Introduction
In an economically backward country like Ethiopia, the first thing that is required to launch what may be considered an industrial revolution is an industrial policy and strategy think –tank at the government level. The major tasks of the think- tank would be to study how people in Ethiopia and in the rest of the world make things with machines which are themselves made with machines in industries of various types and descriptions.
Of course, the think- tank would realize that industries are production processes involving linchpin entrepreneurs, management personnel of people and things, workers of various skill levels, machinery, equipment and plant, and storehouses of raw materials to be processed and converted into finished goods.
The think –tank would appreciate that the essence of economic development is an expanding industrialization of the economy, be it in agriculture, mining or services. Mechanization and chemicalization of agriculture in essence constitute industrialization of agriculture while mining is of course a highly industrial production process. So, when we speak of industrial development it impinges on practically every aspect of the economy, including the services sector where mechanization takes the form of an industrial process.
In Ethiopia, a think –tank like the one suggested above would select industrial areas on which the country should focus in the basis of criteria such as availability of raw materials, skilled and semi –skilled labour and land. Industrial development policy should as a matter of priority address the problem of foreign exchange shortage that would pre-empt industrialization itself which cannot be undertaken, at least in the initial stages, without importing production machines and essential inputs. Hence, an industrial policy and strategy package should be pivoted on the following major considerations:
- Availability of raw materials;
- Availability of skilled and semi- skilled labour;
- Suitable land areas;
- Infrastructure including power and roads;
- Foreign exchange generating capacity;
- Labour /capital intensity;
- Financial resources availability.
An effective industrial policy and strategy should give priority to the production of agricultural raw materials such as cotton, leather, wood, crops, livestock, sheep and goats, wool, etc. and to the production of available raw mineral resources including iron ore, aluminum, zinc, potash, tantalum, gold, platinum, copper, silica, petroleum and natural gas, etc. Agro- industries would process agricultural raw materials into intermediate inputs and agricultural finished products. Other industries would process mineral raw materials into mineral intermediate inputs and final products.
The ultimate objectives of sound industrial development are a, to increase sustainably the quantity and quality of total output (GDP); b, to generate the maximum possible employment; c, to raise the foreign exchange earning capacity of the country through a balanced export promotion and import substitution strategy and; d, to increase the administrative, technical and generally the productive knowledge and skill level of the workforce. Of course, the most important thing is to create viable institutions to implement these obviously laudable objectives.
In backward countries like Ethiopia, the government should play a crucial role although eventually the most reliable implementer of the objectives will be the private sector and foreign direct investment. On the part of the government, setting up a national industrial investment corporation, a project study, analysis and appraisal institute; and generally creating an enabling environment for the domestic private sector and foreign direct investment are major tasks that should be given high priority.
The state of industrial development in Ethiopia
The process of industrial development could be traced way back to the Gafat makeshift munitions workshop put up during the reign of Emperor Teodros (1855-1868) in the second half of the 19th century. However, a definite beginning was made under Menelik II who was famous for his enthusiastic embrace of modern industrial development. Emperor Haileselassie continued and stepped up the process of industrialization on the basis of three successive 5- year development plans beginning in the mid 1950’s. During this period the emphasis was on import–substituting food, beverages, textiles, cement, and leather industries.
Haileselassie did lay down the basic institutional groundwork for industrial development in terms of a technocratic administration, a planning commission, a project study technical agency and a fairly conducive business environment for both the domestic private sector and foreign direct investment. In addition, an agricultural and industrial development bank was established to cater to the financial needs of industrial entrepreneurs who, admittedly, were few and far between.
Similarly, putting its ideological orientation aside, the Derg regime’s approach to industrialization was quite systematic as regards technocratic administration and institutional development. Its central planning commission (supreme council) and project study institute (DEPSA) were very strong and fairly competent.
A comprehensive project portfolio was prepared for implementation on a priority basis, but funding was a serious obstacle as it was not possible to obtain resources from the west on a substantial scale for obvious reasons. Besides, the senseless civil war strained domestic resources to breaking point. In fact, it is ironic that the Derg’s Gafat- type munitions industrial projects precipitated the regime’s downfall as the west escalated pressure on it.
The TPLF/EPRDF regime also continued the industrialization drive amid the self inflicted inter –ethnic tensions and unrest, although it should be pointed out that the government’s major emphasis has been on infrastructure development including roads, hydropower plants, railways, etc. More recently, it has launched an industrial park development strategy to accelerate the process of industrialization, but it remains to be seen whether its intended objectives will be achieved.
