DO CLUSTER BASED INDUSTRIAL PARK CATALYSE DEVELOPMENTAL SPILLOVERS? EVIDENCES FROM ETHIOPIA'S EXPERIENCE

Cluster based industrialization programme where specialized resident firms share specific location known for its contribution increasing productivity through integrated services address organizational red tape. This programme is well known in most industrial economies of which industrial district is of the successful modalities in Europe including (Italy, Germany, Britain) and other OECD countries. Based on such successful experiences of industrial economies in the nineteenth century, with specialized adjustments including ad hoc policies; cluster-based industrialization programme or special economic zones implemented in most South-east Asian countries starting from 21st century. This thesis aims to investigate developmental impact of industrial park programme, barriers coexisting and how it affects outcomes of the initiative in low-income country, using Ethiopia as a case study. The study offers empirical findings based on mixed methods employed (comparative case study & survey), utilized both primary and secondary data sources including; interviews, questionnaire, observation and secondary sources (document analysis). Over the past five or six decades there is an increasing importance of industrial park development as strategic instrument for local economic development especially in the context of many developing countries and massive proliferation experienced across the world. Industrial park is considered as a policy instrument alleviate structural constraints pertaining to institutional deficiencies, social barriers, political problems, poor economic and technological environment and other binding constraints of industrialization sector. Being a development strategy to foster local economic development it often implemented by low income countries or those with low comparative advantage with the presumption they are precursors of technology and innovation center. In the condition of well management and effective implementation, economic zones in general and industrial park in particular would serve as instrument spur local industrialization agenda, catalyse developmental spillovers on the local economy. Yet virtually little is known about development trajectory of Ethiopia’s industrial park development and its practical impact in the context of latecomer to the initiative. This paper aims to address this gap in the literature based on compelling data from different dimensions including IP program issues, IP characteristics, contextual or mediating factors at both national and regional/local level. Ethiopia aspires to be manufacturing hub of Africa and desires to attract large number of FDI. Although it is daunting to put clear picture of industrial park impact in the long run because the initiative is more of process. The present study stipulated that the program created significant number of direct employments in the local labour market which is amongst the major of its many connections with local economic development, it falls short of meeting desired goals. The paper finds that the program has shown positive take-off contributed more in creating significant number of jobs and nothing more could be said about their impact on the country’s industrialization agenda provided that the program is in nascent stage of development. Apparently, as in the case of other Sub-Saharan African countries (SSA) engagement of resident firms in country’s industrial parks delimited their main tasks to simple assembly/processing operations given the economic zones tend to adopt more of traditional export processing zones. In such modality of operation, the likelihood of skill and technology transfer seldom happen but mostly non-existent. The initiative failed to form integration with local economy as it has been pronounced in the policy framework. Along with enclave model Ethiopia’s industrial park program mainly inspired by preferential trade regimes like AGOA and EBA, which makes the initiative myopic and hard to ensure sustainability. This makes the initiative less reliable due to the fact that success factors of industrial park subjected to capacity to invest and capitalize comparative advantage of local economy in time as well as in space than fancy policy or mere physical presence of parks. The finding revealed that similar to other zones in most developing countries, Ethiopia perhaps presents a serious practical challenge to both public IPs and private zone alike. This warranty strategic intervention in order to resolve binding constraints for local manufacturing sectors. Indicative of loss of focus in the private industrial park should be well incorporated in the body of documents designed for supervision and regulatory system in the upcoming private zones in Ethiopia. The results regarding labour conditions including; wage, standards, rights of workers, health & safety, unionization, hours worked showed that there is variation across industrial park as well as sectors of production. In Ethiopia, unlike most zone developing countries, the same labour law proclamation elsewhere in the national economy apply to industrial parks. Although the laws to control non-conducive working conditions and legal breaches maintained, authorities turn blind eyes mainly in fear of losing investors by improving labour standards. The labour composition is dominated by young, less educated, unskilled female workers at low pay of up to 650 ETB/month which is less than 1US$ per day. This situation exacerbated by non-existing trade unions, lack of resources and staff for the inspectorate department and government’s lack of will in reinforcing the labour law. To put further on this, poor working conditions in the industrial parks attributed to incapable and failures in domestic labour institutions. However, major limitation of this study is it lacks detail synthesis on industrial parks labour conditions and same economic activities in the outside environment in comparative perspective without which it is difficult to make generalization. The study concludes that although there exist progressions along identified performance indicators in Ethiopia’s industrial parks, the prospect largely depend on improvement of; policy environment, shortfalls in the areas of implementation, shift from myopic to long term objectives and strong political commitment as experienced by most successful countries in programme operation.