Manufacturing
of Eco-friendly Textiles: A Case Analysis of an Industrial Park in
Mekelle, Ethiopia
Desta, Asayehgn, Sarlo
Distinguished Professor of Economic Development, Barowsky School of
Business, Dominican University of California
Hadush Berhe, Assistant professor
of Industrial Engineering, Ethiopian Institute of Technology, Mekelle
University
Introduction
Because
of extensive growth in infrastructure (roads, schools, railways, water,
electricity), and the booming construction industry, Ethiopia’s Gross
Domestic Product (GDP) had grown at the rate of 10% per annum from 2003/04
to 2014/15. At the same time, as measured by the international poverty
line of less than $1.90 per day, the poverty trends in rural and urban
areas of Ethiopia have decreased from 55.3% in 2000 to 33.3% in 2011
(World Bank. 2017).
Ethiopia has been attempting to use
Benchmarking, Business Process Reengineering (BPR), Quality Management
System (QMS), and the Kaizen managerial techniques to overcome its
disadvantages in the production and marketing of manufactured goods.
Nonetheless, Ethiopian manufacturing companies have been performing poorly
in the international market (Desta, 2015). For instance, Ethiopia’s
value-added (% of GDP) in manufacturing has ranged only from 6.00% in 2004
to 4.08% in 2015 (World Bank, 2016).
Beginning in 2014, the Ethiopian
Industrial Parks Development Corporation (IPDC) sought the assistance of
the China Civil Engineering Construction Company to overcome the abysmal
industrial situation and to substantially improve productivity in the
manufacturing sector (Xinhuanet, September 6, 2017); the IPDC has started
establishing industrial parks in specific areas that have been designed
for manufacturing businesses. In other words, the industrial parks have
been zoned in either government-owned land, or helpless farmers were
evacuated from their farmlands. Government officials claim to have
promised the evacuated farmers priority of employment opportunities in the
Park according to their skill levels, and they also encouraged these
farmers to establish small and micro enterprises. However, Hailu (2017)
argues that the evacuated farmers never received adequate compensation.
Nonetheless, the Ethiopian government
is now actively soliciting foreign investors (from Greece, Bangladesh,
South Korea, China, and other countries) to establish textile and garment
manufacturing enterprises and to redesign the country’s manufacturing
enterprise, thereby energizing Ethiopia’s future industrial growth
(Ethiopian News Agency, August 02, 2009). Based on this vision, the
Ethiopian Government has already established and inaugurated three
industrial parks in Hawassa, Kombolcha, and Mekelle City at the cost of US
$246 million, $90 million, and $100 million respectively.
More specifically, the IPDC has
promised that the leased industrial park spaces will: 1) be equipped with
all-encompassing utilities and infrastructural facilities with access to
relatively cheaper transportation facilities (roadways, railroads, ports),
high-powered electric supplies, gas lines, high-end communication cables,
and large-volume water supplies) that meet international standards; 2)
have access to export and income tax rebates (the IPDC have already
arranged tax reduction schemes for the parks with the Ethiopian Investment
Commission and Ethiopian Revenue and Customs Authority); 3) facilitate the
industrial parks to outsource their management contracts to domestic and
foreign investors; 4) serve as effective and efficient learning
organizations for other domestic and foreign firms; 5) attract and promote
environmentally-friendly domestic and foreign investors (who will employ
green economy, zero-liquid discharge technology, and recycle about 90
percent of their water usage); 6) create a robust and competitive
industrial base through technology transfer; 7) record innovative and
leading eco-industrial parks that operate to foster competitive,
export-driven manufactured products; and 8) elevate industrial
competitiveness, enhance foreign exchange, and foster local employment
opportunities so Ethiopia may achieve the middle-income status (IPDC,
2015). Thus, Ethiopia can promote technological transformation and
economic integration by globally joining top textile and apparel producing
countries (Xinhua, 2017, Economy, July 9, 2017).
It is too early to assess the full
effects of the industrial parks. Nonetheless, given the level of high
confidence that policy makers are drawing, and based on the optimistic
trajectories industry insiders have been drawing about the industrial
parks, Ethiopia appears capable of becoming the textile and garment
manufacturing hub in Africa” (Xinhuanet, 2017). The general purpose of
the study is to identify Mekelle Industrial Park’s strengths and
weaknesses and to overview its opportunities and threats.
More specifically, the intention of
the study is to: 1) analyze the internal strengths and weaknesses of the
Mekelle Industrial Park’s textiles and garment industry, and 2) map out
the external factors (opportunities and threats) that could affect its
level of development as Africa’s center for textile and garment
manufacturing.
The study focuses on the following
central questions: a) Can the Mekelle Industrial Park have the capacity
and the capability to attract innovative and competitive foreign firms,
and b) could foreign enterprises spin off Mekelle Industrial Park’s
research and innovation techniques to other domestic firms?
