Though Ethiopia is still categorized as an agrarian economy and the sector holds nearly 80 percent of the labor force; it is the major foreign currency earner; supplier of raw materials to the agro-industry and food items to the local market. In fact, the sector kicked in the lion’s share for the economic growth the nation has registered in the last few decades.
Utilization of inputs such as fertilizer, pesticides and herbicides which are imported from abroad played pivotal role to enhance the sector’s productivity. Nevertheless, the sector is still more of rain fed and vulnerable to extreme climate condition. Many scholars in the field agree that, bringing sustainable development is hard while subsistence agriculture plays the leading role in the economy.
Therefore, phased actions to bring structural change have been taken as a way out. The emerging economies such as China, Brazil, South Africa, Turkey and India’s modern history relates that they achieved structural change by reducing the role of agriculture in their Gross Domestic Production and enhancing the manufacturing sector. They shifted the labor force stranded in the agricultural sector to the non- farming sectors such as the manufacturing and the service.
Manufacturing sector by its nature is more capital and technology intensive which make it highly productive. Unlike in agriculture, workers in the manufacturing industry engage in production day and night throughout the year. It also utilizes relatively well trained labor. Compared to agriculture, it needs small area for the installation of machineries and working activities. On the other hand, it can create job opportunities to hundreds of thousands.
The successive governments in the last two decades and a half have aspired to attain economic structural change and accordingly, invested more money, time and technology. However, the result achieved can be said below the expected. Among the factors can be mentioned for the low performance are ever growing of high cost of manufacturing machineries in the world market, shortage of hard currency, lack of interest from the foreign investors side due to security reasons and some bureaucratic bottlenecks in some government institutions and corruption to mention but few.
Even though there are challenges, the government is trying its level best to attract foreign investors and to engage in the manufacturing industry sector. To this end, it has worked energetically since long ago to boost the energy sector which is extremely vital for the expansion of the manufacturing industry. It has gone long distance to generate power from all possible sources such as hydro-power dams, wind farms, solar energy and geothermal.
Side by side with these, it invested billions of Dollars for establishing industrial parks in various parts of the country. So far, investors from China, India and Turkey have engaged in the sector and begun production in the parks.
Recently, government’s higher officials visited manufacturing industries in the industry parks located in Sheger city aiming to inspect investment activities and discussed over the needs for expansion area requested by the parks.
Speaking on the occasion, Melaku Alebel, Minister of Industry said that necessary support and capacity building is being provided to investors engaged in the manufacturing sector. The government is working on ways to enhancing the production and productivity of investors engaged in the sector, the Minister added.
He stressed that all kinds of support is being provided to those engaged in various sub sectors of the manufacturing industry. And he further stated that efforts are underway to enhance import substitution and promotion of exports based on the Home Grown Economic Reform program.
Vice President of Oromia Regional State, Awelu Abdi, on his part confirmed that the regional state is ready to provide every support for the entrepreneurs engaged in the manufacturing sector. He added that requests forwarded regarding expansion areas will be addressed through proper assessment.
State Minister of Industry, Tarekegne Bululta remarked that the purpose of the working visit paid to the parks was to assess the accomplishments made so far and to seek possible solutions to the challenges the investors face.
The manufacturing sector has numerous values to the nation’s economy. It creates job opportunity for thousands; links agriculture with the agro-industry; boosts export and supports import substitution scheme. At the peak of their performance, the parks are expected to provide employment opportunities for 10,000 persons.
Generally, it plays pivotal role in developing self – sustaining economy relied in fierce competition.
According to economists, currently, the nation’s macro-economy faces various challenges and among others; foreign currency crunch, illegal trade, inflation, unemployment, the devaluation of local currency, corruption and others. Hence, to alleviate shortage of currency, boosting export and enhancing the nation’s foreign currency earning capacity has been taken as a way out.
So long as the nation earns more hard currency, tackling inflation can be possible. The other thing which should be underlined is that substituting import in order to enhance the nation’s hard currency reserve. Manufacturing plays pivotal role in substituting imports. According to the Ministry of Industry, in the last two years, 95 kinds of import products could be produced locally.
As a result of the manufacturing sector’s pivotal role in broadening the involvement of local and foreign private investments; the government’s aspiration to reduce its role in the sector has become a success story. According to the economic theories, privately owned companies and enterprises have a potential to be competent both in the local and international markets. The owners of the companies develop sense of ownership and cautiously do their day to day business. They show great concern to the quality and quantity of their products not to miss the market. To this end, they always do their cost benefit analysis which means they make balance between what they spend for the production process and the profit they secure from the market.
On the contrary, as to the economists, public owned companies relatively lack sense of ownership that resulted from the employee mentality of the personnel from top to bottom. In addition, more reason that contributes to substandard performance and less competent of public owned companies is the managers might think wrongly that if the company is bankrupted, the government would subsidize the company so that they secure their job.
The fact that most public owned companies fail to engage in production in their full capacity and fell into bankruptcy emanates from negligence of ownership. Two decades ago, for instance, most of food and beverage factories and other medium size enterprises were owned by the government and almost all were bankrupted and some of them were survived by the government subsidy. This failure accompanied with other reasons, initiated the government to apply privatization. Following the transfer of the factories to the private sector, they were reinvigorated and began to produce with their full capacity.
Consequently, privatization of the public enterprises attracted both local and foreign private investors. Side by side with such venture, the government introduced new helpful laws to create enabling environment for the private sector to unleash its potential.
In a nut shell, as the agrarian country, most of the country’s labor forces reside in the rural part and engaged in the subsistence farming. Besides, the sector is vulnerable to climate change and keeping on the economy relied on such subsistence farming is unrealistic. Therefore, shifting the rural labor to the urban center where the manufacturing is flourishing is feasible.
Therefore, the ongoing effort exerted by public-private partnership for the expansion of the manufacturing sector should be invigorated, it was underlined.
BY ABEBE WOLDEGIORGIS
THE ETHIOPIAN HERALD TUESDAY 21 NOVEMBER 2023
