1. One Stop Support Practice with Reference to Textile and Leather Sectors Presentation to GTZ Seminar Mount Grace Country House Hotel May 24, 2006

2. Contents Background Background Business & Investment Climate Business & Investment Climate Civil Service Reform Programme Civil Service Reform Programme Industrial Development Strategy Industrial Development Strategy Institutional Arrangement Institutional Arrangement Textile and Leather Industry Textile and Leather Industry The Way Forward The Way Forward

3. Background A country of 77 million Population A country of 77 million Population 1.14 million sq.km 1.14 million sq.km After 17 years of Socialist system, 1992 the current Gov‘t After 17 years of Socialist system, 1992 the current Gov‘t - Launched Economic Reform Prog. - Launched Economic Reform Prog. - Moving towards market economy - Moving towards market economy - Encourage private sector - Encourage private sector Structure of the Economy: Structure of the Economy: - 45% of GDP originate from Agriculture - 45% of GDP originate from Agriculture - 43% Service - 43% Service - 12% Industry - 12% Industry It is an agrarian Economy It is an agrarian Economy Adopted an Economic Development Strategy, ADLI Adopted an Economic Development Strategy, ADLI - 85% of the population base their lively hood on it - 85% of the population base their lively hood on it - 80% as raw material source for major industrial activities - 80% as raw material source for major industrial activities - 70% of the export earninig is generated from it - 70% of the export earninig is generated from it - 45% contribution to GDP - 45% contribution to GDP

4. Business & Investment Climate The Gov‘t has succeded in mentaininig a stable and preidictable macro- economic environment The Gov‘t has succeded in mentaininig a stable and preidictable macro- economic environment - the economy grows at an average rate of 6% per annum for the - the economy grows at an average rate of 6% per annum for the last 13 years, last 13 years, - inflation has declined from around 20% in 1992 to an annual - inflation has declined from around 20% in 1992 to an annual average rate below 5 % since then, average rate below 5 % since then, - In order to integrate the Ethiopian economy to the Global - In order to integrate the Ethiopian economy to the Global economy, it has been implemented a customs tariff reform economy, it has been implemented a customs tariff reform - It reduced from 230% to the current 30% - It reduced from 230% to the current 30% - the weighted average custom tariff has been reduced from - the weighted average custom tariff has been reduced from 40 % to the current 17.5% 40 % to the current 17.5% - Interest rate and foreign exchange have been relatively stable - Interest rate and foreign exchange have been relatively stable The Investment code and Regulation has been revised 4 times to widen the scope and areas of investment and also The Investment code and Regulation has been revised 4 times to widen the scope and areas of investment and also - to reflect the demand of the private sector - to reflect the demand of the private sector - to be compatable with the global environment - to be compatable with the global environment Various incentives schemes, both fiscal and financial, have been put in place to attract and encourage more investment Various incentives schemes, both fiscal and financial, have been put in place to attract and encourage more investment Licensing & business registration have been rationalized as well as access to land and finance has been eased There are numbers of market access privileges provided by bilateral countries and multi-lateral organizations. Licensing & business registration have been rationalized as well as access to land and finance has been eased There are numbers of market access privileges provided by bilateral countries and multi-lateral organizations.

5. Civil Service Reform Programme There are certain services that private investors need from any gov’t, whether that government favors or opposes government interventions. There are certain services that private investors need from any gov’t, whether that government favors or opposes government interventions. The main thing expected from any gov’t, whatsoever the services it renders, is to provide them transparently, accountably, efficiently and effectively. The main thing expected from any gov’t, whatsoever the services it renders, is to provide them transparently, accountably, efficiently and effectively. In the Ethiopian case, it has been well acknowledged by the Gov’t that the civil service has a series deficiency in discharging its responsibility efficiently and effectively. In the Ethiopian case, it has been well acknowledged by the Gov’t that the civil service has a series deficiency in discharging its responsibility efficiently and effectively. -with time consuming procedures that focused on inputs rather than -with time consuming procedures that focused on inputs rather than outputs. outputs. In a major paradigm shift, the Gov’t introduced the civil service program up on which public service delivery improvement policy is one of the major focuses. In a major paradigm shift, the Gov’t introduced the civil service program up on which public service delivery improvement policy is one of the major focuses. BPR (Business Process Reengineering) BPR (Business Process Reengineering) - Are we doing the right thing? - Are we doing the right thing? - Are we doing the right things in the right way? - Are we doing the right things in the right way?

