Abstract:
An important factor that would influence the success or failure
of an industrial concern is the degree of efficiency in the
utilization of resources under its command. In Ethiopia
efficiency is a major problem. There are some evidences to
support the contention that resources are being utilized
inefficiently.
By employing the Oeomestic Resource Cost (ORC) methodology in
general equilibrium setting. this study attempts to empi~ieal1y
establish the incidence of protection and the magnitude of
efficiency in the state owned textile industry at a point in
time. The major findings are as follows: (a) The system of
protection provides a uniform nominal protection to all firms
(b) The effective protection is high and differs substantially
among firms (c) The domestic resource cost is high and differs
substantially among firms, indicating inefficiency (d) Firms
with high domestic resource cost are accorded high protection
while firms with low domestic resource cost are offered low
protection. This indicates that the Ethiopian system of
protection encouraged and supported inefficient firms
(e) Wide differences exist between economic and private
profitability among firms, indicating the presence of price
pietortions both in the product and factor markets. The
quantitative estimates further indicate that in a number of
cases the effect of government policy was not consistent with
objective of economic efficiency.
To enhance economic efficiency in the state owned textile
sector, substantial restructuring and policy reform is required.
In respect to this, the study identified specific areas that
deserve the attention of policy makers and recommends the
measures to be taken.