The average monthly salary of US$45, electricity resources of 3 cents/kWh, and 3 million hectares of cotton planting land to be developed… When traditional textile producing countries face the common problems of rising labor costs and shortage of production resources, all the above These advantages make Ethiopia, known as the “Roof of Africa”, one of the hot spots for the transfer of the textile and clothing industry. At the same time, the Ethiopian government has frequently extended an olive branch to attract investment in the past two years. However, which type of enterprise is suitable for investment in Egypt? What kind of orders are suitable for local production? These detailed and practical questions can only be answered by going deep into the field. To this end, the China Textile and Apparel Industry Council recently led representatives from a number of textile and garment enterprises to Ethiopia for investigation, bringing practical and effective investment information to enterprises interested in “going global”.
Preferential policies give the green light to investment in the textile industry
After a 12-hour flight, on April 20, the China Textile Industry Federation delegation landed in Ethiopia. In just a few days, the delegation visited high-level government officials, industry associations and well-known local foreign-funded textile enterprises. After the investigation, the delegation members were deeply impressed by the determination of the Ethiopian government to vigorously develop the textile industry.
“The local government very much welcomes foreign companies to invest in the textile industry. One of the main reasons is that the government regards the manufacturing and export of textile and garment industries as an important engine for the country’s economic growth.” Head of the China Textile Delegation, China Textile Industry Federation Gao Yong, vice president of the association, said. In recent years, the Ethiopian government has regarded the textile and garment industry as the most important industrial industry and formulated a series of revitalization plans to expand exports. The government intends to make Ethiopia the next source of clothing in the world, and hopes to achieve a textile and apparel export target of US$1 billion in 2016.
However, due to backward production levels and a shortage of skilled workers, the development of Ethiopia’s local textile and garment industry lags behind. Only by leveraging foreign-funded enterprises can the industry achieve a breakthrough in export scale in a short period of time.
In order to attract the attention of more foreign-funded enterprises, the Ethiopian government promulgated a new decree in 2014 to encourage foreign investment in the textile and apparel industry. The new provisions stipulate that most raw materials and accessories used to process clothing are imported duty-free (the import tariff rate for Ethiopian clothing and clothing accessories is as high as 35%). In addition, because Ethiopia is a member of the “Common Market for Eastern and Southern Africa” and the “Africa, Caribbean and Pacific Organization”, it enjoys tariff-free, tariff-free and The quota-free policy and the commitment to join the “Common Market for Eastern and Southern Africa Free Trade Area” will facilitate exports to neighboring and European and American countries.
The accompanying members believe that investing in Ethiopia is a good choice for garment export companies with stable orders in the European and American markets. “If our country’s garment enterprises produce and process locally and export to European and American markets, they can enjoy two-way tariff preferences. On the one hand, imported fabrics and accessories are tariff-free, and on the other hand, textiles and clothing exported to European and American markets are tariff-free.”
The advantages of natural raw materials accumulate industry development potential
Various preferential policies have contributed to Ethiopia’s “attractive” investment environment, while the favorable climate and land conditions have laid a unique raw material advantage for the local textile industry.
Due to its mild climate and fertile land, Ethiopia is suitable for growing cotton, as well as various natural fibers, including flax, hemp, ramie and bamboo. In terms of cotton cultivation, the country is rich in short- and medium-staple cotton. In order to encourage the development of the domestic textile and garment industry, the government restricts cotton exports, and there are still millions of hectares of land suitable for growing cotton in an undeveloped state. It is understood that the country’s land area available for cotton cultivation is about 3 million hectares, and the actual sown area is currently about 93,600 hectares, accounting for only 3.12% of the potential.
Some members pointed out that Ethiopia has the advantages of raw materials such as cotton and low electricity costs. The price of industrial electricity is only 3 cents/kWh, which is significantly lower than the cost of domestic electricity. This is also very attractive to cotton spinning enterprises with a high degree of mechanization.
In addition to cotton, Ethiopia’s leather industry has also shown a booming trend in recent years. The country is rich in livestock resources, ranking first in Africa and tenth in the world. 20% of its finished leather is supplied to the domestic market, where leather shoes, leather clothing, gloves, bags and travel products are produced locally. Most local leather processing factories mainly process and produce semi-finished leather such as pickled leather, wet blue leather and hard outer leather. Take Pittards, a company headquartered in the west of England, as an example. Pittards has been operating in Ethiopia since the 1920s. The reason why I chose to invest in Ethiopia is that the country is rich in a well-known cashmere-free sheep. This kind of sheep does not have much wool. Compared with European sheep, its sheepskin is thinner, so this kind of sheepskin is very suitable for making some exquisite leather products, such as women’s leather gloves. At present, Pittards’ factory in Ethiopia is very profitable, with total annual operating income reaching US$60 million. The company is also preparing to continue expanding its presence in Ethiopia.Business scale.
Underdeveloped infrastructure and corporate culture are shortcomings
Benefiting from the favorable policy environment, low labor costs and abundant high-quality cotton, some world-renowned textile companies have begun planning to invest and set up factories in Ethiopia. Turkish textile company Akber and India’s Shri Vallah Pittie (SVP) Group plan to invest US$175 million and US$550 million respectively to establish factories in the country; international clothing retail giant Hennes and Mauritz (H&M) has also begun small-scale production in Ethiopia.
Ethiopia has attracted the attention of more and more international textile industry players, but for any country that has the potential to undertake the task of relocating the textile industry, opportunities and challenges coexist. Just like in Myanmar and Cambodia, low-cost labor once highlighted their cost advantages. However, in the past two years, frequent worker strikes have made local textile companies miserable. “Ethiopia’s political situation is stable, the relationship between workers and business owners is harmonious, and there will be no strikes like some Southeast Asian countries. However, the country’s textile and garment industry is still in the initial stage of development, with incomplete industrial chains and backward infrastructure. Factors that may cause investment companies to face challenges.” The accompanying members pointed out that Ethiopia’s railway transportation is still relatively backward. The railway from the capital to Djibouti is expected to be completed by the end of 2015. Therefore, the country’s current logistics efficiency is not high and the cost is high. Some small batches , clothing orders that require quick response may not be suitable for local production. In addition, Ethiopia’s corporate culture can also pose challenges to manufacturing investments. “Local workers are not very motivated to work proactively. How to improve labor productivity through localized management is a question that companies investing in Ethiopia need to think about.”
Ethiopia’s textile and garment industry is in a growth stage, and its process requires the advanced processing technology and progressive corporate culture of Chinese companies to promote it. For Chinese companies, local demographic dividends and resource advantages will share cost pressures, while factors limiting industrial development also exist. Therefore, whether to place the coordinates of “going global” on this “roof of Africa”, companies still need to conduct a feasibility analysis before making a final decision.
Does the “Roof of Africa” hide good opportunities for the relocation of the textile industry?
The average monthly salary of US$45, electricity resources of 3 cents/kWh, and 3 million hectares of cotton planting land to be developed… When traditional textile producing countries face the common prob…
This article is from the Internet, does not represent Composite Fabric,bonded Fabric,Lamination Fabric position, reproduced please specify the source.https://www.yjtextile.com/archives/12258