Chapter 3

Ethiopia’s Industrialization Drive under
the Growth and Transformation Plan∗

The policy landscape of Ethiopia is entering a new phase.

Based on its

developmental experience and policy learning in the last several years, which arethemselves remarkable and worth careful study and documentation, the Ethiopian
government has launched a new five-year plan, the Growth and Transformation Plan
(GTP) 2010/11-2014/15, a lucid and bold document approved by the parliament inNovember 2010.

As the highest national policy framework, the GTP will govern

Ethiopia’s developmental policies, budgets and government organizations, as well as
actions of development partners and foreign investors, in the coming five years.
Unlike similar plan documents in many other developing countries where much issaid but little is implemented, the Ethiopian GTP is unlikely to remain merely on
paper.

The top leader’s resolve and the government’s readiness to carry out thisplan and take the country to the next level of development are clearly visible.

It ishighly probable that the performance of every ministry, agency or institution in
Ethiopia will be judged by its contribution to the realization of the GTP.
This paper discusses and evaluates the design of the GTP as it prepares to be
implemented in the first half of 2011.

While the GTP covers a broad ground fromagriculture and rural development to social issues and governance, our main focus ison its industrial sector targets and measures from the perspective of international
comparison of policy formulation methods.

The National Graduate Institute for

Policy Studies (GRIPS) and the Japan International Cooperation Agency (JICA)
have conducted quarterly industrial policy dialogue with the Ethiopian government
since June 2009 with eight official sessions in total. In the process, a large numberof policy practices, gathered mostly from East Asia’s high performing economies,∗

This chapter is prepared for the Eighth High Level Forum of the Ethiopia-Japan Industrial Policy
Dialogue held in Addis Ababa on May 17, 2011. More discussion of the materials covered in
section 3-1 (Ethiopia’s past policy orientation and experience) is found in chapter 5 below.

33

CHAPTER 3

were reported and compared.

We will study the features of the GTP, including its

strengths and remaining concerns, mainly against the East Asian standards inindustrial policy making.1

3-1. Background3-1-1. Brief history
Recognizing that predatory states and rent seeking culture have been the major
obstacles to African development, the Ethiopian government is determined to build
a developmental state—a state that promotes skills, technology and productive
investment for all citizens, farmers and firms rather than patronage and personal
gains for a few—and has taken a number of steps for its realization ever since thepresent government assumed power in 1991.

The first several years in the 1990s

under the interim government were spent in solidifying the new regime based on amulti-party political system and ethnicity-based federalism, re-establishing amarket-oriented economic mechanism and global linkage, and drafting a new
constitution.

During this early period, the concept of Agricultural Development

Led Industrialization (ADLI) was introduced as the key policy thrust for national
development in the first half of the 1990s.

After overcoming a series of difficulties

arising from internal politics, external conflicts, droughts and famines, Ethiopia by
the early 2000s became ready to earnestly undertake economic development
strategies guided by ADLI principles.
Sustainable

Development

andThe two national development plans of The
Poverty

Reduction

Program(SDPRP)

2002/03-2004/05 and A Plan for Accelerated and Sustained Development to End
Poverty (PASDEP) 2005/06-2009/10 were drafted and executed.
From around 2003 to present, Ethiopia’s overall growth performance has been good.
1

The main comparator countries are Singapore, Taiwan, Korea, Malaysia and Thailand. The GDF
and the Vietnam Development Forum (VDF) (a Vietnam-Japan joint research project supported by
the GDF) organized policy study missions to these countries, as well as to Botswana, Burkina Faso,
Tanzania and Uganda, in 2009-2011 to gather materials and extract lessons for Ethiopia. Moreover,policy experiences of Japan, China, India, Philippines, Vietnam, Mozambique, Zambia and others areused as additional references.

34

Ethiopia’s Industrialization Drive under the Growth and Transformation Plan

Real GDP growth has been 11% per annum on average, and poverty incidents
declined visibly. 2

In policy making, the government has learned and adopted

various industrial policy methods and tools—such as the monthly Export Steering
Committee (copied from the previous Korean model), benchmarking, businessprocess re-engineering (BPR), scaling up of pilot projects and, most recently, kaizen(factory improvement) from Japan—through self-study as well as cooperation with
development partners.

Also in the mid 2000s, the political concept of Democratic

Developmentalism (DD) was formulated to pursue democratic and market-oriented
development under strong state guidance and globalization pressure.
The GTP is the successor to these evolving concepts, documents and plans.

It

incorporates the ideas of ADLI and DD, which themselves have evolved over time,
and the positive and negative experiences of past development plans while adding
new issues and sectors to work with.

Setting ambitious targets and calling fornationwide mobilization, the GTP takes up the challenge of bringing national
development to a higher and more difficult stage.
orientation for the next five years are already set.

The vision and basic policy

The remaining task for the GTP

is designing details and implementation.

3-1-2. Ethiopian policy orientation
By going through cumulative policy learning in the last two decades, as describedabove, Ethiopia has established a distinct policy style which is unique among
African countries (but perhaps not so unique among East Asian economies).

The

four salient features of Ethiopian development policy can be summarized as follows.
First, there is a very strong policy ownership.

Despite the fact that Ethiopia is apoor country heavily dependent on official development assistance (ODA) andhaving only a small traditional export base,3 the Ethiopian government has a clear
development strategy which is home-made.
2

3

Unlike many other “donors’ darling”

Poverty headcount below the national poverty line is on a long-term declining trend from 45.5% in1995 to 44.2% in 1999, 38.9% in 2004, and 29.2% in 2010.
In 2009, Ethiopia’s receipt of ODA (net disbursement) was equivalent to 12.4% of GDP and 60.9%
of gross capital formation (World Bank Development Indicators). Merchandise export, dominatedby food (75%) and agricultural raw materials (14%), was only USD1.5 billion or 5% of GDP in 2008
(national data).

35

CHAPTER 3

countries, Ethiopia does not allow bilateral donors or international organizations toimpose “international best practices” from the West or speak in one voice torecommend political or economic reforms.

The World Trade Organization (WTO)

accession is being sought, but only on the condition that its membership would
leave sufficient policy scope for Ethiopia to catch up rapidly as a latecomer country.
ODA and FDI are welcomed only when they align closely with the national
development plan.

Donors and investors interested in industrial or infrastructure

projects are requested to transfer technology, provide training, and procure as many
local inputs as possible.

Division of labor among donors is assigned by the

Ethiopian government, not by donors themselves.

From the East Asian perspective,these strong attitudes toward development and international cooperation are highly
desirable for a latecomer country without which industrial catch-up can hardly beinitiated.

However, strong policy ownership is necessary but not sufficient forrobust development.

It will not produce results unless the national development

plan, with which every developmental action is asked to align, is of goodquality—and this is the issue that we are about to address.

It may be added that

Ethiopia’s strong policy ownership depends heavily on the governing style andintellectual ability of its top leader, Prime Minister Meles Zenawi.

Maintaining

strong policy ownership into the future will require institutionalization of good
policy practices which make them less dependent on the quality of a top leader.
Second, a strong state guides the private sector. While the Industrial Development
Strategy (IDS) of 2002 clearly states that it is private firms, not state-owned
enterprises, that must be the engine of production and investment, it also contends
that state must use its authority to guide private firms away from rent seeking andtoward investment, technology and global competition.

The Ethiopian government

does not believe that free market, left to its own, will spontaneously raise
productivity or learn technology.

It believes that state must guide and supervise

the market and that, if the state’s capability is initially weak, it must be enhanced tofulfill this role.

