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Ethiopia’s quest for competitive industrial parks
Bereket Gebru
Ethiopia has set out to raise the number of its industrial parks to ten during the second GTP period. Towards realizing that goal, the government set up the Ethiopian Industrial Parks Development Corporation (IPDC) in 2014. By setting up these gigantic industrial sheds, the country aims to enhance exports, employment, technology transfer and agricultural to industrial economic transformation.
Addis Industry Village, Bole Lemi I and Hawassa Industrial Park are the three industrial parks that are already operating in the country. The IPDC website states that Mekelle and Kombolcha industrial parks are about to go operational in the recent future. Adama and Dire Dawa industrial parks are expected to follow.
Ethiopian Industrial parks are assigned a specialized sector to serve. Some serve textile and garment industries, while others are made for pharmaceuticals, footwear and leather products, agro-processing and heavy industries. Another identifying factor about Ethiopian industrial parks is that they are eco-friendly. According to the IPDC website, the Hawassa Industrial Park stands in testimony as its “sewerage, waste disposal will be recycled by using latest technology with Zero-Liquid Discharge (ZLD) facility that was constructed for this purpose.”
The implications of these industrial parks for employment creation, provision of housing and physical infrastructure, education, health and social services, and pollution control are staggering. A 1999 article entitled “industrial parks: principles and practice,” Caj O. Falcke (Ph.D.) states:
The Large-scale manufacturing is likely to play only a limited role in providing employment. Small and medium-sized firms in manufacturing, services and trade, as well as micro-enterprises will provide most of the jobs. Many of these will benefit greatly in exactly the just mentioned critical variables for success by locating inside a well functioning industrial park: outsourcing based on efficient division of labor is facilitated, economies of scale may be achieved, and productivity thereby is enhanced. By clustering into industrial parks, small, medium and even large enterprises can take advantage of public infrastructures, economize on construction and common facilities, and gain access to nearby skilled labor markets, research and educational facilities and other critical inputs.
The challenge for the public as well as the private sector, the article contends, is to facilitate the creation and maintenance of industrial parks that are competitive in the global as well as the local context. It states: “the ability to compete in national, regional as well as international markets is the hallmark of successful private enterprise and the paramount prerequisite for sustainable economic development.”
Access to major markets, infrastructure, cheap skilled labour and incentive packages, the Spring 2008 Prologis Research Bulletin states, are among the main reasons that determine the competitiveness of industrial parks in the global system.
Situated in the horn of Africa, Ethiopia provides an easy access to Africa, the Middle East, Asia and Europe. Therefore, it is ideally located to access the major markets in the world. As a rapidly growing economy, the state of infrastructure in the country is changing tremendously for the better with the industrial parks enjoying the best of electrical, water, telecommunications, roads and other facilities Ethiopia has to offer.
The 2008 bulletin states:
“When China first cracked its “Open Door” in 1980, it lacked virtually all of the basics (not to mention amenities) that modern business enterprises simply take for granted. Absent were such basics as a transparent legal system, the concept of private property, labor markets, banks, foreign exchange markets, and modern infrastructure — including highways, telecommunication facilities, water, waste management, comfortable living quarters, and energy-supply systems. Only the most intrepid foreign enterprises were willing to venture into this uninviting setting.”
With more than a dozen years of rapid development under its belt, it is plausible to think that the present day Ethiopia offers more of some of the amenities stated above than the China of nearly forty years back. Although there have been improvements in infrastructure and work procedures, Ethiopia still needs to keep things rolling to catch up with the demands of today’s businesses. By providing businesses with a fully furnished space to operate from, Ethiopia’s industrial parks compensate for the shortcomings in infrastructure through their connection with ports and close proximity to airports, railway stations, dry ports and universities.
The other point to consider is the availability of cheap skilled labour force. Set to hit the 100 million mark, a significant section of the population of Ethiopia is young. This group constitutes the working section of society. Therefore, there is a large availability of labour in the country. Considering the nearly universal enrollment in primary schools and considerable expansion of education at all levels in the past couple of decades, the labour force is more educated than it used to be. The salary level of Ethiopian workers is also generally low. Therefore, Ethiopia has skilled labour that can be employed for low price.
The other gauge deals with incentive packages. Accordingly, Ethiopia provides manufacturers with:
- Zero tax
- Exempted from income tax up to 8 – 10 years
- Exempted from duties & other taxes on imports of machinery, construction materials, spare parts, raw materials & vehicles
- One-stop-shop for government services
- Land lease term: 60-80 years at zero charge for factories & residential quarters
Developers also enjoy equally beneficial incentives that include:
- Exempted from income tax up to 15 years (outside Addis Ababa)
- Exempted from duties & vehicles
- Provision of essential infrastructure, including dedicated power substations
- Land lease term: 60-80 years at zero charge with sub-lease rights
Considering Ethiopia ticks all the right boxes to host competitive industrial parks at the world stage, the successful completion of the projects would speed up the transformation of the economy to an export-led industrialized one.
