Ethiopia Garment Industry

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ETHIOPIA The next powerhouse of
Apparel Sourcing
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Country Overview
Investment Procedure in Ethiopia
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Ethiopian Economy Background
Industrial Parks (IP) in Ethiopia
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Ethiopian TC Sector
Logistics Scenario in Ethiopia
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Garment Exports of Ethiopia
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Strength and Weakness Analysis
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Challenges in Production
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Trade Relationships of Ethiopia
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Investment A Major Source to Boost TC Industry
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About US
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Surface Area
11,04,300 square kms
Sub-Saharan Africa / East Africa
Region
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65 international textile investment projects have
been licensed over the years for foreign investors
A shift is seen from agriculture to textile and
garment sector in last 5 years
Textile apparel industry has grown at an
average of 51 in last 5 years
Going from Fiber to Factory is comparatively easy
in Ethiopia
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• The economic developments in the textile and
  clothing sector show enormous growth in
  comparison to the starting phase back in FY
  2010-11.
• Yarns export, grey fabric, garments and
  traditional handloom together totaled an export
  amount of just over USD 160 million in FY 2014-15
  compared to USD 60 million in FY 2010-11.
• The Ethiopian government is eyeing to achieve TC
  exports of USD 1 billion by 2020.

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Export Share
The apparel sector represents 6 of the countrys
total export value and is projected to achieve a
share of 22 by 2020
Major Market
The USA and EU are the major export destinations
for Ethiopia as, in FY 2016-17, it exported more
than 90 of TC to the these markets.
No. of Factory
At current, the textile and clothing sector
consists of around 130 medium and large scale
factories of which 37 are foreign owned.
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African Growth and Opportunity Act (AGOA) enables
Ethiopia to export products to the US market with
Duty Free Quota Free privilege.
Everything But Arms (EBA) enables Ethiopia to
export products to the EU market with duty free
access.
Ethiopia enjoys the DFQF status extended by the
international markets including China, India,
Japan and Korea.
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- It is a well known fact that apparel
manufacturing is shifting from China. Now the
question is, who all are capable enough to absorb
this shift?
Why Ethiopia is grabbing the Eyeballs
- Due to law and order situation, political
instabilities and poor working conditions in the
factories of some Asian countries, the big
retailers such as HM, Tesco and Primark are
finding sustainable alternatives for apparel
manufacturing. Ethiopia is grabbing the
attention.
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Why to set-up Factory in Ethiopia? The answer
lies in these points
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• Chinese manufacturer Jiangsu Lianfa textile Co
  will boost 20,000 jobs but brings its own client
  base

• Foreign investment in the Ethiopian textile and
  clothing industry has risen from 4.5 billion birr
  (US 166.5 million) in 2013/14 to 36.8 billion
  birr in 2016/17.
• Most investors that construct factories
  themselves come from Turkey, India and Bangladesh
  but also bring their clients along.

• Bangladesh DBL has invested US 30 million in
  Mekele

• PVH group just started construction of large
  scale factory

• Indian denim giant Arvind will soon start
  production of jeans in Ethiopia

• Turkish Ayka textiles runs a factory in Ethiopia
  with 10,000 workers

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• The Ethiopian Industrial Development Zones
  Cooperation was established in 2014.
• Initially China and India were set to construct
  Industrial Parks but, later, the government
  decided to overtake those initiatives and launch
  the Industrial Parks itself.
• The World Bank supports the creation of
  Industrial Parks within the Competitiveness and
  Job creation Project (CJC)

Benefits for Ethiopia

• Ethiopia is a latecomer to IP development and as
  such can profit to avoid any missteps other
  nations have made.

• The failure in other nations of these zones is
  attributable to a number of factors which
  Ethiopia can avoid.

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S. No. Industrial Park Area (in hectares of land) Developer
1. Addis Industrial Village 8.7 Government
2. Bole Lemi Industry Zone 342 Government
3. Eastern Industry Zone 200 China
4. Kilinto Industry zone 243 Government
5. Kombolcha Industry Zone 1123 Government
6. Dire Dawa Industry Zone 1051 Government
7. Mekele Industry Zone 1000 Government
8. Hawassa Industry Zone 1000 Government
9. Tigray/Amhara/Oromia/SNNP Integrated Agro Industrial Parks Government
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• It takes up to 44 days from the time a clothing
  consignment leaves the factory to when it reaches
  buyers in Europe, compared to an average 28 days
  in Bangladesh and 21 days in China.
• The above scenario drives up costs. It costs up
  to US 1,870 to export a 40-ft container,
  compared with US 1,290 in Bangladesh and US 679
  in Vietnam, according to Reuters.
• But, a US 4 billion electric railway between
  Addis Ababa and the Red Sea, will be inaugurated
  shortly that will reduce the transit time to the
  Port of Djibouti from 2-3 days to eight hours.

Djibouti is the closest and single Port used for
exports of Ethiopian textiles
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Strengths
Weaknesses

• Availability of abundant labor at low cost
• Cheap electricity- up to 8 times less than other
  manufacturing nations
• Water is free. Most garment companies use tap
  water/ground water/river water
• Import duty is free on equipment, machinery and
  on spare parts needed to realize production

• Limited availability of raw materials, only
  cotton is available easily in the country
• Lack of manmade fibers and Ethiopia depends on
  imports for MMF sourcing
• Lack of middle management and merchandisers in
  garment units
• Inefficient production (45 maximum)

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Strengths
Weaknesses

• Backward integration possibilities with raw
  materials local cotton availability
• Low rent and lease up to 1-2 USD per square/meter
  for factory buildings
• All business processes controlled by government
  do not pay without receipt- to fight corruption.

• Lack of IT and CAD/CAM in production
• Social compliance is a big issue
• Lack of PPE workers do not want to use personal
  protective equipment
• Limited options for trims, accessories and
  printing equipment

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• Ethiopia has over 30 bilateral investment
  promotion and protection agreements
• Ethiopian government invests largely in
  infrastructure
• Ethiopian government has installed a scheme of
  incentives for business financing and trading
  terms opening an LC regularly would cost a
  company 3 during the production lead-time in
  Ethiopia
• Ethiopian government has reduced the cost of
  freight and transport with 25 and is about to
  launch its own transportation company providing
  trucks that run to Djibouti port.

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