According to this view, the state should not form an unconditional

alliance with “capitalists” who may or may not behave productively.

The

Ethiopian government wants to maintain arms’ length relations with both local andforeign enterprises by preparing both carrots and sticks for different behaviors.
The bent for strong state also explains why Ethiopia shuns Washington Consensus
36Ethiopia’s Industrialization Drive under the Growth and Transformation Plan

policy advice and shows great interest in East Asian development experience.
Third, internalization of skills and technology is top priority.

This is of course

highly welcome and appropriate for a country determined to catch up economicallyfrom a very low level.

Ethiopian leaders admit that natural resource-based growthis unsustainable and that human skills and technology to upgrade agriculture andindustry must be the central concern.

The requirement of training, technology

transfer and maximum local procurement to foreign contractors of industrial andinfrastructure projects is similarly motivated.

Keen interest in building

engineering universities in large number, expansion of the technical and vocational
education and training (TVET) system, and institutionalization of kaizen is also amanifestation of the same orientation.

This policy focus seems to come partly

from the proactive attitude of the current administration and partly from the fact that
Ethiopia is poorly endowed with natural resources relative to its large population.
However, the strong desire to enhance industrial human resource is not evident in
the industrial section of the GTP (section 3-2-2).
Fourth, policy scope expands as policy learning proceeds.

Several years ago when

Ethiopia began to seriously implement the ADLI strategy under SDPRP
2002/03-2004/05

andsubsequently

under

PASDEP

2005/06-2009/10,

thegovernment had little practical knowledge or experience of industrial policy and had
to start with a simple strategy of giving generous incentives and disproportionate
policy attention to a few selected export-oriented sectors including leather andleather products, textile and garment, and agro products (floriculture was later added
as the private sector discovered its potential).

Donor support in the industrial

sector was also directed toward these sectors.

At the same time, Ethiopia learned

East Asian policy methods by studying literature, sending young officials to Korea
and conducting policy dialogue with Japan, among other means.

By the time thecurrent five-year plan was drafted, in 2009 and 2010, the government felt that it hadlearned enough in the process of executing SDPRP and PASDEP and that it was
ready to move on to the next phase of industrial policy making.

New policy

elements were recently added such as the promotion of import-substituting
industries in addition to export-oriented ones, institutionalization of kaizen as a
productivity tool in addition to benchmarking, proposed enhancement of micro and37

CHAPTER 3

small enterprise (MSE) policy, expansion of the TVET system, creation of new
industrial zones, and general speeding up of industrialization.

3-2. Features of the GTP
3-2-1. General features
The Ministry of Finance and Economic Development (MOFED) has the overall
responsibility for preparing, implementing and monitoring the GTP as with theprevious two national development plans.

The official drafting process took about

15 months and was managed by the Macro Economic Team of MOFED in thefollowing sequence:
Sep.-Oct. 2009 Generic Guideline was circulated to federal implementing
agencies
Nov.-Dec. 2009 Briefings on Generic Guideline to senor officials anddirectors
Feb.-May 2010 Preliminary draft plans of key sectors were MOFED
submitted toJun. 2010
The consolidated draft was reviewed by the Macro
Economic Team
Jul. 2010
The first draft was prepared; English version also preparedAug.-Sep. 2010 Nationwide consultation forums were organized
Oct. 2010
Consistency check and incorporation of comments andfeedbacks
Nov. 2010
Cabinet review and approval by the House of People’s
Representatives
Although the fundamental policy orientation remained constant during the drafting
process, the final version of the GTP is significantly different from the first draft as
many additions, changes and editing were made throughout the document including in
the industry section.4 It is not evident to the present author how much of these4

In the industry section (section 5.2 of GTP), two “strategic directions” (industrial zones and public
enterprise policy), which were previously only mentioned in the text, were upgraded to supplement

38

Ethiopia’s Industrialization Drive under the Growth and Transformation Plan

revisions were initiated by MOFED and how much was due to top leaders, line
ministries or nationwide consultations. The first paragraphs of the GTP states that its
drafting “has benefited from the many consultative meetings held at the Federal,
Regional and local levels with government bodies, private sector organizations, higher
education institutions, professional, women’s and youth associations, religious andcivil society organizations, opposition political parties and development partners”(English p.1).

While such consultative processes are now common amongdeveloping countries, the one adopted in Ethiopia for drafting the GTP appears tohave been highly systematic even by the standards of today’s national plan making(however, see section 3-4 below for the lack of stakeholder involvement).
The system of overall visions, objectives and strategic pillars in the GTP issummarized in Table 3-1.
Table 3-1. GTP’s Visions, Objectives and Strategic Pillars
Ethiopia’s vision to “To become a country where democratic rule, good-governance andguide GTP
social justice reign, upon the involvement and free will of its peoples,and once extricating itself from poverty to reach the level of a
middle-income economy as of 2020-2023.”
Vision on economic “Building an economy which has a modern and productive agricultural
sectorsector with enhanced technology and an industrial sector that plays aleading role in the economy, sustaining economic development andsecuring social justice and increasing per capita income of the citizens
so as to reach the level of those in middle-income countries.”
Objectives
1. Maintain at least 11% growth and attain MDGs.
2. Education and health services for achieving social sector MDGs.
3. Nation building through a stable democratic and developmental state
4. Stable macroeconomic framework
Strategic pillars
1. Rapid and equitable economic growth
2. Maintaining agriculture as major source of economic growth
3. Creating conditions for the industry to play key role in the economy
4. Infrastructure development
5. Social development
6. Capacity building and good governance
7. Gender and youth
Source: Summarized from chapter 2 of the GTP.

the original two strategic directions (MSE development and medium and large industry development).
“Major targets” for these strategic directions were given more numerical details, and“implementation strategies” were rewritten. Moreover, industry and trade were separated into two
sections reflecting the splitting the Ministry of Trade and Industry into the Ministry of Industry andthe Ministry of Trade in October 2010. Also see section 3-2-2 below.

39

CHAPTER 3

The GTP has the following document structure (numbers in parentheses indicate thenumber of pages in the English edition):5
Volume I – Main Text
Foreword, introduction, plan preparation and approval process (4)Ch.1

Achievements and challenges under PASDEP (17)Ch.2

Basis, objectives and strategic pillars (7)Ch.3

Macroeconomic framework (10)Ch.4

Financing (7)Ch.5

Economic sectors development plan (41)Ch.6

Social sector development plan (10)Ch.7

Capacity building and good governance (14)Ch.8

Cross-cutting sectors (gender, youth, labor, culture, environment,
etc. 12)

Ch.9

Opportunities, risks and challenges in implementation (2)Ch.10

Monitoring and evaluation (4)Volume II – Policy Matrix
Text (3)
Policy matrix (35)
The GTP’s objectives and strategic pillars in chapter 2 are expanded with more
concrete contents in chapters 5-8 of Main Text (volume I) and Policy Matrix(volume II).

Chapters 5-8 are the core part of the GTP that lists strategic direction,

objectives, major targets (with numerical tables), and implementation strategies foreach chosen sector.

Policy Matrix additionally gives each sector’s annual targets,

implementing agency, and means of verification in a large table format.
While economic sectors, social sectors, governance and cross-cutting issues are all5

A MOFED high official confirmed that the Amharic original and the English translation of the GTP
had identical content with no added or hidden sentence or section from the one to the other. The
GTP’s basic structure inherits that of PASDEP but some differences can also be detected: (i) the GTP
is more compact (Main Text of 127 pages against PASDEP’s 225 pages, in English); (ii) sectoral
chapters and sections have been reordered and rearranged; and (iii) numerical targets are set more
systematically for all selected sectors.

