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  • 1. ETHIOPIAN TEXTILE INDUSTRY PRESENT STATUS ANDFURTURE GROWTH PROSPECTS Prof. R. B. CHAVANInstitute of Technology for Textile, Garment and Fashion Design Bahir Dar University, Bahir Dar, Ethiopia 2010
  • 2. ETHIOPIAN TEXTILE INDUSTRY PRESENT STATUS ANDFURTURE GROWTH PROSPECTS By Prof. R B ChavanInstitute of Technology for Textile, Garment and Fashion Design Bahir Dar University, Bahir Dar, Ethiopia E-mail: rbchavan@hotmail.com 2010
  • 3. PREFACEEthiopia has a long history of traditional cottage textile sub-sector. Traditionally yarn fromcotton fiber supplied by small hold cotton farmers is home spun using age old spinning dropwheel. The yarn is then converted into fabric using handlooms. This traditional cottage industrycontinues to grow even today making an important contribution to satisfying people’srequirement for textiles and providing large scale employment to rural and urban households.The introduction of modern integrated textile mills in Ethiopia is a recent phenomenon initiatedby Italians during the Second World War. Dire Dawa Textile Mill, was the first integrated textileMill established by foreign capital in 1939. This has marked the starting point of textile sub-sector in Ethiopia. During 196o’s, 5 large-scale integrated textile enterprises were establishedmainly by private capital. The socialist regime, which reigned from 1974 to 1991, nationalizedprivate textile and apparel firms and at the same time established 4 more integrated textile millsto expand the sector in order to satisfy the domestic demand for regular textiles and substitutingimported products.The dictator economy eventually took a toll on the sector. Because of neglect, lack ofcompetition, and outdated technology, the sector could not meet international market standards.As a result, the cotton farming and textile and apparel sectors were producing well belowcapacity. Since the overthrow of the Marxist dictatorship in 1991 the current Federal Democraticgovernment has been transforming the economy from one based on a centrally planned structureto an economy based on free market principles. In 2002, the Ethiopian government has drafted“The Sustainable Development and Poverty Reduction Program”, in which it identifieddevelopment and poverty reduction as the primary targets of the Government and “AgriculturalDevelopment-led Industrialization” as its principal strategy. Hence there is major focus on thedevelopment of the cotton/ textile/garment sub-sectors in Ethiopia. Thus, Ethiopia has a short history of production of cotton, textiles and garments on industrialscale. Therefore, task of writing the present book, probably the first of its kind in Ethiopia, wasboth easy and difficult. It was easy because the events of developments were meager, at the sametime it was difficult due to non-availability of information in a systematic way. It must berecorded here that following reports were found to be extremely useful and extensively used inproviding statistical data and strategic recommendations. 1. Benchmarking of the Ethiopian Textile Industry (UNIDO draft report) prepared for the Textile and Apparel Industry Development Institute, Ministry of Trade and Industry, Ethiopia, April, 2010 2. Market and Potential Analysis for the Textile, Garment and Home Textile Sector in Ethiopia (Final report 2007) prepared by Corporate solution, Bad Nauheim, Germany on behalf of Engineering Capacity Building Program, Germany. I  
  • 4. 3. Fruits of the loom: Export potential of Ethiopian handmade, handloom and home furnishing textiles: Report prepared by Eyob Demessre etal. Submitted to Integrated Institution Export Development Program for Ethiopia, January 2005 4. Cotton – textile-Apparel value chain: Report for Ethiopia, Prepared by Agridev Consultant. Submitted to Regional Agricultural Trade expansion Support Program, Nairobi, Kenya, 2004 5. Study Report on The Development Strategy of Ethiopian Cotton/Textile/Garment Sub- sectors (Draft) prepared by China Textile Planning Institute of Construction, Beijing, China, 2003Much information was also collected through extensive internet search.The book provides the information both of academic interest regarding the development ofcotton, textile and garment sector and some valuable statistical data as well as the information ofcommercial interest for those who are interested in entering into cotton, textile and garmentbusiness in private or partnership mode. The book contains 10 chapters covering the cotton,textile, garment and handloom sectors. Special chapters on cotton grading, export market entry,quality standards and care labels, marketing, business opportunities and SWOT analysis. Thebook covers the up to date information till October 2010, highlighting Ethiopian Governmentsambitious plans to reach the textile/garment export earning of USD 1 billion in next five years. Aproposal has also been drafted by the Ethiopian Textile Industry Development Institute (ETIDI)to ban the export of Ethiopian cotton in order reap the benefits of producing value addedproducts. It is hoped that book will provide much of the scattered information on Ethiopiancotton, textile and garment sub-sectors in the form of a single compilation and enthuse some ofthe national as well as international enterprises to enter into these sub-sectors in a big way andcontribute in boosting the industrial development and economy of Ethiopia.Bahir Dar, Ethiopia Prof. R B Chavan November 2010 E-mail: rbchavan@hotmail.com II  
  • 5. ABOUT THE AUTHORProf. R B Chavan was working as professor for 30 years at the Department of TextileTechnology, Indian Institute of Technology, Delhi, India. During this period he guided 11 Ph Dtheses and published more than 150 research papers in international, national journals andconference proceedings. He has also published 3 books on the subjects related to Chemicalprocessing of textiles, two books on quality assurance of Khadi a hand spun hand woven fabricand edited a special issue of the Indian Journal Textile and Fiber research on “Environmentalissues: Technology options for textile industry”. He has also contributed a chapter on“Environmentally friendly dyes and dyeing processes” to be published by Woodhead PublishingLimited, Cambridge, England in book “Handbook of textile and industrial dyeing: Principles,processes and types of dyes Vol I”. Editor: Dr Matthew ClarkHe is the recipient of Perkin Centenary Award from the University of Manchester for valuablecontribution in the field of color chemistry and Colourage Gold medal for best researchpublication on transfer printing of cotton and polyester/cotton blends. As a part of academiccareer he visited several foreign universities like University of Manchester, England from wherehe obtained his Ph D degree, university of Leeds, England, University of Natal, Brazil,University of Dhaka, Bangladesh. He also visited other countries like Germany, France, ItalySwitzerland and USA.After superannuation from the Indian Institute of Technology Delhi in 2006, he worked asConsultant for 3 years at Mahatma Gandhi Institute of Rural Industrialization, Wardha,Maharashtra, India. The assignment was a part of Rs. 120 million project sponsored by Khadiand Village Industries Commission, Ministry of Micro, Small and Medium Enterprises, Govt. ofIndia. He was one of the members of core group of four experts responsible for setting up theInstitute. During the period of 3 years he provided a valuable technical interventions for thedevelopment of Khadi (hand spun, hand woven fabric) by conducting more than 30 technologydissemination workshops on all India basis. He also developed the technology of Solar operatedCharkha (Mini-spinning machine) and standardized the technology by conducting many fieldtrials. The technology has provided much needed technical intervention to reduce the drudgery ofmanual operation of Charkha, improvement in quality and productivity of yarn and wage earningcapacity of spinners. Most importantly, the technology uses the renewable source of Solar energyavailable abundantly both in rural and urban India and thus solves the problem of non-availability of normal electricity in rural areas. As a result of extensive field trials the Khadi andVillage Industries Commission, India has accepted the technology for implementation in theKhadi sector (Times of India, October 3, 2010 press release). This is one of the majorcontributions of the author in the development of Khadi sector and application of science andtechnology for social benefits. III  
  • 6. Since October 2009, the author is working as Professor at the Institute of Technology forTextile, Garment and Fashion Design (IoTex) at Bahir Dar University, Bahir Dar, Ethiopia. He ishelping in developing the post graduate and Ph D Programs at the Institute. The author isproviding technical guidance for quality testing and quality control at Bahir Dar Textile S C,Bahir Dar, and also prepared a detailed project proposal on “Quality standardization and gradingof Ethiopian cotton”. He also initiated two M sc research projects on “Utilization of studentcafeteria food waste for biogas generation” in collaboration with the Dept. of Applied Chemistry,Bahir Dar University and initiated a Ph D project on “Documentation and application of Naturaldye yielding plants of Ethiopia”. The present book is a result of author’s endeavor towardsmaintaining academic excellence at IoTex. IV  
  • 7. CONTENTSPrefaceAbout the authorChapter 1 Ethiopia: general information 11.1 History1.2 People1.3 Capital city1.4 Main languages1.5 Local time1.6 Calendar1.7 Government and political system1.8 EconomyChapter 2 Cotton production: Present status and future growth plans 72.1 Introduction2.2 Planting period2.3 Cotton production2.4 Cotton species2.5 Cotton quality2.6 Grading and quality checking2.7 Scientific research and education system of cotton2.8 Marketing chain2.9 Cotton production statistics2.10 Potentials for the development of cotton sub-sector 2.11 Cotton production and marketing constrains2.12 Recommendations for the development of cotton sub-sector2.13 General development goals and strategy for implementation2.14 Present status and government plans for future growth of cotton sector V  
  • 8. 2.15 Current and projected yarn production capacity of Ethiopian textile industry2.16 Yarn production and foreign exchange earning plan of textile industry, 2009/10-2014/152.17 Projected production from new investment in spinning factories2.18 Five year lint cotton demand of spinning industry2.19 Existing capacity and future production potential of ginnery2.20 Short and medium-term strategy to satisfy domestic and international demand of cotton (2010/11-2014/15)2.21 Financial requirement for the implementation of the strategyChapter 3 Need for development of grading system for Ethiopian cotton 633.1 Introduction3.2 International importance of cotton grading3.3 Need for development of cotton quality standard and grading system3.4 Brief history of iotex3.5 Objectives3.6 What is cotton grading?3.7 Essential quality parameters for cotton grading3.8 Expected outcome of the project phase I3.9 Benefits and beneficiaries3.10 Impact of cotton fiber properties on yarn quality and pricing3.11Effect of fiber quality on weaving performance3.12 Cotton grading and its need3.13 cotton grade standards3.14 Manual grading3.15 Development of instrument cotton grading3.16 Quality and pricing mechanism3.17nternational cotton marketing3.18 Global status of HVI instrument3.19 Advantages of HVI classification VI  
  • 9. 3.20 Implementation of instrument cotton classification systems3.21 Sustenance of national HVI system3.22 Technical details of cotton grading system3.23 impact of cotton ginning on quality3.24 Cotton grading systems of some countriesChapter 4 Assessment of textile sub-sector 1034.1 Introduction4.2 Diversification of ownership4.3 Distribution and marketing system of textile products4.4 Education and training system4.5 Potentials for developing the textile sub-sector4.6 Challenges for the development of textile sub-sector4.7 Measures to be taken for the development of textile sub-sector4.8 Three phase development strategy4.9 Strategy to achieve the targets4.10 Present status of Ethiopian textile industry4.11 Structure of the Ethiopian Textile Industry4.12 Factors affecting the export competiveness of Ethiopian textile industry4.13 Other issues affecting the competitiveness of Ethiopian textile industry4.14 Foreign Direct investment in Textile and garment industry4.15 Incentives for foreign direct investment4.16 Preferential Market Access and other Incentive Programs4.17 Foreign investments4.18 Turkey Investment4.19 Indian Investment4.20 U.S. Firms Partner with Ethiopia’s Almeda Textiles4.21 The Italian Intervention on Textile and Garment Sector4.22 Ethiopian government may ban cotton exports4.23 Apparel export earnings likely to rise to $1 billion VII  
  • 10. Chapter 5 Assessment of garment sub-sector 1665.1 Introduction5.2 Manufacturing scale and equipment level5.3 Development opportunities for the garment sub-sector5.4 Ethiopia’s garment export picking up speed 5.5 Potentials for the development of garment sub-sector5.6 Challenges for the development of the garment sub- sector5.7 Strategy and measures for the development of the garment sub-sector5.9 Present status of garment industry5.10 Value chain assessment of garment sector5.11 Trends in Garment sector and types of co-operation5.12 Productivity and quality (Benchmarks)5.13 Labor cost5.14 Status of product development5.15 Performance analysis (Case studies)5.16 Textile and garment Exports5.17 Institutional support5.18 Government Support Chapter 6 Handloom clusters and export potentials 210 of handloom sector6.1 Introduction6.2 Handloom establishments and handloom weavers in Ethiopia6.3 Handloom clusters at Addis Ababa6.4 Cluster institutions and their functioning6.5 Handloom value chains6.6 Generalized chain components for handloom marketing6.7 Production technology6.8 Problems during the production process6.9 Quality management system6.10 Handloom products VIII  
  • 11. 6.11 Product marketing and pricing6.12 SWOT analysis of handloom sector6.13 Strategic issues6.14 ConclusionsChapter 7 Quality standards, care labels and packaging 2437.1 Introduction7.2 Trade-related, health safety, social and environmental issues7.3 Personal protective equipment7.4 Quality control7.5 Care labels7.6 Care label symbols7.7 Recommended labeling spots7.8 Packaging7.9 MarkingChapter 8 Strategy for entry into export market 2558.1 Pre-requisites for export marketing8.2 Target groups8.3 Target group segmentation8.4 Purchasing behavior of target groups8.5 Price segments8.6 Export pricing8.7 Cost calculations8.8 Delivery time8.9 Communication and product promotion8.10 Situation in Ethiopia8.11 Developing an export strategy8.12 Important points to be considered by exporters8.13 Tips for entering into export market8.14 Basic preparations for export market entry IX  
