Ministry Proclaims Industrial Success in First Half Year

The Ministry of Industry (MoI) reported a successful half year for the industry and its most important sub-sector manufacturing, adding, nevertheless, that supply shortage and quality deterioration of inputs for major industrial products continued being a problem, so much so that some factories had to stop production for months.

The Ministry’s six month-report, marking the first half of the last year of the Growth & Transformation Plan (GTP), said that supply shortage during the period had caused even some bigger companies to stop production for some months. The manufacturing sector, which was planned to generate an income of 1.2 billion dollars for the fiscal year 2014/15 and 505 million dollars for the six months, fell short of the plan by registering an income of only 191.5 million dollars, which is 38pc of the plan.

“This is because the input shortage and the quality deterioration of the input, management inadequacy, decrease in product and productivity, focusing on the local market and the shortage of support to the expected level,” stated Ahmed Abitew, the minister.

The Ministry supports and follows up 87 projects that produce import substitution products and exportable items. Among these, 23 are from the textile industry, 11 are from the skin and hide products, five from meat and milk products, 12 from the metals and engineering, 14 from food, beverages and pharmaceuticals, and 23 from chemical and construction input industry sub sector. And among these projects, a total of 16 were transferred to production in the six-month period.

And because of promise in the local market than the export, the manufacturers in the country focused on the local market than exporting. They sell in the local markets in contradiction with their licenses, which allows them only to export. They say the input shortage and input quality and the cost of transportation are the reasons for selling to the local market.

“The price of one kilogram of thread in the local market is 78 Br while the international market pays only 38 Br,” explained Ahmed.

The manufacturers that the Ministry found charging such high prices are denied of the incentive that is given to exporters according to the report. The incentives that the government offers for the manufacturing export oriented factories are free production land, tax minimization and exemption, and 70pc loan from the government for investors who come with 30pc of their investment.

“The denial of the incentives is the first step and some of the factories are getting back to the exportation. If they persist in taking the illegal route, we will approach the legal procedure as these manufacturers agreed to export 80pc of their products when they were licensed,” Melaku Taye, corporate communications directorate director told Fortune.

In order to fill the gap between the demand and the supply of inputs to the manufacturers, the ministry has bought 3,500tn of cotton in the past six months and has opened letter of credit (LC) for the importation of 1,000tn from the US, according to the report and the minister. Demand assessment is also being done for the third round importation of cotton.

The Ministry is also conducting market assessment to import skin from neighboring countries.

Although the cotton was bought, as it was delivered in the month of December, it did not help the performance of the factories and is expected to balance the following six months performance.

The Ministry targeted the industrial sector to grow by 20pc to 21.4pc at the beginning of the GTP and saw it growing by an average of 20pc in the four years of the GTP. At the start of the GTP in 2010/11 the growth of the industrial sector was 12pc. The contribution of the industrial sector to the country’s economy was registered to be 14pc, falling short of the planned 17pc. This is 85pc of the plan. The industrial sector has seen an average growth of 13pc in the four years of the GTP.

As the companies could not import inputs for their factories because of management and financial problems observed in them, the government intervened and imported the cotton for the consumption of the textile factories in the country after a long debate among the officials of the government.

The production performance of the industries in the previous fiscal year was better than the current year’s performance. The textile industry has shown a growth of 62pc, the hide and skin industry 59pc, agro processing 70.5pc, pharmaceutical and health care materials 62pc, and the metals industry 54pc in the fiscal year 2014/15. But the average performance of the industries in the current fiscal year was only 41pc, less than half of the plan to achieve 80pc to 90pc – the decline is attributed to the additional 12 factories in the market, whose production had no significant influence in the market.

Indicated in the report as having no progress at all was the plan to erect a rubber processing factory, which did not happen at all other than planting rubber tree seedlings. Another is the plan to achieve 72pc completion of the Urea fertilizer factory, which has not progressed further than the 20pc that has been done in the past fiscal year; this factory is intended to produce 300,000tns a year.


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