Manufacturing in

Ethiopia Ethiopia, , om, Itiyoophiyaa, so, Itoobiya, ti, ኢትዮጵያ, Ítiyop'iya, aa, Itiyoppiya officially the Federal Democratic Republic of Ethiopia, is a landlocked country in the Horn of Africa. It shares borders with Eritrea to the ...

was, before 1957, dominated by

cottage A cottage, during Feudalism in England, England's feudal period, was the holding by a cottager (known as a Cotter (farmer), cotter or ''bordar'') of a small house with enough garden to feed a family and in return for the cottage, the cottager ...

and

handicraft A handicraft, sometimes more precisely expressed as artisanal handicraft or handmade, is any of a wide variety of types of work where useful and decorative objects are made completely by one’s hand or by using only simple, non-automated re ...

industries which met most of the population's needs for manufactured goods such as

clothes Clothing (also known as clothes, apparel, and attire) are items worn on the human body, body. Typically, clothing is made of fabrics or textiles, but over time it has included garments made from animal skin and other thin sheets of materials ...

ceramics A ceramic is any of the various hard, brittle, heat-resistant and corrosion-resistant materials made by shaping and then firing an inorganic, nonmetallic material, such as clay, at a high temperature. Common examples are earthenware, porcelain ...

machine tools A machine tool is a machine for handling or machining metal or other rigid materials, usually by cutting, boring, grinding, shearing, or other forms of deformations. Machine tools employ some sort of tool that does the cutting or shaping. All m ...

, and

leather goods Leather is a strong, flexible and durable material obtained from the tanning, or chemical treatment, of animal skins and hides to prevent decay. The most common leathers come from cattle, sheep, goats, equine animals, buffalo, pigs and hogs ...

. Various factors – including the lack of basic infrastructure, the dearth of private and public investment, and the lack of any consistent public policy aimed at promoting industrial development – contributed to the insignificance of manufacturing.

Five-year plans

In 1957, Ethiopia initiated a series of five-year development plans. Throughout much of the 1960s and early 1970s, manufacturing activity increased as the government's five-year plans diversified the economy by encouraging agro-industrial activity and by substituting domestically produced goods for imported items. Thus, according to the

World Bank The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Interna ...

, manufacturing production increased at an annual rate of 6.1 percent between 1965 and 1973. During the same period,

agriculture Agriculture or farming is the practice of cultivating plants and livestock. Agriculture was the key development in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that enabled people to ...

grew at an annual 2.1 percent rate, and services grew at an annual 6.7 percent rate. Despite this favorable growth rate, manufacturing in 1975 accounted for less than 5 percent of the

gross domestic product Gross domestic product (GDP) is a money, monetary Measurement in economics, measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjec ...

(GDP) and employed only about 60,000 people. Handicrafts, such as weaving, pottery, blacksmithing, leather working, and jewelry making, along with other small-scale industries, accounted for another 5 percent of GDP. In 1984/85 manufacturing and handicrafts together accounted for 11.4 percent of GDP.Wubne, Mulatu. "Agriculture".
A Country Study: Ethiopia
' (Thomas P. Ofcansky and LaVerle Berry, editors).

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(1991). ''This article incorporates text from this source, which is in the

public domain The public domain (PD) consists of all the creative work A creative work is a manifestation of creative effort including fine artwork (sculpture, paintings, drawing, sketching, performance art), dance, writing (literature), filmmaking, ...

Nationalization

In 1975 the

Derg The Derg (also spelled Dergue; , ), officially the Provisional Military Administrative Council (PMAC), was the military junta that ruled Ethiopia, then including present-day Eritrea, from 1974 to 1987, when the military leadership formally " c ...

nationalize Nationalization (nationalisation in British English) is the process of transforming privately-owned assets into public assets by bringing them under the public ownership of a national government or state. Nationalization usually refers to pri ...

d more than 100 industries and took partial control of some of them. The main characteristics of the manufacturing sector inherited by the revolution included: a predominance of foreign ownership and foreign managerial, professional, and technical staffing; great emphasis on light industries; inward orientation and relatively high tariffs; capital-intensiveness; underutilized capacity; minimal linkage among the different sectors; and excessive geographical concentration of industries in

Addis Ababa Addis Ababa (; am, አዲስ አበባ, , new flower ; also known as , lit. "natural spring" in Oromo), is the capital and largest city of Ethiopia. It is also served as major administrative center of the Oromia Region. In the 2007 census, t ...

, the capital city.

Exodus of foreigners

Following nationalization, there was an exodus of foreigners who had owned and operated the industrial enterprises. The war in Eritrea and labor strikes and demonstrations also closed the approximately 30 percent of the country's manufacturers that had been located in that region.

Economic dislocation

The economic dislocation that followed the revolution had a significant impact on the manufacturing sector. Private sector capital investment ceased, and labor's marginal productivity began to decline. In performance terms, the manufacturing sector's output after 1975 grew haltingly. Manufacturing had grown at an average annual rate of 6.1 percent between 1965 and 1973. A period of decline from 1974/75 to 1977/78 and an average annual growth rate of 18.9 percent for 1978/79 and 1979/80 were followed by a reduction of the growth rate to about 3.1 percent per annum between 1980/81 and 1984/85 and 3.8 percent per annum from 1985/86 to 1988/89.

Manufacturing productivity

Socialist economy

Finally, in March 1990 president

Mengistu Haile Mariam Mengistu Haile Mariam ( am, መንግሥቱ ኀይለ ማሪያም, pronunciation: ; born 21 May 1937) is an Ethiopian politician and former army officer who was the head of state of Ethiopia from 1977 to 1991 and General Secretary of the Work ...

announced the replacement of Ethiopia's

communist Communism (from Latin la, communis, lit=common, universal, label=none) is a far-left sociopolitical, philosophical, and economic ideology and current within the socialist movement whose goal is the establishment of a communist society, a s ...

economic system with a

socialist Socialism is a left-wing economic philosophy and movement encompassing a range of economic systems characterized by the dominance of social ownership of the means of production as opposed to private ownership. As a term, it describes the e ...

economic system. Among the proposed changes were that private investors would be permitted to participate in all parts of the economy with no limit on the amount of capital invested.