6. Service Delivery Improvement for the Three Institutions Descriptions Work Steps Time (Days) to get Service Before BPR After BPR Before BPR Now EIA Inv. Licence 18-39425-108 4 hours Reg. certificate 18-39428-96 4 hours Job licence 13458 1 hour Bus. registration 264225 4 hours Inv. Licence renewal 11413 1 hour

7. Service Delivery Improvement for the Three Institutions Descriptions Work Steps Time (Days) to get Service Before BPR After BPR Before BPR Now Ministry of Trade & Industry Trade Licence 14-2662-35 34 minutes Business Registration 231221 76 minutes New trade licence 1468 39 minutes Trade licence renewal 10417 36 minutes

8. Service Delivery Improvement for the Three Institutions Descriptions Work Steps Time (Days) to get Service Before BPR After BPR Before BPR Now Ethiopian Customs Authority Transit Import process 4362-4 15-45 minutes Transit Export process 832 20-40 minutes Clearance Import 29643 6 h 15 minutes Clearance export 832-15 26 minutes

9. Industrial Development Strategy In line with the over all economic development strategy, apart from maintaining stable and predictable macro- economic environment, the Government has put in place various sectoral policies and strategies to create more favorable situations for the private sector. In line with the over all economic development strategy, apart from maintaining stable and predictable macro- economic environment, the Government has put in place various sectoral policies and strategies to create more favorable situations for the private sector. In view of the industrial development of the country, recognizing the paramount significance of the manufacturing sector in particular, the Government of Ethiopia has adopted and put in place the Industrial Development Strategy in 2002. In view of the industrial development of the country, recognizing the paramount significance of the manufacturing sector in particular, the Government of Ethiopia has adopted and put in place the Industrial Development Strategy in 2002.

10. Industrial Development Strategy The basic objectives and principles, which the strategy has taken into considerations are: The basic objectives and principles, which the strategy has taken into considerations are: It first and foremost recognizes the private sector as an engine of growth of the economy, It first and foremost recognizes the private sector as an engine of growth of the economy, It takes into consideration the country’s all over all development strategy, i.e. ADLI, It takes into consideration the country’s all over all development strategy, i.e. ADLI, It emphasis the export activities as the main target and hence known as Export-Led-Industrialization, It emphasis the export activities as the main target and hence known as Export-Led-Industrialization, It is based on the principle of labor intensive technology and greater use of local resources, It is based on the principle of labor intensive technology and greater use of local resources, It acknowledges the developmental role of the Government, It acknowledges the developmental role of the Government, It emphasis the active role of FDI and the importance of creating alliance and collaborations between foreign and domestic investors, It emphasis the active role of FDI and the importance of creating alliance and collaborations between foreign and domestic investors, It recognizes the active participation of the public, private, civic societies and employee - employer relation. It recognizes the active participation of the public, private, civic societies and employee - employer relation.

11. Industrial Development Strategy The strategy has also emphasis that a better and conducive environment has to be created for the industrial development by way of: to be created for the industrial development by way of: creating and deepening macro-economic stability, creating and deepening macro-economic stability, modernizing the financial system, modernizing the financial system, creating dependable physical infrastructure services, creating dependable physical infrastructure services, developing the human resource asset, developing the human resource asset, creating efficient, effective and accountable and dependable civil servant, creating efficient, effective and accountable and dependable civil servant, creating efficient judiciary system. creating efficient judiciary system.

12. Industrial Development Strategy On the basis of the above mentioned principles, and also on the basis of the comparative and competitive advantage of the country, the strategy has already identified priority areas that deserve special and unique attention and support by the Government. In this respect, the sectoral focus of the strategy in agro-based industries and the interrelationship between agriculture and industry. The priority sector, hence, are identified: On the basis of the above mentioned principles, and also on the basis of the comparative and competitive advantage of the country, the strategy has already identified priority areas that deserve special and unique attention and support by the Government. In this respect, the sectoral focus of the strategy in agro-based industries and the interrelationship between agriculture and industry. The priority sector, hence, are identified: Textile and Garment Industries, Textile and Garment Industries, Meat, Leather and Leather Product Industries, Meat, Leather and Leather Product Industries, Agro-processing Industries, Agro-processing Industries, Construction Industries, Construction Industries, Micro and Small Scale Enterprises, Micro and Small Scale Enterprises, Tourism and IT. Tourism and IT.

