The last few years have seen a string of inaugurations of mega industrial parks in different corners of Ethiopia. And, with the country unveiling more ambitious plan to construct new industrial parks, economists are urging the government to place more weight on the strategic importance and economic dividends of the capital-intensive investments beyond distribution patterns.
The country has already built state-of-the-arts industrial parks including the iconic Hawassa Industrial Park and yet, the government plans to increase the parks’ number to 30 in the next two years.
Despite, some challenges, the efforts are now paying off the country. Last year, Ethiopia’s inflow of Foreign Direct Investment (FDI) has been increased to over 3.7 billion US dollars and is one of the vibrant countries in Africa in attracting the highest FDI inflow.
Hawassa Industrial Park, developed at 300 million US dollars and inaugurated in 2016, is one of the biggest industrial parks in the country and has been described as the Ethiopian government’s “flagship” industrial park. It has started production at a relatively small scale in late 2016, with the first exports in mid-2017. Currently, Dire Dawa, Mekelle, Kombolcha, Adama, Jimma, Bahirdar and Bole Lemi are also operational industrial parks. Seven more industrial parks are also under-construction.
Addressing unemployment among the youth population is crucial to Ethiopia. Hawassa, Kombolcha, Bole Lemi, Mekele and Adama industrial parks collectively, have currently created jobs for over 70,000 Ethiopians, and 103 million USD has been generated from the exports of the Industrial parks during the 2018/19 Ethiopian fiscal year.
As part of its efforts to make the country a light manufacturing hub in Africa by 2025, Ethiopia is working to create favorable atmosphere and systems that enable to do business in the country. The mega projects are also strengthening Ethio-China relations with Chinese giant construction company China Civil Engineering Corporation (CCECC) playing a crucial role in Ethiopia’s industrial parks development and having entered the market, it has built the Hawassa, Kombolcha, Adama, Dire Dawa Industrial other manufacturing hubs since it entered in the Ethiopian market.
Moreover, various Chinese and other companies are also showing interest to construct industrial parks on their own in addition to getting sheds at the government constructed parks.
The operational parks have already launched exports and begun generating the much needed foreign currency to the country. But some have been questioning if such investments have met the intended goals.
Dr. Ermias Ashagere is an Assistant Professor of Economics at Bahir Dar University. He said that industrial park is a new trend in the country. It is good that industrial parks are built since they can create massive jobs. However, the fact that the basic infrastructure remains poor with the economy yet to be transformed, more plan should be well studied and considered, he argued.
“We are putting the cart before the horse. The government needs to first help the private sector get more financial and technological efficiencies.” Most of the companies already operating in the parks import inputs from other countries. And this makes their business difficult. You cannot lean on importing inputs and exporting products.
Before opening up industrial parks, the government should first build the required infrastructures such as electricity, water, and telecom services besides creating market opportunities and stabilizing the macro economy, he adds. It is clear that East Asian countries such as Taiwan, Malaysia, or China have experiences worth sharing with extensive use of industrial parks or SEZs to attract foreign investment and push their industrialization, he added.
“Industrial parks are not for political purposes or equity, they are meant for economic values. These capital-intensive investments should be viewed from their economic significance that they would bring to the country.
Industrial parks are meant to attract labor and capital-intensive domestic and foreign investments and establish links to global markets by supplying quality products, eventually bringing economic transformation. Hence, the question is: Are these objectives being realized or not?
Recently, Prime Minister Dr. Abiy Ahmed said that the construction of industrial parks should be carried out in consideration of economic returns and the nation’s industrialization policy, signaling that due care will be attached in determining the location and status of industrial parks in line with their strategic importance, not distributions patterns.
The construction of industrial parks needs to consider the economic corridors, road accessibility, labor availability, and others. Industrial parks should have the required electricity, telecom, and other infrastructural facilities. By improving IPs management and organizational structure, the corporation plans to increase manufacturing’s share in the GDP.
Comparing the rising population and land resource, the number of industrial parks is very few. Park development brings lots of blessings to the country. It bolsters industrialization, urbanization and job creations.
The industry sector is not competitive. It is highly reliant on imported inputs. “We ought not to compromise efficiency over equity. We need to stick to a universal approach. Industry parks are not about fairness, they are about efficiency. Industrial parks must be located where there are road networks and better infrastructural facilities, Teshome Adugna, Assistant Professor of Economics told The Ethiopian Herald.
“It is time to revise the way we have been doing business. Building industrial parks and increasing productivity are different kettle of fish. We need to first increase agricultural products so that the agro-processing and manufacturing sectors have the required inputs,” Tesome added . To him, generating more power is also another pressing task awaiting the country; parks should be supplied with the required amount of power.
One of the major constraints facing industrial parks is power shortage. For instance, over 1,700 MW is needed for industrial parks and the operational industrial parks require 306 MW of power, however, less than 170 MW is being supplied. This is far from the demand which the economists say the country must work to increase its power generation capacity.
The Ethiopian Herald September 6, 2019
BY DESTA GEBREHIWOT
