International Comparison of
Manufacturing Performance- A Supplemental Analysis for Setting
Ethiopia’s Light Manufacturing Targets 5th High Level Forum for the Phase II of Policy
Dialogue of Industrial Development in Ethiopia
Toru Homma
Senior Advisor on Private Sector Development
Japan International Cooperation Agency (JICA)
Homma.Toru@jica.go.jp

Addis Ababa, 25 February 2014

Contents
1. What is light manufacturing?
2. Complex feature of light manufacturing
3. Manufacturing and light manufacturing
FDI data in some countries
4. Implications for Ethiopia

2What is light manufacturing?
 General perception: these are definitely light manufacturing
 Garment and footwear
 Food Wood products and furniture What about these? Light manufacturing or not?
 Textile? (often mixed with garment) Large scale process-oriented automated beverage?
 Agro-Processing? Food included? Edible oil? Bio fuel?
 Packaging? If it is made of paper, agro, plastic?
 Metalworking garage? (sometimes with wood) Paper: Pulp & paper? Paper packaging? Paper Craft?
 Non metal minerals? Jewellery?
3

What is light manufacturing?
 Various ideas; no concrete definition
Generally shared key features are:
 Labour intensive
 Consumer product manufacturing
 Less capital intensive Less difficult to enter
But these features may not be clearly depicted if it isdefined by sub-sector, for example:
 Food processing industry includes
Fish processing  Automated large-scale milling Some other examples shown in the previous slide

4

Various definitions of light manufacturing Light Manufacturing in Africa (The World Bank, 2012)
 Covers 5 light manufacturing industries= Basic, simple and labour intensive industries
1. Agribusiness2. Leather goods
3. Wood processing and wood products
4. Simple metal products
5. Apparel Good sense of coverage but difficult to obtain datafrom statistics (WB report is based on extensive
surveys)5

Availability of light manufacturing FDI data Generally difficult to obtain abovementioned data Difficult especially in Africa
 Aggregated data of secondary industry is available
 But sub-sector data is hard to find as public data Sometimes available by asking IPAs in each country but
it is not sustainable No common classification at the sub-sector level So no common aggregating way as light manufacturing But capturing LM data is still meaningful
 This study tries some countries’ data analysis
 Zambia Ghana Cambodia
 LDC aggregated data
6

Zambia: FDI Inflow
Manufacturing investment amount
Smaller dominance than the case of Ethiopia
Average manufacturing
investment amountratio: 20.9%

Source: calculated by author from Zambia Development Agency data on individual
pledged investment projects
Note: Data in this slide is confidential.

7

Zambia: FDI Inflow
Light manufacturing investment amount
Relatively larger ratio to all manufacturing than Ethiopia
Average lightmanufacturing
investment
amount ratio:
25.7%

Source: calculated by author from Zambia Development Agency data on individual
pledged investment projects
Note: Light manufacturing is defined as products of food, textile, leather, wood,
furniture & jewellery. Classification of each investment is by the author in this analysis.
Note: Data in this slide is confidential.

8Zambia: FDI Inflow
Number of manufacturing investment project
LM is more visible than comparing investment amount
Ratio of average number ofmanufacturing investment
project: 33.9%

Source: calculated by author from Zambia Development Agency data on individual
pledged investment projects
Note: Data in this slide is confidential.

9Zambia: FDI Inflow
Number of light manufacturing investment project
LM is more visible than comparing investment amount
Ratio of average number of lightmanufacturing investment project: 35.0%

Source: calculated by author from Zambia Development Agency data on individual
pledged investment projects

Note: Light manufacturing is defined as products of food, textile, leather, wood,
furniture & jewellery. Classification of each investment is by the author in this analysis.
Note: Data in this slide is confidential.

10Zambia’s industrial priority sector and vision
4 out of 6 are light manufacturing industries
Vision2030

Fifth National Development Plan (2006-2010):
Upstream/downstream manufacturing activities
based on mining & agro-industry

Commerce, Trade and Industrial Policy (CTI Policy) 2009-(10 years)
PolicyCom&Trade Inv. Promo. ThematicIndustrial
Framework
PolicyPolicyIssues
Policy6 out of4 priority
sectors= LightmanufacturingVision: to develop a competitive, export-led manufacturing sector that
contributes 20% of GDP by 2015
Priority Sectors
MSMEs
Rural
1. Processed Foods (60% of manufacturing GDP)SME Dev Industrialization
2. Textiles and Garments (15% of manu.GDP)(incl. OVOP)
Policy3. Engineering Products (14% of Non Trad. Exp)
4. Gemstones (10% of NTE*)
5. Leather and Leather Products (3% of NTE)
6. Wood and Wood Products (8% of manu.GDP)