40

Ethiopia’s Industrialization Drive under the Growth and Transformation Plan

targeted, it can be surmised from space distribution that economic sectors
development is given a prominent role in eradicating poverty and reaching middle
income.

Economic sectors in chapter 5 further divide into agriculture and ruraldevelopment (11.5 pages), industry (6.5 pages), trade (1.5 pages), mining (3.5
pages) and infrastructure (17.5 pages).

While volume is only a partial indicator ofimportance, it is suggestive of what issues are given high policy attention.

It canbe concluded that the Ethiopian government aims to generate concrete sources ofgrowth in the agriculture and industrial sectors under state guidance rather thanconfining itself to general provision of primary education, health care and goodbusiness environment, and letting the market do the rest.
In comparison with other five-year plans in the developing world, Ethiopia’s GTP
has the following characteristics.

First, the whole document is relatively lean and6

concise, and various parts hang together reasonably well under a clear policy
direction (however, this does not mean that individual numbers are convincing or
mutually consistent).

As noted above, the visions, objectives and strategic pillars

are given contents in the core sectoral chapters. Second, despite compactness, the
GTP manages to set annual numerical targets for each chosen sector.

It can be said

that the GTP is a consolidated document combining visions, sectoral andsub-sectoral strategies and concrete action plans in one.

This is good from theviewpoint of unambiguous allocation of tasks and effective monitoring, but it canalso be a problem since all policy actions are pre-set at the beginning of the
five-year cycle without much room for additional stakeholder consultation, revision
or rolling adjustments.

Third, many of the GTP’s targets are highly ambitious.

This can be said for both overall growth targets and specific sector and sub-sector
targets.

These issues will be discussed further in section 3-3-2 below.

In chapter 9 of the GTP, risks associated with the implementation of the GTP aredescribed as follows.
The main foreseeable challenges in the implementation of the GTP

6

Word limits were imposed in drafting the GTP whose English translation has 127 pages.
comparison, Malaysia’s Third Industrial Master Plan 2006-2020 has 766 English pages.

41

InCHAPTER 3

include low implementation capacity, low national saving rate that is
unable to support the investment needs of the economy, and theunpredictability of external financing.

In addition, it is anticipated that

global market price fluctuations could provide some challenges toeffective implementation of the plan.

(English p.123)

Regarding the shortage of funding, it is further stated that the problem will be dealt
with by improvement of the tax system and expansion of the tax base,encouragement of domestic savings, enhancement of external finance opportunities
and contribution of local and international non governmental organizations (NGOs)
and civil society organizations (CSOs).

Foreign earnings will be increased by both

expanding export capacity and substituting imports.

To address implementation

capacity challenges, the civil service reform program will be strengthened at alllevels.7
These proposed risk management strategies are reasonable but may not be sufficient.
Additionally, we would like to point to three more issues—target rigidity, limited
policy capability and the lack of dynamic response from the private sector—as
potential risks in implementing the GTP.

These will be the main topics in theremainder of this chapter (sections 3-3 to 3-5).

3-2-2. The industry section
Industrial performance was less than expected in the PASDEP period. From 2005/06
to 2009/10, real GDP grew an impressive 11.0% per annum on average against thebase case target of 7.0% and the high case target of 10.0%. This was the result of a
mixture of overachievement of agriculture (8.4% against base case target of 6.0%
and high case target of 6.4%) and services (14.6% against base case target of 7.0%
and high case target of 10.0%) and underachievement of industry (10.0% againstbase case target of 11.0% and high case target of 18.0%).
7

In the PASDEP, the shortage of domestic savings and the problem of implementation capacity were
not mentioned as risks (except for the low capacity of the domestic construction industry). Instead,external uncertainties such as foreign financing, commodity prices and geopolitical factors werehighlighted.

42Ethiopia’s Industrialization Drive under the Growth and Transformation Plan

Slower-than-expected industrial growth was disappointing to the Ethiopian
government which hoped to attain faster industrialization with concentrated policy
effort on a few selected export-oriented sub-sectors such as leather and leather
products, textile and garment, and agro-processing.

The share of industry in GDP

remained a relatively stable 13% rather than rising to 16.5% as targeted.

The

exports of the above-mentioned three sub-sectors did grow, but were still small at
USD115 million (only 3.8% of total export) as of 2009/10.

In light of these results,

the cost effectiveness of incentives and subsidies poured into these sub-sectors in
the forms of cheap land, allocation of bank loans and foreign exchange,
concentrated policy attention and ODA support, and so on, needs to be re-examined.
The industry section of the GTP (section 5.2 of GTP) has a relatively simple
structure with MSE development and promotion of eight medium and large
industries as two pillars.

The opening sentence of the section says that “favorable

conditions will be created for industry to play a key role in the economy” (Englishp.56).

After affirming ADLI and the (revised) policy principles of the 2002

Industrial Development Strategy, 8 the following four Strategic Directions arepresented:a) Micro and small enterprises (MSEs) development
This is expected to create jobs in urban areas and increase rural- urban andurban-to-urban functional and economic linkages.
b) Medium and large industries development, which includes
1. Textile and garment
2. Leather and leather products
3. Sugar and sugar related industries
4. Cement
5. Metal and engineering
6. Chemical
7. Pharmaceutical
8. Agro-processing
8

Policy support will be focused on industries that are labor intensive, have broad linkages with the restof the economy, use agricultural products as inputs, are export-oriented and import substituting, andcontribute to rapid technological transfer.

43

CHAPTER 3c) Industrial zones development (for medium and large manufacturingindustries)d) Public enterprises management and privatization
The first two can be construed as “main sub-sectors” while the latter two were
upgraded from text discussion in passing to Strategic Directions in the drafting
process.

Inclusion of import substituting industries (4, 5, 6 and 7) in addition to

the export-oriented industries targeted by the PASDEP is particularly noteworthy.9
Then seven Objectives are stated which are:1.

Creation of a broad-based spring-board for competitive domestic industrial
and private sector development

2.

Employment opportunities and poverty reduction

3.

Support sustainable development of agriculture

4.

Full utilization of industrial capacity

5.

Use of domestic raw materials and labor (for medium and large industries)

6.

Create a strong foundation for the sector to start playing a leading positionin the national economy, employment generation, and foreign exchangeearnings and savings

7.

Local production of equipments, machinery and spare parts

In the Major Targets sub-section, numerical targets of designated sub-sectors arepresented, which are further elaborated in Volume II (Policy Matrix) with annual
targets, implementing agency and means of verification.

The appendix to thispaper replicates the entire industry sector targets in the Policy Matrix while Table
3-2 below gives selected highlights.

It must be admitted that many of the

sub-sectoral targets are quite ambitious.

We will contemplate on this issue in thenext section.

9

Among the import substituting industries, the cement industry was already featured in the PASDEP.

44

Ethiopia’s Industrialization Drive under the Growth and Transformation Plan

Table 3-2. Selected GTP Targets for the Industrial Sector
Sub-sector
TextileLeather
Sugar
CementSteel &
engineering
Fertilizer (urea)
Pharmaceutical
Agro-processing
Industry zones
Public enterprises
MSEs - job
creation
MSEs - training oftrainers
MSEs - training ofoperators
MSEs manufacturing land
MSEs - shades
MSEs - buildings

Unit
Export earning in $ million
Export earning in $ million
Production in million tons
Production in million tons
Gross value-added inmillion birr
Production in million tons
Domestic market share
Export earning in $ million
Number of factories inzones
Gross value-added in million
birrBase year Target forMultiples
2009/10
2014/1521.8
1,000
45.9 times
75.73
496.9
6.6 times
0.314
2.25
7.2 times
2.7
27
10 times
6

101.4

16.9 times

15%
35.2

300
50%
300

8.5 times

-

164

-

2.26

5.32

2.4 times

Number of jobs-

2,970,000-

Number of trainees-

10,000-

Number of trainees

-

3,000

-

Hectare-15,000-

NumberNumber

-21,591819-

Source: Excerpted from Policy Matrix of the GTP.
years.

