Ethiopia has been working hard to boost the manufacturing sector. If the situation keeps at the same rate, Ethiopia will record meaningful manufacturing sector. True, the manufacturing retains a reputation as a sector of rapid productivity improvements; this is largely due to the spectacular performance of one subsector of manufacturing. The manufacturing sector in the country runs an enormous trade scope, and it is important to understand why the manufacturing sector got priority in the Ethiopian economy. The importance of manufacturing industry for the growth trajectories of developing countries like ours is really untold.
Taking this entire concept into account, The Ethiopian Herald conducted interview with Mekonnen Balcha, an industrial Engineer graduated from Addis Ababa University and working as a consultant, to have professional point of view regarding the significance of manufacturing industry for economic advancement.
He said, “Manufacturing is the engine of growth and there is a positive causal relationship between output and labor productivity in manufacturing, derived from static and dynamic increasing returns to scale. Here, it is quite important to closely observe the importance of manufacturing industry for economic growth.”
According to Mekonnen, the manufacturing output growth and economic performance are now moving in an intertwined manner and with an encouraging trend though a lot remains to be done. The relation between industrial growth and GDP growth can be explained by the effects of manufacturing on productivity levels, creating job opportunity, linkage with agriculture and its positive impact on the whole economy. Such effects are due to transfer of labor from low productivity sectors to the industrial sector and to the existence of static and dynamic economies of scale in manufacturing.
As to him, manufacturing has traditionally played a key role in the economic development of Ethiopia and other developing countries, too. Yes, exploring industrialization is attributable to long-term changes in opportunities available to the sector across the nation. As industrialization has continued to play a key role in the growth of the country, Ethiopia is highly focusing on the industry thereby achieving economic development by following the path of industrialization will likely remain important for it because is able to take advantage of its backwardness relative to those countries which have already experienced rapid industrialization with a disproportionately large share of manufacturing activities, and could soon enter a mature stage of industrialization, he opined.
Up to now, Ethiopia has developed several industry parks across the nations, which have been focusing on light manufacturing activities such as electronics assembly and food processing, he said.
According to Mekonnen, industry parks development in Ethiopia has faced some challenges, including a lack of infrastructure and skilled labor. However, the government has been working to address these issues through investments in infrastructure and training programs for workers.
In general industry park development in Ethiopia is a key part of the country’s economic growth strategy. The government has been actively promoting the development of industry parks and has made significant progress in this area in recent years.
Interestingly, Mekonnen said Ethiopia’s manufacturing industry is growing rapidly because of the government policies aimed at attracting investment and promoting local production. The sector is diverse, with industries including textiles, leather goods, food processing, and pharmaceuticals. While there are challenges that need to be addressed, the future looks bright for Ethiopia’s manufacturing sector.
“Economic growth is the priority area on which Ethiopia has been embarking with a view to defeating poverty and attaining growth. The development of the Ethiopian manufacturing sector over the years has displayed the growth of economic advancement measured by real value added GDP,” he added.
“It is not entirely clear, however, whether this trend is attributable to sector-specific, structural factors, which could have led to a decline in the manufacturing sector’s development quality, quantity or both, relative to other sectors. If the relative importance of manufacturing in Ethiopia declined due to sector-specific factors or due to a long-term shift in world economic structure, it should rebalance development strategies and place less emphasis on manufacturing development,” he added.
Almost no country has achieved and sustained a high standard of living without making significant developments in its manufacturing sector, except for a few oil rich countries and small financial havens, empirically tested the manufacturing sector’s overriding influence on the rate of economic growth, he opined.
He said despite recent assertions of shrinking opportunities for manufacturing development in developing countries like Ethiopia and the decrease in the importance of manufacturing for economic development, the sector continues supporting the latter.
As to him, the structural transformation of a traditional economy dominated by primary activities into a modern economy where high-productivity activities in manufacturing assume an important role remains a defining feature of economic development. He said “Industrialization should be seen as a single global process in which the industrial mode of production has diffused across the globe. Individual country experiences with industrialization can only be understood as part of this global and ongoing process of technological diffusion, indeed.”
He said that achieving low-carbon industrialization has a number of interrelated implications for industrial policy. Manufacturing has become the main engine of accelerating economic growth in the nineteenth century in Europe.
The textile industry is one of the largest in Ethiopia’s manufacturing sector, with companies producing a range of products including clothing, home textiles, and industrial fabrics. The leather industry is also significant with high employing capacity in Ethiopia being one of the largest producers of high-quality leather in Africa.
Mekonnen said, “Ethiopia’s manufacturing industry has been growing rapidly in recent years, with the government implementing policies to attract foreign investment and promote local production. The country’s manufacturing sector is diverse, with a range of industries including textiles, leather goods, food processing, and pharmaceuticals. One of the key drivers of Ethiopia’s manufacturing growth has been the establishment of industrial parks, which provide infrastructure and services to companies looking to set up operations in the country. The government has also implemented tax incentives and other measures to encourage investment in the sector.”
The textiles industry in Ethiopia has also been growing rapidly in recent years, with the government actively promoting the sector as a key driver of economic growth. The country has a long history of textile production, dating back centuries, but it is only in the last decade and a half that the industry has begun to modernize and expand, headed.
One of the main factors driving growth in the Ethiopian textiles industry is the availability of cheap labor. Despite these advantages, however, the Ethiopian textiles industry still faces a number of challenges. One of the biggest is a lack of infrastructure, particularly when it comes to transportation and logistics. The country’s roads and ports are often poorly maintained, which can make it difficult to move goods around efficiently. In addition, there is a shortage of skilled workers in many parts of the industry, which can limit productivity and quality.
The Ethiopian government has launched a number of initiatives aimed at improving infrastructure and developing human capital, to address all these challenges. For example, it has invested heavily in building new roads and ports, as well as upgrading existing ones. The government has also established training programs to help workers develop the skills they need to succeed in the industry.
Food processing is another important industry in Ethiopia’s manufacturing sector, with companies producing a range of products including beverages, dairy products, and processed fruits and vegetables. The pharmaceutical industry is also growing rapidly, with several local companies producing generic drugs for both domestic and international markets, he accentuated.
However, he added the food processing industry is slowly gaining momentum due to the government’s prioritization to promote boosting manufactured products for export to enhance the nation foreign currency garnering capacity.
In sum, one of the major challenges facing the manufacturing sector in Ethiopia is the lack of infrastructure and technology. Most food processing companies operate on a small scale and use outdated equipment, which limits their production capacity and efficiency. There is also a shortage of skilled labor and technical expertise in the industry. As there are still challenges that need to be addressed despite the growth of Ethiopia’s manufacturing sector, a lot remains to be done along this line with a view to solve problems in relation to lack of skilled labor, inadequate infrastructure, and limited access to finance for small and medium-sized enterprises and other related factors.
BY MENGESHA AMARE
THE ETHIOPIAN HERALD TUESDAY 23 JANUARY 2024
