Workers at a factory of Silver Spark Apparel Ethiopia Plc., a subsidiary of India’s Raymond Ltd., at the Hawassa Industrial Park, Ethiopia on Feb. 14.
By Atul Ranjan
ADDIS ABABA, NNA – Ethiopia has emerged as a key production hub for the Indian textile and garment industry’s exports to the U.S. and EU markets, using official support provided by the African nation.
Standalone Indian investments in Ethiopia’s textile and garment sector totaled 31 manufacturing-related projects at the end of last year, according to foreign investment data from the Ethiopian Investment Commission. The number is second only to China, which topped the list with 151 such investments.
Ethiopia offers firms preferential access to the largest textile and apparel export markets — the European Union and the United States —along with other advantages including cheap labor and utility costs and improved political stability compared to other African nations, industry analysts and company executives said.
The EU and the U.S. are the destinations for 38 percent and 15 percent respectively of global textile and apparel exports, said Prashant Agarwal, joint managing director, Wazir Advisors Pvt. Ltd., an India-based consultancy firm.
“While the EU imports $292 billion-worth of textile and apparel products, the U.S. imports stand at $116 billion, making them attractive markets for many global suppliers, including from India,” Agarwal said.
Locating in Ethiopia also offers Indian manufacturers import duty advantages up to 27 percent on different products reaching the U.S.
“Export from India to the U.S. invites 27 percent duty… but if you export from Ethiopia it’s actually zero duty,” Shashi Bhushan, country head of Silver Spark Apparel Ethiopia Plc., told NNA in an interview.
Silver Spark is a subsidiary of India’s leading textile and branded apparel firm Raymond Ltd., which opened its factory in the East African nation in 2017.
“Other factors like availability of cheap labor, power and political stability help make our products more price-competitive in the U.S. and the EU markets,” Bhushan said.
Monthly wages for general workers in Ethiopia range between $50 and $70, the lowest on average compared to other production bases like Kenya, Bangladesh, Cambodia, Myanmar and Vietnam, according to the Japan External Trade Organization office in Addis Ababa.
The Silver Spark factory — Raymond’s first offshore garment manufacturing facility — in the Hawassa Industrial Park, about 280 kilometers from the capital Addis Ababa, produces jackets, trousers and vest coats among other goods.
Demand for greater compliance with social and environmental standards in the textile and garment industries is also one of the factors driving manufacturing firms to move to Ethiopia.
“Till very recently, the global manufacturing hub was concentrated in countries like China, Vietnam, Sri Lanka and Bangladesh, where the facilities are quite old and retrofitting costs to achieve new compliance norms are high,” said Rajarshi Dutta, chief operating officer of Arvind Lifestyle Apparel Manufacturing Plc., a subsidiary of Indian textile maker Arvind Ltd.
“Here in Ethiopia, new factories are being built from scratch which can meet current and future compliance norms,” he said.
But locating manufacturing in Ethiopia is not without its challenges for manufacturers, such as the “lack of any local supply chain here,” meaning that nearly all the raw materials have to be imported, Dutta said.
Despite these challenges many firms are still looking to expand their footprint in Ethiopia. For example, Arvind, which has factories in Bole Lemi and Hawassa Industrial Parks, plans to open new factories in Jimma Industrial Park in southwestern Ethiopia.