History shows us that few countries reached high level of socio-economic d e v e l o p m e n t without successfully achieving industrialization. The link between inclusive industrialization and sustainable development needs no introduction.
Ethiopia has long eyed transforming its economy from an agrarian and resource based to a productive manufacturing one as pivotal to its aspirations of becoming a middle income country. While embarking on becoming a low middle-income carbon neutral economy by 2025, Ethiopia recorded continuous economic growth for over a decade now, which saw the share of its agriculture sector making way to industrial and service sectors. However, most of the growing share of the GDP went to the service sector.
Thus, despite the industry sector’s growth and modest growth in GDP share, it is not still moving at the targeted and needed pace enough to trigger structural transformation.
To that end, the country is embarking on various interventions to speed up its industrial development and structural transformation, which includes effective utilization of its rapidly expanding industrial parks and agro-processing clusters, among other initiatives. One of the modality the country can look into to zip up the pace of its industrialization is to widen the size of the market for its industrial products, through various approaches, one of which is to look close to home.
A large internal market provides a strong platform needed to compete across the world, driving industrialization and attracting investment (from within the continent as well). According to Dr. Wondaferahu Mulugeta, Economics Associate Professor at Federal Meles Zenawi Leadership Academy, the country should work on creating demand for national products within the local market.
“Ethiopia is a country of 105 million people, which makes it a huge, huge domestic market.” To that end, he points out that the country should work on creating demand for its local products in the local market by promoting them and creating a sense of pride and desire for local products within the consumers. We could learn from what India have done in this regard, he adds. “If we are able to do that, it is possible to help scale-up the small and medium enterprises into large industries.”
Ethiopia has setup regional clusters for the development of small and medium scale enterprises with the target of basing long-term industrialization, and harnessing the future of the country’s industrialists. So, in this regard, consumer power is vital to drive-up their growth and eventual transformation.
Also, given integration into the Global Value Chain (GVC) is key to sustainable industrialization, and Ethiopia is more and more interconnected to the global economy, local market can serve as a sort of “homebase” for the local enterprises to withstand external pressures until they gain strength and become globally competitive. Likewise, it gives the county time to fulfill the parameters needed to smoothly/ capably operate within the GVC.
The next logical step in terms of widening the market is for the country to integrate its market with neighboring countries and other African countries. This is another modality by which the country’s industrial development can be fostered.
Currently, Africa has a small and isolated markets, where if integrated the continent can create vast opportunities to encourage ecofriendly industrialization, attract investment, among others. After all, in the global economy, size matters. Of course, Ethiopia has been at the forefront when it comes to spearheading regional integration, and championing Africa Union’s integration objectives. In this regard, Dr. Wondaferahu indicates that harnessing business corridor with neighboring countries will help accelerate the industrialization process of the country.
“If we work hard on the proposed business corridors with neighboring countries that are already under work, it will help with accelerating the structural transformation”. He argues that working on regional integration and hastening the operationality of the business corridor with neighboring countries while working in parallel to network the country’s firms with other countries’ firms should be looked in to more closely. Continental initiatives like COMESA, and particularly African Continental Free Trade Area (AfCFTA), if adopted, can help African countries, including of course Ethiopia, hasten their industrialization by creating economies of scale.
The AfCFTA initiative, for instance, will not only help create a single market and raise intra-trade within the countries of the continent, but their manufacturing sector will also be beneficiary. And within this large market, large-scale production of manufactured goods is going to increase, and therefore propel huge drive towards industrialization within member states. To conclude, Ethiopia can foster an eco-friendly industrial development by focusing on the growing large domestic market of over 100 million people, and integrating its market with neighboring and regional countries so that the nascent manufacturing industry of the country gets the market it needs to grow and ultimately be globally competitive.
Herald December 26/2018
BY ROBEL YOHANNES
