MPs Scrutinize Industry Minister Over Unsatisfactory Manufacturing Output, Trivial Exports

‘Our industries are not ready’: Melaku Alebel

Officials from the Ministry of Industry faced criticism from lawmakers this week for the country’s continuing struggle to get its manufacturing sector off the ground, with MPs particularly concerned about the mismatch between the strong financial support afforded to the sector and its poor export performance.

The Ministry’s first quarter report indicates that manufacturing industries received USD 408 million in foreign exchange for the import  of raw materials, machinery, and spare parts over the first three months of the fiscal year, nearly six times the amount reported during the same period last year.

Meanwhile, the sector generated just USD 97 million in export revenue.

Lawmakers noted USD 680 million was allocated to the sector over the entirety of the last financial year, while the sector in turn generated USD 318 million.

The report notes the sector received 13 billion Birr in loans over the first quarter.

“The credit and forex supplied to the manufacturing sector have increased substantially, but the export performance of manufacturing industries remains stagnant. Why is this imbalance occurring?” asked Zelalem Tadesse, member of the parliamentary industry and mining committee.

Melaku Alebel, minister of Industry, attempted to justify the mismatch by pinning the blame on commercial banks.

“The financial and forex provisions for manufacturing industries are still not adequate. Ethiopian banks are still financing only the service sector. We must overhaul the financing orientation of our banking industry to shift to manufacturing financing. This requires policy intervention,” he told MPs.

Melaku urged lawmakers not to evaluate manufacturers by their forex generation capacity alone. The Minister argued that manufacturers generate huge volumes of tax revenue for the government.

“The government must raise taxes to fund development, security, and other expenses. Think of the tax contribution of these industries in terms of health, education, and development. They are contributing massively,” said Melaku.

He told MPs that a group of six large manufacturers, including Heineken, BGI, and Belayneh Kindie Group, paid 62 billion Birr in taxes last year, more than most major towns and cities in Ethiopia.

Melaku conceded that manufacturers are having trouble penetrating the international market due to stiff competition.

“Our industries are not ready,” he said.

The Minister also said the success of manufacturing exports depend on sustainable value chains and input supply.

“Unless Ethiopia realizes agricultural modernization, we cannot industrialize. Agriculture must be commercialized. We are working with the Ministry of Agriculture,” he told lawmakers.