Ethiopia striding to become Africa’s Hub of Manufacturing
Fekadu W. 11-06-17
Ethiopia was awarded by World Bank (WB) as best performer of investment on October 25, 2018. Nation has got one of the most acclaimed accolades by formulating successful investment polices and applying ingenious systems eyed to enhance productivity and attract more foreign Direct Investment (FDI). Earlier, UNCTAD meeting in Addis Ababa had also testified that Ethiopia has become among the top most investment destination countries in Africa in 2017.
It had been reckoned that Ethiopia has got the reward due to its competence to leave other competent countries in the dust and become victorious (The competition was organized by WB; the Bank has rigorously examined the policy and performance of countries to identify which one is the best performer). Similarly, some said, the award could be considered as a witness to forecast the success of Ethiopia in its future endeavor to become African manufacturing industry hub in 2015.
We could indubitably say that the expansion of industry parks infrastructure, formulation of workable legal framework to supervise and foster investment activities, designation of incentive packages to encourage investment, provision of tailored assistance by the government and its skillful recruitment of FDI investors have all enabled Ethiopia to become a winner.
The award will also strengthen the next endeavor of Ethiopia in the application of the Second Growth and Transformation Plan (GTP-2) in the remaining times (and to intensify the strategy being employed to bring economic transformation).
It has been many decades since the industrial revolution had occurred in England in 1860s and 70s. However, even though the global economy has evolved significantly in the last few decades away from the industrial revolution—which transformed many of the world’s advanced countries—there is still much hope tied to the idea that manufacturing will play a key transformative role in developing the economy of many countries in Africa today.
Based on its achievement until now, it could be said that Ethiopia has already started to lead the way as Africa’s 21st C hub for manufacturing. Even, some has likened the industrial journey of Ethiopia as the “New China”.
Similarly, research conducted on 5,500 small African firms, in 29 countries, had found that 39% of them were more expensive than comparative firms elsewhere, while medium and large firms were found to be 50% more expensive (the research had taken in to account labor and capital costs, productivity and efficiency of manufacturing in Sub-Saharan Africa with similar countries outside Africa, in particular Bangladesh).
In a bid to find out more market niches, these days Ethiopia is kindling the interest of more high-profile investors (known for their efficiency and productivity) from around the globe. Accordingly, big hopes are pinned on Ethiopia that it may successfully penetrate into global manufacturing markets substantially(far better than other African countries whose industrial development index is bleak(their unproductive factories, expensive cost of martial and labor are all unattractive to FDI investors interested to scoop up bountiful profit).
Ethiopia is currently calling on inventors, mostly capable FDI investors, to come to it and invest in its abundant sectors be it manufacturing, agro processing or mining. And currently, there is unshakable good news regarding the growth of investment in Ethiopia, particularly, in the manufacturing industry. This sector has since long started to attract high-end textile manufacturers from all over the world.
The good news has attracted world-known textile companies including PVH Corp, H &M, and Guess. In addition, there are around 14 other companies that made their way to Ethiopia from around the globe.
The international community is hailing as best performer, contrary to the skyrocketing labor costs in many countries and the “world’s manufacturing business being fiercely strangulated by impinging social issues (such as rising child labor, as in the case of some Asian countries).
Ethiopia has circumvented and navigated away from many challenges of investment that are indeed easing with time. African manufacturing costs are very costly. However, it is not so expensive in Ethiopia as it has ample trained work force awaiting to be employed in manufacturing plants. In addition, Ethiopia has managed to alleviate most of the hindrances that were acutely affecting the investment sector (by constructing industry parks and proactively equipping them with desirable infrastructure needed to start investment).
Currently, lack of infrastructure is no more a problem to invest in Ethiopia. It has built commendable highways and railways that help open up inaccessible areas and transport bulky machineries to the hinterland and every corner within hours or a day (a far cry from what used to be in Ethiopia; let alone catalyzing investment-there was time to reckon that transporting relief aid to the needy was difficult).
Significantly, the Ethio-Djibouti railway line recently inaugurated by Ethiopia is among the foremost infrastructure that may spur further investment in the near future. The railway has shortened the tedious and week-long journey from Djibouti to Addis Ababa to a single day trip. This ease of transportation is anticipated to catalyze investment in Ethiopia.
In addition, epileptic and unreliable electricity service is a head ache to many investors in many African countries. But, this big investment engine is not a threat to start business in Ethiopia. Ethiopia has so far put enough production of electricity to help burgeon investment and many more electricity projects like GERD (two of the turbines are expected to start generating electricity soon) are on the pipe line. Hence, shortage and outage of power is no more an obstacle to any investors interested to invest in Ethiopia.
Likewise, Ethiopia is committed to educate its youth and employ and use it as means of development. Accordingly, thousands of youth are being educated in numerous universities focusing on the fields of technical and vocational training. Besides, nation has established a system to intertwine apprenticeship trainings being provided by factories with class room trainings in universities and TVET colleges. This will possibly help unleash the potential of the youth in the sector of manufacturing and realize rapid industrialization. And, challenges to investors related to low technical know-how of workers are expected to be alleviated with time.
Most importantly, it had been long since Ethiopia has started the endless journey of industrialization and the sector is gathering momentum with the opening of many factories across the country, following the establishment of numerous industry parks and the arrival of FDI investors. Earlier, the construction of Hawassa industrial park has become the trail blazer of industrialization activity in the country.
After Hawassa, many parks like Mekelle, Bure, Kombolcha and Bahirdar were opened (construction of these and many more parks is also well-underway). Currently, numerous same parks are being erected across the country. According to the Ethiopian Investment Commission (EIC), two industrial parks will be inaugurated during the next month, one in Adama city, some 99 km from the capital Addis Ababa, and the other in Dire Dawa city, Ethiopia's second largest city in the eastern part of the country.
Two other industrial parks in Kilinito and Bole Lemi-II, both located at the outskirts of the capital, Addis Ababa, are also scheduled to be inaugurated in February, 2018. Except the Kilinto industrial park, which is specialized in pharmaceuticals, the other three are under construction to attract local and foreign investors in the textile and apparel productions sector. The construction of the four industrial parks is expected to be finalized in this Ethiopian budget year.
Nation anticipates the ever growing number of industrial parks would accelerate its ambition to become African's powerhouse in the manufacturing sector. Ethiopia has planned to construct 15 industrial parks during the GTP-II, due effective from 2015 to 2020. To this end, nation has earmarked more than one billion USD for the construction of industrial parks.
Nation is striving to forge conducive manufacturing environment for both local and foreign companies and level better employment opportunities to its citizens, through its industrial parks development strategy; the final goal of industrialization and construction of industrial parks is to encourage export activity, enhance employment opportunity for thousands and alleviate poverty in a meaningful manner.
Taking its abundant human and material resource into account, Ethiopia envisages to raise the contribution of industrial output in the overall economy and eventually change the style of economy to industry-led, from the current agriculture-led.
Based on its encouraging performance, no doubt, Ethiopia will continue its resolute stride to become hub and continental power house of industrialization. And the government is expressing commitment more than ever; to offer further assistance to investors interested to engage in manufacturing and enhance development of the country through massive influx of FDI, which is whimsically coveted by many countries below Sahara.