&lang=en&exch=1

30 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service Thematic Area Category Indicator Scoring Status 0 = less than 3 scoring revised to allow for greater disaggregation Local economic development Level of staffing of municipal 2 = 4 or more employees Dropped – Complete capacity LED office 1 = < 4 employees data could not be 0 = no LED office found Unemployment rate Overall unemployment rate, 3 = > 5 percentage points below Included – Cutoff 28 2020 average point revised from +/- 2 = < 5 percentage points below average 10 pp to +/- 5 pp 1 = < 5 percentage points above average 0 = > 5 percentage points above average Financial institutions (banks, Presence of leading financial 2 = 10 or more unique bank institutions Included – Given credit unions, MFIs) institutions AND a Commercial Bank of Ethiopia universal high (CBE) Office level 4+29 prevalence of 1 = Less than 10 unique bank institutions MFIs/SACCOs BUT a CBE Office level 4+ indicator was revised 0 = Less than 10 unique bank institutions to focus on banks AND a CBE Office level below 4 only.

Foreign direct investment Amount of FDI, past five years 2 = > $100 million Dropped – Data was (FDI) 1 = $25-$100 million incomplete at the city 0 = < $25 million level. Health Health facilities, combined Presence of referral hospital 1 = yes Included public and private 0 = no Health facilities, combined Number and capacity of 1 = > 0.3 beds per 1000 population (2015 Dropped - Complete public and private hospitals (public and private) national average) data could not be 0 = < 0.3 beds per 1000 population found at the city level

28 20.6% average unemployment for the 27 assessment cities 29 CBE branch levels (1-4) indicate the variety of services available at that branch

31 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service Thematic Area Category Indicator Scoring Status Education Universities Presence of university(ies) 1 = > 10,000 students at a public Included university 0 = < 10,000 students at a public university or no public university present

Governance Regional/zonal status City is the administrative 2 = regional capital Included center of region or zone 1 = zonal capital 0 = neither regional nor zonal capital

Administrative capability and Administrative capability and 2 = performance rating of 90 or > Included capacity capacity performance ratings 1 = performance rating of 80 or > 0 = performance rating < 80 from World Bank ULGDP and ULGDP2 projects

Financial capability and Financial capability and capacity 2 = performance rating of 90 or > New indicator capacity performance ratings from 1 = performance rating of 80 or > added when data 0 = performance rating < 80 source was World Bank ULGDP II project provided

Own source revenue Percent increase of own 2 = > 25% cumulative increase over past 3- Included – reduced collection source municipal revenue, past year period (2018-2020) from 5 to 3 year 1 = 10- 25% cumulative increase over past period three years 3-year period 0 = < 10% cumulative increase over past 3-year period Local government fiscal Capital spending per capita 2 = average of > $100 per resident, past Dropped – Complete performance (annual capital budget divided 3 years data not available 1 = average of $25 - $100 per resident, by 2020 population) past 3 years 0 = average of < $25 per resident, past 3 years

32 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service Thematic Area Category Indicator Scoring Status Land titling/leasing for Number of land plots titled per 2 = average of > 10 newly titled land Dropped – Complete development capita, past 3 years plots per 1000 population data not available 1 = average of 5-9 newly titled land plots per 1000 population 0 = average of < 5 newly titled land plots per 1000 population

33 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service ANNEX III: INDICATOR REVISIONS

Upon the collection and review of available data the AT made three adjustments to the original indicator list as proposed in the approved Design Report. These include:

1. Reduction in the overall number of scored indicators from 27 to 20 2. Substitution of one of the core indicators 3. Elimination of the categorization of indicators as “leading” and “lagging”

1. Reduction in the overall number of scored indicators: Simultaneous with the drafting of the Design Report, the AT continued collecting data with which to measure secondary cities’ performance against these indicators. The constraints encountered in the collection of data are detailed in the Data Collection section of this Synopsis Report. By the time the Report was drafted, the AT had been able to collect sufficient data to utilize 20 of the 27 proposed Assessment indicators. In addition, a demographic indicator for Internally Displaced Persons (IDP) population was added. While inclusion of the other seven indicators would have made the Assessment more robust, EPMES is confident that it would not have substantially affected the empirical identification of the top group of secondary cities listed in the Assessment Scorecard.

