Ethiopia Revives 1,115 Factories, Creates 1.58 Million Jobs as Made in Ethiopia Shifts to Exports

Ethiopia is preparing to take its “Made in Ethiopia” industrial programme into a more difficult phase after the government said the initiative revived 1,115 factories, created 1.58 million jobs and generated US$5.96 billion worth of import substitution between 2021 and 2025. The Ministry of Industry says the next stage will concentrate on expanding manufactured exports, adding new productive capacity and modernising the services that support industry, marking an important shift in the programme’s economic purpose. The first phase was largely about getting more out of an industrial base Ethiopia already possessed: reopening factories that had stopped operating, raising utilisation at plants working below capacity, reducing dependence on imported finished goods and creating employment around domestic production. The next phase asks a more demanding question. It is one thing for Ethiopian factories to replace goods that would otherwise have been imported into a domestic market affected by foreign exchange shortages, transport costs and government policies favouring local production. It is considerably harder for the same factories to persuade buyers outside Ethiopia to choose their products over alternatives manufactured in China, India, Turkey, Egypt, Kenya, Vietnam and other competing production centres. If Ethiopia succeeds, “Made in Ethiopia” could evolve from an import substitution programme into something much closer to an export industrialisation strategy. The scale of the official results explains why the programme is being extended. Reviving 1,115 factories means Ethiopia has attempted to recover productive assets that already contained capital in the form of machinery, factory buildings, established workforces and industrial knowledge rather than relying entirely on building new plants. The reported creation of 1.58 million jobs suggests that the government views industrial expansion not only through the value of manufacturing output but also through its ability to absorb a rapidly growing labour force, while the US$5.96 billion attributed to import substitution points towards another equally important objective: reducing Ethiopia’s persistent demand for foreign exchange. For an economy that has experienced years of hard currency shortages, replacing imported finished products with locally manufactured alternatives can produce benefits even before those factories become internationally competitive, because each product manufactured domestically potentially reduces part of the dollar demand that would otherwise be required to purchase the equivalent product abroad. The economic value of that substitution, however, depends heavily on how much of the production chain has actually moved inside Ethiopia. A factory that assembles imported components can replace a finished import while still requiring substantial foreign currency for machinery, spare parts and intermediate inputs, whereas industries built around Ethiopian agricultural products, minerals, labour and energy can retain a much larger share of value domestically. The US$5.96 billion figure is therefore significant, but the deeper measure of industrial progress will increasingly be how much domestic value Ethiopia adds to each product rather than simply the gross value of goods no longer imported. Ethiopia First Had to Make Its Existing Factories Work The design of the first phase addressed a problem common across developing economies where governments spend heavily attracting industrial investment while a significant share of installed manufacturing capacity remains idle or underused. A factory operating at 40 or 50 percent of capacity has already absorbed much of the expensive capital required to establish production, including land, buildings, machinery and basic infrastructure, yet still produces far below what those assets were designed to deliver. Increasing utilisation at such a plant can therefore raise industrial output much faster and at a lower incremental capital cost than constructing an entirely new factory. Ethiopia’s decision to focus on dormant and underperforming plants recognised that industrialisation is not only about announcing new investment projects but also about identifying why existing firms are unable to produce. In Ethiopia’s case, those constraints have included shortages of foreign exchange for industrial inputs, limited access to finance, interruptions in raw material supply, infrastructure problems, logistics costs and the difficulty some local producers have faced competing with imported goods. Bringing more than a thousand factories back into production, if sustained, matters because it represents the recovery of capital that had effectively been removed from the productive economy. This approach also helps explain why the programme could produce large employment gains relatively quickly. Industrial job creation does not depend only on the workers standing inside a factory. Manufacturing creates demand for transport, packaging, maintenance, warehousing, agricultural inputs, professional services, wholesale distribution and other activities surrounding production, meaning that the economic employment impact can extend beyond direct factory payrolls. The reported 1.58 million jobs should nevertheless be interpreted carefully unless the government publishes a detailed breakdown separating permanent direct manufacturing employment from temporary, indirect and value chain jobs, because these categories have very different implications for productivity and household income. A manufacturing job in a productive factory that continuously sells goods can generate wages and skills for years, while employment associated with plant construction or temporary