6 March 2018

Ethiopia: Industrial Parks Transforming Manufacturing Sector

Photo: Twitter / Christine Lagarde
Christine Lagarde at the Eastern Industrial Park in Addis: "I saw the dynamism and enthusiasm of the people working there and the commitment of private investors to #Ethiopia."

Ethiopia has been demonstrating significant commitment in expanding industrial parks that would facilitate proper environment for Foreign Direct Investment. These parks are key elements of the infrastructure supporting the growth the country has been pursuing. The construction of the parks is the continuation of nation's commitment to alleviate poverty and ensure sustainable economic growth over a couple of decades. Although the country mainly concentrated on developing the agricultural sector in those years, it has been exerting efforts to develop the industrial sectors side by side.

Through providing a location in which government, private sector and universities cooperate, these parks create environments that foster collaboration and innovation. They also enhance the development, transfer and commercialization of technology and global knowledge.

About 50 years ago, manufacturing industries in the country were dominated by cottage and handcraft industries which met most of the population's needs for manufactured goods such as clothes, ceramics, machine tools and leather goods. And it was impossible for the nation to invest on industry as it had no adequate capital. The only option the country had was to develop the agriculture sector and integrated it with the industrial development.

Several factors including lack of basic infrastructure, the absence of private and public investment and the lack of any consistent public policy aimed at promoting industrial development contributed to the stagnation of manufacturing industries. Since 1991, as a result of economic liberalization and commissioning of a comprehensive industrial policy, various reforms reversing the command economy were introduced. As a result, in those twenty six years, the country has invested a lot to develop the manufacturing sector.

In the present system, the government has been undertaking various activities to expand its economy to alleviate poverty and compete with the global markets. In order to realize this, the nation is striving to be the hub of light manufacturing industries in Africa.

The country registered a double-digit economic growth in the past two decades, which is expected to be sustained and attributed to many factors mainly to the development prudent policies and strategies of the country that have a clear national vision aiming to achieve middle-income status by 2025.

In connection to this, the nation established appropriate policies and strategies for the manufacturing sector's development which is an integral policy direction to the achievement of a vibrant and competitive industrial sector. To facilitate this transformation, the government prioritizes the development of textile and garments. The textile industry in the nation has been contri buting a lot for export growth for the last few years. The textile and apparel sector had managed to create over 45,000 job opportunities till the previous year.

This achievement is expected to reach fourfold by the end of the Second Growth and Transformation Plan. The government has planned to generate one billion USD from the textile sector in the same period. To make this happen, the government has so far designed policies and strategies to promote Foreign Direct Investment and lure private investors to the sector.

The textile and garment sector requires the latest technology, vendors of raw materials, chemical laboratory equipment, digital textile printing machines and waste processing technologies. To sustain businesses, the textile industry needs to be leaning on export and ready-made garments with cost-efficiency by using the latest technology.

Among other things, Ethiopia has cheap labor, cheap electricity, conducive investment climate and duty free custom services. Due to these and other incentives, Chinese and Indian textile manufacturers are shifting their plants to Ethiopia.

To speed up nation's economic transformation, the textile sector could play very significant role to considerably boost huge productivity in GTP II. This will be attainable if the government can enhance the development of the Ethiopian textile industry through empowering the required skilled manpower.

Of course, the textile and apparel industries could also play imperative contribution to improve people's livelihood and are important to exploit manuf acturing industries. Above all, the sector has to consume the raw materials gained from the agriculture sector and produce globally competitive commodities that can generate foreign currency.

These days, domestic and foreign investors are entering in textile industries aiming at exploiting domestic consumption and meeting the export needs. But, the number of domestic investors engaged in the sector is not sufficient compared with their foreign counterparts, despite much of them are occupied by foreign investors. However, this often provokes grievance among local investors and who want to participate in the investment area. It is good if they accumulate technical and financial capability before they want to enter industrial parks.

In the recent years, the sector has shown encouraging progress and provided fundamental contribution for the economic and social growth of Ethiopia. Though textile is one of the essential commodities that bring considerable export earnings to the nation, it must develop the capacity of fulfilling all round engineering and technology facilities.

Of course, the sector dramatically proceeds to be an extremely ever-changing and essential sector of the economy providing large scope for competent graduates to make their appraisal. It is also essential to exploit other countries' clothing-related technological knowledge, skills and experience in a specialized area of textile technology and management. In this case, domestic investors have solidified role of setting up industries massively, and in recruiting human power.

Therefore, industries that are engaged in textile are required to hire skilled human power to beefing up FDI at expected level. On the other hand, foreign investors are hoped-for to equip and transform the textile manpower to a stage where it should provide competitive support and service based on international standard.

It is also important to boost the national textile productivity through empowering adequate local manpower with technologies and technical advice. Though there is higher interest to engage in export-led oriented industries, the country has been implementing the industrial development strategy to reduce foreign currency scarcity, and pave ways to produce globally competitive commo- dities.

To make this happen, industries should produce quality and standardized commodities. To speed up the growth of Ethiopia's textile industry, textile companies need to have superseding significance in raising its competitiveness, creating employment, and earning foreign currency among other things.

Consequently, the government is currently working to improve, support and expand the textile industry both in the national and foreign markets to win the competitiveness among international markets. Students in universities and colleges are aspiring, and have key role to further maximize benefits from the sector. In line with this, factories should have well equipped laboratory to add quality and efficiency of products.

In this regard, local stakeholders have also key role to play in empowering professionals through supplying hands-on experience opportunity at factories and other places of work.

Likewise, the government must also provide due emphasis to ensure the sector's competitiveness and sustainable growth in textile and garment sector. With regard to this, the government should design and implement the prudent policies and strategies which can encourage investors so as to transform the textile industry. It should support them to exploit their potential and create impact in the economy.

As many scholars agree, the best way to develop the country's economy is to enhance and diversify its industries by clearly identifying its latent comparative advantages. Ethiopia recognizes that the development of the textile sector is the right path to industrialization.

Introducing structural transformation in the manufacturing and agricultural sector is a key factor to realize Ethiopia's vision to join middle income country. To ensure this, the economy should needs to grow by 11 percent for the next consecutive 10 years and contribution of manufacturing sector in the economy should scale up to by 25 percent.

The development of industrial parks in Ethiopia is instrumental in creating jobs for qualified professionals. It also enables manufacturing of quality products that exportable on the international market while promoting the transfer of high tech.

The industrial parks beyond strengt hening industry and agricultural linkage, it would aims to highly contribute to regional economic integration and technological transformation as well.

The government has given attention to bring competitive investors with management skills, technological capacity, market ties in the textile and apparel sector.

It also encourages and will provide incentive to local investors with special policy and package including investment loan, support for capacity building and market linkage.

The expansion of industrial parks brought new industrialization phase in the country.

In the GTP-II, the government has planned to build 10 industrial parks in selected areas of the country. A legal framework, the Industrial Parks proclamation, was also introduced in order to ensure proper management and development of industrial parks.

Generally, to achieve sustainable development, the applications of top-level technical expertise and other available tools are essential. And the development of industrial parks that is a cornerstone for the development of manufacturing sector that plays considerable roles for the implementation of Ethiopia's vision to become middle income country and top light manufacturing hub by 2025.

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