2. Substitution of a core indicator: It was not possible to collect sufficient data during the Assessment period to adequately verify secondary cities’ scores for the core indicator “home of a major and/or fast- growing industry”. Instead, the indicator “presence of an industrial park” has been substituted as a core indicator30. EPMES’ research during the Assessment has suggested that while industrial parks do not yet provide the majority of Ethiopia’s economic production, their central position in the GoE’s strategy for achieving middle-income status and their rapid growth in the past few years justifies this emphasis. Also, the presence of an industrial park in a secondary city is closely linked to the rapid in-migration of rural residents seeking wage employment in the industrial parks.31 3. Elimination of the categorization of indicators as “leading” and “lagging”: Two factors contributed to this decision: lack of available data for certain leading indicators, and for other indicators, lack of multi-year data that would allow examination of trends. Examples of dropped leading indicators are:

• Amount of business income tax collected, past five years • Amount of foreign direct investment (FDI), past five years • Number of mobile subscribers as % of population aged 15-6432

30 Note: The initial EPMES conversation with USAID about this Assessment included mention of the presence of an industrial park as a signal or indicator of a city’s potential readiness for USAID support 31 See Lamson-Hall et al, op.cit. 32 For a full discussion of leading and lagging indicators, see South African Cities Network, “Potential of a Better Life: The Tale of Nine Cities”, 2015

34 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service ANNEX IV: FINAL SECONDARY CITIES SCORES Table 4: Individual and Cluster City Scores Round One Score Round Two Score # City (Maximum of 6) (Maximum of 10) Geographic Cluster 1 Dira Dawa & Harar N/A33 8.3 Geographic Cluster 2 Hawassa & Shashemene N/A 7.6 1 Mekelle 6.0 7.5 Geographic Cluster 3 Dessie & Kombolcha N/A 7.3 2 Hawassa 6.0 7.3 3 Bahir Dar 5.7 7.3 Geographic Cluster 4 Adama & Bishofu N/A 7.0 4 Dire Dawa 5.7 7.0 5 Jijiga 5.0 7.0 6 Debre Berhan 5.5 6.6 7 Dessie 4.5 6.6 8 Gonder 4.5 6.1 9 Jimma 5.5 6.1 10 Dila 4.5 6.0 11 Adama 4.5 5.9 12 Debre Markos 4.5 5.8 Round One Cutoff 4.5 13 Kombolcha34 4.0 5.9 14 Harar 4.0 5.8 15 Nekemt 3.5 5.2 16 Arba Minch 3.5 5.0 17 Sebeta 3.0 4.9 18 Bishoftu/DebreZeyit 3.0 4.8 19 Shashemene 3.5 4.8 20 Wolayita Sodo 3.5 4.8 21 Hosana 3.5 4.8 22 Asela 3.5 4.8 23 Burayu 2.5 4.3 24 Semera 2.7 4.0 25 Ambo 1.5 3.5 26 Gambela Town 2.0 3.5 27 Assosa 2.0 3.4

33 Clusters were not scored in Round One. All clusters contain at least one city that scored well on Round One Core Indicators and were Round Two eligible. 34 Kombolcha and Harar, while scoring relatively well in Round Two lagged in performance on key core indicators necessary to be considered among high-performing cities. Kombolcha does not serve as either a regional capital or zonal administrative center. It also does not contain a large public university. Harar, while a regional capital, lacks a large public university and economic investment in the form of an industrial park. It is worth noting that both of these cities cluster with nearby Round Two cities (Kombolcha/Dessie and Harar/Dire Dawa) in which their combined resources make them attractive areas for investment.

