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Industry parks strengthening high-end manufacturing
Gebre-Michael Asgedom
The sheds of the newly-built Mekelle industry park has been transferred to the investors, according to the park’s manager. It has been said that Mekelle Park has housed 15 sheds, of which half are handed over to capable foreign industrialists. Managers confirmed that all of the industrialists are exhaustively selected as high-profile textile manufacturers.
Most of the investors are from Bangladesh who has accumulated invaluable experience in the production of garments. Up on finalization of installation of factories in the coming September, the factories are expected to resume production as soon as possible and export high-end textile produce to the global market, making Ethiopian produce more competent in the international market.
Tigray Small and Medium Manufacturing Industries Development Agency stated that recruitment of factory employees has been started earlier with a view to accelerate the process of production. The Agency has recruited over 10,000 job seekers from the region, of whom 95 percent of the beneficiaries are females. The current number of employees will be doubled when the park went into full operation.
Similarly, this year had saw the nation, earning close to three billion USD from export of domestic produce (including agricultural ones).However, the manufacturing sector has not managed to secure the desired amount of hard currency (though it showed 1.7 percent increment compared to last year’s same time) due to inefficiency and inability to go into production at the desired level, lack of technical competence and inept management, among others.
Accordingly, the industry parks are expected to solve the aforementioned incapacity problems and inject a new spirit of production into the manufacturing sector. Most importantly, the new industry parks are anticipated to attract sophisticated technology from developed countries and introduce it to the local manufacturing sector.
Following the construction of industry parks, Ethiopia has become one of the largest recipients of Foreign Direct Investment (FDI) , particularly in the textiles sector. Cognizant of this very fact, farsightedly, Ethiopia has been inviting manufacturers and textile companies from all over the globe to come to Ethiopia and invest. As an incentive, nation has been offering cheap power and lower labor costs needed by companies to become profitable.
To sustain attraction of more FDI firms, the construction of industry parks has been gathering momentum across the country. And the inauguration of Kombolcha and Mekelle industrial parks is recent industrial activity, next to Hawassa industrial park (Kombolcha park had cost 90 million USD and it has housed 13 factory sheds, while Meqelle park cost 100 million USD and housed 15 factory sheds). The two parks had been ready to settle more manufacturers; the nation has so far constructed many parks, including Bole-Lemi and Hawassa, with an out lay of over 650 million USD.
So far, investors from USA, Italy and the Netherlands have shown interest to settle and resume production in the Kombolcha and Mekelle parks. Currently, Kombolcha Park has been prospectively attracting high-profile textile juggernauts that have built a reputation in textile and apparel production (such as Carvico S.p.A from Italy, Trybus from USA and Pungkook Corporation from Korea).
Significantly, Hawassa industrial park is regarded as the paragon of success of the government’s effort to mushroom industrial parks throughout the country and catalyzes industrial development; realizing its vision to accelerate industrial development, transform the economy and boom export output.
The park has consumed 350 USD to construct state of the art sheds and erect zero-liquid discharge waste treatment plant. It has also housed 37 manufacturing sheds waiting to be fully occupied by fruitful foreign and domestic manufacturers.
Worth commending, Hawassa Industrial Park is expected to create job opportunities for over 60,000 Ethiopians. With 100 percent of products dedicated to high quality exports, the Hawassa industrial park is expected to generate one billion dollars. Furthermore, the newly inaugurated parks are expected to add more jobs to thousands of citizens. Hence, millions of Ethiopians are expected to benefit from industry parks.
To expand the horizon of job creation, Ethiopia has planned to make the number of industrial parks close to 13 over the coming couple of years. The parks would be constructed with the capacity to employ thousands of citizens and transform the manufacturing sector of the country; particularly, the sector is expected to make the country the second Bangladesh in the production of textile and garment.
