Issues and Challenges to Business Entry into the Manufacturing Sector demystified
The seventh EDRI-AACCSA seminar that addressed the topic “Issues and Challenges to Business Entry into the Manufacturing Sector” was held on 02 February, 2016 at the Hilton Addis Ababa.
H.E. Newai Gebre-Ab, Chief Economic Advisor to the PM and Director of EDRI, in his opening speech stressed that in order for Ethiopia to realize the target of becoming a middle income country, there needs to be a robust manufacturing sector, in which domestic private investors are key players to bring about structural change in its economy. In this regard, he expressed that the seminar was organized to discuss the existing challenges, prospects and opportunities to ensure entry and successfulness of domestic private investors in the manufacturing sector.
Ato Dawit Abebe, advisor to the State Minister, Ministry of Industry made a presentation on “Ethiopian Industrial Strategy and Policy, Legal Framework and Incentive Packages in Promoting Manufacturing Sector.” He explained that the government of Ethiopia is committed to achieving sustainability and inclusiveness of growth through developing the agricultural sector and raising the share of manufacturing. He pointed out that the biggest constraint to business entry into manufacturing for domestic investors is the lack of access to capital and identified a number of challenges related to infrastructure. He also stated some enablers provided by the government to create a conducive environment for investment and export market, such as tax exemption of two to seven years and the export credit guarantee scheme.
The seventh seminar also opened the floor for representation of domestic investors by bringing in Ato Bekele Tsegaye, Managing Director of BEKAS Chemicals P.L.C. to present on “Issues and Challenges to Business Entry into the Manufacturing Sector and Remedial Measures for Enhanced Business Environment.”
Ato Bekele started by identifying the reasons why domestic investors shy away from the manufacturing sector and invest in trade which he described as easy to manage with less risk and investment. He then went on to list a number of challenges that discourage domestic investors and identified some remedial measures that could alleviate some of the existing problems and create a conducive environment for domestic investors to invest in the sector.
According to the investor, one of the major challenges of entry into manufacturing for domestic investors is the low understanding and absorption capacity of ICT by domestic investors. Limited capital of domestic investors in addition to the shortage of foreign currency, the low access to land and the high cost related to urban lease are but a few of the challenges discouraging domestic investors. Inadequate supply of infrastructural facilities such as electric power, shortage of inputs, unfair trade practices and custom tariff as well as lack of operational efficiency and good governance are also some challenges existing within the sector. In addition to overcoming the aforementioned problems, Ato Bekele suggested the revision of some ambiguous commercial laws and that of strict requirements for joining the manufacturing sector. He also stressed on the need to establish technology think tanks to build the capacity in the manufacturing sector and to put in place a reliable tariff and import data management system for feasibility studies.
The presentations were followed by interventions from participants who offered additional points and raised questions on the topic, some remedial measures and on policy issues.
In his closing speech, Ato Elias Geneti, President of the AACCSA, expressed their commitment to work in collaboration with EDRI towards addressing the points raised in the seminar.