Business organizations across the world are under increasing pressure than ever before to stay dynamic and responsive in their competitive positions due to a global economic phenomenon resulting from ‘Liberalization, globalization and privatization. They have to become more productive to meet competition. It is a good strategy to maintain a competitive advantage in a competitive market.  Productive efficiency is of crucial importance for managing inflation for lowering costs of goods and services.

Productivity is the essential prerequisite for increasing exports to  achieve  export led growth, also  through  technological  development to  generate  wealth for further investment,  and social welfare and economic  of any country.

The concept of productivity is generally defined as the relation between output and input. It is argued that productivity is one of the basic variables governing economic production activities.

Productivity is a multifaceted phenomenon. It denotes an increasingly efficient and effective use of resources of land, labor, capital, and technology. It is combination of number of diverse aspects like:

• optimum utilization of available and potential resources, assets, and capacity,
• effective management of projects without waste of time and  before cost escalations
• waste avoidance in the use of materials, machines, energy, time and other inputs,
• labor cost and/or higher quality goods and services,
• modernization of plants, and machinery,
• development of technology and pursuit of innovation,
• dedicated managerial leadership and
• full utilization  of human talents, creativity and skills

Productivity and innovation are crucial for the socio-economic development of nations.  Unemployment, underdevelopment, inflation and poverty, and the resultant unrest within a society are largely the consequences of its low and/or declining productivity in various industries.

A nation prospers when production activities are managed intelligently, diligently, and harmoniously. Otherwise the cost of resources will be high. Thus, the poverty of nation is an outcome of weakness in the organization and management of their production resources.

Productivity stands for composite efforts of all the factors contributing to production. Productivity should not be confused with increased production. Higher production does not necessarily mean higher productivity. Higher productivity can be achieved by better utilization of resources.  Higher productivity results in cost reduction and thus causes higher profitability and enhances competitiveness.

Production, productivity, innovation, organization, management and employment are social processes required to manufacture product. The involvement of the  social actors is essential, viz, industrialists, businessmen, managers, engineers, technicians, workers, farmers, political leaders, scientists, planners, policy makers, bureaucrats, administrators, accountants, salesmen, clerks and so on.

Productivity is strongly related to the culture of society and motivation of employees. A motivated employee uses resources economically, efficiently, and effectively with greater care.. Culture also plays a determinant role in directing workers to work- place and making them to use resources efficiently and effectively. Culture also initiates and motivates society for a higher performance.

Productivity is not everything, but in the long-run it is almost everything. A country's ability to improve its living standard over time depends almost entirely on its ability to raise output per worker

The four groups of arguments that relate liberalization to growth of productivity and output are:

a) Reduction of inefficiency

b) Better exploitation of scale of economies

c) Superior technology embodied in imported inputs, and

d) Faster rates of technological ‘catch up' in expanding sectors of comparative advantage

Higher production does not mean higher productivity. Higher productivity can be achieved only by better utilization of resources. Though higher productivity results in cost reduction and thus favors profitability and competitiveness, profitability is not a measure of productivity as some times profit can be achieved while resources are inefficiently and ineffectively utilized. Poor capacity utilization, outdated technology and machinery, poor maintenance and excess manpower are indicators of inefficiency in the organization. Inefficient utilization of resources does not lead to productivity.

Theories of motivation have indicated that people are motivated by various needs. These various needs are motivated by different satisfiers.  If the organization is in a position to know what motivates its workers and provides rewards or incentives based on their needs and wants, it will definitely increase their productivity. However, there is an argument among researchers that since there is no guarantee that giving someone a reward will lead to increased effort or that increased effort means better performance that will lead to higher productivity, because productivity is a function of many elements of which reward is only one of the factors.

In most cases it is assumed that job satisfaction and productivity are always interrelated, but some findings revealed that this thought is not necessarily seen a correct one since relationship between satisfaction and productive efficiency cannot be taken for granted. Assumption to increase productivity of the employee might be possible through satisfying their needs.