35 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service ANNEX V: FINDINGS PRESENTATION NOTES

On September 22, 2020 EPMES presented and facilitated a virtual presentation and discussion with USAID/Ethiopia of the Secondary Cities Assessment results, findings, and consideration of potential implications for USAID/Ethiopia programming. The following are notes from this presentation, including Questions and Answers.

EPMES Secondary Cities Assessment, Phase One Presentation to USAID Notes from Comments, Questions & Responses September 22, 2020

[Note that italicized items are questions that were extracted / presented from the google chat]

SI Participants: Rebecca Lawrence, David Dunbar, Stephanie Schmidt, Anna-Karin Hess

USAID Participants (Not a comprehensive list because many joined and left throughout the presentation): Awoke Tilahun, Belete Deribie, Sean Jones, Tahir Gero, Zemen Haddis, Paul Vaca, Sonila Hysi, Megan Kyles, Margaret Henning, Melaku Mohummed, Michel Haines, Dwaine Lee, Sileshi Damte, Muluken Chanie, Mildred Steward, Miranda Bachman, Fitsum Habte, Meskerem Woubshet, Rachel Cintron, Tyler Holt

Introduction by Paul Vaca: This Assessment was initiated by the Front Office, by Sean. It has been about five months since EMPES received initial direction. EPMES did a deep-dive look into Secondary Cities in Ethiopia to determine where we might focus our Activities. This is driven by the notion that this strategy of layering activities could allow for activity synergy and notable gains. EPMES is going to walk us through their Assessment methodology and findings. They have incorporated pauses into the presentation to allow you to ask questions throughout. We will also have time to reflect at the end. This will remain our focus for the remainder of the strategy period and help us determine how we want to move forward with a Secondary Cities approach.

In Google Chat: Paul Vaca: AGENDA 1. Introduction of Assessment 2. Presentation of Secondary Cities Methodology and Findings (with Q&A) 3. Open Floor for Comment 4. DO3 Secondary Cities Activity Announcement

[David Dunbar presented the First Half of the Secondary Cities Assessment and stopped at this point for USAID questions]

Sean Jones: This was extremely useful for understanding the approach the team took. Were there other assessments or analyses that other donors or USAID or the private sector have done in the past decade or so that might have informed your selection of cities? David: There was one paper released about four years ago from Cities Alliance on the future cities of Africa. Two cities included in our study were noted in that report: Mekelle and Dire Dawa. It was a helpful paper but only those two cities were listed. There are Africa-wide studies but nothing that focuses on large numbers of cities in one country. Though, there was a study of nine South African cities conducted by a local university in South Africa. There was also a 2017 USAID paper from the urban team at

36 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service USAID/Washington by Claire Romonik about Ethiopia in general and urbanization, but that’s going way back.

Sonila Hysi: Thank you for explaining so clearly. I have a couple of clarifying questions. You began the Assessment initially with 27 cities and then used the cut off score point to choose 11, but I am counting 12 in the Assessment Report. In that initial cutoff, did one of the cities get cut off? How did you choose that cutoff?

David: We did not include cities if they were lacking in two of the six areas [for Round 1]. That was assessed as being a reasonable place to cut off. We also went back and scored all cities from Round 1 as if they had advanced, and they scored low in the Second Round as well. To your first question about the number of cities, we realized that clustering was a much better method of assessing them, especially with regard to the potential for future USAID program investment consideration. So, there are seven geographic locations that contain three individual cities and four clusters (2 cities in each cluster). That’s where the total of 11 comes from. I’ll go into more detail about this in the second half of this presentation.

[End of Presentation Time for Questions]

Paul Vaca: Economists have pointed out that borders do matter. For instance, NY state does less trade with Canada than would be predicted by proximity. A number of city clusters that EPMES has selected do involve borders, like Shashemene and Hawassa. To what extent do your findings show this border impact. Or does this not play a significant role? Or does it potentially benefit cities because there are more layers of government with which to coordinate?

