1. Issues of Industrial Policy and Strategy of Ethiopia 1

2. 1. Setting the Vision for Industrial Development 1.1 Government commitment for industrial development – Believes worthwhile to undertake industrial policy, – Designed own industrial policy 1.2 Essence of ‘Industrial Policy’ – Restructuring, diversification and technological dynamism – But, market failure impedes structural transformation, hence ‘Industrial policy’ 2

3. 2. Elements of Industrial Dev’t Strategy of Ethiopia 2.1 Guiding principles or approaches 2.1.1 Private sector as the engine of growth 2.1.2 ADLI – Overarching development strategy (Ethiopian context) – What is Its role in industrialization? – Further implications to industrialization Lack of demand as central constraint for industrialization Industrialization depends on success in agriculture External markets/demand have little role in industrialization 3

4. 2.1.3 Export-led Industrialization Foreign exchange constraint and limited local market But in principle, bias against import replacing industries (even if efficient) Countries’ industrialization experiences: complementarity b/n export-led industrialization and import substitution In practice it refers to agriculture based export oriented industries 2.1.4 Focus on labor-intensive industrialization Stock of large, cheap & hard working labor force But unskilled and less productive, and Technology-intensive approach as driver or international competitiveness 4

5. 2.1.5 The leading role of the state Uncontestable, given its organizational advantage nation-wide But, the essential key role of the private need be appricaited 2.2 Creating a conducive environment for industrialization 2.2.1 stable macro-economic environment 2.2.2 Development conducive financial system 2.2.3 Reliable infrastructure provision 2.2.4 Trained manpower 2.2.5 Effective & efficient administrative/governance structure 2.2.6 Efficient judicial system 5

6. 2.3 Industries identified for Promotion Market failure to identify strategic industries Based on the principles/criteria, the following are identified – Textiles and garment industries – Meat, leather and leather products industries – Agro-processing industries (sugar, fruits & vegetables processing, grain mills, bakery, soft drink industries, etc) – Construction industries (involves: iron and steel, cement and cement products, chemicals, plastic & plastic products, etc) – SMEs (all industrial groups, with few exceptions including non-manufacturing ones, i.e., in agriculture and services) Satisfy at least one of the criteria 6

7. 3. Does it represent a comprehensive/full-fledged industrialization policy and strategy? Most of the industries identified for promotion are ill defined Focuses on few consumption based industries, excluding technologically strategic/leading industries – Excludes all intermediate and capital goods – Focused on static as opposed to dynamic comparative advantage ADLI implication: industrialization has to stall until agricultural income/demand picks up The role of trade policy not addressed The role of science and technology not addressed 4. Issues requiring further investigation Industrial policy and indebtedness? Industrial policy and WTO membership? Industrial policy and political instability? 7

8. THANK YOU 8