Kilinto Industrial parK

ABN; Let’s discuss about a specialized industrial park, the Kilinto Industrial Park, and the facilities it incorporates?

Aklilu: Kilinto Industrial Park is dedicated to various types of pharmaceutical products including final medicines and formulations, excipients, API, medical supplies, and pharmaceutical packaging. It covers an area of 279 hectares, of which 166 hectares are leasable land readily available for investors, and 24.32 hectares are handover by 11 IP Enterprises.

Kilinto Industrial Park offers several basic infrastructures to support businesses operating in the park. These include:

Power: The park has a power capacity of 200MW for each plot, with a permanent power supply averaging 1MW/RMU. The current electricity rate is approximately 3 US cents/kWh, which is one of the lowest rates in the world.

Water: The park has an average total water discharge of 289.47 L/s from six boreholes, ensuring reliable water supply for industrial operations.

Internet and Telephone: Kilinto Industrial Park provides high-speed internet services with a total capacity of 15 GB/s, along with available telephone lines to facilitate smooth communication for businesses operating in the park.

Wastewater Treatment: The park has a wastewater treatment plant (ZLD) with a capacity of 14,000m3/day (13,000m³/ day for ETP and 1,000m3/day for STP), ensuring effective treatment of industrial wastewater in an environmentally friendly manner.

Road Infrastructure: The park has 19.96 km of compounded asphalt access roads with widths of 30m, 20m, and 15m, providing easy access to each plot within the park.

Security: Kilinto Industrial Park is equipped with park security measures, with Federal police and Addis Ababa police members working jointly with the park security agencies 24/7 to ensure a safe and secure operating environment for businesses.

Government Services: The park offers a one-stop shop that provides government services related to customs clearance, investment licensing, administration, product registration, and other necessary services to facilitate smooth operations for businesses.

Warehousing and Testing Services: Joint warehousing, calibration, and testing services are available within the park to support businesses with their operational needs.

Transportation Connectivity: Kilinto Industrial Park is strategically located 20 kilometers from Addis Ababa Bole International Airport and is also connected by the new electric railway to the Port of Djibouti, which is 863 kilometers away. This railway offers cold chain services, providing convenient transportation options for businesses operating in the park.

ABN; What incentives are available for pharmaceutical manufacturers in industrial parks?

Aklilu: The following tax holidays are available to pharmaceutical manufacturers in industrial parks, but do not apply to manufacturers operating outside of industrial parks: a. Formulation/final medicine -production inside of industrial parks: 10-12 years b. Active Pharmaceutical Ingredient (API) production inside of industrial parks: 12-14 years c. Pharmaceutical packaging production inside of industrial parks: 7-8 years Pharmaceutical manufacturers are also exempt from paying duties and other taxes on the import of capital goods, construction materials, spare parts, and vehicles, and there are no taxes levied on exports.

ABN; How is access to the domestic market and export facilitated for pharmaceutical manufacturers in Ethiopia?

Aklilu: Access to the domestic market is facilitated through measures that leverage public procurement, such as the Pharmaceuticals Fund and Supply Agency (PFSA) managing a long-term procurement guarantee mechanism for manufacturers that win an EPSS tender or export their products.

The length of the guarantee depends on the percentage of production that the manufacturer exports, with up to 3 years for 30% exporters and up to 5 years for 60% exporters. EPSS also offers a 25% price preference and prepayment of 30% of the tender value to manufacturers awarded a contract by EPSS.

ABN; Compared to other African or developing countries, particularly in the neighborhood and East African sub region, how would you describe the status of Ethiopia? Or would you compare the industrial parks development of Ethiopia with other African countries?

Aklilu: The development of IPs in Ethiopia, yet very recent phenomenon, can be said it has surpassed most of other Africa countries in terms of number of IPs developed and put into operation. The concept of IPs in other countries is understood under the special economic zone umbrella. In Ethiopia, The first Industrial Park was built by chinese private investors in 2010. Four years later, GoE decided to establish IPDC to design, build , operate and manage industrial parks across the nation. With less than a decade, IPDC has managed to build and operationalize more than 13 industrial parks. The parks are built with a high international standards to meet FDI expectation and the plug and play arrangement enable foreign investors to easily set up their factor in Ethiopia. The lesson learned from South East Asia gave competitive advantage to Ethiopia to develop conducive Investment climate. In this regards, no other African country has managed to promote Industrial parks like Ethiopia does.

ABN; On the other hand, how would you describe the role of AfCFTA for Ethiopia’s continental trade as the country has been engaged in industrial development and been manufacturing goods for export? In terms of AfCFTA’s role in creating market opportunities?

Aklilu: The AfCFTA's primary goals are to accelerate the pace of economic regional integration in Africa by eliminating tariff and non-tariff barriers to all trade in goods and services, as well as to liberalize the movement of people and investments across the continent. As a result, it is estimated that full implementation of the agreement will increase East African trade by approximately 13% by 2030. This equates to approximately $737 million in trade. Ethiopia can expect a 10% increase over the same period, amounting to approximately USD 10.7 million.

Ethiopia's market opportunities from the AfCFTA will be in the following sectors, according to the International Economics consultancy: vegetables, coffee, oilseeds, textiles and garments, machinery, and textiles and garments. Ethiopia has a comparative advantage in the horticultural commodities sector due to its favorable climate, large domestic market, and connections to the European market.

ABN; Do you think, Ethiopia is on the right track to achieve the goals of SDG as far as industrial development is concerned?

