THE CONTRIBUTIONS OF THE MANUFACTURING INDUSTRY

EXPORTS

While on the face of it , manufactured exports appear to have registered impressive growth in the past few years, a closer look at the structure of exports reveals that leather and leather products, food and textiles in that order constituted the bulk of industrial exports. Manufactured exports are thus limited to agricultural based products. Export earnings generated by the sector have been able to meet only about half the sector's foreign exchange requirements.

EMPLOYMENT

Manufacturing industry employs only 0.5% of the labour force, the textile and food industries accounting for over 60% of manufacturing employment. Ethiopia has an abundant supply of unskilled and semi-skilled labour. However, there exist acute shortages of executive personnel such as managers, trained production supervisors, various disciplines in engineering, etc.

LINKAGES

One of the major weaknesses of manufacturing industry is its inability to create forward and backward linkages with the rest of the economy. Consequently the share of domestic intermediate inputs going to other sectors of the economy has been much less and could only be met from imports. Therefore, the manufacturing sector has failed to raise the technical capacity of the agriculture sector by supplying it with improved implements and other inputs.

With regard to the transport sector, the supply of domestically manufactured inputs has been limited to truck assembly, the production of tyres and tubes, and a few other manufacturers components.

The contribution of the manufacturing sector to the construction industry is limited to the supply of cement, bricks, hollow blocks, and reinforcement bars.

Two major conclusions may be drawn regarding linkages. First, the share of locally manufactured inputs supplied to the various sectors would have been significantly higher had the country's foreign exchange reserves been adequate to allow greater amounts of imported inputs. Second, the past import substitution strategy may be said to have failed in Ethiopia. It only resulted in the creation of an industrial enclave with limited linkages with the rest of the economy. The import substitution strategy that concentrated on the processing of final consumption goods stunted the development of the manufacturing sector and the rest of the economy at large. And, as the demand for imports of consumer goods, capital goods and other inputs increased over time, the sector's ability to generate foreign exchange became increasingly constrained.

REGIONAL DISTRIBUTION

Many of the industrial establishments are concentrated in a few regions of the country with Addis Ababa, and the Shewa region, and Dire Dawa and the Hararge Region accounting for 91.7% of all industrial establishments 89.5% of industrial employment and 93% of the GVP. Wello, Gojam, Sidamo and Arsi regions account for only 3%, 2% and 1% of public enterprises, respectively.

The distribution of industrial enterprises has been largely determined by the availability of markets and infrastructure, the uneven distribution of electricity, telecommunications and transport facilities and most importantly, the absence of appropriate incentives and policy measures resulted in disparities between regions and have had a negative effect on the overall national development.

ISSUES AND CONSTRAINTS

A number of constraints have hampered industrial development in Ethiopia. A brief overview of these constraints will provide us with vision about the challenges and opportunities that lie ahead and will help us in drawing up appropriate development objectives, and for designing an appropriate industrial development strategy. With this in view, the factors that constrained the development of the sector are briefly discussed below.

1. The inadequacy of infrastructure has been one of the major constraints for the industrial development. Roads, energy, water supply, and other facilities have not been developed to support the industrialisation process in the country.

2. Although the country's major natural resource base is its rich agricultural potential, it has not been utilised for the development of the industrial sector. The very low productivity in agriculture resulting from the use of outmoded technology could not cope with the demand for industrial raw materials and foreign exchange requirements, in addition to limiting the market for industrial goods.

Although Ethiopia is known to possess a wide variety of mineral resources, their utilization is yet to be realized, mineral exploration and exploitation still being at its infancy. This thwarted the expansion of industries based on mineral resources that would have otherwise made it possible to reap the benefits of comparative advantage.

3. The industrial sector is characterized by very low inter and intra-sectoral linkages. It has been unable to produce intermediate inputs, spare parts and capital goods for its own use as well as for use by other sectors of the economy. The sector itself has continued to be import dependent for machinery and equipment, spare parts and other inputs with no possibilities for self sustained development.

4. Small and medium scale industries, as well as handicraft and rural industries, were given less priority in the wider spectrum of industrial development. The encouragement and expansion of these industries would have meant an adequate supply of consumer goods, developed domestic enterpreneurship, generated employment oppotunities and created inter and intra-sectoral linkages and a balanced regional development.

5. Past industrialization policy was such that it resulted in an unwarranted concentration of industries in and around a few major urban centres. There were no inducements for industrial enterprises to be located in different regions of the country in the interests of promoting balanced regional development.

6. The industrial sector has been characterized by capital intensive technology. This has led to a number of problems. First, the sector has not been able to generate employment opportunities. Second, having been unable to absorb available labour force, the sector has lost a large potential market for its own products.

7. The absence of appropriate institutions for man power development and for the selection, transfer, adaptation and diffusion of technology also remained major constraints for industrial development.