13. Institutional Arrangeemnt Ministry of Trade Industry Ministry of Trade Industry Private sector operators Private sector operators Sectoral Associations Sectoral Associations Other Gov‘t Organization Other Gov‘t Organization Non-Government organization Non-Government organization

14. Ministry of Trade and Industry Vision: Secure globally competitive trade and Vision: Secure globally competitive trade and industrial sector that would be well industrial sector that would be well founded on the basis of consistent founded on the basis of consistent development and growth. development and growth. Mission: promote, and expand the development Mission: promote, and expand the development of trade, industry and investment in the of trade, industry and investment in the country by creating conducive enabling country by creating conducive enabling environment to the developmental environment to the developmental forces and render transparent and forces and render transparent and efficient services and supports. efficient services and supports.

15. Investment Growth Year Number of projects obtaining Investment license Capital In bill. US $ Employment Total Growth % % FDI 20031,45559121.6074,085 20042,77491173.56149,349 20053,705341810.00147,185

16. Textile and Leather Industry Sector The sector is completely in line with the industrial developemnt strategy of the country The sector is completely in line with the industrial developemnt strategy of the country - save capital - save capital - employ large labour force - employ large labour force - resource base - resource base - in terms of livestock population- 1st in Africa 10th in the world - in terms of livestock population- 1st in Africa 10th in the world - cattle-41million - cattle-41million - sheep- 25 million - sheep- 25 million - goat- 23 million - goat- 23 million - in terms of cotton 70-80 thousands ha., 32-35 thousands tons lint - in terms of cotton 70-80 thousands ha., 32-35 thousands tons lint cotton, only 50% consumed cotton, only 50% consumed - demand of the product - demand of the product

17. Top-Down (Pull) Approach

18. Value Chain “Value chain”: “Value chain”: the sequence of the productive process (functions) from the provision of specific inputs to raw material production, transformation, and marketing and up to final consumption of a particular product. It is also an institutional arrangement linking and coordinating the producers, processors, traders and distributors of that product.” the sequence of the productive process (functions) from the provision of specific inputs to raw material production, transformation, and marketing and up to final consumption of a particular product. It is also an institutional arrangement linking and coordinating the producers, processors, traders and distributors of that product.” By Andreas Springer – Heinze By Andreas Springer – Heinze

19. Textile and Leather Industry Development One stop shop support Center “One-stop shop service” means rendering of supports and services directly to users or causing to be rendered by strengthening and enhancing the integration of supply (value) chain activities in order to enable the textile and leather industry to be competitive and successful. “One-stop shop service” means rendering of supports and services directly to users or causing to be rendered by strengthening and enhancing the integration of supply (value) chain activities in order to enable the textile and leather industry to be competitive and successful.

20. One stop shop support Direct support Direct support - Information and advice, - Strengthening PPD, - Technical consultancy including firm reengineering, - Marketing, - Planning and coordination - Information and advice, - Strengthening PPD, - Technical consultancy including firm reengineering, - Marketing, - Planning and coordination - Follow-up - Follow-up - Policy issues & Research works - Policy issues & Research works - Investment promotion - Investment promotion - Undertake those relevant activities that may be delegated to it from other Government and Non-Government organizations to speed-up the sector’s development. - Undertake those relevant activities that may be delegated to it from other Government and Non-Government organizations to speed-up the sector’s development. Indirect support Indirect support - Human resource - Human resource - Finance - Finance - Working premises - Working premises - Quality and Standardization - Quality and Standardization

21. The PPD National Export Coordination Committee National Export Coordination Committee -Chaired by PM -Chaired by PM - Regularized every month - Regularized every month - Only those relevant government - Only those relevant government organs who directly and indirectly organs who directly and indirectly concerened in export activities are memebrs concerened in export activities are memebrs - It is based on Action Plans prepared by each respective organns - It is based on Action Plans prepared by each respective organns National PPD National PPD - Chaired by the Minister of MIT and Cochaired - Chaired by the Minister of MIT and Cochaired by the president of Chamber of commerce by the president of Chamber of commerce - Regularized every 3 months - Regularized every 3 months

22. The PPD Textile and Leather PPD (sectoral) Textile and Leather PPD (sectoral) - At the begining of every fiscal year a - At the begining of every fiscal year a jont action plan against production, jont action plan against production, marketing (sell), investment and marketing (sell), investment and intervention (support) areas ccordingly intervention (support) areas ccordingly is designed firm by firm level. is designed firm by firm level. - Regularized every 2 months - Regularized every 2 months - Sectoral associations are actively - Sectoral associations are actively envolved envolved - M&E will be done in the presence of all - M&E will be done in the presence of all - Issues identified - Issues identified - Subsequent action plan prepared - Subsequent action plan prepared

23. AGOA Description200320042005TOTAL Total number of garment enterprises 371010 Export Value (in mill. US$) 0.5041.674(240%)1.710(6%)4.922(123%)

