Ministry of Defense rejects funding for three new industrial parks | The journalist
Finance Minister Ahmed Shide has 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 company’s proposal for the next fiscal year 2022/23 on September 1, 2022 at the Hilton Addis Hotel, Ahmed pointed out that the government has no funds for new industrial park development projects as the ministry has gone to excessive lengths to close a 4.5 percent budget deficit-to-GDP ratio.
Kebede Geleta, director of the industrial parks division at the Public Enterprises Holding and Administration (PEHA), which regulates public enterprises (SOEs), including the company, presented the planning document.
It now manages 13 industrial parks that were built over the past decade.
“IPDC intends to establish new industrial parks in the Ethiopian financial year 2022/23. These are the Aysha, Asosa and Bishoftu industrial parks. So far, activities have started, with a completion rate of 10%. We appreciate the good start and the momentum towards completion, but the remaining 90% must go faster,” Kebede said during his presentation.
Nevertheless, Ahmed, who chaired the meeting, was surprised to learn of the new plans.
“If you intend to build additional industrial parks in the coming year, you need to be sure how you will finance them. As far as I know, even completed projects face serious obstacles, not to mention starting a new industrial park project,” Ahmed said.
“Even in industrial parks that are over 90% complete, funding for the finishing touches is rare. As a result, the Ministry of Finance injects funds, which become almost like a budget. These new projects, such as Aysha, Asosa and Bishoftu, have been decided at the government level, but they should not be launched until funding is secured,” Ahmed added.
However, Sandokan Debebe, CEO of the IPDC, believes that new industrial parks should not be funded directly by the government.
“We did not intend to build a new industrial park with public funds. We intend to undertake activities such as land preparation, fencing, rights of way and other preparations for the Aysha, Asosa and Bishoftu industrial park projects in 2022/23.
The IPDC is also trying to establish industrial parks in a cooperative venture with private investors, according to Sandokan, instead of only public investment before.
“We are now in contact with such investors and developers who wish to join the IPDC and develop new industrial parks. We’ll get to the bottom of that soon. So, at the moment, we have no plans to start a new industrial park construction project with government funding,” Sandokan said.
The company now holds title deeds to approximately 3,000 hectares of land purchased for the construction of an industrial park. According to expert estimates, the development of the three new industrial parks will cost at least $700 million.
Despite the fact that the IPDC generated an operational profit for the first time this year, the Ethiopian government has not fully repaid the external debts incurred to create the infrastructure of the industrial park.
For the moment, the government intends to facilitate the financing only of 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 construction of any new industrial parks for the foreseeable future, according to Ahmed.
“Funding for the Adama-Hunan Industrial Park has been approved. However, the payment was delayed due to complications related to the restructuring of Ethiopia’s external debt portfolio. It will take time. Construction will begin as soon as the Chinese bank releases the funds. However, preparations such as the right of way can be done until the funds are disbursed,” the minister explained.
Construction on Adama-Hunan is expected to begin once funding from the Chinese bank is received. Preparations have already been completed, including the purchase of 120 hectares of land, according to Sandokan.
Ahmed also said that the government intends to sell the existing industrial parks. “We want to sell industrial parks as long as we can find buyers. Personally, I don’t believe we can find buyers right now.
It has been more than a year since the Ministry of Finance included industrial parks in its list of public enterprises to be part of the ongoing privatization process.
“I don’t believe that industrial parks have reached the economic level where they can recoup their capital expenditure while generating profits for investors,” Ahmed added.