As it is clearly seen from aforementioned discussions, productivity signifies a continual striving towards the economically most efficient mode of production of goods, commodities and services needed by a society. Hence it constitutes an important requirement for raising the living standard of the people in a nation. Productive efficiency is of crucial importance for managing inflation by lowering the costs of goods, services and commodities consumed by people. Productivity is the essential prerequisite for increasing exports, achieving export led growth, attaining techno-economic development and generating wealth for investment, consumption and social welfare.

In Ethiopia major economic reforms have been undertaken after liberalization since 1992 with the objective of increasing productivity and competition among the companies. The new policies have liberalized many government controls on production capacity, imported capital goods and intermediate inputs making them cheaper and more accessible to both domestic and international competition. These reforms have altered the economic environment in which the textile industry operates.

In this part, the attempt is made to test the impact of liberalization on employment, productivity and motivation.

Ethiopian Government designed the policy of Agriculture-led economy to foster poverty reduction and to bring about economic development in the country by increasing the productivity of labor and land that it has relatively in excess capacity. According to the Government of Ethiopia (2002), there is relatively excess labor and land as compared to capital which is in acute scarcity. There is land in excess and labor wage rate is also low as compared to other African countries. Textile industry also follows labor intensive technology to minimize unemployment in the country.

Labor intensive industries using unskilled and/or semi-skilled workers with a relatively low wage rate, the emphasis is on increasing the productivity of capital, which is in the scarcity. On the other hand, in capital intensive industries, where there is labour shortage, the prime concern is to increase labor productivity.

Productivity performance of the textile industry presents a disturbing picture of poor capacity utilization, outdated technology and machinery, poor maintenance and excess human power. The situation calls for drastic restructuring to improve the economic viability of the industry.

"The principal goal of a nation is to produce a higher and rising standard of living for its citizens. The ability to do so depends on the productivity with which a nation's labor and capital are employed."

Productivity in textile industry is getting drained mainly due to under –utilization of machines, inefficient working, poor machinery maintenance, over-spinning, lack of modernization, power shortage and unhealthy labor and management relations .the liberalization of the economy dramatically and drastically changed the industrial climate as well as government policy with regard to public sector undertakings.

The study attempted to see whether liberalization as an economic reform has brought any significant change on productivity of Ethiopian Cotton Textile Industry, taking time period pre- and post-liberalization. To this effect, the study covered the time period between 1981 and 2004. This time period was divided into two equal portions as pre- and post-liberalization periods. In assessing the impact of liberalization, the study followed pre- and post-liberalization comparison, taking time period 12 years before liberalization and 12 years after liberalization. Through empirical analysis on the variable stated in hypothesis part, it is believed that it would be possible to gauge the success or failure of the new economic reform launched since 1992 in Ethiopian Cotton Textile Industry.

Statistical tools such as ratios, and measures of central tendencies, are used to evaluate the data as the study is based on time series data in order to test the impact of liberalization on productivity of Ethiopian cotton textile industry.

4. Data analysis

According to the Managing Director of Hawassa Branch of Cotton Textile Industry, "the impact of liberalization on employment is significantly high. Because of economic reform of liberalization, now the industry is profitable. Consequently, it is paying higher remuneration to its employees. Because of compatible payment, moral of each employee is boosted up and raised, and thus each employee is exerting maximum effort to the operation of the organization. This high performance associated with efficiency in operation of resources is believed to have increased productivity and profitability".

