Term paper on Ethiopian Industrial policy

1. JIMMA UNIVERSITY
College of Business and Economics
Department of Economics
Program: MSc in Industrial
Economics

2. Course
Industry and Development (IECON 526)
Assignment type: Term Paper
Submitted to Dr. Leta Sera (PhD)
Email:letammj@yahoo.com

3. Contents
 Industrial DevelopmentsOfEthiopia,Challenges&Oppurtunities
 Historical backgrounds of Ethiopian Industrial development
 Industrial development and strategy under imperial period
(1930-1974)
 Industrial Development Strategies during Derg Regime,
(1974–91)
 Industrial Development Strategies during the EPRDF Regime
Post-1991
 The Federal Democratic Republic of Ethiopia Industrial
Development Strategy (IDS) 2002
 2.1 Sustainable Development and Poverty Reduction Program
(SDPRP) – (2002/03-2004/05)

4. Cont.…d
 2.2 Plan of Action for Sustainable Development
and Eradication of Poverty (PASDEP)-(2005/06 -
2009/10)
 2.3 The Growth and Transformation Plan (GTP) –
(2010/11-2014/15)
 2.4 The Second Growth and Transformation Plan
(GTP II) – (2015/16-2019/20)
 2.5 The Homegrown Economic Reform Program
and Ten-Year Development Plan
 Challenges
 Opportunities
 Conclusion
 Recommendation

5. INDUSTRIALDEVELOPMENTS OF ETHIOPIA, CHALLENGES AND
OPPURTUNITIES
• Historical backgrounds of Ethiopian Industrial development
Industrialization is the engine for socio-economic transformation of
countries. It is favored for creating employment opportunity, bringing
competitive advantage, and generating dynamism in the economy.
Industrialization and industrial development also signifies the political
power of countries and their relative influence across the globe
(Sonobe and Otsuka, 2011).
Modern manufacturing factories were emerged in the country in the
1920s (as of 1927 about 25 were set up mostly by foreigners) though
a conscious effort towards developing a modern industrial sector did
not start till the 1950s. And the sector got momentum since then
during which a comprehensive plan to promote industrialization and
economic development was commenced (Mulu, 2013).

6. Cont.…d
Historically, the modern manufacturing industry began to emerge in
Ethiopia in the 1920s. However, it started to get momentum only in
the 1950s during which a number of new industries were established
with the aim of achieving import substitution.
By the early 1970s, Ethiopia's industrialization strategies included a
range of fiscal incentives, direct government investment and equity
participation in private enterprises. This policy attracted considerable
foreign investment to the industrial sector.
Looking at the industrial policy trajectories and practices of Ethiopia
demonstrate that the successive governments have a strong
commitment to achieve their own version of industrialization as a tool
of altering the structure of the economy. They all believed that a
sustained economic development can be realized through industry
despite their differences in how and when to realize it. Thus, let us
see the industrial development strategy followed by previous to
current governments of Ethiopia as the following.

7. Industrial development and strategy under imperial period (1930-1974)
The policies of Imperial regime is one of the major factors
influencing the development of the industrial sector of a
nation. In Ethiopia, various industrial development
strategies have been employed in order to develop and
direct this sector since the 1950s. A conscious effort
towards developing a modern industry began in the
1950s, when development plans (the three five-year plans)
were formulated. The main agents for the expansion of the
industrial sector during this period were foreign
nationals residing in Ethiopia.

8. Cont.…d
It was believed that the settlement of foreigners and
the expansion of commercial farms would continue to
give impetus to the growth and expansion of the
industrial sector. Hence, development programs and
government policies were formulated to pursue this
objective.
A number of proclamations were declared to
encourage foreign investment, and the investment
proclamation was revised in 1964. Anumber of
incentives such as tax holidays, easy financing loans,
exemptions from duty payments, and effective tariff
protection from foreign competition were given.
However, these incentives were based on some
conditions. For example, a tax holiday was for those
who had an initial investment of, made more than Birr
200,000 and duty exemption was for heavy machinery.