Industrial Strategy
To be prepared as a vehicle to implement Industrial Policy(Source) Elaborated by Homma T. based on various documents and papers issued by the Government of Zambia, theMinistry of Commerce, Trade and Industry of Zambia and Zambia Development Agency
11
Note*: NTE – Non Traditional Export

Lessons/learning from Zambia
 Diversification of industrial structure is the core thinking
 Exit from monoculture and over-dependency on minerals National Dev. Plan focuses upstream / downstream
manufacturing activities based on mining & agro-industry
 6 priority industries identified in its industrial policy
 LM is not necessarily focused but naturally prioritized 4 out of 6 priority industries are light manufacturing
 FDI data shows…
 FDI for manufacturing and LM is steadily grown but theirshares are not necessarily expanding Number of FDI project tells more than FDI amount Difficulty to obtain comparable FDI data Needs extensive work for reliable analysis for
distinguishing light manufacturing industries
12Ghana: FDI Inflow
Manufacturing investment amountMillion USD

Quarterly sectoral data is available and regularly updated

Average manufacturing
investment amountratio: 12.2%

Source: Quarterly Update by Ghana Investment Promotion Centre (GIPC) available
from its website
13

Ghana: FDI Inflow
Light manufacturing investment amount
Similar ratio to all manufacturing with that of Ethiopia

Average light manufacturing
investment amount ratio: 22.1%

Source: calculated by author from Ghana Investment Promotion Centre data on
individual pledged investment projects
Note: Light manufacturing is defined as products of food, textile, leather, wood,
furniture & jewellery. Classification of each investment is by the author in this analysis.
Note: Data in this slide is confidential.

14

Ghana: FDI Inflow
Number of manufacturing investment project
More diversified to other than manufacturing industries
Ratio of average number ofmanufacturing investment
project: 15.1%

Source: Quarterly Update by Ghana Investment Promotion Centre (GIPC) available
from its website
15

Ghana: FDI Inflow
Number of light manufacturing investment project
More visible than comparing investment amount
Ratio of average numberof light manufacturing
investment project:
40.7%

Source: calculated by author from Ghana Investment Promotion Centre data on
individual pledged investment projects
Note: Light manufacturing is defined as products of food, textile, leather, wood,
furniture & jewellery. Classification of each investment is by the author in this analysis.
Note: Data in this slide is confidential.

16Lessons/learning from Ghana
 Diversification and transformation
 Ghana Shared Growth & Development Agenda(GSGDA):
manufacturing growth should contribute to transformation
 Diversification is going on towards various industries
including manufacturing, construction and services
 Light manufacturing is not necessarily focused Data availability and customer-oriented investment services
 Quarterly investment data with sectoral performance arepromptly updated on website
 This kind of customer-oriented attitude creates perceptionof one of the most reform-oriented African countries, as
often referred to by Doing Business reports
 However, light manufacturing data is difficult to capture
unless using individual investment project data
17

Cambodia: FDI Inflow
Manufacturing investment amountMillion USD

Far smaller dominance than the case of Ethiopia
Averagemanufacturing
investment amountratio: 6.6%

Source: Calculated by author from the data on approved Qualified Investment Project (QIP) by
Cambodia Investment Board (CIB) - Council for the Development of Cambodia (CDC)

Note: Manufacturing is defined as the sector classified under “industries” except for energy, mining
and others. Light manufacturing is defined as the sub-sector of food, garment, shoes and wood.

18

Cambodia: FDI Inflow
Light manufacturing investment amountMillion USD

Almost all the amount of manufacturing FDI goes to LM

Average lightmanufacturing
investment
amount ratio:
96.6%

Source: Calculated by author from the data on approved Qualified Investment Project (QIP) by
Cambodia Investment Board (CIB) - Council for the Development of Cambodia (CDC)

Note: Manufacturing is defined as the sector classified under “industries” except for energy, mining
and others. Light manufacturing is defined as the sub-sector of food, garment, shoes and wood.

19

Cambodia: FDI Inflow
Number of manufacturing investment project
Manufacturing is majority; very different with amount comparison
Ratio of average
number of
manufacturing
investment project:
55.5%

Source: Calculated by author from the data on approved Qualified Investment Project (QIP) by
Cambodia Investment Board (CIB) - Council for the Development of Cambodia (CDC)

Note: Manufacturing is defined as the sector classified under “industries” except for energy, mining
and others. Light manufacturing is defined as the sub-sector of food, garment, shoes and wood.

20

Cambodia: FDI Inflow
Number of light manufacturing investment project
Most of manufacturing FDI flow into LM
Ratio of average numberof light manufacturing
investment project: 87.9%

Source: Calculated by author from the data on approved Qualified Investment Project (QIP) by
Cambodia Investment Board (CIB) - Council for the Development of Cambodia (CDC)

Note: Manufacturing is defined as the sector classified under “industries” except for energy, mining
and others. Light manufacturing is defined as the sub-sector of food, garment, shoes and wood.