24. 5+2 Selected Sister Shoe Companies Factories/ProjectsInstalledCapacity/dayAttainedCapacityPlanMechanisms 1.Peacock Shoe factory 250010005000DoubleShift 2.Kangaroo 10008002000DoubleShift 3. Wallia Shoe factory800200800 4. Ras Dashen Shoe factory 800150800 5.Ramsea 7507501500DoubleShift Total5850280010100 Factories/ProjectsInstalledCapacity/dayAttainedCapacityPlanMechanisms1.Peacock 250010005000DoubleShift 2.Kangaroo 10008002000DoubleShift 3. Wallia Shoe factory800200800 4. Ras Dashen Shoe factory 800150800 5.Ramsea 7507501500DoubleShift

25. 5+2 Selected Sister Shoe Companies Factories/ProjectsInstalled Capacity/da y AttainedCapacityPlanMechanisms 6.Ethio-leatherIndustry/cluster12000 1000 MSEs & 7000 jobs inder invest. 7. Anbessa Shoe Factory1000Underconstruction 8. Ras Dashen shoe factory 700Plannedexpansion 9. Walia Shoe Factory700Plannedexpansion 10. Ramsea Shoe factory 3000Plannedexpansion

26. 5+2 Selected Sister Shoe Companies Support areas has already identified and action plan has designed Support areas has already identified and action plan has designed - Marketing - Marketing - Trained manpower - Trained manpower - Logistics - Logistics - Fianancial requirements - Fianancial requirements - Quality finished leather - Quality finished leather - Environment issue - Environment issue

27. Supporting Upgradation of Selected Tanneries 21 tanneries 21 tanneries 80% of their production activity is in the form of semi-processed products 80% of their production activity is in the form of semi-processed products - 45% in pickled - 45% in pickled - 25% in wet-blue - 25% in wet-blue - 10 % in crust - 10 % in crust - 20 % in finished leatrher - 20 % in finished leatrher In order to produce sufficent finished leather to the shoe and garment factories there need to upgrade or encourage to upgrade their production level. In order to produce sufficent finished leather to the shoe and garment factories there need to upgrade or encourage to upgrade their production level. 11 factories have been identified as a first batch- on the basis of committment, experience, potentail, facility and readiness 11 factories have been identified as a first batch- on the basis of committment, experience, potentail, facility and readiness Action Plan has been identified together with the operators-investment, marketing, human resource,policy issues etc. Action Plan has been identified together with the operators-investment, marketing, human resource,policy issues etc.

28. 5 Strategic Textile Projects (All private) It is found that there is insufficent availability of fabrics both in terms of quality and quantity It is found that there is insufficent availability of fabrics both in terms of quality and quantity Quite large number of garment factories import fabrics Quite large number of garment factories import fabrics We have succeded to recruit investors who were in other business to engage in the upstream activities of producing yarn and fabrics We have succeded to recruit investors who were in other business to engage in the upstream activities of producing yarn and fabrics We have commenlf identified action plan We have commenlf identified action plan One of them will commence productio after one month (1.7 million liner meter fabrics) One of them will commence productio after one month (1.7 million liner meter fabrics) The rest they are under diffrent investment stage The rest they are under diffrent investment stage

29. The way foreward Export Plan (in million US$) 2006 2007 2008 2009 20010 Textile and garment 100 200 270 400 500 Textile and garment 100 200 270 400 500 Leather and leather products 105 180 250 350 500 Leather and leather products 105 180 250 350 500 Major constarints of the sector: -Low productivity -Low productivity - under capacity utilization - under capacity utilization - skills and qualificatins of workers - skills and qualificatins of workers - marketing problem - marketing problem - quality of product - quality of product - difficulty to access finance - difficulty to access finance - information and consultancy advice - information and consultancy advice

30. Recommended Action Make the PPD very active Make the PPD very active Strengthen sectoral associations Strengthen sectoral associations Strengthening existing capacities Strengthening existing capacities Expand capacities Expand capacities Investment promotion Investment promotion Provission of information and consultancy advice Provission of information and consultancy advice Quality and standardization Quality and standardization Human resource development Human resource development Finance Finance Coordinating the value chain Coordinating the value chain Policy issues Policy issues Strengthen the Textile and Leather Industry Development center to provide one stop support and service Strengthen the Textile and Leather Industry Development center to provide one stop support and service Mobilization of External Support-GTZ, UNIDO, World Bank Mobilization of External Support-GTZ, UNIDO, World Bank

31. Thank You Very Much!!