Industrial zone and MSEtargets are cumulative results for five

3-2-3. Industrial policy dialogue and the GTP
How does the industry section of the GTP look in light of ideas and proposals
discussed in the Ethiopia-Japan industrial policy dialogue in 2009-2011? We feelthat not so many of our discussions are reflected in the text of the GTP, at least notdirectly and explicitly, and it is hoped that they will be more fully taken into accountin other documents and in the implementation stage.
Among the many issues raised in our policy dialogue sessions, perhaps the mostimportant is emphasis on quality rather than quantity or speed in industrial policy
making.

We have argued that care and reservation must be exercised in setting

numerical targets and that main focus should shift from tons and percents to45

CHAPTER 3

indicators of skills, technology and other capabilities (chapter 8).

It was also noted

that, in the policy formulation process of Ethiopia, consensus building on key
directions and deep participation of stakeholders were weak in comparison with thebest policy practices in East Asia (chapter 4).

The GRIPS and JICA teamfrequently expressed concern over the speed of drafting key documents such as
kaizen institutionalization and MSE development which seemed too fast for
ensuring feasibility and willing participation of major stakeholders inside andoutside government.

However, the approved text of the GTP is heavy withnumerical targets while competitiveness and productivity are mentioned only inpassing without specific targets.
This is odd in light of the fact that high-level policy makers in Ethiopia always
stress the critical importance of agricultural and industrial skills, engineering
education, technology transfer, TVET system and other measures related toindustrial human capital.

In our policy dialogue sessions, the prime minister

frequently expressed his keen interest in technology transfer and innovative attitude
as well as learning concrete lessons in this regard from East Asia.

The gap

between this obsession with industrial human capital and the absence of clear
statement or targeting of skills, technology and knowledge in the GTP is puzzlingand must be explained.
Another related puzzle is the fact that the term kaizen (factory improvement method
developed in Japan) is entirely missing from the text of the GTP, together with otherproductivity and efficiency tools such as benchmarking, twinning and BPR.
Meanwhile, upgrading of the TVET system and creation of new industrial zones are
not only mentioned but even featured extensively.

It is difficult to comprehend thelogic of highlighting some of the industrial policy tools and ignoring others when all
are essential for realizing the industrial goals of the GTP.
kaizen is especially hard to understand.

The lack of mention of

Unlike benchmarking, twinning and BPR

which are already known and widely practiced, kaizen is a newly introduced
productivity tool that must be learned, scaled up and institutionalized with great
effort in the GTP period as a national movement to transform the popular mindset(section 3-5).

Without knowing whether and how kaizen fits into the GTP

framework, it is difficult for Japan to prioritize kaizen support in its development
46

Ethiopia’s Industrialization Drive under the Growth and Transformation Plan

cooperation with Ethiopia.10
The Japanese team in the bilateral policy dialogue also conducted a needs survey on
the basic metal and engineering sector at the request of the Ethiopian government.11
The survey was conducted under a strong time constraint to offer advice to theimplementation of the Basic Metal and Engineering Development Plan in the GTP
period.

This survey produced several recommendations including the proper

sequencing of development from downstream to upstream, re-examination offeasibility of Bikilal ore, identification of locally substitutable metal products in the
power sector, and capacity building using kaizen.

It also raised questions

concerning the methodology of steel demand projection and setting targets for local
procurement of metal inputs in individual sectors. However, these recommendations
and questions are not reflected in the basic metal and engineering sector targets of
the GTP.

3-3. Numerical targets
3-3-1. Macroeconomic targets
Use of numerical targets is normal in national development plans.

In themacroeconomic area, they are indispensable for charting the general direction of thenational economy and ensuring consistency among sectoral and financing figures.
However, the number and scope of numerical targets must be selected judiciously

10

11

GRIPS and JICA consider kaizen institutionalization as the key entry point for launching a national
productivity movement in Ethiopia. In our policy dialogue, policy makers and experts havevariously suggested how kaizen should be compared with other productivity and efficiency tools.
One idea is that BPR and benchmarking create one-time jump while kaizen is constant improvementin small steps. Another thinks that benchmarking sets targets and kaizen offers a way to achieve
them. Yet another suggestion is that kaizen is much broader than other tools as it encompasses
philosophy, culture and mindset change. However, many people in Ethiopia are still confused about
the relationship and compatibility between kaizen and other tools. We strongly recommend that adefinitive official view on the precise role of kaizen in the GTP be announced as soon as possible.
Mr. Toru Homma, a JICA industrial expert, led a survey on steel industry and metal engineering
industry serving the power and construction sectors in the first half of 2010, while the Engineering
Capacity Building Program (ECBP) in parallel undertook a similar survey on the metal engineering
industry serving the sugar and cement sectors.

47

CHAPTER 3

and the levels at which they are set must be arrived at in a rational way that allows
analysis and assessment.
In the GTP, the target for real GDP growth for 2010/11-2014/15 is set at 11.2% perannum in the base case scenario and 14.9% per annum in the high case scenario.
The main difference between the two scenarios is whether agriculture will risestrongly as technology and practices of model farmers are scaled up to all otherfarmers (high case) or the scaling up will remain partial (base case).
these are ambitious targets.

Either way,

If these are attained, Ethiopia will be among top

growth performers in the world for a decade surpassing most East Asian economies
including China.

We do not question ambitious growth targets as such numbers innational development plans are an expression of political will and national
aspiration.

Ethiopian policy makers feel that the high growth achieved in the

PASDEP period of 2005/06-2009/10 should define the minimum growth rate in the
future.

The GTP states that

During the [PASDEP] period the economy grew on average at 11% per annum.
Assuming that the current economic growth trend is maintained for the next
five year period, it is feasible that, in addition to achieving its Millennium
Development Goal (MDG) targets by 2015, Ethiopia will achieve its longer
term vision of being a middle income country by 2020-2023.

(English p.1)

However, it must be emphasized that an appropriate analytical framework is needed
to explain growth scenarios for logical clarity and operational flexibility because
simple extrapolation is not convincing; and falling short of the growth target should
not lead to undesirable policy reactions that may increase economic distortion andimbalance.
In the Third High Level Forum of our industrial policy dialogue in November 2009,
the Japanese side argued that trends and fluctuations of growth performance
depended on three factors: private dynamism, policy quality and uncontrollable
shocks (chapter 8).

While growth was higher in the first half of the PASDEP

period than the second half, it was not clear whether this slowdown was caused
mainly by exogenous shocks which turned from positive to negative (such as global48

Ethiopia’s Industrialization Drive under the Growth and Transformation Plan

recession and worsening of weather conditions) or by deterioration of policy quality
or private effort (or both).

Ethiopia does not have an effective analyticalframework to identify the main cause(s) of the growth slowdown or address the
problem with appropriate policy response.

For the same reason, the alternative

growth scenarios (base case and high case) in the GTP period cannot be evaluatedobjectively unless underlying conditions such as assumed trends in labor force,
capital stock and productivity and different assumptions about exogenous variables
areexplicitly

stated.

