Destined to become Africa’s number one innovative eco-industrial park developer and operator, the Industrial Parks Development Corporation (IPDC) is a key agent in Ethiopia’s industrialization transformation. CEO Sisay Gemechu explains how it is working with international partners and providing a complete range of services to offer companies a one-stop shop for high quality eco-friendly industrial premises.
Could you please discuss how Ethiopia aims to sustain its impressive economic expansion?
Ethiopia has been developing with double-digit growth for about 10-12 years. That development is based on infrastructure and on agrarian improvement. The government is keen to sustain this development. One of the strategies in order to sustain this development is through industrialization, particularly in manufacturing.
In the manufacturing sector, the government plans to promote industrial park development to pave the way for private sector investors. These private sector investors can be local, such as traders or farmers. We encourage them to diversify into manufacturing. The second way is to invite foreign direct investments.
What is the background of the government’s plan to make Ethiopia the manufacturing hub of Africa and what are you expecting from the GTP’s second phase?
To sustain the development, it is mandatory to have investors investing in the manufacturing sector. The role of this corporation is to pave ways for these investors. According to the Ethiopian Industrial Parks Law of Commerce, industrial parks are open for private developers, for public commercial park developers, and public-private partnerships. All these are important for the industrial parks’ development.
We realize that it is quite costly to develop industrial parks. Though some private developers are there, it is not always moving according to our plan. Therefore, the government decided to intervene in this development in order to invite investors, who arrange factory shares or sub-lease developed parcels of land to set up their factories.
The development of industrial parks means not only constructing factories, but also setting up and providing all the necessary facilities. By facilities I mean commercial facilities and infrastructure, which includes roads, power, telecom, water, shopping malls, banking, etc. Also, government services, such as customs, immigration office, commercial services, and the Ministry of Environment, will all be stationed within the industrial park in a one-stop shop. Our job is to facilitate this: we construct offices and facilities for all these necessary government institutions.
We are planning to create an “island” that will fulfill the needs of investors and manufacturers. In order to compete worldwide, we need to construct industrial parks that come with all these services and infrastructure. That makes us a better competitor.
Our government is transparent and committed – we are keen to work with foreigners. Additionally, the cost of labor in Ethiopia is lower and we are expanding the education system to train and educate people. This human capital development will contribute to making Ethiopia a light manufacturing hub of Africa over the next 10 years.
The light manufacturing vision is one aspect. We are also planning to pave ways for other industries, i.e. heavy and chemical industries. We are working on a transfer from light to heavy manufacturing. This is a work in progress.
I would like to assure the private sector that we are a committed government and a committed country. We are working hard and plan comprehensively in order to fulfill all that is demanded in the manufacturing sector.
What response are you getting from the private sector?
In the late 50s and 60s, light manufacturing moved from Europe and America to Japan. And from Japan, it moved to the Tiger economies, such as South Korea, Taiwan, Singapore and Hong Kong. Then it moved to the coastal part of China, staying there for some 30 years. It’s now the fourth migration of light manufacturing. Of course, there was also a migration from the coastal part of China to central and western parts of China, Southeast Asia and North Africa. We are competing with all these regions and countries. Tiger economies and coastal China have very good infrastructure and well-developed services. We are striving to fulfill all the prerequisites to create this “beautiful nest” here in Ethiopia.
So far, we have accomplished the construction of the Bole Lemi Industrial Park in Addis Ababa, where 11 investors have rented 25 shares of 185,000 square meters of factory space. We are expanding to Hawassa, in the southern part of Ethiopia, 225km from Addis Ababa. It is a beautiful city center. We are constructing around 38 factory shares in Hawassa. Both Bole Lemi and Hawassa are almost completely and occupied by FDI. Hawassa is 25-30% completed and we are planning to build industrial parks in 6 or 7 more cities over the next year.
We are not only attracting foreign direct investment but also encouraging local investors to join the industrial parks, to rent or sublease developed space and construct their own factories. So far we are moving in the right direction as long as we sustain the pace of construction. Of course, it is a learning curve for our institution and for our country as a whole. We are learning from our investors and implementing the acquired knowledge. We send our experts to factories in China, Korea, Bangladesh, India, and Europe to learn about their factory setups and government services which we later implement here.
And you are learning not to make the same mistakes…
Correct. One of the aspects we are learning about is environmental policy. We do not allow pollution of our environment and are now implementing zero liquid discharge in order to save water and our environment. This will make us a better competitor as well.
Our vision is to be an innovative and leading eco-industrial park developer and operator in Africa by 2025. We are putting it into action, starting with Hawassa. Hawassa is 1km away from a lake that is a tourist center in the southern part of the country. Some people fear that industrial parks will pollute and damage the lake and the city, but we are planning to make it environmentally friendly where 80-90% of the water will be recycled. Only 10-20% of water will be lost by heating and evaporation. We will implement the same policy in other industrial parks.
