12 April 2018

Ethiopia: Frontrunners in Industrialization


Ethiopia aspires to use its human resource and agricultural potential as springboard in its quest to industrialize. The Agriculture Development Led Industrialization policy mainly targets to exploit the potential of the agriculture sector as sustainable supplier of inputs to newly flourishing industries. In this regard, the strategy to give special focus to the textile and apparel as well as leather and leather products subsectors is a bold move.

Ethiopia's industrial policy prioritizes the two subsectors in light of agricultural-led, export-led and labor-intensive industrialization ambition. This policy choice, particularly of the textile and apparel, was also applauded by renowned international journals including the Wall Street Journal which in 2014 declared that Made in Ethiopia will be the next Made in China.

The construction of industrial parks, one of the priorities of the five year Growth and Transformation Plan I and II is the demonstration to the fact that such industries have received due attention. While some of the state-of-the-art industrial parks such as Bole Lemi II and Hawassa Industrial parks are built specifically for textile and apparel, almost all the rest have place for textile and garment industries besides others, such as vehicles assembly and food processing.

Textile industries both inside and outside of the industrial parks have attracted the interests of global companies with renowned international brands, putting the country in the right path to become an important hub for the industry.

Contrary to past experiences, the textile subsector has now started to generate significant amount of foreign currency as the number of textile and apparel industries has now reached more than 200 in few years time. The sector has grown at an average rate of 51 percent, and more than 65 textile investment projects have been licensed for foreign investors in the last five to six years. And in the past eight months of this fiscal year alone, the country has managed to earn some 65 million USD from the textile subsector.

These encouraging performance is attributable to continuous improvement in the production capabilities of domestic firms and more importantly due to the performance of renowned international companies that have invested in Ethiopia.

The leather and leather products subsector is also prioritized to bring about structural change, taking the fact that the country possesses the largest livestock herd in Africa, and the 10th largest in the world.

For long, the main leather-related export items of Ethiopia have been low value-added hides and skins. That is why the government has given due emphasis to value chain and producing high value-added finished leather. The subsector has also strong backward linkages to the agriculture sector which is the mainstay of the majority of Ethiopians. With this, the government is planning to transform rural lives.

Besides, prominent international companies are also investing in the sector. This is facilitating knowledge and technology transfer, besides generating forex earning. For instance, with a plan to invest some two billion USD, Huajian, one of the largest shoe exporters in China, setup its factory in Ethiopia in 2011 with a focus on shoemaking for export.

Further, the two subsectors would also prompt the growth of light manufacturing industries which is labor intensive and create large amount of jobs. And this why they are considered important for technologically less advanced developing countries with huge labor force but lack capital.

In general, if the policy is implemented properly by getting rid of bottlenecks and solving issues related to quality raw materials, the textile and apparel as well as leather and leather products subsectors would ultimately help in bringing about the desired structural transformation.


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