Ethiopia and the Manufacturing Question

Whether African countries can follow East Asia's path of growth through factory exports, using Ethiopia's industrial parks as a case study.

East Asian economies such as South Korea, Taiwan and China grew rich largely by building factories that made goods for export. Can African countries follow the same path? Ethiopia made one of the boldest attempts.

Why manufacturing matters

Manufacturing has helped many countries develop because:

It can employ large numbers of workers with modest skills.
Productivity in factories tends to rise quickly, raising wages.
Exports connect firms to world markets, bringing technology and know-how.

Ethiopia’s strategy

From the early 2000s, Ethiopia’s government pursued rapid, state-led development, investing heavily in roads, power, including the Grand Ethiopian Renaissance Dam on the Blue Nile, and industrial parks. The Hawassa Industrial Park, opened in 2016, attracted global clothing companies producing for international brands. Ethiopia offered low wages, cheap electricity and duty-free access to U.S. and European markets.

Ethiopia’s economy grew at around 10 percent a year for over a decade, among the fastest rates in the world.

Difficulties

The strategy faced serious problems. Many factory workers, often young women from rural areas, quit quickly because wages were very low relative to living costs. Research by Christopher Blattman and Stefan Dercon found that factory jobs in Ethiopia did not raise incomes compared with informal work and brought some health risks. Later, conflict in the Tigray region from 2020 and the suspension of Ethiopia’s duty-free access to the U.S. market under the African Growth and Opportunity Act in 2022 hit exporters hard. The country also faced foreign currency shortages and debt problems.

Premature deindustrialisation

The economist Dani Rodrik observed that many developing countries are reaching their peak share of manufacturing jobs at much lower income levels than earlier industrialisers. Automation and competition from China make it harder to build large factory sectors. He called this premature deindustrialisation, and it raises doubts about whether Africa can repeat East Asia's path.

Other paths

Some economists argue that African countries may develop through different routes, such as agro-processing, tourism, services, digital businesses and “industries without smokestacks” like horticulture exports. Kenya’s cut-flower exports and Rwanda’s tourism and services are examples.

Thinking one development path fits every country

East Asia's factory-led growth was extraordinarily successful, but global conditions have changed. African countries may need a mix of manufacturing, agriculture and services suited to their own strengths.

Key takeaways

Manufacturing exports drove East Asia's growth, and Ethiopia tried to follow that path.
Ethiopia invested in infrastructure and industrial parks and grew around 10 percent a year for over a decade.
Low wages, worker turnover, conflict and lost trade access created difficulties.
Premature deindustrialisation suggests African countries may need other paths too.