Manufacturing Proposal
Manufacturing Proposal
JAN/ / / 2019
DESSIE: ETHIOPIA
TABLE OF CONTENTS
Page
Acronyms…………………………………………………………………………………………….…………………………ii
CHAPTER ONE
1. Introduction…………………………………………………………………………………………………………………1
CHAPTER TOW
CHAPTER THEREE
METHODOLOGY…………………..…………………………………………………………………….…………………………13
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3.1. Data type and Source …………………………………………………………..……………………….…….………14
REFERENCE……………………………………………………………………….………………….…..……………….18
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ACRONYMS
iii
iv
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The export sector will plying an important relates bring about rapid economic growth in
Ethiopia. However, most of them largely depend on a single product or a very narrow range of
low value products mostly agricultural products and minerals for their sources of foreign
currency earning. In particular the development of manufacturing industries for export is crucial
in order to build the foundation for rapid economic growth and targeted as one of the leading
sector in Ethiopia as it show great sign of external benefit than the rest of the economy.
Manufacturing is the transformation of raw materials in to finished goods for sell by means of
tools and processing medium and including all inter mediate processing in valuing the
production of finishing of component parts (semi-manufactures). Some industry like semi
conductor and steel manufactures use them (fabrication). It also comprise of course and
programs related to planning, managing and performing the processing of materials in to
intermediate or final products and related professional technical support activities such as;
production planning and control maintenance and manufacturing engineering (CSA,2008).
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It can be noted that the town has continued to rely on a few agricultural raw commodities for the
principal source of its export revenue. Similarly the manufacturing export products have been
limited a few non durable consumer goods. In order of significance, leather and leather products,
food and beverage, textile and textile product, processed and manufactured at various level
mainly using locally available raw materials.
Generally the nature and the structure of Kombolcha commodity export sector suggest the
greater possibility for the entire commodity export earning being fluctuated with such possible
risk as volatile foreign market price and adverse weather condition on the supply of key export
commodities. In the world the instabilities in export earnings are mostly likely significant for
export sector with least commodity diversification and highest market concentration (NBE,
2002).
Manufacturing activity will a vital role for economic growth in different ways. In a particular
case manufacturing for export plays on important role to insulate commodity of Kombolcha from
the sharp declining. However, the performance of this activity attribute to several factors which
are common to Kombolcha some of these problems are poor infrastructure facilities , poor
financial systems , low income which curtail demands, lack of qualified human power and
unsuitable policy environment are the major problems that restrict the town to rich the highest
manufacturing. The instability of export earning partly due to instable world market prices will
be the major causes of concern of the town as it is depends on a few primary products for major
share of its export revenue. Heavily reliance upon a few commodities for exchange earning can
be troublesome in its stabilized effects on the total export proceeds (Bautista, 1996).
On the other hand the town exports such a few manufacture products as food, beverage, textile,
leather and finished products using mainly locally available raw materials. However particularly
processed products have excessively dominant the manufacturing exports. These export could
have been further processed to rise the value added contains higher export earnings. This
suggests the presence of unutilized potential with in the manufacturing export sectors. In addition
the export items have remaining few in number and type and small in size or volume of the total
production. As a result, the share of export earning in import to ill financing has kept on
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constructing and leads to steadily worsen of the trade balance deficits. This has likely contribute
to hamper the town effect to bring rapid and stable economic growth as it has direct effect on
investment in development activities . Furthermore the export earning with dominant agricultural
commodities in neither reliable nor bring about stable and rapid economic growth (Buhl
Terfassa, 2009).
