Asian Investment Is Turning Ethiopia Into Dynamic Apparel Sourcing Hub

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New rail line and young workforce set the stage for industrial development

The East African country of Ethiopia is fast developing into a dynamic apparel sourcing hub, as low labour costs draw in international clothing makers. Manufacturers from China, South Korea, India and other countries have opened new plants in the nation, while a growing number of European and US brands are sourcing garments from here.

One reason for Ethiopia's emergence on the clothing scene is the opening of a railway line to a port in neighbouring Djibouti, located on the Horn of Africa on the Gulf of Aden. The railway speeds the transport of goods from the landlocked country's industrial areas, such as the Bole Lemi Industrial Park, an hour's drive from the capital, Addis Ababa.

Opened in 2014, the 150-hectare park is bustling with Chinese, Taiwanese and South Korean production lines, conveniently clustering factories for textiles, apparel and leather shoes in one area.

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A factory operated by Shin Textile Solutions, a South Korean company, exports its entire sportswear output, with about 60% going to Europe, 20% to the US & the remainder to Asia. Japan's Fast Retailing, which makes and sells casual clothes under the Uniqlo brand, is among the many apparel makers that have shown interest in the plant.

Drive To Industrialise

Arkebe Oqubay, special adviser to Prime Minister Hailemariam Desalegn, has pledged to transform Ethiopia from an agricultural economy into an industrial powerhouse. As part of its drive to lift the country to middle-income status by 2025, the government has been building industrial parks.

The newest is Hawassa Industrial Park, a one-hour flight from the capital. Among the 15 companies with factories there is PVH, a US apparel company. PVH's 280 employees produce garments for a number of international brands, including Calvin Klein, for export to Europe and the US. Ethiopia's low labour costs make it an attractive garment-sourcing destination, according to the company.

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The average monthly pay for a factory worker is about US$ 50, compared with US$ 140 to US$ 160 in Kenya, US$ 70 to US$ 90 in Bangladesh, US$ 150 to US$ 170 in Vietnam and US$ 400 to US$ 500 in China. Another factor in the country's favour is its fast-developing infrastructure. Ethiopia used to depend heavily on trucking, hindering its transition to a more export-oriented economy. But the railway connecting Addis Ababa to Djibouti will help solve this problem.

The government has built a distribution centre in the Addis Ababa suburb of Mojo, which also has a train station on the new line. Goods from Ethiopia's industrial parks will be sent to the Port of Djibouti via the centre. At present, most of the companies investing in Ethiopia are apparel makers and other light-industry manufacturers. But General Electric plans to make medical equipment in the country, and Samsung Electronics is working with a local partner to produce printers. Meanwhile, Hyundai Motor reached an agreement with a local company in May to build a commercial vehicle assembly plant.           

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