9. Cont.…d
During the later years of the Imperial era, the main
strategy for industrial development was import-
substitution, a process assisted by a system of import
duties intended to encourage the domestic production of
goods and to discourage imported goods.
Specifically, systematic and comprehensive policy
framework aimed at charting the sector`s trajectory was
introduced in the successive five years plans of
HailesellasieI regime. Mulatu (1994) posited that both the
first(1957-1962) and second(1963-1967) five year plans
pursued by the regime identified manufacturing as the key
sector for transforming the structure of the economy and
for achieving a rapid and sustained growth.

10.  Two more five-year plans, the Second Five-year Plan and Third
Five-year Plan, were launched between 1963 and 1973.
 During this period, the government extended the incentives
to attract investors and continued to strengthen its presence in
economic activities.
 The implementation of these initiatives envisaged in the three
successive five-year plans (1958–73) attracted foreign investors
and boosted the manufacturing sector. However, by the end
of the plan period, the overall industrial base of the country
had remained weak (World Bank, 1985).
 Although the trend was mildly encouraging in the last few
years of the Imperial government, the actual level of
manufacturing activity and its employment creation was very
low compared with the case in other developing countries.

11. Industrial Development Strategies during the
EPRDF Regime Post-1991
Soon after the EPRDF-led transitional government
seized power it announced that the country would
follow a market-led economic policy.
The first decade of the EPRDF regime (1991–1999)
was marked by a series of reforms under the
structural adjustment program (SAP) with the aim of
reversing the command economic system by way of
fostering competition, opening up the economy, and
promoting the private sector.
In this period the government implemented three
phases of IMF/WB sponsored reform programs.
The first phase of the structural and economic
reform programs took place during 1992/93–
1994/95. A key measure undertaken during this
period was liberalization in various markets.

12. Cont.…d
o The second phase of the economic reform program
(1994/95–1996/97) was aimed at limiting the role of
the state in economic activity and the promotion of
greater private capital participation.
o In 1996 the country entered a three-year Enhanced
Structural Adjustment Facility (ESAF) arrangement
with the IMF and began the third phase of the
reform program spanning the period 1996/97–
1998/99.
o Under this arrangement, the government committed
itself to achieving broad based economic growth in a
stable macroeconomic environment, while the
liberalization measures were further strengthened.

13.  The Industrial Development Strategy (hereafter, IDS)
developed in 2002 focuses mainly on the manufacturing
sector.
 The document also addresses other sub-sectors in the
broader spectrum of the industry sector. The document,
however, has no clearly defined timeline, goals, as well as
implementing institutions and monitoring and evaluation
mechanisms.
 Since the overthrow of the Derg regime, major emphasis
has been given to agricultural development, the
establishment of democratic government, and
implementation of capacity building.

14. Private sector as an engine of industrial development
Agricultural led industrial development and strong agriculture-industry
linkages
Export oriented industries to lead industrial development
labor intensive industries to be given special attention
Government to play a leading role in coordination and also to make direct
public investment in sectors where gaps exist in private investment
Good governance and Nationwide participatory industrial development that
requires coordination among the government and private investors,
Private industrial investors and farmers and, employers and employees. It
focused on two broad areas of intervention to bring fast and sustainable
industrial development in the country. Those are:-
This industrial development strategy rests on the
following major pillars:

15. The industrial sector of the country is subjected to deep-rooted obstacles.
Therefore, this strategy aims to address these obstacles by creating conducive
environment, which include: Creating favorable situation for developmental
enterprises.
The specific strategic objectives and implementation strategies to sustain these
objectives are summarized here under:
Creating stable and favorable macroeconomic environment through:
Strong control over policy implementation, control of money supply, balanced
budget schedule and tight implementation scheme, government intervention
when markets fail to clear, creating modern and development-oriented financial
systems through: Capacitating and strengthening the National Bank, facilitating
an environment in which banks get full, timely and reliable information, building
the human capital and technology of banks, improving the financial capacity of
development banks, protecting domestic banks from foreign competition, giving
emphasis to insurance and pension institutions, facilitating an environment for
the establishment and expansion of financial assets, market and institutions,
integrating rural financial institutions with other financial institutions; Providing
sustainable infrastructural facilities which include:

16. • Road construction and road transport service, railway
Construction and railway transport service, air transport
service, telecommunications service, electric power
service and supply of land and water
2. Providing Direct Support and Guidance to
Developmental Enterprises
The strategy, thus, identifies priority sectors for direct
support by the government including additional economic
incentives and capacity building measures. These specific
prioritized sub- sectors include: Textile and Garment
Industry, Meat, Leather and Leather Products Industry,
Agro- processing Industry, Small and Micro Enterprises and
construction Industry.

