By: Sintayehu Tamirat
Ethiopian recently implemented Special Economic Zone Proclamation increased number and quality of investments in Dire Dawa Multipurpose Special Economic Zone (DDMPSEZ), said Ahmed Rushid, General Manager of the economic zone.
The general manager told EBC World that DDMPSEZ - the country's first multipurpose economic zone - has attracted many Foreign Direct Investments with a great deal of experience.
Ahmed attributed the boost in FDI to the Special Economic Zone Proclamation No. 1322/2024, which aimed at enhancing the countrys participation in global value chains and strengthen its capacity to effectively compete in regional trade on efficiency, lead time and cost.
"Dire Dawa Multipurpose Special Economic Zone has been operational for the past three months. We could accomplish tangible undertakings following the implementation of the Special Economic Zone Proclamation No. 1322/202. We only had 6 big global and domestic manufacturing firms over the past five years. But now the number of multinational corporations and domestic firms increased to 40. This is big achievement. 27 have gone operational while the remaining are in the pipeline. Attracting this much investment shows the attention given to the special economic zone. We also generated significant revenue, which is promising."
Ahmed also commended the jobs created from the operational investments.
The investors who joined DDMPSEZ have years of experience in doing businesses in free trade zones overseas. "Among the investors are Ethiopian origins that were running their investments in different parts of the world," he said.
The three-month progress has been possible due to the rigorous tasks undertaken over the past three years by the federal government and other stakes, said Ahmed, mentioning the preparation of sound proclamation, engaging all relevant stakes, implementing it and transforming 12 of the 13 industrial parks into special economic zones, with the exception of Dire Dawa Free Trade Zone, which was initially an industrial park, then a free trade zone and now a Multipurpose Special Economic Zone. the government has also built additional special economic zones.
The boost in quality, quantity and variety of investments attracted to DDMPSEZ has also been largely due to the unprecedented incentive provisions of the Special Economic Zone Proclamation, DDMPSEZ General Manager underlined.
Illustrating this he state "Investors can now use 100% of the foreign currency they generate from manufacturing and exporting of their produce or selling them here at the DDMPSEZ."This was 50-50 before the advent of the new proclamation, he added.
"Previously, as an investor exported his products, he was expected to deposit on the retention account the foreign currency he earned from the export and allowed to use 50% of the deposit. the investor can use the remaining 50% in local currency [Birr]. It was the bank that serves the investor that uses the foreign currency. This is one of the conducive conditions unveiled to investors here."
Another attractive incentive package he cited is exemption of all types of taxes, DDMPSEZ General Manager said."Investors here are entitled to exemptions from taxes and duties for all imports and exports of goods into and out of a special economic zone. They will also have zero rated VAT treatment and exemption from other indirect taxes for all goods and services entering a Dire Dawa Multipurpose Special Economic Zone ."
The investors selling their services here within the DDMPSEZ free trade local market will not pay any tax. This also applies for suppliers providing raw materials to manufacturers on the free trade market available here. In addition, as investors export goods manufactured here or those imported for value addition, no taxation is applied. "This beefs up productivity," Ahmed said. "For example, since our free trade zone is considered as any overseas market, products are sold here and so are payments. But conventionally, exporters get payments after their export reached the buyer at destination country. It also avoids the hardship exporters experience. An investor who faced troubles at a certain point in the export market is supposed to travel to solve the issue. This at least costs time, effort and foreign currency. So, the presence of the free trade zone here alleviated this hurdles.'
EBC World could learn that there are several companies bringing goods to the free trade zone. Car importers, vehicle assemblers, factory input suppliers and more.
The Ethiopian Investment Commission (EIC) says the country's SEZ development program is driven by its desire to create export-oriented, sector-specialized, vertically integrated, and sustainable industries. So far, the government has built 16 SEZs, and over 300 companies are operating in them.