Both the leather products and the textile and apparel sectors have been designated as top priority manufacturing industries in Ethiopia’s recently released five-year development plan
Ethiopia seems to be attracting the attention of economists interested in Africa, and for good reason. Except for Rwanda, Ethiopia is the only African country whose economic growth has been consistently high for more than a decade without relying on a natural resource boom.
Between 2004 and 2014, per capita growth in Ethiopia was 8% per year. This was the highest on the continent during this period, and is impressive by any standard.
The growth has been attributed mainly to a construction boom and increased agricultural productivity. However, manufacturing has also been vital. It has grown at 11% per year and manufacturing exports increased more than elevenfold. This was largely thanks to the increasing export earnings of the footwear and apparel industries. The growth represents more than a doubling of manufactured exports’ share in total merchandise exports, which itself more than quintupled during the period.
Nevertheless, manufacturing as a share of gross domestic product in Ethiopia remains 5%, well below the African average of 10%. The country also scores below the African average on diversification, export competitiveness, productivity and technological upgrading.
Despite this, it’s not a long-shot to predict that Ethiopia will catch up with countries like China and Vietnam in some low-tech manufacturing industries in the near future. Labor costs are very important for these industries. In addition, right now you’d be hard pressed to find a country in the world that has cheaper labor than Ethiopia. Even beyond these obvious industries, there are reasons to believe that Ethiopia might be on the right track to catch up with more advanced economies.
The developmental state
First is the country’s developmental orientation. In many ways it resembles that of successful catch-up experiences in East Asia, such as Korea and Taiwan, with a relatively “authoritarian corporatist” structure and centralized economic planning.
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