17. • The program covered a wide range of issues and sectors although the
main focus was on rural and agricultural development. The objective of the
program is to build a free-market economic system in the country which will
enable:
a)The economy to develop rapidly,
b)The country to extricate itself from dependence on food aid, and
c)Poor people to be the main beneficiaries of economic growth.
Given that poverty reduction will continue to be the core of the county's
development agenda, the strategy is built on four pillars (building blocks).
These are:
 Agricultural Development Led Industrialization (ADLI), Justice system and
civil service reform,
 Decentralization and empowerment, and Capacity building in public and
private sectors.

18. Strengthening private sector growth and
development especially in industry as means of
achieving off-farm employment and output
growth (including investment in necessary
infrastructure).
Rapid export growth through production of high
value agricultural products and increased
support to export oriented manufacturing sectors
particularly intensified processing of high quality
skins/leather and textile garment.
The strategy gives recognition to the critical role
of exports both in terms of growth of income and
foreign exchange. Key Sector development
policies and strategies under SDPRP were:-

19. Private Sector and Export Development
• Private Sector Development (PSD) was about
enabling the enhanced utilization of labor and
other resources of the country through the
growth of private businesses by providing
predictable and enabling environment both in
domestic and overseas markets.
• In the manufacturing sectors, a new set of
export trade incentive schemes covering credit
guarantee, duty-drawback, voucher system
and bonded manufacturing warehouse, are
aimed at enhancing competitiveness through
relieving exporters from the burden of duties
and taxes.

20. Developing the Manufacturing Sector
The components of this program include:
 Establishing Industrial Zones
 Completing the implementation of the Leather and Leather
products technology Institute project,
 Completing the implementation of Garment Training Centers
project
 Devising and implementing training programs
 Establishing a National Network of Information System and
ensure the flow of industrial information and
 Establish a Research and Development Institute. Not only this,
the program also consist the
 construction of both public and private projects, and
geological data base program under mining sector.

21. 2.2 Plan of Action for Sustainable Development and
Eradication of Poverty (PASDEP)- (2005/06 -2009/10)
• The plan encompasses a wide array of issues aimed at bringing
sustainable development and eradicating poverty. The document
addresses progress and achievement under SDPRP, economic
performance, plan, objectives, strategies, monitoring and evaluation for
the five years. Unlike the preceding program, the PASDEP attaches
significant weight to industry sector development in general and the
manufacturing sector in particular.
• The PASDEP carries forward important strategic directions pursued under
the Sustainable Development and Poverty Reduction Program (SDPRP) -
related to infrastructure and human development, rural development,
food security, and capacity-building- but also embodies some bold new
directions. These include, a major focus on growth in the coming five-
year period with a particular emphasis on greater commercialization of
agriculture and enhancing private sector development, industry, urban
development and a scaling-up of efforts to achieve the Millennium
Development Goals (MDGs).

22. The PASDEP in general consists of the following
eight pillars. Namely:
Building all-inclusive implementation
capacity;
A massive push to accelerate growth;
Creating the balance between economic
development and population growth;
Unleashing the potentials of Ethiopia's
women;
Strengthening the infrastructure
backbone of the country;
Strengthening human resource
development;
Managing risk and volatility and,
creating employment opportunities

23. The Industrial development Strategic
Objectives under PASDEP were:
• The Industrial development Strategic Objectives under PASDEP
were:
Enabling all industries to utilize their full capacity in order to
increase production and productivity;
Establishment and expansion of industries that are labor intensive
and that use domestic raw materials;
Strengthening the participation of the private sector in the
development process; and,
Increasing the industrial sector's share of GDP and its
employment generation capacity as well as its contribution to
foreign exchange earnings
• In these programs, most of specific strategic plans were the same
with the other previous programs. In addition, two specific sub
sector strategic plans included are:
Sugar Industry Development Program and
Production of Flowers, High-Value Fruits and Vegetables.

