Measuring Total Factor Productivity and Competitiveness of Ethiopia: Textile and Garment Industry
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Date
2008-07
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A.A.U
Abstract
This paper analysis the levels of total factor productivity and competitiveness of
Ethiopian textile and garment industries in sight from medium and large scale firms over
the period 2001-2005. In this regard, textile and garment sub-sector plays an important
role in industrialization and economic development. Despite its importance for
industrialization, the Ethiopian textile and garment sub-sector has not shown
encouraging sign both in terms of productivity and competitiveness. Hence, the general
objective of this study aimed at analyzing the level of total factor productivity and
competitiveness of Ethiopian textile and garment sub-se::tor using secondary data from
central statistical agency of Ethiopia which covers five years period. The study
considered 17 textile and 8 garment sample firms.
In the analysis, the study employed stochastic frontier production function model and unit
cost ratio method. The study made use of a computer program frontier version 4.1c and
stata version 9 as a tool for analysis. The results of the analysis revealed that the level of
total factor productivity and competitiveness capacity of the sub-sector is not good. On
average, technical progress, technical efficiency and Scale efficiency (economies of scale)
declined by -34%, -25% and -1.3% per annum over the study period, respectively. The
negative change of these efficiencies resulted in negative total factor productivity growth.
SO, the contribution of total factor productivity to output growth is found -60.3% per
annum. With regard to competitive capacity, all the four digit groups of manufacturing
activities in the sub-sector prove to be uncompetitive even in the domestic market.
From this analysis, therefore, it would be probably drain that the growth of the subsector
is pulled back by total fac tor productivity gro11" 17 & failed to compete both in
domestic and international market as a result of increasing trends in technical regress,
technical and scale inefficiencies as we:! as cost ineffectiveness. This is, perhaps, a
reflection of firm level weakness with mediocre product ct design, use of backward
machineries, limited international exposure and passive inaction to competitive products.
Thus, textile and garment firms ought to family work in addressing their weakness and
adjust themselves with the challenges of the changing global environment. Government
should also play its supportive role in terms of ensuring fairly competitive domestic
market, providing market and technology intonation, supporting trainings and
minimizing transaction costs related to the provision of its services.
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Keywords
Competitiveness, Garment Industry.