The declining trend in the contribution of agriculture to GDP has, however, not been compensated by a
growing share of industry in GDR Modern manufacturing remained small. Most industries remained
isolated from the world market and technology, with high costs relative to best-practice operations
elsewhere. The sluggish growth of the manufacturing sector may be attributed, among other things, to
inappropriate policy which has been maintained by the past ten years. The future lies in shifting industrial
structure towards high-growth competitive enterprises that are linked to the domestic economy. Reviving
investment for this purpose will require restructuring or removing loss-making firms and substantial
efforts to mobilize domestic and foreign investible resources. Mobilization of domestic and foreign
investible resources for industrialization requires a favorable climate which induces both domestic and
foreign investors to commit their capital in industrial development. Sustainable industrial development
cannot be attained without correct industrial strategy. Lessons from the experience of industrialized and
industrializing countries as well as existing opportunities usually form the basis for drawing up such
industrial development strategies. (Befekadu Degefe, 1990)
According to MOFED data (2010) were highly dependent on few commodities, where Coffee, Chat, Oil
Seeds, Hide Skin and Flower accounted for 78% in average. High dependence of exports on primary
exports has many drawbacks for the country. First, traditional exports have been dominated by declining
terms of trade which made export earnings not to increase well enough despite increased export volumes,
despite the recent spikes in value of traditional exports. Secondly, exports of traditional exports do not
have much linkage effects in the economy because mostly they are sent raw.
The general objective of the study will be to assess manufacturing export performance in
Ethiopia in the case of Kombolcah.
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1.3.2. The Specific Objective
• To suggest policy recommendation that will promote and expand manufacturing export
performance in Kombolcha.
1.4. Research Question
For Ethiopia manufacturing involves processing of at least a part of their minerals and
agricultural raw materials in order to raise the pre-export value. In the case of Kombolcha effort
to promote manufacturing export may lead the town to take a great advantage of its potential
endowment of agricultural resources the economic exploitation of which could best
nontraditional export so that it leads to a positive impact to manufacturing export. The finding of
this study will be concerned as among other important input to enhance and strength strategic
and policy decision making capacity with respect to the particular sector and to minimize the
town unemployment for the country’s economic development
One that will be the most constraint factor for the study is that the requirements are not fully
satisfy to done the research. In addition time and financial constraints that will be affect the
research work. The research will be under some constraint in trying to investigate this study
among them to related literature found in the library are not in Ethiopian context that has using
as a secondary source lake and finance as well as sufficient internet service for further
information.
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1.7. SCOPE OF THE STUDY
The study will cover the last historical data starting from (2010) to (2018) on the performance of
manufacturing export in Kombolcha.
The paper contain five chapters, the first chapter will deal with the introduction in which the
research problem, objective will be presents. In second part related theoretical and empirical
literature on export performances of manufacturing export will be discussed. In the third part
methodology will be discussed. In the fourth part data analysis and interpretation of the study
will be discussed. Chapter five conclusions and recommendation will be discussed in this paper.
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CHAPTER TWO
The industry revolution which first started in England in 18 th century and was later to in gulf to
today advanced countries has eluded most of the countries the third world. In 1982 under
developed country which account for to third of the world population contributed only 11 percent
of the total manufacturing value added of this, 7.7 percent was accounted for by about a dozen
so-called semi-industrialized countries. In fact between 1973 and 1980, 72 percent of the growth
in manufacturing value added originating in the less developed countries was attributed to only
ten countries. The prospect for the immediate future is not bright. According to UNIDO, if the
prevailing trends continue by the year 2006, the underdeveloped countries which will account for
72 percent of world population will contribute only 19.9 percent of value added in
manufacturing. Such black realities call for examination of their underlying causes not only
globally but also with in specific context of each country. (UNIDO 2006).
The salient feature of industrialization can be deducted from this definition. First it is not a
sudden spurt that peters out just as suddenly but assigned process. Secondly it entails the
application of modern science and technology to the production process. Third the key and
dynamic rule in this process is played by manufacturing sector.
