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Gathering Momentum of IPs to Realize Industry-led Economy

Gathering Momentum of IPs to Realize Industry-led Economy

Fekadu Wubete 08-01-16

Nation had finalized the construction of Hawassa Industrial Park(IP) at a cost of 250 million USD and inaugurated it on July 13, 2016. The park has landed on 30,000 square meters and has housed 37 sheds. It is equipped with one-stop service centers and has its own renewable electricity sources to avoid power supply problems.

Until now, some 15 foreign and six local companies have joined the park. Most of the foreign companies are from America, Turkey, Sri Lanka and India that are engaged in textile and garment production.

The park is expected to play its own crucial role in materializing the country’s vision to become pioneer in the manufacturing sector in Africa by 2025. It enables to expand industry development and reinvigorate the national spirit and endeavor being exerted to finalize construction of same projects in regions (kindling spirit of industrialization, even some quipped it as torching up Ethiopian industrial revolution).

Dictionary that focuses on investment, investopedia, states that IP is portion of a city that is designated as industrial area (as opposed to residential or commercial use). IPs may contain oil refineries, ports, warehouses, distribution centers, chemical plants, plastics manufacturers, airports, food and beverage processors, and steel manufacturers, to name just a few.

According to a research journal publicized by University of Wyoming, the concept of industrial park dates back to the turn of the century in which "planned industrial districts" were first established in Chicago and Kansas Cities using state of the art technology (Peddle, 1993). These districts were privately developed and built around railroad projects (in the mid-forties government became key player to expand IPs and convert wartime facilities in to industrial projects.


These areas are also known as industrial estates and are frequently built outside of densely-populated areas or residential neighborhoods. The first IPs began to be constructed with the aim of creating a space where industry could be isolated from urban centers. But establishment of IPS is located in areas where there is good access to transportation and infrastructure. Establishment of numerous industries in one area could also create conducive condition to build high-quality waste treatment and disposal facilities.

In the past forty years, the number of IPs has grown rapidly all over the world. Currently, it is estimated to be over 12,000 worldwide. Almost every country in the world has some kind of industrial estate. For instance, Vietnam and Sri Lanka are estimated to each have 50 to 60 industrial areas, and India and China reaching hundreds of industrial clusters.


In the case of Ethiopia, The 2nd GTP of the nation is formulated to effect fast-track development and poverty alleviation through speedy transformation of the industry sector.Accordingly, IPs are meant to speed up the process of industrialization and implement rapid transformation from agriculture-led economy to industry-based economy (it is aimed to enable the industry sector take the lead from agriculture and become a major contributor to the GDP. IPs construction is anticipated to enhance productivity and create wider job opportunities in the 2nd GTP).

Viewed from development experience of other countries, it is essential to encourage industrial development through IPs. Nation believes that the vision to make Ethiopia hub of African manufacturing activities is absolutely unthinkable without the establishment of IPs( based on investment survey and feasibility studies).

During the 2nd GTP, Ethiopia has planned to boost the contribution of the manufacturing sector to 25 percent which is sizeable increment compared to the meager five percent contribution of the sector at present. To realize this effort, nation has earmarked billions of dollars to build 12 industrial parks across the country.

In this regard, the construction of IPs in Dire-Dawa, Meqelle and Kombolcha is also well in progress and the projects are anticipated to be completed in the coming April. New constructions of IPS in other localities are expected to employ Hawassa-type modern technology(and protect environment from the impacts of pollution).

Contrary to the benefits of IPs, some sources stated that Environment Impact Assessment (EIA) may not be properly carried out in developing countries as the finance and environment-related know-how of industrialists and consultants is not very well developed. If there is any study at all, they said, projects fail to include detailed impact assessment of industries on environment and society (unlike developing countries, most developed countries have strict regulations and codes for their industrial estates. But, in some low- and middle-income countries little is done to protect surrounding communities from waste of industries and their harmful byproducts). For instance, South Asia and Africa have large-scale problems due to contamination of groundwater sources by untreated effluent.

Industrial estates in many low-and middle-income countries have little or no waste treatment and disposal infrastructure. For instance, in the case of an industrial park that has no pollution control mechanisms lead, which is often main contaminant released by industries, can be emptied into surrounding air, soil and water. Hence, if not cautiously managed and treated, IPs may turn in to a cluster of pollutant industries that discharge pollutants and contaminants, including lead. In addition, when industries are located in such close proximity, it is very hard to distinguish which one is responsible for pollution.

To curb adverse effects that may be induced by IPs, the Multilateral Investment Guarantee Agency of the World Bank recommends that  if proper precautions are taken, industrial estates can reduce community and environmental impacts by isolating potentially hazardous processes in areas far away from residential neighborhoods and by ensuring safety and environmental standards for all of the industries in the zone.

Similarly, IPs Dev. Corp. Chair person, Arkebe Oqubay, said that cognizant of environmental sustainability and comprehension of energy and water conservation principle, IPs in Ethiopia are being designed and constructed in state-of-the-art technology and water treatment systems that implement Zero Liquid Discharge (ZLD).

He said modern system and equipment installed with IPs, for instance in Hawassa, enable to dispose waste products by reducing them to harmless matter and even recycle used water to irrigable and potable water (other IPS will also be equipped with efficient system of waste  disposal and  ZLD technology that fulfills world-class standards).

Arkebe said efforts should be exerted to finalize IPs being constructed in Addis Ababa and regions on time. Besides, building the capacity of institutions established to develop and manage IPs (Investment Commission, IPS Devt. Corp. and Investment Council) is an exigent task of the country. Moreover, more effort should be exerted to thoroughly utilize IPs via the full participation of the private sector.

In addition to leadership and effective management, industrial estates must also have sufficient finances in order to upgrade their status to the desirable level and enable them employ environment-friendly technology. Proper enforcement of environmental and health standards, however, needs adequate political support and cooperation between the government and industrialists.

Overall, nation has got big assignment to help enhance quality of production and productivity of IPs through GTP-2 and realize many Hawassa-like IPS across the country; speed up transformation of the current agriculture-based economy to industry-based one; expand the culture of entrepreneurship and effect noticeable transformation in the economy.

In a bid to attract more investors and develop the industry sector, the government has decided to give special permit to investors and foreign citizens who are interested to invest in IPs. Investors who want to invest in IPS will be able to get multiple visa that would expire within five years. The foreign employees will also get multiple visa for three years(contrary to the current trend that gives a one year residence permit to investors and the visa that allows  to stay in the country for six or nine months in special cases).

Until now the accomplishment related to construction of IPs is encouraging. The achievement that has gathered momentum at present should be sustained as far reaching industry-led economy. Secret in public, the single handed effort of the government cannot get the country anywhere near the desperately needed level of industrialization (for instance, most of the participants registered to participate in the Hawassa IP are foreign companies: six local companies and fifteen foreign companies). Hence, domestic companies should be encouraged to exploit the opportunity made available in Hawassa and other regions.


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