The Effects of Industrial Park Development on Manufacturing Firms’ Performance in Ethiopia

This study examines the effects of industrial parks on export earnings, employment creation, and FDI attraction in Ethiopia. Despite varying degrees of successes and failures, several countries have utilized industrial park and other forms of special economic zones as a policy instrument for fostering economic transformation. China is at the forefront of using special economic zones as a policy tool for economic transformation. Ethiopia is one of the African countries that has adopted industrial park development as a policy tool to enhance its economic transformation. However, the issue is not well researched and this study aims to contribute to fill the research gap. The analysis of the hypotheses test reveals that industrial parks in Ethiopia have statistically significant effects on export earnings, employment creation, and FDI attraction with significant levels of p ≤ 0.001. Low labor productivity, domestic raw material supply constraints, weak forward and backward linkage, transport cost and logistic constraints, and government institutions’ capacity constraints are identified as the major constraints that affect the effectiveness of industrial parks and manufacturing firms. On the other hand, the availability of a trainable labor force, raw material potential, preferential policies and incentives, the economic growth of the country, and the labor wage rise in China and other emerging countries are identified as the main five potentials and opportunities for sustained and dynamic industrial parks development. Based on the findings, three policy implications are suggested. First, formulating and implementing manufacturing labor force development and utilization policies and strategies are vital. Second, the forward-backward linkage along the value chain needs to be enhanced through proper policies. Finally, institutional capacity building through learning by doing and public-private partnership has to be strengthened.