For

this,

Ethiopianeedsamacroeconomic

framework—whether based on growth accounting, a full-scale econometric modelor others—that can explain the relationship between assumptions and outcomes.12
Unlike performance in social service delivery such as education or healthcare inwhich key determinants are policy action and public sector spending, performancein productive sectors such as agriculture and industry does not follow a linear
relation between policy inputs and outcome.

Production, investment and exports

depend not only on policy and public expenditure but also on private effort on
quality, design, distribution, marketing, and branding along the value chain against
rival firms and countries as well as global business cycles, price fluctuations andweather (in the case of agriculture).

Growth performance in agriculture andindustry must therefore be interpreted differently from those in social sectors.
Without clear understanding of the causes of growth performance, the government
runs the risk of resorting to undesirable policy reaction when actual numbers fallshort of targets.

If the reason for the shortfall is inappropriate policy design or

implementation, policy review is in order.

If the policy is adequate byinternational standards but business response is weak, a long-term policy drive forchanging the mindset and behavior of the private sector may have to be launched(section 3-5).

But if the growth is lower than expected due to causes beyond thereach of the government or an unreasonably high growth target, the proper response
is to lower the target and modify the macroeconomic policy stance accordingly.
12

If

For example, in the high case scenario, the assumed gross domestic capital formation of 22.0% of
GDP (English p.32) seems too low against the growth target of 14.9%. This implies an incremental
capital-output ratio (ICOR) of only 1.48 (=22.0/14.9). To support high growth with such a low
investment rate, investment efficiency must be extremely high.

49

CHAPTER 3

additional incentives, subsidies and public spending are instead mobilized to try toattain an unreachable goal, the country is likely to suffer a serious macroeconomic
imbalance.

Flexibility and adjustments are needed to guard policy implementersagainst being trapped in pre-set targets.

3-3-2. Sub-sectoral targets
The GTP is a comprehensive development plan with details.

It incorporates

visions, strategies and action plans (annual targets for sectors and sub-sectors) in
one document.

In many countries these policy components are prepared inseparate documents and in sequence.
For example, the Policy Matrix of the GTP specifies sub-sector annual targets for
output, exports, capacity utilization and newly hired workers for textile, leather andsugar industries from 2010/11 to 2014/15 (see also Table 3-2 above andAppendix).13

As noted earlier, many of these targets look ambitious.

Accordingto MOI and MOFED officials, these numbers were proposed in a bottom-up fashion
from MOI directorates in charge of these sub-sectors to MOI leaders.

They arebased on the analysis of existing industry capacity and future projects in the pipeline.
The Macro Economic Team of MOFED did not revise these numbers except for
those related to the power and infrastructure sectors.
The merit of specifying sub-sector targets in detail for five years in advance isclarity in division of labor.

The existence of the Plan Matrix makes it easy toidentify responsible ministries and directorates for all targets, allocate concrete tasks
to them for each year, and monitor the progress.
On the other hand, the demerits of such detailed planning without sufficient market
consultation are inflexibility and the lack of stakeholder cooperation.

Sub-sector

targets set by the government which are too many, too high or too rigid may bind
policy implementation as circumstances change or if stakeholders (especially13

The problem of pre-specifying too many details over products, markets and investments was also
visible in A Strategic Action Plan for the Development of Ethiopian Leather and Leather Products
Industry, two volumes (UNIDO and MOTI, 2005).

50

Ethiopia’s Industrialization Drive under the Growth and Transformation Plandomestic and foreign enterprises) feel uncomfortable with the targets.

If targets areunmet, worry and blame will torment the ministry or directorate in charge.

The

government may be able to achieve numerical targets in a certain sub-sector byforcing or subsidizing production and investment but it may miss the more
important objective of fostering productivity and competitiveness.
The three points raised over numerical targets in the Third High Level Forum in
November 2009 are still valid: (i) it must be asked whether the targeted number
properly belongs to the domain of government or it should be better left to themarket in the context of a specific sector in Ethiopia; (ii) qualitative goals such as
skills and technology transfer must be translated into proxy variables that are bothmeaningful and quantifiable; and (iii) goals and timetables must be set both
ambitiously and realistically in the sense that serious joint effort by government andthe private sector should be able to attain them (chapter 8).
In plan documents, macroeconomic targets are indispensable and key sectoral
targets (such as growth rates and GDP shares of industry, agriculture, services, etc.)
are also important but they must heed the precautions mentioned above.

At thesub-sectoral level, it is better to let the ministries and directorates in charge decidetargets and policy measures in close consultation with businesses and allowing thepossibility of annual adjustments rather than stipulating them in advance in the five
year plan.

Sub-sector targets must be indicative, not state orders that must be

attained by any means.

As income and industrial capability rise, nations usually

graduate from fixed-period planning which takes up enormous time and energy ofgovernment officials and adopt flexible policy making with movable targets andmeasures.

In the East Asian region, Japan, Korea, Taiwan and Singapore no longer

produce five-year plans.

As policy capability is gradually built up and the private

sector becomes more dynamic, Ethiopia should also move toward less pre-set
sub-sector targets and more flexibility and adjustments in sub-sector policy
formulation.

51

CHAPTER 3

3-4. Policy capability
3-4-1. Missing ingredients
This and the next section reiterate the topics already taken up as main issues in theSeventh High Level Forum in January 2011 (chapter 4).

Ethiopia’s industrial

policy formulation is still on a learning curve and it has a long way to go before
catching up with the best policy practices of the world.

Besides concrete policy

measures, the areas in which the Ethiopian government must continue to learn
include policy procedure (how industrial policy is made), policy organization (whatorganizational arrangement can produce most effective policies) and national
movement (how to ignite a change in popular mindset toward productivity andcompetitiveness).

The first two are dealt with in this section while the last will be

discussed in the following section.

The lack of sufficient policy capability on thepart of the Ethiopian government can be a serious impediment in theimplementation of the GTP.

To put it more positively, clear recognition of thisproblem and strong resolve to overcome it in proper steps will provide Ethiopia withan excellent opportunity for policy learning which is the key to national
development based on knowledge, skills and technology.
We have argued in chapter 4 that policy making procedure must contain fiveingredients: vision, consensus building, stakeholder involvement, lead ministry oragency, and drafting.

Policy formulation must begin with the vision advanced by

the top leader with his or her deep conviction.

To concretize this vision, an official

mechanism with clear authority and mandate must be designated to manage policy
and a secretariat function must also be set up.

This mechanism must spend

sufficient time in building consensus on key policy directions, issues and measuresamong concerned ministries and non-government stakeholders (especiallybusinesses).

Necessary surveys and studies should be commissioned to competentexperts or research institutes.

When this process is completed and basic agreement

is reached, a policy document should be drafted and comments should be received
for revision and finalization.

This, in a nutshell, is the standard procedure formaking industrial policies in high-performing economies (Figure 4-1 in chapter 4).
To realize this procedure, Korea has presidential committees, Taiwan and Thailand
52

Ethiopia’s Industrialization Drive under the Growth and Transformation Plan

use research institutes as facilitators, and Singapore and Malaysia mobilize athree-layer official mechanism of committees and working groups.

Although eachcountry has different ways and styles, they all fulfill five ingredients mentioned
above.

They naturally create a sense of shared ownership and responsibility

among all stakeholders inside and outside government which makes it easy to
implement the policy once it is agreed.
The problem with Ethiopia is that some of these necessary ingredients are missing.
The vision is provided by the top leader and the drafting process—whether
internally drafted or outsourced to domestic or foreign consultants—does exist, but
the intermediate process of building consensus on main policy features bymobilizing all stakeholders remains weak.