  • 12. Chapter 9 SWOT analysis and recommendations for the 282 development of textile, garment industry9.1 Strengths9.2 Weaknesses9.3 Opportunities9.4 Threats9.5 Recommendations for development of textile, garment, home textile sectorChapter 10 Business in Ethiopia: opportunities, 295 incentives and regulations10.1 Investment opportunities10.2 Economic liberalization10.3 Why invest in Ethiopia10.4 Investment opportunities in different areas10.5 Regulations and incentives for starting a business in Ethiopia10.6 Investment incentivesReferences 320     X  
  • 13. CHAPTER 1 ETHIOPIA: GENERAL INFORMATION1.1 HistoryThe history of Ethiopia, known to many as Abyssinia, is rich, ancient, and still in part unknown.Anthropologists believe that East Africas Great Rift Valley is the site of the origin ofhumankind. The first recorded account of the region dates back to almost 5,000 years ago duringthe time of the Egyptian pharaohs, when the ancient Egyptians sent expeditions down the RedSea in quest of gold, ivory, incense, and slaves.It is in the Afar region of Ethiopia where scientists discovered the remains of "Lucy" orDinkenesh, meaning "thou art wonderful," as she is known to the Ethiopians. "Lucy" lived morethan three million years ago, and her bones now rest in the Ethiopian National Museum at AddisAbaba.The countrys rich history is woven with legends of King Solomon and Queen of Sheba; the Arkof the Covenant that is said to rest in Axum. The story of King Lalibela, who is believed tohave had constructed eleven rock-hewn churches, still standing today and considered the eighthwonder of the world.Ethiopia is the only African country which was not colonized by European colonial forcesexcept, it was briefly occupied by the Italians between 1936 to1941.In recent history, between 1889 and 1913 Emperor Menelik II reigned fending off theencroachments of European powers. Italy posed the greatest threat, having begun to colonize partof what would become its future colony of Eritrea in the mid 1880s. In 1896, Ethiopia defeatedItaly at The Battle of Adwa, which was considered the first victory of any African nation over aEuropean colonial power.Meneliks successor, Haile Selassie I (reigned 1930-74) was left with the task of dealing Italysresurgent expansionism. In the early years of World War II, Ethiopia was liberated from theItalians by the joint forces of the Resistance Movement and British army.After being restored to power, Emperor Haile Selassie attempted to implement reforms andmodernize the state. However, increasing internal pressures, including conflict with Eritrea andsevere famine placed strains on Ethiopian society that contributed in a large part to the 1974military rebellion that ended the Haile Selassie regime. 1  
  • 14. The biggest impact of the coup was the emergence of Lieutenant Colonel Mengistu HaileMariam as head of state, and the reorientation of the government and national economy fromcapitalism to Marxism. During the 17 years of the military control, the economy deeplyworsened, while civil unrest grew beyond the control of the military.Growing civil unrest and a unified force of the Ethiopian people, led by the Ethiopian PeoplesRevolutionary democratic Front (EPRDF) against communist dictators finally led to the demiseof the Mengistu regime in 1991. Between 1991 and 1995 the Transitional Government ofEthiopia, a coalition of 27 political and liberation organizations embarked on its path totransform Ethiopia from a centralized, military-controlled country to a free and democraticfederation Government.In 1994, a new constitution was written, setting up a legislative and a judicial system, andguaranteeing equal rights and freedom of expression to all citizens of Ethiopia. In May 1995peoples representatives to the Parliament were elected.1.2 PeopleWith a population of about 85 million (2009 Estimate), Ethiopia represents a melting pot ofancient Middle Eastern and African cultures evident in the religious, ethnic and languagecomposition of its Semitic, Cushitic, Omotic and Nilotic peoples. The Ethiopian populationcomprises about 80 linguistic groups of which the Amhara and the Oromo constitute themajority, with about 60 percent of the total population. Approximately 85 percent of thepopulation lives in the rural areas. The annual population growth rate is about 3.09 percent, andthe economically active segment, between ages 14 and 60, is about 50 percent of the totalpopulation.1.3 Capital cityAddis Ababa, the largest city, is the seat of the Federal Government of Ethiopia, and lies on thecentral plateau at an altitude of 2,400 meters, 9 degree north of the equator. Its averagetemperature is 16 degree Centigrade. Addis Ababa was founded in 1887, and has a population ofabove 3 million. It is host to the African Union (AU), and the United Nations EconomicCommission for Africa (ECA). Several other international organizations have their headquartersand branch offices in the capital, which is also the center of commerce and industry. 2  
  • 15. Manufacturing plants for steel fabrication, wood, tanneries, textiles, cement, leather goods andbreweries are among the industrial activities located in and around Addis Ababa.Ethiopias other important cities of trade and industry are: Awassa, Dire Dawa, Gondar, Dessie,Nazareth, Jimma, Harar, Bahir Dar, Mekele, Debere Markos and Nekemte. All these towns areconnected to Addis Ababa by asphalt and gravel roads, and most of them have goodinfrastructural facilities, such as first class hotels and airports.1.4 Main languagesEthiopia is a country where as many as 80 languages are spoken. Amharic is the officiallanguage of Ethiopia. The working languages of the national/regional government may differaccording to regions. English, French, Italian and Arabic are also widely spoken.1.5 Local timeEthiopia is three hours ahead of Greenwich Mean Time. The 12 hour clock is used locally andthis can be confusing to visitors. The first cycle starts with "one" at 7 A.M. and goes on to "12"at 6 P.M. The second cycle starts at 7 P.M. "one" and goes on to 6 A.M. "12".1.6 CalendarEthiopia follows the Julian calendar, which consists of twelve months of thirty days each and athirteenth month of five days (six days in a leap year). The calendar is about eight years behindthe Western (Gregorian) calendar. The New Year is Celebrated on September 11, which is 1Meskerem E.C. (Ethiopian Calendar).1.7 Government and political systemEthiopia adopted a new constitution that established the Federal Democratic Republic ofEthiopia (FDRE) in 1995.The federal government is responsible for national defense, foreignrelations and general policy of common interest and benefits. The federal states comprise of nineautonomous states vested with power for self-determination. The FDRE is structured along thelines of bicameral parliament, with the council of Peoples’ Representatives being the highestauthority of the federal government, while the federal council represents the common interests of 3  
  • 16. the nations, nationalities and peoples of the states. Members of both councils are elected for afive-year term.The federal state is headed by a constitution president and the federal government by anexecutive prime minister who is accountable to the council of peoples’ Representative. Eachautonomous state is headed by a state president elected by the state council. The judiciary isconstitutionally independent.The Federal Democratic Republic is composed of states which are delimited (formed) on thebasis of settlement patterns, language, identity and consent of the peoples concerned.1.8 EconomyIn economic fields, agriculture is the mainstay of the countrys economy. Currently, itcontributes 47 percent to the GDP; 60 percent to the export and employs about 80 percent oflabor force. Industrial manufacturing and service sectors constitute about 13 percent; 40 percentof the GDP respectively.The country is endowed with huge natural resources. Out of the total 113 million hectors landareas, about 56 percent is suitable for cultivation. Nearly 15-16 percent of this is currently undercultivation. Water is the most abundant resource. A dozen of large rivers, including Blue Nile,lakes, underground water, seasonal rainfalls and comfortable weather conditions (average 10 -200 Celsius) provide suitable ground for the cultivation of various crops.Livestock is another major agricultural resource the country is known for. Ethiopia ranks first inAfrica in livestock population. All these resource bases made agriculture the mainstay of theeconomy.With the launching of the new economic policy and a series reform programs in 1992, theparticipation of private sectors in the economy has steadily increased, and the economy isliberalized and gradually turned to the trend of growth from its stagnant or negative trend underthe previous regime. The new economic policy and development strategy follows AgriculturalDevelopment-Led Industrialization in which agriculture in its current potential in terms of landand labor is seen as an ultimate resource basis to earn material and financial capacity for thedevelopment of the industrial sector.Other economic factors resources are 4  
  • 17. • Minerals • Gold • Marble • Limestone • Tantalum (small amounts)Other resources with potential for commercial development are• Large potash deposits,• Natural gas,• Iron ore• Petroleum (possibly) and• Geothermal energyLandThe government owns all land and provides long-term leases to the tenants. This system keepson hampering growth in the industrial sector as entrepreneurs are unable to use land as collateralfor loans.GDP composition by sector: • Agriculture: 46.7% • Industry: 12.9% • Services: 40.4% (2006 estimate)Population • Population 85 million (2009 estimate) • Population below poverty line: 38.7% (2005-2006)Labor force • Labor force: 37.9 million (2007) • Agriculture and animal husbandry 85%, • Government and services 10%, • Industry and construction 5% (2005) • Unemployment: (% of labor force) 16.7% Age group 10 years and over. Urban areas (2006 estimate). 5  
  • 18. Agriculture • Main products: cereals, pulses, coffee, oilseed, cotton, sugarcane, potatoes, qat, cut flowers, hides, cattle, sheep, goats, fishIndustries • Food processing • Beverages • Textiles • Chemicals, • Metals processing, • CementExports, imports • Exports: $1.085 billion f.o.b. (2006 est.) • Exports commodities: coffee, qat, gold, leather products, live animals, oilseeds, textiles • Exports partners: China 10.5%, Germany 8.7%, Japan 7.4%, US 6.8%, Saudi Arabia 5.8%, Djibouti 5.8%, Switzerland 5.1%, Italy 5% (2006 est.) • Imports: $4.105 billion f.o.b. (2006 est.) • Imports commodities: food and live animals, petroleum and petroleum products, chemicals, machinery, motor vehicles, cereals, textiles • Imports partners: Saudi Arabia 18.1%, China 11.4%, India 8.1%, Italy 5.1% (2006)Foreign exchange reserve and gold $1.108 billion (2006 est.)Debt - external: $6.038 billion (2006 est.)Economic aid - recipient: $1.6 billion (Financial year 2005-06)Currency: birr (ETB) 6  
  • 19. CHAPTER 2 COTTON PRODUCTION: PRESENT STATUS AND FUTURE GROWTH PLANS2.1 IntroductionCotton is one of the oldest cultivated fiber crops in Ethiopia. Ethiopia has favorable weather andtopography for the cultivation of cotton. A study of the Ministry of Agriculture indicates thatthere is 3,000,810 ha (approximately 3 million ha) of land suitable for cotton production, whichis equivalent to that of Pakistan, the fourth largest producer of cotton in the world. Pakistanharvests about 2-2.5 million MT of cotton annually from a total cotton farm area of 2.9 millionha.The low to medium altitude areas of the country are generally known to have an immensepotential for the production of cotton subject to the availability of water. In terms of productivity,high yields are obtained in areas with an altitude ranging up to 1000 meters above sea level. Inthe absence of hail, frost, and other unfavorable weather conditions, cotton production can alsobe extended into areas with altitude of 1500 meters above sea level. Out of the total 3 million haof land suitable for cotton production, 1.9 million ha or 63.3% is found in 38 high potentialcotton producing areas and the remaining 1.1 million ha or 36.7% is in 79 medium potentialdistricts. Ethiopia currently (2008/09) produces only about 47,694.4 ton of lint cotton annuallyfrom a total cotton area of 75,375 ha land which is only 2.51% of the total area favorable forcotton cultivation. Selected regions and respective land area suitable for cotton cultivation is shown in Table 2.1 7  
  • 20. Table 2.1 Selected regions and respective land area suitable for cotton cultivation No. Region Number of Area of land Suitable selected for cotton cultivation, Woredas ha 1 High Potential Areas 1.1 Tigray 3 208,825.20 1.2 Amhara 5 544,031.80 1.3 Sothern region 6 385,397.40 1.4 Oromia 6 205,491.20 1.5 Gambella 3 262,850.20 1.6 Benshangul Gumuz 3 79,931.8o 1.7 Afar 9 100000 1.8 Somali 3 100000 Sub-total 38 1,886,527.60 2 Medium Potential Areas 2.1 Tigray 6 60,303.60 2.2 Amhara 14 134,679.20 2.3 Sothern region 17 215,531.95 2.4 Oromia 12 201,930.05 2.5 Gambella 4 53,600.90 2.6 Benshangul Gumuz 16 223,235.45 2.7 Afar 5 100000 2.8 Somali 5 125000 Sub-total 79 1,114,281.15 Total 117 3,000,808.75Source: Cotton Cultivation and Marketing Plan, Ministry of Agriculture and Rural Development, 2010.As most of the lowlands are deficient in rainfall, the cultivation of cotton depends entirely onirrigation. Cotton growing on the irrigable lowlands is, therefore, a large scale commercialenterprise undertaken by government organizations, primarily by the Ministry of State FarmDevelopment, and to a certain extent by the Relief and Rehabilitation Commission. There arefive state owned enterprises producing cotton in the country. These are Tendaho, Middle Awash,Upper Awash, North Omo and Abobo. Large-scale cotton cultivation is carried out mainly in theAwash valley and in three minor areas, namely North Omo (southern Regions), Ababo(Gambella Region) and Gode (Ogaden Region). Cotton is produced with the help of irrigation inall regions except Ababo. 8  
  • 21. Peasant cotton growing areas are rain fed and generally situated at altitudes ranging from about1,000 meters to 1,700 meters above sea level. Rain-fed cotton is also grown under peasantholdings in the Regions of Gonder (Humera), Sidamo (Bilate) and Gamo Gofa (Arba Minch)where the annual rainfall is more than 700 mm. Peasant production is characterized bytraditional technology with no access to improved seeds and chemicals. Almost all the cottonproduced by the peasant sector is used by the handloom industry. Spinning cotton into home-made yarn for making traditional fabrics by handloom weavers is an important historicaltradition.2.2 Planting periodThe planting period for cotton in Ethiopia considerably varies from area to area. In the lowerAwash valley, cotton planting starts in late June and ends in mid August. In the Middle Awashand rift valley areas, cotton planting commences sometime in early May and ends early June.Planting is carried out during late April-early May in Upper Awash. In Humera, Metema andGambella areas planting is done in June-August. Harvesting also shows similar variations. InLower Awash cotton harvesting begins early November and ends mid January. In Middle Awashthe harvesting period is November to late December. In Humera, Metema and Gambella,harvesting takes place starting Mid November to end January. The planting and harvestingperiods of cotton in the major cotton producing areas is shown in Table 2.2 Table 2.2 Planting and harvesting periods in different regions Area Planting period Harvesting period Lower Awash June to August November to January Middle Awash and Rift valley April to June November to December Upper Awash April to May September to November Hummera Mettema and Gambella June to August November to January Source: Cotton – textile-Apparel value chain Report for Ethiopia, Prepared by Agridev Consultant Regional Agricultural Trade expansion Support Program, Nairobi, Kenya, 2004 9  