investment activity has a different economic character. As Ethiopia moves into the next phase, employment reporting would become more informative if it showed not only how many jobs were created but also which industries created them, how many are permanent, what workers earn and how output per employee is changing. An industrial programme ultimately succeeds not simply by employing more people, but by moving workers into increasingly productive activities that support higher incomes. The significance of factory revival should also be understood against Ethiopia’s broader ambition to alter the structure of its economy. The country has spent years pursuing manufacturing through industrial parks, infrastructure investments, textile and apparel production, agro processing, leather, pharmaceuticals and other sectors, yet manufacturing remains much smaller as a share of the economy than would be expected in a deeply industrialised country. Restoring idle plants can produce a strong initial improvement without necessarily changing that structure quickly. Ethiopia therefore needs to distinguish between recovering from previously low capacity utilisation and creating a sustained industrial acceleration in which manufacturing grows faster than the rest of the economy over many years. The first is a recovery story. The second is structural transformation. “Made in Ethiopia” will ultimately be judged by whether the factory revival becomes the beginning of the latter. The US$5.96 Billion Import Substitution Figure Shows Both the Achievement and the Limitation Import substitution has provided Ethiopia with an obvious starting point because the country possesses a large domestic market and has faced severe foreign exchange constraints. Every time a locally produced product replaces an imported finished good, Ethiopia potentially preserves foreign currency that can instead be used to purchase machinery, fuel, medicines, industrial components and other imports that are more difficult to replace domestically. This logic is particularly attractive in an economy where access to dollars has frequently constrained businesses themselves, because manufacturers often struggle to import the inputs required to operate while the economy simultaneously spends foreign currency importing consumer products that could theoretically be produced locally. The US$5.96 billion attributed to import substitution therefore represents more than an industrial output statistic. If the underlying production has meaningful domestic content, it represents a reduction in one of the structural pressures that has repeatedly affected Ethiopia’s balance of payments. The challenge is that import substitution can only carry an industrial strategy so far. Ethiopia cannot indefinitely increase manufacturing simply by taking market share away from imports because eventually the easiest products to manufacture locally will already have been substituted and industrial expansion will depend increasingly on growth in domestic consumption or access to foreign markets. In some industries, there is also a danger that domestic protection can hide weaknesses that only become visible when companies are exposed to international competition. A manufacturer serving the Ethiopian market may be able to operate with higher production costs, inconsistent quality or slow delivery if imported competitors face currency shortages, tariffs, transport costs or regulatory restrictions. The same company has no such protection when attempting to sell into another country. International buyers compare suppliers across multiple markets and can shift orders quickly when another manufacturer offers a better combination of price, quality, reliability and delivery time. This is why Ethiopia’s decision to make exports a central part of the programme’s next phase represents a much more rigorous test of what has actually been built since 2021. Import substitution can demonstrate that Ethiopia possesses factories capable of producing goods. Export growth demonstrates that those factories can produce goods competitively. The difference is fundamental. A domestic factory may survive because Ethiopia needs what it produces. An export factory survives because customers outside Ethiopia prefer what it produces. The second outcome requires productivity rather than protection to become the foundation of industrial growth. The Export Phase Will Expose Ethiopia Directly to Global Competition Ethiopia has several advantages that could support an export manufacturing strategy, including a large labour force, significant electricity generating potential, domestic agricultural inputs, an expanding internal market and geographic access to African, Middle Eastern and European markets. The country can also use its own domestic market as a scale base, allowing manufacturers to build production volumes at home before attempting to compete internationally. This model has been used successfully elsewhere because industrial firms generally become more efficient as production increases, workers accumulate experience, suppliers develop around factories and fixed costs are spread across larger volumes of output. Ethiopia’s challenge is to convert these theoretical advantages into delivered prices that compete internationally after electricity, finance, transport, customs, port charges and production inefficiencies are included. Logistics will be particularly important. Ethiopia is landlocked, which means every physical export ultimately depends on access through another country, principally Djibouti, before reaching maritime shipping routes. A factory can have inexpensive labour and electricity and still lose international orders if the cost and time required to move a container from the factory floor to a foreign buyer eliminates those advantages. Export