GIZ Special Initiative for Africa
GIZ Special Initiative “Training and Job Creation” (encompassing projects in Morocco, Tunisia, Senegal, Côte d’Ivoire, Ghana and Ethiopia) contributes to the latter target achievement: Improvement of the business environment for selected geographical areas and economic sectors (Clusters) and promotion of sustainable investments that lead to more employment. Derived thereof, the special initiative aims reads as follows: Businesses in selected sectors record job-creating growth. The project is broken down into three fields of activity:
- Expanding capacities of Ethiopian small and medium sized businesses;
- Improving conditions for sustainable and job-creating production increase in industrial parks;
- Improving conditions for cooperation between Ethiopian and international companies. Therefore, the target group encompasses not only local and international small and medium sized businesses and investors, but also the job-seeking population and employees in industrial parks.
DFID is working on industrialisation in several countries across Africa including Ghana, Kenya, Ethiopia, Rwanda, Uganda, Tanzania and in the future Senegal and Nigeria. In Ethiopia DFID is supporting EIC and IPDC, including advising IPDC on financial viability. DFID sees the conference as useful in drawing out lessons learnt from countries like Ethiopia and Nigeria for those at earlier stages of industrialisation. In particular DFID is keen to discuss lessons from its recent report by PWC on how in a time where many countries are debt constrained and energy and water are scarce, industrial parks be built and operated in a way which saves money and natural resources. This includes harnessing private sector investment, having well managed tenders and contracts and careful planning and timing and close dialogue with the private sector investors. Engagement with the workers and local community, including the regions and local businesses is also critical from before park build and throughout operation to ensure parks thrive and deliver benefits beyond the park gates.
World Bank Group
The World Bank Group has been a strategic partner of the Government of Ethiopia in its effort to achieving structural transformation and becoming a middle-income country by 2025. Ethiopia’s economy experienced strong, broad-based growth averaging 10.3% per year from 2006/07 to 2016/17, compared to the regional average of 5.4%. To advance the pace of structural and economic transformation, the role of the private sector in the Ethiopian economy needs to be strengthened by addressing challenges around productivity, competitiveness, and the sustainability of infrastructure financing.
Ethiopia has been demonstrating significant commitment in expanding industrial parks as part of its industrialization strategy 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 World Bank Group has been actively supporting the Government of Ethiopia in the implementation of its industrialization strategy since the beginning of the Industrial Parks Program through advisory programs, lending operations and investments in viable operations. As such, the Group is uniquely positioned to provide complementary advisory support to the Government to help proactively position the country as a competitive and sustainable investment destination.
The Group has so far supported (i) the establishment of the legal and institutional framework for the Industrial Park program in Ethiopia, (ii) had significant engagement in the institutional building of Industrial Parks Development Corporation, (iii) directly finances the development of Bole Lemi phase II and Kilinto Industrial parks and (iv) is carrying out an analytical work to support the Government to identify housing solutions for selected industrial parks.
IFC—a sister organization of the World Bank and a member of the World Bank Group—is the largest global development institution focused exclusively on the private sector in developing countries and emerging markets. Ethiopia remains a priority country for IFC as having a vibrant economy with a strong and agile private sector. IFC is ramping up support for the Ethiopian businesses by helping create markets and will continue to help the country to escape the “low income trap” and succeed in becoming a lower middle-income country.
In the past five years IFC has provided US$452 million in new investment commitments in Ethiopia across agribusiness, financial, manufacturing and other sectors.
IFC puts a great emphasis on increasing the competitiveness of developing industries by promoting climate-efficient solutions and clean technology development. In addition to the direct investments at the business-level, IFC helps respond to market failures by providing policymakers with solutions to reduce energy, water use and waste in industrial processes.
One of the great examples of the policy-level support, the IFC’s Green Industries Program, was recently launched in Ethiopia. The Project will help Industrial Parks Development Corporation and Ethiopian Investment Commission establish a national eco-industrial park framework. It aims to support efficiency-improving interventions which will lower the production costs and minimize environmental impacts that will consequently attract and retain investment. At a broader level, the project will contribute to the reduction in greenhouse gas emissions through the removal of regulatory barriers to the implementation of energy efficiency and water efficiency investments in the private and public sectors. By providing support to the Government and relevant industries on sector specific interventions, IFC will ensure that the forefront sectors remain competitive while the growth of the sectors is environmentally sustainable.
