Evaluating Economic Impact of Industrial Parks Development Projects in Ethiopia

Abstract

The construction and operation of industrial parks development projects are widely used as a major economic development strategy for most policy and decision-makers. Currently, there are 32 industrial parks in different zones, special zones and city administrations in Ethiopia. In this study, those zones and city administrations that have industrial parks in their geographic setting are categorized under treated zones and other zones that have no industrial parks in their geographic settings are categorized under controlled zones. This study aims to assess the factors that affect economic impact of Industrial Parks and to evaluate the micro and macro-economic impact of Industrial Parks Development Projects in Ethiopia. To address these research objectives, the authors used two estimation techniques: Ordered Probit and Difference in Differences (DID) estimation techniques. Both primary and secondary data sources were used to address the research objectives. The finding of the study revealed existence of high community commitment, abundant non-financial resource, tangible government support and good social capital in Ethiopia as the major factors that optimize economic impact of industrial parks development project whereas existence of unskilled labour supply, concentration of Ethiopian Industrial parks in the urban areas and out-dated technology are the major factors that diminish economic impact of Industrial Parks development projects in Ethiopia. The establishment and operation of Industrial Parks Development Projects significantly increased all assessed macro-economic indicators except domestic capital formation. The majority of our respondents strongly agree on the positive role of industrial parks development projects for environmental protection, infrastructure development, employment opportunities generation and technology transfer. Hence, it is highly recommended for the government to design special policies and incentives packages that encourage domestic investors to invest in the Ethiopian industrial parks.