competitiveness must therefore be understood as a national system rather than a factory level achievement. Customs clearance, roads, railways, dry ports, freight forwarding, port access and the availability of containers can influence whether an Ethiopian manufacturer receives an order just as much as the efficiency of the machinery inside the plant. The government’s decision to include the modernisation of industrial services in the next phase is therefore economically important because successful manufacturing depends on a network of activities that surround production, including testing laboratories, engineering, certification, finance, insurance, maintenance, industrial design, digital systems and logistics. Quality and consistency will become equally important as Ethiopia seeks foreign buyers. Industrial policy discussions in developing economies often focus heavily on the quantity of production while export markets reward standardisation. A foreign buyer ordering thousands or millions of units needs assurance that the first shipment and the tenth shipment will meet the same specifications. Manufacturers seeking access to regulated markets also need internationally recognised certification, traceability and compliance with health, safety, environmental or technical standards. Building those capabilities requires investment not only by individual companies but also in national institutions responsible for standards, laboratories and export certification. Ethiopia can therefore increase the number of factories substantially without becoming a major manufacturing exporter if those supporting institutions remain weak. The currency reforms Ethiopia has undertaken since 2024 also make this transition particularly consequential. A more flexible exchange rate can improve export competitiveness because Ethiopian wages and locally sourced inputs become cheaper when measured in foreign currencies, but depreciation simultaneously increases the domestic cost of imported machinery and intermediate inputs. The companies most likely to benefit are therefore those capable of producing with a high share of local inputs while earning foreign currency through exports. This creates a strong industrial policy argument for developing deeper domestic supply chains rather than merely attracting assembly operations that depend on imported components. Ethiopia will capture much more economic value from exporting processed agricultural products made from Ethiopian crops, textiles made from domestic cotton or manufactured products based on local minerals than from exporting goods whose most valuable components are imported before final assembly. Ethiopia Needs to Move From Counting Factories to Measuring Productivity The indicators used to judge “Made in Ethiopia” should gradually change as the programme matures. During an industrial recovery phase, the number of factories reopened is a useful measure because it shows whether previously idle productive capacity is returning to the economy. Once most economically viable factories have resumed operation, however, reopening another plant becomes less important than what those factories actually produce. A country can have thousands of industrial establishments without achieving high manufacturing productivity if firms remain small, technologically weak or dependent on protected domestic markets. Ethiopia’s next phase should therefore place more emphasis on manufactured exports per worker, domestic value added, foreign exchange earnings, utilisation rates, industrial wages, investment in machinery and the number of firms successfully entering and remaining in foreign markets. New capacity also needs to be more selective than simply adding factory numbers. Ethiopia should ask which industries can plausibly achieve scale, source a large share of inputs domestically and compete in regional or global markets. Agro processing is an obvious example because Ethiopia already produces agricultural commodities that can be transformed into higher value food and industrial products before export. Textiles and apparel can benefit from labour availability and local raw materials where supply chains are developed sufficiently. Leather offers similar possibilities because Ethiopia possesses one of Africa’s largest livestock populations, although the country has struggled historically to convert that raw material base into consistently competitive finished exports. Minerals and chemicals may offer additional opportunities as energy supply increases. The industrial strategy becomes more effective when government focuses on removing specific constraints in sectors where Ethiopia has plausible comparative advantages rather than spreading incentives across every form of manufacturing. There is also a regional opportunity that did not exist at the same scale when earlier Ethiopian industrial strategies were designed. The African Continental Free Trade Area offers the possibility of treating African economies as part of the addressable market for Ethiopian manufacturers rather than focusing predominantly on Europe, North America or Asia. Ethiopia does not need to become globally dominant in a product for exports to become economically significant. Competitive manufacturing for neighbouring and wider African markets could allow firms to develop scale in products where transport distance and regional demand give Ethiopian producers an advantage. Construction materials, processed foods, pharmaceuticals, household goods, textiles and other manufactured products can become regional businesses before becoming global ones, particularly as transport and trade integration improve across eastern Africa. The Next Phase Will Decide Whether “Made in Ethiopia” Becomes an Industrialisation Strategy The government’s reported results from 2021 