Regional Industrial Project Presentation for Djibouti & Ethiopia (Horn of Africa) by A.ELMI.AHME & DJ.ALEMAYEHU SEPTEMBER 2012

1. By
A.ELMI.AHMED
&
DJ.ALEMAYEHU
East Africa Regional Border Industrial Zone
Economic Development in Djibouti

2. Introduction to the Opportunity
• Grow cross-border trade and increase the demand for
trade services supported by both the public and private
sector;
• Develop the human capital to design, guide and operate
a 21st
Century global supply chain hub by providing
education and training to build a world class workforce;
• Advocate for policy changes at the local, federal and
state levels to provide business incentives, improve the
region’s transportation infrastructure, and support
smooth operation while assuring border security;
• Develop a research agenda and clearinghouse for
related research to assist companies and policy makers;
and
• Increase the number of jobs in the sector.

3. Opportunity Assessment Key Activities
• Identification and design of forward thinking
innovative features of the industrial supply chain
hub to become differentiated as a world class
hub;
• Economic analysis to assess the economic
multiplier impact for job creation;
• Rationalization of opportunity of the supply chain
management hub concept; and
• Documentation of the appropriate products and
industries and critical success factors for the
regional supply chain hub.

4. Industrial Supply Chain Strategy
Building on the unique characteristics, identify the industries that
we can focus infrastructure, regulation, policy, and communication
resources to attract firms that can use a industrial supply chain hub
or interchange for East Africa.
The industrial supply chain hub is, in reality, a collection of
industrial supply chain facilities or mini-hubs:
Air freight to motor freight
Rail freight to motor freight
Value added services

5. Industrial Supply Chain Strategy
The Strategy involves multiple areas:
Build differentiated industrial supply chain hub(s) which will
stimulate economic growth and job creation
Attract industries to the supply chain hub
Industries with a heavy manufacturing focus
Industries with a light manufacturing focus
Industries with a distribution and value added services focus
Facilitate development of hub with private/public sector
partnership
The Strategy Elements (design dimensions) outline the necessary
and the differentiated capabilities of the Strategy

6. Strategy Elements
Ability to serve global markets
Infrastructure and support capabilities
Government regulations
Competitive tax climate
Availability of human, land, supplier, and financial capital
Economic competitiveness and lowest total cost to serve
Supply chain sustainability
Collaboration and partnership

7. SCM Strategy Elements
Ability to serve global markets
Djibouti – Ethiopia – S. Sudan trade corridor
International transport links
Access to ports
Customs house, forwarding, and related services
Foreign trade zone facilities

8. Strategy Elements
Ability to serve regional and global markets
Infrastructure and support capabilities in Djibouti
Airport capabilities
Interstate highways
Railroad network
Intermodal transportation capacity
Distribution facilities

9. Infrastructure and support capabilities
Attribute Current State Implications Future State
Airport
capabilities
Djibouti and Addis
Ababa airport
capacity; frequent
Direct flights;
available capacity
for dedicated and
belly cargo freight
Less congested;
draw for global
fulfillment
operations;
dedicated air
freighter and belly
cargo to
accommodate
100% screening
rules
Utilize Regional
airports and other
local airports
Highways Current and new
planned roadsoffer
less congested
alternatives
Good connectivity
from Djibouti, to
Ethiopia, to Sout
Sudan
Exploit current
capacity and
expand network
1 of 2

10. Infrastructure and support capabilities
Attribute Current State Implications Future State
Railroad network No functioning
railroads.
Results in
congestion on
other capabilities
Railroad
infrastructure is
being planned by
Ethiopia to
connect Southern
Sudan to Djibouti
Intermodal
transportation
capacity
Several dispersed
facilities with
excess capacity
Djibouti less
congested; good
connection to
regional cargo
Potential for more
centralized
intermodal facility
Distribution
facilities
Good private,
leased, and public
warehouse
capacity
Physical capacity
and labor available
for new
business activity
Extend
competitive
advantage; Build
consol/deconsol,
cross-dock
centers
2 of 2

11. Strategy Elements
Ability to serve regional and global markets
Infrastructure and support capabilities
Government regulations
Higher weight limits
Carrier permitting process

