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The domestic private sector in Ethiopia is still in an early stage of growth. Although some larger private companies are now run by professional managers and boards of directors, most private businesses are family owned.
The presence of the state in the economy is still predominant. Most public enterprises are in manufacturing industries such as tanneries, food and beverages, textiles and garments, pharmaceuticals, chemicals and vehicles. In this sector the state accounts for about 60% of total output, and most of the employment (38,000). Although the state decreased its weight in the sector from 86% in 1996 to 53% in 2002, it has remained at this level for few years and has even increased up to 57% in 2004.
Over the last decade, a number of businesses including banks, insurance companies, hotels, travel agencies, factories, and commercial farms have been set up by private investors. Major export-oriented companies dealing in coffee, hides and skins, tea, floriculture and leather are now privately owned. Nearly all coffee exports are in the hands of private exporters.
However, in spite of some encouraging improvements, the share of the value added at factor cost of the three export earning sectors, leather and footwear, textiles, and beverages, registered a decline. This indicates the need to address the factors that are affecting these sectors’ performances and their market positions.
Italian Intervention
In order to support the private and industrial sector development, the Italian Government is funding a project called Program Aid. The project, which began in 1995, was devised to promote the privatization of public enterprises, competitiveness of manufactured products, and the sector as the driving force for economic growth. With a grant of 16 million euros, Program Aid supports two key industries, Leather and Textile.
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