  • 22. 2.3 Cotton productionThe industrialization of the Ethiopian textile sub-sector started in 1930s, when the country’scotton planting remained in a stage of traditional growing pattern by household farmers. Before1960, most cotton textile products made in Ethiopia depended on raw material imported, andcotton import alone occupied roughly 30% of the total import value. As a result of the increaseddemand on cotton from textile sub-sector, in 1960’s the Government initiated the large scaleplanting of cotton and made favorable land policies to meet the raw material needs of thedomestic textile sub-sector.Tendaho Agricultural Development Enterprise was the first foreign-invested commercial cottonfarm. Later, local investors, including local governments, started to invest in establishing farmsspecializing in cotton planting. With new cotton varieties, cotton growing area enlarged,irrigation projects constructed, machineries and chemical fertilizer employed in the planting,the Ethiopian cotton sub-sector was on the road to mass production. Since 1990s, along with thetransition to the market economy, a group of private farms have come into being, thus formingthe cotton production system in which small farm households, public farms and private farms co-exist.The technology employed in cotton production also varies from producer to producer. The stateowned and private farms use improved agricultural practices and technologies. The small holderfarmers although participate in large numbers in cotton production, practices traditional andbackward farming. Ethiopia grows relatively good raw cotton with fiber length of 26-28 mm.There is potential to produce long staple length cotton in the country with improved seed andtechnology utilization.2.4 Cotton speciesCotton is not indigenous to Ethiopia. Major cotton species are Gossypium hirsutum L includingCarolina Queen, Deltapint 90, Stonenlle 1324, Cu-okri, Acalasi (S.J-2), Cucuroval 51 S, Bulk2020 (crossbreed), Arha, Reba B-50 and Albar, (Coming from the USA, Israel, Turkey, formerSoviet Union and western African countries). All had high productivity when they were justintroduced.The output and quality index of the major cotton species when introduced are given in Table 2.3 10  
  • 23. Table 2.3 The output and quality index of the major cotton species when introducedSpecies Seed Seed QualityName cotton cotton index Yield Yield only with Rainfed Irriga Kg/ha -tion Kg/ha Length Strength Fineness Evenness Maturity mm lb/in mv % %Acalasi SJ-2 3250 -- 28.6 39.4 3.2 47.1 77.5Deltapin t-90 3850 -- 27.7 38.3 3.7 47.7 78.7Stonell e-1234 3854 -- 27.9 36.1 3.6 47.8 78.0Carolina Queen 4960 -- 27.2 38.5 3.8 46.5 82.8Cu-Okra 4950 -- 26.1 39.4 4.0 46.6 83.8Cucurov A1518 5280 -- 27.0 37.0 3.8 46.6 82.1Bulk 2020 2242 28.1 38.7 3.5 47.0 75.1Arba 2030 30.3 40.0 3.5 47.1 77.0Reba B-50 1804 26.3 36.4 3.2 48.4 70.9Albar 1672 27.3 40.2 3.5 48.5 73.8 Source: Study Report on The Development Strategy of Ethiopian Cotton/Textile/Garment Sub-sectors: China Textile Planning Institute of Construction, Beijing, China, June 2003 2.5 Cotton qualityThere are no systematic records on quality of cotton produced in Ethiopia. In 2002/03, a Chineseteam from China Textile Planning Institute of Construction Beijing, Collected the cotton samplesfrom few state farms and textile mills and analyzed the cotton samples for different qualityparameters at the Cotton Quality Supervision and Test Centre of the Ministry of Agriculture ofChina. The test findings are given in the Table 2.4 11  
  • 24. Table 2.4 Indexes of fibre quality of cotton samples Length Specific Elong- SpinningSampling place Length Evenness, Strength, ation, Micro- Refle- Yello- evenness mm % (cN/Tex) % naire ctance, wing %Tendaho Awash Ag.SC 28.6 84.5 27.9 7.2 3.5 76.4 9.5 144Upper Awash Ag.Ind. 28.3 82.9 27.2 7.3 3.9 72.9 7.3 127Middle Awash Ag.SC 26.5 85.3 31.9 7.0 4.6 75.0 8.1 144Bahir Dar Cotton mill 26.2 80.5 26.4 6.0 3.5 77.5 10.5 117Awasa Textile 27.7 80.9 28.5 6.8 4.4 73.9 9.2 117Akaki Textile S C 25.8 81.2 26.9 6.3 3.9 72.2 11.7 118Kambolcha Mill 28.8 84.3 30.9 7.7 3.9 70.3 10.3 145 Source: Study Report on The Development Strategy of Ethiopian Cotton/Textile/Garment Sub-sectors: China Textile Planning Institute of Construction, Beijing, China, June 2003 The comparison of cotton quality parameters between Ethiopian cotton and one of the Indian cotton varieties (J-34) is given in Table 2.5. Table 2.5 Comparison of Characteristics of Ethiopian Cotton Property Ethiopian cotton J-34 Indian cotton Staple length 25 - 31 mm 28.5 mm Micronaire 3.1 - 4.4 4.5 Strength 22 - 25 g/tex 28.5 g/tex Trash content (%) 3 - 6% 4.5% Uniformity ratio 48 - 50% 83 ( HVI) Source: Benchmarking of the Ethiopian Textile Industry, UNIDO Draft report 2010 According to the above test reports, Ethiopian cotton is characterized by the positive points of good fiber maturity, length and evenness, no or little contamination of “three threads” a term referring to foreign fibers (hair, synthetic fiber and other colored fiber thread). The negative points are rather low strength, high yellowing degree in color, sugary fiber (Stickiness), and the indexes of length, fineness and strength not matching one another. The trash content is on the 12   
  • 25. higher side (6%) as compared to an equivalent variety of Indian origin cotton J-34 used inspinning coarse yarn counts. Ethiopian cotton is suitable for spinning coarse and mediumyarn counts (Ne 20-40’s). Cotton grown in Middle Awash region is medium staple (28-30mm) while that in Hawot region is short staple (25-27 mm).2.6 Grading and quality checkingThere is no well established system for grading and quality checking of cotton. In principle,Ethiopia adopts American grading standards for cotton produced in the country. Cotton qualitycheck includes field quality grading, storing the samples of seed cotton according to their patchfield number, species, and time of harvest. 10 samples of un-ginned cotton from each batch aretaken for testing.Fiber tests are conducted through the combination of apparatuses and visual observations andfeel. The test of length is made by hand pulling, while that of color, strength and fineness bySpinlab and Micronnair Instruments.Specie name, packing number, color, length, strength and grade are recorded on each bale of thecotton.The cotton ginning factories are not equipped with adequate quality test laboratories. Constanthumidity and temperature are not maintained, making many test errors and rare reproducibility oftest results.2.7 Scientific research and education system of cottonThe National Agricultural Research Institution (NARI) is located in Addis Ababa, with itsagricultural technology stations in middle and lower Awash. The responsibilities of NARI andtechnology stations include dissemination and training of research findings related to agriculture,forestry, fruit and pasturage. At the same time, the stations are responsible for collection andintroduction of new plant resources, cotton seed breeding, cultivation, fertilization, irrigation,drought fighting, preventing or solving the problems of disease, pest, or weed, and the researchwork on planting systems.The federal and regional governments have established higher institutions of agriculturaleducation. The three main agricultural universities are Alemaya Agricultural University, AmboAgricultural College and Jimma Agricultural College. Unfortunately, these agricultural 13  
  • 26. institutions are not well equipped with scientific manpower and test equipment for quality andtechnical inputs in cotton post-harvesting technologies.2.8 Marketing chainCotton is grown as a cash crop and passes through different channels before it reaches the endusers as finished products. The marketing chain of cotton and its derivatives is shown in Figure2.1. Figure 2.1 Overview of cotton marketing chainSource: Abdella, Merima, and Gezahegn Ayele, Agri-chain analysis of Cotton Sub-sector in Ethiopia. Ethiopian Development Research Institute, Ethiopia 2008. 14  
  • 27. ProducersState farms, private commercial farms and small holders produce cotton. Prior to 1992, largescale cotton farming had been the exclusive domain of state enterprises. After the reforms of1992, private commercial farms have also been engaged in cotton production. Currently there aresix major private commercial farms engaged in cotton production; namely, Lower Awash,Middle Awash, Birale, Humera, Metema and Wollega farms. As regards the smallholder sector,its annual production is not much known. The traditional cottage industries including handloomsand handicrafts were fully dependent on cotton supplied by smallholders.There are five state-owned farms, which account for 30-31% of the total cultivated area. Thesestate farms are Tendaho, Middle Awash, Upper Awash, North Omo, and Abobo. The privatecommercial farms accounted for the major share of 43% of the total area cultivated, while thesmallholder peasants represent 27% during 1996/97-2000/01. In terms of annual production,private commercial farms offer the dominant share of 56% of total production, followed by thestate farm enterprises (32%) and the smallholder peasant (12%).Cotton productivityIn spite of the low share that publicly owned farms have in total area cultivated and annualproduction level, they perform relatively better in terms of productivity by using better farmingsystem than the privately owned and the small peasant farms. The average annual productivityfor the state owned enterprises ranges from 20 to 30 q/ha on irrigated farms and 15 to 20 q/haunder rain fed agriculture. Privately owned farms that use irrigation systems also have a betterproductivity level than the small peasants, who predominantly rely on traditional and backwardfarming practices. The productivity data is given in Table 2.6 Table 2.6 Productivity of cotton by various producers Type of producer Productivity (q/ha) Rain fed Irrigated Small holders 5-10 - Private farms 15-20 20-30 State farms 15-20 20-30 Research institutes 35-45 Source: Werer Research Center (cited in Agri-chain analysis of Cotton Sub-sector in Ethiopia, 2008). 15  
  • 28. The different farming techniques together with various inputs utilized and the overallmanagement system in the production process would imply for the disparity in the productivityand quality of cotton produced by the various farms. The case studies undertaken for the threecategories of producers in Afar and Arbaminch reveal this fact very well.Major problems faced by the farmsState farmsLack of improved seedsThe two major seed types that have been used on the farm are Akala SJ2 and Delta Pine-90,which were released from Werer Research Center. Akala SJ2 was released in 1987 with anexpected yield of 32.5 q/ha. Delta pine-90 was released during 1990 with a better-expected yieldof 38.5 quintals per ha. The farms used to buy these seeds from the research center, but now ithas been long since it starts preparing its own seeds, and even sells to other farms. The yieldcapacity of these seed types is decreasing as the seeds lose their genetic potential from time totime.There was an attempt to introduce another seed called Gedera that was imported from Israel in2005. Because adaptation trial was not made prior to its cultivation, the seed variety resulted inhuge loss for the farm. Lack of improved seed variety has constrained the farm’s capacity fromreaching the desired yield and quality levels. Although there are many reasons for this problem,the fact that the farm does not get enough technical and/or advisory support from variousinstitutions, particularly from agricultural research centers is the major one.Irrigation water shortageWater shortage for irrigation arises from various reasons. Limited capacity of the cannel that wasbuilt some 30 years ago is the major one. The cannel was originally built to irrigate limited areasof land, but as the total area under cultivation both by the enterprise and by other farms in thenearby area increases, the capacity of the cannel to reach the entire land has been declining fromtime to time. The other reason is related with the prolonged cannel maintenance time taken bythe Awash Water Authority. Because the authority does not finish the maintenance according toschedule, water will not be released to the farms during the appropriate irrigation time. Duringtimes of heavy flooding from the Awash River, the cannel will also be closed completely as itwill be filled with soil sediment, creating water shortage for irrigation. 16  
  • 29. To solve the water shortage problem, the authority once tried to open another way-out for thecannel, but it did not succeed, as there were major problems in its design.Labor shortageShortage of labor particularly during harvesting time is becoming a major problem to the farm.The vast majority of pickers are brought from the Southern part of the county, and labor sourcingwas not a problem for a long time until recently. The low wage paid to pickers (25cents per kg)compared to the surrounding private farms is one of the reason for shortage of labor whichresults in labor shifting away from the state farm towards other farms who offer a relativelybetter price. Apart from the disincentive created by low wage rate, alternative job opportunitiescreated in areas where the laborers came from is the major reason that created labor shortage notonly to the enterprise, but also to other cotton farms in the area.Shortage of labor has a lot of implication on the farming operation. Delayed cotton pickingresults in loss of cotton quality as the plant has to stay on the ground beyond the intended timelosing its moisture content and exposed to dust and other dirt materials. Delayed picking willalso expose the cotton plant to be fed by cattle, camels, and goats. Due to increased problemsfaced by shortage of labor, the farms are planning to move towards mechanized harvestingalthough it is costly and results in lower quality of cotton compared to hand picking.PestThe common pest types that affect the fiber yield and quality are the African Bollworm (ABW),aphids, jassids and white fly. Particularly the ABW has a significant effect on yield and qualityof lint, causing an average cotton yield loss of 48% or 720 kg/ha The most widely used methodfor controlling pest by the farm is the application of insecticides using aircraft spraying whichcost approximately 990 birr per ha. One problem associated with insecticide usage is theresistance development by the insects that subsequently fails to control the pest. The otherproblem arises due to the delayed availability of insecticides, as they are usually importedthrough various agents of chemicals in the country. Health hazards associated with the use ofchemicals that have high level of toxicity is also a major problem. The most frequently usedchemical on the farm is thiodon, which contains a dangerous chemical called endosulfan withhigh level of toxicity. Although there are no records of injuries or death caused by this chemicalin Ethiopia, there has been a record of dozens of death in cotton farms associated with the use ofthis chemical, such as in India, Malaysia, and Sudan. 17  
