In 2014, the government of Ethiopia created a special entity – the Industrial Parks Development Corporation (IPDC – to transform the country from a predominantly agricultural economy into a manufacturing one. Ever since, the government and private sector actors have built a dozen industrial parks throughout Ethiopia’s major urban areas. Ethiopia is on the right track in attracting investors, using FDI as a source of capital while implementing industrial parks that are labor intensive. On the other hand, by providing loan through development bank of Ethiopia and other incentives, the government is encouraging local investors to engage in the manufacturing sector.
Recently, the Ethiopian parliament held a discussion on Auditor General’s audit findings about the performance of industrial parks. During the discussion, representatives drawn from Industrial Park Development Corporation, Auditor General, the Ethiopian Investment Commission and other stakeholders took part. The finding identified lack of capital, construction delay, shortage of foreign currency, poor follow up mechanism and low productive capacity as the major challenges Ethiopian industrial parks are facing in meeting their economic objectives. Moreover, the other factor that is affecting the productivity of industrial parks is the high employee turnover due to lack of sufficient or attractive remunerations.
Industrial Parks Development Corporation General Manager Lelise Neme said that besides creating over 45 thousand jobs in last six months, industrial parks in different parts of the country are generating US $11 million each month. Within a short span of time, Ethiopia has managed to build 11 IPs, of which six have gone operational. The Corporation is also set to up the number to 30 by the end of the GTPII in 2020. The report also indicated that there are seven privately owned industrial parks. Ethiopia extensively focused on expanding the export sector in its efforts to achieve its goal of becoming a middle-income country. To realize this goal, the country has prioritized efforts to attract anchor companies to invest in selected sectors, especially in the manufacturing industry.
China, India, Turkey, Sudan, and the United States are the leading countries which are currently investing in Ethiopia. This is believed to help build industrial capability, increase foreign currency earning, facilitate knowledge transfer and create significant amount of job opportunities. According to Lelise Neme, respective government institutions should give due attention to solve the aforementioned problems the industrial parks are facing. The Corporation is jointly working with higher education institutions to train qualified manpower to provide productive labor to the growing demand, she said.
Besides, she said, the industrial parks have been built by taking the demand of investors into consideration. Currently, shades are being installed inside the industrial parks based on the investment demand and profitability, she noted. As to Lelise, with the goals of realizing a green economy, all of Ethiopia’s industrial parks have been constructed in an environment friendly manner. Ethiopia is grabbing the attention of many international companies and rapidly boosting its FDI inflow.
Federal Auditor General Gemechu Dabiso urged the Corporation to exert maximum effort to meet the national goal of boosting manufacturing export. Ethiopia offers a comprehensive set of fiscal and non-fiscal incentives to encourage investment into priority areas, including customs duty exemptions of up to 100 percent on imports of capital goods for eligible areas of investment; income tax exemptions for a period ranging between one and nine years, depending on the specific activity and the location of the investor; loss carry forward for business that suffer losses during the income tax exemption period for half of the tax exemption period; with the exception of a few products, no export tax is levied on Ethiopian export products; duty drawback scheme, voucher scheme and bonded factory and manufacturing warehouse schemes; various nonfiscal incentives for exporters and guaranteed remittance of capital for foreign investors.
Herald January 31/2019
BY TSEGAYE TILAHUN
