It is worth understanding that the manufacturing industry is the right and healthy sector of the urban economy, along with a simple, efficient public and private service sector.
Therefore, the healthy growth of cities should be directly related to the growth of this sector, while it should be an indirect result of the production of the agricultural sector.
For ages, the government tried to explore the economy of the country based on agriculture yesterday and today under the title Ethiopia’s Economy Yesterday and Today.
In the past twenty-seven years, it had been said that “we had a developmental government and an agriculture-led economic policy,” but the performance was very weak, so that it is very hard to forget about food insecurity and the limited growth that was recorded. The government and private service sectors performance was below the average.
The share of the agriculture sector in the overall economy has decreased, the service sector has increased, and the growth rate of the sectors has increased from 6.3 percent in 2011/2012 to 13 percent in 2017/18. In this situation, it can be said that transforming the economy from agricultural led to that of the industrial sector is unmated.
It is better to look the challenges of the new direction of structural change of the government in this article. Failures that have been in due course are those include implementation and the continuing problems in the agricultural sector, and as a result, agriculture that has not been able to realize production affects the industrial sector in three ways. Due to the problem of supply of raw materials and other inputs, the lack of wide market potential and demand in the country and the drought of investment (Capital) which the sector needs at a high level. It is easy to see that all the three challenges mentioned above, including others, will seriously affect the relations of the manufacturing institutions with the wider society and the whole country, and it will have a strong negative effect. The lack of foreign exchange the economy has encountered is a headache not only for importers but also for the manufacturing industry, so it is heard from the press conference that the actors in the sector are forced to cease function, reduce, and lay off their employees to skirmish with their difficulties, both individually and as a group.
This is because the sector uses a large amount of inputs, including agricultural products, from foreign markets. It used to be that it was called mining and crushing, and it seems not only because it was not possible to start the manufacturing industry sector in the agricultural sector as a resource for the products that the country exports to the foreign market, but also because it was not wanted.
Sesame, nugget, soy sauce… the country produces and supply to the foreign market, but paradoxically, it imports a lot of edible oil from the foreign market and distribute it according to quota.
In general, modernizing agriculture and making it efficient, working to produce products that are used as input for the manufacturing industry in the country in the first type, quality and quantity, investing in the agricultural sector, for the benefit of the masses, pouring knowledge, ensures the benefit of the masses, but it is not an easy task like buying and selling even in the foreign market. It is important to understand that although it is not a source of benefit for a few in the short term, it is useful for all in the long run; it is the beginning and foundation of further processes. In the manufacturing industry sector, products are produced that are small in quantity but more valuable by using resources or raw materials that are large in quantity but cheap in price, with knowledge and technology.
Therefore, even if the foreign currency is cheap, for the sustainable growth of the sector for a manufacturing industry (assuming there are others; Ceteris Paribus, With Other Conditions Remaining the same.) It is worth understanding that staying away from the market is a challenge in itself, but staying away from the inputs and raw materials is a relatively bigger challenge.
A local manufacturing facility that imports its raw materials and inputs from China, but the market is right under its nose, it will find it difficult to continue in the long term as a competitor with a similar Chinese facility that supplies its products to the Ethiopian market. Without forgetting that there are still others, both of them, when they stay away from resources and the market, they are listening to the rest.
The growth of the agricultural sector should be ensured not only by the additional amount of production produced for various purposes, but also by the increase in the income of the majority of the producers. When the income of the masses increases, it is used by the economy for consumption and what is left for savings and investment. The consumption demand of the large farmers and herdsmen, which grows with the income, is the basis for the development of the manufacturing industry.
Even the manufacturing industry startups operating for the domestic market are few and limited to the needs and markets of the city.
Although beer, bottled drinking water, food processing, construction material manufacturing and other factories are profitable for the time being, if they are not connected with the demand and purchasing power of farmers and pastoralists in the wider market, it is difficult to maintain the sustainable growth of the industrial sector, especially the share of the economy.
It is only used by traders and foreign producers, but it is a good example of the needs and market of modern development of the large farmers three decades ago and now.
The farmer did not want to use modern equipment, or it was less, started to use it, they produced more products, they used it, so their demand grew, but without creating employment opportunities for the people of the city, it was offered to him at a high price.
It means that domestic efficiency, profitability, consumption, savings and investment have weakened over the years. At the same time, if the demand and capacity to drink beer, use cement, bank loans, buy insurance coverage, etc., does not increase gradually, the further development of these institutions will stop at one place. It will also be difficult to move to the global market.
Anywhere, it is possible to win for the long term by using the first opportunities, reducing the challenges, enhancing the competitiveness in the process, especially in the manufacturing sector through experience and mass production.
With the problem of supply of resources, the direction of industrial development, which is aimed at the limited domestic and foreign markets, has to be corrected already because of the main reasons mentioned above.
It might be reasonable for the government to rely on self and domestic, homegrown economic aspect notably on capital to realize the structural change.
BY LAKACHEW ATINAFU
THE ETHIOPIAN HERALD FRIDAY 21 OCTOBER R 2022