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world today that the realization for it is usually taken for granted? However, some of the
argument for Industrialization are superficial and because there are also argument against an
“obsession” with it. One the needs to pauses and look at the way of industrialization, Some
arguments for Industrialization are not more than arguments for” modernization” in general
wherever this nebulous tern may mean others takes Industrialization as synonymous with
economic development based largely on the not coincidental fact that practically developed
countries are Industrialized. on the opposite side of fence is the view that counsels against to
irrational a pre occupation with Industrialization, usually hiding behind the comparative
advantage doctrine and suggesting that more fruit full result may be obtained by concentrating
on agriculture for these reason the imperative for Industrialization need to agued out so beryl.
This can be best done by reviewing the role played by Industrialization historically the process of
development.
According to Adam smith theory of international trade assumed that a previously isolated
country about to international trade possess surplus productivities capacity above the
requirement to domestic consumption with trade country is able to reallocate the given resource
hence surplus productivity capacity suitable for export market appears as a costless means of
acquiring imports and expanding domestic economic activity.
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According to the stable theory of growth the discovery of a primary commodity in which a
country has a comparative advantage or an increase in demand for its comparative and leads to
varies benefits such as more efficient use of resources and adoption of technological innovation
resulting from foreign competition. Greater capacity utilization and gains of scale effects
associated with large international market.
Jung and Marshal (2014) argue that export growth represents an increase in the demand for a
country’s output and thus serves to increases real GNP.in addition, increase in export may loosen
a binding foreign exchange constraint and allow purchase of productive intermediate imports and
hence serve as an engine to economic growth. Export growth may also result in enhanced
efficiency and thus may leads to greater output .CHOW(2016) suggest that in small open
economies export growth can expand their limited domestic markets and contributed to the
economics of scale necessary for industrial developments .furthermore, export growth
integrates domestic economy with regional and global economies .thereby expanding the
dimension of competition to the international market .on the other hand, emphasis that the first
and foremost purpose of exports is to relieve the import shortage that many developing countries
confront i.e. revenue from exports can fill the “foreign exchange gap “ that was perceived as
abstraction to growth.
According to KRISHNO (1998) international markets for technology and knowledge are
imperfect and hence help to overcome some of imperfections and permits access to international
best – practice technology through other mechanisms.
While it remains a huge parts of the modern world’s economy perhaps a quarter of aggregate
world production of goods and service .many of the world’s wealthier nations develop on ever
smaller proportion of their work force to manufacturing activity owing to reallocation of such
activity to lower wage country. While the rising proportion of their economic activity shifted to
service sector.
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For the developing country on other hand manufacturing activity has played a vital role for
economic growth in terms of generating demand for agricultural, job opportunity for massive
growing population, foreign exchange earning capacity thro ugh export and backward and
forward linkage with other sector of the economy.
The important aspect of these countries and in particular are sub Saharan countries export
structure is that it is concentrated on a limited number of traditional produces which are usually
more vulnerable to natural disaster and more be exposed to a an adverse price movement .also
they suffer more than other countries from the low price elasticity of demand for many of their
agricultural products. As a result the export earnings are more subject to frequent instability.
Furthermore, the export earnings from primary agricultural commodities is neither sufficient nor
adequate basis for stable economy growth .it is evident that the competitive advantage of most
economies in SSA lies in the exploitation of natural resource through diversification and
increased processing of resource based products. However, although it reduces risks
diversification as such does not ensure strong sustainable growth. The change is to identify
support and expand activities in an value added is greater ,productivity growth is faster and
demand elastic in world market ,are higher .generally , the manufacturing export sector has been
suffered from structural weakness characterized by the following features ;
I. The export items have remained very few in number or type and small in size or volume
relative to the total production
II. Leather and leather products have heavily dominated the manufacturing export products
III. The export items are mainly partial or semi –processed of agricultural raw commodities
that could have been further processed till finished products stage so as to raise value
added contents of the export proceeds. Consequently, the export earnings has remained
too low cost of imported intermesh of inputs for the manufacturing industry itself.
furthermore the manufacturing sector has faced several impediments include among
other poor and inadequacy in skilled man power and facilitated managers and traditional
technology (labor intensive) ,lack of local technology for maintenance service .all of
which have accounted for low level of productivity which in turn severely undermine the
competitiveness of the products in the international market. As a result, it has played in
significance role in to insult them instability in the export earning from the key
commodities. Despite the pervasive notion that the country needs to maintain
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manufacturing output at a size because share in GDP, manufacturing output to national
GDP ratio has been low and remained the least among most of SSA countries.
