Starting in September 2023, Ethiopia is preparing to launch its first industrial plan, with an emphasis on strengthening import substitution capability and raising competitiveness. Over the next three years, the policy, according to the Ministry of Industry (MoI), seeks to dramatically expand the share of locally produced items, gunning for a startling 60%, up from the existing 37.5%.
According to the Ministry, Ethiopia is currently successfully producing a variety of basic consumer commodities, including edible oils, pasta, dairy products, and generic medications. A new research claims that local production prevented Ethiopia from spending approximately $2.3 billion on imported items during the 2015 fiscal year.
According to Tarekegn Bululta, state minister for industry, the strategy has a detailed roadmap that spans the following ten years and contains precise output goals and alluring incentive programs. The plan, which focuses on import substitution, is expected to offer useful direction to sectors looking to produce goods domestically. Simplified access to foreign money will be one of the incentives provided, removing a long-standing barrier that has prevented the importation of crucial inputs.
The previous two decades have seen a heavy emphasis on export-oriented and labor-intensive industries in Ethiopia. These industries have benefited from perks like affordable land leasing rates, lenient lending terms, tax breaks, and easy access to foreign money. Nevertheless, despite these initiatives, the nation’s annual export earnings from the industry sector have stayed flat at about $350 million. Ethiopia, on the other hand, struggles with a constantly expanding trade deficit and macroeconomic instability as a result of its high yearly imports of over $18 billion and low export revenues of about $4 billion.
Three years ago, the government of Prime Minister Abiy Ahmed adopted import substitution as an alternate strategy to address the ongoing trade deficit.