Labour churn erodes the flagship industrial-park experiment, unsettling managers who hoped the zones would anchor an export-led industrialisation drive. During the first nine months of the current fiscal year, 36,600 workers were recruited, but 37,000 walked out, managers of the state-owned Industrial Parks Development Corporation (IPDC) told Parliament last week.

A sharp export slump mirrors the labour flight. Factories inside the special economic zones shipped goods worth only 83 million dollars, 65pc of the 127 million dollar target for the period.

“The export market still hasn’t recovered from Washington’s suspension of the African Growth & Opportunity Act,” Fesseha Yitagesu, CEO of the Corporation, conceded at the hearing.

The trade benefits were revoked in January 2022 over alleged human rights violations during the civil war in northern Ethiopia. The loss of duty-free access has left a hole that the Corporation's management and investors have yet to patch.

A study by Habtamu Worku, an economist at the National Bank of Ethiopia (NBE), quantified the scars. At the programme’s 2019 peak, the industrial parks exported 3.23 million kilograms of apparel and footwear worth 30 million dollars a month to the United States under AGOA’s duty-free terms. Earnings collapsed to 11.3 million dollars in 2021 after the Biden Administration revoked market access, while shipment volumes fell to 2.31 million kilograms.

After a brief uptick to 12.9 million dollars in early 2022, monthly receipts slid again, landing at 10.6 million dollars by mid-2024.

Habtamu argued in this paper that the macroeconomic shock was “smaller than many feared,” yet far from trivial. The Corporation saw the loss of 18 companies, 11,400 jobs, and 45 million dollars in revenue. Volumes dropped 32.3pc, and values fell 13pc. Ethiopia’s goods sold to the U.S. in 2021 totalled 276 million dollars, 90pc of them garments once sewn in the gleaming sheds that dot the parks.

Profit remains elusive. Between July and March, the Corporation projected three billion birr from renting factory units, leasing cultivated land and providing auxiliary services. It collected three billion Birr, about 65pc of the plan, leaving a sizable cash-flow gap. Net profit followed suit. A forecast of 951 million Br dwindled to 192 million Br, barely one-fifth of the goal. Fesseha blamed tenants who “aren't paying rent as stipulated” and noted that bills fall due quarterly.

Despite financial strains, investment is a comparatively bright spot. The parks attracted 689 million dollars in fresh capital, 86pc of the target, spreading across 98 approved projects. Nine are bona-fide foreign direct investments (FDI), one is a joint venture, and the remaining 88 involve domestic investors, a reversal of earlier patterns. Local investors now supply 60pc of new money, up from roughly 10pc four years ago. Once assembly lines start humming, planners expect 22,614 jobs, though the recent high turnover shows that hiring is no guarantee workers will stay.

Import substitution, long hailed by federal officials as a path to preserve scarce foreign exchange, has been less convincing.

Birhan Eshetu, an international trade-policy analyst, argues that import substitution remains vital for Ethiopia’s growth trajectory. But, he noted that the current programme concentrates on textiles while the country’s import bill is dominated by food and beverages. For him, quality is a sticking point.

“Local goods often fail to meet market expectations,” he said, even though park operators still enjoy duty exemptions on imported machinery and a seven-year tax holiday.

To accelerate scale-up, Birhan called for extended tax holidays, duty relief on inputs and modernised logistics, including port procedures so containers clear in days rather than weeks.

The Corporation's management disclosed that factories supplied 115 million dollars in goods to the local market during the past nine months. However, several federal lawmakers complained output is slipping, especially at Hawassa, where a substitution has slumped to 37pc as the zone shifted to logistics.

Fesseha pinned part of the blame on the stop-start pattern of textile contracts.

“Military uniforms are produced only every two years,” he said, insisting the dip is temporary.

Park tenants paint a different picture.

“High taxes and cheaper prices have robbed import substitution of its allure,” said Hibret Lemma, head of the Hawassa Industrial Park Investors' Association.