To partially answer these questions,
the study is organized into two sections. The first section maps out a
brief description of the Mekelle City. Based on a detailed SWOT analysis
given in the main part of the research paper (see Desta and Berhe, 2017),
section two draws tentative baseline conclusions and draws research
implications for the future.
The
Mekelle Industrial Park
The city of Mekelle is located in
Tigray National Regional State in the northern part of Ethiopia. The city
features a city administration, a municipality, seven sub-cities, 33 kebelles
and 105 Ketenas. According
to the Central Statistical Authority projection, the population of the
city of Mekelle is roughly 261,168 (Liveihood, 2017). Mekelle City has
economic linkages with the surrounding towns, other regions and the Addis
Ababa city. With respect to education, Mekelle City has a number of
primary, secondary, TVET, and private and government higher educational
institutions.
The City of Mekelle is endowed with a
24-hour electric supply from the centrally-located national grid. Though
limited, the City of Mekelle has access to mobile, internet, postal and
telephone services. Though very marginal, Mekelle’s main water supply
source is potable underground water, distributed intermittently through a
piped network. Residents and employees can ride a daily inter-urban
transport service to and from Addis Ababa and other major cities and towns
in Ethiopia.
The
Mekelle Industrial Park that was established in 2017 is located about five
kilometers from the main city of Mekelle. The Park covers an area of
100-hectares of land, located along key economic corridors and customs
facilities that enable the transport of imported raw materials directly
from the customs post situated along the line of the industrial park. The
Mekelle Industrial Park was established to replicate other benchmark
industrial park development centers. Thereby, a focus group, and other
administrative teams from the Mekelle Industrial Park visited the Komolcha,
Bole Lemi, and the Hawassa industrial parks.
According
to Mekelle Industrial Park management officials, the Park was established
to contribute to the industrialization process of the nation in general,
and the Tigrai Region in particular. To facilitate the construction,
operation and other issues related to the industrial park, the following
government branches and stake holders were set up to render support: 1)
the Industrial Parks
Development Corporation is assigned to regulate the construction and
administration of the park; 2) the Ethiopian investment commission is
assigned to attract foreign investors; 3) the Ethiopian
Custom and Revenue Authority is assigned
to enforce and supervise incentives of tax
exemptions given to prospective investors; 4) the Tigray Bureau of trade,
industry, and urban development is assigned
to facilitate and prepare investment land,
power, and other infrastructural facilities: 5) Mekele University has been
assigned to provide
long-term training to Park employees; 6) The Mekelle garment
college and TVETs, Industrial Park development cooperation are
assigned to develop entrepreneurship and to encourage the development of
small-scale business owners within the park; 7) The Tigray office of occupation healthy and safety is assigned to
control hazards arising in or from the workplace that could impair the
health and wellbeing of workers and the community; 8) the Tigray Bureau of
labor and social affairs is assigned to encourage and assist investors to
balance and confirm the availability of trained workers); 9) the Ministry
of Industry is assigned to promote the expansion of investment in the
textile and apparel industry and remain competitive); and 10) the
Ethiopian kaizen institute facilitates is assigned to introduce its kaizen
system of continuous improvement techniques.
SWOT
ANALYSIS, Tentative Conclusions and Policy Implications
In
principle, each industrial park is supposed to be unique and is required
to have its own vision, mission, and value statements. However, the IPDC
has interestingly used one aggregate
vision, mission, and value statement for all industrial parks in the
country. Stated briefly, industrial parks established in Ethiopia are
expected to boost eco-industrial parks development operating through the
highest standards of professionalism. The parks are also expected to
enhance exports, transfer technology, generate employment, and achieve
middle-income status. Finally, the parks are expected to be “innovative
and leading eco-industrial parks and operator[s] in Africa by 2025.” The
mission and vision statements of all the parks demand the highest level of
integrity and professionalism. As learning organizations, the parks are
expected to be effective, efficient, and environmentally-sensitive in
order to achieve customer satisfaction.
The
vision, mission, and value statement of the Ethiopian Industrial Parks are
too vague and general. However, given no choice, the preliminary
understanding of the operative capacity and capability of the Mekelle
Industrial Park and the SWOT analysis, that is, the internal factors
(Strengths and Weaknesses) and external tools (Opportunities and Threat)
were collected using: a) brainstorming method, b) previous research
experience, and, c) interviews with industry managers, government agencies
and employees. In short, the SWOT analysis (See Desta and Berhe, 2017)
identifies the Park’s leverage or competencies (value added); realizes
and magnifies new opportunities; minimize limitations; and proposes some
ways of preparing and undercutting future threats.