21

Lessons/learning from Cambodia
 High concentration on light manufacturing esp. garment
 Labour-intensive, Low labour cost (USD 80 but highpressure on raising) Typical feature: “CMT (Cut-Make-Trim)” garment/footwear
 Becoming a part of global supply chain (GSC)
 “Thailand+1 approach”: horizontal division of labour at
manufacturing process level Quality investment
 Foot-rooting, employment creation, responsible inv.
 Japanese investment is welcomed as Quality Investment
 Investment climate
 Open investment policy, high focus on SEZs
 Data availability
22
 Relatively available and open to publicIndustry breakdown of greenfield FDI
projects in LDCs, cumulative 2003–2010
Value
Share in total Number Share in total
Sector/industry($ million)(%)(%)
Total sectors
263,416100.0 1,472
100.0
Primary
144,545
54.9
232
15.8
Minerals
2,982
1.1
39
2.6
Coal, oil and natural gas
132,660
50.4
157
10.7
Alternative/renewable energy
8,903
3.4
36
2.4
Manufacturing
74,415
28.3
583
39.6
Food, beverages and tobacco
5,328
2.0
137
9.3
Textiles
1,180
0.4
36
2.4
Wood and wood products
3,006
1.1
14
1.0
Chemicals and chemical products
4,304
1.6
34
2.3
Rubber and plastic products
801
0.3
19
1.3
Non-metallic minerals
4,734
1.8
43
2.9
Metals51,189
19.4
179
12.2
Machinery and equipment
503
0.2
25
1.7
Electrical and electronic equipment
331
0.1
19
1.3
Medical devices
24
0.0
2
0.1
Motor vehicles and other transport equipment
2,674
1.0
60
4.1
Consumer products
342
0.1
15
1.0
Services
44,455
16.9
657
44.6
Hotels and tourism
5,191
2.0
49
3.3
Transport, storage and communications
19,151
7.3
162
11.0
Financial services
3,091
1.2
299
20.3
Business activities
16,7096.3
129
8.8
Space and defence
30
0.0
2
0.1
Healthcare
231
0.1
14
1.0
Leisure and entertainment
52
0.0
2
0.1
Source: UNCTAD, based on information from the Financial Times Ltd, fDi Markets (www.fDimarkets.com)
Note: Data for value of greenfield FDI projects refer to estimated amounts of capital investment

23

Industry breakdown of greenfield FDI
projects in LDCs, cumulative 2003–2010
LDC average seems to be more manufacturing and LM
oriented than Ethiopia in last decade Selected data from the previous slide
Sector/industry
Total sectors
Manufacturing
Light manufacturing(Share in total)
Light manufacturing(Share in manufacturing)Value($ million)
263,416
74,415

Share Number(%)
100.0 1,472
28.3
583

Share
(%)
100.0
39.6

9,514

3.6

187

12.7

9,514

12.8

187

32.1

Source: UNCTAD, based on information from the Financial Times Ltd, fDi Markets(www.fDimarkets.com)
Note: Data for value of greenfield FDI projects refer to estimated amounts of capital investment

24

(By the way, just for reference)

Bangladesh’s “light engineering” industry
 What is “light engineering industry”?
 Key features are similar to LM: Labour-intensive, lesscapital etc.
 But it is essentially metal and engineering industry, which
provides with smaller items
 Considered as “mother of all other sectors”
 It is unique to Bangladesh Higher attention on light engineering It is more often heard than “light manufacturing”(although Bangladesh is considered as one of the world
leading light manufacturing bases, especially garment)
 Private sector driven: Light Engineering ProductBusiness Promotion Council (LEPBPC)
25

Implications for Ethiopia (1) Need for consensus on what Ethiopia expects from lightmanufacturing  then, establish own definition of LM Large scale FDI-based LM? and/or potential domestic
LM industry base, involving MSEs?
 Employment? Then the size of factory matters?
 Ease of entry? Then the level of technology matters?
 Effective use of available local resources?
 Sub-sector oriented? Garment, footwear, leather … ?
 Diversified towards upstream and downstream?

26

Implications for Ethiopia (2) Necessity for obtaining reliable LM FDI data Difficulty on classification: for simplicity and comparability,
it should be finally accumulated according to ISIC/SITC Not only FDI amount but number of FDI project may work
 Learning from other countries’ experience Both Asia and other African countries
 Needs to be reflected in GTP2
 Development of appropriate and manageable indicators
 Consideration of policy options: investment incentives,support through Kaizen, CPA, hand holding etc.

27

Amesegenalew
Thank you

JICA’s VISION“Inclusive and Dynamic Development”

www.jica.go.jp
28