Policy advantages spark Ethiopian textile investment

Ethiopia, known as the "roof of Africa," seems to have become the "darling" of many international textile and apparel industries in 2014. India Textile Group has invested 550 million U.S. dollars to open Africa's largest textile and clothing factory in Ethiopia; Turkish textile companies plan to invest US$175 million set up factories in Ethiopia; international clothing retail giants Hennes and Mauritz (H&M) and British retail giant Tesco are also planning to open branches in Ethiopia.

According to statistics from the Ethiopian Textile Industry Association (TIDI), Ethiopia exported 60 million U.S. dollars in textiles and garments in the first six months of fiscal year 2013 to 2014 (since July 2013). Compared with the same period of last fiscal year, exports grew. 15 million U.S. dollars. The Walta Information Center, a major Ethiopian website organization, stated that Ethiopia’s textile and apparel industry is currently undergoing explosive growth and that the industry will become one of the most important industries in Ethiopia.

The advantages of production conditions have been favored by international textile companies. In recent years, many international manufacturers have set their product processing bases in Asia, such as Bangladesh and Vietnam. Currently, with the increase in wage levels in Asia and the increase in labor costs, some manufacturers are Conditions for production sites have become more and more stringent. They have begun to search for a cheaper labor market as a production base. According to the report of the German Fashion Association, in the African countries, Morocco and Morocco are known as garment producing countries. They mainly produce clothing of the “discount type” (lower price), and other African countries such as Ghana and Kenya, etc. The development is relatively lacking. Ethiopia, as the second most populous country in Africa, has many advantages in production. Thomas Ballweg, Purchasing and Technical Consultant of the German Fashion Association, believes that on the one hand, Ethiopia has a sufficient workforce and low production costs. On the other hand, Ethiopia has the convenience of being close to the Suez Canal. Conditions, products can be shipped to European countries. Compared with the Far East countries, the time for transporting products from Ethiopia will be greatly shortened, saving about one-third of the logistics transportation time.

Thanks to a favorable policy environment, low labor costs, and convenient transportation conditions, some of the world's leading textile companies are seeking to set up factories in Ethiopia. In May this year, India's Shrivallabh Pittie Textile Group will invest USD 550 million to build a textile plant in Africa, Kombolcha, one of Africa's largest textile mills, the SVP Textile Company, which will be supported by Ethiopia Development Bank. A delegation of U.S. clothing industry investors visited Ethiopia to examine the investment prospects of Ethiopia. The head of the delegation, Phillips-Van Heusen (PVH) Group Vice Minister, said that he was very attractive to Ethiopia. The investment environment and the promotion of industrialization have made impressive efforts. Akber, a Turkish textile company, also plans to invest 175 million U.S. dollars in the establishment of a factory in Ethiopia, and other famous clothing manufacturers are also considering whether to set up a factory in Ethiopia. According to a report from the Volta Information Center, in the first nine months of this fiscal year, Ethiopian clothing and textile industry has obtained 84 million U.S. dollars in investment. In addition, Swedish international fashion retail giant Hennes and Mauritz (H&M) and British retail giant Tesco are also planning to open a branch in Eze.

The Ethiopian government has formulated an "Economic Development Plan" and it is estimated that by 2016, Ethiopia's economic growth rate will maintain about 7% to 8%. At the same time, the Ethiopian government has also placed special emphasis on strengthening the development of the textile industry and strongly welcomes large garment manufacturers like H&M to build factories in Ethiopia. According to a supplier from H&M, H&M hopes that the processing orders for garments in Ethiopia will reach 1 million pieces per month, and the company spokesperson confirmed that Ethiopian manufacturers have begun to include H&M's clothing supply system.

Imports of raw materials were encouraged by national policies. Minister Abtew of Ethiopian Ministry of Industry recently stated that since the implementation of this fiscal year, due to the continuous expansion of production capacity of enterprises and the strong demand in the domestic market, Ethiopian industrial production enterprises have been plagued by insufficient supply of raw materials. Therefore, the Ministry of Industry has actively taken countermeasures and actively expanded imports of raw materials for industrial production. In particular, leather and textile companies that are subject to raw material restrictions will receive strong support from the Ministry of Industry. At the same time, the Ministry of Industry will also actively respond to the lack of domestic power supply to meet the production needs of industrial enterprises. Minister Abtew said that the current demand in Ethiopia's domestic market has continued to expand. In the past six months, 60% of the products produced by textile and leather companies have supplied the domestic market. According to official sources, Ethiopia has 60 garment manufacturers and 15 textile companies. Sisay Gemechu, the country’s minister of industry, has announced plans to build an industrial park for the textile and leather industries in the country.

The determination to develop Ethiopia's textile and clothing industry is reflected in the investment projects formulated by the government. Textile and apparel production is the country’s top investment promotion project for the government, which includes: First, to strengthen garment processing and manufacturing in order to promote the increase in export orders. Second, we use local and neighboring countries to have sufficient cotton advantages for spinning production. Third, the introduction of weaving production projects will ease the strain on local fabrics.

According to the person in charge of the LISI Institute of Leather Industry Development, in the past 9 months, the Ethiopian leather industry made a total of 99.98 million U.S. dollars of export revenue, an increase of 11% year-on-year. Therefore, the processing of leather products is also a project for investment projects approved by the government. Including: men's and women's leather shoes production, leather bag production and leather gloves production projects.

Infrastructure construction has been well-supported by multi-funded infrastructure, which is an important factor for many international textile companies to choose a factory base. The relatively backward infrastructure conditions in Africa are also one of the reasons restricting the development of its textile industry. As Ethiopia, one of the member countries of the African Union, in April this year, the Arab Economic Development Bank of Africa (BADEA) decided to provide it with US$10 million to support the construction of the Ethiopia road project. In May, the South African Standard Bank will open a representative office in Ethiopia as a platform to enter Ethiopia. At the same time, the World Bank agreed to provide Ethiopia with 380 million U.S. dollars** to improve the construction of local urban infrastructure and public services in Ethiopia and promote sustainable development.

In addition to receiving economic assistance from AU and other international organizations and agencies, Ethiopia has continuously created and improved the construction of textile and garment industries including capital, logistics, infrastructure, and public services, creating various projects for the development of the textile and garment industry. In addition to the favorable conditions, the Ethiopian Textile Industry Association also put forward a plan for the development of the textile industry in the “Economic Growth and Transformation Plan” stage that the country has established and implemented from 2010~2011 to 2014~2015. The association stated that during the phase of the implementation of the economic transformation plan, Ethiopia plans to achieve a billion US dollars worth of textile and apparel exports by 2016.