Abstract
Manufacturing industries are among the sectors given precedence by the Government of Ethiopia (GoE) owing to their multifaceted primacy. Yet, the performance and share of Ethiopia’s manufacturing sector from the national economy is at its infancy regardless of ongoing resolute endeavors to improve its status. This paper examines manufacturing linkages and input sourcing as a factor for influencing firm performance in Ethiopia.Through information availed from both primary and secondary sources, this paper uses empirical evidence to examine how linkages between/among manufacturing and other sectors affect a nation's growth. Input sourcing has also been discussed as a variable to see sourcing related challenges. To this end, first-hand information was gathered using in-depth interviews, focus group discussions, and a sample survey. The information gathered was then analyzed using relevant analysis techniques and tools.Thusly, the paper shows that manufacturing industries in the country generate their inputs both from local and foreign sources depending on the nature of the manufacturing sub-sector. Input supply linkage in the nation is highly dominated by backward linkage compared to the forward one. It has been observed that limited input capacity utilization among manufacturers; use of inputs quality attribute for supplier selection by the dominant majority; reaching multiple sources for input generation; local sourcing of inputs featured with access from close geographic proximity (Addis Ababa and its surrounding); shortage and unavailability of inputs leading firms to look for sourcing from foreign origins; the dominance of backward linkage than forward; as well as trust, good transport and time/speed elapsed for delivery being used as decision criteria for selecting input suppliers. Incontestably, input supply linkage can be gauged with manufacturing industries and across different sectors (service, agriculture, mining, etc.). The general observation made in this regard is the presence of weak linkage both between manufacturing industries and across different sectors.This article argues that lack of strong forward and backward linkages between/among industries and inadequate input supply and poor quality of inputs are unsound for economy-wide growth that leads to inefficiencies, and is a root cause of insolvency, which is in itself growth-inhibiting. Conversely, strong linkages, and adequate input supply enhance growth because they facilitate the flow of inputs to where they have the largest net economic benefits. Hence, linkages and input sourcing need more policy attention. Keywords: Manufacturing, Backward Linkages, Forward linkages, Input sourcing, Input supply, Industrialization DOI: 10.7176/DCS/11-4-01 Publication date: April 30 th 2021
Highlights
Ethiopia is one of the poorest countries in the world and it is Ethiopia’s economic idiosyncrasies
On this point (Arkebe Oqubay, 2015) has summed up for Ethiopian manufacturing sectors with two distinct features: there is a low level of industrialization in terms of the sector's share in Gross Domestic Product (GDP) and the industrial structure is dominated by small firms and resource-based industries
There is a paucity of supporting pieces of evidence linking product market orientation behavior with the type of input supply linkage, our data suggest that a positive association between high domestic market share and local sourcing
Summary
Ethiopia is one of the poorest countries in the world and it is Ethiopia’s economic idiosyncrasies. Ethiopia's manufacturing sector has been among the key productive sectors of the economy identified by the government which can spur economic growth and development because of its immense potential for wealth creation, employment generation, and poverty alleviation (MoFED, 2016; Mulu, 2013; Oqubay, 2018). The growth pole theory stresses that the product of agglomeration economies in a leading, dynamic industry or sector serves as an “engine” for development via creating forward and backward linkages. This promotes diversified production and consumption for a growing local urban population and for other growth points throughout the pole’s area of influence (Hite, 2004). We summarized and presented information gathered from different sources in the form of narratives and triangulated with the quantitative findings extracted from variegated secondary data sources
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