published at: (Market Research Reports: http://www.tradeport.org/ts/countries/ethiopia/mrr/index.shtml)

Summary

1. Local boosters from the public and private sectors unabashedly urge investors to be bullish on Dire Dawa. They may be right. Growing political autonomy, combined with its near economic self-sufficiency, puts Dire Dawa in a prime position to become a commercial powerhouse. Plans for an inland port, a free trade zone, and an investment corridor are well underway. A southern ring road and five-region cooperative council are improving Dire Dawa's integration with the rest of Ethiopia. The local chamber and government officials seek interlocutors in Djibouti, Somaliland and other Gulf states to promote Dire Dawa internationally. Rich in groundwater, rife with electric power, and replete with commercial promise, the community is predicting a full-fledged boom, with or without a peaceful end to Ethiopia's dispute with Eritrea. End summary.

2. Econ/commercial officer visited Dire Dawa in eastern Ethiopia (500 kilometers from Addis Ababa) December 1-4 and met with regional government and chamber of commerce officials, private businessmen, and managers of state- owned factories.

Autonomous region means business

3. Dire Dawa chamber of commerce president Luigi Quartelli told Econoff that because of the city's multiethnic character, the former communist regime made it a separate administrative region directly under the jurisdiction of the prime minister. After discussions with leaders in Somali, Harar and Oromia regions, which all wanted Dire Dawa in their regions, the new federal government granted Dire Dawa autonomy as a city-region, just like Addis Ababa, and governed by a locally-elected council. The restructuring of offices, departments, and positions is nearly finished. The final step, the election of local representatives, is expected to take place soon. With its new stature, Dire Dawa can take decisions without continuous oversight from the capital. "now we can talk business," Quartelli announced.

We got the power

4. As a separate administrative region, Dire Dawa has no regional constituency to push for government project assistance. One businessman commented that there had been no new road projects in Dire Dawa for years. Others complained that telecommunications were poor. With only 4000 telephone lines, people must "wait until someone dies or can't pay their bill" before moving up on the waiting list. Even so, Dire Dawa has an impressive road network for Ethiopia and is blessed with an enormous underground aquifer, by one estimate 20 billion cubic meters, so "access to water is not a problem." The city is served by three hydro-power substations, so electricity shortages are infrequent. The only limiting factor is the number of power lines. Although the government may have neglected infrastructure in the past, the sparkling new international airport is evidence of public sector concern for the city's fortunes.

Inland port plans at bay

5. Quartelli said the government plans to make Dire Dawa an inland port. Shipments coming by road from Djibouti and elsewhere will enter a free trade zone area without payment of import duties. A new regional customs authority building is nearly completed on the airport road. Large warehouses are under construction nearby for inclusion in the "secure area." This "dry" port will abrogate the need for import licenses and allow direct imports to be immediately resold through local letters of credit from buyers. Both the Ethiopia and Djibouti chambers are pushing the concept. The national bank and ministry of transport and communications are studying the concept while investors await final approvals.

Linking up with other regions

6. Investors in Dire Dawa are optimistic for several other reasons as well. First, local businessmen are convinced the eventual privatization of Ethiopia's large natural gas field (Calub Gas) will reap lots of business for the entire region. Second, Dire Dawa will soon be linked to the Somali, Jimma, Southern, and Bale regions through a "southern ring road." Construction of this road is underway, so Dire Dawa will soon have direct road connections to other parts of the country. Third, bosters are justly proud of the new international airport and claim there is a high demand for air transport to Jijiga, Djibouti, Somaliland and throughout the Gulf. (although EAL flies to Addis Ababa twice daily, all seats were booked a week in advance of Econoff's December 4 flight.) Fourth, five regions in Southeast Ethiopia (Afar, Dire Dawa, Harar, Oromia, and Somali) formed a cooperative council to coordinate and integrate security and economic development issues.