24. The Growth and Transformation
Plan (GTP) – (2010/11-2014/15)
The Growth and Transformation Plan (GTP) aims to
sustain the registered performance in the PASDEP
period and achieve the MDG targets by 2015. It gives
special emphasis to agricultural and rural
development, industry, infrastructure, social and human
development, good governance and democratization.
The country’s vision in the plan period specifically on
economic sector is: to build an economy which has
a modern and productive agricultural sector with
enhanced technology and an industrial sector that
plays a leading role in the economy; to sustain
economic development and secure social justice;
and, increase per capita income of citizens so that
it reaches at the level of those in middle-income
countries.”

25. The Growth Transformation Plan rests on the
following pillars:
 Sustaining faster and equitable economic growth
 Maintaining agriculture as a major source of
economic growth
 Creating favorable conditions for the industry
sector to play a key role in the economy
 Enhancing expansion and quality of infrastructure
development
 Enhancing expansion and quality of social
development
 Building capacity and promoting good governance
and
 Promoting women and youth empowerment and
equitable benefit.

26. Cont.….d
The goal of industry sector under first GTP
was to register a higher growth rate than
that of the agriculture and service sectors.
The target is to achieve average annual
growth rate of 20% as a base case
scenario and 21.3% as a high case
scenario. To achieve the objectives, the
following strategic objectives had been
employed. The development objectives of
industry sector were:

27. Cont.……d
Creating a broad-based springboard for competitive
domestic industrial and private sector development.
Creating employment opportunities and thereby reduce
poverty.
Supporting sustainable development of agriculture
Increasing industrial production and productivity by fully
utilizing the existing capacity of industries
Promoting medium and large industries that use domestic
raw materials and labor
Creating strong foundation for the sector to start playing
a leading position in the national economy, employment
creation, and foreign exchange earnings and saving.
Strengthening the sector’s capacity to produce equipment,
machinery and spare parts.
• However, the targeted GDP share of the sector at the end of
the plan period is 18.8% under the base case scenario.

28. 2.4 The Second Growth and Transformation Plan (GTP II) –
(2015/16-2019/20)
Given the vision of becoming a lower middle
income country by 2025, GTP II aims to achieve
an annual average real GDP growth rate of 11%
within stable macroeconomic environment while at
the same time pursuing aggressive measures
towards rapid industrialization and structural
transformation.
This aim rests on the following nine strategic
pillars. These are:

29. GTPII….
 Sustaining the rapid, broad based and equitable economic
growth and development;
 Increasing productive capacity and efficiency so as to reach
the economy’s productive possibility frontier through rapidly
improving quality, productivity and competitiveness of
productive sectors (agriculture and manufacturing
industries);
 Enhancing the transformation of the domestic private sector
to enable them become capable development force;
 Building the capacity of the domestic construction industry,
bridging critical infrastructure gaps with particular focus on
ensuring quality provision of infrastructure services;
 Proactively managing the on-going rapid urbanization to
unlock its potential for sustained rapid growth and structural
transformation of the economy;

30. GTPII…
• Accelerating human development and technological
capacity building and ensuring its sustainability;
• Continuing the building of democratic and
developmental good governance through enhancing
implementation capacity of public institution and
active engagement of citizens;
• Promoting women and youth empowerment,
ensuring their effective participation in the
development and democratization process and
enabling them to equitably benefit from the
outcomes of development;
• Building climate resilient green economy

31. GTPII…
• In order to achieve the stated objective of the industrial
sector, a number of implementation strategies are devised
within GTP II. These strategies mainly focused on:
The implementation of projects and programs which
are geared towards attracting quality investment,
Enhancing production and productivity, boosting export
shares,
Accelerating technological learning and strengthening
the linkage among industries.

32. The Homegrown Economic Reform Program and Ten-Year
Development Plan
• In 2019, the government adopted the Homegrown Economic Reform
Plan (HGER) to addressed macroeconomic imbalances and areas where
structural reform had made less progress. The HGER is the ongoing
industrial strategy and identified the following as key macroeconomic
constraints to growth:
The persistent scarcity of foreign exchange, undiversified and low exports, an
overvalued exchange rate and a large gap between the OER and the MER;
 The high risk of debt distress;
 Limited private sector access to financing;
 High inflation and Resource misallocation as a result of focusing on
non-tradable instead of tradable (also resulting in increasing income
disparities between the urban and rural population) and on inefficient
or capacity constrained State owned enterprises.