As a result, the policy content depends

critically on the scope of knowledge and experience of a few persons who happen to
be assigned to the task rather than reflecting the broad and diverse views of a large
number of stakeholders.

Moreover, policy capacity of a lead ministry or agency

generally needs further strengthening.

3-4-2. Three issues
To be more specific, three problems have been identified in the preparation process
toward the GTP and its related documents.
First, speed is emphasized over quality.

In Ethiopia, many policies are formulated

in great haste at the cost of quality and implementability.

While we recognize thestrong political urge to move fast that permeates every chapter of the GTP, the fact
is that Ethiopia drafts policies much faster than East Asian high-performing
economies with far more policy experience.

The latter typically spend one year to

update an existing policy and two to three years to draft a new one.14

As a newlearner of industrial policy methodology, it would not be improper for Ethiopia to
14

Taiwan spent three years to draft a new industrial statute of 2010 that would govern the economy’s
industrial strategy for decades to come. Similarly, Malaysia took nearly three years to produce theThird Industrial Master Plan 2006-2020. When Singapore launched its national productivity
movement with Japanese assistance in the 1980s, the first few years were spent on understanding thebasic concept and narrowing the perception gap between the teacher (Japan) and the student(Singapore).

53

CHAPTER 3

spend at least a few solid years to study best practices, devise local adaptation andcreate an appropriate policy mechanism before it adopts an important industrial
policy package such as kaizen, MSEs and industrial clusters.
less likely to be effective, supported or implementable.

Hurried policies are

In the end they will takemore time to produce results than policies that are formulated through proper steps
as discussed above.
Second, Ethiopia needs a simple and organized mechanism in the central
government to coordinate, monitor and adjust high priority policies.

In the last

several years, the country has created central committees and teams more or lessrandomly to deal with the expanding policy scope.

Starting with the monthly

Export Steering Committee, which has so far worked well, the government has
added two committees on infrastructure and a working team on import substitution
policy.

For the enhancement of the TVET system under the MSE strategy and the

new task of kaizen institutionalization, inter-ministerial coordination is expected totake place in the Board of Directors established individually for these policies.
Admittedly, these are ad hoc creation of coordination mechanisms whose
complexity will accumulate as policy scope further expands.
Instead of endlessly adding committees, boards and teams, the GRIPS Development
Forum (GDF) proposes a central coordination mechanism comprising of (i) the
National Competitiveness Council chaired by the prime minister and attended byministers, business leaders and experts that meets every month and has several
working groups under it to study specific issues or sectors; (ii) a permanent planningcommission that specializes in making and executing development plans which also
serves as the secretariat to the above council; and (iii) a policy think tank that
supports these two bodies with action-oriented surveys, studies, seminars and otherintellectual inputs (also see Figure 4-12 in chapter 4).
and the commission are immaterial.

Precise names of the council

Through this mechanism, only the mostimportant issues should be deliberated and decided before the prime minister whileother issues should be handled at the lower levels.15
15

It is reported that the government is studying the possibility of installing a new central coordination
mechanism consisting of a full-fledged planning entity and an enhanced think tank ((ii) and (iii)
above). As for the National Competitiveness Council ((i) above), the current Export Steering54

Ethiopia’s Industrialization Drive under the Growth and Transformation Plan

Third, proper steps should be taken to institutionalize kaizen.

Introduction ofkaizen to Ethiopia is in a very early stage with the first kaizen pilot project of 28
local companies successfully completed, kaizen manuals and videos produced, anddissemination plan formulated.

These initial results must be scaled up functionally,

sectorally and geographically to the national level.

The institutionalization ofkaizen is important for Ethiopia because it will be the country’s core activity in anational movement for mindset change toward efficiency and productivity.

Kaizenshould not end with a few projects assisted by Japan but should become alocally-owned decade-long movement encompassing all farmers, workers, engineers
and managers to change the way Ethiopians think, live and work.

Our policy

dialogue has shown that, for such a broad national movement to produce great
results, certain prerequisites are ensured including leadership, core organization,
supporting institutions, massive campaign, training programs and materials, andfostering private sector capacity (see section 3-5 below; also see Handbook (JICA
and GRIPS, 2011)).

Formulation and execution of this movement will be a major

challenge for the Ethiopian government, for which good preparation and proper
steps will become all the more important.

In the last two years Ethiopia and Japan

have worked together to solve initial perception gaps and administrative delays
which are common in introducing kaizen to a new country.

In the years ahead,

more policy learning and local adjustments will be needed for the scaling up of
kaizen.

3-5. Private dynamism and mindset change
3-5-1. The problem of weak private sector response
Will the Ethiopian private sector respond strongly to the industrial policy measuresof the GTP? Can local enterprises match the strong political will and ambitious
growth targets advanced by the Ethiopian government? Industrialization requires a
combination of good policy and strong private dynamism.

Apart from improving

Committee could be expanded to take up its functions. If this idea is concretized with proper design,
it will contribute greatly to the improvement of policy coordination in Ethiopia.

55

CHAPTER 3

the quality of industrial policy of the government, latecomer countries often face theproblem of a weak private sector characterized by short-terminism, job hopping,foreign product worship, real estate speculation, dependency on subsidies andprotection, and unwillingness to explore new products, technology and markets.
There may be less-than-expected industrial performance due to the lack ofSchumpeterian animal spirit.
This concern comes not from theoretical reflection but from the observation ofmany countries, in East Asia and elsewhere, that show divergent growth records
despite similar policy frameworks and external environments.

The difference

between Korea and Taiwan on the one hand, which are already in the high income
group, and Malaysia and Thailand on the other, which remain in the middle income
range though all the four economies started industrialization with public support in
the 1960s, cannot be explained solely by policy measures adopted by them whichhave large overlaps.

The fact that Hyundai Motor, a Korean auto maker, absorbed

the technology of Mitsubishi Motors rapidly in the 1970s to become a global
competitor by 1986 while Proton, a Malaysian auto maker established in 1983, andits suppliers, continue to be local players and receive Japanese technical assistancefor improving competitiveness even today points to the innate difference in thenational capacity to master foreign technology.

Similarly, any Japanese factory

manager who has worked in both Taiwan and Thailand can tell that there is afundamental difference in the discipline and innovativeness of engineers andworkers between these two economies.

The hypothesis that all nations are equal intheir work attitude and productivity aptitude given the same management is notborne out by facts.
In our meetings with Prime Minister Meles, he frequently raised questions regarding
the lack of private sector dynamism.

One of his questions was why the Ethiopians

with large sums of money invested in urban properties instead of building factories.
On another occasion he asked how East Asian governments steered the private
sector away from speculation and rent seeking and into manufacturing andtechnology.

He also wished to receive literature explaining concretely how Meiji

Japan and post-WW2 Korea absorbed technology so quickly from foreign-assisted
industrial projects.
56Ethiopia’s Industrialization Drive under the Growth and Transformation Plan

Our answer on how to wake up a sleepy private sector is the initiation of a national
movement for mindset change.
projects.

National movement is not just a collection of

It is a comprehensive program of aspiration, philosophy, mass campaign,

factory projects, training, awards and institution-building that lasts for at least a
decade until it becomes self-sustaining and an integral part of popular mindset.

Itusually aims at quality, productivity and life improvement by instilling the spirit ofactivism and cooperation.

In many instances the movement is started as top-down

imposition of actions that must be executed at the grassroots level which, if it is to
succeed, yields visible benefits that ignite voluntary implementation and willing
expansion.

Successful examples from East Asia include Japan’s Rural Life

Improvement Movement (1948-) and factory kaizen movement (1950s-),
Singapore’s Productivity Movement (1960s-) and Korea’s Saemaul (new village)
Movement (1970s-).

