Capital Ethiopia Newspaper

New Industrial Zones raise budget questions

The Textile Industry Development Institute (TIDI) is to request through the auspices of the Ministry of Industry (MoI) four billion birr to develop industrial zones. Although the four proposed zones are expected to take two years to complete, the funding request is for this fiscal year only.
The money request which has been sent to the Ministry of Finance and Development (MoFED) for approval has not been included in this year’s budget.
This may be tricky since reports indicate that the MOI which is supposed to handle finances for projects like Industrial Development Fund (IDF) has only 600 million birr in its accounts which is insufficient to cover the costs of three of the four future industrial zones.  
The zones  are to be located in Addis Ababa, in the eastern part of Dire Dawa city, 523Km east of Addis Ababa, Kombolcha 393Km north of Addis Ababa and Hawassa 273Km south of Addis Ababa. The proposed Kombolcha Industrial zone is dedicated to textiles and clothing only.
The Addis Ababa Industrial zone is expected to be in total 700hct. The first part will be in Bole Lemi on 160hct of land. That will be able to accommodate 10 factories for garment making, which are expected to create over 40,000 jobs.
All preparatory work has been finished and construction is expected to begin before November 2012. Another zone in Kilinto is to follow right after Bole Lemi is completed.
Land title deeds for the three regional industrial zones include: 1,000hct for Dire Dawa, 1,100hct for Kombolcha and 1,000hct for Hawassa. They have already been transferred to the Federal Ministry from the corresponding regional administrations for the development of the Industrial Zones.
Fiker Tesfu Finishing Technology Director at T’IDI said these zones are slated for  transfer of technology, in line with the government’s aim of intervening in areas where the private sector has failed.
“The industrial zones will help us in our export oriented development strategy,” said Fiker adding that the industrial sector should also be capital and labor intensive in a country with 25 percent unemployment.  
Currently there are two well organized industrial zones developed by investors from China and Turkey. Eastern Industry Zone is being run by Chinese business people and Sendafa Industrial zone by Turkish investors.
Previously MoI stated that the Industrial Zones were historically unorganized, sluggish and unable to address government’s economic and developmental agendas for the manufacturing sector. 
The Ministry says they needed the government’s intervention to foster faster growth and achieve the GTP goals in time. As a result, they came up with a plan to create and manage these Federal Industrial Zones under the Ministry’s supervision.
MoI has requested support from South Korea’s governmental authority that is responsible for handling Koreas industrial complexes.
Under the GTP plan the government has prioritized a list of strategic directions: Textile, Leather, Sugar, Cement, Metal, Chemical, Pharmaceutical Agro-processing and manufacturing sub sectors.
It also plans to network with and support small and micro enterprises SMEs which play a key role toward the long term industrial transformation of the economy.
Textile and Clothing is Ethiopia’s top manufacturing sector priority. It is projected to have a GDP contribution of USD 2.5 billion with an existing average production efficiency reaching 90 percent, export earnings of USD 1 billion and an additional employment creation of 40,000 excluding SMEs.
The Ethiopian government has touted the nation’s proximity to the Middle East and the European Union, with 2.6 million hectares of land and a climate suitable for cotton cultivation equivalent to Pakistan, the fourth largest cotton producer in the world, but only five percent is so far utilized.
Government figures show that two of the sector’s most important prerequisites are present. This includes cheap, environmentally friendly hydroelectric power. Currently this costs around 5 US cents per Kilowatt hour and a cheap and easily trainable unskilled labor force with wages at USD 35 /month less than Africa’s average.   
While another important sector likely to be included in the industrial zone, the Leather and Leather Products Production capacity is expected to reach 60.2 square feet, with an existing average production efficiency reaching 90 percent and export earning to amount to USD 496.5 million by 2015.
These industries are part of the government’s plan of attracting investments towards the manufacturing sector which will primarily be oriented to the export business.
Ethiopia has the second largest population in Africa with slightly over 80 million people. It has an average annual export share of 13.6 percent of GDP (nominal) and annual average export growth of 29 percent over the last seven consecutive years.  Ethiopia’s Industry contributes 13 percent to the GDP.