33. It encompassed three pillars:
A)Macro-financial reforms: reduce the risks associated with external debt; lower
external vulnerabilities, arrest inflation and enhance growth, investment and exports
by:
Strengthening public finances;
Gradually moving towards a flexible exchange rate regime;
Strengthening the monetary policy framework; and
Enhancing financial sector development.
B)Structural reforms: address bottlenecks inhibiting private sector growth by:
easing the constraints to doing business;
lowering tariff and non-tariff barriers to international trade;
 improving the efficiency of public institutions; and
Improving services such as logistics, telecom and electricity.
C)Sectorial reforms: address market failures and sectorial regulatory and
investment constraints in five key potential priority sectors, including
agriculture, manufacturing, mining, ICT and tourism, that can leapfrog
economic transformation.

34. HGER…
The HGER was complemented by the Ten-Year Development
Plan (TYDP): A Pathway to Prosperity (2021-30), which
Parliament approved in March 2021. The government opted
for a 10-year plan to emphasize future development
directions and longer-term objectives over the detailed
policies and instruments laid down in previous plans. The
TYDP is based on the HGER’s policy frameworks, focus
areas and structural reform strategies. It explicitly identifies
the private sector as the engine of growth and lists
institutional reform including building capacity, strengthening
accountability and improving peace and stability as a priority.

35. HGER…
• The TYDP’s overall development goal is to
improve welfare by improving Ethiopians’
standard of living and quality of life. Its 10
strategic pillars are interlinked with the goals and
targets of the United Nations 2030 Agenda for
Sustainable Development and its commitments
under the African Continental Free Trade Area and
Agenda 2063. Key medium-term priorities are:

36.  promoting multi-sectorial and diversified sources
of growth and job opportunities;
Promoting sustainable and inclusive financial
sector development;
Harnessing the demographic dividend and
developing quality and efficient infrastructure
Promoting sustainable urban development; and
 Fostering peace, justice, and inclusive
institutions. Progress on these priorities will
constitute milestones towards achieving the long-
term goals.

37. HGER
HGER implementation was initially encouraging, but was adversely
affected by shocks.
The government made good progress on structural reform, including
deepening SOES reform. Regarding macroeconomic policies, the
exchange rate was allowed to depreciate more quickly, reducing the
gap with the parallel market rate. A strong revenue effort, focused
on improved tax administration, resulted in an even lower budget
deficit than anticipated for the first half of 2019-2020.
Financial repression has been tackled and a domestic treasury
market developed in finance government operations. Starting early
in 2020, however, Ethiopia was struck by several shocks, which have
led the economy to deteriorate sharply compared to the HGER’s
medium-term projections.

38. Development of Industrial Parks in Ethiopia
The Ethiopian Industrial Parks Development Corporation (IPDC) was
founded in 2014 with the legislative mission to build and run industrial
parks across Ethiopia as a national priority effort. Industrial parks are
intended to help the Ethiopian government fulfill its objective of
transforming the economy from an agrarian to an industrial foundation
by creating jobs and expanding exports without increasing
environmental strain.
Operation of industrial parks is structured based on the three principal
players which are industrial park developer, operator and enterprise.
The industrial park investment will upgrade industries and generate
employment opportunities. All these aspirations and practical
implementations will put Ethiopia as the manufacturing hub of Africa in
the near future.

39. IP…
• IPDC is in charge of overseeing all industrial park
activities in partnership with the Ethiopian Investment
Commission and the Ethiopian Revenue and Customs
Authority. Furthermore, government agencies such as the
Ethiopian Electric Utility, Ethio telecom, and the Main
Department for Immigration and Nationality Affairs provide
a one-stop-shop service for investors.
•Currently, there are 13 public and 5 private industrial Parks
available in Ethiopia. Among them,10 well known IPs are
mentioned below.

