Ethiopia Inaugurates Its First Free Trade Zone In The Eastern Part Of The Country

A month after the Ethiopian Ministry of Transport and Logistics designated Dire Dawa Industrial Park as the location for Ethiopia’s first Free Trade Zone (FTZ), Prime Minister Abiy Ahmed and senior government officials attended the inauguration ceremony at Dire Dawa City located 445 km East of Addis Ababa.

Such zones are very important to facilitate export and import, as has been observed in the economically developed world, Prime Minister Abiy said in his speech at the imagination.

“The world is changing exponentially. Trying to accept the new world with old thinking is considered as good as carrying our youth on our shoulders in the same way we carried them as children.

“The Free Trade Zone we are building is one of our ways to integrate into a rapidly changing world,” he said. “I have no doubt that the zone will not only facilitate trade and investment but also enhance our technological capabilities.”

Ministry of Finance finalizes preparations for a new incentive regulation to be applied in free trade zones as the country inaugurates the first free trade zone in Dire Dawa. Similarly, the Council of Ministers ratified the first national special economic zone policy in its 11th extraordinary meeting aimed to expand free trade zones in the country.

The free trade zone is expected to serve as a place where various goods are imported from different countries, produced, and supplied to the foreign market, where efficient commercial financial and logistics services are provided. Sandokan Debebe, CEO of Industrial Parks Development Corporation (IPDC), said the free trade zone will create the ability to stabilize the commodity price inflation that is being observed in our country in connection with the logistics costs.

“The FTZ will also fill the gap in the supply of raw materials and value chain faced by the manufacturing industries.”

Legal frameworks, infrastructure arrangements, and other services to make the Free Trade Zone operational have already been dealt with. Dagmawit Moges, Minister of Transport and Logistics said the Logistics Council has been coordinating and carrying out the necessary legal frameworks, infrastructure arrangements, and other relevant services for the Dire Dawa Free Trade Zone and made it ready for use.

“As outlined in its Logistics Strategy, it has identified the establishment of Free Trade Zones in Ethiopia as one of the enablers for facilitated trade, bringing logistics efficiency and attracting FDI.”

Dire Dawa Industrial Park has now been re-established to be the first free trade zone under the name Dire Dawa Free Trade Zone with the official opening ceremony of Dire Dawa free trade zone expected to be held on Sunday, August 14, 2022. Kiya Tekalign, Strategy Advisor at Industrial Parks Development Corporation (IPDC) said;

“The Corporation has finalized necessary preparations to establish the zone including legal frameworks, working systems, and infrastructure in collaborating with the different governmental stakeholders.”

As she said, the Ministry of Finance has finalized preparing the free trade zone incentive regulations which are expected to be ratified soon. To benefit from the scheme, the corporation calls on the private sector to invest in the free trade zone. In addition, the free trade zone would offer customs duties privileges and play a significant part in reducing the cost of logistics, as he explained.

Dire Dawa was selected to be the first free trade zone due to its proximity to ports, market potential, and huge cargo gravity as well as suitability for multimodal transport and logistics operation. The free trade zone is 300 km far from Djibouti port, 500 km from Berbera port, and 2.5 km from Dire Dawa dry port. FTZ is integrated with the dry port and various service-providing institutions such as customs during operation, the Minister added.

As indicated by Kiya, in the free zone, the country’s customs system and general laws are applied in a way that facilitates development, and investors, importers, exporters, and organizations that work in this free trade zone will benefit from various incentives and manufacturers entering a free trade zone can obtain production inputs without leaving the free trade zone in addition to the duties and taxes imposed on unfinished products not being implemented.

“The Free Trade Zone will be used as an export processing zone where goods can be unloaded, handled, produced and assembled as well as re-sent to the industrial park as a free trade park and export processing zone.”

The zone is expected to provide support for the manufacturing, importing, and exporting procedures by increasing efficiency, trade competitiveness, FDI, urbanization, and industrialization of the economy. It is also expected to decrease inflation and reduce logistics time and cost while increasing import substitution and export revenue, job creation, and skill transfer which are among the goals of the free trade zone.

The corporation has prepared 15 sheds for production and warehouses, 4 hectares of open storage ward, and also 48 hectares for private sectors who want to build their production facility.

Since the goal of establishing a free trade zone has been included in the logistics strategy, extensive research has been carried out, especially in the last two years, and the research found to be convincing has led to the establishment of the special economic zones by the National Logistics Council as a policy program, and the Dire Dawa Free Trade Zone has been working as a pilot project. By watching the need to strengthen and expand the free trade areas and learning the best experiences of successful countries, the government has planned to establish more Free Trade Zones in other regions and Special Economic Zones as well.

Based on detailed criteria, Modjo, Adama, and Semera areas are among those considered for free trade zones. The FTZs will enable Ethiopia to become a significant land-linked trade, investment, industrialization, and logistics hub in Africa. Establishing free trade zone is one of the initiatives set in the 10-year perspective development plan of the country. Among the contributions this free trade zone is expected to give are:

• Integrating Dire Dawa Industrial Park and dry port with various service-providing institutions
• Reducing logistics time and cost
• Boosting trade competitiveness
•  The increasing pace of urbanization and industrialization.
• Increasing foreign trade and FDI flow
• Creating a wide range of employment opportunities,
• Facilitating the transfer of knowledge, and
• Reducing the cost of domestic commodity prices and stabilizing the inflation rate.

Dire Dawa Industrial Park specializes in garment, apparel, and textile and commenced operation in 2018, with 15 factory sheds that have necessities such as electricity supply, telecom services, feeder roads, water supply, and other related services.

It can be recalled that many of the 15 sheds in Dire-Dawa Industrial Park are not occupied by investors. As Shiferau Solomon vice CEO of IPDC explained, the outbreak of the pandemic took over as soon as the park was inaugurated, and also the instability of the country was the main reason for under operation.

In 2019, Ethiopia agreed with Kenya to establish a free trade zone and enhance infrastructural development. Ethiopia also ratified the African Continental Free Trade Area (AfCFTA) in March 2019 and is also going through the WTO accession process. The FTZ aligns with AfCFTA and plans to realize regional integration, and is part of Ethiopia’s initiatives in the 10-year perspective development plan.

As Ethiopia is a landlocked country, it is known that it imports goods mainly using the port of Djibouti. Similarly, the country’s exports are also transported to destination markets using this port of Djibouti. Dire Dawa is not only close to Djibouti, but also has a convenient road for cargo vehicles leading to the port of Djibouti and the Ethio-Djibouti railway line passing through it, making it convenient for logistics services.

source Capital Ethiopia, Business info Et, and Ethiopians Today