Ethiopia Needs to Declare State of Industrialization Emergency Strategy

Tsegaye Tegenu, PhD

2021-11-25

State of emergency is a situation of urgent need for action when an extraordinary force poses a fundamental threat to the country. A state of emergency empowers the government to declare and execute policies that it would normally not be permitted to do. At this juncture Ethiopia needs to declare one-size-fits-all solution to all economic problems in the country. This solution is a declaration of a state of industrialization emergency which aims to increase the output and employment share of the mining, construction, and manufacturing sectors.

Under normal circumstance the government uses different theories and approaches, and sector assessment models to identify economic problems and design solutions. Due to the current external pressure and internal challenges, the government must focus on production tasks (making things) rather than providing services (doing things). Since the market approach is slow, inefficient, and inequitable, the country needs massive state intervention in linking the various economic sub-sectors (see figure).

The government must focus on manufacturing (“a process of transforming inputs into a finished product”). Manufacturing has backward and forward linkages with other sectors of the economy. Manufacturing provides also broader opportunities for capital accumulation and intensification compared to other sectors. There are possibilities of exploiting economies of scale induced by division of labor, specialization, and large-scale production. Manufacturing has also spillover effects: take the form of product and process technologies (hardware) on which software producing and software-using service sectors are based. Manufacturing is dependent on transportation infrastructure (roads, highways, bridges, rail, airports, ports), energy infrastructure (generation, transmission and disposal in nuclear, coal, gas, renewables) and telecommunications infrastructure.

In history manufacturing is recognized as the engine of economic growth, technological dynamism, and a source of the wealth of nations. However, there are various questions when formulating the manufacturing strategy and policy. For instance, from where should one start (initial step and conditions) to form the manufacturing strategy and design the implementation model? What should be considered when selecting intervention subsectors and policy instruments? What are the objectives of the manufacturing strategy and aims of the policy instruments?

Under state of emergency, it is not possible to target the entire manufacturing system (the chain of supplier–customer relationships) and subsectors (process industries, mass manufacturing industries, large/small batch industries, and extraction industries). Considering the current external pressure and country’s level of economic growth, I suggest the industrialization emergency strategy should focus on establishment of domestic arms industry, intermediate goods producing industries and agro-industries.

  • Domestic arms industries
  • Intermediate goods producing industries
  • Agro-industries

The arms industry involves the research, development and production of land-based weapons and aerospace systems for the supply of the national defense force. The arms industry should also provide the logistic support (such as food, clothing and health items).

The industries producing intermediate goods cover activities producing goods that are usually destined to be incorporated into other goods. This includes mineral products, chemicals, plastics, metal and electronic components.

Agro-industries are manufacturing units which add value to agricultural raw materials through processing and handling operations. The demand pull created by an agro-industrial enterprise stimulates businesses well beyond the closest links with its direct input suppliers and product buyers; a whole range of ancillary services and supporting activities in the secondary and tertiary sectors of the economy.

There is also a question as to which party should be responsible for the implementation of the strategies. The federal government should solely be responsible for establishing the arms industries. Agro-industries can be established through local government and private sector partnership in every district of the country. There are many intermediate goods that can be used for multiple purposes. Heavy industries should be managed by the federal and regional governments, while consumer goods can be produced by the private sector.

Especially at this time of its history, Ethiopia needs an army of voluntary business and industrial economist as fanons and caeros on the practical and local fronts. The time is not only to share knowledge of theoretical models through publications and presentations, but also calculating and informing the local people on the cost and benefits of their decision making. Who will volunteer?


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