One man's dream transforms into industrial showcase

Chinese Premier Li Keqiang looks at a scale model of the Eastern Industry Zone accompanied by his Ethiopian counterpart, Hailemariam Desalegn (first from left) in Addis Ababa, Ethiopia, on May 5. Li Tao / Xinhua

Eastern Industry Zone is winning plaudits from Ethiopian and Chinese officials, but entrepreneur say much more needs to be done to make it a true success

An industrial park that has become an African showcase - Ethiopia's Eastern Industry Zone - started with a man from China's Jiangsu province who had a pipe dream.

Lu Qiyuan came to Ethiopia around 2006, to build a water pipe factory. But an Ethiopian official suggested he consider a cement factory instead because of a cement shortage.

After the cement factory was built, Lu, 50, decided to develop an industrial zone to offer a way for Chinese companies to invest in Ethiopia while getting support from both the Chinese and Ethiopian governments. Now, Lu says, top officials call at his business.

"We have visitors almost every day. Sometimes one group in the morning and one in the afternoon," says Lu, president of the Eastern Industry Zone.

Among the visitors are many high-level officials. Besides Ethiopian President Mulatu Teshome and Prime Minister Hailemariam Desalegn, Chinese Premier Li Keqiang, and vice-premiers Wang Yang and Liu Yandong all have visited the zone, as well as more than 30 groups with delegates of ministerial or vice-ministerial level from China.

Launched in 2007, the zone was listed as a state-level Overseas Trade and Economic Cooperative Zone by the Chinese government in May. The number of enterprises in the zone, which covers 4 square kilometers, is expected to reach 50 this year from the current 30 or so. It is located in Oromia region around Dukem, a small town some 35 km southeast of Addis Ababa. Companies located there include Hua Jian International Shoe City (Ethiopian), East Steel, Yangfan Motors and Shadeka Spare Parts Manufacturing.

Lu says while Chinese companies were hesitant to go overseas a few years ago, that has changed with rising labor costs in China. "The incoming 20 companies are waiting for the completion of factory buildings. Many enterprises are lining up to buy land in the zone," says the private entrepreneur.

Lu says it sometimes was a struggle for him to promote the zone at the beginning, given that the industrial zone model can seem strange to many officials in Ethiopia. In an effort to get around the problem, Lu arranged for many Ethiopian officials to visit industrial zones in Suzhou city in Jiangsu province and in Chongqing municipality.

He says the turning point for the zone came in 2014 after the Ethiopian government "sincerely acknowledged the importance of industrial zones" and "our work in planning and attracting investment".

Arkebe Oqubay, a senior adviser to the Ethiopian prime minister, visited other Chinese industrial zones in Africa and came back convinced that Eastern Industry Zone is doing things right, Lu says.

"I can talk directly with the prime minister. The prime minister is scheduled to meet and talk with me once every six months. Besides that, I can still talk with him if I encounter problems," Lu says.

Among the challenges are problems with efficiency and a lack of foreign exchange, Lu says.

"It's easy to build an industrial zone, but how to attract investors is another issue. China now has a large industrial capacity to be transferred, but whether Ethiopia can convince them to come depends on the policy."

He says Ethiopia has no problem in attracting 20 to 30 companies at a time, but that won't solve Ethiopia's high unemployment and serious financial woes. Those problems can be solved only if Ethiopia can bring in 300 to 500 companies a year.

The prime minister has asked that the park expand from 4 sq km to 25 sq km, Lu says.

Bringing in foreign investment alone is not enough, Lu says. What is needed is development of Ethiopia's national industry to match the industries in the zone. "If the national industries and the industries in the zone don't match, the country may never support itself."

Lu is confident that more companies will open in the Eastern Industry Zone, considering the strong support from the government and the favorable conditions in the country.

"Parliament has passed a special law for industrial zones, and the details of the law will be published soon," he says. "A support system, which will include the customs, tax, financial, investments and even immigration department, will be established and set up offices in industrial zones."

Support comes from the Chinese government as well, especially when it involves the Belt and Road Initiative, says Lu. The initiative refers to the Silk Road Economic Belt and 21st Century Maritime Silk Road, development strategies put forward by Chinese President Xi Jinping in 2013. The belt would link China with Europe through Central and Western Asia. The road is the maritime route through the Strait of Malacca to India, the Middle East and East Africa.

Ethiopia is like the China of 30 years ago, when China was launching its reform and opening-up policy, and Ethiopia has the potential to develop in the next 30 years as China did, Lu says.

"The country is the location of the headquarters of the African Union, and its relationship with China is the best in its history. It has stable public order and good transportation," he says, adding that he has never heard of robbery in Ethiopia.

Cheap labor and power and high profit margins also make Ethiopia a good destination for investment.

A worker's typical monthly wage in Ethiopia is only about 300 yuan ($48) and the country has adequate power supplies, even exporting power to its neighboring countries, Lu says.

While enjoying zero tariffs when exporting to Europe, the United States, Japan and China, the price of many products in Ethiopia is at least twice that in China.

"The price of cement is about 1,000 yuan a metric ton, but in China, it's only about 250 yuan. As for steel bars, it is sold at about 6,200 yuan a ton instead of about 2,200 to 2,300 yuan in China. For spare parts, the price differences are even larger," explains Lu.

Lu says he has invested about 1.4 billion yuan in the Eastern Industry Zone, including 600 million yuan in the park itself and about 800 million yuan in cement and steel factories in the zone.

He says CGC Overseas Construction Group, a major Chinese company, has been talking with him about equity participation in the Eastern Industry Zone.

"If they become a big shareholder in the zone, they may shoulder the responsibility of financing, and I will concentrate on construction," Lu says.

houliqiang@chinadaily.com.cn