Ethiopian Business Review

The Government Installs Industrial Parks on the Basis of Quota

Currently, Ethiopia is striving to construct 30 industrial parks in the next two years, as shortcut to cope with late industrialization. However, Birhanu Gizaw (PhD), who has been an industrial engineer both in the academic and private sector for 30 years, the last 15 of which he has spent in Germany, boldly argues that Ethiopia needs to revise its industrialization policy. He argues industrialization is about a fundamental change in mentality, and manufacturing products and technology that simplify the life of each and every citizen, rural and urban alike.  Currently, he is developing a technology park in collaboration with Jimma University, the first of its kind. In addition he is a lecturer at the Addis Ababa institute of Technology, and is chairperson for the Society of Electrical Engineers.  He recently sat down with EBR’s Ashenafi Endale to discuss the country’s industrial efforts. The following is an excerpt:

Why industrialization is so important for a given country? 

Mainly it is crucial to fight poverty and bring social equity. Technology must be used to fight poverty. In almost all the rural areas of Ethiopia, many of the basic necessary materials for life are absent. 

Where is Ethiopia in terms of industrialization? 

Industrialization first blossomed in the 19th century. One of the first heavily industrialised states was Ohio, in the US. There were four million people employed in industries in Ohio, which improved their living conditions.  The first wave of industrialization revolutionized the construction of railways, ships and transport means. Now, there are three types of industry, light, medium and heavy. Ethiopia is currently working on the first two. 

Currently, the government is developing Industrial Parks (IPs) in major regional cities and towns. Do you think it will lead the country towards industrialization?

Industrialization is demand driven. You cannot achieve it by developing IPs in all regions. The necessary conditions must be available in the area that the parks are installed, such as raw materials. Also, it must consider both the internal and external needs. For instance, we export a lot of raw coffee. If we could process it here we could serve the local as well as global society in a better way and also benefit well. If we were to install an iron ore industry, we would have to consider two major things: availability of raw materials and the need of iron in Ethiopia as well as in neighboring countries. The Ethiopian Grand Renaissance Dam is a good example in this regard. It targets not only the needs of Ethiopia but also other African countries.

This should be replicated in all industrialization endeavors. Unfortunately the government prefers to establish IPs for each region without considering the basics. This risks making the country repeat the same mistake again and again.  Perfection comes only with rigorous thinking and precise strategies.

But the government argues that Ethiopia needs IPs to address unemployment and hard currency shortages in a short time. 

One of the biggest problems that is keeping industrialization from growing in Ethiopia is a lack of availability of systems and services. The government installs IPs on the basis of quotas for regions.

Development of IPs should not be about copying the same method from some distinguished friendly countries. We should really study our own problems, and come up with the solutions to them. Industrialization goes beyond resources. We must come up with our own version of solutions. We have to rethink how to promote industrialization. 

Globally, there are industrial parks, technology parks and business parks. Our government opted for the first. We need parks where life saving materials like sterilizers, x-ray machines or other health materials are produced. There are hundreds of materials we need badly, but are importing at a dire cost. 

In almost all of the IPs there is a high staff turnover, even though they should have contributed to the reduction of unemployment rate. What do you think is the missing element here?

There is much left to do to bring about an industrial culture. In the IPs, people especially who have migrated from rural areas work full time at minimum wage. In Germany, industries are located near farmers. The farmers work in the industries when there are no farm activities and go back to their farms when the farm season comes. So they are both farmers and industrialists. An employee cannot work in an industry full time for a minimal wage. 

The performance of the operational IPs so far has been poor. Exports from these IPs stood at USD89 million in the past fiscal year. How do you evaluate the performances against the ambitious government plan?

We need studies to know the constraints of each of them. I am not sure if we are the direct beneficiaries of the IPs. This is mainly because IPs are run by foreign investors. The IPs succeed only if each farmer in each village is a beneficiary. 

For the last decade, the government has been complaining that manufacturing has not been able to grow, mainly because the private sector is unwilling to invest in the sector, but rather in sectors that pay off in the short term. Do you think local manufacturers can compete with bulk imports, which are cheaper than domestic products?

I used to consult at a local metal products factory. The factory started producing household materials like spoons and knives, among agricultural and spare part products. The spoons were quality stainless steel, and quite strong. The factory sold them for seven birr, and they lasted up to ten years. However, imported spoons from China are sold for three birr in the market. They quickly bend and do not last even a year. So the factory had no option but to cut production of the spoon and some other materials.  

We are not manufacturing essential products for our population. Over 90Pct of the rural population have no beds. If we could manufacture and supply beds, then manufacturing of mattresses, pillow and others follow. For instance, we have abundant natural herbs used for medicine. They could be refined, processed, packed and exported, like coffee. Parks could also be built for poultry farming and fish processing, among others. We import sulfuric acid used in car batteries and other this from Europe, where as we could produce it here at a reasonable cost. 

In your opinion, is there a way to get the most out of IPs?

The strategy must be revisited. That should be done by a third party. The voice of universities also needs to be included. We are not even learning from foreign companies operating in our IPs because they are not willing to teach us the core technologies. China is willing to give loan but not the knowledge. That is why we have to come up with scientific solutions from the grassroots level. 

 All the investors operating in IPs are foreign. Their links with local companies outside the parks is also minimal. Do you think this is best way to transfer technology?

It is the worst way. All the routine, dirty, backbreaking jobs are done by Ethiopians while the main jobs are done by foreigners. Ethiopians are not allowed to see the crucial part of the technology. Nowadays, some foreign investors even abuse employees. Should we be happy about this? We need industry that respect the dignity of human beings, the dignity of Ethiopians, and respect human life.


7th Year • Nov.16 - Dec. 15 2018 • No. 68


 

 

Ethiopian Business Review

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