Saturday, 07 June 2014 21:13

Manufacturing

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TEXTILES AND GARMENTS

Manufacturing in Ethiopia’s 5 years plan began in 1957 to the present which shows that the country wanted to expand its economy to alleviate poverty and compete with the biggest market in the world.

The value of exports and the Ethiopian textile and garments industry has increased rapidly from USD 10 million to 120 million during the past ten years and Ethiopian government aims to boost exports. By focusing on social and health standard of staffs and the environment, Ethiopian made clothes can be international competitive and acknowledged in the long run.

Ethiopian government has identified several strategic investment areas as a priority that deserves incentives in order to attract the private sector.  One of the major areas that are currently enjoying a significant amount government incentive is the manufacturing sector. With the objective substituting the bulk import of manufactured products, which is consuming the already scarce hard currency of the country, the government has been providing incentives for the private sector interested to be engaged in a range of light industries.

Agro-processing such as production of textiles, leather and food processing and packaging are identified by the government as strategic sectors that have the potential to create a huge amount job while supporting the agriculture sector that mainly depend on small scale farmers, who provide  their products as an input for these industries.

In addition, the government has also been encouraging the local production of medicines and chemicals, with the main intention of saving the several hundreds of millions of hard currency the country spend in importing the products and facilitating the technology transfer in the sector.

According to report of the World Health Organization (WHO), local production of generic medicines promises affordability, accessibility and availability of needed drugs.


Pharmaceutical Sector of Ethiopia 

Currently Ethiopia’s pharmaceuticals market is estimated to reach around half a billion dollars. Frost and Sullivan in its 2012 survey estimated that Ethiopian pharmaceutical market could grow by 14% annually and reaches around one billion dollars by 2018.

There are around nine local pharmaceutical manufacturers in the country, out of which only three have WHO’s Good Manufacturing Practice (GMP), which allow them to export their products and participate in government tenders financed by donors.

Some 200 importers of pharmaceuticals products and medical consumables are also operating in the country. The local industry currently comprises of 22 pharmaceutical and medical supplies, manufacturers, of which nine are directly involved in the manufacture of pharmaceutical products.

The Ethiopian Food, Medicines, Healthcare Administration and Control Authority procurement has reached to $310 million in 2014 from $27 million in 2007.


The Incentives

Current incentives by the government for local production of pharmaceutical products include tax free loans of up to 70% for new investments and up to 60% for upgrading projects for the first five years from the dedicated government bank- the Development Bank of Ethiopia.

There is also a 100% custom duty exemption on import of all granted capital goods, such as plants, machinery equipment, and construction materials. Spare parts at up to 15% of the total value of imported investment capital goods are exempted from customs duty.

Those exporting 50% their products or services, or supplying 75% of their products or services as production or services input to an exporter are exempted from income tax for five years. While those exporting less than 50% of their products or services of their products or those supplying only to the domestic market are exempted from income tax for two years. Investors who invest in priority areas to produce mainly export products will be provided with land necessary for their investment at reduced lease rates.

The tender authority grants local manufacturers a 25% price preference, and also prepays 30% of the tender value upon contract award. The balance of the 70% of the award value can be accessed through the Development Bank of Ethiopia if the local company requires additional capital and is willing to cede the tender to the bank. To encourage products, registration for local manufacturers is also reduced to an average of one month time.


The Result  

There are around nine local pharmaceutical manufacturers in the country, out of which only three have WHO’s Good Manufacturing Practice (GMP), which allow them to export their products and participate in government tenders financed by donors.

Pharmaceutical industry performance report shows that most the manufacturers in the country have been operating below their capacities due to several problems, and supply only around above 20% of the market.

At the same time the variety of products by the local pharmaceutical manufacturers is also limited. They have been producing only 90 of the more than 380 products on the national essential medicines list.

In 2014, local pharmaceutical companies supplied products to the value of close to $44.23 million. In addition to the absence of national strategic and action plan, the Ethiopian pharmaceutical industry has been facing significant challenges such as human resource capacity constraints, limited access to foreign currency and raw material procurement difficulties.

With all the supports extended to the sector and ambitious targets set for the sector, the performance of local manufacturing of medicines was insignificant. Even though the country has planned to producelocally and export worth $20 million pharmaceutical products from 2010 – 2015, it only attains 10% of its target. The local products cover only 20% of the total local market.

The strategy now envisages export of $30 million five years after and $80 million by 2015. It aims to make essential drugs affordable for local people while at the same time creating jobs and cutting the over $300 million dollars hard currency every year, which the country invests for importing pharmaceutical products and drugs

During Ethiopia’s 2nd round Growth and Transformation Plan (GTP II) – 2015-2020, the country envisages to raise the share of domestic pharmaceuticals industry market to 50% and create jobs to close to 7,000 people.