David: That’s a good example of borders. A more drastic one would be Dire Dawa and Harar because they are regional capitals. Certainly, there would be issues to be tackled by a governance program. During this Assessment, the EPMES team were looking from the point of view of economic and demographic drivers. People move between these areas for employment opportunities and those don’t recognize boundaries. But, certainly, any governance program would have to deal with the question of borders, but yes there could be an upside benefit as well. Sean Jones: You did a really good job at providing a concise presentation to some folks who are looking at the Secondary Cities Assessment data for the first time. So, thinking about the top seven geographic areas, the last slides drew a correlation between existing programming and the geographic areas. Is there a sense what percentage of USAID programming, removing Addis, correlated with these geographic areas?

David: We did not look at that number specifically. We did get data regarding program size and location and how much was being spent in each region. That would certainly be interesting to look at. A big issue that we faced during this Assessment was a lack of disaggregated data down to the city level. The city level doesn’t figure prominently in GoE CSA collection and dissemination efforts.

USAID: It appears that the majority, if not all, data is focused on those urban areas but maybe less so on rural conditions or rural economies that might have contributed to urban areas. Is that right? What’s the right way to look at that urban-rural connection?

David: There were data we wanted to have but weren’t able to get, like hospital catchment areas (e.g. the reach of the hospital system beyond the urban area into the rural hinterland). We were hoping to get population figures for those hospital catchments, but we were unable to collect this data from CSA, as they assigned the same number to all hospitals. We did look at markets, agricultural markers. The presence of markets indirectly speaks to rural areas. But we were really focused on the cities in this Assessment.

37 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service Paul Vaca: I’ve noticed that there are a number of questions in the chat box here.

“Rachel Cintron

9:52 AM

It seems that we are looking for cities with a high likelihood of success - and where most of these factors are already present. Would there be a case for working in cities that score less well but serve areas/populations of importance - based on "equity," need, or size of population/refugee population?”

David: Certainly, but we were tasked specifically at looking at cities for general and economic success in the near future. So that was really not a task for this Assessment.

Rebecca: [Missed some of her response]. Those are things that contribute to other areas of programming like resilience and the Feed the Future projects. It’s important to think about the focuses of programming and cities and how to balance those. David: There are many factors that drive people from rural areas into cities that related to difficulties in earning a living in the countryside. The extent to which rurally targeted programming addresses the needs of rural populations could affect the rate of flow into cities.

“Tyler Holt

9:59 AM

Great presentation. In designing our (DO3) Secondary Cities activity we found the World Bank's prior work and contacts to be useful. "Second Urban Local Government Development Program (ULGDP II) and follow-on work. Cities Alliance has been a sub and collaborator with the WB. What can you say about WB work on secondary cities, and are they screening like we are? Any assessment of city-based political will?”

Paul: We know that they have the World Bank program with Cities Alliance. Can you talk about how WB is taking their approach to secondary cities and provide a comparison? David: The WB is now in their third program. They selected cities based on past performance in previous programs and size. Once they’re in the program, they’re expected to meet performance targets. The allocation of funds in the next phase of the WB program is based on performance targets. Two of our indicators for this Assessment came from ULGDP2. I think the WB has found these to be good motivators because there are dollars attached to performance. To the second question, there was not a political will indicator in this Assessment. Political will is hard to judge empirically and we couldn’t conduct key informant interviews. It would be interesting, but we didn’t have that luxury.

“Fitsum Habte

10:03 AM

Nice presentation. Can you explain more on how governance was measured? I am bit surprised that cities like Jigjiga has one of the highest governance scores.”

38 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service

David: We used several indicators in the governance areas, included those we just mentioned. There is also year-on-year data regarding performance in collection of own source revenue over a five-year period. Mekelle, Bahir Dar and Jijiga all scored highly on the governance indicators as there was strong reported year-on-year increase in the past four years of revenue, in addition to strong fiscal performance. I take it from your comment that Jijiga is not a well governed city?

“Zemen Haddis 10:04 AM

Thanks for the presentation. Does the economy parameter capture hotel and tourism? Was it not possible to cluster Bahir Dar and Gonder?”