The Industrial Park agenda will continue to be a significant part of the World Bank Group engagement in Ethiopia for the next few years to help the government address emerging issues, introduce private sector solutions and participation in Industrial Park development, operation and management, and ensure the business viability of the industrial parks. To complement that, IFC will continue to support private sector investments in manufacturing, agribusiness, infrastructure, housing and renewable energy with a view to improving sustainability through promoting energy efficiency, greenhouse gas reduction technologies and help drive the region’s development.
With that, I would like to welcome everyone to actively engage in the discussions and deliberations during the conference, and to thank our hosts: Ethiopian Investment Commission, Industrial Parks Development Corporation of Ethiopia, GIZ (German Corporation for International Cooperation GmBH), DFID (Department for International Development of the UK Government) and everyone here today for joining us and contributing to Sustainable Industrial Areas event on transformation of manufacturing sector and greening industrial parks.
Over the past decade (2005/06-2015/16), Ethiopia has achieved remarkable economic growth. GDP growth rates averaged 10.8 percent annually - compared to a regional average of 4.8 percent, hence placing the country among the top-performing African economies. Recently, the country is also recording increased share of the industry sector, and gradually a reduced contribution of agriculture sector - at 40 percent. However, manufacturing within the industrial sector is estimated to contribute not more than 6 percent, which still is considered as relatively small. Hence, the Government’s current five-year plan, Second Growth and Transformation Plan, has rightly focused on fast tracking and transforming the country’s economic development journey among others by enhancing both domestic and foreign investments in the manufacturing sector.
In doing so, today, Ethiopia offers ample investment opportunities. With over 100 million population, Ethiopia is the second most populous country in the continent. This tied with Ethiopia’s successive growth trend, laid the foundation for making the country one of the major investment attractions in the continent in many large and rapidly growing sectors that include government priority areas such manufacturing (textile and garment leather and leather related products, pharmaceuticals, agro processing light machineries manufacturing and industrial parks development, among the few) as well as agriculture and service sectors.
In the past two decades the government has been implementing massive and continued infrastructure projects in roads, railways, power generation, airports etc. This has ensured the country to have one of the most competitively priced cost structures in the African Continent with regard to electricity, overall operational environment and production costs.
Currently, the Government’s growth strategy emphasizes the development of Industrial Parks (IPs) as an important tool to support economic diversification, attract investment and increase exports. The IPs scheme is especially relevant in the light manufacturing sector to create employment, initiate export led growth, encourage private investment attractions and stimulate benefits from integration with the local economy. IPs are projected to be equipped with a streamlined business environment, common services and amenities, high-quality infrastructure and readily serviced industrial land. All such arrangements have been made available to local and foreign companies through a single, efficient and streamlined IP administration. Ethiopia currently operates 13 public industrial parks of which 7 are fully operational and the rest are under construction. There are also more than 8 industrial parks that are being developed by private firms. The government has also put in place concrete plans to develop thirty (30) IPs by the end of 2020. The major emphasis of the government for developing these industrial parks are maintaining environmental and investment sustainability throughout the country by building vertically integrated industries with state-of-the-art facilities such as the Zero Liquid Discharge, build export competitiveness, and enhance skills development – and achieve all these through strong collaboration with the private sector including global players in the value chain.
Ethiopia provides attractive investment incentives to enterprises that establish themselves inside industrial parks ranging from 10 to 15 income tax exemptions to duty free import of capital goods privileges. These range of incentives are opted to bring as much investment flow into the country as possible and realize the ambitious goal of the government to be a leading manufacturing hub and a lower middle-income country by 2025.
The government is undergoing a set of sweeping economic policy reforms under the new administration of Prime Minister Dr Abiy Ahmed. The scale of public sector activities and initiatives in Ethiopia is on course to be substantially reduced in many areas, and a much more private sector friendly developmental state is now clearly taking hold. Full privatization of industrial parks is opted to bring more involvement of the private sector and create ample investment opportunities in industrial parks development operation and management to interested groups.
