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The Public Private Consultative Forum, which take places on a regular basis, focused on the manufacturing sector this time. The consultative forum held on December 24 at the Sheraton Addis went over a paper on competitiveness and production. It looked at barriers to success in the manufacturing sector.
The paper magnified problems related to adequate finance, lack of inputs, hard currency and customs challenges in the manufacturing sector.
The paper stated that lack of a modern manufacturing system and lack of skilled human resources are also some of major challenges the sector faces.
The country’s education and training system is unable to produce qualified labour for the sector, according to the paper.
Power cuts have also caused a lot of damage to machines, production decreases and losses in manufacturing.
The paper said that to alleviate this the government has to expand the industry zones and include the local manufacturing sector.
The lack of locally made technology means it must be imported from overseas, which is expensive.
Yohannes Ayalew, vice governor of National Bank of Ethiopia (NBE) said that the government has given attention for access to finance and has created conditions to make available especially the finance for the manufacturing sector, even though there are some problems when it comes practicalities. With this consideration the government is undertaking a study to solve the problems.
“The possibility about the formation of an investment bank has recommended on the paper that presented for discussion to boost the finance accessibility for manufacturing sector,” he said.
“On this stage it is difficult to form an investment bank in Ethiopia. Initially the system does not allow this kind of bank to form in this country. Because the availability of the share market is crucial to form the bank, while share market does not exist in the country,” Yohannes said.
But based on the government decision the National Bank has accomplished a ten year financial sector strategy study that sees an investment bank as an option, he said.
According to the vice governor the first phase of the strategy will focus on the formation of a bond market (secondary market).
“We have to focus on why the manufacturing sector to is unable to get finance from banks and for this we have also developed a study to solve the problem,” he added.
NBE has seen the challenges on debt equity ratio and in kind loans and the loan for small scale businesses has also been included on the study.
Currently DBE has ample capital available for industrial development. He said currently there is not a financial problem for the sector.
In terms of LC commission the banks have different fees. “To make the commission consistent we are undertaking a study,” he said.
“Lack of quality and quantity of agricultural inputs has been mentioned on the paper. To solve the problem we are working with the Ministry of Agriculture to solve the shortage of intermediary inputs for the primary sectors,” a representative from Ministry of Industry explained at the event.
On the other hand we are on the final stages of establishing industries to produce accessories and components in the country, but in the short term we have formed a new enterprise to restructure the Merchandise Wholesale and Import Trade Enterprise (MEWIT) to import some accessories.
Currently, MEWIT is importing cotton for factories, when the new enterprise fully starts its operation it will import other accessories. The operation of hides and skins and livestock is in the process of commencing in an organized manner.
“Lack of fundable documents for projects is the basic problem form local manufacturing sector,” Tadesse Haile, State Minister of Industry said.
Currently the government is working to improve the customs facility to accelerate the manufacturing sector. The government has targeted to make the manufacturing sector a major economic actor, while several challenges have been lagging the ambitious plan that was set about four and half years ago.
Ahmed Abetew, Minister of Industry, who seriously criticized the paper that was presented that day, to show challenges and make recommendations for the manufacturing sector, said that the finance sector shortage Is the fault of the investors not the banks.
He said that the agriculture sector has expanded to value addition. Ahmed said that lack of skilled labour is a major challenge for the manufacturing sector, because managers have to spend time training workers as opposed to finding them ready to work after they graduate from school.