Currently, the service sector is emerging in tandem with Ethiopia’s agriculture-driven economy. Some economists consider the economic trend as an unhealthy one. As a result, economists argue that the country needs to support its service sector with strong industrial base.
Dr. Gutu Teso President of Oromia Economists Association told The Ethiopian Herald that if Ethiopia has to balance its economic growth, the manufacturing sector has to take the lead as that is the only way to push the agriculture sector forward.
The experience of developed countries indicates the passing of their economy through three stages; agriculture, industry and service. “When we see the current status of Ethiopian economy, it jumped from agriculture to the service sector. And those service sectors were not considerate to the demand of the manufacturing sector. Most of our services are dependent on foreign industrial sectors,” says Gutu.
When the government started involving the service sectors in the economy, it engaged private investors in the education sector, health, finance, sectors and the Ethiopian Airlines, notes Gutu. Meanwhile, from different developed countries’ experiences he says that economic growth follows the step from agriculture to industry and then service.
According to him, even though the current service sectors in Ethiopia play dominant role in the economy, they do not require huge initial investment. That also makes the status of the Ethiopian service sector low in terms of quality and its structure. “In this case the service sector demands huge investment and infrastructure.
That has not been done. On the other hand, the manufacturing sector requires huge initial investment. But the situations in the past few years could have made attracting foreign investors in the manufacturing sector difficult,” he argues.
Gutu also believes that the idea of liberalizing some significant sectors could play crucial role in boosting both the manufacturing and service sectors.
However, Dr. Tekie Alemu Economics Lecturer at Addis Ababa University argues that the key secret behind the growth of developed countries was the implementation of industrial protectionism.
As a result, “Ethiopia has to transform and protect its value -adding agricultural and industrial sectors. In order to balance the economic role of the two sectors, agriculture and industry, the government must exert its utmost effort in making them feed on each other. Industrial parks must be capable of fulfilling domestic demands, which is of a very crucial significance in terms of boosting the Nation’s economic progress,” he stresses.
However, pulling back the service sector just to put the industry upfront cannot be a solution, Gutu underscores adding that it is mandatory to encourage local investors’ engagement on the sector.
He also argues that the nation’s industrial policy and strategy by itself has a problem. He says it is important to encourage local small scale enterprises and industries to be involved in producing different types of commodities with specialized manner.
Even though Tekie agrees with the importance of giving priorities to local investors and finding the way to strengthen the manufacturing sector, he argues that liberalizing most value-adding sectors like Ethio Telecom or Electric Power Corporation may not be a wise move in balancing the economic contribution of the industrial and service sectors including agriculture.
“If they are not protected they may not make the significant economic contribution. It is also better to protect the industrial parks that are launched by balancing market competency, which could be achieved by covering local demand,” he stresses.
Fasil Tadese is Economics Lecturer at Unity University. For his part, he argues that major inputs in the private and state sectors to link the agricultural, industrial and service sectors have not been used during the past years.
Therefore, he suggests that it is better for both the government and private sectors to utilize the human resource, land, seasons, minerals, capital in order to put a strong industrial base and balance the contribution of the service sector to the economy.
The Ethiopian Herald July7/2019
BY HENOK TIBEBU