  • 30. Problems faced by Private farmsAlmost all of the problems associated with the farming activities of the state farm like lack ofimproved seeds, shortage of irrigation water, shortage of labor and pest are also faced by theprivate commercial farm.Major problems faced by smallholdersApart from the common problems that arise due to the lack of improved seeds, shortage ofirrigation water, labor shortage and pest, smallholder farms also face the following problems.Lack of finance: There are no credit associations to provide peasants with the necessary finance for farmingactivities. This has limited the small holders’ chance of looking for alternative input price offersin other markets, forcing them to rely on prices provides by big private commercial farms. Thishas also forced the small holders to sell the raw cotton without it being processed/ginned, whichfetches much lower price.Lack of market informationInformation regarding the existing domestic and/or international market is almost non-existentwith the small holders. This has made them to become price takers, with no-negotiation powerfor the selling price of cotton.Problems related with land ownership In case small hold farming, most of the peasants come from other parts of the region and pay acertain amount of their net profit to tribe members who own the land. The tribes have full powerto discontinue the farmer upon failure of paying the specified amount, or if they obtain a betteroffer from another farmer who wish to expand his land. This uncertainty over land has been amajor disincentive to smallholder farmers to invest their time, power, and money fully.In and around Arbaminch, the situation is a bit worse. In spite of the long existing tradition ofcotton farming, in this area that was once called the Cotton Belt in Ethiopia, the area is losing itsoriginality due to obstacles faced by the farms starting from the very small land holdings theygot. The average land holding of a household in that area is estimated to be one fourth of ahectare which they use it for not only the production of cotton but also other cash crops likeBanana and food crops like cassava, tef, sweet potato, and others. Because cotton harvestingrequires a lot of investment and intensive care throughout its cultivation period, there is a trendto shift from cotton to other less time and money consuming cash crops. 18  
  • 31. The small holders are aware of the fact that successful cultivation of cotton would result inhigher yield and return at the end of the day than other cash crops cultivated in that area, butbecause of lack of finance and technical assistance provided to them, they prefer to cultivateother crops with lower but less riskier returns like banana. One other factor for the small holdersto abandon cotton farming has to do with lack of market access for their produce. They lackinformation regarding where to sell and at what price. Often the local collectors would go aroundthe house of every farmer and collect cotton at a very low price. The capacity of the localcollectors to absorb the total cotton produced in the area is also limited resulting in large amountof cotton to be wasted without even reaching the local market. This shows that markets arehighly disintegrated leaving little room for incentive to farmers.Smallholder farms in Humbo Wereda, which is found around Arbaminch, have started to formtrade unions that would collect the final cotton harvest and take it to the market. It is a goodmove to establish such unions to alleviate the market problem of farmers. Nevertheless, apartfrom that, huge technical assistance in terms of improving the productivity and yield of cottontogether with forming a strong linkage with the domestic and international market is yet to befocused and developed.Local AssemblersAs can be seen from the Figure 2.1, rural assemblers play an important role in collecting seedcotton from smallholders. These assemblers are mostly independent operators at primary marketswho assemble and transport the raw cotton using pack animals and small trucks for sale toprivate ginners. They handle about 20% of the cotton production by smallholders.GinneriesIn 2003 there were 11 ginneries, 4 state owned and 7 private with an estimated annual ginningcapacity of 200,000 MT of raw cotton. 19  
  • 32. Table 2.7 Distribution, number, and operation of private and state-owned ginneries Private Location No. of Operation GinneriesAddis Ababa 04 Offer ginnery service to private commercial farms and lint cotton exporters in Awash valley and other cotton producing regionsGonder 02 Provide service to private commercial farms and cotton traders operating at Metema and its surroundings.Humera 01 Owned by a cotton producing share company.State ownedMiddle Awash 01 Provide service to state owned farms and small holders aroundstate enterprise the areaTendaho State 01 Provide service to state owned farmsEnterpriseSouth Omo State 01 Provide service to state owned farms South Omo StateEnterpriseSouth Omo State 01 Provide service to state owned farms South Omo StateEnterprisesAbobo State 01 Provide service to state owned farms South Omo StateEnterprisesSource: Abdella, Merima, and Gezahegn Ayele. 2008. Agri-chain analysis of Cotton Sub-sectorin Ethiopia. Ethiopian Development Research Institute, Ethiopia.All the ginneries are operating under capacity due to the low production of cotton in the country.While all the cotton produced by state farms and private commercial farms go to the ginneries,only 20% of the smallholder production is ginned. This is mainly because handlooms are themain buyers of raw cotton directly from smallholder peasant farms.Most of the lint cotton processed by public and private ginneries is sold to domestic textile millsfor further processing and production of textile fibers. Textile mills receive 80% of the cotton lintprovided by ginneries, where only 20% goes to the export market that is very low compared toeastern and southern Africa average.Delayed ginning operation due to prolonged time taken to source spare parts from abroad tomaintain the ginning machines is one of the problems that the factory faces. Electricityinterruption is also a major problem, which results in almost 20% of the idle time. Shortage ofqualified laborers and laboratory equipments that are essential for the grading procedure are alsocreating difficulty in the ginning process. 20  
  • 33. Limited information regarding the international market is a major marketing problem.Textile sectorDomestically produced raw and lint cotton are the major raw materials consumed by textilefactories, although other synthetic fibers and acrylic yarn are used to a limited extent. Almost80% of lint cotton produced locally is absorbed by the textile mills for further processing toproduce fabrics both for the domestic and for the export market. The domestically producedcotton is sufficient in fully satisfying the demands of the textile mills, making import of eitherraw and/or lint cotton negligible.The large cotton mills that consume local lint cotton as primary inputs for manufacturing textilefibers are mostly state-owned or those leased by the private sector from the government on fixedcontractual agreements. The major textile factories are:integrated mills (Akaki, Hawassa, Kombolcha, Bahir Dar, Dire Dawa, Almeda and Ethio-JapanNylon Textile factory;Spinning mills (Adie Ababa and Edget Yarn Factory);Spinning and weaving (Arbaminch Textile Factory);Integrated Blanket Factory (Debre Berhan Blanket Factory).Most of the textile factories in the country are largely underperforming unable to maximize thebenefits of procuring raw material from their close vicinity. The annual lint cotton consumptionof the existing textile mills is estimated to be 42,860 mt, which can be fully met from domesticsupply, but their actual consumption does not exceed 30,000 mt Table 2.8 shows the actualproduction in percent of the installed capacity of different textile mills. Table 2.8 Actual value of production of textile mills as % of yearly capacity Industrial group 1998/1999 1999/2000 2000/2001 Manufacture of textiles 32.8 43.5 53.49 Spinning, weaving, finishing 31.23 42.93 54.31 Cordage, rope, twine, netting 60.22 53-41 45.66 Knitting 32.29 16.37 31.48 Source: CSA (2003) 21  
  • 34. The old and obsolete machineries that exist in most of the textile mills together with lack ofindustrial capacity and base, lack of relatively skilled and trained labor and proper productionmanagement are the major factors contributing to this inefficiency. Because of the mills’ limitedprocessing capacity, the domestic supply of lint cotton is by far in excess of its actual utilizationcreating a lot of wastage.Garment factories that are predominantly owned by private companies perform relatively betterthan the textile mills. In 2005, there were 25 garment factories oriented to the export market ofUSA and EU following the preferential treatments granted by these countries. The flow of exportto these countries has increased enormously for the past three years, especially to the EU wherethe value obtained from export of garment and clothing textiles increased by 28% in 2004 and144% in 2005.In spite of the growing export trend for garment and clothing textiles to the international market,there is a week linkage between the cotton textile sector and the clothing sector where exports ofcotton related garments are out-weighted by garments made from imported fabrics. Some of theobvious reasons are the poor quality of textile fabrics made in the country and high cost ofproduction due to inefficiencies experienced by the various textile mills resulting in high pricefor fabrics. In addition, lack of flexibility on the part of the textile mills to meet the demands ofsmall and medium garment factories in terms of the right size, width, and color has made theworking relationship between the two sectors very loose.RetailersRetailers play an important role in the market chain of seed and lint cotton, cotton oil seed andfabrics. Most of the textile finished products and the edible oil produced by the actors in thecotton chain pass through a network of wholesalers and retailers before they reach the finalconsumers.2.9 Cotton production statisticsA systematic statistical data is available from following two sources.1. Cotton textile value chain report for Ethiopia prepared by Agridev Consult, on behalf ofRegional agricultural trade expansion support program (RATES), Nairobi, Kenya 2004 22  
  • 35. 2. Study Report on The Development Strategy of Ethiopian Cotton/Textile/Garment Sub- sectors, prepared by China Textile Planning Institute of Construction Beijing, China June 2003Though these reports are out dated, a summary is given in order to keep the record of theinformation. A more recent statistical data from the Ministry of Agriculture is given at the end ofthe chapter.Statistical data from Regional agricultural trade expansion support program RATES(1996/97 to 2000/01)The statistics for state farms, private farms and small holder farmers in terms of area planted,total cotton production and yield per hectare for the period 1996/97 to 2000/01 is given inTables 2.9 to 2.11 Table 2.9 Area planted under cotton during 1996/97 to 2000/01 HaProducer 1996/97 1997/98 1998/99 1999/2000 2000/01 Average % shareTendaho 5450 5652 5955 5645 4117 5363 13Middle 5153 5368 4789 1667 5407 4456 11AwashUpper Awash 1000 1000 1000 1000 1000 1000 02North Omo 1500 1500 1500 1500 1500 1500 04Abebo 250 250 250 250 250 250 01Total state 13,353 13,670 13,494 10,062 12,274 12570 30farmsPrivate 18,150 18,150 18,150 18150 18,150 18,150 43commercialfarmsSmallholders 11,650 11,650 11,650 11,650 11,650 11,650 27Total 43,153 43,470 43,294 39,862 42,370 42,370 100 Source: Cotton – textile-Apparel value chain Report for Ethiopia, Prepared by Agridev Consultant. Submitted to Regional Agricultural Trade expansion Support Program, Nairobi, Kenya, 2004 23  
  • 36. Table 2.10 Production of seed cotton during 1996/97 to 2000/01 (MT) Producer 1996/97 1997/98 1998/99 1999/00 2000/01 Average %Share Tendaho 7943.7 7716.5 9512.5 11503.4 8370.4 9009.3 11 Middle Awash 15024.1 11627.5 9746.3 5763.8 15566.2 11545.6 14 Upper Awash 2100.0 2100.0 2100.0 2100.0 2100.0 2100.0 3 North Omo 3000.0 3000.0 3000.0 3000.0 3000.0 3000.0 4 Abebo 325.0 325.0 325.0 325.0 325.0 325.0 0 State farms (total) 28392.8 24769.0 24683.8 22692.2 29361.6 25979.9 32 Private farms 45375.0 45375.0 45375.0 45375.0 45375.0 45375.0 56 Smallholders 9320.0 9320.0 9320.0 9320.0 9320.0 9320.0 12 Total 83087.8 79464.0 79387.7 77387.2 84056.6 80674.9 100 Source: Cotton – textile-Apparel value chain Report for Ethiopia, Prepared by Agridev Consultant. Submitted to Regional Agricultural Trade expansion Support Program, Nairobi, Kenya, 2004 Table 2.11 Yield of seed cotton during 1996/97 – 2000/01 (MT/Ha) Producer 1996/97 1997/98 1998/99 1999/00 2000/01 Average Tendaho 1.5 1.4 1.6 2.0 2.0 1.7 Middle Awash 2.9 2.2 2.0 3.5 2.9 2.6 Upper Awash 2.1 2.1 2.1 2.1 2.1 2.1 North Omo 2.0 2.0 2.0 2.0 2.0 2.0 Abebo 1.3 1.3 1.3 1.3 1.3 1.3 State farms (total) 2.1 1.8 1.8 2.3 2.4 2.1 Private farms 2.5 2.5 2.5 2.5 2.5 2.5 Smallholders 0.8 0.8 0.8 0.8 0.8 0.8 Total 1.9 1.8 1.8 1.9 2.0 1.9 Source: Cotton – textile-Apparel value chain Report for Ethiopia, Prepared by Agridev Consultant. Submitted to Regional Agricultural Trade expansion Support Program, Nairobi, Kenya, 2004At an extraction rate of 37% the average yearly domestic production of lint cotton during theperiod 1996/97 – 2000/01 was about 29.950 MT, of which 24,861 MT or nearly 83% wasdestined for the domestic market. The share of textile mills and handlooms and handicrafts was86% and 14% respectively of the annual domestic sales of lint cotton. 24  
  • 37. Import/Export of cotton lintAs can be seen from the Table 2.12 below, Ethiopia has exported about 4,989 metric tons of lintcotton per annum during the period 1996/97 – 2000/01. Import of lint cotton, however, wasnegligible. The amount exported represents 17% of total annual domestic production of lintcotton. The major cotton export markets are Africa, Asia, and Europe. The largest portion (67%)of cotton export was destined to the Asian countries, namely, India, Pakistan, Bangladesh, whileabout 23% of the volume of cotton export went to Africa essentially Djibouti. The remaining10% was destined to European markets. Table 2.12 Cotton supply, import, export and consumption figuresS.No 1996/97 1997/98 1998/99 1999/00 2000/01 Average1 Total domestic lint 30,742 29,402 29.370 28,633 31,101 29,850 production (MT)2 Supply to domestic market 24,746 28,219 24,335 20.959 25,046 24,861 (MT)3 Supply to export market 4997 1182 5035 7674 6055 4989 (MT)4 Import lint cotton (MT)5 Import of textiles and 30,662 34,265 73,983 40,514 42,656 44,423 textile articles (MT)6 Export of textiles and 1324 1750 5630 9680 8674 5412 textile articles (MT)7 Net import of textiles and 29,338 32,512 68,353 30,834 34,012 39,011 textile articles (MT) 5-68 Net import of textiles and 24,937 27,640 58,100 26,209 28,910 33,159 textile articles in lint equ. (MT) 0.85x79 Total lint cotton supply to 50,683 55,864 82,435 47,168 53,956 58,020 domestic market (MT) 1-3+4+810 Population x000 58,144 59,822 61,672 63,495 65,34411 Per capita consumption of 5.6 5.6 5.6 5.6 5.6 5.6 woven cloth (m2)12 Per capita consumption of 1.12 1.12 1.12 1.12 1.12 1.12 lint cotton (kg)13 National consumption of 65,121 67,001 69,073 71,114 73,185 69,099 lint (MT) 10x1214 Surplus/deficit (MT) 9-13 -14,438 -11,141 13,363 -23,947 -19,229 -11,079 Source: Cotton – textile-Apparel value chain Report for Ethiopia, Prepared by Agridev Consultant. Submitted to Regional Agricultural Trade expansion Support Program, Nairobi, Kenya, 2004 25  