Local factories primed for privatization

7. Dire Dawa boasts important state-owned factories that give the city near independence from the rest of the country. Several are run-down with aged equipment while others offer prime investment opportunities for foreign investors. They include a meat-packing plant recently purchased by Sheik Mohammed Al-Amoudi, a mineral water bottling plant in Harar ("Bibile"), the Harar brewery, and an edible oil plant. A cement factory utilizing huge limestone reserves nearby is undergoing privatization (see reftel). But regional officials have considered closing the plant because of pollution, so buyers beware. The East African Bottling Company, Coca-Cola's local franchisee, meets local demand with the production of five million bottles annually.

Looming large but spinning wheels

8. The Dire Dawa textile factory makes fabric, yarn, and acrylic products with 3500 workers and a capacity of 67,000 spindles and over 1,000 looms. Annual production is about 13,000 kilograms of yarn, 50,700 yards of fabric, and 2,000 kilograms of acrylic. All products are sold to wholesalers in Addis Ababa at local market price. Cotton is grown locally but acrylic and chemicals are imported from Europe. The grounds and facilities are impressive, but the factory is 50 years old with outdated machines. World War Two era looms create a deafening rhythmic thump, which would be even louder if one-quarter were not under repair. Operations manager Berhanu Sisay said the substandard products cannot compete overseas, but are "ok for the local market." The factory has a good reputation and is the "closest to breaking even of any other textile plant in Ethiopia." (this may be true Of the Arba Minch and Awassa plants, but not the new Almeda textile factory in Adwa at least.)

Pasta for the masses

9. The food factory uses local wheat to produce wheat flour, four varieties of long cut pasta, nin%types of short-cut pasta, and various biscuits. Production Manager Zeratsion Tsegaye modestly called it the "best state-run plant in Ethiopia." It opened in 1995 with the latest Italian machinery and made 2.5 million Birr profit in its first year. The plant employs 200 permanent and 80 part-time workers. At present, its pasta and biscuits are distributed all over the country; they even print the labels in french and plan to sell to Djibouti soon. The Ethiopian Privatization Agency told company reps there is substantial investor interest in the plant. The original price of 49 million birr was before a major devaluation and the company has added some new machinery since then.

Free trade area and investment corridor

10. Mohammed Sheik Adem, head of economic planning in the Dire Dawa Administrative Council, said "Ethiopia's second city is very alive." Dire Dawa could benefit from the trouble with Eritrea if proper facilities and service are provided, he noted. The planned renovation of the road to Djibouti, for example, will make Dire Dawa an important crossroads for the entire country. A team of council and chamber members are going to Djibouti this week, he said, to encourage investment and trade. The council promotes links with Somaliland and Gulf states as well and is hoping Berbera port will open opportunities with surrounding countries. The city is expanding its educational opportunities by upgrading the local technical school to a college. In addition, business formed a local sports council to raise funds for the promotion and participation of kids' athletic programs.

11. Investment office head Adugna Abebe said regional authorities are promoting Dire Dawa as a commercial city, especially for medium and small industries. Surrounded by bare-rock mountains, city officials plan for future expansion along an investment corridor toward the town of Melka Jebdu. Under the city's master plan, 2000 square kilometers along this strip is apportioned for land uses ranging from manufacturing to mechanized farming. A new four-lane highway stretching 10 kilometers along this corridor is nearly completed. New manufacturing must be 7 kilometers outside of town and conform to environmental laws. The best prospects for investment are in the oilseed, horticulture, and meat, dairy and poultry industries. Only the shortage of rainfall keeps Dire Dawa from self-sufficiency in grains, though irrigation and improved farming techniques could boost the area's agricultural potential, he noted.

Putting money where their mouth is

12. New investors are springing up in Dire Dawa already. A recently-returned U.S.-educated businessman is building a non-carbonated mineral water factory in town, with machinery imported from the IWTC International Water Corporation in Phoenix. One young investor is putting up a modern hospital near the new airport, on a stretch of land promoted for investment by local authorities. The largest dairy farm in Ethiopia is in Dire Dawa; the owner plans to import modern U.S. milking equipment this year to expand production. These are just some examples of actual new investment in Dire Dawa. Even accounting for booster exaggeration and enthusiasm, the town could be destined for a lot more in the near future.