Further growth earmarked for landmark

First industrial zone hosting Chinese businesses will double number of buildings onsite to 21

The director of Ethiopia's first Chinese investor-occupied industrial zone is promising to expand the concept to other areas of the country.

Jiao Yongshun, who is the assistant director of the administrative committee of the Eastern Industry Zone in the capital Addis Ababa, says it plans to double the number of buildings on the site to 21 to keep up with a growing demand.

It now covers 5 square kilometers of land in the town of Dukem, about 37 km from Addis Ababa. Work on the zone first started in 2009.

It now offers a total of 130,000 square meters of industrial space, fully equipped with the facilities needed for modern manufacturing including guaranteed power and water supply, an efficient sewage system, roads and landscaping.

Already, 20 Chinese companies have moved into the burgeoning complex, involved in manufacturing including textiles, shoes, automobiles, steel and cement.

The core Chinese government aim of transferring some of its industrial overcapacity to the continent has been welcomed by Ethiopia and other countries, says Jiao.

He adds that with a population of more than 90 million, Ethiopia's leaders have said they are keen to learn lessons from China's modernization drive over the last three and four decades.

With a double-digit GDP growth rate over the past decade, Ethiopia has been one of Africa's fastest growing economies.

The zone's eye-catching front gates - in the shape of spreading wings - sit strategically on the Addis Ababa-Djibouti Highway, the main artery linking Ethiopia to an important neighboring port.

Plans are already in place for a 10,000 sq m office building, an 11,000 sq m showroom and reception center, three 18,500 sq m accommodation blocks, and a 3,000 sq m canteen.

The facility's financing comes from Jiangsu Yongyuan Investment Co Ltd, which is part of the Jiangsu Qiyuan Group, an industrial research and development, production and sales corporation.

The zone is also listed as part of the Ethiopian government's Sustainable Development and Poverty Reduction Program.

The Addis Ababa government has offered various preferential policies to companies occupying space in the zone, including extended tax holidays.

Jiao says its highway location has been a major advantage, positioned between two towns with a population of 300,000, meaning easy access to a large workforce.

Chinese footwear manufacturer Huajian Group, which exports its products mainly to North America, is the zone's largest employer, with 3,200 local workers.

Moving to Africa is increasingly appealing to many Chinese manufacturers, as labor costs at home continue to rise.

Ethiopian workers still earn about a tenth of those in China.

Chinese producers are also facing growing pressure from rising anti-dumping charges in the West, making Ethiopia an ideal location to service customers in both the US and European markets, as well as the rest of Africa, says Jiao.

In the past, poor Ethiopian infrastructure has put off many potential foreign investors.

For example, the 37-km trip from Addis Ababa to the zone might have taken as long as 90 minutes on the earlier single lane highway. Up to 20 power cuts a day might also have proved too much of a headache.

Jiao says Chinese Premier Li Keqiang's much-publicized visit to the zone in May, accompanied by Ethiopian Prime Minister Hailemariam Desalegn, gave it a huge boost.

Since then, the number of enquiries from possible Chinese tenants has surged, convincing the owners to consider further expansion.

Jiao says he is unconcerned by competition from other industry zones built by private companies.

Huajian Shoes, for instance, has already secured a further site in Lafto, southwest of the capital, on which it plans to develop a light industry city of its own to include industrial, residential, hotel and shopping facilities.

However, he is concerned that some of the subsidies and benefits being offered by the government to other Ethiopian industrial site developers are not being made available to Chinese counterparts.

He also says that because the zone is a land developer, it is not eligible for the promised tax holidays that are offered to other foreign manufacturing companies.

Jiao, 58, has been doing business in Ethiopia since 1999, when he worked for a textile group based in Tangshan, in North China's Hebei province.

Since joining the zone in 2008, he says he has hosted many Ethiopian officials wanting to learn more about how to operate an efficient industrial zone.

The Ethiopian Investment Agency, established in 1992 to promote private investment, primarily foreign direct investment, was recently upgraded to a commission and is making strenuous efforts to create a more favorable environment for foreign investors.

Nearby, the government-built Bole Lemi Industrial Zone has already attracted 20 foreign tenants, including the shoemaker Gorge Shoe Corp from Taiwan, and a new state-owned site is now being planned in Kilinto, south of there.

A World Bank survey released in November 2012 on Chinese FDI in Ethiopia highlighted six major challenges of doing business in the country: inadequate trade regulations, low customs clearance efficiency, foreign exchange risk, inconsistent tax regime, lack of skilled labor and lack of access to local finance.

Despite all the challenges, the World Bank survey of 69 Chinese companies doing business in Ethiopia finds that most Chinese investors have expressed optimism in the Ethiopia markets, including Jiangsu Qiyuan Group.

The Ethiopian government still exercises tight control over foreign currency and its own currency, known as birr, has depreciated substantially in the past decade.

A report by global business consultancy Deloitte called Ethiopia, A Growth Miracle, also pointed similar challenges facing the country in attracting foreign investment.

chenweihua@chinadaily.com.cn

(China Daily Africa Weekly 08/22/2014 page20)