Challenges of Economic Integration of Small and Medium Enterprises in Manufacturing Sector Tigray Regional State Mekelle City

Abrehet Mehari Gebreselassie

doi:10.7176/jesd/11-4-14

Abstract

The purpose of this study is to assess the economic integration of small and medium enterprises in Ethiopia, in the case of Tigray Regional State Mekelle. The development of Small and Medium Enterprises (SMEs) in the manufacturing sector has been highly agenda on the Tigray Regional State to generate employment and reduce poverty. The goal of the economic integration of SMEs is have free movement of capital, labor finance, and service between SMEs in the region and outside the country and becomes a more efficient in the allocation of resources. This study was employed a qualitative research method conducted in Mekelle city, focusing on the challenges of SMEs. Collected data by interview 15 (10 SMEDA leaders and stakeholders) and eight focus group discussions with the SMEs council, including non-participatory observation of the researcher. The result also revealed that small and medium enterprises are operated in a problematic situation suffering from financial constraints and work premises are found out as a general challenge to all SMEs. Also, the commitment, capacity, and attitude of leaders at a different level to support and coordination for SMEs is weak. The critical problem of peace and security among the Ethiopian Regional Governments and neighboring countries hinders the market linkage among them. On the other hand, the dependency and rent seeking mentality of the SMEs to prepare a business plan and promote their products. The commitment, attitude, and capacity of the leaders at a different level to support and coordinate SMEs' activities is feeble. The researcher recommends that the regional government should establish specialized financial institutions and market supporting unit to help SMEs. Alongside the asset of the operators should be considered as collateral to solve the liquidity problem of the enterprises. Capacity building to operators and SMESDA leaders are very critical to internalize the experience gain from others to support SMEs efficiently. Work premises should be ready before the SMEs are established. Keywords : Small and Medium Enterprise, Economic Integration of Small Enterprises, work premises DOI: 10.7176/JESD/11-4-14 Publication date: February 29 th 2020

Highlights

Economic Integration is the process whereby the economic barriers between or among economies removed to mutual exchange of capital, human power and information(SESRIC,2012)., strengthening the local Small and Medium Enterprises (SMEs) markets (OECD, 2004),and help in protection of regional security (Dawit, 2017).In addition, Christoph (2010) suggested that economic integration can facilitate access to a larger consumer base, a greater share of qualified workers, additional sources of financing, and new technologies
General Objective of the Study The main objective of this study is to identify the challenges of economic integration of Small and Medium Scale Enterprises in Tigray Regional State, Mekelle City
Major Findings The responded said that policy and strategies are applicable to the region’s SMEs and gets out of poverty if it works out properly but, the strategy was not fully responding to the need of SMEs. it lacks proper implementation due to lack of skilled experts, commitment of the leaders especially at low level position

Summary

Introduction

Economic Integration is the process whereby the economic barriers between or among economies removed to mutual exchange of capital, human power and information(SESRIC,2012)., strengthening the local SME markets (OECD, 2004),and help in protection of regional security (Dawit, 2017).In addition, Christoph (2010) suggested that economic integration can facilitate access to a larger consumer base, a greater share of qualified workers, additional sources of financing, and new technologies. Economic integration can create an environment for existing firms to grow, solve common problems to enhance productive, improve quality product and compete in the market, and initiate for new firms to established This alone cannot assure the growth of firms. Government of Ethiopia has set several national development goals to be achieved by 2025 This includes attaining lower-middle-income status; diversifying and doubling the country’s export capacity; lifting the contribution of the manufacturing sector from its current level of 5% to 17%, which turns Ethiopia into a leading manufacturing hub in Africa. It creates decent jobs and a dynamic private sector that contributes to the growth and structural transformation (Tegay, 2018). A country like Ethiopia, where capital and foreign exchange are scarce and labor are relatively abundant, the most realistic and viable approach to kick-start industrialization and structural transformation into manufacturing sub-sectors rely on labor-intensive production technology (Alemzewud, 2018, p.2).Manufacturing provides new technology for other sectors

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