Some movements initiated decades ago are still practiced andhave evolved into advanced forms.
However, organizing a national movement requires high policy capability due to its
complexity and duration.

The Quality Control (QC) Circle Movement of Burkina

Faso since 1989 and the Productivity Movement of Botswana since 1991 haveproduced some results but did not transform the national business landscape as
dramatically as in the East Asian economies cited above.

Ethiopia has chosenkaizen and its institutionalization as the core instrument of its national movement
for mindset change.

The first JICA-assisted pilot project of 28 manufacturing

companies was completed by June 2011 with satisfactory results, but the country
has a long way to go before a kaizen-based national movement is firmly established.
For continued success and expansion, systematic policy learning from international
best practices as well as failures is crucial.

3-5-2. Lessons from international comparison
As a preliminary effort to collect international experiences in national movements,
the GDF organized policy study missions to several countries in East Asia andAfrica from 2009 to 2011.16
16

From these studies, common success factors and

See footnote 1 of this chapter.

57

CHAPTER 3

country-specific factors that influence the effectiveness of national movement havebeen distilled.
The six success factors are shown in Table 3-3 with the examples of Japan,
Singapore, Burkina Faso and Botswana.
(i)

They are:Leadership—strong personal commitment of the top leader is a must for
initiating and sustaining a national movement.

(ii) Core organization—there must be a central organization with full authority
and responsibility to draft strategies, set standards for consultation andtraining, design and implement projects, coordinate players, secure funding,receive international cooperation, etc. related to quality and productivity
movement.
(iii) Supporting institutions—there must also be a large number of supporting
institutions for awareness creation, certification, consultation, training,
publication, award giving, etc.

at central and local levels.

(iv) Massive campaign—nationwide campaigns for raising awareness must be
staged through multiple channels.
(v) Training programs and materials—authorized and standardized courses
and textbooks must be available for training movement leaders and instructors
as well as a large number of entrepreneurs, engineers, workers, farmers,
etc.

in different sectors and regions.

(vi) Fostering private-sector capability—promotion of private-sector service
providers (consultants and trainers), their associations and related nongovernment supporting institutions is important for long-term sustainabilityof the movement as main activities will eventually have to be carried out
by the private sector when the government exits from service delivery.

58

Ethiopia’s Industrialization Drive under the Growth and Transformation Plan

Table 3-3. Success Factors of National Movements
LeadershipCore organization (s)Supporting institutions(central and local levels)
Massive campaign

Japan

Singapore

Burkina Faso

Botswana○○(private)○○(public)△△(public)

○

○

△
△/×
(public→private)△(fragmented)○(national
movement)○(national
movement)△(partial)

△

○

○

△
(not update)

△

○

○

×

×

Training programs andmaterials
Fostering private sector
capability△

Note: Assessment by the GRIPS Development Forum: ○ good, △ moderate, × poor.

While the productivity movements of Japan and Singapore score high on all thesecriteria, the movements in Burkina Faso and Botswana show many problems which
explains why they have remained partial and less effective.

Ethiopia needs tostudy all these aspects of national movements if its kaizen institutionalization is tomake a strong impact on national productivity.
The design of a national quality and productivity movement must also reflect
country contexts as identical movement may produce different outcomes depending
on initial conditions (Table 3-4).

Generally speaking, if the private-sector motive

for launching national movement is more pressing the easier it is to carry it out.
Furthermore, in countries where the private sector is relatively well-developed,
business response to government-initiated movement is expected naturally to bestronger and more extensive than in countries where the private sector is small andweak.

This suggests that national movements are more difficult to start and sustain

precisely in those countries where such movements are acutely needed because
initial capacity and incentives for productivity improvement are low.

Put

differently, latecomer countries with limited industrialization must make far greater
policy effort than more advanced countries to launch a national movement because
the hurdle they must clear is higher.

This is the challenge that Ethiopia faces indesigning the strategy for institutionalizing kaizen for the next five years andbeyond.

Intensive policy learning must fill the gap between what is required and59

CHAPTER 3

what the country already possesses in terms of industrial policy capability.
Table 3-4. National Movements: Country-specific Factors
Japan
Drivers of
productivity
movement

Degree ofprivatesectordynamism
External
supportSingapore

Strong■ Domestic■ Need forexport drive
as resourcepoor country

Strong■ Domestic andexternal■ Perceived poor
work ethics■ Need for FDI
attraction
as resourcepoor country
Moderate
Strong■ Private sector- ■ Govt.-led
led national
national
movement
movement
US & Europe
Japan

Note: Assessment by the GRIPS Development Forum.

60

Burkina Faso
Moderate■ Domestic andexternal■ Enhance
supply-side
response during
structuraladjustment
program
Weak■ Governmentinitiated movement
WB/JapanBotswana
Moderate
Domestic■ Perceived poor
work ethics■ Need for economic
diversification
as resource-richcountry■■

Weak
Govt.-initiatedmovement
Singapore

61
Goal lGoal lGoal lGoal lLinks to
MDGs

Sugar industry
0.38
20.5

12

14.23

20

116

35

6

9.34

2.7

24336

0.314

13
190.5

10
75.73

50

Increased in the
Gross Value Addition of the subvolume, productivity sector (in billion birr)
and quality of
Per capital steel consumption (in kg)
products of the
sub-sector

Steel and Engineering industry
Increase per capita
steel products andsubstitute imported
goods

6,211

Sugar products supplied for export
market (in thousand tone)
foreign currency gained from sugar
export (in million USD)
Number of workers employed (inthousands)

Improve the capacity increased in capacity Cement product (in million tone)of cement production of cement production Per-capita cement consumption (inand per-capita
and increase thekg)
cement product for cement productdomestic and foreign
market simply

Cement industry

Increase the supply The contribution of
the sugar industryof sugar, increase
for increased sugar
the sugar
production andbi-products andbi-products, andsupport the power
employment
generation provide
opportunities
to key economic
activities andIncreased inincrease the share of production and hard
the product in thecurrency generated
export market
from sugar export

7,366

60

40

-

65

100

21.8

17.78

26

165

13.6

22.23

33.8

162

13.6

21475

115.8

40.6
22680

218

50

339.5

0.978
69.8

352

21

12

4,776

75

450

1,435

76.29

50

187.2

0.737
42.5

296.2

16

5.9

200

865

470

1,074

27.75

50.7

197

17

18899

244.5

460.7

50

514.2

1.335
99.4

416.8

25

18

10,071

80

700

1,942

34.72

101.4

300

27

112610661.7

1246.3

607

2.25
304

496.9

30

24.28

11,576

90

1,000

2,545

Ministry ofIndustry

Ministry ofIndustry

Ministry ofIndustry

Ministry ofIndustry(Page 1 of 5)

Ministry ofIndustryannualreportMinistry ofIndustryannualreportMinistry ofIndustryannual report

Ministry ofIndustryannual report

Annual Targets
Base year
Implementing Means of(2009/10) 2010/11 2011/12 2012/13 2013/14 2014/15
AgencyVerification

sugar product (in million tone)
Ethanol product (thousands M3)
Electric power generated(Thousands MWH)
Additional sugar cane development(in thousands hectare)processed hides and skin (million
care)
Capacity utilization of industries (%)
Foreign currency gained fromsector's export trade

Increased in
production andproductivity of theleather sector

Increase theproduction andmarket earnings ofthe leather industry
sector

Leather Industry

Gross value product of the textile
industry (in million US$)
Foreign currency earning (in million
USD)
Industries' capacity utilization (%)
Number of new workers employed in
the sub sector

