Manufacturing export misses target
Private sector involvement requested in the Lease Finance scheme
The local manufacturing sector exported less than 50 percent of the plan set in the export target in the 2017-2018 fiscal year.
According to the annual performance report of the Ministry of Industry, presented at the stakeholders’ consultative meeting held on Thursday at Ghion Hotel, the local manufacturing sector exported industrial good valued at USD 487.5 million. The export target set by the Ministry of Industry was USD 997.9 million. At the end of the second Growth and Transformation Plan (GTP-II) in 2020 the manufacturing sector export is expected to generate 3.5 billion dollars and employs 750,000 workforce. In the GTP plan the manufacturing sector forecast to grow by 21 percent each year. However, the sector grew by 11 percent in the year under review.
The local manufacturing sector is using 57 percent of its installed production capacity. According to the report, textile and garment achieved 46.3 percent of the export target, leather and leather products 47.7 percent, meat and milk 55.9 percent, food and beverage 62.4 percent, pharmaceuticals 36.6, chemicals and construction 45.5 percent, electric and electronics 39 percent and metals and engineering 27.4 percent.
Minister of Industry, Ambachew Mekonnen (PhD), revealed the political instability that occurred in the country in the past two years has affected the overall economy of the country. “We are registering economic growth withstanding the political instability,” Ambachew said.
According to the minister, the manufacturing sector is traversing through challenging times. He cited shortage of foreign currency and industrial inputs, erratic power supply, and the civil unrest as the major factors that affected the productivity of the manufacturing sector. Ambachew said the foreign currency issue is being addressed and the country’s political situation is stabilizing.
State minister of Industry, Bogale Felleke, stated that the manufacturing sector could have achieved better if there was peace and stability in the country. “The manufacturing sector is not a place where people can make easy money. There are several challenges and one has to be very competitive to make profit. There is no lack of awareness about the manufacturing sector. People are aware of the manufacturing sector. Investors are reluctant to join the sector because they have fear about the challenges. What we have to do now is to resolve the bottle necks in the sector,” Bogale said.
While discussing the annual performance of the manufacturing sector, industrialists voiced their complaints. Most of the complaints came from leather producers. A representative of the Ethiopian Leather Producers Association said that following the ban on export of rawhide the price of hide in the local market has nosedived driving many traders out of business. “While rawhides are damped here due to minimal prices leather factories are allowed to import leather from abroad.”
In the 2017-2018 fiscal year, 24 million pieces of rawhides were used by the local leather industries and 2.5 million pieces were imported. Hides and leather, spice and cotton producers requested officials of the Ministry of Industry to give due attention to these sectors.
Meat exporters complained about the growing contraband trade of cattle. Meat producers said the price of meat in the local market is more expensive than the international market. Abattoirs are unable to export much due to the exorbitant price of oxen. “We are focusing on sheep and goat that we mainly export to the middle east,” the exporters said.
The country earned 133.7 million USD from leather and leather products export and 107.6 million USD from the export of meat and milk.
The industrialists claim that the Ministry of Industry does not have the capability to enforce laws and regulations. Customs and other government offices do not consider letters written by the Ministry seriously.
Representatives of the Chemicals Inputs Manufacturers Association said that the Ministry of Industry, institutes, and industrialists should all work on producing industrial inputs locally. “The local manufacturing sector cannot be competitive in the international market if it imports industrial inputs. We should focus on research and development so that we can substitute imported inputs.” The representative said that the Chemical and Construction Inputs Development Institute which was established six years ago to support to manufacturers does not have a laboratory. “In order to support the industry it has first to build its capacity. You have to support the institute itself,” he said.
The Ethiopian government has launched the Capital Lease Finance Scheme two years ago. Under the Scheme the Development Bank of Ethiopia (DBE) buys and provides machineries to manufactures in the form of loan. Officials of the Ministry of Industry and Regional Lease Finance Enterprises disclosed that the fact that DBE provides the finance and procures the machineries by itself it takes a long time for the bank to deliver the machineries. The officials said that it takes a year or two for DBE to buy and deliver the requested machineries. The officials proposed that DBE only provides the loan while other procurement specialists buys and delivers the machineries. “It is better if the private sector supplies the machineries,” they said.
Asfaw Abebe, Small and Medium Manufacturing Industry Development Agency Director, told The Reporter that there is a delay in delivering the machineries to the enterprises. “Other countries experiences show that the bank provides the finance while the procurement and supply work is done by the private sector. This helps to expedite the procurement process,” Asfaw said. “We will present the proposal to the government for endorsement,” he added.
The Ministry of Industry has set target to generate USD 997.9 million from the manufacturing sector export in the 2018-2018 fiscal year. In the GTP-II target it was planned to generate two billion dollars from manufacturing sector export in the fiscal year.