David: We did not have a tourism indicator. We were fairly limited in the number of indicators we could have. We tried to use the strongest indicators. As far as clustering, Bahir Bar and Gonder might be possible but they are a little further apart. They’re not as obvious as others. We set our criterion at 75 km. Other cities were a bit closer. Bahir Dar and Gonder would have been much further apart.

“Kathrin Tegenfeldt 10:07 AM

World Bank also funds a $500m WASH program in all secondary cities”

“Kathrin Tegenfeldt 10:09 AM

My understanding is that the wash related indicator was dropped. Could you share a bit more about this?”

Paul: We hear WASH as a focus in urban areas. Could you talk about how the team may have or declined to look at WASH?

David: We did look at WASH but we were limited in being able to integrate WASH into this Assessment due to the limitation in the kind of WASH indicators that were consistently available from the GoE across the country at the city level. The ULGDP2 indicators were more useful. We are aware of that WB program that Kathrin mentions in her chat comment.

“Tesfaye Wolde 10:13 AM

Can you please clarify the basis in which the major regional cities like Mekelle, Hawassa and Bahir Dar be considered as secondary cities compared with others?

39 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service David: Basically, our definition of a Secondary City for the purpose of this Assessment was any city with a population of 100K or over. All three regional cities were over that level.

“Kathrin Tegenfeldt 10:13 AM

What would have been a useful wash indicator?”

David: We tried to find water service data on the percentage of households served by central water or the potential loss rate from leakage. We knew this kind of data existed, but despite several follow ups to GoE offices, the EPMES Assessment team was unable to receive the requested WASH data during the 7 weeks of data collection. USAID: We are actively designing suites of new activities for each of the eleven projects we have. Geographic targeting was a critical part of that. Now that we have this valuable input from this Secondary Cities Assessment, how do you think this Assessment Report can be useful for USAID teams regarding where activities should be focused?

David: Overall, the Assessment Report data and findings are indicative of cities, particularly their economic strength. If the Mission has the time and ability to do it, this report gives you a focus on a small number of cities where you could maybe consider to do more intensive research to fine tune the selection of project or activity locations. It comes back to the question of whether the Mission decides to invest program resources in the places that are strongest already or those with the greatest need. The argument for those that are strongest already is that they’ll have quicker success and are likely to expand as the program grows. The major takeaways are the focus on clusters. It’s interesting to think about inter-city cooperation and how they share catchment areas and rural hinterlands. People may move to one city or another and if those cities coordinate handling of migration, it’s an important improvement. Tyler Holt: I’m with the USAID office planning the secondary cities activity with Cities Alliance. Due to the small funding size (only a couple million dollars), we’re only able to work with two or three cities. We were planning, their plan was not to identify cities ahead of the award but instead work collaboratively with the 10 cities you have identified and check in with leaders regarding political will. Do you think that’s a good approach? David: Yes, I think that’s a good approach. Using the EPMES analysis work conducted under this Secondary Cities Assessment as a starting point is a good approach. It was not in the nature of our Assessment to look at political will, but, yes, that’s essential. I hope that you can use our research as a starting point. I’m sure you’re aware of work done in the Philippines on secondary cities. I found that to be a good starting point. Tyler Holt: Yes, […] I worked there on that project for 4.5 years. The Mission had done sub-level governance work for some time. David: I encourage you to use this as a starting point. Questions of political will often change rapidly, so wait until the award to make that decision. Paul Vaca: One counterpoint is that we do not have a long history of DG programming at the sub- national level. This was clear when we were doing the Theory of Change workshop for the citizen

40 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service responsive governance PAD. Yes, there might be a meaningful place for DG to go but DG funds are the thinnest and might not be a priority at the sub-national level. You mentioned governance being key, but we might want to take that to heart since we haven’t had that focus in our own programming. We’ve looked more at the economic side than governance at the sub-national level. That’s important for us to recognize.