In this particular case, manufacturing export has played an important role to insult commodity.
Countries from share declining and un expected variability of export earnings from primary
commodities .this is due to higher income and price elastics’ of demand and supply for
manufactured goods than for primary goods .it is also less vulnerable of nature and violent
fluctuation in global commodity demand and price than agricultural commodities all which have
stabilizes effect on export earning .as a result it lead these countries to the face less uncertainty
about to finance for a given higher level of imports .this is of particular importance to many sub
–Saharan African countries seeing their heavy dependency on export of primary products.
However, the performance of such activity has usually been attributed to several factors that are
common to most developing countries .some of these impediments or factors are poor
infrastructure facilities, weak financial system, low income, which curtail demand .lack of
qualified man power and unsuitable policy for environment. As a result these countries in SSA
have not reached the thresh hold of manufacturing which could help them break out of vicious
circle restricting entry in to foreign markets and hence output mainly for their domestic market.
Manufacturing industries and the small share of manufacturing product in the total merchandise
export in the history of the manufacturing industry has very insignificant share in the national
economy.
While those with low ratio of skill per worker and relatively high ratio of land per worker and
relatively high ratio of land per worker can be expected to export mainly primary products.
SSAA ‘s export structure indeed corresponds to this pattern it is thus appears that most SSA
countries export few manufactures relative to primary product then would be predicted from
their resource endowment. This implies that they have some scope to increase the share of
manufactures even without further accumulation of human and physical capital.
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2.1.2 Manufacturing sector contribution for raw materials
The manufacturing sector also dependent on imported raw material and other factory input
existing industrial raw materials are an evenly distributed in the region and access to some o0f
these materials also a problem as they are located in the interior parts of the country. The score
forward and backward integration of industries and between industry and other sectors, in
particular, the agricultural sector is also narrow. The development of the manufacturing sector is
also hampered by inadequate transport and communications. Another major problem is the
inadequacy of skilled industrial transport and communications. Another Major problem is the
inadequacy of skilled industrial human resources including managerial entrepreneurial,
engineering technological and technical capabilities for exploiting and processing the country
agricultural and mineral resources.
Commercial energy used in the country is provided mainly by petroleum products. The country
has the potential for hydro electricity and other new and renewable sources of energy. However
there are not adequately harnessed.
The other constraints include lack of industrial and technological information, data and in
abilities to collect, store, process and provide reliable and timely information to industry. In
addition to industrial financing is a major constraint.
The given that most of manufacturing activities require a much higher input of capital and skilled
per worker them of land per workers , countries with relatively higher ratio of capital and skill
per worker can be expected to export mainly manufactures
Export oriented manufacturing activities together with higher cost of production in damped the
ambition of local manufacturing industries to engaged in manufacturing for export , However
few of them are engaged very little in manufacturing foreign market .
Despite the persuasive nation that the country needs to maintain manufacturing output at a
suitable share to GDP, the share has remained later and stable at average of 4.2 percent. Looking
the significance of Ethiopia manufacturing industry some African countries such as Kenya,
Uganda Ghana and Zimbabwe., Ethiopia found itself for behind these countries. For instance the
share of manufacturing output in the national GDP stood at 17 Percent for Zimbabwe, 10 percent
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for Kenya, 9 percent for Uganda, 8 percent for Ghana in 1998. In particular Uganda is almost
identical to Ethiopia in terms of agriculture to GDP share where as its manufacturing output to
GDP rational almost double to that of Ethiopia (NBE, 2010).