40. 1. Lemi Bole Industrial Park of Ethiopia
It is located in the City Administration of Addis Ababa. The park contains
20 factory sheds with a combined land area of 172 hectares to produce
garments. Bole Lemi Park has also developed sheds and service space on
181 hectares of land to make Peril and textile.
2. Kolento Industrial Park of Ethiopia
Kolento industrial park is also located in Addis Ababa, City Administration,
with a total area of 279 hectares of land for the manufacturing of
pharmaceutical products.
Hawassa Industrial Park of Ethiopia
Hawassa Industrial Park H.IP is located in the area of Nations and Nationalities
(SNNPR). The park contains 52 factory sheds and a total land area of 140
hectares for textile and apparel manufacturing.

41. 4. Mekelle Industrial Park of Ethiopia
The Mekelle Industrial Park is located in Tigray. The park has 15 factory
sheds with a total area of 75 hectares to manufacture textiles and garments.
5. Kombolcha Industrial Park of Ethiopia
The Kombolcha industrial park is located in the Amhara region, under the
Kombolcha City Administration. It has also nine Factory sheds and a total
land area of 75 hectares to make Peril and cloth.
6. Adama Industrial park of Ethiopia
Adama Industrial Park is in the Oromia region, in the Adama City
Administration. It includes 19 Factory sheds and 120 hectares of land to
make garment clothing and machinery.

42. 7. Jima Industrial Park of Ethiopia
The industrial park is located in Jimma City Administration’s Oromia region. There
are nine Factory sheds. It has a total land area of 75 hectares for textile and garment
manufacturing.
8. Debre Birhan Industrial park.
The Debre Birhan industrial park is located in the Debre Berhan City Administration
in the Amhara region. It has eight factory sheds with a total area of 75 hectares to
make garments and clothing, as well as trade.
9. Dire Dawa Industrial Park
Dire Dawa industrial park is part of the Dire Dawa city administration. The Park has
15 sheds and 150 hectares of land for garment, textile, and apparel manufacturing.

43. 10.Bahir Dar Industrial Park of Ethiopia
The Bahir Dar industrial park is located near the BahirDar city administration in
the Amhara region. The park also contains 8 sheds with a total land area of 75
hectares for the production of textiles and clothing.
Challenges of Ethiopian industrial development
Though the manufacturing sector is a way out for sustainable economic
development its growth is not without challenges.
The major ones include unskilled labor forces with limited experience; limited
infrastructure; external pressure from global market, shallow industrial research
and development activities, underdeveloped market information system, problems
related to trade logistics and limited promotion made on the resources and other
opportunities.

44. On the behalf of industrial parks the strategy faces key challenges. The
employment gains are small compared to the size of the labor market;
technology and knowledge transfer are limited; and poor backward
linkage to micro, small and medium-sized enterprises (MSMEs) through
supply chains has inhibited the emergence of competitive domestic
firms.
Domestic firms may be subject to de facto discrimination in the
industrial parks, partly due to the desire to attract FDI and generate
foreign exchange. Labor productivity, absenteeism, and turnover remain
problems. There are also issues connected to environmental footprint,
further improvements in infrastructure (such as worker housing) and
investor support.

45. To sum up, we can summarize, the challenges of industrial development in general
and Ethiopian manufacturing sector in particular is hindered due to the following
and other numbers of problems.
 High logistics and transportation cost
 Limited study and action on export incentives
 Low labor productivities
 High cost of imported raw materials for the manufacturing
 Limited compliance to the international requirements and market
 Limited research on manufacturing industries including end market study
 Underdeveloped rural infrastructure which limits the expansion of
manufacturing industries to the potential areas
 Weak supply chain integration
 Low level of technology and weak market institutions and information
system

46. Opportunities for the Industrial Sector development in Ethiopia
Although many challenges and bottle necks of Ethiopian Industrial
sector mentioned above, the country have potential and
underutilized resources which can be create opportunities to
enhance growth of its economic phenomenon mainly industrial
sector. Thus it has :
Private sector friendly government
Relatively cheap electricity charge in comparison to other
African countries
Macroeconomic stability and rapidly growing economy
Relatively cheap labor force and rapidly increasing number of
trained employees
Access to wide market which include large domestic market,
COMESA,AGOA, EBA opportunities and China market etc.