USAID: I couldn’t agree more – governance and financial management were all mixed in. But in Ethiopia, the focus of the Cities Alliance is public financial management and ensuring J2SR, that the country is heading to self-reliance financially and is economically sustainable. […] Limited funding means that we’re going to have to be very modest in what we think we can achieve. We didn’t want to spread ourselves too thin in this collaborative model so we’re focusing on two to three cities.

David: You might learn from the health and education teams to hear what their experience has been with governance on the ground and the experience they’ve had at sub-national level in service delivery. The World Bank has spent a lot of money and time on this.

“Jennifer Karsner 10:24 AM

Other Missions, like Senegal, have used blended funding for subnational governance.

We have also used resilience funds for own-source revenue generation.”

USAID: The local governance assistance program in Senegal involves own source revenue. That’s another interesting model to look at. David: One person you [Tyler] might want to talk to at the Urban Expansions Initiative, is Patrick Lamson- Hall. He is doing interesting work around planning simple but effective planning for new neighborhoods on the outskirts of Ethiopian cities. They work with planning offices, particularly in Hawassa. I will send you the contact info.

Tyler Holt: We have been working with Kevin Nelson in the USAID Urban Office and Cities Alliance who have partnered with WB. And UN habitat worked on three WB supported urban programs. It will be good to connect all these names. Jennifer [Unsure of Last name]: Do we have a good idea of how regional power dynamics would be affected depending on how strong cities get? I understand the intervention might not tip anything one way or another in the valley where they’re fighting for control of three woredas. If we picked Jijiga, how would we deal with Afar and regional power dynamics?

David: That’s not something I could address; it didn’t come into the scope of this Assessment.

Rebecca Lawrence: But it is good point. It needs to be a consideration given the risks and longer-term sensitivities so as not to exacerbate these contexts.

USAID: This relates back to Rachel’s point about equity and what are the optics around equity in terms of the way we structured the Assessment? Would we do complimentary programming elsewhere?

41 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service David: We were happy to see that not all cities were concentrated in one region. The indicator results ended up with the top 3 individual cities and the strongest 4 urban clusters actually covering the majority of regions. Paul Vaca: We’ve got about a half hour left. The intention was to get a pulse check from the Mission that this is useful as we move to Phase Two of the Assessment and the more in-depth City Profile reports that will result. Is there anything that would give us pause about the methodology or are we confidently moving into Phase Two?

Rebecca Lawrence: I think the questions raised are excellent. Because we already completed the data collection phase, they are worthwhile for framing the upcoming City Profile briefs.

David: I have no other thoughts, though I don’t think I mentioned that at beginning we looked at about fifty indicators and did throw a wide net, but there were insufficient city-level data available for a lot of them. Based on my experience, however, and the results of this Assessment thus far I really don’t believe that if we had more indicators that the results would be any different. It would be nice to have the ability to refine a bit further, but given the Covid-19 situation, the results reflect the most dynamic and investment ready cities. Rebecca Lawrence: It comes back to the original scope to review existing data and evidence. The approach Tyler described is how to layer on some of these decisions. David could you summarize what the Assessment City Profiles will look like?

David: Basically, they are a deeper dig into the seven thematic areas already described. We’ll just give a little more nuance to the results we have. The City Profiles will Include some empirical information and expand the presentation of data beyond what we collected in the Phase One data collection phase.

Paul Vaca: Is anyone at the Mission raising red flags on the way forward or the way we’ve selected these cities that need to be addressed before the EPMES Assessment Team moves forward with deep-dive reports? From what I’ve heard, nothing really jumped up to that level. This is your last chance to shape upcoming reports. Speak now or forever hold your peace.

USAID: I think this is great. Any details you can show about governance specifically would be really helpful for future planning.

USAID: I agree. If you don’t want to make assessments of governance, at least provide information about the city administrator, point of contact, what the urban administration is, and how long they’ve been around.

USAID: We’ve heard from partners a lot about turnover of woreda officials. If you look at that, that would be helpful. And sources of own source revenue, that would be helpful.

