South Korean garment-makers are among companies in talks with the government about establishing operations at the planned site in the capital, Addis Ababa, Mekonnen said in an interview in the city on March 15. The facility is scheduled to open before the fiscal year ends on July 7, he said.

“This is one of the key strategies to facilitate and support foreign and domestic private-sector partners and particularly to enhance exports,” Mekonnen said. “It’s key for our industrialization.”

The economy of Ethiopia expanded an annual average of 10.6 percent for the eight years through 2011, double the rate of all of Africa, according to the World Bank. The Horn of African economy runs on a mixture of state dominance of large industries such as banking, telecommunications and power with private investment in manufacturing and agriculture.

The project is known as the Bole Lemi Industrial Zone and covers 156 hectares (385 acres). It’s designed to help companies such as agro-processors, pharmaceutical-makers and textile manufacturers produce and sell value-added goods and boost revenue from exports. The government is building roads, electricity and telecommunications infrastructure at the site and it will offer tax incentives for industries based there.

Trade Zones

Ethiopia is ranked 127th out of 185 nations in the World Bank’s Ease of Doing Business Index, behind African countries including Swaziland and Kenya. Companies are hindered by a lack of protection of investment and barriers to cross-border trading, according to the World Bank. The bank’s International Finance Corp. is contributing to a $10 million project to help Ethiopia ease investment rules for businesses.

Similar zones are being considered in at least five other locations including, Kombolcha, 158 miles northeast of Addis Ababa, and Dire Dawa, a self-administered city about 228 miles east of the capital, Mekonnen said.

The government is making a push to attract private investment with plans to convert its investment agency into a “one-stop service” for new companies to register, Mekonnen said. It is also introducing measures to speed the clearance of exports and imports at the border, he said.

Tax Breaks

The government passed a law last year offering income tax breaks of as long as six years for manufacturers of items including leather products, sugar and textiles. Producers who send 60 percent or more of their goods abroad will receive an additional two-year income-tax exemption, Mekonnen said.

Tax incentives on imported capital goods are reserved for existing investors and companies planning to expand their operations by more than 50 percent, according to the law.

“If there’s no expansion you are not creating new capacity,” Mekonnen said. “The reason we give incentives is to encourage re-investment.”

Huajian Group, a Chinese shoemaker, said last year it plans to invest $2 billion over a decade building a new manufacturing zone on the outskirts of Addis Ababa.