Indicator

Increased in
production andproductivity of the
textile sector

OutputIncrease theproduction andmarket earnings ofthe textile sector

Textile industry

Objective

Appendix: Policy Matrix for Trade and Industry Development

Ethiopia’s Industrialization Drive under the Growth and Transformation Plan

Goal lGoal lLinks to
MDGs
OutputIndicator

62
Increased in supply Domestically produced ureaof urea fertilizer with fertilizer (in thousands tone)
domestic productIncreased in supply
Generate and saveof the country's
foreign currency
through establishing caustic soda andchemical industries by soda ash
giving focus to thoseindustries support theagriculture sector andother industries andwith plan to export
their industrial
products by using
domestic raw
materials input

The factory construction progress
which can produce 35,000 tone
soda ash in a year (%)

The factory construction progress
which can produce 50,000 tone
caustic soda in a year (%)

Caustic soda and soda ash industry development

Increase chemicalfertilizer supply by
producing fromdomestic raw
materials inputs

Chemical industry
Fertilizer industry development

Increase per capita
steel products andsubstitute imported
goods

Growth in capacity utilization (%)
Increased incapacity utilization ofsteel andengineering
industries
Increased in theDomestically produced spare part
Support othercapacity of thecoverage (%)
industries byengineering
supplying spare
Spare part supply to leather
sub-sector toparts throughindustries (%)
produce spare parts
improving design
Spare part supply for textile
for other industries.
and manufacturingindustries (%)
capacities of the
Scare part supply for sugar
steel andindustries (%)
engineering industry
Snare Dart supply for cement
industries (%)
Snare Dart supply foraero-industries (%)
Spare part supply for constructionindustries (%)
Spare part supply for vehicles (%)

Steel and Engineering industry

Objective

-

20
50
50
50
95
45

15
40
40
40
95
35

10

25

25

45

30

10

80

75

50

50

60

95

60

60

60

30

65

85

85

85

85

95

75

85

85

35

90

90

100

100

300

85

95

75

85

85

35

90

95

Ministry ofIndustry

Ministry ofIndustry(Page 2 of 5)

Ministry ofIndustryannual report

Ministry ofIndustryannualreportAnnual Targets
Base year
Implementing Means of(2009/10) 2010/11 2011/12 2012/13 2013/14 2014/15
AgencyVerification

CHAPTER 3

Goal lLinks to
MDGs
OutputIndicator

63
Increased in supply Land cultivated with commercial
Enhance thecapacity to substitute of natural rubber raw rubber tree (in hectare)material
imported natural
rubber bydomestically
produced products
Annual supply of natural rubber
input (in tone)
construction Performance of aprocessing factory that produce
6700 tone rubber annually

Rubber tree industry

Construction performance of thefactory that cover 30%demand andproduce 37,000 tone plastic
products

Factories established for short pulp
fiber and have the capacity to
produce 78,670 tone individually
Fiber pulp factories established thathave the capacity to produce 79,000
tone
Improved in capacity Growth in capacity utilization (%)
utilization of theexisting paper
factories

Increased in supply Paper factories established whichhave the capacity to produce 82,000of domestically
produced paper and tone individuallypulp products

Demands covered
Enhance thecapacity of industries with domestically
produced plastic
to substituteproducts
imported goods

Plastic Industry

Enhance thecapacity of paper
and pulp industries
to substituteimported goods

Paper and paper products industry development

Number of factories established to
Increased in
Enhance thecapacity of soap and factories to produce produce soap and detergent
products up to 166,000 tone
detergent industries and supply
detergents forto substitutedomestic market
imported goods
Improved in capacity Growth in capacity utilization (%)
Enhance thecapacity of soap and utilization ofdetergent industries sub-sector's industry
to substituteimported goods

Soap and detergent industry development

Objective

61

32

1904

821
100

200
50

73

75

1672

67

50

2052

2137

25

82

80

4048

1370

50

90

1

1

2

85

10000

3000

100

98

1

1

90

(Page 3 of 5)

Annual Targets
Base year
Implementing Means of(2009/10) 2010/11 2011/12 2012/13 2013/14 2014/15
AgencyVerification
Ministry of
Ministry ofIndustry
Industryannual report2
3

Ethiopia’s Industrialization Drive under the Growth and Transformation Plan

64
Goal lGoal lGoal lLinks to
MDGs
OutputIndicator

Growth in foreign
currency earningfrom export ofagro-processing
products

Factories established in industry
Establish Industrial Establishedzones and increase industrial zones and zones
factories built
employment
opportunities andexpand foreign trade

Income gained from sub sector'sexport trade(in million US$)

Improved in food and Growth in capacity utilization (%)
beverage industries
capacity utilization

Industry zone development

Improve production
and capacity
utilization of the
sub-sector andsupply the products
for domestic andforeign markets

Agro-processing industry

Enhance the capacity Improved in capacity Growth in capacity utilization (%)
of existing and newly utilization ofpharmaceuticalestablishedindustries
pharmaceuticalindustries tosubstitute imported
drugs pharmaceuticalmaterials andgenerate foreign
currency earning byexporting thepharmaceuticalproducts
Domestically produced market
Improved in theshare of pharmaceutical andmarket share of
medical product (in %)domestically
produced
pharmaceuticalproducts
increased in foreign Income gained from pharmaceuticalexport trade (in million USD)
market earning
throughpharmaceuticalproduct export

Pharmaceutical industry

Objective

35.2

24

82

65

2

1

60

20

50

15

30

22

144

70

4

25

75

35

150

75

7

30

100

53

197

80

12

40

30

300

90

20

50

Ministry ofIndustry(Page 4 of 5)

Ministry ofIndustryannual report

Annual Targets
Base year
Implementing Means of(2009/10) 2010/11 2011/12 2012/13 2013/14 2014/15
AgencyVerification

CHAPTER 3

Goal lGoal lLinks to
MDGs
OutputImproved inoperation
management ofpublic enterprises

Job opportunity
Give particular
created forattention for Microand Small Scale unemployed citizens
Enterprises toincrease
employment
opportunities andincrease their role toreduce poverty andbring economic
development
Training of trainers
conducted
Trainings conducted
to operators
Land serviced andshades built for
operators

Micro and small scale enterprises

Increasecompetitiveness of
pubic enterprises,
increase foreign
market earnings
generated by public
enterprises andenhance corporate
management of theenterprises

Indicator

65

450
2136

1153
1591
20

Supply of manufacturing land in
hectareNumber of shades constructed
Number of buildings constructed

3712
150

1500

Number of trainees

410

63.7

0.05

474.4

94
3.31

2

3.39

83

2.26

4076
157

2532

500

1700

554

76.2

4.06

98

3.97

4649
164

3048

650

2000

617

88.6

4.47

100

4.56

4818
171

3444

675

2200

679

122.9

5.15

4.88

4336
177

3840

725

2600

740

140

5.25

5.32

Ministry ofIndustry

Ministry ofIndustry(Page 5 of 5)

Ministry ofIndustryannual report

Ministry ofIndustryannual report

Annual Targets
Base year
Implementing Means of(2009/10) 2010/11 2011/12 2012/13 2013/14 2014/15
AgencyVerification

Number of trainees

Number of citizens employed inthousands

Growth in production capacity of
public enterprises (in %)Growth in profit of public enterprises(in billion birr)
Growth in foreign market earnings
from the public enterprises products(in USD)

Growth in value addition by public
enterprises (in billion birr)

Management and privatization of public enterprises

Objective

Ethiopia’s Industrialization Drive under the Growth and Transformation Plan