The government pays special attention to the manufacturing sector because as a viable sector, it plays a pivotal role for import substitution, boosting export, promoting innovation, creating value chain between agriculture and industry and to develop a self-sustained private sector led economy.
Currently, as a result of the war underway in the northern part of the Ethiopia, a lot of economic destructions have occurred by the terrorist TPLF. Among others, the destruction targeted industrial parks impose grave economic harm on the country. Until the rehabilitation of the destroyed manufacturing sector is underway and become reproductive, it seems essential to substitute the gap by invigorating the manufacturing industry in other parts of the country.
But there are numerous problems that must be addressed regarding the peacefully operational manufacturing industries. Among others, power interruption, shortage of inputs, insufficient provision of foreign currency from banks, absence of places where products can be displayed and functioning market are the core problems need swift solution.
Maryamawit Engdawork is an economist by profession and works as an advisor for the Minister of Industry. As to her, various measures are undertaken in order to improve the sector. Among the measures, the ten years perspective development plan is the principal one in which problems starting from inputs up to the market are identified.
According to Professor Alemayehu Geda, an economist at Addis Ababa University Department of Economics, until recently, the economy showed significant progress but the contribution of the manufacturing sector to the nation’s Gross Domestic Production (GDP) is only 7 percent though it was planned to reach to 17 percent.
Regardless of registering significant progress in its expansion, the manufacturing industry of Ethiopia is lagged behind from some developing countries in terms of being competent. For instance, it is 20 percent back from Vietnam and even as compared to Cote devour and Kenya it lagged behind. In fact, the economic reform is under implementation and the export performance is improved but more work is needed to bring long lasting solution, the economist explained.
Ethiopia has abundant natural resources and its economy is relied on agriculture. The export products are dominated by primary economic activities with no value addition.
As to Maryamawit, to propel the economy towards prosperity, the nation has various opportunities and among others, the majority of its population is youth in which 70 percent of them are below the age of 30 which can be strong labor force. Besides, the abundant natural resource such as minerals, water, and arable land make the nation advantageous in facilitating its journey to development. The abundant renewable energy sources can enhance power supply but if well exploited.
The Ethiopian Airlines which is popular in the world is playing pivotal role by transporting export products to the international market with preferential price. The expansion of asphalted roads and rail way supports easy transportation of freights to the port of Djibouti and other ports.
The economic progress and enabling environment enhanced the inflow of foreign investment from time to time. As a result, investors those came from abroad engaged in agriculture, trade and manufacturing and could be able to create job for thousands.
The establishment of African trade preferential zone has created good opportunity to Ethiopian products to be sold in eastern and southern African nations’ markets.
According to the recent Industrial Parks Institute report, establishment of most industrial parks is carried out by the allocation of government finance. The objective of the establishment of the industrial parks is to attract local and foreign investors to begin production in the parks.
Investors enjoy various services provided there and among others, shades in cheaper prices, a one stop service such as the provision of tax collecting and the bank services, cheap electric power and internet services, water and proper west management system friendly to the environment and the availed residential houses and meal services both for the managers and workers.
However, as to Maryamawit, the production and supply performance of the industries has not reached to the level of what is expected from them. In fact, the industrial parks landscape has its own limitation in utilizing sufficient inputs and human resources. The production system is not organized in a way to attain sustainable development.
Not only these, according to Professor Alemayehu Geda, the recently registered economic growth does not resulted due to increment of production and productivity through the involvement of the private sector it is rather obtained due to the expansion of infrastructure invested by the public sector.
As to him, in fact the stretching of infrastructure such as roads, health and educational sectors contribute a lot for the economic growth directly and indirectly. The roads transport helped to transport agricultural products swiftly to urban centers where they find the market.
The expansion of education and health centers also supplies well qualified and productive human resource to the market in which indirectly contribute to the growth.
In addition to these, 50 percent of the investment capital comes from foreign investors which has its own demerits because as investors felt uncertainty due to political and economic reason, they might withdraw their capital and invest in somewhere else.
On the other hand, as to Maryamawit, weak market system prevailed locally and shortage of foreign currency still remains as challenges.
There are also good opportunities to the sector. Being the member of IGAD and AGOA chance which currently suspended enable the manufacturing products to get market. But even if there is opportunity as compared to other African countries, Ethiopia benefited less than others in this regard.
As to Alemayehu, to attain structural change that is to say to change agricultural led economy in to industry led one, the expansion of manufacturing is essential. The sector could attract investment; create job opportunities to both the urban and rural youth which remain idle due to lack of job.
Currently, the export is dominated by merchandizing agricultural products with no value addition. For instance, Ethiopia exports fruits and chickpeas to the foreign market and paradoxically imports juices and edible oil from abroad. In order to tackle this paradox, the emerging manufacturing industries flourished here and there must be adjusted in the way they can process fruits and pack as juices and supply to both domestic and foreign markets. Similarly, they can produce edible oil from chick pea and supply to domestic markets and in such a way they create job opportunity for thousands, substitute imports and boost export.
As to Alemayehu, through the production and exporting of few agricultural products attaining sustainable development is impossible. Therefore, products must be diversified. In addition to agricultural products processed and finished industrial goods should be exported both quantitatively and qualitatively.
However, currently, up to 75 percent of export commodities are derived from agriculture and produced in small scale farming. It is also rain fed and utilizes fewer inputs.
Even though 80 percent of the nation’s labor force is engaged in agriculture, Ethiopia is still food aid recipient country. The sector is vulnerable to global warming and climate change. During the extreme weather condition, it suffers from drought and flood in time of heavy rain fall. When farmers yield is hit by drought and flood, they might face uncertainty and leave their home to meet their food requirement from other sources.
Apart from natural destructive phenomena, land portion of farmers become lower from time to time due to population pressure as a result of the farmers are forced to share their farm land to their children when they become above the age of 18. This again makes the farm land more fragmented which adversely affects land productivity. The less utilization of inputs also reduces the amount of yield.
According to some independent think tank group, about 30 percent of farmers are land less. Hence, shifting the stranded labor force in the rural part to the non-farming sector is essential and to that end expanding the manufacturing sector could be a way out to absorb the idle labor force.
The other thing that should be considered is that the exported products must be globally competent and to make it fit to the market, providing quality product with sufficient amount of quantity is not negotiable.
In line with this, protecting rights of the workers and creating healthy working environment has its own positive impact in raising productivity. Respecting workers’ right to association and express their feeling incentivize them to be productive.
When dispute arises between the industry management and workers associations the situation must be resolved through dialogue. So far, the government introduced various laws helpful for the protection of workers’ rights but still there are shortcomings in enforcing the laws. In this regard, often the Ethiopian Workers Association Confederation explained its concern.
Therefore, it should be understood that, addressing of the shortcomings of the manufacturing serves to move the nation’s economy forward.
BY ABEBE WOLDEGIORGIS
THE ETHIOPIAN HERALD DECEMBER 15/2021
