Ethiopia's economy has been based on agriculture for eons now. Agriculture has played a key role both in terms of carrying the bulk of the country’s export production and domestic needs at large. Since the last couple of decades, however, the government is pushing to diversify into manufacturing, textiles, and energy generation. The power grids, various investments the country has attracted from abroad in different manufacturing sectors, large scale agricultural investments in previously inaccessible remote areas of the country though not as scheduled in terms of volume and effect on the economy and other economic leap forwards the country has witnessed during the last couple of decades are creating a fertile ground for the its long vision to make a successful transition from agrarian to industrial economy in the near future. The main challenges for Ethiopia are sustaining the economic growth it achieved and accelerating poverty reduction, which can best be done by creating more jobs and therefore expanding the work sector. The industrial parks in Ethiopia plan to do just that.
Taking this into account, the government has opened many industrial parks recently in major towns of the country and these parks are already attracting more foreign investment from different corners of the world and creating thousands new job opportunities for unemployed youth. Industrial parks are known to have a great role in expanding a region’s manufacturing sector and tapping into their local talent. The idea to develop industrial parks in Ethiopia was modeled after those in Asia and Eastern Asian countries such as China, South Korea, Singapore, Malaysia and Vietnam.
These and other undertakings are indicative of the fact that Ethiopia has been taking all the measures to turn the levers for the realization of its set goal of becoming the low middle income country by 2025. It is vividly cited in the second Growth and Transformation Plan that the promotion and expansion of industries with the special emphasis on manufacturing industry is a centerpiece for the plan. Among the several strategic interventions to boost the role and contribution of the manufacturing sector to the national growth is the development of industrial parks. The ongoing development of industrial parks is expected to be an engine of industrialization that nurture manufacturing industries, accelerate economic transformation, to further promote and attract both domestic and foreign investment to more areas of the country.
Among the 15 industrial parks that are scheduled to be constructed in areas identified as potential spots in different parts of the country, the ones at Hawassa, Kombolcha, Mekelle, Addis Ababa, and Bure are already inaugurated and the remaining are well on the pipeline.
The factories in the parks are designed to have a convenient plug-and-play environment with access to all the necessary infrastructure including power, telecom, water, etc. what is more, one stop shop services are part of the inside of the parks aimed at facilitating multiple services to tenants. An additional area id also allocated for the building shared dormitories and commercial centers, health clinics, and banking.
For instance, the Hawassa industrial park is a show case of Ethiopia’s commitment for green and climate change resilient economy as it is constructed with a water and waste treatment plant that utilizes the latest technology for treating and recycling the water. Other industrial parks are also expected to follow the footsteps of this park. As a result of its sophisticated facilities, this industrial park has already attracted investors from China, USA, Hong Kong, Sri Lanka and South Korea and many more investors are expected to flock to it in the near future.
These and other integrated agro-industrial parks, exclusively focused on agricultural raw materials, will link agriculture with industry. According to the GTP-II document the country has identified marketable surplus commodities for which preparations are carried out for a detailed value-chain analysis. It is after this and other foundations are made that the present budding industrial parks in the some areas of the country have become a reality. These industrial parks are planned to be closely linked to agriculture in the country in various ways. In the clusters, industries will supply different inputs to agriculture. Agriculture itself is going to transform from subsistence agriculture into modern agriculture. Therefore, there are also investment opportunities in harvesting technologies, in agro-mechanization, and different input to agriculture. In this way, agriculture will supply the raw material and industry will supply agriculture with different inputs. This will result in a spiral growth that will be the epicenter of the transformation process. There is a huge opportunity, starting from the small farmers, cooperatives, and small as well as medium industries, domestic and international investors.
In addition, the park development policy considers incentives. In general, investments in Ethiopia benefit from attractive incentive packages. However, given the nature of these parks, there might be additional incentives to be considered by the government. The biggest incentives are the market itself, the raw materials, the environment and the very supportive government. However, to make the industries competitive, the government is going to look into those areas which should be incentivized. According to the data obtained from the Ethiopian Investment Commission, Ethiopia is becoming a destination for investment, and the interest is growing from year to year by about 25%. This is primarily due to the political and macro-economic stability of the country, which was rated by Moody and Fitch at B and B+ levels.
Ethiopian Prime Minister Hailemariam Desalegn, speaking repeatedly at a ceremony marking the parks’ official operation commencement on Monday, said that his country's favorable business environment is drawing a growing number of foreign investors and huge Foreign Direct Investment (FDI). The premier further asserted that the Hawassa industrial park can be seen as a "foundation in Ethiopia's ambition to be the manufacturing hub of the African continent." The Ethiopian Investment Commission has also announced its plan to replicate the best lessons obtained from the Hawassa Industrial Park to other parks that are being built across the country.
The Ethiopian government highly convinced that the development of industrial parks is the major path for the country to realize its vision of becoming manufacturing powerhouse in the African continent. Cognizant of this, the country has budgeted more than one billion U.S. dollars for the construction of industrial parks in the second five-year Growth and Transformation Plan (GTP-II) period, effective from 2015 to 2020. The government also expects the development of industrial parks throughout the country would increase the share of the manufacturing sector to the country's agriculture sector dominated GDP, in which the manufacturing sector stood at only 5 percent for many years.
As one of the continent's fastest-growing economies, Ethiopia wants to shift away from farming and agriculture and sees manufacturing as a vital sector to create jobs and maintain high growth. In a nutshell, if the country has to tap its potential from the already created fertile foundations for its longstanding vision of transcending from agriculture to an industrial economy, adequate power supply, better qualified labor force, additional incentives for investors and other encouraging strategies should speed up the growth and expansion of industrial parks that have already started to flourish in some cities of the country and enable Ethiopia become hub of light manufacturing in Africa in the near future.