The regime’s major weakness as far as industrial development is concerned is its failure to strengthen the administrative and institutional infrastructure put in place both by the Haileselassie and the Derg governments. The TPLF/EPRDF government still does not have a planning commission, a project study institute and an economic technocratic administration to speak of. As a result, inefficiency, implementation delay, waste and, above all, corruption have all crippled the regime’s effort to speed up the country’s industrialization drive.
Sadly, the upshot of all this effort to
industrialize the Ethiopian economy has been far from satisfactory. The industrial sector, including mining, contributes only about 12 percent to the country’s GDP (i.e. it is only 12 percent of GDP). Further, its contribution to foreign exchange earnings, employment and structural transformation is minuscule. The industrial profile in terms of mix and scale is nowhere near desirable. Heavy industry as we know it is non-existent.
With regard to scale, micro, small and medium- scale industries abound while large-scale ones hardly meet international criteria to be described as such. Industrial technologies used are often obsolete, making it ever more difficult to compete not only on the global market but also domestically. As hinted above, the major problems hamstringing industrial development in Ethiopia are: lack of technocratic administration and absence of an institutional framework conducive to industrial growth and development.
How to get the industrial sector off the ground
From the broad- brush review of the industrial sector in Ethiopia presented above, several solution proposals come to mind. We may classify these recommendations under the following categories: Technocratic administration and institutional development. Under technocratic administration especially the prime minister and the minister of industry should have in –depth knowledge of the critical importance (and the intricate process involved therein) of industrialization for overall economic and social development of the country. They should be not just policy but also technocratic leaders.
They should spearhead the development of the necessary institutional framework for accelerating industrialization in the country. Their knowledge of industrial policy and strategy issues including mix, scale, labour/ capital intensity, net foreign exchange earning capacity, technology selection, etc. is of vital significance.
On the other hand, institutional factors critical for the acceleration of industrial growth and development should also be underscored. Major institutions that need to be set up anew or strengthened include the following;
- a state – owned industrial investment corporation which may undertake investment activities in partnership with the domestic private sector and foreign direct investment in joint ventures;
- A strong planning commission resourced with competent technocrats;
- A state- owned industrial project study, analysis and appraisal institute staffed by the required competent personnel;
- A well- resourced industrial development bank;
- A technocratic council of economic advisors to the prime minister
Concluding remarks
It is a matter of common sense that industrial – sector reform alone will nor achieve the intended objectives.
The entire style and direction of political and economic leadership should change for the better. Merit in terms of knowledge, experience and talent should be the sole criterion for the assumption of political power and the acquisition of wealth. Ethnic or any other identity as a means of acquiring power, influence and prestige should be proscribed. Positions of political and economic power and influence and the attendant material and moral benefits should accrue to deserving men and women.
Accordingly, on the basis of its poor 28- year track record, the EPRDF/TPLF party and government should be voted out in the up- coming would- be free and fair election scheduled for sometime in mid-2020. As of now, perhaps the only eligible alternative to EPRDP/ TPLF is the citizenship – politics – promoting group led by prof. Berhanu Nega who, rather unfortunately, seems to have alienated, himself from the people by too close an alignment with the much hated ruling EPRDF/TPLF regime. No major economic or political reform can be undertaken as long as the ego-driven EPRDF/ TPLF intellectual lightweights remain in power. No significant restructuring of the economy can be effected as long as the ill- gotten gains of EFFORT dominate the economy.
In actual fact, EFFORT should be nationalized and then privatized. By contrast, an enabling economic environment should be created for MIDROC, possibly after paying any tax arrears, bank debts and compensation payments for any business malpractices that may still be outstanding.
On the other hand, agreement should be reached between the TPLF/ EPRDF cabal and opposition parties for the former to return at least 70 percent of the money and wealth it stole from the Ethiopian people during its 28-year high before the upcoming election is conducted. Otherwise, it would be quite silly to try and hold an election while criminals are still in power.
The government’s current privatization programme should be postponed until after the election. If so, the state- owned industrial investment corporation proposed still could play a significant role in joint investment ventures.
Similarly, sycophantic, pseudo-intellectual toads occupying critical positions of economic power should be voted out. Accordingly, technocrats who know the levers to control inflation like the back of their hand would become central bank governor and vice-governors.
Fiscal policy would be an important instrument for accelerating industrialization in the hands of a seasoned finance minister in the tradition of Yilma Deressa and Tesfaye Dinka. Industrialization is no joking matter. It cannot be successfully undertaken and conducted by insular and parochial ethnocentric mentality.
The Ethiopian Herald Sunday Edition 11 August 2019
BY TEKLEBIRHAN GEBREMICHAEL
