The government's ambitious plan for the manufacturing sector received heavy blows from a performance report that has textiles recording the least, at 49.4pc and agro-processing the highest, achieving 63pc of the plan.
Leather and leather products and pharmaceuticals and chemicals achieved only 54.5pc and 58.7 pc, respectively.
The textile and garment sector brought in 84.6 million dollars, far short of the planned 171.4 million dollars in export earnings for the 2011/12 fiscal year. The sector's performance, at 84.6 million dollars, was a 36pc increase from the previous year's earnings of 62.2 million, according to data from the Ministry of Industry (MoI).
Ayka Addis Textile & Investment Group was responsible for 71pc of the total earnings alone. This factory, established in 2007 by Turkish investors, has a production capacity of 46,000 garments a day.
The plan was to earn 471.3 million dollars from all manufacturing industry exports, but only 255.5 million was achieved, 55.8 of the target. It, however, showed a 22.8pc increase from the previous year's earnings of 207.9 million dollars.
Despite notable growth trends in basic manufacturing figures recorded over the past several years, the Ethiopian manufacturing sector remains essentially weak, according to the findings of a draft study conducted in January 2012 to look into the competitiveness of Ethiopian firms for participation in the Common Market for Eastern & Southern Africa (COMESA) Free Trade Area.
The contribution of the manufacturing sector in 2009/10 was less than five per cent of the GDP, while the share of manufactured exports was around 0.5pc, the study found. Under the GTP, the plan is to increase the contribution of the manufacturing sector from 3.6pc as of 2010/11 to 10pc by 2014/15.
In the manufacturing sector, textiles and garments are one of the major areas of focus in the GTP, aiming to increase export earnings to one billion dollars by 2014/15. During the previous five-year Plan for Accelerated & Sustainable Development to End Poverty (PASDEP), from 2005 to 2010, the government had planned to earn 500 million dollars a year from the export of textiles, but it managed to collect only 21.8 million dollars.
Ethiopia is also planning to raise the gross value from the production of textile and garment industries to 2.5 billion dollars, by the end of 2014/15, by scaling up production capacity by 90pc. There is also a plan to create 40,000 new jobs, according to the GTP.
An industry expert, however, criticises the Plan as being too ambitious and not being based on a planned assessment but on the figures of other middle-income countries.
With about three years to go until the end of the GTP, the 84.6 million dollars in export earnings is a far cry from the expected one billion dollars.
The yearly trend that the GTP planned and the current trend do not match up. The plan was to gain 100 million in the 2010/11 fiscal year and double that in 2011/12. There is around a 115.4 million-dollar difference.
The reasons for the underperformance extend from the shortage in the supply and quality of raw materials and skilled manpower, according to Melaku Taye, Corporate Communication Directorate director at the Ministry. Textile and garment factories complain about the same problems.
Cotton, a raw material for textile companies, saw different ups and downs over the past two years, from a shortage of supply in 2010/11, leading to an export ban on cotton, to the creation of a surplus of cotton, which textile factories were forced to take off of the cotton growers' hands last month.
The international decrease in cotton prices and in the prices of yarn, knitted garments, and finished garments, was one of the causes for the underperformance of textile exports, according to the MoI report.
The average price of cotton in the international market in 2011 was 3.11 dollars a kilogramme, while the average price of cotton in the past six months of 2012 was 1.82 dollars a kilogramme. In the same manner, the price of yarn decreased from 4.82 dollars to 2.92 dollars, knitted garments from 7.5 dollars to 4.55 dollars, and finished garments from 13 dollars to 7.87 dollars.
This, linked with the world economic crisis, which affected buyers, leading them to change their orders, was an outside factor that affected the sector.
On the side of chemicals, another input for textile industries, there were three companies chosen to supply the necessary chemicals in April 2012. Two Swiss companies, CHT-Bazema Group and Textile Colour AG, as well as Rose Chemicals from Turkey are to be the only textile chemical suppliers in Ethiopia that will enjoy duty-free privileges. The companies are expected to construct factories in Ethiopia, as well.
Although the country requires over 1.3 million skilled persons for the textile and garment industry, there are only 40,000 such people in the industry, according to a study conducted by experts at the Textile Industries Development Institute (TIDI).
Although there are textile engineering institutes that are planned to be opened in Axum, Dire Dawa, and Addis Abeba as well as a Textile Department in the Engineering Faculty of Kombolcha Univesity in 2012/13, there is currently only one textile institution, the Institute of Textile Garments & Fashion Design, in Bahir Dar University.
The other sector within manufacturing that has been given priority under the GTP, leather and leather products, also underperformed, managing only 54.4pc of the targeted 206 million dollars at 112 million dollars. The sector's growth rate was a meagre 7.4pc, showing only an eight million-dollar increase in revenue.
In the plan, the sector's export earnings are expected to grow from 75.73 million dollars at the end of 2009/10 to 496.8 million dollars in 2014/15.
The leather industry also faced problems with raw materials. There were constraints on the supply side of hides and skins and chemicals. The policy change towards the export of only finished products created a gap in this year's export performance, according to sources at the Leather Industry Development Institute (LIDI).
In the same manner as in the textile industry, the government has selected three chemical suppliers for leather factories with the same commitment to set up factories in Ethiopia. The selection of the suppliers is hoped to resolve the longstanding complaints of local leather factories that suffer due to the shortage of major leather chemicals.
Two Italian companies, Tancuir Chemicals and Repico Chemicals, and a US firm, C & E Chemicals, were chosen.
Other manufacturing industry sectors, such as agro-processing, earned 51.75 million dollars out of an expected 82 million dollars, a 63pc performance, while pharmaceuticals and chemical products earned seven million out of a target of 11.9 million, at 58.7pc. These sectors have shown growth of 50.2pc and 1.3pc, respectively, compared to their performance in the 2010/11 fiscal year.