I am not saying that we have completed the learning curve. We are at the beginning of it but we are learning well.
As you have mentioned, construction of the parks can follow three paths: designed by the government on behalf of the government, through public-private partnership with the Industrial Parks Development Corporation, or private developers only. What kind of developers are you looking for and how can they qualify?
My institution is both a developer and an operator. We encourage developers, local or international, to join our industrial parks. One of the purposes of this corporation is to pave ways for private developers. It is difficult for private developers to access land with complete infrastructure. According to our constitution, Ethiopia is a federal system and land is registered under regions and city centers. When negotiating with regional states and cities, my institution undertakes certain responsibilities and acts as a land bank. Once local or foreign investors come and fulfill the Investment Commission criteria, we hand over the land to them. This process is decided by the Ethiopian Investment Board, which is chaired by H.E. the Prime Minister. My role is to free the land and act as a land bank. Also, my obligation is to provide the investors with all the infrastructure and services, i.e. roads, railway, water, power, telecom, etc.
How are you working with, for example, the Ethiopian Railway Corporation and other involved stakeholders in order to ease doing business for these investors?
My duties are to identify the land and develop industrial parks, not just in terms of developing factory spaces but also all the services that come with them, such as commercial, administrative, recreational and government services. The government services include the Ethiopian Revenue and Customs Authority, which will have an office inside the industrial park. So once the manufacturer decides to export his final product, he will have all the services available in order to do that. This will be a one-stop institution.
We are working closely with the Ethiopian Railway Corporation, the Ethiopian Logistic Services Corporation and Ethiopian Airlines, among other government institutions. Our industrial parks will be close to the railways, airports and highways. They will be interconnected and well integrated.
How are you promoting the benefits of these industrial parks to the European market?
One of the mandates of the Industrial Parks Development Corporation is to extensively promote the benefits of the industrial parks to investors locally and from abroad. To do this, we are closely working with and also learning from our development partners. Currently, we are working with the World Bank. They have already given us $215 million to develop two national parks in Addis Ababa. We are gaining not only finance but also technical support and expert advice. We are learning from our development partners like the World Bank, JICA from Japan, and KOICA from Korea, on how to attract and retain investors.
In order to attract and retain investors, we need to fulfill their needs and interests. Investors are producing in different places and they export within a given period of time to different parts of the world. We are working closely with our development partners and investors in order to fulfill those needs and we are now capable to attract investors not only from Asia, but also the USA and Europe.
My message to investors in Europe and other developed countries is this: Ethiopia used to be known for famine and war but is now on the way to becoming a number one light manufacturing hub in Africa. This is already becoming a reality. I would like to invite European companies to come to Ethiopia and explore all the opportunities it has to offer.
What is your personal assessment of the commercial and diplomatic relations with the UK, and where would you like to see a closer collaboration?
The UK government has been one of our biggest supporters and I hope this carries on in the future. I would like to publicly thank the DFID institution for supporting and nurturing us. There are other UK investors in Ethiopia, such as Diageo, and we are hoping to attract many more. We hope to continue our collaboration with the World Bank in order to accelerate our development plan.
How would you sum up your first year as CEO of the IPDC?
I am very happy with my achievements. I have established this institution from zero to where it is now, developing parks and attracting foreign investors. The IPDC is operating on full scale. This happened thanks to the support of the government and our development partners: World Bank, JICA and KOICA.
I have been working in this sector directly and indirectly for the past six years. I used to supervise for the State Ministry for Investment and Agriculture and worked for the Prime Minister for two years. During that time, my main focus was the manufacturing sector, and it was a great lesson for me as I learned how to solve problems, working together, focusing on private sector specifically. I moved into the Ministry of Industry for two years, where I was leading the industrial parks development plan. This is when the government decided to set up an independent corporation under the office of the Prime Minister. I was appointed the CEO of this corporation and I believe that they made the right decision as I led this project from day one.
Last month we had a celebration with my deputy and I hope that next time we will celebrate even more industrial parks, even more investors and more exporters.
What innovations are you the most proud of?
For us innovation is being competitive worldwide. In order to be competitive worldwide we need to have unique features compared to other industrial parks in Africa. Our ambition is to become number one innovative eco-industrial park developer and operator in Africa. Of course, there are other industrial parks in Africa but we plan to implement all the innovations in a better, more improved way. We are creating a one-stop service and we will make it better as we are learning from Asia and from our investors. This makes us unique.
Another aspect that makes us unique is being environmentally conscious. We are building eco-industrial parks with zero liquid discharge. It is very difficult to design, construct and manage those, but we are fully committed to do so and protect our environment.
I am motivated by the services we provide to our investors, and we plan to handle and protect our environment.