VIABILITY AND SUSTAINABILITY ASSESSMENT OF INDUSTRIAL PARKS IN ETHIOPIA: THE CASE OF BOLE LEMI INDUSTRIAL PARK

Abstract

The world-acclaimed economic trajectory registered during the last couple of decades in Ethiopian economy has left the economy with lowest manufacturing sector contribution to GDP. As the Ethiopian economy goes the largest in the region, the demand for industrialization and structural transformation is critical need of the economy to sustain the growth trajectory. After taking Industrial Parks Development as a policy direction to catalyze industrialization, Ethiopia has embarked up on constructing Industrial Parks and more than 22 parks have been constructed in different parts of the country. The first Industrial Park in Ethiopia is a private one called Eastern Industrial Park constructed by Chinese investors in 2007. The first public Industrial Park, Bole Lemi Industrial Park (BLIP), was built at the outskirt of the capital six years back with a total cost of 2.7 bln. Birr. This paper assesses the viability and sustainability of this oldest Industrial Park in Ethiopia BLIP to come up with lessons both for further industrial park development efforts and a better conducive policy formulation inputs for the sector. Looking back to its six years journey using a Cost Benefit Analysis, BLIP’s Economic and Social viability assessment looks feasible when its feasibility is assessed by considering both direct and indirect benefits. Assuming that the Park will have a life of 25 years; the social cost benefit analysis of the park showed that it has a pay Back period of 9 years and 3 months, a net present value of Birr 132,788,534.15 and internal rate of 10.70%. It implies that the project is somehow feasible from the government perspective though the return is not that much lucrative. This is because the rate of return is less than the lending rate of commercial Banks. Its financial analysis through looks not viable as its payback period is estimated to be 49 years while the Net present value and the Internal Rate of Return are estimated to be Birr -2,003,621,605.86 and -5.01% respectively. On top of working on its financial viability, as a government project meant to catalyze development, Economic, Social and Environmental feasibility and sustainability variables as assessed. As a recommendation, in detail with a recommendation that enhances viability and sustainability of BLIP in the future. Policy fine-tuning on competitiveness and productivity of IPs – facilitating for industrial parks to be developed and managed by private sector, with active participation of the domestic one is put forward. Besides, strengthening pre-feasibility and feasibility assessment before any public investments through a stronger Public Investment Management – PIM system is recommended on the other hand, blending the One-Stop-Services (OSS) systems of Industrial Parks with ‘Innovative supports’ of IPs designed through a sector-specific challenges of companies is recommended to improve service deliveries in IPs. The other key recommendation of this paper is on cautions IPs in Ethiopia should take when they specialize on specific sectors as x BLIP did on textile sector. As the 4th Industrial Revolution and a growing protectionism have been a challenge for the global textile industry, sector specialization in Industrial Parks development in Ethiopia needs to seriously consider global trends and future challenges of the specific sector and devise a relevant coping mechanisms. In boosting the competitiveness of BLIP, a proper companies has to be attracted and for that, a targeted approach of promotion and attracting an anchor companies needs to be done with a shift of focus from the current trend of attracting CMT (cut-make-trim) operating companies (which is the smallest form of business in the value chain) to an integrated companies that accumulate lines of profit margins in accumulated functions in the value chain.