47. Competitive incentive packages which include
export incentives
The coming into being of Integrated Agro-
Industrial Parks which facilitate one stop
shopping for all the services, to gain economies of
scale, for bulk purchasing and selling, extension
services, and development of common
infrastructure
The country has gotten a strong global attention
due to its remarkable economic growth and credit
worthiness

48. Conclusion
Looking at the industrial policy trajectories and practices of Ethiopia demonstrate
that the successive governments have a strong commitment to achieve their own
version of industrialization as a tool of altering the structure of the economy.
Generally, the three past and current Ethiopian government followed different
industrial policy perspectives. Imperial regime followed import substitution led by
private sectors; while Derg used to be follow import substitution led by public
sectors. And, the EPDRF and current government followed mainly Export
promotion and import substitution in some infant domestically produced
products. They all believed that a sustained economic development can be realized
through industry despite their differences in how and when to realize it.
Industrialization and achieving industrial development is the keen
interest of all the successive regimes in the country. However, how
to achieve it and where to locate it, is a contentious issue. Industrial
development policy in Ethiopia as a whole is dictated by
development paradigms such as market- oriented development
(under the Imperial era and EPRDF regime); public oriented (under
Dergue); foreign dominating industrialization vs. domestic
ownership; and Import Substitution Vs Export promotion.

49. It is important to notice that policy formulation and execution in
Ethiopia is not static rather it is pragmatic and is not obsessed to a
particular development ideology. The economic policy shift and
hence industrial policy by extension, of the Dengue from a centrally
planned economy to mixed economy and EPRDF’s turn its back
against liberal thought in favor of developmental state and the
inculcation of import substitution industrialization in the industrial
policy menu of EPRDF.
The manufacturing sector of Ethiopia remained at its infant stage for the last five
decades due to myriad of constraints. It is generally characterized by weak
production and consumption, and poor backward and forward linkage with the
domestic economy. The sector is highly dependent on imported sources for its raw
material requirements. Weak inter-sectoral and intra-sectoral linkage implies that
the sector has not been the source of dynamism for the economy at large.

50. Recommendations
This policy orientation is tremendously important in bringing industrial
development which is fairly distributed across regions as the state can be a
pioneer in investing in underdeveloped areas and can attract the private sector.
The Investment proclamation and its special emphasize for peripheral regions
is an important evidence for the need to have equity across the country. Here, it
is important that state must use its authority to guide private firms toward
investment, technology and global competition. However, the government also
need to pay due consideration for efficiency as a backward country, Ethiopia
needs to use its limited capital in the most efficient way. Care should be given to
balance industrial equity and efficiency.
Ethiopia experienced declining in maternal and child mortality, combined with a
rise in life expectancy, in the recent time and; many Universities generate
younger graduates with lack skill and added on labor forces 100,000 to 150,000
annually.

51. In this regard, it may be appropriate to strengthen and improve the
standing of a second tier of higher education centered on TVET
institutions, based on robust and broadly recognized certifications,
which builds technical skills that are likely to be both necessary
and relevant to the labor market. Training that focuses on skills for
agriculture, manufacturing and the digital economy will be
particularly useful.
In addition to these, modernizing outdated curricula and pedagogic
methods is also further remedies.
At least five important future-focused shifts in the content and
methods of instruction would better to prepare Ethiopia’s youth
for the economy of the future. First, the teaching of science,
technology,
engineering and mathematics (STEM) throughout the educational
system needs to be reevaluated at all levels.

52. This should also include measures to close the gender gap in
STEM, for example, through scholarships, mentoring and other
special initiatives. Second, shifting from rote learning towards
creative thinking will be essential in instructional methods and
assessment. Third, approaches that spur independence, innovation
and entrepreneurship, especially in secondary and tertiary
education, would create the mindset and soft skills necessary for a
dynamic economy. Fourth, a phased and sustainable program to
bring the digital world into classrooms and instruction would
generate high returns, especially in and around areas of growing
economic and tech activity. Finally, a new generation of young
women and men need to be much more sensitive to environmental
sustainability, both in theory and in practice. This could involve
greening of school areas through ‘Green Clubs’, participation in
community sustainability activities such as tree planting and
conservation, perhaps as part of the Green Legacy Initiative, and
involvement in social outreach and mobilization.