Agriculture has been everything for Ethiopians that has served as the source of basic needs; food, clothing and shelter. It has also been the main stay of the nation’s economy. About 70% of the labor force depends on the sector. Besides, it contributes 45% to the country’s Gross Domestic Production (GDP) and 80% to the foreign currency earning. Though remained subsistent, the sector has taken the lion’s share in fulfilling every household’s demands so far and is expected to continue in the same vein until the manufacturing sector takes the leading role in the long run.
It is obvious that the sector is subsistence in which more than 2/3 of farmers possess only less than half hectare of land. It is also climate sensitive and when extreme weather conditions occur, farmers face crop failure which again makes them dependent on foreign handouts.
In such manner, attaining sustainable development without bringing structural economic transformation is impossible. The past governments, beginning from the imperial regime, tried their level best to enhance the role of the manufacturing sector in the economy and to shift the stranded agricultural labor force to the non-farming sectors such as manufacturing and service. In the first five years of development plan of the imperial regime from 1966 to 1971, for example, some achievements were registered in increasing the role of manufacturing sector in the economy and it was possible to increase the sector’s role by 6% but could not sustain.
Three years later, the outbreak of the Ethiopian revolution crumpled down the effort and dragged the nation to back to square one. The ideology introduced by the Derg regime was pro socialism and anti-capitalist economic system which labeled the private sector as exploiter of the proletariat. Latter, the regime nationalized both foreign and local private manufacturing industries.
Recorded documents indicate that following the nationalization of the private firms, Ethiopia continued to register negative economic growth particularly in the manufacturing sector.
In fact, public owned manufacturing industries were expanded during the Derg era but the industries were producing below their average capacity due to inefficient management and lack of sense of ownership. It was proved that the protracted war waged against the rebels in the northern part of the country consumed not only the regime’s time but also the nation’s resources and the industrial production was lowered so that the sector could survive only by subsidy.
The EPRDF regime which assumed power by overthrowing the Derg in 1991 announced that it would pursue free market economy and introduced laws helpful to attract local and foreign investment. In such measures, it could win the hearts of the international financial institutions and secured substantial amount of hard currency in the form of grant and loan.
In addition to these, aiming to stimulate the economy, it privatized some of the public owned enterprises and the money obtained from the privatization endeavor was allocated to the infrastructure developments such as roads, educational institutions and health centers.
According to the World Bank and the International Monetary fund, in the following two decades starting from 1995, the nation registered double digit steady economic growth. However, according to experts, it is the agriculture sector which has played pivotal role in the economic growth and the growth did not bring structural change as it was intended by the government. The growth also attributed to the public investment than the private one.
The government gave emphasize for the expansion of manufacturing and bring structural change in both the two Growth and Transformation Plans but the achievement was below the intended target.
When introducing the 10 years perspective economic development plan, the current incumbent underlined the value of bringing economic structural change through shifting from agricultural led to the industrial led in which manufacturing is the base.
The emerging economic achievement indicates that attaining economic growth is likely through paying much attention to the manufacturing sector. The sector serves to attract both foreign and local investment; enhance import substitution and boost export; creates the two directions linkages between agriculture and market; create job opportunities to hundreds of thousands, and enables knowledge and technology transfer. In addition, it plays key role in creating self-sustained private led economy.
In the last two decades, cognizant of the vitality of the expansion of the manufacturing sector, the government aggressively engaged on constructing infrastructure and exploring and exploiting energy sources which are vital for industrial production activities. So far, various hydro-power dams are constructed. The Abbay Dam which is projected to generate 5 thousand plus megawatt and eyeing its completion soon is expected to level the nation’s energy landscape.
The country is also exploiting other energy sources like wind farm, solar and geothermal that help increase electric power supply to the national energy grid. Currently, due to power outages, most manufacturing industries are producing below their average capacity. Hence, the completion of the construction of the hydropower dams is expected to ease power interruptions and enhance the industries’ producing capacity.
As mentioned above, in the past, the EPRDF regime gave wider attention for the expansion of manufacturing industries which are labor intensive such as sugar factories, textiles and garment among others.
It also cultivated sugar plantations in thousands of hectares of lands. It had an ambition to construct about ten sugar factories and all the projects were derived their financial sources from government budget.
However, due to inefficient project management, financial scarcity and extended corruption, it failed to achieve as per the plan. For instance, while the sugar projects located in southern Omo areas that include Omo I, II and III see their completion soon; other projects started in Amhara region could see their completion after long delay and incurred additional construction cost.
The Tendaho sugar factory, constructed by loan secured from the government of India, seen its completion after many years’ delay. However, it is understandable that due to various technical reasons, it is not producing in its full capacity yet. To the poor country such as Ethiopia, delaying the construction of projects and mismanaging the resources is not affordable. Hence, by drawing lesson from the past mistakes, the government should start new projects by doing risk assessment beforehand.
Currently, in order to reduce the role and the involvement of the government in the economy, the Ministry of Finance announced tender to privatize the sugar factories located in Southern Omo areas but to date, no private entity showed interest to purchase the factories and it is expected that sooner will be privatized.
As mentioned above, to attain structural change and to shift the economy from agriculture led to industry one, expanding manufacturing is vital and to lay the foundation in better ground, opening the space to the private sector is essential. To that end, strengthening cooperation with the partners and foreign investors and financial institutions is vital.
Cognizant of these, Melaku Alebel, Minister of Industry recently said that the Ethio-Russia partnership in manufacturing is a beacon of collaborative success. Russian business delegation led by Russia’s Head of Federal Agency on Mineral Resources, Evgeny Petrov is here in Ethiopia to explore investment opportunities. The delegation held bilateral meeting with the officials of the Ministry of Industry.
During the occasion, the Minister highlighted synergies and future possibilities that lie in the collaboration between the two countries in trade and investment, manufacturing sector in particular. This partnership marks a significant journey of collaboration, promising to shape the future of the two nations, he elaborated.
“Our journey, rooted in mutual respect and shared interests, is more than just an intersection of two nations—it’s a testament to the power of unity in achieving common goals,” the minister added.
Ethiopia has made strides in sustainable development, the Minister said, adding the country is committed to a strategy that emphasizes inclusive and sustainable industrial development, critical to achieving national prosperity.
Moreover, Melaku added that Russia’s technological prowess complements Ethiopia’s dynamic economy, creating a synergy that is beneficial for both.
He also said that, extending the relations beyond trade is anchored in investment and cultural exchange, fostering a comprehensive partnership. In the manufacturing sector, Ethiopia and Russia are leveraging their strengths for mutual benefit. The Minister also said that Russia’s role as a critical trading partner brings technology and expertise to Ethiopia, while Ethiopia offers one of the Africa’s fastest-growing markets. “Investment stands at the heart of our economic ties, with Russian interest in Ethiopia’s manufacturing sector fostering industrial growth, technology transfer, and knowledge sharing,” he noted.
“Therefore, the Ethio-Russia partnership in manufacturing is a beacon of collaborative success and will further this fruitful relationship,” Melaku reiterated. The delegation was also briefed on investment opportunities in Ethiopia, particularly in the manufacturing sector.
BY ABEBE WOLDEGIORGIS
THE ETHIOPIAN HERALD WEDNESDAY 20 DECEMBER 2023
