13 May 2017

Africa: Ethiopia's Potential to Become Africa's Textile, Apparel Hub

Photo: Xinhua
Local employees work at Huajian shoe factory in an industrial park in Ethiopia.
analysis

Just last week, The Jakarta Post reported that Indonesian textile industry is facing competition from Ethiopia. According to the newspaper, despite Indonesian governments' effort to "lure textile manufacturers away from China to the archipelago, [the nation] is facing a rising threat from East African country, Ethiopia, which is offering companies a competitive cost structure." The claim is that China's textile manufacturers are shifting their production overseas due to increased labour costs and air pollution, in to the availability of less expensive labour and electricity in Ethiopia, many of them are settling here.

Ethiopia's export is currently dominated by Coffee which represent 16.5 percent of the total exports of Ethiopia, with flowers, vegetables and oily seeds follow in big fractions underscoring the fact that the economy still depends on Agriculture.

In a bid to make Ethiopia's manufacturing sector globally competitive, it is true that the government of Ethiopia has been keen on diversifying exports with priorities focused on strategic sectors like textile and garment manufacturing in the move towards industrialization from a primarily agriculture based economy. The effort is part of the structural transformation of Ethiopia's economy to exports of industrial outputs rather than raw agricultural products.

Ethiopia's history in textile began in 1939 when the first garment factory was established. Data shows that in recent years, the country's textile and apparel industry have grown at an average rate of 51 per cent per year. More than 65 international textile investment projects have been licensed for foreign investors.

The growth in the textile industry is directly linked to the government's move to set up an industrial development strategy. As a result of this effort, 124 foreign investors have expressed interest in the Ethiopian textile sector, 71 of which are from China, as reports from the Ethiopian Investment Commission indicates.

The major driving factors that contribute to the inflow of international investors to the Nation are of course, the less expensive labour and electricity. Yet, investors are also taking advantage of the Ethiopian textile and garment industry from its high quality cotton that is grown in the country as well as duty free access to US and EU markets. It is estimated that the country has three million hectares of arable land available to grow cotton, of which only less than ten percent of this abundant resource has been utilized so far.

Moreover, the government with a commitment to the development of state-run Industrial Parks, has set up the Hawassa Industrial Park, which is exclusively dedicated to textile and garment manufacturing industries. The 250 million US dollar park is the only such facility on the continent, and it will eventually encompass 1.3 million square meters making it Africa's largest manufacturing park.

Initiatives such as the Africa Growth and Opportunity Act (AGOA), Common Markets of East Africa (COMESA) and other bilateral trade agreements with Western countries offer free trade benefits and access to the global and regional market for Ethiopia, and in reverse is becoming a threat to some Asian countries. Moreover, an array of bilateral trade agreements concluded with Western countries, including the Netherlands, Belgium and Luxembourg are boosting textile markets abroad.

Besides, Swedish apparel giant H&M, International Labour Organization (ILO) and Swedish International Development Cooperation Agency (SIDA) have launched an industrial relations project aiming to improve the development of a socially sustainable textile and garment industry in Ethiopia. They are also dedicated to providing training and technology transfer in the sector, which all stand in favour of boosting Ethiopia's textile industry. Accordingly, Ethiopia has risen as one of the most promising locations for more apparel manufacturing in Africa.

Henceforth, Ethiopia is showing the potential to become Africa's textile and apparel hub with over 80 years of development, Nation's textile and apparel industry has transformed from one of the country's least developed sectors to today's fully integrated industry and value chain with a significant contribution to the nation's GDP.

According to recent reports, Ethiopian textile and apparel products are being exported to Europe, Asia, North America and African nations with a total annual export of more than 150 million US dollars per year. The Hawassa Industrial Park which is almost to kick off exporting textile and apparel to the global market is expected to generate a lucrative hard currency as big as one billion US dollars per year. This is a staggering amount of as compared to current export earning of the sector.

The industrial park is now home to some 20 international corporations from USA, Europe and Far East along local companies which have already leased factory shades.

The Industrial Park has been planned as a one-stop shop for manufacturers, according to the Industrial Parks Development Corporation. All relevant government agencies that exporters interact with will have a presence on-site, including customs, tax and immigration offices. Banking and logistics services will also be provided within the park.

Hence, in a very recent future, the Hawassa Industrial Park will indeed be known as the Ethiopian textile and garment hub, and the apparel industry will stand as a major contributor to the national economy.

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