Bold government investments and massive public spending spearheaded by technocrats within the ruling party are turning the tide in the manufacturing sector in Ethiopia. The government in the East African nation is now building massive industrial parks across the country, thereby generating badly needed foreign currency and employing tens of thousands of younger employees. “Companies that will settle inside these industrial parks will not incur any cost in terms of setting up and constructing roads, buildings, electricity and water supplies. We will cover all the costs,” Arkebe Equbay, a lead technocrat in the government and an advisor to the Prime Minister of Ethiopia, recently said. “Besides, we will provide a tax haven of up to ten years for companies. Simply, the companies only need to bring in their machinery.”
These mouth-watering offers seemed to have swayed some foreign investors. The world’s biggest shoe maker, Huajian and many Western clothing brands, such as PVH, H&M, Zara, Decathlon, Caizedonia, Walmart and Costco have already entered or are eying up the opportunity of entering the Ethiopian manufacturing sector.
“We want the companies that are going to settle in our industrial parks to export their products to a foreign market. If they do so, we will allow them to import their factory inputs for free,” Fitsum Arega, former Head of the Ethiopian Investment Commission recently told state media. “Plus, there won’t be any local taxes that will apply to any kind of transactions between the companies that settle inside the parks. This is because we want them to feed each other and then thrive. Plus, the companies will be free of any income tax for ten years.” According to Ethiopia’s Industrial Parks Development Corporation, it aims to develop 100,000 hectares of land (10,000 Hectares annually) by 2025.
Cities in Mekelle, Adama, Kombolcha, Dire Dawa and Bahir Dar are among the major cities that are selected for the development of these parks. With a final size ranging from 500 to 2,000 hectares, each park will be developed in phases of 75-200 hectares and will have its own characteristics.
According to data provided to 7Dnews by the Industrial Parks Development Corporation, Dire Dawa (in the East) is being developed as an integrated zone on the model of an international Special Economic Zone and will be easily accessible from Djibouti by road and train. Mekelle (in the North) is expected to benefit from an already established industrial base and a particularly dynamic economic environment. Kombolcha (North- Central) is equidistant between major Ethiopian cities, making it an ideal destination for manufactured products for the domestic market. Adama (South- Central) is the capital of the Oromia region and is currently a preferred destination for investors in medium and heavy manufacturing. Bahir Dar (North West) is a major domestic and international tourism destination and Jimma (South-West) is home to coffee and logistics connections to the rest of the country. All are currently being upgraded. Already, the Kilinto, Adama, Kombolcha, Jimma, Bole Lemi, Mekelle and Hawassa Industrial Parks and the Addis Industrial Village are up and running.
Ethiopia’s economy currently depends heavily on agricultural products for export revenue. The sector has long been unreliable due to seasonality and market fluctuations. As a result, the country has faced severe foreign currency shortages in the past few years, thereby forcing the government to seek short-term help from countries such as the UAE.
At the moment, Ethiopia is implementing Phase 2 of its much talked about Growth and Transformation Plan, which is anchored on building a solid and vibrant industrial base that is planned to generate economic transformation and inclusive growth.
The government of Prime Minister Aiby Ahmed is aiming to make the East African nation a leading manufacturing hub in Africa by 2025 with a massive focus on light industry. The development of industrial parks remains at the centre of this.
According to the 2016 Global Competitiveness Report, Ethiopia is ranked 34th out of 138 countries for impartial public decision making. An average of about 11% GDP growth since 2005 coupled with massive transport network expansion projects, including electric-powered railway lines connecting the capital and other economic corridors to the Port of Djibouti, is making Ethiopia a preferred destination for investors.