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«The Effectiveness of Industrial Policy in Developing Countries: Causal Evidence from Ethiopian Manufacturing Firms Tewodros Makonnen Gebrewolde, ...»

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C Specific Sector Support PASDEP prioritised industrial development in four sectors, and these sectors received support from the government to achieve more non-agricultural employment, investment and production. These sectors are the textile and garment sector; meat and leather producers; agro-industry, and the construction industry. The government has implemented specific measures in support of these industries since 2003/04.

These sectors were chosen for their direct linkages to the agricultural sector, labour intensiveness and export potential. These priority sectors have been subject to several benchmarking exercises and the establishment of industry-wide targets. Notable targets in PASDEP were that by the end of 2009/10 the export earnings from the textile sector would reach USD 500 million as a result of investment in the sector worth USD

1.6 billion. The majority of the additional investment was planned to come from the private sector. However, the government also planned to invest jointly with foreign investors. For the meat and leather industries it was envisaged for that export earning would increase to USD 178 million by establishing 74 firms by 2009/10. These targets highlight the continuing strong role of the state envisaged during the PASDEP period.

To achieve these specific targets a host of measures have been taken related to training, input market interventions, establishing sector development institutes, public private partnerships and the scaling up of sectoral pilot projects.

All four sectors were given priority access to foreign currency. As discussed in the main text, they also all had access to concessionary loans via The Development Bank of Ethiopia, a state owned bank established facilitate investment with loans up to 70 percent of the initial capital to private sector firms investing in the four treated sectors.

Sector specific support included:

• Textiles: The government started textile engineering training program in one of the government universities (Bahirdar University). The first class graduated in

2002. In 2010 the government established the Ethiopian Textile Development Institute to organize all the support in one institution. The institute supports existing firms and entrants in the sector on selection of technology, negotiation, construction, erection and commissioning. It also provides practical training on technology and marketing.

• Leather and Leather Products: Additional export support via inclusion in the Prime Minister’s Committee to Promote Exports. Also, similarly to the support provided to the textile sector, the Ethiopian Leather Industry Development Institute was established in 2010.

• Agro-processing: Firms in the Agro-industry sector have access to cheaper leases for land.

• Construction: Other than the concessionary loans and priority access to foreign exchange the construction sector received little other specific support.

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