  • 38. As regards import of lint, although Ethiopia does not import lint cotton as a raw material, itnevertheless imports substantial quantities of finished textile products. During the period1996/97 – 2000/01, the country has imported 44,423 MT of various textile articles per annumworth Birr 684.4 million. Volume and value of export of textile articles during the same periodwere 5412 MT and Birr 53.7 million. Thus the net import of finished textile goods during theperiod mentioned was 39,159 MT or Birr 630.7 million. In terms of cotton lint equivalent, theaverage annual net import was about 39,159 MT. The origin of textile import to Ethiopia is verydiversified.Cotton lint utilizationVarious studies conducted in the past show that Ethiopia’s per capita demand for textile productsis about 5.6 m2 or 1.12 kg in cotton lint equivalent. Thus annual demand for lint cotton duringthe period 1996/97 – 2000/01 is estimated to be about 65,121.3 to 69,098.8 MT. On the otherhand total annual supply including domestic supply and net import (in lint equivalent) was58,144.0 to 82,435.2 MT. This indicates that the country faced a substantial deficit in most of thepast five years. The demand for and supply of lint cotton during the period 1996/97 – 2000/01 isshown in the table above which indicates that the country had surplus amounting to 13,362.5MT of lint only in 1998/99 when import was substantially high compared to other years.The deficit shown in the table may have been partially met through informal cross border trade.Various studies show that the volume of informal cross border trade involving textile products isconsiderable. For example, according to the Ethiopian Customs Authority, textile productsnormally constitutes about 50% of the contraband seizer. It has been estimated that out of 42million Birr worth of goods apprehended by the Ethiopian Customs Authority, about 22.5million Birr worth of goods were textile products. UN statistics on used clothes trading alsoshows that Ethiopia has imported about USD 25.7 million worth of used clothes over a period of10 years. According to the UN data, Ethiopia ranks 13th among the 90 major countries in theworld importing used clothes. The same source also indicates that Djibouti has imported aboutUSD 29.1 million worth of used clothes during the same period. This clearly shows that informalcross border trade of used clothes through Djibouti and other border areas is significant. 26  
  • 39. Statistical data from the Report prepared by China Textile Planning Institute ofConstruction, Beijing (2003).With the development of cotton farms the cotton sub-sector has made a historical contribution toEthiopian national economy in creating employment opportunities for rural labor-force, andearning foreign exchanges through exports.The Output, Consumption, Import and Export of Cotton for the period 1970/71-2002/03 is givenin the Table 2.13 Table 2.13 output, consumption, import and export of cotton (1970/71-2002/03) Year Acreage Output Yield Consumption Import Export X1000 ha X1000MT Lint kg/ha X1000 MT X1000 MT X1000 MT 1970 61 14 233 1975 61 18 298 1980 53 27 518 24 5 1985 53 22 392 23 3 1986 53 20 454 22 1987 53 20 468 20 1988 37 21 401 21 3 1989 35 18 332 22 2 1990 36 19 528 20 2 1991 40 12 300 16 4 1992 40 10 200 33 16 1993 41 14 366 22 11 1994 42 15 333 17 13 1995 42 15 357 18 3 1996 42 15 357 18 3 1997 42 15 357 18 3 1998 43 15 354 18 3 1999 43 15 352 18 3 2000 50 34 578 7.7 2001 59 31 569 6 2002 63 33 512 7 Average 49.8 19.6 401.0Source: Cotton World statistics bulletin of International cotton advisory committee 1998(Through China report 2003)From the statistics of cotton production given by two agencies it is clear that the cotton sub-sector has provided over 90% of its raw materials needed by the textile sub-sector. Otherwise,foreign currency reserve would have to be spent in importing raw cotton. This could have been 27  
  • 40. an unwise choice. The cotton sub-sector has been vital support for the textile sub-sector.Therefore, it is obvious that the cotton sub-sector development will directly promote Ethiopianindustrialization.According to statistics from the Customs of Ethiopia, 6.014 tons of cotton was exported for US$6.55 million and 3,062 tons of cotton seeds for $50.29 million in 2001/ 02. The Ethiopiancotton export destinations are India. Pakistan, Indonesia. Denmark. Thailand and Djibouti etc asshown in Table 2.14 Table 2.14 Cotton export from Ethiopia (x1000 MT) Importing 1998 1999 2000 2001 country India 834 1139.5 3574.3 Pakistan 932.8 3119.7 5534.0 1182.9 Indonesia 498.2 543.4 Denmark 452.0 Thailand 250 454.4 102.1 Djibouti 0.3 99.0 0.4 63.1 Yemen 40.4 Greece 501.0 Vietnam 301.4 Sri Lanka 104.0 Switzerland 103.6 Italy 19.1 Total 1183.1 5034.9 7673.1 6055 Source: Study Report on The Development Strategy of Ethiopian Cotton/Textile/Garment Sub-sectors: China Textile Planning Institute of Construction, Beijing, China, June 2003 To encourage cotton export, the government has formulated policies, one of which is to charge15% sale tax for selling cotton in domestic market, but charge none for exporting cotton, inaddition to a 10% return to cotton farms as a reward. 28  
  • 41. 2.10 Potentials for the development of cotton sub-sectorThe potentials of growing cotton are high because of following favorable factors 1. Natural environment advantages.      2. Large labor force and Low production cost  3. The potentiality for expanding the cotton growing acreage  4. Increasing the yield potentiality   5. Domestic and international market potentials  Natural environment advantagesEthiopia is bestowed with natural environment advantages such as availability of vast land atsuitable sea level heights, sufficient sunshine and temperature, soil conditions, abundant waterresources etc. for the development of cotton sub-sector.64% of Ethiopian land is at or below 1500m, which provides a vast territory for cotton growing.The main areas for cotton growing are in low or mid regions from 360 m to 1300 m high. Thecountry endowed with 13 Ethiopian months of sunshine, the annual sunshine in Ethiopiaamounts to over 3,000 hours, which can fully satisfy the need of cotton growing. The averagetemperature in cotton growing area is 26-310 C. Under such conditions, theoretically, cotton canbe planted all the year around. Ethiopian cotton field soils are brown and composed ofdenaturation soil and alluvial soil. The content of cohesive particles is 60% while that of sandparticle 40%. The soil is rich in organic matters. Most importantly, with its rich rainfall, ninerivers, many lakes and as the source of the Blue Nile, Ethiopia is rich in water resource and isrecognized as the Water Tower of Africa, though the water utilization ratio is only 5%.Large labor force and low production cost Out of 67 million, 57 million i.e. 85% of population live in rural area. 13 million i.e. 23%population is between 15-49 years old. (2002). This constitutes ample labor force for agriculture.Ethiopia has a comparative advantage over other countries in terms of production cost perhectare. According to a survey by International Cotton Advisory Committee (1998), theproduction cost of Ethiopian cotton is 66.3% of that of China, 57.3% America. 33.5% Australia.23.2% Israel, and 90.8% India. By contrast, because of low production efficiency, theproduction cost per kilogram, has a comparative disadvantage and is higher than that of any of 29  
  • 42. the above mentioned countries. Ethiopia also enjoys low cost of cotton ginning, packing andprocessing.The potentiality for expanding the cotton growing acreage56% of Ethiopian territory is arable land, of which 15%. about 16.85 million ha up to now havebeen cultivated. 3.7million ha can be irrigated, though only 197,000 ha, 5% of it has beenirrigated until now. Judged from its arable land and irrigated land, Ethiopia has a greatpotentiality for expanding cotton- growing acreage.Potentials for increasing the yield per hectareAt present the cotton species are primarily American species--- Deltapint 90 and Acalasi (SJ-2).However, these species have been used for more than20 years, thus giving rise to the seriousproblem of species ageing and degeneration. Generally, species will be limited to a 3-5 years usein the major cotton production countries, because by species renewal, yield can be increased byl0%-15%, in some cases, even by 30%. Also the use of fertilizers is low and cultivation methodsare not totally scientific. With the use of improved seeds such as crossbred or geneticallymodified, increasing the use of fertilizers and scientific inputs for cultivation the yield perhectare can be considerably increased with the positive effect on total production.Vast domestic and international marketAssuming 1.5 kg per person per year consumption of cotton and 75 million population (2006)the domestic consumption of cotton will be 103,000 ton. With the progress of cotton sub-sectorthere will be emphasis on the export of cotton. The government has identified textile andgarment sub-sector as one of the priority sectors for rapid industrial developments. All thesefactors will lead to increase production of cotton. At the international level, cotton is a kind ofcash crop and it is a leading raw material for the textile and garment sub-sector, and definitelyoccupies the dominant position among natural fibers. With the rise of world population andpeople’s living standard, cotton will continue its dominant place in global fiber consumption. Asa small cotton-planting country, in terms of its present export scale, Ethiopia has a rather largeexport market.2.11 Cotton production and marketing constrainsAccording to a study conducted by the Ministry of Agriculture, cotton production and marketingfaces various constraints. The nature and type of the constraints are different. On the production 30  
  • 43. side, the constraints are related to the absence or limited availability of research and extensionservices and inadequate supply of inputs, while on the marketing side, the constraints are relatedto lack of capacity to supply quality products, inadequacy of the existing infrastructure and lackof finance. Some of the constraints are as follows.Strengthening the development of human resourcesQualified and trained human resource is the most important factor in production, marketing andgeneral management. The development of human resources is of practical importance andurgency for the developing countries, which possess the advantages of raw materials, labor forceand market potentialities. Labor-force with low cost and high quality is a vital element ofshowing the comparative advantages of the industry, and is also to create the most competitiveenvironment for foreign investments.Education and training to enhance the comprehensive qualities of the staff on the public farmscan be a concrete and effective method of reinforcing the development of human resources. Thetraining of personnel can be performed at two levels:Train personnel of medium and advanced level for cotton management and administration andtechnological research. Identify training plans and regulate the management methods oftraining; reform the management measures; select devoted and excellent experts in the cottonproduction, management, administration, and technology for training personnel in batches indefinite time schedule. Train managers, workers and farmer at the basic level. Improve trainingmethods to rapidly enhance the trainees’ basic quality and skill.Production constraintsAccording to the reports of RATES, Kenya and China Textile Planning Institute of ConstructionChina, some of the constraints in the development of cotton sub-sector and measures aresummarized belowShortage of improved seed VarietiesThe seed varieties available in the country are either inadequate or do not meet the requiredinternational standards or both. Not much research efforts are made to develop cotton seedvarieties which can allow the production of cotton of acceptable quality and quantity. The seedvariety needed to produce the type of cotton in great demand in the international market is longfiber seed, and it is not available in the country. More seriously, minimal research efforts aremade to the multiplication of those seed varieties which are already known and used in other 31  
  • 44. countries. These constraints have seriously undermined the effort to improve cotton productivityand quality.Surveys demonstrate that in Ethiopia, cotton plants are primarily American species--- Deltapint90 and Acalasi (SJ-2). However, these species have been used for more than 20 years, thusgiving rise to the serious problem of species ageing and degeneration. Generally, species will belimited to a 3-5 years use in the major cotton production countries, because by renewal ofspecies, yield can be increased by l0%-15%., in some cases, even by 30%. Since 1990s, the cotton species have come into a new utilization era from normal cotton tocrossbreed cotton and pest-resistant cotton. There are two ways to produce crossbreed cotton.One is breeding among species, or subspecies. This has obvious advantages and is an effectiveway to increase the yield, quality and pest- resistance.Another approach is the development of genetically modified Pest-resistant cotton usually refersto Bt gene-transformed cotton. Its successful breeding opens a new technological path for anti-pest cotton species.The world has come into the era of supplying seeds commercially instead of breedingindependently. It is advocated that seeds for production be replaced every year and that farmsand farmers not to keep their seeds. Seed breeding, crossbreeding, processing, testing, packingare all done in industrial way. For example, China’s cotton planting acreage has been 4.5-5million ha. planting acreage of pest-resistant cotton (Bt cotton) has reached 30%, crossbredcotton is 15% , demonstrating a strong developing trend. Indian cotton acreage is 7-7.5 millionha, 50% being crossbred cotton. At the same time, America has cotton acreage of 5-5.5 millionha, 60% of which is anti-pest Bt cotton. These giant countries in cotton production often usetheir breeds for 3-5 years. It is generally held that new breeds will increase yield by 10%-15%,the highest being 30%. In this way, quality as well as its resistance to pests, will also beimproved.Shortage of technical inputsNeedless to say, if one is to meet required quality standards, availability of adequate amounts oftechnical inputs- fertilizers, pesticides, herbicides and better equipment is crucial. The reality inEthiopia is, however the reverse. In spite of its visibility by its absence, the attention given toprovide such inputs to the farmers has been minimal, and this has had an obvious negativeimpact on improving quality and productivity. As cotton is prone to attacks by different types of 32  
