EDRI Working Paper 018: Global Value Chains and Development of Light Manufacturing in Ethiopia

Abstract

Development of manufacturing activity will be a key component of Ethiopia’s development program over the next decade, and probably well beyond. As the country remains relatively capital scarce, the focus is necessarily on light manufacturing, which covers sectors or activities that are relatively labor intensive. Although Ethiopia is the second most populous country in Africa, its low level of per capita income means that the domestic market remains very small by international standards. This factor is one important reason that GVC participation is attractive. GVCs are focused on global markets, and so offer the potential for serving much larger world markets for intermediates or final consumption goods. Although there is clearly scope for higher incomes within Ethiopia to support and grow domestic demand, the opportunities offered by the world market are much greater, which makes increased GVC participation a potentially attractive option for Ethiopia, building on the experiences of countries like China and Vietnam.