Back to Reality: A Critical Review of Performance of the Export Oriented Manufacturing in Ethiopia

Abstract

This article critically reviews the performance of the export oriented manufacturing industry in Ethiopia and its role in deriving the industrial development and structural transformation of the economy. Detail analysis of available panel of data indicates that overall performance of the manufacturing sector, as measured from plan targets and the move towards structural transformation, is not promising. The more export promotion deepens, the weaker is the overall industry performance and fate of moving to economic structural transformation is meagre. More importantly, it is a contradiction to find weakening performance of sectors dedicated to exports production while the country deepens the efforts to export manufacturing. Thus, the article argues that export lead industrialization is counterproductive in Ethiopia. Despite this fact, production for local market has not been adequately surfaced in to the intention of the government. The experiences of Latin America and South East Asian countries prove that production for local market is critical for a successful industrialization and ensuring economic structural transformation. Therefore, Ethiopia’s industrialization needs to back in to reality of the economic life. The export lead industrial development should be replaced by a comprehensive industrialization where export oriented production and producing for national consumption are implemented simultaneously and one is complementing the other.

Keywords: Export lead industry, import substitution, industrialization, structural transformation