Page 36 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.79, # 1, 2022, pp. 34-49

Ethiopia is exporting more as primary products than value-added products which in
turn affect employment opportunity, better price, and long-term competency. The
growth performance of the manufacturing industry which is the key indicator of the
degree of structural transformation in the economy was lower than the target for the
plan period. The poor growth performance of the light manufacturing industries and
the delay in the implementation of large manufacturing projects were the major
contributors to the slow growth in the overall manufacturing sector (Yodit,2015)
Therefore, proper implementation and integration of light manufacturing industry
developments call for urgent and systematic research on economic integration
SMEs’ policies and strategies. This paper focused on the economic integration of
SMEs engaged in Wood and Metal, Textile and Garment, Leather and Leather
Product Agro-processing, and Construction Input in manufacturing sub-sectors.

1.2 Problem Statement
Ethiopia is characterized as an undeveloped country, chronic poverty, with a high
population second to Africa, a lack of investment capital, and infant
entrepreneurship are all persistent problems of the country (Elias,2015). Given this
situation, one cannot expect the economic integration of SMEs and entrepreneurship
to create a competitive situation as required and derived by SME members and
actors at large. World Bank Group 2015 identified that the microfinance institution
in Ethiopia does not accommodate small and medium enterprise needs. Without
adequate support from financial institutions, SMEs could not run their business
efficiently and effectively to enhance productivity and realize their competitiveness.
As World Bank’s Investment Climate also mentioned that SMEs as a fundamental
foundation and seed for manufacturing industries. However, the quality and
coverage of infrastructure is low, the inadequacy stems largely from resource and
capacity constraints leading most SMEs to low productivity, and inefficient
allocation of resources that hinder SME competitiveness (CBC,2013). The vision of
Tigray is to create a society where extreme poverty becomes history and every
citizen has access to a job. But underdeveloped nature of productive capacity and
unemployment is a challenge of the region (GSTS,2019). This makes it difficult to
strengthen the economic integration of SMEs in the manufacturing sector which
calls for systematic research in this area. Research has been done in the area of small
enterprises. However, as per the knowledge of the researcher, studies in the field of
the economic integration of SMEs in the Region have not been done before.
Therefore, the general objective of this study is to examine the economic integration
of small and medium enterprises in Ethiopia regarding the critical analysis of the
manufacturing sector in the Tigray Regional State

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