In line with manufacturing, Ethiopia has set ambitious plans to become the hub of Africa’s textile manufacturing. To this end, it has started to attract a number of world-known textile companies including PVH Corp, which has more than a century of experience. In addition, there are around 14 other companies from all over the world: Raymond and Arvind from India; Hydramani from Sri Lanka; Chargeurs and Ontex from Europe; TAL, EPIC and MUST from Hong Kong; and Busana from Indonesia, among others.
Currently, the textile industry is considered as one of the most labor intensive sectors capable of creating more new jobs and nation has targeted to create 40,000 new jobs in the sector, of which 27,806 jobs were so far created (regarding the textile industry, survey conducted by McKinsey Institute Global stated that Ethiopia has the potential to be one of the biggest players in garment manufacturing).
Similarly, since 2015 a number of European companies, H&M, Premark and Tesco, among others, began sourcing some of their garments from Ethiopia for the country has a lower cost advantage, including (below 60 USD per month). Similarly, work-permit costs to foreign workers are less than one tenth of that of neighboring Kenya, and Far East countries of China and Vietnam.
Nonetheless, some said Ethiopia is not as far competent when it comes to certain areas that would motivate manufacturers. And even though it has been praised for the availability of cheap electricity, this crucial service has been found to be unreliable owing to frequent outages that hamper businesses. Likewise, despite the abundance of cheap labor in the country, it is mostly unskilled that hinders well-oiled manufacturing activity.
In addition, poor infrastructures, cumbersome customs processes, low level of social and environmental compliance and a shortage of technical and managerial skills are among the bottle-neck impediments being mentioned by potential investors.
Seeing these challenges as stumbling blocks to the prospect of the manufacturing sector, the nation has devised strategic directions to help the industrial sector take off meaningfully. The devised strategy has eyed at enhancing the knowledge and skill of employees, establishing more labor- intensive light manufacturing industries and introducing sophisticated manufacturing technologies.
In addition, as part of the solution, universities, colleges and technical and vocational schools are expected to train more competent workforce, generate amply-trained human power and feed the growing demand of investors for skilled human power.
The development trend of the manufacturing sector is not gloomy, despite all the challenges. The manufacturing industry in general and the textile industry in particular have been growing in an encouraging manner. And Ethiopia has become the second largest recipient of FDI in textiles globally, after Vietnam. So far, it had managed to attract close to four billion dollars.
Ethiopia has been witnessing increasing investments from numerous firms in the past. Currently, it is focusing on bringing more high-profile FDI companies. In this regard, earlier the selection of investors was being made roughly. However, currently nation has been intensely working to attract capable investment firms recognized for their best performance.
The last five years had witnessed growing investment and enhancement of capacities in the industrial sectors. Particularly, the investment is notable in textile, garment and leather, among others. Coupled with existing capacities, these developments are positive signs for Ethiopia’s future endeavor of industrialization and ambition of structural transformation. Aimed at addressing critical constraints of the industry sector, the government has been investing tremendous amount of money in developing industrial zones. In addition, it has issued new laws and established supportive institutions to support industry parks development.
The nation has targeted to secure 30 billion USD from the textiles sector by 2030. Particularly, GTP-II is interested to see the manufacturing sector hit its target successfully. And the industry sector, largely be driven by the expansion of manufacturing industries, is expected to make a significant contribution to growth and structural transformation during this period. In view of this, the contribution of the industry to the GDP is projected to grow at annual average rate 19.8%.
Moreover, GTP-II envisages the private sector to play leading role in the development of medium and large-scale manufacturing industry. Hence, measures are being taken to further level, enabling environment for the private sector. The measures include timely amendment of investment rules and regulations, readying industry parks and scouring investment alternatives.
The nation is expanding industry parks taking into account speedy structural transformation in the industrial sector may flourish the economy far better than other sectors and work miracles to alleviate poverty; the very fact that attracting more FDI plays a fundamental role to augment employment and spur the transfer of knowledge and technology. Thus, the nation is industriously striving to construct as many industrial parks as possible and help interested investors invest their money on selected sectors(draw investors from all over the globe and invest their money on various sectors of the economy).