• Value of output is greater than the value of material input and labor input for the entire period of time, which is very normal situation.
• However, before liberalization the output and inputs were declining up to 1992, except capital input. After 1992 the output and inputs started increasing up to 2004, except labor. Labor was declining after 1989-2004 because of downsizing and privatization effect, which started taking place after 1995/6.
• Fixed capital has been gradually increasing starting from the beginning up to 2004. On the other hand, the number of employees, as it can be seen .
• Because of that civil war, many private firms quitted their operations by dismissing their employees and closing their firms.
• Many of public sector textiles were also closed in the city of Asmara, Eritrea.  The table presents capital intensity, partial and total factor productivity in cotton textile industry from 1981-2004.
• For the time period 1981 – 1992 (pre-liberalization period), labor productivity was lower, because of poor capacity utilization, outdated technologies and machineries, poor maintenance and excess manpower. This made the industry oblivious to the inefficient utilization of resources thereby increasing the production cost. Thus, profitability was low.
• However, after liberalization, as it can be seen from Table labor productivity increased in such a way that it had never seen before.
• This labor productivity was attained by the industry by its ability to raise output per worker. For post-liberalization period, output increased by 75.8 percent whereas labor decreased by 18.88 percent.
• This clearly shows the saving of labor after liberalization. If it is not possible to raise output per worker, there will not be any productivity in the industry, and therefore it will not contribute to the growth of economy.
• Capital labor ratio was also decreasing before liberalization, up to 1992.
• Post-liberalization (1993-2004), however, capital labor ratio in the industry started to increase very fast.
• The increase has been resulted because after liberalization, the amount of capital in the industry was increased by 246.58 percent and it became excess.
• In contrast, the number of employees in the industry was decreased by 18.88 percent through downsizing or structural adjustment after liberalization.
• Capital labor ratio is increasing because the increased capital is being divided by the decreased number of labor.
• The miraculous event took place in capital productivity and material productivity. As it has been seen so far with labor productivity and capital labor ratio, they were decreasing before liberalization and increasing tremendously after the reform of liberalization.
• However, the case of capital productivity and material productivity was completely different after liberalization. Capital productivity, before liberalization, was decreasing because the utilized capital was lower than which has been used after liberalization.
• When low amount output is divided by low capital, obviously the quotient will be low. But after liberalization, the amount of capital used in the industry increased tremendously (by 246.58 percent) with the hope of yielding wealth in the near future.
• For example, the capital used for land development and construction purpose will not yield the output until they are completely become operational. Until then, the money used on them is believed to be idle as it is not generating any income in the short-run.
• Therefore, capital productivity is low after liberalization, because the existing output is being divided by the increased amount of capital. The amount of capital has been increased for capital investment and acquisition.
• The other completely unexpected event which was found decreasing after the reform of liberalization was material productivity. Material productivity was declining after liberalization. It was declining because of such reasons as obsolete machines, high material cost, low yield of material, low quality product and low demand for it, and substitution effect. Because of these reasons low material input is not yielding high output per used material input. The value of output proved that it is decreasing 0.9 times per worker (75.8/80.32). This is because, material input increased by 80.32 percent after liberalization whereas output increased by 75.8 percent.
• From this it can be concluded that the impact of liberalization was significant on productivity of Ethiopian Cotton Textile Industry. The impact was in increasing for labor productivity and capital intensity. However, it was in decreasing for capital productivity and material productivity after liberalization.

Findings ;

• Before liberalization, labor productivity was decreasing up to 1992. After 1992, however, labor productivity started increasing because more output was produced per worker than ever before.
• Capital labor ratio/ Capital intensity also increased after liberalization because more capital was employed in expectation of generating or yielding more wealth in the near future.
• Capital productivity was decreasing because more capital was used for capital investment and capital acquisition, which could actually not yield output in the short-run. Capital has been acquired beyond required level and hence used inefficiently. Thus, idle capital is resulted in the decline of capital productivity after liberalization in the short-run. But in the long-run when capital investment starts yielding output, the situation may be reverse and the graph which was running downward can run upward in the long-run. Until that point of time, the conclusion may be, the industry has to arrest further capital acquisition and expand labor and material use.
• Material productivity was also declining after liberalization, showing inefficient utilization of material to produce output. This happened because of poor capacity utilization, outdated technology and machineries, poor maintenance of plants because of the shortage of spare parts, low skill of workers, high cost of material input, low yield of raw materials, low quality of raw material and the like.

Conclusion- It has been proved that liberalization has brought about a significant impact on productivity of Ethiopian Cotton Textile Industry and that impact was in increasing for labor productivity and capital intensity. However, a change resulted in decreasing for capital productivity and material productivity for the reasons discussed here above. Therefore, the industry has to arrest further capital acquisition and expand labor and material use. The outdated machineries must be replaced by new ones. Inefficiencies must be eliminated and resources must be used effectively. All bottlenecks resisting productivity must be eliminated by the management of industry. Government should assist the management of the industry in importing new advanced technologies to make the industry productive and profitable.