It is well recognized that Ethiopia has planned to transform itself to an industrialized economy and increase the per capita income of its citizens to middle-income levels in the years to come. The country must make changes on economic progress via reinvigorating industrial engagements, boosting public private partnership, improving taxation system, trade as well as financing rules and enlightening basic services such as electricity to support the manufacturing industry and local business thereby attracting new investment though great progress has been witnessed so far.
Having this in mind, The Ethiopian Herald had recently a stay with Worku Demena, an industrial engineer graduated from Addis Ababa University, to have ample information about the immense contribution of manufacturing industry to sustainable national economic growth.
He said, "The government has to well embark on the industry thereby sustainably boosting economy of the country as well as to know how important manufacturing industry to the economic development of Ethiopia is."
Yes, he said, manufacturing sector has been playing a significant role in fostering economic growth in many developing countries such as Ethiopia. Since the manufacturing sector is very important to the growth of economy, knowledge of its relationship with the macroeconomic aspects is quite crucial. Ethiopia's manufacturers account for an immense contribution to national economy though not sufficient.
According to Worku, in this competitive world, Ethiopia has to recognize that manufacturing is a major driver of its economy. Ethiopians think that sustaining and stimulation of the growth of the manufacturing sector is critical to the economy after learning the contribution of the sector. Yes, it is important for the economy to manufacture more value-added products at home instead of exporting raw materials.
He said, "Ethiopia wants to bolster the manufacturing industry as it is vital for economic growth and job creation. Besides, strong manufacturing industry means a strong economy. That is why it is repeatedly said that manufacturing strategy is useful in coming up with reliable economic advancement."
Ethiopia has to modernize its tax system to boost investment, exports, and economic productivity. Besides, manufacturing industry is pivotal in creating an emissions-reduction fund to help industrial companies further improve their environmental performance, he opined.
Since addressing the challenges to a flourishing manufacturing industry will expand benefits to more Ethiopians, the country has systematically planned to become a manufacturing powerhouse, he added.
As to Worku, improving trade logistics, customs procedures and properly applying trade regulations, which primarily impact large exporting manufacturing firms, would be of significantly useful in bolstering the national economic growth. Simplifying business related regulations and processes has to be expanded to facilitate the smooth entry and exit of manufacturing industry that will support a dynamic and thriving manufacturing industrial sector.
"In the exploration of world development experience, industrialization is found to be the pillar for the strength, the engine for the speed and the main way of the struggle against poverty and towards economic development process. Ethiopia, a typical agrarian less industrialized country, has been struggling towards the promising economic transformation or industrialization since long back," he opined.
The Ethiopian economy has been characterized by its agrarian ubiquity up to the present. It contributes the largest share of GDP and employs the overwhelming portion of population followed by the service sector. However, its industrial wing is disproportionately at low level in all aspects of contribution.
The main weakness of the Ethiopian industry lies on its reliance on imports for its production. The weak backward and forward linkages within the sector and among different sectors of the economy are at the core of its vulnerability for external shocks on one hand and unable to support other sectors of the economy on the other hand. As the Ethiopian industrialization could be characterized by its tortoise nature, it has to move to the move of rabbit in the years to come by overcoming a range of pitfalls.
He said more seriously, manufacturing sector had been damaged by a number of factors and the nationalization and expansion of public private partnership needs to be the main policy instrument to make a difference. Besides, the private sector has to be provided with new manufacturing plants and tempting environment for manufacturing industry.
As to Worku, since manufacturing is a cornerstone of our modern economy, the sector has to be made modernized; manufacturers have to become innovative and high-tech relying on a highly skilled and knowledgeable workforce that includes designers, researchers, programmers, engineers, technicians and trade's people.
A vibrant manufacturing community encourages industrial clusters that develop skills, knowledge and technology. Success breeds success, he said, when Ethiopia's manufacturers grow and compete, they act as magnets for new investment and for new young people wanting to be part of this great industry, making the products of tomorrow.
Fostering rapid globalization of markets, lowering of trade barriers and increasing global demand have led to both growing competition and new opportunities for manufacturers. Strong science base and strong existing clusters, knowledge-and technology-intensive manufacturing industries, including niche manufacturers, have to be strengthened to boost the most strategic opportunity for the future of the domestic manufacturing sector, he stated.
He further stated that from horticulture and agricultural products export to clean energy, to telecom sector, the old and the new, and from mined materials to final product, Ethiopia has the ability to co-ordinate its supply chains to produce the goods necessary for a clean and advanced economy.
As far as the national manufacturing industry is concerned, the government should describe the entire supply chain and the broad manufacturing has to include life cycle analysis and environment impact assessment of manufacturing, mining and other related productions and energy use, he opined.
A manufacturing strategy must also require analysis of community impact, including the jobs and multiplier effects of restoring supply chains and of public investments. Employers need to invest in the skills of their workforce, rather than shirking responsibility while complaining about skills gaps.
Private-sector investment is also an important component of a manufacturing strategy. However, the private sector has not been making the capital investments necessary to move towards a greener economy nor to bolster the skills of the country's workforce. This needs to be well addressed.
The federal government also plays an important role in investment in research and development, as well as co-ordination and marketing and it could also be a buyer. This is particularly important for manufacturing industry's development for the public good. Investments should also play a strong role in the development and dissemination of clean technology and more energy-efficient technology for manufacturing and mining. Investments are also essential for strengthening telecommunications infrastructure and expanding access, Worku stated.
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When it comes to ensuring markets for goods produced in Ethiopia, one of the most promising means of augmenting demand for domestically manufactured products is to tie in sustainability goals into procurement policies. Targeting investments in sectors with high potential for economic stimulation, job creation and environmental transformation government purchasing and procurement contracts must be one of the first mechanisms used towards the goal of revitalizing manufacturing industries in Ethiopia.
A revitalized manufacturing sector can play a key role in Ethiopia's post-conflict recovery, too. However, Ethiopia cannot rely on the old mechanisms, such as offshoring or ever-expanding export markets, for the goods it does produce. This requires a change in thinking about the role of the state and of workers in stimulating manufacturing in the nation and, ultimately, directed policies that promote good jobs thereby benefiting communities across the country out of the bounties of the manufacturing industry.
Worku wrapped up his idea saying that nations around the African continent and beyond have been rethinking the place of manufacturing in their domestic economic strategies to ensure access to essential goods and bolster decent employment as well as secure sustainable economic progress. If Ethiopia does not use this opportunity to rethink the role of manufacturing industry in its economy, it would be left behind the ever-changing international economic order.
