Turkey’s industrial boom: lessons for Ethiopia

Turkish Foreign Direct Investment (FDI) to Ethiopia is leading the group of emerging economies that have shown interest in investment opportunities here. Although the Chinese lead in terms of number of companies that have invested in the country, the Turks lead in combined capital outlay, according to the Ethiopian Investment Commission (EIC). 

The combined capital investment by the Turks is just shy of 20 billion birr, constituting 22.5 percent of the overall outlay. The EIC believes that Turkish companies are number one in the quality of the investment on account of having the highest share of overall capital investments by FDI in Ethiopia. This is music to the ears of the Ethiopian government. And it seems that that it is just a tip of the iceberg. In that regard, the relationship between the two countries was further cemented with the recent visit to Ethiopia of Turkish President Recep Tayyip Erdoğan.

Back in 2009, during a visit to Turkey, the then President of the Oromia Regional State, Abadula Gemeda, is said to have shared a joke with the man behind major constructions in Istanbul: that he was not leaving Turkey until a Memorandum of Understanding was signed between the two sisterly countries. Several government officials, including former President Girma Woldegioris, and the late Prime Minister Meles Zenawi, former Foreign Minister Seyoum Mesfin, former Trade and Industry Minister Girma Birru, former Ethiopian Ambassador to Turkey and current President of Ethiopia Mulatu Teshome (PhD) and other government officials have met and talked with him. Enthusiasm was high among the officials that the then foreign minister, Seyoum Mesfin, even called it “The mother of all investments.” The talisman behind the colossal project, Yusuf Akgün, Chairman of Akgun Construction, said: “They won our hearts.”

Akgün is at the helm of a company that already runs a major investment zone in Turkey. The company deals with and specializes in construction and design materials with many business partners from various well-known brands in the European Union. Its network extends to countries such as Germany, France, Austria, Belgium, Italy and South Korea.

Akgün is also the owner and chairman of Ikitelli Organized Industrial Zone, extending over some 1000 hectares of land and composed of 37 industrial cooperatives and 30,000 workplaces. It is the biggest industrial center in Turkey in terms of manufacturing capacity and number of hosted workplaces.

Akgun Ethiopian factory (pictured, above).

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That is what Akgün is planing to have here in Ethiopia. Akgün Group signed an agreement with the Ethiopian government in 2009 that enables it to develop an international industrial zone in the Oromia Regional State near Legetafo. Akgün initially secured 100 hectares of land from the regional state, which would be eventually extended in the future once the project gets moving. The total cost of the project is estimated at 10 billion dollars and is projected to employ one million people.

The company has started some initial work and is conducting a soil test and  planning to start construction in the near future. Machineries and equipment are on their way to Ethiopia. However, the initial construction site is found in the catchment area of the Legedadi dam which supplies clean drinking water to 50 percent of the over three million Addis Ababa residents. This predicament has stalled the progress of the construction of the Ethio-Turkish Organized Industrial Zone.

Foreign exchange earner

True to form, the Turks are adept at construction and at managing industrial zones, which is one of the major revenue generators of the transcontinental country which links Europe and Asia. “Last year, we were the second top taxpayer in Turkey,” Mustafa Topçuoğlu, President of Demirciler Sanayi Sitesi, told The Reporter. In addition, the industries are foreign exchange earners. “Out of 500 enterprises, 200 export their products to foreign countries,” Topçuoğlu said.

Turkey is one of the economic giants in the region. With a GDP of USD 1.5 trillion (PPP), according to the CIA World Factbook, in 2013, the export earning of the transcontinental country was a whopping USD 167 billion. Major exports include apparel, foodstuffs, textiles, machineries and transport equipment.

Technoparks: R&D

Turkey strongly supports Research and Development (R&D) and innovation-related investments through its comprehensive investment- incentive regime. Aiming to become a high-tech manufacturing and export base in the next 10 years, Turkey will heavily rely on its technology parks which are fast increasing in number and populated by the country’s visionary entrepreneurs and talented workforce. “Technology development and innovation in technoparks will bring an export revenue of USD 10 billion by the year 2023,” Turkey’s Minister of Science, Industry and Technology, Nihat Ergun, said back in 2013. “The target is to double the number of technoparks in Turkey and increase their exports 10-fold. Anything less will not be considered a success,” Ergun noted. Technoparks in Turkey have come a long way in the last decade, from only tow in 2013 to dozens of active technoparks today.

“If you are an organized industrial zone, then you have to have a technopark. There is no industrial site apart from this which has been successful on this issue. We established a technopack after reaching an agreement with Yildiz Technical University about a year ago,” Topçuoğlu said. In that regard, the enterprises that work on R&D in the technoparks will be exempted from tax for 10 years, according to Topçuoğlu.

Currently, one research that is being conducted at the Yildiz Technical University technopark is on an Unmanned Ariel Vehicle (UAV) called the Heron. It is a medium-altitude long-endurance unmanned aerial vehicle. Turkey operates a special variant of the Heron, which utilizes Turkish- designed and manufactured electro-optical sub-systems. For example, the Turkish Herons use the ASELFLIR-300T airborne thermal imaging and targeting system. The Turkish Herons also have stronger engines in order to compensate for the added payload created by the heavier ASELFLIR-300T.

Focusing on the next generation

There are more that  5000 engineers and scientists currently working at the Yildiz Technical University technopark and at least 75,000 people are now working in technoparks in different parts of Turkey with their main focus being on R&D.

For instance, Yildiz Technical University technopark gives due attention to the aerospace industry. “We develop solutions for airlines and software in aircraft maintenance. We have a very niche market. Major airlines are our main customers. There is only one technopark, which is focused on this area in Turkey and not more than ten in the world,” an engineer at the technopark said.

The technopark hires new graduates in addition to giving them on-the-job trainings. They also have summer internship programs for university students. “They come to us to work for one or two months. During their stay with us they learn about the industry and if we  find a good potential student we will hire them up on their graduation,” the engineer told The Reporter.

This and other schemes are what Akgün and co have in store for Ethiopia. And to realize the project they have aggressively promoted the Ethio-Turkish International Industrial Zone project in Turkey, Germany, the US, the UAE and Japan. The industrial magnet, Akgün, is confident that his company will soon embark on the largest industrial zone development project in Africa which is backed by both the Ethiopian and Turkish governments. “We just need them [government officials] to give us a sovereign guarantee that there would not be further problem,”  Akgün said.

Sourced here http://www.thereporterethiopia.com/index.php/in-depth/indepth-business-and-economy/item/3233-turkeys-industrial-boom-lessons-for-ethiopia