Page 85 - Azerbaijan State University of Economics

Abrehet Mehari: Factors Affect The Productivity of Large And Medium -Scale
Manufacturing Industry In Ethiopia

First, policies aimed at human capital formation are very important to increase Large

and Medium Scale manufacturing industries. Human capital development will help
firms to easily upgrade the skills of their workers, to use new and advanced
technology, and uninterruptedly advance productivity for the continuous growth of
efficiency and competitiveness. Human capital, which includes education and
training is not only crucial for increasing total factor productivity but also helpful to
transfer technology from abroad. Therefore, quality institutional arrangements that
enhance investment in human capital development are more central. Second,
technology transfer through FDI attraction should be fully exploited to boost the
total factor productivity in large and medium scale manufacturing industries.
Therefore, this research suggests that there should be reforms targeted at attracting more
foreign direct investment towards this sector. In line with attracting FDI, the
government should further ensure peace and security that create a predictable and safe
business environment for foreign firms.

The government should also facilitate loan access to Large and Medium Scale
manufacturing industries. This intervention can enhance Large and Medium Scale
manufacturing industries' growth by creating sufficient capital or funds to boost their
business. This measure can also allow creating a new area of investment and
enhance the productivity of firms. In addition, resources should be directed towards
infrastructure development. Such policy can facilitate the reliability of raw material
supply and output delivery, reduce the delivery time of goods, and ultimately results
in increased productivity and profitability of manufacturing industries.

Further, achieving high Large and Medium Scale manufacturing industries growth
also requires creating stable macroeconomic stability that creates a stable and
predictable business environment. The rate of inflation should be reasonably
moderate and stable to intensify the demand for final goods and services which will,
in turn, lead to increased production, and as a result, improved productivity.
Otherwise, macroeconomic instability (high and unstable inflation) can negatively
affect productivity growth by discouraging producers to produce more goods and
services by employing different factors of production.

IV. REFERENCES
AACCSA (Addis Ababa Chamber of Commerce and Sectoral Associations) (2014).
Manufacturing Survey Analysis
Abreha, K. G. (2019). Importing and firm productivity in Ethiopian manufacturing. The
World Bank Economic Review, 33(3), 772-792

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