Aklilu: As Africa's first zero-emission textile industrial park, the Ethiopian government is trying to develop IP into Africa's sustainable industrial park with state-of-the-art infrastructure and equipment. Industrial parks are becoming a tool in promoting green and circular economy. To ensure this the GoE invested in a state-of-theart zero-liquid-discharge treatment plant, with such 90 % of the water is recycled and reused, and the final waste is crystallized. While more costly than the government's original plan, this initiative meets the government's aim of meeting leading international standards, placing priority on resource conservation and differentiating Ethiopia’s Industrial Parks from other parks worldwide.

ABN; What special emphasis has been given to the industrial parks of the country as the country needs to properly exploit the potential of AfCFTA?

Aklilu: Industrial parks are challenged by regional integrations around the world. This is because the fiscal incentives provided in industrial parks are designed to attract FDI, which is involved in importing raw materials from its parent company in another country. As a result, member countries exporting to other AFCFTA members from their SEZs must meet the region's minimum sourcing requirements for raw materials. To properly exploit the AFCFTA, industrial parks must source raw materials from local markets or from AFCFTA member countries; otherwise the appropriate tariff rate will be applied. Some of the programs on which the corporation is working to increase the forward and backward linkages of the industrial parks and prepare for AFCFTA include strengthening business-to-business linkages between industrial park companies and local SMEs, promoting SMEs to do business in the IPs, assisting investors to access resources from the local market, and collaborating with agricultural sector players.

ABN; Now, let’s come to Ethiopia’s first FTZ, Dire Dawa FTZ, what does it comprise and major activities within the Zone?

Aklilu: Manufacturing, trade, and logistics are the three major sectors of the FTZ. The manufacturing sector is the same as the manufacturing sector in industrial parks, which engages in processing raw materials to produce products primarily for the export market and partly for the local market. The new sector comprised in the FTZ is the trading sector, which will engage in both import and export trade. Any FTZ trading company can import goods from other countries, store them, add value to them, and then re-export or sell them in the domestic market. In this process, unless the goods are sold to the local market, the trader is exempt from any customs duty tax. The third sector, the logistics sector, is in the FTZ to provide logistics-related services to zone users. The value-added logistics services include loading and unloading of cargo, consolidation and deconsolidation, sorting, customs clearance, freight forwarding, cargo transportation, and other related services. To complement these three sectors, auxiliary services such as banks, insurance companies, consultants, cafés, restaurants, and other services are provided in the zone.

The FTZ has a variety of factory sheds, warehouses, open storage yards, serviced lands, an exhibition hall, shopping malls, and other amenities. The service lands are well equipped with basic infrastructure, and the investor is required to construct vertical infrastructure in accordance with zone standards and conduct business while under a land lease agreement with the corporation. The factory sheds and warehouses are ready-made facilities in which the investor can run businesses in a "plug and play" modality.

ABN; How would you summarize its contribution to the country’s successful economic activities in line with its industrial parks development?

Aklilu: The free trade zone benefits Ethiopia's economy in the three ways, among others;

A ) Stabilize the economy: Economic sabotage contributed to the rise in commodity prices. FTZs can help by ensuring that there are sufficient reserves of goods and that they are distributed to the economy in a timely manner. The FTZ is thought to have a positive impact on lowering production costs and thus deflating commodity prices by reducing logistics costs.

B ) Attract both domestic and foreign direct investment: The FTZ attracts investors interested in industries such as trading, offshore, re-exporting, consulting, trade facilitation, and related business fields, resulting in capital inflows into the economy as well as technology and knowledge spillover effects.

C ) Increase economic activity and job opportunities: As a result of increased logistics and other business activities, the country can benefit from the employment opportunities and business symbiosis created, including intellectual property (IP) throughout the country.

ABN; What makes this FTZ so special and more advantageous?

Aklilu: The Dire Dawa Free Trade Zone is the first of its kind in Ethiopia, making it special. Not only is it the first, but it is also located in Dire Dawa, a city known for its proximity to two major ports, Djibouti Port and Berbera Port. The DDFTZ is more advantageous for investors in general and Ethiopian investors located in neighboring counties’ FTZ in particular for reasons such as access to better infrastructure, lower facility rental prices, better weather conditions, access to quality and skilled labor, and streamlined governmental services at the one-stop service window.

ABN; What lessons have been learned and also what about challenges that have come across in realizing the Dire Dawa FTZ?

Aklilu: From conception to completion, the Dire Dawa Free Trade Zone took only three months. Under the supervision of the steering committee, the technical committee has managed to finalize the policy framework, institutional setup, address infrastructural and facility gaps, standardize operational procedures, and address other relevant issues in the last three months. A national project can be completed on time and with high quality if different institutions work well together.

ABN; Would you tell us about the synergy and collaboration among the different stakeholders in the development of FTZs in the country?

Aklilu: The development of Dire Dawa FTZ has brought together different governmental offices. The IPDC is mandated to conduct the construction of the physical infrastructure and all relevant facilities, as well as streamlining the working procedures in the FTZ. The Ethiopia Investment Commission is the lead government entity to coordinate the one-stop service where all governmental service providers sit in one room to provide FTZ-related services such as licensing, product standard approvals, visa processing, and environmental control. The EIC is also mandated to conduct promotion activities and attract, register, and license investors interested in investing in the FTZ.

The ministry of trade and regional integration has identified all commodities that are allowed to enter and leave the zone. The ministry is also in charge of providing licenses for trading companies to operate in the zone and enforcing regulations in light of trading activities. Customs commissions provide relaxed customs procedures to give clearances to traders. The Ministry of Finance decides on the various fiscal incentives for investors engaged in the three sectors. As a result, all relevant government agencies have worked together to make the FTZ a reality, and the same synergy is expected during the FTZ's operation.