Ethiopia: More Industrial Parks, Fewer Investors
ANALYSISBy Hawi Abdisa
Problem of logistics service and shortage of water supply are major challenges, especially with Mekelle Industrial Park
(All Africa) –The government of Ethiopia has launched the first phases of Kombolcha and Mekelle Industrial Parks that specialise in the manufacturing sector with no firm inside the parks. Officials from the federal government and regional states, including Prime Minister Hailemariam Desalegn, attended the inauguration ceremonies of the parks.
The former has 15 manufacturing sheds whereas there are 13 sheds inside the latter.
Hawassa Industrial Park (HIP) was hosting 15 global textile and apparel manufacturing companies from the USA, India, China and Sri Lanka, and also had six local firms with 2,000 employees at the time of inauguration time. The parks in the north of the country were not in action during the date of their opening.
Mekelle Industrial Park (MIP) in Tigray Regional State, built on a 100ha plot of land at the cost of 100 million dollars, is expected to create 20,000 jobs. The second park, Kombolcha Industrial Park (KIP), located in Amhara Regional State, built on a 75ha plot of land with 90 million dollars, is also expected to host firms which will be able to employ a similar number of people. While MIP intends to specialise in textile and apparel, KIP aims to focus on textile, clothing and food-processing.
“We have set the nest, so the birds now have a place to land,” said Prime Minister Hailemariam Desalegn in a meeting held after the inauguration with the residents of Meqelle city, government officials and the business community.
The government, however, wants to remain hopeful while the manufacturing sheds in MIP are waiting for companies to come in and hire 600 employees in one shift. It is conducting studies to construct the second phase of the park.
“A study for the construction of the second phase of MIP is almost concluded,” said Belachew Mekuria (PhD), deputy commissioner of the Ethiopian Investment Commission (EIC).
The sheds in the industrial parks, which are waiting for investors, are constructed with most facilities that manufacturing companies require. They have included the installations of 850kb transformers, face security systems, card keys and water sprinklers as well as an air conditioning system.
Moreover, health centres, fire brigades, commercial buildings, and one-stop-service shops are features of the industrial parks. But the waste treatment and disposal plants in both Mekelle and Kombolcha industrial parks are not constructed.
The plants will be constructed and start operation as soon as companies to reside in the sheds start manufacturing, according to Belachew.
As is true for other industrial parks in the country, the construction of MIP and KIP has also been undertaken by foreign companies. The government asserted that it had lost hope in local construction companies to take projects as large as the industrial parks following the poor performance demonstrated in the construction process of the Bole-Lemi Industrial Park.
It is to be recalled that 23 local contractors took five years to complete the first phase of Bole-Lemi Industrial Park, while the China Civil Engineering Construction Corporation (CCECC) took only nine months to complete the construction of HIP.
It seems to be to avoid the delay paranoia that the government gave the construction contract of MIK and KIP to China Communications Construction Company Ltd (CCCC) and CCECC, respectively. Both companies took nine months to construct the parks. However, the supervision work of MIP has been done by the local supervising firm MH Engineering Plc.
CCCC has been operational in Ethiopia for the past two decades. It is working on the expansion project of Bole International Airport and has executed the Addis-Adma express way, as well as the Mekelle-Djibouti railway.
“Children of peasants whose land is taken will get training and will be given priority to work in the industrial park,” said Arkebe Oqubay (PhD), special adviser to the Prime Minister and board chairman of the Industrial Park Development Corporation, during the inauguration ceremony.
Refugees are also among the 20,000 people that are expected to get employment opportunities at MIP after the completion of the feasibility study.
It is known that the country is giving shelter to more than 750,000 refugees, mainly from Eritrea, South Sudan and Somalia. And a year ago, the European Union pledged half a billion dollars to finance two industrial parks in Ethiopia which will create jobs for refugees, a scheme in which MIP will take part.
But all that hope expected in job opportunities including for refugees and foreign exchange earnings from exports will only materialise when companies join the sheds in the parks and start manufacturing.
“The process of finding investors is ongoing,” said Sisay Gemechu, chief executive officer (CEO) of the Industrial Parks Development Commission (IPDC). “The number of investors that are going to start manufacturing in the parks will be disclosed after September once the negotiations are over,” he said.
So far three companies including Velocity Apparel, Dutch Brand Management (DBM) BV and Calzedonia, an Italian textile factory, are said to be the closest global companies to enter MIP, as well as a local company known as MAA Garment & Textile Factory. It has also been announced that the government has already gained the interests of H&M and Vanity Fair. However, the reality is contrary to what the government is saying.
“H&M does not own any factories and is not buying from any factory in Mekelle Industrial Park yet,” Pierre Borjesson, country director of H&M responded to Fortune via e-mail.
Besides putting in efforts to attract international investors, different incentives were provided for local investors to take sheds in the parks. One of the incentives is loan arrangements that go up to 85pc, according to Arkebe.
On the other hand, 55pc of the sheds in KIP are already reserved by different companies including from the USA and South Korea although there is no contractual agreement yet. The companies are engaged in the manufacturing of suits as well as luggage and bags. An Italian company engaged in fabric production is also another company which has requested to construct a shed on 20ha inside the park.
“The real challenge lies in finding investors that are good enough to meet the standards of the industrial parks. A lot of requests to enter the parks have been submitted to us so far. But there are many we have turned down for not meeting the criteria we have set,” Belachew said.
Arkebe shares Belachew’s argument.
“Adding to the complexity of constructing the parks, getting investors is the most challenging part ahead,” said Arkebe in his inaugural speech.