The major manufacturing activities are in the production of food, beverages, tobacco, textiles and garments, leather goods, paper, metallic and non-metallic mineral products, cement and chemicals. Under Growth and Transformation Plan (2010/11 – 2014/15) of the country, production of textile and garments, leather products, cement industry, metal and engineering, chemical, pharmaceuticals and agro-processing are priority areas for investment. Thus there are ample manufacturing opportunities for prospective investors in the following areas:

  1. Textiles and clothing: spinning, weaving and finishing of textile fabrics from the beginning and the production of garments; manufacture of knitted and crocheted fabrics, carpets, sport wears, etc.
  2. Food and beverage products: processing of meat and meat products, fish and fish products, and fruits and vegetables; integrated production and processing of dairy products; processing of animal feed and processing and bottling of mineral water; sugar production; brewing and wine-making, processing of pulses, oil seeds of cereals, manufacture of macaroni/pasta etc;
  3. Tannery and leather goods: tanning of hides and skins up to finished level; manufacture of luggage items, handbags, saddle and harness items, footwear and garments, and integrated tanning and manufacturing;
  4. Glass and ceramic: tableware and sanitary ware, sheet glass and containers;
  5. Chemicals and chemical products: manufacture of basic chemicals (including ethanol) based on local raw materials, including fertilizer and nitrogen, soda ash, rubber PVC granules from ethyl alcohol; manufacture of caustic soda and chlorine-based chemicals; carbon and activated carbon; precipitated calcium carbonate; ballpoint ink, varnishes; soap and detergent, cleaning and polishing preparations, perfume and toilet preparation and pesticides, herbicides or fungicides;
  6. Drugs and pharmaceuticals: manufacture of pharmaceutical, medicinal, chemical and botanical products in the form of tablets, capsules, syrups and injectables;
  7. Paper and paper products: pulp from indigenous raw materials, paper and paper products;
  8. Plastic products: high-pressure pipes, pipe fittings, shower hoods, wash basins, insulating fittings, light fittings, office and school supplies, and fittings for furniture;
  9. Building materials: manufacture of lime, gypsum, marble, granite, limestone, ceramics, tubes, pipes and fittings.

AREAS OF INTEREST

 

AREAS OF INVESTEMENT

Special Zone of Oromia Surrounding  Addis Ababa

Other Areas

 

 

 

 

 

Other Areas

 

FOOD INDUSTRY

1 UP TO 5 YEARS

2 UP TO 6 YEARS

BEVERAGED INDUSTRY

1 UP TO 3 YEARS

2 UP TO 4 TEARS

TEXTILES & TEXTILES PRODUCT

2 UP TO 5 YEARS

3 UP TO 6 YEARS

LEATHER & LEATHER PRODUCTS INDUSTRY ,EXCEPT TANNING OF HIDE  & SKINS BELOW FINISHED LEVEL

 

2 UP TO 5 YEARS

3 UP TO 6 YEARS

WOOD PRODUCTS INDUSTURY

2 UPTO 3 YEARS

3 UPTO 4 YEARS

PAPER AND PAPER PRODUCT INDUSTURY

1 UP TO 5 YEARS

2 UP TO 6 YEARS

CHEMICAL & CHEMICAL INDUSTURY

2 UP TO 5 YEARS

3 UP TO 6 YEARS

BASIC PHARMACEUTICAL PRODUCTS & PHARMACEUTICA PREPARATION INDUSTURY

4 AND 5 YEARS

5 AND 6 YEARS

RUBBER AND PLASTIC PRODUCTS INDUSTURY

1 AND 4 YEARS

2 AND 5 YEARS

OTHER NON – METALLIC MINERAL PRODUCT

INDUSTURY

1 AND 4 YEARS

2 UP TO 5 YEARS

BASIC  MANETAL  INDUSTURY (EXCLUDING MINIG OF MINERALS)

3 UP TO 5 YEARS

4 UP TO 6 YEARS

FABRICATED PRODUCTS INDUSTURY (EXCLUDING MACH ENERY & EQUIPMENT)

1 AND 3 YEARS

2 AND  4 YEARS

COMPUTER ,ELECTRONIC & OPTICAL PRODUCTS

INDUSTURY

2 UP TO 4 YEARS

3 UP TO 5 YEARS

ELECTRICAL PRODUCTS INDUSTURY

2 AND 4 YEARS

4 AND 5 YEARS

MACHINERY AND  EQUIMENT INDUSTURY

5 YEARS

6 YEARS

VEHICLES TRAILERS AND SEMI TRALEIR INDUSTURY

2 UP TO 5 YEARS

3 UP TO 5 YEARS

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