  • 45. pests, absence or inadequacy of pesticides has forced textile factories to receive inferior rawcotton damaged or infested with honey dew caused by the excretion of sucking insects likeaphides. Following measures are suggested to improve the situation.In Ethiopia, large-scale farms are highly mechanized. The cleaning of the remaining old Plants,tilling, raking, leveling, sowing, and preventing pests, diseases and weeds, are mostly dependableon machineries. Large tractors, sowing machines, leveling machine, large cotton-ginningmachines, Oil extractors and diesel generators are mainly from the former Soviet Union andGermany. All these machines, suffering from ageing to all degrees and shortage of spare parts,need renovation. The problem of ageing and shortage of parts also restrict the cotton yield andquality. The enterprises should reinforce their maintenance work of equipments. Make full use ofthe existing machinery potentialities, put into use new parts, and bring down the malfunctionrate. Thus, they can raise the production capability and efficiency and bring into play the scaleeffects of large farms.Fiber quality testFiber quality test is the foundation on which cotton quality and price are assessed. Public farms,on the basis of the existing fiber tests, should reform and introduce new state of art testequipment, improve cotton fiber test laboratory, enhance the testing measures so that, they canmake a series of scientific test criteria and procedures for the assessment and regulation of cottonquality.The government cotton administration should set up agencies to supervise cotton quality. QualityTesting Station should be established in different cotton producing regions. It should becompulsory that cotton producer, when applying for government’s financial aid and exportsshould testify cotton in terms of quality by the testing certified agencies. The technical staff inthe testing laboratories should be qualified from the recognized institutions.Large-scale farms should set the role modelLarge-scale state farms are the leading force to increase Ethiopian gross output of cotton.Therefore, the large scale farms should take the initiatives in utilizing new agriculturaltechnologies, new varieties and planting techniques. And thus act as an example for privatefarms and traditional farmers to follow suit. This will drive Ethiopian cotton subsector toadvance. 33  
  • 46. Equalizing fertilizationFertilizer, being the “food” of cotton, is an important factor of improving cotton yield, theincrease percentage being 30-50%. Now the advanced cotton-planting countries have undergonethe transition from single nutrition to multiple nutrition and the transition from nitrogen fertilizerto the combination of nitrogen with phosphate, potash and trace elements.Ethiopia uses a rather small amount of fertilizer. Since there have been no fertilizer factories inthe country, all fertilizers depend on imports. The amount of fertilizer is as low as 17kg/ha, incomparison to 83kg/ha for the average global level, 97kg/ha for the North Africa, and1,125kg/ha for China. The recommended amount for Upper Awash is N 64kg/ha and P 46kg/haand for Tendaho Farm Carbamide 100kg/ha. The fertilizer method is manual spraying along withdiammonium before sowing, followed by disc harrowing, and addition of Carbamide during theperiods of flower and boll. Control of disease and pestsMajor cotton pests in Ethiopia include bollworm, pink bollworm, leafhopper, aphid. Cotton-leafacarid, trips and leaf miner. Chemical pesticides are Polyethrine, Thiodon, Carbamate,Endosulfan, Pyrethroids and Deltonet. All imported from the U.S.A, U.K, France, andGermany.Diseases and pests cause 30% loss of cotton production and also affect the cotton quality.Therefore, forecast teams of cotton diseases and pests should be established and integratedmeasures should be adopted to control diseases and pests to ensure high yield and quality ofcotton.Absence of extension servicesExtension service to small-scale cotton producers is virtually non-existing. What ever isproduced at this level is entirely using traditional practices which can ensure neither adequate norquality production. The quality constraints on its part have diminished the potential earnings ofsmall scale farmers. In general absence of extension services have impeded the expansion ofmodern cotton production practices in the country.Limited Research workOverall limited attention is given to cotton production in the country. Research on improvingproductivity is minimal. There is only in one center-Melka Werer that some research is 34  
  • 47. undertaken. And even this is limited in scope, focusing only on irrigation practices in the area.There is no research on rain fed production where the efforts of small farmers are concentrated.In view of this new varieties and technologies should be employed to raise the cotton quality andyield, which involve the work of tilling, sowing, planting density, plant protection, fertilization.Irrigation, preventing pests, diseases and weeds, as well as chemical regulations.The development of science and technology in connection with cotton should be further stressed.That is to say, equip the research laboratories with scientific equipment; improve the functioningof cotton research institutions, employ qualified research staff to strengthen scientific innovationand technological development ability. The scientific research and development findings shouldbe transferred in the fields for productivity and yield improvements.Scientific R & D institutions should cooperate with cotton enterprises, conduct surveys, spreadrelated knowledge, and promote the academic exchanges for the dissemination of cotton scienceand technology. The institutions should also bring into play the advantages of the industry as awhole and devote themselves to the comprehensive R&D activities of high standards, profoundscientific contents, and high added values.Limited Irrigation PracticesIrrigation practices are limited to a few state and large-scale private farms operating in a fewareas. The rest is rain fed where erratic rains frequently cause crop failures or the production ofcotton of inferior quality and quantity.Ethiopia is accessible to abundant water resources for irrigation, though its present utilizationrate only 5%.As long as water is provided, cotton can grow all the year around. However, Ethiopian cottonfields with irrigation constitute 22% of the whole cotton planting acreage. The limited irrigationincludes ridge and furrow irrigation and flooding, with the water from pumping or blocking. Therest of the cotton fields depend on rainfall. Therefore, the low rate of Irrigation and heavydependence on rainfalls severely restricts the development of the cotton sub-sector.With irrigation, un-ginned cotton yield is 2-3tons/ha, while if only rain-fed, un-ginned cottonyield reduces to 0.8-l.5 tons/ha.In its growing and breeding period, cotton needs irrigation 4-5 times, with the amount of 45,000-60,000 m3/ha each time. Irrigation should be conducted 10-15 days before sowing, and also 3-4times during its reproducing period. Usually there is no irrigation during the seedling period, but 35  
  • 48. it is needed in the budding, blossoming and boll periods. Irrigation should happen every 14days during blossom and boll periods, while 21 days in the rest periods. The last irrigation shouldbe conducted 15-21 days before harvest. Irrigation can be done through furrow irrigation orsprays. Flooding should be avoided. During the process of construction for irrigation, water-saving irrigation techniques should be used, such as development of water transportation throughpipes, seepage control, spraying irrigation and drip irrigation.Thus irrigation works are the lifeline of agriculture and therefore top priority has to be given toirrigation of agricultural fields.Take advantage of international aidsEthiopia is the country receiving the lion’s share of foreign aid in the world. Normally aids areconfined to specific purposes and not applicable for competitive trades. One of agriculture’scharacteristics is closely related to activities of public welfare, such as controlling of nature,fighting poverty, helping people in need, which belongs to the non-competitive field. Ifdonations are used to conduct capital construction for irrigation works and reform cotton fieldswith low or medium yields, then it is to better for the ecology. Moreover, to help victims ofnatural calamities, produce and feed themselves will be more effective than to solve the actualproblems of poverty and famine. Consequently, it is advisable to appeal to the internationalcommunity: integrate food aid with developing agricultural resources, enlarge planting acreage,reform cotton field with low or medium yield, improve cotton varieties, prevent and solve pest ordisease problems, establish scientific and technology proliferation system, and train personnel, soas to help establish the basic conditions for cotton production.The focus on the irrigation works of the arable land will achieve multi-purpose effects, reducingcalamities, and transforming saline-alkali land. In this regard, the Ministry of Water Resourceshas set up a Water Resources Development Fund. In addition, the World Bank can helpimplement a 15-year plan of irrigation works. Corresponding plans in other aspects should bedesigned to support the developing strategies of the cotton sub-sector.Market ConstraintsBeyond cotton production, cotton marketing is also constrained by different factors. The mostnotable among these are the followingsInadequate knowledge about market standards 36  
  • 49. The Ethiopian Standards Authority has established the quality which domestic cotton productionshould fulfill to meet the required market standards. These standards are not, however widelyknown to all the players on the marketing chain, and this has prevented producers and domesticmarket suppliers from taking all necessary precautions to ensure that their products are up to thestandards required.Furthermore, inspections against the standards are not made by a neutral body which can ensurefair evaluations, but rather by the buyers themselves, and this practice has often denied farmers afair price for their products.Lack of Market informationThe market information system in Ethiopia is generally poor, and cotton marketing is not anexception. Absence or inadequacy of such a system has deprived producers and suppliers accessto such vital information as alternative market outlets, levels of demand and price, and thestandards required by the various players in the market. Production and marketing decisions haveas a result been made either arbitrarily or on incomplete information basis. Needless to say,producers need market information to help them decide on what, how much and at what qualityto produce and traders to decide at what price to buy and sell. Absence of market information hasreduced the competitiveness and bargaining power of farmers and local suppliers, forcing themto be price takers.Information network is the general trend of the present world and social development. The rapidestablishment of the national market information network of cotton and solving the urgentproblem of production information shortage and blockage of technology and market informationwill be an effective choice for Ethiopia. It is therefore essential to set up cotton trade union,reinforce the trade regulation, and provide an all-round information service. A nationalinformation system should survey the production and operation of the whole trade, in the hope ofidentifying the development level, being consultative to the government’s policy making andscientific research, as well as sharing the information with cotton enterprises.Absence of a System for Contractual Production and Marketing ArrangementCotton production and marketing is done in an arbitrary manner in that there is no practicewhere by producers can be assured of a reliable market and traders a steady supply. The reasonfor this is that there is no experience in pre-delivery contractual arrangements among the marketplayers. Such arrangements between producers and traders could have allowed the former to 37  
  • 50. produce as per an agreed contract and to a required standard and the later to ensure timelypurchase and payment. It could have helped ease financial and technical constraints often facedin the production and marketing process. The traders could for example have helped the farmersto overcome financial and technical problems which they often face.Inadequacy of Support through Service co-operativesIn spite of the many constraints which cotton farmers face in production and marketing, there isno mechanism for collective efforts to address the problems. Production and marketing is done ina fragmented and isolated manner, and through individual efforts. A reliable way out of suchconstraints is to address them collectively by establishing service co-operatives. Such structureshave proved to be instrumental to other similar activities by ensuring their members access tomarkets, better bargaining power in setting prices, and in the supply of agricultural inputs,among others. At present, there are no service co-operatives operational in most of the cottonproducing areas and where they exist, their focus is on other activities, depriving cotton farmersthe opportunity to expand and get a fair price for their products.Lack of financeCotton production even at a small scale requires finance to purchase technical inputs likefertilizers, as well as necessary equipment. Cotton farmers have often faced serious financialshortages and so have the traders engaged in the business. Individual attempts to access creditfacilities have not been successful due to lack of collateral. Beyond the production and marketingof raw materials, textile factories and ginneries, as well as oil mills also face serious financialconstraints, which have limited their ability to purchase new or replace obsolete equipment.In order to overcome the financial problems Government should widen the financial channels,which can include the government’s fiscal allocation, bank loans, foreign funds, self fund-raisingby enterprises, and effective use of international aids. For these purposes, the government mayconsider establishing a special development fund and entrust it to commercial banks foroperation. Besides, the government should abide by the principle of “loan according to sale; loanaccording to efficiency”. Thus, support for the production can be strengthened without thedanger of bad loans.As for the national investments, they can be spent in the capital construction of the sub-sector,such as the construction of medium or large-sized reservoirs, dams, and roads. Bank loans can beexpended in purchasing or storing cotton. Funds raised by enterprises themselves can be used to 38  
