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Ethiopia's strategy for industrialisation: Dr Arkebe Oqubay is a Minister and Special Advisor to the Prime Minister of Ethiopia, board chair of the Ethiopian Railway Corporation, vice-chair of the Ethiopian Airlines board and former mayor.

African Business: In light of the COP21 summit, how do you believe Ethiopia is addressing its responsibilities on climate change as it moves to greater industrialisation?

Dr Arkebe Oqubay: We have incorporated it in our Vision 2025, aiming at developing a carbon-neutral manufacturing hub. We will continue to rely on renewable and clean energy. The wind farms and the 6,000 MW hydropower we are developing are examples. We are operating Addis Ababa's light rail transport and the Djibouti-Addis Ababa railway services. Both are powered by renewable energy. Ethiopia's determination to develop green or eco-industrial parks is part of the broader approach to building a climate-resilient green economy. Strengthening our manufacturing capability and industrialisation will be supported by the development and use of renewable energy resources.

It is important to note that Africa's contribution to total greenhouse emissions is less than 4%, very small. But Africa is the worst hit by climate change, particularly its agriculture sector. Developed countries should assist Africa's effort to build its green economy financially and technologically, although all countries have obligations to put clear targets. Ethiopia aims to reduce the emissions of greenhouse gases by 64% in 2030. This is clearly stated in the intended nationally determined contribution or INDC. We are aware of the urgency and enormous danger of climate change, and I hope Ethiopia's efforts to make a modest contribution can set a good example to other African countries.

AB: What sustainable measures are in place to ensure that agricultural development in Ethiopia can be self-sustaining to ensure food security and run in tandem with your request for an industrialising expansion?

AO: Ethiopia's development strategy has focused on agriculture and smallholder farms for the last two decades, which has improved food security and reduced poverty. For instance, Ethiopia is in a better position to feed its population now than it was 30 or 40 years ago, even though its population has more than tripled. We have been working to develop a resilient and transformed agriculture. Soil and water conservation, shifting from rain-fed to irrigated agriculture, and the promotion of improved technological practices and inputs have been 1 part of our programme. We have also focused on forest protection and afforestation schemes covering sizeable areas. We have made some progress, but we need to scale up our efforts. With increased impacts of climate change, food security becomes a huge challenge. It has made rainfall unpredictable.

AB: Large-scale industrialisation parks are being promoted in Ethiopia. What are your objectives for what can be achieved in these zones over the next five years?

AO: To emerge as a leading manufacturing hub in the region, Ethiopia has to promote investment, build many industrial parks and focus on skills development. The development and use of industrial parks is one of our key strategies for catch-up and economic transformation.

It is important to mitigate adverse environmental impacts, promote economic use of our infrastructure, facilitate manufacturing investment, and promote linkages and know-how transfer. We need to build up to 10m square metres of factory sheds in five years. This will focus on key industries, primarily in light manufacturing. The industrial parks will specialise in a few related sectors. One-stop government service is to be organised in the parks to create an enabling environment. We have critically reviewed Asian and African industrial parks to learn from their experience.

Many policymakers and practitioners miss the fact that industrial parks are not an end in themselves. Industrial parks need to be part of the broader industrial policy framework serving the industrialisation strategy. It is also naive to assume they are the miracle medicine. Industrial parks have to be demand-driven, and execution is as critical as the policy and plan. But this is more easily said than done. To enhance our learning and experience, we are building a model eco-Industrial Park in the city of Hawasa specialising in apparel and textiles that will create 60,000 manufacturing jobs and earn $ibn in exports annually when the firms operate at full capacity. We will commence developing a few more industrial parks in six cities.

AB: Key industrial areas of the economy are off limits to foreign direct investors. When will there be expansion to allow penetration of foreign capital and interests?

AO: The real facts are different from such perceptions, as Ethiopia has an FDI-friendly investment policy. FDI can participate in almost all areas, and there is no restriction in 100% foreign ownership; and we offer generous incentives. The only exceptions are the telecom and banking sectors.

We do not yet have the capacity to regulate foreign banks and we want our domestic banks to grow. We use returns from the telecom business to expand our railway network, which is critical to firms, foreign or otherwise. Ethiopia was among the top-five FDI African destinations in 2014. We expect rapid growth in the coming years as we have made many changes in institutional settings. At present, we shall focus on attracting manufacturing investment, targeting the major origin countries and leading firms. Industrial parks will play a critical role in this.

AB: How would you hope the manufacturing bases in Ethiopia will expand to influence indigenous ventures and home-grown entrepreneurs?

AO: Our domestic firms will learn from leading firms in developing management skills, technological and marketing capabilities. In the context of slow global economic growth, competing and improving our participation in the global value chain is increasingly becoming more challenging. Domestic firms may be linked as sub-contractors, and increasing use of domestic inputs improves local content. We also have support schemes to develop domestic firms.

Our skills education infrastructure, including technical schools and universities, will accelerate the spillover effect dynamics. We have made huge expansions and transformed our technical colleges and universities based on the German system. For instance, 70% of university courses are in natural science, technology and engineering. We have a university student population of about half a million, and more than 1,300 technical schools that can train up to one million students annually. This is a work in progress, and we have huge challenges in terms of quality and making it demand-driven. Such transformation is an enormous challenge, but it all boils down to skills development, steady improvement of productivity and innovation.

AB: What specific plans/policies can be instituted to integrate technology transfer and educational initiatives from international companies and investors?

AO: First, we will focus on attracting leading firms and internationally competitive firms. Learning from the best is more rewarding than learning from the average performer. We must put in place incentives and sanctions that will shape behaviours of firms, both foreign and local. Learning requires discipline and incentives have to be linked to performance. Focusing on exports puts a huge requirement and pressure on firms. The ultimate test of competitiveness is being able to succeed in the international market. We will promote higher education/technical skills linkage with industry, and training by firms is central to know-how transfer. In brief, skills development and know-how transfer requires a strategic approach.

Dr Arkebe Oqubay is the author of Made in Africa: Industrial Policy in Ethiopia, Oxford University Press (2015).
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Comment:Ethiopia's strategy for industrialisation: Dr Arkebe Oqubay is a Minister and Special Advisor to the Prime Minister of Ethiopia, board chair of the Ethiopian Railway Corporation, vice-chair of the Ethiopian Airlines board and former mayor.
Author:Moore, Darren
Publication:African Business
Article Type:Interview
Geographic Code:6ETHI
Date:Jan 1, 2016
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