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 ratify the first national special economic zone policy on its 11th extraordinary meeting aimed to expand free trade zones in the country.
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 in the presence of Prime Minister Abiy Ahmed and other senior government officials.
“The Corporation has finalized necessary preparations to establish the zone including legal frameworks, working systems, and infrastructure in collaborating with the different governmental stakeholders,” said Kiyya Tekalign, Strategy Advisor at Industrial Parks Development Corporation (IPDC).
As he said, the Ministry of Finance has finalized preparing the free trade zone incentive regulations which is expected to be ratified soon. To benefit from the scheme, the corporation calls 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 potentials 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 indicate by Kiyya, in the free zone, the country’s customs system and general laws are applied in a way that facilitates the development, and investors, importers and 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,” Kiyya Explained.
The zone is expected to provide support for the manufacturing, importing, and exporting procedures by increase efficiency, trade competitiveness, FDI, urbanization, industrialization to 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 hectare 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.
Dire Dawa Industrial Park is located in Dire Dawa on 150 hectares of land 445 km from Addis Ababa. The park specializes in garment, apparel, and textile and commenced operation in 2018, with 15 factory sheds which has 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 were the main reasons for under operation.
In 2019, Ethiopia agreed with Kenya to establish a free trade zone and enhance infrastructural development. Ethiopia has also ratified the African Continental Free Trade Area (AfCFTA) in March 2019 and is also is 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.