The manufacturing sector is expected to bring tremendous opportunities to the nation. It creates job opportunities for thousands. It links industry with agriculture. It also serves as import substitution and saves hard currency, produces export items and attracts Foreign Direct Investment (FDI).
The sector serves as a base for industrialization which triggers structural change despite its infancy stage and struggling to survive by facing insurmountable challenges.
In this regard, the Addis Ababa Chamber of Commerce Sectoral Association made public debate with several stakeholders; and on the occasion the guest speaker Ahmed Nurie, a senior government representative, presented some findings of the study on the sector. According to Ahmed, both GTP one and two emphasis the vitality of the development of manufacturing; and thus, the government tried its best to bring investors to the sector.
Many agreed that realizing sustainable development with agrarian economy is not feasible and sustainable while manufacturing is a way out in many emerging economies. Hence, fostering the sector can bring multifaceted opportunities and elevate millions out of poverty is possible.
According to Ahmed, one of the key roles that the sector can play is diversifying the economy by multiplying the kinds of products that supply to domestic and foreign markets in addition to facilitating the division of labor.
Products that are derived only from agriculture are vulnerable to extreme weather condition. In the contrary to this, manufacturing is less dependent on nature; it continues producing the whole year.
Moreover, it opens doors for innovation and creativity through utilizing technology and skilled power that can add value in each product item. In addition, it facilitates urbanization that improves the living standard of the workers.
In the globalized world, a country cannot survive in isolation; economic integration is crucial since the international trade plays key role. And for this to happen, import and export activities have to be encouraged. In the process, technology and knowledge transfer will take place. Then high production of the local products that can substitute the imported ones.
The manufacturing sector has a direct linkage with the educational institutions. As it is known, the sector need a relatively better skilled manpower which utilizes technology and for this vocational schools graduates are essential. Skilled labor equipped with knowledge related to metal and wood work, mechanics and electricians can serve firms engaged in manufacturing.
On the other hand, youths with ICT knowledge and related profession can be absorbed by the sector; furthermore, the expansion of the sector itself stimulate the expansion of educational institutions.
Currently, many manufacturing firms from the emerging economies such as China, India, Turkey and Brazil find their way to Africa in order to invest. To start their businesses in Africa, in addition to well established infrastructure, they look for skilled labor. Hence, qualified persons have high probability of getting employment in these firms. This indicates that how manufacturing and educational institutions are interlinked. The expansion of the sector also strengthens its upward and horizontal integration with other sub-sectors.
As mentioned earlier the sector is in its infancy level and its contribution for Domestic Growth Product is insignificant. Currently, agriculture, service and manufacturing sectors contribute 46, 40 and 5 percent respectively. Such feature indicates how the nation far lags behind other countries and more actions are needed to bring structural change which enables the manufacturing sector to play a dominant role both for export and for GDP contribution.
Globally, the sector contribute 70 percent of trade and it serves as anchoring local innovation and renewed global interest; in addition to that, it increases return in brand creating. In his presentation, Ahmed did not ignored the shortcomings of the sector that need immediate remedy. According to him, numerous factors can be taken as constraints for the under development of the sector.
The inefficient provision of infrastructure and energy; particularly, power interruption make the business unreliable. In land transportation and unreliable telecommunication network also mentioned as an obstacle. Some firms in the sector are owned and managed by the owner and the prevalence of such tradition affects the competitiveness of the sector; hence, unless firms are managed by professionals based on merit system, the survival of the firms would be questionable.
The inadequate organizational structure and poor level of technology transfer can also be mentioned as inhibition factors for the sector’s progress. Poor level of investment particularly from domestic investors, poor awareness of the business that is to say involving to the job by traditional mentality, poor utilization of land, finance and abuse of incentives, preoccupation by short term gain and restricted to local markets are some of the critical factors that hinder the progress of the sector.
On the other hand, bureaucratic hurdle in tax and revenue authority pointed out as short coming of the sector. Participants also forwarded their complaints that need government’s attention. Some of them are lack of the initiative to take remedial action on the executive officials, the emerging of mutual mistrust between business and executives and shortage of inputs such as cement, iron, land and flow of information.
In sum, there is big hope on the sector in realizing the above mentioned targets and to bring economic transformation through structural change; however, unless the problems related to the sector are properly addressed, achieving the goal might be a day dreaming.
[TheEthiopianHerald]