Sean Jones: This comment is maybe less for SI and more for others, over the next couple months, there will be dual tracks where SI will move forward to phase two, but on our side, we have work in USAID looking at where our activities are, in which geographic areas. We’ll have conversations about the tradeoffs about where current and future activities will be if we were to invest more. I see a two-track process coming forward.

Paul Vaca: Great – it seems like we have a two-track way forward. As we’ve stated before, EPMES is providing valuable thinking into the Mission’s programming of secondary cities. We will take this Secondary Cities Assessment Report and any subsequent reports or City Profiles and ensure that they are presented

42 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service during the Activity Design Phase and when we choose their geographic focus, so that the Mission will wind up with synergies at the core of the CDCS.

EPMES: These are great insights. EPMES has heard some things to help shape the Phase Two City profiles.

USAID: We look forward to keeping the discussion alive as we make decisions critical to our USAID/Ethiopia strategy.

43 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service ANNEX VI: SECONDARY CITIES MAYOR CONTACTS

After completion of the first draft of the synopsis report and the assessment presentation USAID requested EPMES to generate a list of city mayors and contacts for future outreach. While outside of the scope of work EPMES was able to generate the following list in the available time frame for cities falling within the targeted geographical areas. [The information in the table below has been redacted] Year Name of Secondary Appointed the Phone Number E-mail Address City to Office Mayor (if provided) Adama Bahir Dar

Bishoftu

Dessie

Dire Dawa

Harar

Hawassa

Jimma

Kombolcha Mekelle

Shashemene

44 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service ANNEX VII: ASSESSMENT DATABASE OVERVIEW

Data presented in this report can be viewed in the Secondary Cities Database. The database is not indented to be interactive; it is simply a method for displaying the underlying data in this report. Instead database information will be incorporated into an interactive dashboard in Phase Two of the assessment. The database contains the following sheets and corresponding information: Table 5: Database Overview

Tab Description

Round One Round One Scoring: Contains all 27 secondary cities included in this Assessment. Each city is scored on the six core indicators using the scoring criteria found in Annex II: Secondary Cities Assessment Indicator List Each indicator is then standardized on a 0 – 1 scale. The sum of all six indicators creates a city’s final Round One Score.

Round Two Round Two Scoring: Contains all 27 secondary cities included in this Assessment, noting which cities were classified as Round One eligible due to their performance on the six core indicators (Column B).

In Round Two, 20 key indicators were broken out into seven thematic areas.

• Each indicator was scored using the scoring criteria found in Annex II: Secondary Cities Assessment Indicator List and then standardized on a 0 – 1 scale to ensure they all contributed equally (a maximum of one point) to the Thematic Total. • The Thematic Total consists of the sum of all indicators within a thematic area for a given city. Thematic Totals were then standardized on a 0 – 10 scale to ensure they all contributed equally (a maximum of 10). • Thematic totals were then weighted according to the methodology noted earlier in this report and summed to create the Round Two Score (Column C). Weights can be found in cells A1:B9.

Round Two Cluster Contains the same information as the Round Two tab but includes four city clusters. The score from the cluster city that performed the best on any given indicator is used to create the indicator score for the cluster. The rest of the process follows the Round Two tab.

Geography Contains raw data and constructed indicators for the geography thematic area.

Demography Contains raw data and constructed indicators for the demography thematic area.

Economy Contains raw data and constructed indicators for the economy thematic area.

Governance Contains raw data and constructed indicators for the governance thematic area.

45 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service Tab Description

Heath Contains raw data and constructed indicators for the health thematic area.

Education Contains raw data and constructed indicators for the education thematic area.

Infrastructure Contains raw data and constructed indicators for the infrastructure thematic area.

USAID Activity List Contains data on the number of USAID activities being implemented in the secondary cities, disaggregated by technical /sector area.

Metadata Provides descriptions and sources for all data in the report.

46 | secondary cities Assessment, PHASE ONE synopsis Report USAID/Ethiopia Ethiopia Performance Monitoring and Evaluation Service United States Agency for International Development Entoto Street Addis Ababa, Ethiopia