  • 51. improve production conditions, for example, to purchase or maintain farm implements and fibertesting devices, to cultivate barren land and to train personnel.2.12 Recommendations for the development of cotton sub-sector.The report prepared by Agridev consultancy on behalf of Regional Agricultural Trade ExpansionSupport Program (RATES Centre), Nairobi, Kenya (2004) has recommended several measurefor the development of cotton sub-sector. These recommendations are summarized below.Production increase through area expansionAccording to a recent report of the Ministry of Agriculture, there are many cotton producingareas in the country. These areas could be grouped into two. The first group consists of areasidentified in 38 Weredas and 8 regions, which have a high potential. They include irrigated farmscurrently operated by state farms, private investors and small farmers. Those areas in Gambelaand Somali regions, where irrigation infrastructures have been laid and rain fed farms of highpotentials currently run by investors and small farmers. The second group consists of farms in 79weredas in 8 regions. They are farms of medium potential. They are mainly rain fed farmscurrently operated by private investors and small farmers, but have the potentials for irrigationdevelopment through river diversions and construction of small dams.The Govt. thus has to encourage local and foreign investors in order to develop and utilize theabove mentioned potential for expansion.Productivity increase through intensificationThe use of improved agricultural technologies, improved farm management practices andresearch and extension services, will have far reaching impact beyond the level of production,positively affecting the quality of the product, which will in turn improve its marketability. Thefocus in this regard should therefore be on the following:a) Application of improved agricultural technologiesThe use of improved agricultural technologies such as improved seed, artificial fertilizers,pesticides, appropriate machineries and implements are crucial to increase production and toimprove the quality of lint cotton. The use of improved seeds should include • Developing and expanding hybrid seeds • Introduction and adoption of highly productive and long fiber varieties. 39  
  • 52. • Involvement of Ethiopian seed enterprises as well as similar other agencies in the multiplication and dissemination of high quality seeds.As regards to other technologies, the focus should be on the use of chemical fertilizers,pesticides and appropriate machineries and implements required for such an activity. Service co-operatives and other organizations responsible for the supply of inputs must play a big role. Andin this endeavor, they need to be supported and encouraged through all possible means.b) Application of better farming methodsThe focus here must be to develop improved cotton production packages and introduce themthrough the extension system effectively. The packages should include improved methods ofland preparation, seeding, irrigation practices, harvesting, post harvest handling, crop protectionetc.c) Improved Post harvest ManagementThe activities here include taking proper care of the crop during transportation and storage so asto prevent losses and damages. Similar care should be made during ginning, particularly inmaintaining the desired moisture level of the crop and keeping it clean from dirt and wastematerials.d) Promotion of Crop RotationCrop rotation practice must have two purposes. One is to help improve the income of the farmersby encouraging them to grow crops, such as sesame, haricot beans and wheat alongside cotton.The crops to be included in the rotation must, however, be short maturing and high yielding andthat its practice should be compatible with the technology and equipment in use. The other is toimprove the fertility of the soil and to help break the reproduction cycle of pests and diseases.e) Effective Extension ServiceThis is an activity that has been lacking in the past and the importance of the service to increasecotton production and productivity is enormous. The Ministry of Agriculture and its counterpartsat regional levels must provide extension service on cotton if production and productivity are tobe increased in the country.f) Improved Research activitiesResearch activities have also been weak and this need to be strengthened if the potential forcotton production in the country is to be realized. The Ethiopian Agriculture Research Authority 40  
  • 53. must work hard to expand its research activities to solve crop productivity constraints faced bydifferent producers in the country.g) Dissemination of Knowledge about StandardsKnowledge about the quality standards required in cotton production has, as noted earlier, beenlimited and the need to rectify the situation has been obvious. To this effect, the EthiopianStandards Authority in collaboration with other concerned agencies; must advice and supportfarmers and traders whenever they need such support and disseminate all information aboutstandards through all possible means.h) Promotion of Irrigation PracticesThe ministry of Water Resources and other relevant agencies must work hard to expandirrigation facilities of all types-large and small-scale particularly in the rain deficit areas.i) Availability of GinneriesThe ginneries currently servicing the cotton producing areas are obsolete. And not fairlydistributed. It is imperative therefore that they are replaced by modern ginneries and that itsdistribution is improved in such a way that all production areas get easy access.j) Other FacilitiesThe need for the availability of adequately distributed oil processing mills suitable for cottonseedand the expansion of storage facilities in all production areas cannot be refuted. Hence,improving the availability and distribution of oil mills and the expansion of storage facilities areimperative.Improving the Market EfficiencyThe ultimate measure of the success of the production expansion efforts is the benefit which onederives from improved market access. Hence, serious attention must be exerted to improve theavailability of cotton markets. To this effect, expanding access to the existing markets in India,Pakistan, Indonesia and Thailand, where Ethiopian cotton has been sold. Bridging the existingsupply gap has to be an important target.Furthermore, new markets have been opened in Turkey, Egypt, Yemen and Oman. Thesecountries are nearer to Ethiopia, where the transport cost is lower and the benefit, accordingly,higher. Hence, further strengthening marketing ties with them is crucial. Other markets must alsobe explored and expanded in due course. These are Italy and Greece, which have occasionally 41  
  • 54. been importing Ethiopian cotton and China, korea republic and Japan, where a huge potentialexists. European markets, particularly Germany and Russia must be considered as options if thecapacity to deliver the type and quality they require is build. To this effect, producing long fibrelint would have paramount importance.In general the market expansion efforts must be guided by a cost minimizing and benefitmaximizing strategy for which establishment of contacts with buying companies and supplyingthem with products which meet their standards are essential.Strong Market information System The following additional measures are recommended to improve market opportunitiesAs noted earlier, it is of crucial importance that producers and suppliers of cotton get adequateinformation about the type and quality of the product in demand in different markets. Suppliersalso need information on alternative market outlets and the levels of prices offered in thesemarkets. Availability of such information helps marketing decisions of where and how much tosell and at what price. The establishment of good market information system is therefore neededto undertake the following:Collection and processing of information on price from all major domestic markets, and itsdissemination on regular basis to producers, traders, service co-operatives and relevant Govt.agencies.Collection and processing of information on the type, quantity and quality of production at thefarm and intermediary levels, and its dissemination to relevant agencies at Wereda, regional andfederal levels, as well as to traders, service co-operatives and similar establishments.Compilation of information from external markets on levels of prices and demand and the qualityand standard they expect of the products supplied, and the dissemination of the information toexporters, producers, service co-operatives, trade unions and other relevant bodies on regularbasis.Training and deployment of qualified field staff and establishment of information flow networksat desired levels.Building the capacity of service co-operatives, trade unions and similar other bodies to compileand disseminate to their members the market information they receive and providing them withany other additional support required. 42  
  • 55. Promotion of contractual arrangement in production and marketingTo ensure a steady supply to buyers and a reliable market to producers, establishment of asystem for pre-delivery contractual arrangements between the following market players isessential. • Between farmers and local buyers • Between farmers and service co-operatives and ginneries • Between service co-operatives and exporters or textile factories • Between local suppliers and exporters, as well as between local suppliers and ginneries and textile factories and • Between state and private farms and ginneries and textile factories.Such contracts are expected to help facilitate the establishment of purchase prices, the type,amount and quality of the product to be produced and marketed, payment arrangements betweenthe parties concerned, obligations of the contracting parties and the type of support to beprovided to producers. To this effect, a guideline, which specifies the procedures, and the rulesand regulations that need to be observed must be developed.Encouraging the Participation of Private InvestorsConducive environment has to be created for the participation of investors both in cottonproduction and marketing as well as in oil processing and ginning.Creating Better Access to FinanceThe financial constraints faced by cotton producers and traders needs to be addressed through thefollowing alternatives • Supporting saving and credit associations to broaden their areas of involvement. • Establishment of Service Co-operative banks with Government’s loan-able funds to be maintained until they are self supporting. • Establishment and expansion of inventory credit system • Provision of Government financial support to production enterprises, and similar other support to private investors. 43  
  • 56. Institutional and Other Supporta) Creating effective institutions that provide services for the promotion of regional/internationaltrading activitiesb) Reducing transaction costs through road improvement, expansion of telecommunicationservices.2.13 General development goals and strategy for implementationThe development of textile and garment industry is dependent on the development of cotton sub-sector. In order to give impetus to textile and garment sector it will be essential to increase theacreage of the cotton growing area, increase the per unit yield, enhance the quality, and satisfythe domestic needs and earn foreign exchange by exporting as well. These measures will boostcompetitiveness of Ethiopian cotton sub-sector in the world. In the report prepared by China Textile planning institute of construction (2003) followingdevelopment goals and strategy for implementation are suggested for the period 2002-2012.With the increase of population and rise of people’s living standard and the development of thetextile and garment sub-sectors, the demand for cotton will be increased rapidly. Taking thepopulation of 67million (2002) as base line and about 3.09% growth rate, Ethiopianpopulation will be 73 million by 2005 and 89 million in 10 years (2012). The fiber consumptionper person of less than 1kg (2002) will rise to 1 .5 kg per person in 2012. The total consumptionof cotton fiber will be 130 thousand tons. Taking into consideration the factors of garmentimports, synthetic fibers and fiber waste, the demand will be around 100 thousand tons. Addingup, 60 thousand tons for the garment sub-sector for export and the direct export of cotton. Allthese assumptions will require the domestic cotton yield to be around 200 thousand tons.To realize the general goal, the cotton sub-sector should first satisfy the domestic needs andsupport the smooth realization of industrialization.Compared with its neighboring cotton producing countries, Ethiopia belongs to the countries ofsmall cotton production, lagging behind Tanzania, Sudan and other African countries of mediumyield. Therefore, to be a medium sized country of cotton production by the year 2012, the grossyield should not be less than 200 thousand tons. The China report has suggested the following goals/targets to be achieved in three phases andthe strategy to be adopted to achieve the cotton production to 200 thousand tons by 2012. 44  
  • 57. Table 2.15 Suggested Cotton sub-sector development planGoal/Target 2002 2003-2004 2005-2007 2008-2012 (Base) (Short term (Medium term; (long term (10 2 years) 5 years yearsCotton growing area 63,000 80,000 100,000 to 180,000 250,000 to(Ha) 280,000Cotton production 32,700 40,000 to 65,000 80,000 to 120,000 200,000(tons) tonsExport Quantity 7000 20,000 50,000 70,000(ton)Export value (USD) 20 million 50 million 70 million Study Report on The Development Strategy of Ethiopian Cotton/Textile/Garment Sub-sectors: China Textile Planning Institute of Construction, Beijing, China, June 2003Development goalsShort term in 2 Years (2003-2004)On the basis of 63,000 ha of land for cotton cultivation and 32,700 tons cotton production in2002 (Base line), l0000 ha more should be employed to plant cotton per year. As a result 40,000- 65,000 tons of cotton will be produced from 70.000--80.000 ha and export earning of 20million USDMedium term 5 years (2005-2007)On the basis of the acreage in 2002, enlarge the planting acreage by 20-30 thousand ha everyyear, and reach 100-180 thousand ha so that the total yield of cotton will reach 80-120 thousandtons, the export of raw cotton 50-70 thousand tons, and foreign exchange earning of 50 millionUS dollars. Meanwhile, domestic consumption should be improved.Long term 10 years (2008-2012)On the basis of the previous five-year cotton acreage, increase rapidly the sowing acreage andattempt to reach 250-280 thousand ha. Meanwhile, as a result of the increase of the per unityield, the total yield will be 200,000 tons and support the development of the textile sub-sectorwith the market orientation turning from domestic market to international market.Strategy for implementationShort term 2 years (2003-2004) • Identify cotton development as the focus point of national economic development and formulate policies and laws for cotton development. Conduct extensive study of land resources, and provide lands for expanding cotton-planting area. 45  
