Industry is one of the important productive sectors to bring about sustainable economic development in the region. In its broader sense, industry consists of manufacturing, mining and quarrying construction, utilities industry, gas and power. By virtue of endowment of natural resources Oromia has massive potential for industrial development. On the other hand its large population size and presence of relatively larger industrial and social establishments are among major factors providing favorable environment for the development of trade and commerce. Transport and communication infrastructure and services are the catalyzing factors to enhance the socio-economic interactions in and outside the region facilitating the industrial development and expansion of trade.
Manufacturing Industries (large and medium)
Despite high potential for industrial development the sector is yet at its infancy stage due to several constraining factors among which shortage of capital, technology, market and skilled manpower are the major ones. As a result the contribution of industry has remained low and only 11.9% of the regional GDP in 1999 (Oromia Economic Study). Moreover, linkage between industrial sectors and agriculture has remained very poor as it is now. The industrial sector is mostly depending on imported raw material source rather than using local resource indicating the need for establishment of necessary linkage between industrial and other sectors, particularly agriculture.
Generally there are 40 Government owned and controlled manufacturing establishments in the region. On the other hand there are about 5272 privately owned small scale industries in the region. The privately owned small scale industries are providing employment to about 20551 people and the numbers of these privately owned establishments have also increased from 3879 in 1988 to 5272 in 1992. However, the trend in terms of number and size of employment generated by these industries are not significant in relation to the opportunity provided by free market economy.
The domestic resource utilization of manufacturing industries is generally low and the sector can be said heavily dependent on foreign markets for its source of raw materials. The average imported input dependence in 1987/88 was about 40% and much more higher than this for some industries, such as chemical and metal, which requires tremendous effort to ensure market for local resources by linking industry and other sectors.
Small Scale Manufacturing and Cottage/ Handicraft
According to the 1988 CSA survey there were about 2731 small scale manufacturing industries and 892719 cottage industries registered in the country. Out of the 2731 small scale manufacturing 625 (23%) and 348,673 (39.1%) of the cottage industries were located in Oromia employing about 465,000 persons or 23% of the national figure. About 50% of these establishments were in food and beverages followed by textiles and non-metallic mineral products, which accounted for about 20% each.
As it is evident from the above discussion, though the industrial sector is at a lower stage of development, it still plays an important role in the development of the region in terms of creating job opportunity, introduction of new technologies and generating additional revenue. However, most large and medium sized manufacturing industries are mainly dependent on imported raw materials, and are concentrated in few godinas thus resulting in development disparity between godinas. Therefore, in light of the pivotal role this sector plays in transforming the economy of the region, the following measures are proposed to be undertaken to encourage and enhance its development.
- Incentive mechanisms have to be designed for those industries, which use local raw materials as inputs, especially agricultural products, in order to establish a strong linkage between the two sectors.
- Special arrangements have to be put in place for investors who intend to invest in peripheral godinas.
- Focus on developing basic infrastructure in potential investment areas.
- Encourage labour intensive investments through attractive tax mechanisms.
- Facilitate access to working and business premises.