Government officials are very
optimistic that the industrial parks thus far established in Ethiopia
could transform Ethiopia into Africa’s fashion hub. More particularly,
the Mekelle Industrial Park is expected to be a formidable regional center
for textile and garment manufacturing in Northern Ethiopia. However,
mission, vision and value statements used for the Mekelle Industrial Park
are too general and were not developed based on shared agreement of the
major stakeholders of the Mekelle Industrial Park. In addition, the values
of the industrial park were not described in clear behavioral terms. To
achieve its visions, the strategic paths (i.e., resource priorities,
organization structure, issues that need daily organizational attention)
were not articulated to initiate strategically (See for example, Stanford
University School of Graduates, 2017).
To be unique and more appropriate,
the Mekelle Industrial Park needs to bear a well-constructed vision that
includes a core ideology (the essential purpose of the organization—why
it exists, the core values, and what it stands for), and a clear picture
of what the organization will become and the major term results to be
accomplished.
Given this, it is suggested that
instead of using a general vision statement, the Mekelle Industrial Park
needs to be driven by an innovative and cradle-to-cradle production system
in order to be the world’s best sustainable textile enterprise. Thus,
Mekelle can become one of the leading eco-industrial park operating in the
Tigrai region by 2025.
On the other hand, the mission or
purpose of Mekelle Industrial Park needs to describe the boundaries how it
will achieve its stated objectives. In short, the mission of the Park must
be specific and clearly stated, it must measure what it claims, it must be
attainable and relevant (add value), and it must be accomplishable. To
fulfill these, Mekelle’s Industrial Park must be designed to be ethical,
transparent, and it must deliver value-added products and services to its
global customers through innovative technology.
The core values or boundaries within
which the Mekelle Industrial Park will operate in pursuit of its vision
must: 1) adhere to global thinking, 2) respond quickly to changes in
customer requirements, 3) maintain delivery requirements, 4) strive to
exceed expectation, 5) be fair, empower, and inspire employees to perform
beyond the best, 6) create environmental sustainability, and 7) play a
role in social, corporate, and community responsibilities.
Using the mission, vision, and value
statements developed for the country as a proxy, a preliminary SWOT
analysis of Mekelle Industrial Park’s textile and garment enterprises
indicates that it faces the following internal (strengths and weakness)
and external (opportunities and threats) challenges.
From a strengths point of view, the
production cost of Mekelle Park is reputed to provide high quality textile
and garment products thanks to its cheaper resources. If asked, the nearby
academic and training institutes would not hesitate to share their
invaluable knowledge and research on the Kaizen
management system, total quality management (TQM), supply chain management
systems, and fruitful outsourcing techniques. If managed well, the Mekelle
Industrial Park would undoubtedly provide high-quality value-added
services. As a result, the Mekelle Industrial Park would differentiate
itself by providing unique products to its international customers.
In
terms of weakness, the Mekelle Industrial Park will likely be challenged
by water scarcity and lack of adequate business infrastructures (such as
transportation, lack of automation, electricity, telephone lines, aged
existing technology, video-conferencing, electronic document process,
electronic data interchange, intranet, internet, and outdated technology).
The existence of magnanimous bureaucracy and the outlandish corruption in
the state and throughout the country are also likely to be formidable
challenges. Meanwhile, the coordination of the stakeholder, composed of
government agency support bodies, academic institutions, non-government
agencies, would hinder the park’s day-to-day operations. Finally, since
Ethiopia is landlocked, the enterprises operating at Mekelle’s
Industrial Park may not have timely access to global, environmentally
friendly facilities, which would likely mean costly access to overseas
suppliers and the international market.
In
terms of strategic growth opportunities, the Mekelle Industrial Park could
take advantage of government’s venture on high volume cotton production,
lower duty access to the EU markets, and access to East African markets
for textile and clothing items. The enterprises operating in the park
could initiate their creativity to produce globally-oriented, high-value
textiles such as flame-retardant, acid- and rain-proof fabrics. In
addition, the government could train and promote local garment designers
and provide financial support to designers participating in international
design competitions.
However,
since consumer fashion preferences can be volatile, Mekelle Industrial
Park will likely face challenges. The Ethiopian government will have to
help the various industrial parks to handle the rampant counterfeiting,
the illegal importing of cheaper textile goods, and the smuggling of
garments and textile products. Unless the government remains vigilant,
foreign producers will likely use the industrial parks as source for the
transshipment of foreign products and for relabeling and re-exporting
processed products to protected markets as Ethiopia’s products.
Given
these challenges, Mekelle Industrial Park’s future success depends on
its ability to effectively predict and respond to various dynamic changes.
Mekelle Industrial Park must be accommodated by proactive enterprises that
can swiftly and regularly respond to consumer demand, and can source the
newest merchandise on reasonable terms (See, Timetric. 2017 for another
textile business).
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