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Capacity Strengthening for Industrial Development in Ethiopia - Development of Standard Input-Output Coefficient for Ethiopia Export Product

Wednesday, 20 June 2018 15:20 Written by 
  • Location(s): Ethiopia, India
  • Type(s): Solution
  • Theme(s): Development
  • SDG(s): 9. Industry, Innovation and Infrastructure
  • Locations in Africa: Ethiopia
  • Types in Africa: Solution
  • Themes in Africa: Development
  • SDGs in Africa: 9. Industry, Innovation and Infrastructure
  • Locations of ComSec Solutions: India
  • Types of ComSec Solutions: Solution
  • Themes of ComSec Solutions: Development
  • SDGs of ComSec Solutions: 9. Industry, Innovation and Infrastructure

Summary

Ethiopia's economy is undergoing significant tranformation with positive overal growth rates over the past decade ( between 8% - 13%), but faces challenges to scale up productivity and industrialization. The Government puts a major emphasis on export-oriented industries and the industrial sector to allow for a broad based growth that attracts foreign direct investments and addresses the countries's massive unemployment problem. To bring national capacities for enterprise development in the industrial sector to scale, improve industrial planning and ensure the development of policy frameworks that incentivize export, expertise from the rapidly growing Industrial Sector of Asian countries is of major importance.

Challenge

Ethiopia's economy is undergoing significant tranformation with positive overall growth rates over the past decade ( between 8% - 13%). The country places a particular emphasis on promoting its agricultural and export led industrialization. which is targeted to account for 18% of GDP by 2025. As envisaged by the Growth and Transformation Plan II, the development of the industrial sector should allow for a broad based growth that attracts foreign direct investments and become a lever for poverty eradication by adressing the countries's massive unemployment problem, generating income and adequate savings. The potential to unleash export-led industrialisation of the already widely

existing textile and leather manufacturing, is promising, but requires a strategic transformation and systematization of incentives. Currently, Ethiopia's exports are widely dominated by primary commodities (Approximately 90% of all merchandise exports; UNCTAD LDC 2016). The share of the industrial sector in GDP oscillated around 12% between 2006 - 2016 and will need to be scaled up massively if the targed is to be reached. Currently, the sector is characterized by low levels of technical and technological capabilities and lacks competititiveness in the quality and standards of it s products. Institutional support will be critical to develop research and product development as well as productivity and management skills in the sector.

Solution

To strengthen national capacities for enterprise development in the industrial sector in line with the countries' Growth and Transformation Plan, the Ministry of Industry, supported by UNDP, has set up a multiyear capacity building programme that focuses on i) the review of policies and regulatory capacities in industrial development, ii) improving the competitiveness of Ethiopian manufacturing and service industries through enhanced productivity, value chain analyisis and cluster development, and iii) enhancing the skills, knowledge and technical capacity of private sector support giving institutions and Small-/Medium enterprises. The ministries' policy review draws inspiration from successfull examples of other regions. As such, a study on manufacturing export perfomance in 2015 provides a synopsis review of existing export incentives with a particular focus on policy settings of industrial oriented countries in Asia and specific lessons learned shared by the Government of India. It exposes export promotion programmes and lessons learned with regards to interventions that can stimulate the exports of foreign and domestic investors. Based on this review, Ethiopia was able to develop an easily accessible and implementable standard input-output coefficient (SIOC) system on standard input-output coefficient of Ethiopian export products for the beneficiaries of the export promotion schemes and implementing organizations, instead of the existing self-declared input-output coefficient which is cumbersome and time consuming. The system has enabled the exporter to get the raw material/inputs or components required in producing exportable products at the international price and exempts the capital goods needed for the investment from duties and taxes. The development of the system has removed the previous self declared information submitted by the exporter which was exposed to misuse of materials and causes loss of revenue for the government and unfair competition between citizens. The system is developed for six export product categories: leather and leather products, textile and garments, horticulture, agro-processing and food, chemical pharmaceuticals and plastics and metal & engineering products. The aquired knowledge was applied to pre-launch a trial phase of Ethiopia's information system in the leather and textile sector.

Supported by: UNDP, Indian government representation in Ethiopia (Indian Embassy

Implemented by: Ministry of Industry

Contact detail: This email address is being protected from spambots. You need JavaScript enabled to view it.

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