Measuring Total Factor Productivity and Competitiveness of Ethiopian Textile and Garment Industries
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Date
2008-07
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Addis Ababa University
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-sector using secondary data from central statistical agency of Ethiopian 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 drawn that the growth of the sub-sector is pulled back by total factor productivity growth & failed to compete both in domestic and international market as a result of increasing trends in technical regress, technical and scale inefficiencies as well as cost ineffectiveness. This is, perhaps, a reflection of firm level weakness with mediocre product design, use of backward machineries, limited international exposure and passive reaction 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 information, supporting trainings and minimizing transaction costs related to the provision of its services.
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Competitiveness of Ethiopian Textile