12. Government regulations
Attribute Current State Implications Future State
Higher weight
limits
Favorable to some
shippers and
industries
Lower
transportation
costs; favorable for
intermodal
particularly in
transition from rail
intermodal
Extend
competitive
advantage
Carrier permitting
process
Multi-agency
system
Cumbersome
process; not
favorable for
carriers and
shippers
Need “one stop
shop” permit
process; need
reciprocal, bi-
national
permitting

13. Availability of human, land, supplier,
and financial capital
Attribute Current State Implications Future State
Land and facility
availability
Competitive real
estate prices
Advantage over
other states
Land is cheap;
good place for
DC’s
Financial Capital Lack of venture
capitalists and
angel funding
Problem for start-
up firms
Invest in hub;
need long-term
capital and policy
commitment from
users to occupy
land
Supplier and
support
capabilities
Strong supply base Nearby supplier
locations
Extend
competitive
advantage
2 of 2

14. Economic competitiveness and lowest
total cost to serve
Attribute Current State Implications Future State
Hub operations
cost
Higher cost to
operate
Are there offsetting
productivity
advantages?
Lowest cost to
serve; lowest
weather risk
during
transportation
Hub service
levels
Managerial and
skilled labor may
create advantages;
northern fringe
location may inhibit
access to entire
U.S.
Service
advantages could
offset cost
disadvantages
Better service
potential for
combined
Djibouti/Ethiopia
market for
intermodal
imports
Outbound empty
trucks
Trade imbalance;
excess empty
containers
Low outbound
rates
Fill outbound
trucks

15. Supply chain sustainability
Attribute Current State Implications Future State
Customer service
and reliability
Increased
uncertainty due to
congestion
Increased cost and
reduced service
Customers
requiring more
reliability and
closer suppliers
to lower cost and
improve service
Security Consumers and
regulators
expecting
increased security
Increased freight
monitoring
Need technology
and facilities to
monitor freight
Green/
environmental
aspects
Firms strongly
focus on low cost
suppliers
Firms looking for
suppliers who can
minimize
environmental
impact
Firms looking for
closer suppliers
or transporters
that have less
environmental
impact

16. Attribute Current State Implications Future State
One integrated
regional plan
Regional support
from all
stakeholders of
the integrated
plan
Champion Need a
“champion” or
major player to
act as an anchor;
early investment
and commitment
Collaboration and partnership

17. Synthesis of Strengths and Weaknesses of Strategy
Elements
 Strengths
 Good potential for cross-border
distribution hub away from
congestion of Djibouti – Ethiopia –
S. Sudan
 Good potential for trans-loading
heavy imports
 Good airport and highway
infrastructure with limited
congestion
 While wage rates are high, skilled
management and labor talent is
readily available
 Land and facilities readily available
 Relatively inexpensive outbound
motor carrier capacity
 Weaknesses
 Infrastructure barriers and custom
processes, particularly at border
 Current industry sectors in
recession
 Poor perception of current
capabilities
 Lack of public/private partnership
authority
 Absence of regional government
authority to coordinate and
promote supply chain initiatives

18. Supply Chain Hub Strategy Creation
Strategy
Elements
Industries
offering
Value Add
Potential

19. Economic Model: Industry Sectors
1 Crop and animal production
2 Forestry, fishing, and related activities
3 Oil and gas extraction
4 Mining, except oil and gas
5 Support activities for mining
6 Utilities*
7 Construction
8 Wood product mfg.
9 Nonmetallic mineral product mfg.
10 Primary metal mfg.
11 Fabricated metal product mfg.
12 Machinery mfg.
13 Computer and electronic product mfg.
14 Electrical equipment and appliance mfg.
15 Motor vehicle, body, trailer, and parts mfg.
16 Other transportation equipment mfg.
17 Furniture and related product mfg.
18 Miscellaneous mfg.
19 Food, beverage, and tobacco product mfg.
20 Textile and textile product mills
21 Apparel, leather, and allied product mfg.
31 Water transportation
32 Truck transportation
33 Transit and ground passenger transportation*
34 Pipeline transportation
35 Other transportation and support activities*
36 Warehousing and storage
37 Publishing including software
38 Motion picture and sound recording industries
39 Broadcasting and telecommunications
40 Information and data processing services
41 Fed. Reserve banks, credit intermed. & related svcs
42 Securities, commodity contracts, investments
43 Insurance carriers and related activities
44 Funds, trusts, and other financial vehicles
45 Real estate
46 Rental, leasing svcs. & lessors of intangible assets
47 Professional, scientific, and technical services
48 Management of companies and enterprises
49 Administrative and support services
50 Waste management and remediation services
51 Educational services