to 2025 give the programme a credible foundation from which to proceed. Reviving 1,115 factories means previously idle capital has returned to production. Creating 1.58 million jobs, using the government’s figure, suggests industrial expansion is beginning to absorb labour on a meaningful scale. US$5.96 billion in import substitution indicates that domestic manufacturing is capturing expenditure that previously flowed towards foreign producers. None of those achievements, however, guarantees that Ethiopia has created an internationally competitive manufacturing sector. They show that the country has increased production inside its borders and strengthened its ability to supply its own market, which is an important but incomplete stage of industrial development. The export phase changes the standard against which the programme should be judged because international markets will provide a much less forgiving measure of factory performance than domestic targets. Ethiopia cannot instruct a buyer in another country to purchase Ethiopian goods, and it cannot permanently protect an exporter from competing suppliers. The firms that succeed will therefore have to demonstrate that they can produce goods at the right price, maintain quality, deliver reliably and continuously improve productivity. Government policy can support this process through infrastructure, finance, trade agreements, skills development, reliable energy and efficient regulation, but the ultimate commercial decision will be made by customers. That makes the next stage potentially more important than everything that has happened so far. Import substitution helped Ethiopia recover industrial capacity and conserve scarce foreign exchange. Export industrialisation could allow the same factories to generate foreign exchange, expand beyond the limits of domestic demand, raise productivity and create better paid employment. The first phase asked whether Ethiopia could manufacture more of what it consumes. The next phase will reveal whether Ethiopian manufacturing has become competitive enough for other countries to consume more of what Ethiopia makes. The Uchumi360 Insight Ethiopia’s “Made in Ethiopia” programme should not be judged simply by the number of factories carrying the national label or the headline value of imports replaced. Its deeper significance lies in whether Ethiopia can use the factory revival of the past four years as a bridge towards a more productive industrial economy. Reviving dormant factories is economically sensible because it recovers capital that already exists, while import substitution is particularly valuable in a country constrained by foreign exchange. But neither automatically produces the sustained productivity growth associated with successful industrialisation. The government’s decision to place exports at the centre of the next phase recognises that limitation. A factory that survives by replacing imports can be economically useful, but a factory that can sell profitably into foreign markets has passed a much more demanding test. It has demonstrated that its costs, quality, logistics and management are competitive against producers that Ethiopia cannot regulate or restrict. If a meaningful share of the 1,115 revived factories can make that transition while new industries are built around domestic inputs and higher value production, the programme could begin to change Ethiopia’s economic structure rather than simply increase manufacturing activity within it. The US$5.96 billion import substitution figure therefore tells only the first half of the story. The more consequential number over the next five years will be how many billions of dollars Ethiopian factories can earn from customers who were never obliged to buy Ethiopian goods in the first place. FAQ What is the Made in Ethiopia initiative? Made in Ethiopia is Ethiopia’s industrial development initiative focused on increasing domestic manufacturing, reviving underperforming factories, reducing reliance on imported products, expanding employment and improving the competitiveness of Ethiopian industry. How many factories were revived under Made in Ethiopia? The government says 1,115 factories were revived between 2021 and 2025. How many jobs did the programme create? Government figures attribute approximately 1.58 million jobs to the programme and associated industrial expansion between 2021 and 2025, although a detailed breakdown between direct factory employment and wider indirect employment would provide a clearer measure of the labour market impact. How much import substitution did Ethiopia achieve? The Ministry of Industry says local manufacturing generated approximately US$5.96 billion in import substitution, reducing the amount of manufactured goods Ethiopia would otherwise have purchased from overseas. What will the next phase of Made in Ethiopia focus on? The Ministry of Industry says the next phase will concentrate on expanding exports, establishing additional productive capacity and modernising the services required to support competitive industrial production. Why is the export phase more difficult than import substitution? Domestic manufacturers can benefit from tariffs, foreign exchange constraints affecting imports, government procurement and proximity to Ethiopian consumers. In foreign markets, Ethiopian companies must compete directly with manufacturers from multiple countries on price, quality, reliability, standards and delivery times. Why are exports important for Ethiopia? Import substitution reduces foreign currency demand, while exports generate foreign currency directly. Successful manufacturing exports would also allow Ethiopian factories to grow beyond the limits of domestic demand and potentially raise productivity through greater scale and international competition.