Ahmed Shide, Minister of Finance, humbly rejected an industrial park development plan presented by the Industrial Parks Development Corporation (IPDC). Aysha, Asosa, and Bishoftu are the new public industrial park development projects.
After hearing the corporation’s proposal for the next fiscal year 2022/23 on September 1, 2022 at the Hilton Addis hotel, Ahmed emphasized that the government has no funds for new industry park development projects, as the ministry has been overstretching to bridge a 4.5 percent budget deficit ratio to GDP.
Kebede Geleta, Industrial Parks division director at the Public Enterprises Holding and Administration (PEHA), which governs State Owned Enterprises (SOEs), including the corporation, presented the planning document.
It now manages 13 industrial parks that were built over the last decade.
“The IPDC intends to establish new industrial parks in the Ethiopian fiscal year 2022/23. These are the Aysha, Asosa, and Bishoftu industrial parks. So far, activities have commenced, with a 10 percent completion rate. We appreciate the solid start and momentum toward completion, but the remaining 90 percent must go faster,” Kebede said during his presentation.
Nonetheless, Ahmed, who was chairing the meeting, was astonished to learn of the new projects.
“If you intend to build additional industrial parks in the coming year, you must be certain of how you will finance them. As far as I know, even completed projects are experiencing serious obstacles, let alone starting a new industry park project,” Ahmed said.
“Even in industrial parks that are more than 90 percent complete, financing for final touches is scarce. As a result, the Ministry of Finance is injecting funds, which is becoming almost like budget. Those new projects, such as Aysha, Asosa, and Bishoftu, were decided at the government level, but they should not be started until finance is obtained,” added Ahmed.
However, Sandokan Debebe, CEO of IPDC, believes that the new industrial parks are not expected to be funded directly by the government.
“We had no intention of constructing a new industrial park using government funds. We intend to undertake activities such as land preparations, fences, rights of way, and other preparations for the Aysha, Asosa, and Bishoftu industrial park projects in 2022/23.
The IPDC is also trying to create industrial parks in a cooperative venture with private investors, according to Sandokan, instead of sole public investment previously.
“We are now in contact with such investors and developers who want to partner with IPDC and develop new industrial parks. We’ll get to the bottom of this soon. So, for the time being, we have no intention of beginning a new industrial park construction project with government funding,” Sandokan stated.
The corporation now owns title deeds to about 3,000 hectares of land bought for the building of an industrial park. According to expert estimates, developing the three new industrial parks will cost at least USD 700 million.
Despite the fact that the IPDC generated operational profit for the first time this year, the Ethiopian government did not fully repay the external debts incurred to create the industrial park infrastructure.
At the moment, the government intends to facilitate financing only for the Adama-Hunan industrial park, which will be financed by Chinese banks. Adama-Hunan will be the 14th public industrial park.
The administration has chosen to postpone the construction of any new industrial park for the foreseeable future, according to Ahmed.
“Financing for Adama-Hunan Industrial Park has been authorized. However, the payment was delayed due to complications with Ethiopia’s external debt portfolio restructuring. This will require some time. Construction will begin as soon as the Chinese bank releases the funds. However, preparations such as right of way can be carried out until the funds are disbursed,” the minister explained.
Construction on Adama-Hunan is planned to begin once the financing from the Chinese bank is received. Preparations have already been completed, including the purchase of 120 hectares of land, according to Sandokan.
Ahmed also stated that the government intends to sell existing industrial parks. “We want to sell the industrial parks as long as we can find buyers. Personally, I don’t believe we can find buyers right now.”
It has been over a year since ministry of finance included industrial parks into its list of SOEs to be part of the ongoing privatization process.
“I do not believe that industrial parks have reached the economic level where they can recoup their investment expenditures while also generating profits for investors,” Ahmed added.