20. Target Industries
Transportation & logistics
Alternative energy
Aerospace
Medical devices
Regional Security and Defense
Advanced Manufacturing

21. Target Industries
 Alternative Energy
 Automotive Engineering
 Life Sciences
 Security and Defense
 Advanced Manufacturing
 Agro Industry

22. Target Industries: Synthesized from Workshop Two
 Automotive Renewal
 Alternative energy
 Battery technology
 Bio fuels
 Wind
 Solar panels
 Beverage and alcohol distribution
 Carbon fiber manufacturing
 Chemical processing
 Defense
 Electronics - industrial
 Food processing
 Medical technologies
 Retail importing and value add
 Water technologies
 Waste Management

23. Target Industries: Cluster Descriptors
 HEAVY: Heavy Manufacturing and industrial cluster attracted to hub for resource
efficiency and differentiation
 Automotive renewal
 Alternative energy
 Carbon fiber manufacturing
 Chemical processing
 Defense
 Electronics – industrial
 LIGHT: Light Manufacturing and industrial cluster attracted to hub for resource
efficiency and differentiation
 Food processing
 Medical technologies
 Water technologies
 DISTRIBUTION:Warehousing and consumer based industry attracted to hub market
location for distribution and value added services
 Beverage and alcohol distribution
 Retail importing and value add
 Waste management

24. Industrial Supply Chain Hub Strategy
Creation
Strategy
Elements
Industries
offering
Value Add
Potential
Economic
and Job
Creation
Impact

25. Economic Activity
Activities involve multiple areas:
Build differentiated supply chain hub (s) which will stimulate
economic growth and job creation
Attract industries to the supply chain hub
Industries with a heavy manufacturing focus
Industries with a light manufacturing focus
Industries with a distribution and value added services focus
Facilitate development of hub with private/public sector
partnership
Air freight to motor freight
Rail freight to motor freight
Value added services

26. Supply Chain Hub Strategy Creation
Strategy
Elements
Industries
offering
Value Add
Potential
Economic
and Job
Creation
Impact
Economic
Development

27. Presentation Outline
Project Background
Project Objectives andWorkshop Deliverables
SCM Strategy,Targeted Industries, and Economic Impact
Economic Development Policies and Collaboration and
Communications
Recommendations and Next Steps

28. Enabling Economic Development
 Global markets
 Infrastructure
 Regulations
 Tax climate
 Capital availability
 Economic competitiveness
 Supply chain sustainability
 Collaboration
strategy elements
Targeted industries
Industry
Value
Proposition
Economic
development
Job creation
•Heavy manufacturing
•Light manufacturing
•Distribution

29. Enabling Economic Development
strategy elements
Targeted industries
Industry
Value
Proposition
Economic
development
Job creation
Policy
refinements

30. Enabling Economic Development
strategy elements
Targeted industries
Industry
Value
Proposition
Economic
development
Job creation
Policy
refinements
Collaboration
and
communications

31. Enabling Economic Development: Policy Refinements
SCM strategy
elements
Targeted industries
Industry
Value
Proposition
Economic
development
Job creation
Policy
refinements

32. Policies to Enable Economic
Development
 Ability to serve regional and global markets
 Infrastructure and support capabilities
 Streamlined government environment
 Competitive tax climate
 Availability of human, land, supplier, and financial capital
 Economic competitiveness and lowest total cost to serve
 Supply chain sustainability

33. Policies to Enable Economic
Development
 Ability to serve global markets
 Infrastructure and support capabilities
 Create development incentives associated with transportation
assets
 Tie economic development and site location to transportation
assets
 Allow private investment in transport infrastructure
 Coordinate between all modes of transportation

34. Policies to Enable Economic
Development
 Ability to serve regional and global markets
 Infrastructure and support capabilities
 Streamlined government environment
 Incentivize use of brownfield properties for transportation and
distribution
 “One stop permitting”
 Neutral entity to implement and drive logistics

35. Enabling Economic Development:
Collaboration and Communications
strategy elements
Targeted industries
Industry
Value
Proposition
Economic
development
Job creation
Policy
refinements
Collaboration
and
communications