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Pursuing Climate Friendly Industrialization

 

Pursuing Climate Friendly Industrialization

(Yibeltal Tamru  04-12-16)

Recently, the Economic Commission for Africa launched its flagship Economic Report on Africa 2016. The report engages in Africa's current agenda, that is, to define and design its own pathway to industrialization based on its own realities and learning from history and experiences of other regions to leapfrog traditional, carbon-intensive methods of growth, while championing a low-carbon development trajectory.

Africa experienced strong economic growth in the last decade, and its medium-term growth prospects remain positive, despite global economic headwinds. However, this growth has not yet translated into commensurate benefits in economic diversification, decent jobs and rapid social development.

Given the impacts of climate change, resource scarcities and environmental degradation, measures for greening Africa’s development are critical and can bring significant benefits.

According to the report, greening industrialization provides the impetus for turning current supply chains linking natural resources to markets, into value chains that diversify Africa’s economies and ensure greater value added.

Indeed, Ethiopia has been a pioneer in this regard. The report attested that:

Ethiopia is an excellent example of a country that combines complex policies that link greening, infrastructure, industrialization, and climate resilience. The country’s internationally acclaimed Climate Resilient and Green Economy framework maps its broader strategy, in which industrialization is key. The government’s quest to increase textile exports aligns with its zero waste and zero pollution policies by establishing eco-industrial parks. This alignment will, for example, help to ensure that wastewater treatment is part and parcel of manufacturing activities.

The report discusses Ethiopia's experience in-depth stressing that Ethiopia has had annual GDP growth of 10.5 per cent from 2005-2014. Although its economic take-off has been based on agriculture, it has recently focused on manufacturing for sustaining rapid growth and structural transformation. Indeed Ethiopia also has focused on long-term infrastructure, in particular energy, and transport to which it has allocated almost 60 per cent of its capital budget.

Indeed, Ethiopia is a latecomer to industrialization—and to industrial parks. In 2015 it had four industrial zones, three of them foreign-owned. The Eastern Industrial Zone at Dukem, the Lebu Industrial Zone which is owned by Huajian Group and Modjo Industrial Zone owned by George Shoe. Only one Industrial Park is owned by the government; the Bole Lemi Industrial Zone.

Let us take a brief view of the report's analysis of Ethiopia's experience highlighting Hawassa Industrial Park.

Hawassa Industrial Park is situated 275km south east of the capital. While these parks have created 11,000 jobs, they have generated insignificant export earnings to date. The government decided that its 2025 vision must be based on a thorough understanding of industrial parks and investment promotion. It thus commissioned policy research on industrial parks, with a focus on countries that have used industrial parks for industrial catch-up, notably China, the Republic of Korea, Singapore and Vietnam in Asia, and Mauritius and Nigeria in Africa. The state is the driver of the industrial park programme, and the lead organizations are the Ethiopian Investment Commission and the Industrial Parks Development Corporation.

Ethiopia has targeted manufacturing for its industrial parks, focusing on priority sectors. Choice of investor is based on a close understanding of final markets and the role played by lead firms in the value chain. Initial engagement started with the two largest US buyers in the textile and apparel industry. The 10 leading Asian manufacturers were then approached, with the intent of building a vertically integrated value chain, including production of high-quality cotton (ginning, spinning and weaving), establishment of fabric mills and output of garments. The country also aims to attract a network of support industries and accessory manufacturers.

Understanding the nature of the industry and the requirement of the clients has been essential. Construction of this specialized industrial park, Hawassa Eco-Industrial Park, was started in mid-2015 to host the leading firms, to be completed in nine months. The location was selected because of the competitive labour cost, skills and physical infrastructure. The design of the park has been focused on the needs of the lead buyers in global textiles and apparel. The layout and design of buildings draw from the latest standards developed in the industry, such as those established by the US Customs authority after the September 11, 2001, terrorist attacks, to ensure security of trade, and safety at work, after the fire disasters in Bangladesh textile factories in April 2013. A one stop government service has been introduced to cut red tape and improve the business environment. The China Civil Engineering Corporation, a leading construction company is building the park as a turnkey “design and build” project. Efforts are being made to generate positive spill-overs by integrating the industrial park with the city of Hawassa and contribute to a stronger service sector. Studies are being conducted to design resource-efficient housing units, to accommodate local workers.

The Hawassa Eco-Industrial Park is nested within Ethiopia’s green economy strategy. Ethiopia has also sought to leapfrog global competition by using the green identity of the park to provide a competitive advantage over rivals from Bangladesh and China. The green industrial park recycles water, uses LED (light-emitting diode) and intelligent lighting systems, plants trees, and uses natural ventilation and lighting. To achieve zero pollution—and making it one of the first such industrial parks globally to do so—the park has adopted state-of-the-art “zero liquid discharge” technology, reflecting its similar reliance on 100 per cent renewable energy. Ethiopia is just completing Africa’s first electric-driven railway network, from the capital Addis Ababa to the port of Djibouti, and a spur will be constructed to link Hawassa with this mainline, to ease transport from the industrial park.

All future industrial parks in Ethiopia are to be green, and will be based on the design of Hawassa Eco-Industrial Park. Even before formal opening in early 2016, Hawassa has registered 100 per cent occupancy and by 2017 will have 60,000 workers (75 per cent of them expected to be female), and with gross export earnings of $1 billion anticipated. Of the 10 leading international firms investing in Hawassa, two manufacturers each come from India and Hong Kong; one each from Sri Lanka, Indonesia, Taiwan and China; and a couple are local firms. Ethiopia aims to employ 2 million workers in a dozen export-oriented industrial parks by 2025.

Ethiopia has set a goal to achieve fourfold growth of manufacturing output by 2025, which entails attracting new investment and industrial infrastructure.

Indeed, Ethiopia, like the rest of Africa, has a long way to go. As a senior official of the Economic Commission for Africa noted, “there is now growing commitment among African countries to pursue inclusive green development. Collective commitment from across the African Union would strengthen the speed and effectiveness of such a strategic shift.”

 

 


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