Monday, June 17, 2024

Ethiopia embraces local investors: New manufacturing policy opens doors to industry parks


By our staff reporter

In a bid to bolster domestic production and reduce reliance on imports, the Ministry of Industry (MoI) has rolled out a new manufacturing policy prioritizing import substitution.

MoI has devised strategies aligned with the recently endorsed manufacturing policy, which prioritizes the expansion of the import substitution subsector. Through the Investment Board, industry parks are now open to local investors, facilitating the implementation of these strategies.

Replacing a previous policy dating back 22 years, the updated manufacturing policy underscores import substitution as a primary pillar for sectoral development. Unlike its predecessor, which heavily emphasized export-led manufacturing, the revised policy shifts focus towards import substitution industries.

Experts highlight the nation’s substantial capacity for domestic production but note that significant foreign exchange is still being drained by imports of various finished products. In response, the new policy places particular emphasis on bolstering the manufacturing sector to curb import dependence.

Zerihun Abebe, Head of MoI’s Export Products Competitiveness, emphasizes that the shift in policy direction does not discredit the previous approach but rather seeks to strike a balance between export and import substitution. With imports surpassing exports by a significant margin, there is a pressing need to narrow the trade deficit by fostering local production.

The new policy is built on two main pillars. Firstly, it aims to enable the manufacturing sector to produce inputs required by manufacturers of finished products. Secondly, it seeks to boost domestic manufacturing output to reduce reliance on imported goods. Over the next three years, the policy targets the complete replacement of over 96 imported commodities with locally manufactured alternatives.

Crucially, the policy takes into consideration factors such as the most commonly imported products and the nation’s potential and resources for rapid substitution. By harnessing these resources and aligning strategies with the policy objectives, Ethiopia aims to strengthen its domestic manufacturing base and achieve greater self-reliance in key sectors.

He mentioned that the policy is now established, with several strategies under development, and an implementation plan set to follow suit. Zerihun disclosed, “following the recommendations, approximately 50 strategies will be formulated, and currently, four strategies have been devised, including the implementation tactic for import substitution.”

Zerihun highlighted the significance of one of the strategies, the incentive approach, which is on the brink of initiation. He explained, “distinct incentives will be extended to the import substitution and other manufacturing sectors to invigorate the industry.”

Recognizing the pivotal role of local investors in industry growth, the policy prioritizes their involvement. Zerihun emphasized, “To achieve the anticipated sectoral growth, we must prioritize local investors.”

In line with this, the Investment Board has given the go-ahead for local investors’ participation in industry parks predominantly owned by foreign direct investments. The new program aims to introduce performance-based incentives using innovative methodologies.

Discussing the incentive structure, Zerihun stated, “Under the new policy, incentives will be provided based on investors’ activities, diverging from the previous uniform approach.”

With a shift towards market-led manufacturing industry development, the policy has been revamped to emphasize productivity and competition, necessitating stable macroeconomic conditions, adequate financing, and access to land, infrastructure, and logistics.

Despite the dominance of traditional agricultural commodities in exports, the nation’s manufacturing sector exports goods worth approximately half a billion dollars.

The leadership of MoI is actively championing the new policy across various sectors. Notable achievements include the successful replacement of malt supply for brewers and the adoption of locally sourced coal by the cement industry. Additionally, textile and leather supply to specific sectors, notably the military, has witnessed substantial growth.

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