While a manufactures could make a significant contribution to the growth of total export is a few
number of Ethiopia town most will inevitably have to continue to rely on an expansion to
achieve in two ways by increasing productivity and output in traditional products and market
shares and diversifying in to more dynamic processed primary products. Since attaining these
objective depends on the technological change and creation of additional productive capacity and
hence on new investment a sustainable growth process requires mutually reinforcing dynamic
interaction between capital accumulation and export resulting in structural change in the pattern
production and exports. Rising output in the primary sector then allows a surplus tube generated
for investment to establish resources bases industries as the scope accelerating development
through productivity improvement and diversification in the primary sector is exploited
sustainability growth will require a gradual shift to the production and export of manufactured
goods.
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CHAPTER THEREE
METHODOLOGY
3. Location and Description of the Study Area
Kombolcha is a town and woreda in north-central Ethiopia. Located in the Debub Wollo zone of
the Amhara Regions, it has altitude and longitude of 11’N,39’E with an elevation between 1842
and 1915 meters above sea, some guide books describe Kombolcha are the twin city of Dessie,
which lies some 13 KM to the northwest 380 KM away from the capital, Addis Ababa, Ethiopia.
Based on the 2007 national census conducted by the Central Statistical Agency of Ethiopia (CSA),
Kombolcha woreda has a total population of 85,367, of whom 41,968 are men and 43,399 women; 58,667
or 68.72% are urban inhabitants living in town of Kombolcha, the rest of population is living at rural
kebele around Kombolcha. The majority of the inhabitants were Muslim, with 73.92% reporting that as
their religion, while 23.44% of the population said they practiced Ethiopian Orthodox Christianity and
2.32% were Protestants.[4]
The 1994 national census reported a total population for Kombolcha of 39,466 in 8,643 households, of
whom 18,995 were men and 20,471 were women. The three largest ethnic groups reported in this town
were the Amhara (91.34%), Tigrayan (5.85%), and the Oromo (1.29%); all other ethnic groups made up
1.52% of the population. Amharic was spoken as a first language by 93.02%, 5.2% Tigrinya, and 1.11%
spoke Oromiffa; the remaining 0.67% spoke all other primary languages reported. The majority of the
inhabitants were Muslim, with 57.42% of the population having reported they practiced that belief, while
41.71% of the population said they professed Ethiopian Orthodox Christianity.
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3.2 DATA TYPE AND SOURCE
This study will be used both primary and secondary data. The data will be time serious ranging
(2010_2018). The main source of secondary data and other facts will be public institution and
periodical statistical publication and report of international organization and ministry of trade
and industry (MOTI), ministry of finance and development (MOFED) and central statistical
authority (CSA) and national bank of Ethiopia and others, and the main source of primary data is
interview, questioner and others.
This study will use purposive sampling techniques, to select factories that engaged
manufacturing sectors of exports. There are 27 factories in Kombolcha, out of this 12 are
engaged in manufacturing export.Therefore,this study will be purposively select 12 all factories
that engaged in Kombolcha manufacturing exports.
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3.5 METHOD OF DATA ANALYSIS
After the data collected from primary and secondary source, the next step will be data analysis
that makes the data ready for interpretation collect descriptive statistical method will be used
specifically table and percentage to interpret the study.
The following table shows the time plan through which the researcher will follow when doing
the research.
1, Title selection
2 Literature review
3 Preparing proposal
4 Data collection
7 Submission and
presentation of the study
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3.6.2 Expected cost budget
3 Pen 5 10 50
4 Transport 10 20 200
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REFFERENCE
Kamijani, Akbar, mirijilil.sayed Hussein (2006), strategic trade police mechanism for the
development of Iran industry export.
Ministry of Trade and Industry, june (2000).some police and reform measure taken since
1992, Addis Ababa.
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Adam smith (1778) theory of international trade.
Edward, lawurnce and Phillip Alves (2005), South Africa’s export performances.
Jung and Marshal (2014) export growth represents an increase in the demand for a
country output.
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