The SIA conference is a vehicle for a critical interrogation of these nascent industrial parks praxis with regard to designation, development, and promotion, marketing, operation and regulation. It is further to document the challenges relevant institutions are encountering in attracting local entrepreneurs to parks and creating linkages with local producers. Industrial parks` contribution to urban development and their impacts on neighboring communities merit exploring. The overall purpose of the conference is thus expected to investigate how best Ethiopia can use industrial parks as an industrial policy instrument to transform its agrarian economy in a manner that delivers overall economic, social and environmental benefits.
The conference is also expected to initiate a dialogue on Ethiopia`s industrial parks program and current practices where relevant policymakers, scholars, practitioners, public sector institutions and the private sector come together to exchange views and share experiences with regard to industrial parks in particular and industrial areas in general.
The Growth and Transformation Plan (GTP) of Ethiopia and its industrial development strategy are all centered agricultural-based, manufacturing sector-driven and export-led development. Despite remarkable economic growth over the last decade, Ethiopia has achieved little in terms of economic structural transformation. The key constraints that hinder economic transformation are lack of capital, foreign exchange, knowledge, infrastructure and institutional constraints in delivering efficient services.
Industrial Parks (IPs) are established to act as catalysts for trade, investment, and wider economic growth. Most often, they aim to improve competitiveness to facilitate the socio economic transformation. To enhance the GoE developmental agenda, the Industrial Parks Development Corporation (IPDC) was established in 2014, by the government, as one of the public enterprise, to play a vital role for industrial development, to increase the growth rate, cultivate and improve the quality, quantity and productivity of the manufacturing sector.
Industrial Parks Development Corporation (IPDC), since its establishment has completed the construction of 8 industrial parks, Bole Lemi, Hawassa,Mekele, Kombolecha, Jima, Adama, Dire Dawa, Deberebirehan Industrial Parks. Out of the eight, 4 are operational and the other 4 are onboard for operation. In addition to the eight parks, 2 parks namely Bole Lemi II, Kelineto (IPS) are under construction and their construction to be completed in the coming 2-3 months. Totally developing 11 Industrial parks located throughout the country.
The four operational Parks created more than 43, 000 employments and begun exporting their products to the international market. All Industrial Parks are equipped with appropriate technology for waste water treatment including the recycling technology to protect the environment and efficient utilization of the resource.
Sustainability in Ethiopian Industrial park
IPDC is working to develop environmental friendly Industrial Parks , refers as an eco-industrial park, where businesses liaise with each other and with the local community in an attempt to reduce waste and pollution, efficiently share resources (such as information, materials, water, energy, infrastructure, and natural resources) and help achieve sustainable development, with the intention of increasing economic gains and improving environmental quality.
Sustainable Business, we argue, is a reflection of the corporation’s realized strategy, vision of inclusive and sustainable IP transformation underpins everything we do. Specifically we are going to develop a cost-effective, people-centered and partnership-oriented approach that delivers results.
Sustainable business park management model requires vision. This is pointing out by the World Commission on Environment and Development (WCED) as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs".
In this regard IPDC planned, designed and built Industrial parks in such a way that it makes it easier for businesses to cooperate, and that results in a more financially sound, environmentally friendly.
The connection to the EIP framework
IPDC’s Industrial park development performance goes in line with Eco- Industrial Park (EIP). The performance requirements for EIP are Park Management performance, Environmental Performance, social performance and economic performance. We believe that IPDC is working under this frame work to achieve all performances. Under the park management performance, IPDC working and providing park management services like, security, cleaning and solid waste disposal services, waste water treatment service, fire and emergency prevention , maintenance services and control services. A one stop shop center is established in each park to provide the service closely.
In the environmental performance, due attention is given for the environment and no negative pressure on the environment. IPDC uses ZLD (Zero Liquid Discharge) and advanced technology for waste water treatment both for industrial and municipality wastes. Use hydroelectric power for all IPs with energy efficient use like installation of LED lumps.
Regarding the social Performance, IPD is working with the local administration and the surrounding community. It encourages and promotes an employment opportunity as priority for re settlers. Support school materials for students.
Regarding the Economic performance, more than 43, 000 employment opportunities generated from 5 operational Industrial Parks. During the construction of IP both skilled and unskilled labor force joined the construction companies. Local sub-contractors, service providers like security service, cleaning, solid waste disposal, and greenery service are beneficial from IPDC IPs construction and operation.