A Study on the trend and role of manufacturing industry in the Ethiopian economy

Abstract

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. For this reason, many third world countries have been trying to get into the road of industrialization mainly through either import-substitution or export promotion strategy. Ethiopia, a typical agrarian less developed country, has been struggling towards the promising economic transformation or industrialization since the shattering of WW II. It was tried to put into practice through the implementation of the above two alternative strategies in different policy regimes. What were the trend, the contribution and the international position of the sector in general and the manufacturing wing in particular are the destinations of this study. To arrive to these themes, exploratory and descriptive data analysis methods have been employed. The analysis consumes secondary data collected from different sources and is verified by tabular and graphical illustrations. 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. Meanwhile, the manufacturing sub-sector is the main component of the industry. The manufacturing production is highly dominated by light consumer goods in that food, beverage and textile have the lion’s share from the total value added. Different policy regimes with different development strategies, economo-political systems and other conditions have resulted different industrial development achievements in that the middle socialistic regime became detrimental while the present market systembased regime becomes the finest of the three. 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 the other sectors of the economy on the other hand. The Ethiopian industrialization could be characterized by its tortoise nature while that of the Republic of Korea resembles to the move of rabbit. Hence, comparing the distance moved by tortoise and rabbit within the same period and condition could be explained as the unwisely comparison between rat and elephant. Rather, the comparison helps us in identifying the causes of the divergence in economic performances and the lessons that could be drawn from Korean fast industrialization experience as explained in the main text. For many reasons, the Ethiopian economy needs very close attention to direct it to its healthy and balanced growth in general and the rapid industrial take-off in particular for the coming two decades.