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Industrial parks widening investment opportunities!
Netsanet Amha
Past two decades witnessed that Ethiopia has been striving to alleviate poverty and ensure sustainable economic growth. Although the country was mainly concentrated on developing the agricultural sector in those years, it has been exerting efforts to develop the industrial sectors side by side.
At the very beginning, it was impossible for Ethiopia to invest on industry as it had no capital. The only option the country had was to develop the agriculture sector and integrated it with the industrial development. In those twenty six years, the country has invested a lot to develop the sector.
The 2016 report of Ministry of Finance and Economic Development indicated the growth of agriculture is mounted to 38.8 percent of the Gross Domestic Product (GDP), 90 percent of the foreign currency earnings and 85 percent of employment in 2014–2015. Whereas, the industrial sector accounted for about 15.2 percent of the GDP and 46 percent was by the service sector. Then, the government began expanding to integrate it with the industry. The hydropower dams and the sugar development projects are real witnesses.
The country registered a double-digit economic growth in the past decade, which is expected to be sustained, which could be attributed to many factors mainly to the development policies and strategies of the country that has a clear national vision aiming to achieve middle-income status by 2025.
Cognizant of the importance of transforming the agricultural economy to industrial led economy the government expanded its major mega projects some of which were executed in the first Growth and Transformation Plan (GTP I) and the others have still undergoing as part and parcel of the second Growth and Transformation Plan (GTP II).
However, there were some gaps in executing GTP I particularily in the country’s export. In the first and second years of the execution period of GTP II, the government has engaged in filling some of the gaps that it identified while executing the first GTP. One of these is the efforts that the government has been exerting to expand industrial parks that were believed to facilitate the economic transformation.
The Industrial Park Corporation recently reported that the deficit in the textile and leather export targeted in the first GTP was due to lack of ample market access and only infant industrial zones that could not accommodate a number of foreign and local investors. Although the country had ambitiously targeted 1.5 billion USD from the export of leather and textiles, it failed to meet the target.
However, Ethiopia has never faced such deficit in the second GTP as it has managed to expand industrial parks in different parts of the country. Now that the aforementioned gaps tested the country’s export in the first GTP will not be challenges in the execution of the remaining period of second GTP as a number of industrial parks have constructed across the country and a large market opportunity has opened to the country in countries throughout the world, it indicated.
It was known that the Industrial Parks Development Corporation was established in 2014 by the Council of Ministers, Regulation 326/2014. It was bestowed with the mandate to develop, operate and administer wide ranges of industrial parks throughout the country so as to unleash the potential of industrial parks to facilitate the country’s economic development. As it is asserted by the corporation at the very beginning of its foundation, it planned to develop 100,000 hectares of land in the next ten years, just between 2016 and 2025.
It is believed that the large, medium and light scale industrial parks would back the development of investment, which could augment the ever rising investment of the country in the years ahead. It will open opportunities to national, domestic and foreign investors. The development of Industrial Parks is a historical moment and a great juncture in advancing investment; thereby, led the country to be the hub of light manufacturing industries in the continent.
The Corporation also made vivid that it has targeted 1 billion USD annual investments from the industrial parks over the next decade. In this regard, the parks incorporated textile, leather, agro-processing and other labor intensive factories.
The large, medium and light scale industrial parks now began to facilitate the transition to the industry-led economy through speeding up the manufacturing sector and play significant roles in job creation, import substitution and strengthening export.
Industrial Parks Development Corporation Board Chairperson and Special Advisor to the Prime Minister Dr. Arkebe Oqubay told the media while the Hawassa Industrial Park was inaugurated that the factories in the Industrial Parks have been established at a convenient environment with access to all necessary infrastructures including power, telecom, and water.
In addition, one-stop shop services would be established in the park to facilitate the provision of multiple government services to occupants. He added that the government has allocated a sum of 10 billion birr annually to develop industrial parks throughout the country as it has given special attention to industrial development and is striving hard to become Africa’s light industries hub by 2025. They could play a significant role in facilitating the transformation of the agricultural-led economy into an industrial-led economy, he emphasized.
“The delivery of integrated power transmission, water supply, waste disposal and recycling mechanisms and raw material supply arrangements are basics to the development of industrialization. Import-export transport and logistics facilitation, shared market utilization and effective security as well as competent and effective management are also needed adequately,” he added.
The ongoing expansion of industrial parks will, of course, play a significant part in enabling the country move towards a middle income country by the year 2025. The parks that have been set up so far should increase their employment for women and men as well as increase their production competitively to supply to foreign markets thereby obtain huge foreign currency.
In fact, this does not come out of the blue. It is emanated from the very intention that Ethiopia has given special attention to investment, which has enabled foreign investors to look into the country. It has become a reality in the past ten years where the influx of Foreign Direct Investment (FDI) increased from time to time.
Despite remarkable economic growth over the last decade, Ethiopia has been striving to achieve economic structural transformation. It has been struggling to overcome the key constraints that hinder economic transformation including lack of capital, foreign exchange, knowledge, infrastructure and institutional constraints in delivering efficient services.
Industrial Parks (IPs) have been and are key policy instruments in meaningfully reducing these challenges. That is why the government has been working day in day out in enhancing economic transformation by attracting investment, promoting technological learning, upgrading and innovation and generating stable and decent employment.
The feasible policy and institutional options that Ethiopia has adopted could help the country to have a comparative advantage. It has managed to attract so many foreign investors in connection to the construction of industrial parks around Addis Ababa, in Hawassa, in Kombolch, Mekele and other places. This is just to realize the ambitious development plan of the country aiming rapid and sustainable industrialization nurturing manufacturing and agro-processing industries; thereby, accelerating economic transformation and attract domestic and foreign direct investment that the government has been developing industrial parks that attracted a large number of investors to the country.
