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Bolstering manufacturing and export
Gebre-Michael Asgedom
The second China Trade Week held in Addis Ababa had managed to convene over 50 Chinese Suppliers and Ethiopian Customers in one pavilion. Chinese companies have said that Ethiopia may be their market destination in the future and expressed commitment to continue their business engagement in Ethiopia. Above all, the event has witnessed that Ethiopia has big potential for investment and marketing, parallel to its capacity to accommodate large business fairs.
The Trade fair in Addis Ababa was conducted under the auspices of Chinese Chamber of Commerce and China Council for the Promotion of International Trade. It was a three-day event that managed to attract many Chinese companies engaged in the construction, machinery, electronics, food and beverage, furniture and packaging, among others.
Following the trade fair, Chinese investors witnessed that Ethiopia has been undertaking various mega projects. In this regard, infrastructures, like Ethio-Djibouti Railway and various industrial parks finalized by the support of China are an epitome of development; these development achievements could also be replicated elsewhere in Africa and beyond. Hence, driven by its endeavor to become manufacturing hub of Africa, no doubt, Ethiopia could be international gateway to Africa in the near future.
So far, Ethiopia has managed to become China’s entrance to Africa in many areas, including in investment, industrialization and infrastructure. In the same way, Chinese investors stated that they are interested to strengthen investment in Ethiopia.Until now, Ethiopia’s relation with China has become a paragon of close partnership (Ethiopia could be number one symbol to China-Africa cooperation); finance, trade, and people to people ties between the two countries are going in an encouraging manner and both countries have witnessed sharp interest to broaden their partnership in investment, construction and other crucial areas.
In addition, being the largest economy in East Africa and the second most populous country in the continent as well as the seat of the headquarters of the African Union, Ethiopia is a very important market niche to many Chinese, Turkish, Indian and Israeli companies. And with a view to support development of manufacturing, Ethiopia is industriously working to realize development of industrial parks.
Similarly, many are of the opinion that to leap frog to industry-based economy, Ethiopia better expand its industry parks as an alternative to enhance its revenue generating capacity. Indubitably, Ethiopia has untapped potential to attract investors interested to engage in manufacturing activity. However, the revenue being generated from manufacturing has remained far below expectation.
Accordingly, Ethiopia should focus on development of integrated agro-processing parks to change this reality and vault to manufacturing activities. Equally important, parallel to the development of industry parks, the country should focus on recruiting high-profile companies that have the capacity to process agricultural goods and export value-added products.
Indeed, encouraging activities are being undertaken to foster development of the manufacturing sector. To this end, lately more than 200 companies have been registered to enter into the agro-processing parks. To satisfy the demand of these companies, Ethiopia is undertaking construction of many industry parks, parallel to recruiting investors fit to start manufacturing (particularly, many are interested in engaging in agro-processing activities).
Currently, the construction of the industry parks is being undertaken in Amhara, Tigray, Oromia and SNNP regional states and it is well in progress. In line with this, since the type of shades to be built for companies differ according to their area of production, the current development process involves installing infrastructures and facilities fit to the type of activities.
Particularly, the construction of industry parks used for agro-processing differs from the ones related to textile, garment or shoe shades; it needs specification and standards. First, registration of investors has to be taken and then selection of their interest and indentification of the type of agro-processing sector they need to develop has to be made (it needs exhaustive indentification process, a breast of infrastructure construction).
It is believed that the construction and operation of industrial parks will have immense benefit to keep up the growth of the country’s economy. Undeniably, this activity will help modernize and transform the manufacturing sector by enabling it to penetrate into the international market; it also enables investors to engage in manufacturing activity speedily as they are provided with developed industrial area furnished with one-stop shopping facilities and services.
Specially, developing agro-processing industrial parks would help to harness the agricultural potential of the country and enhance revenue earnings. Secret in public, the manufacturing sector is not the backbone of Ethiopian economy contributing not more than 15 percent for the GDP and a lot should be done to improve this sector.
The country has to work hard to transform the current undesirable reality and completely change the level of low manufacturing and process of weak value-addition, backward system of production and other factors that contribute to low performance in the manufacturing sector.
As a firm base to establish industrial economy, Ethiopia is blessed with tremendous endowments; it is a nation of over 105 million people and it has diversified agro-ecology suitable to many agro-processing and other manufacturing activities. Currently, it is one of the fastest growing economies in the world, thanks to development of large-scale road and railway infrastructures, power generation capacity and industrial parks. Furthermore, it has begun to make commendable strides in drawing foreign direct investment (FDI).
However, although the country is making efforts to increase manufacturing output through the introduction of policies that provide generous incentives, these efforts are negatively affected by practices that deter investment. 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 power outages that hamper production. 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 shortage of technical and managerial skills are among the bottle-necks being mentioned by potential investors.
Cognizant of these challenges as stumbling blocks to the prospect of the manufacturing sector, 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 a bid to enhance its manufacturing performance, Ethiopia is striving to increase revenue earnings from the industry sector by exporting value-added manufacturing products through newly established industrial parks. In this regard, it has eyed to develop 17 integrated agro-processing industrial parks (IAIPs) across the country by 2025.
Regarding industrialization, GTP-II has envisaged to see the manufacturing sector contribute its own to the economic growth and renaissance of the country. In view of this, share of the industry to the GDP is anticipated to scale up to an average rate of 19.8% per annum (however, this amount may decline following the instability that rocked the country for the last three years and pushing down the country’s growth estimate from double digit to close to 8.6).
As a viable solution to the problems of manufacturing, the country is working to attract many private investors to contribute their own share in the development of medium and large-scale manufacturing industry. Hence, measures are being taken to further pave the ground for the involvement of the private sector by providing timely solutions, amendment of investment rules and regulations, readying industry parks furnished with essential facilities and looking for more investment alternatives.
Currently, Ethiopia is being lauded for its effort of expanding industry parks and speedy industrialization activity which in turn is generating more job opportunities for citizens time after time. Many analysts agree on the very fact that Ethiopia can be Africa’s leading manufacturing hub provided it sustains the current effort and enhance its performance in the coming ten years.
To help manufacturing activity gather momentum, Ethiopia is better readying itself to the toughest competition that may be posed by advancing industrialists all over the globe. In this regard, nation has given due attention to development of qualified industry parks by allocating tremendous amount of budget to construction.
Taking into account the instrumentality of industrialization in job creation and lifting millions of citizens out of grinding poverty, GTP-II has given due attention to attract more FDI into Ethiopia through construction of space age industry parks, attracting and settling investors and strengthening manufacturing. In this regard, Ethiopia will intensify its auspicious and audacious move towards promoting investment opportunities and attracting more foreign investors.