  • 58. • Guarantee capitals to increase the irrigable land. Make full use of water resources. • Tap the potential of public cotton farms through reforming institutions; decentralize the management right up to lower levels. Simultaneously, encourage private farms and small farm holder farmers to grow cotton. • Establish centers for developing improved cotton seed varieties for introducing new types and seeds. In this way, cotton quality is expected to be better. In the first place perfect the fiber types, with the emphasis on improving the length, strength and luster of the cotton, reduce the percentage of short fibers, and to increase the spinning ability of fibers for the needs of some high-class yarns and fabrics. • In the second place, improve the working of cotton-ginning machines and purchase parts in an attempt to improve ginning quality; introduce instruments and equipments and improve testing measures for the purpose of upgrading cotton quality classification. • Attract businessmen and their investments, in order to increase the number of private farms and enlarge their size. • Train intermediate and advanced talents for management, technology, and research. Send key members in phases to advanced countries for further studies. Invite experts on cotton management and technology to Ethiopia to give lectures and advice.Mid-term - Five-years (2005-2007) • Choose proper places for the enlargement of the cotton acreage and realize the goal of output increase. The first way to enlarge cotton-planting acreage is to restore the original public growing acreage; the second is to enlarge the private acreage; the third is to encourage farmers to enlarge their planting. • Till the land, construct irrigation works, improve fields of low yields, establish complete popularization system of agricultural science and technology, spread scientific planting management methods, introduce or invent applicable techniques of plant protection. fertilization and irrigation, and transform extensive management into intensive one for the sake of stabilizing or even increasing the yield per ha. • Public cotton farms should set up an example in the field of popularizing new varieties. They should establish production system of scientific management and improved seed varieties with the help of national scientific research institutions. New varieties and efficient planting techniques should be popularized gradually. 46  
  • 59. Long-term 10 year (2007-2012) • The long term work will focus on the gradually establishing complete market economic system encouraging farms and farmers to plant cotton, consistently regulating the national macro policies, and improving the productivity.Attention will also be given to the cooperation of relevant industries, lowering the costs of cottonproduction and improving the size and competitiveness of the cotton sub-sector.2.14 Present status and government plans for future growth of cotton sectorThe Ethiopian Government has carefully studied and made earnest efforts to implement therecommendations given in the following two reports 1. Cotton textile value chain report for Ethiopia prepared by Agridev Consult, on behalf of Regional agricultural trade expansion support program (RATES), Nairobi, Kenya 2004 2. Study Report on The Development Strategy of Ethiopian Cotton/Textile/Garment Sub- sectors, prepared by China Textile Planning Institute of Construction, Beijing, China June 2003 3. Recently UNIDO has prepared a draft document “Benchmarking of the Ethiopian Textile Industry” on behalf of Ministry of Trade and Industries giving the present status of Ethiopian cotton and textile/garment sub-sectors (April 2010)An attempt is made to briefly review and provide statistical data of the present status and plansfor future growth of Ethiopian cotton sub-sector.Government support measures to cotton growersThe government support measures to encourage cotton cultivation in Ethiopia include thefollowing: • Supply of quality seeds • Supply of inputs such as fertilizer and pesticides. Cotton is highly vulnerable to disease and needs preventive measures. • Minimum price support policy does not exist in Ethiopia as cotton marketing is in private hands. • Encouraging production of organic cotton which fetches premium in world market. 47  
  • 60. The ministry of Agriculture and Rural Development is responsible for the development of thecotton sector in Ethiopia.Cotton productionAs mentioned earlier, state farms, private farms and smallholding farmers produce cotton.1. State FarmsPrior to 1992, large-scale cotton farming had been the exclusive domain of state enterprises. Thefive state cotton farm enterprises (Tendaho, Middle Awash, Upper Awash, North Omo andAbobo) used to produce more than 62,000 metric tons of seed cotton annually from some 30,000ha in 2003. Most of the state farm cotton production, about 26,000 metric ton, was from theAwash valley area. State farm’s share of annual cotton production was around 32% in the year2003.Currently (2008/09); there are three government owned farms producing cotton in the country;Upper Awash, Abobo, and Vegetable and Fruit Development Enterprise. These state farms plantcotton on a total area of 3522 ha, out of which 2300 ha is rain fed and 1222 ha is irrigated.From these areas, 65504quintal of seed cotton is produced. Cotton production of state farms isonly 5% of the total cotton production and covers only 7% of the irrigated land.2. Private farmsAfter the reform of 1992, private commercial farms have also been engaged in cotton production.Private farms are mostly located in Metema, Humera, Middle Awash and southern rift valley.They cover a land of 28,984 hectare and yield 654,610.8quintal of seed cotton, which is 67% ofthe total production. Private farms cover 93% of the irrigated land.3. Smallholder FarmsThe land covered by small-hold farmers for cotton production is about 42,948 hectare andproduces 568,923quintal of seed cotton, which is 28% of the total production. It covers 81% ofrain fed cultivation of cotton.The statistics of total area expected to be cultivated, and seed as well as lint cotton production forthe years 2008/09 and 2009/10 is given in Table 2.16 48  
  • 61. Table 2.16 Cotton Cultivation Area and Productivity in the Years 2008/09 and 2009/10 2008/2009 Cultivation Year 2009/2010 Cultivation Year Area Product Productio Producti Irrigation Expected Productio Producti Type of Cultiva ion in n in on in or rain land to n in on inNo Farm Land ted in quintal quintal quintal fed be quintal quintal. hectare per (seed (lint cultivate (seed (lint hectare cotton) cotton) d in cotton) cotton) hectare1 Governmen 2300 17.0 39100 14467 Rain fed 2800 47600 17612 t farms 1222 23.5 26404 9769 Irrigation 2622 48404 17909 Sub-total 3522 18.6* 65504 24236 5422 96004 355212 Private 5134 13.2 67918.58 25130 Rain fed 8097 137194 50762 farms 23770 24.67 586692.2 217076 Irrigation 56211 1402437 518902 Sub-total 28904 18.9* 654610.8 242206 64308 1539631 5696633 Smallholde r farms** Tigray 11690 11.6 135721 50217 Rain fed 11690 135721 50217 region Amhara 28658 13.6 390888 144629 Rain fed 33991 463637 171546 region Benshangul 883 10 8830 3267 Rain fed 883 8830 3267 region Gambella 1718 19.5 33484 12389 Rain fed 1718 33484 12389 region Sub-total 42949 13.2* 568923 210502 48282 641672 2374194 Achievable 35-40 Potential 24992 613096 226845 Irrigation 58833 1450841 536811 50383 250099 250099 Rain fed 59179 826466 305793 Total 75375 17.1* 1289038 476944 118012 2277307 842604 * Average production of seed cotton in quintal per hectare. **This information does not include the southern region. Source: Cotton Cultivation and Marketing Strategic Plan, Ministry of Agriculture and Rural Development,  2009/10  Comparison of the status of cotton production in 2001 and 2009 The comparison of the area cultivated and cotton production by three stake holders namely, state farms, private farms and small hold farmers is given in table 2.17 49   
  • 62. Table 2.17 Status of the area cultivated and cotton production (2001 and 2008Area/Productio State farms Private farms Small-hold Totaln farmers 2001 2009 2001 2009 2001 2009 2001 2009Area cultivate 12570 5422 18150 64308 11650 48282 42370 118012(ha)% share 29.1 4.6 43.8 54.5 27.5 40.9Seed cotton 25979. 9600. 45375. 153963 9320. 64167 80674.. 227730.Production 9 4 0 1 0 2 9 7(MT)% share 32.3 4.2 56.2 67.6 11.5 28.2Cotton ProductionCotton production and consumption trends for the years 2003-2008 are given in Tables 2.18 Table 2.18 Cotton production for the past six years, 2003/04-2008/09 No. Year Lint Cotton MT 1 2003/04 31,406 2 2004/05 16,579 3 2005/06 27,693 4 2006/07 34,184 5 2007/08 36,300 6 2008/09 47,694.4 Source: Source: Cotton Cultivation and Marketing Strategic Plan, Ministry of                Agriculture and Rural Development, 2009/10   Cotton production in Ethiopia compared to other cotton producing countries The cotton production and yield in Ethiopia (2009/10) compared to the major cotton producingcountries is shown in Table 2.19 50  
  • 63. Table 2.19 Cotton production in Ethiopia and major cotton producing countries Country Area under Yield (kg/ha) Production cultivation (‘000 tons) (‘000 ha) Ethiopia 85 263 22* China 5,591 1,216 6,800 India 10,152 502 5,100 Pakistan 3,072 687 2,112 Turkey 280 1,339 375 Bangladesh 34 294 10 World 30,597 725 22,177 Source :International Cotton Advisory Committee (ICAC) (2010)* The Ministry of Agriculture and Development estimate is 47,694 tons for 2008/09 rdIn case of Ethiopia, the yield of 263 kg is about 1/3 of the global average of 725 kg and lowestamong the reference countries where (except Bangladesh) the average yields are over 2 to 4times higher. This is attributed to natural factors such as soil characteristics and climate butchiefly agriculture practices such as irrigation, availability of good quality seeds and use offertilizers and bio technology.Cotton consumption by textile industryThe actual lint cotton consumption of textile industries could be obtained from yearly purchasedata shown in Table 2.20 Table 2.20 Actual cotton consumption of textile industry (spinning) for the past six years, 2003/04-2008/09 (MT)No. Textile Industry 2003/04 2004/05 2005/06 2006/07 2007/08 2008/091 Combolcha 2,620.2 3,344.5 2,339.4 3,508.6 2,434.5 3,230.02 Awassa 2,023.3 2,049.2 2,009.7 1,797.3 1,482.5 1,080.43 Arba Minch 1,238.2 147.2 200.6 1,258.8 2,123.5 1,144.44 Bahir Dar 2,066.3 1,928.1 1,598.8 2,116.3 1,880.5 480.15 Edget (Average) 400.0 420.0 439.0 4,377.0 400.0 380.76 Dire Dawa 3,142.6 3,121.3 2,914.7 2,440.0 2,798.5 1,684.07 Almeda (Average) 5,040.0 5,040.0 5,040.0 5,040.0 5,040.0 2,500.08 Adey Abeba 687.6 106.4 975.6 927.5 488.9 478.59 Ayka Addis --- --- --- --- --- 2,496.210 Adama Spinning --- --- --- --- --- 2,150.6 Total 17,218.2 16,156.7 15,517.8 21,465.5 16,648.4 15,624.9 Source: Cotton Cultivation and Marketing Strategic Plan, Ministry of Agriculture and Rural Development, 2010 51  
  • 64. In 2008/09, lint cotton consumption of small scale textile enterprises was 937 ton per year. Dataon the actual lint cotton consumed by artifacts, traditional handloom weavers and cottageindustries is difficult to retrieve. However, it was estimated to be 5,000 ton in 2008/09.Therefore, cotton consumption of traditional weavers and cottage industries is estimated to bearound 6,000 ton or more.As can be seen from cotton production and consumption tables, all domestic demands of lintcotton could be met from cotton supply within the country, except in 2004/05 where there was adeficit. In 2004/05 the demand was greater than supply and the textile industries imported morecotton. However, in all other fiscal years, the supply was almost twice that of demand of cottonby textile industries if all cotton produced was utilized domestically.Export MarketFrom 1950 – 1975, Ethiopia was importing seed cotton for the consumption of textile mills.Later on cotton was produced in sufficient amount in the country itself and subsequently thecountry was able to export lint cotton to different countries, specially starting from 1995. Theamount of cotton exported for the last ten years is indicated in the Table 2.21 Table 2.21 Quantity of cotton exported (in ton) and income earned (in USD) Year of Quantity MT Revenue, Cultivation x1000USD 2000 5,626 7,219 2001 7,625 7,911 2002 5,827 53,347 2003 7,562 7,735 2004 8,189 10,879 2005 1,228 1,848 2006 6,177 6,807 2007 11,760 14,342 2008 14,907 19,237 2009 4,766 5,788 Source: Cotton Cultivation and Marketing Strategic Plan, Ministry of Agriculture and Rural Development, 2010 52  
  • 65. In the years 2006, 2007 and 2008, the amount of lint cotton exported from Ethiopia is about0.09% of the world market, which is insignificant. The major countries that import lint cottonfrom Ethiopia are Pakistan, India, Greece, Indonesia and Thailand. In addition, Egypt, Turkey,Oman, Switzerland and United Arab Emirates purchase small amount of cotton from the country.Cotton import to the country, 2005/06-2007/08Ethiopia not only exports cotton, but also imports it whenever the need arises. Though cottonproduction is more than the demand of the nation, due to various marketing imbalances, certainamount of cotton is usually imported. The amount of cotton imported and the associated cost forthree years is given the Table 2.22. Table 2.22 Quantity of lint cotton imported (ton) and its value (USD) Year Quantity (MT) Price (X 000USD) 2005/06 211.8 4830.3 2006/07 669.4 17235.5 2007/08 1,295.2 35141.4 Source: CSA report 20082.15 Current and projected yarn production capacity of Ethiopian textile industryThere are 10 medium and large scale textile factories in Ethiopia (2009/10). Nine out of ten arecomposite textile mills while Adama Spinning factory produces only spun yarn. The installedproduction capacity of these 10 factories is 37,625 ton of yarn per year consuming 15624.9 tonof lint cotton. In 2009/10, these ten textile factories actually consumed 33,323 ton of lint cottonper year and produced 25,858 ton of yarn per year indicating that they were operating at 68% oftheir installed production capacity. The current and projected yarn production capacity of textileindustries for the next five years (2010/11-2014/15) is given in Table 2.23 53  
  • 66. Table 2.23 Current and Projected Yarn Production Capacity of Textile Industry Production Capacity 2009/10 Achievable Production Capacity through Support Capacity Current ProductionS. 2010/11 2011/12 2012/13 2013/14 2014/15 Efficiency (%) Name of FactoryNo. Production Production Production Production Production Efficiency Efficiency Efficiency Efficiency Efficiency Installed (kg/day) (kg/day) (kg/day) (kg/day) (kg/day) (kg/day) (kg/day) (%) (%) (%) (%) (%)1 Arba Minch 5,856 10,000 58.6 78.0 7800 90.0 9000 90.0 9000 90.0 9000 90.0 9000 Textile2 Awassa Textile 4,000 7,000 57.1 75.0 5250 90.0 6300 90.0 6300 90.0 6300 90.0 63003 Adei Ababa 4,323 7,000 61.8 80.0 5600 90.0 6300 90.0 6300 90.0 6300 90.0 6300 Textile4 Bahir Dar Textile 5,241 7,500 69.9 80.0 6000 90.0 6750 90.0 6750 90.0 6750 90.0 67505 Dire Dawa Textile 8,794 12,000 73.3 80.0 9600 90.0 10800 90.0 10800 90.0 10800 90.0 1080 06 Kombolcha Textile 6,200 10,000 62.0 90.0 9000 90.0 9000 90.0 9000 90.0 9000 90.0 90007 Alemeda Textile 11,000 20,000 55.0 90.0 1800 90.0 18000 90.0 18000 90.0 18000 90.0 1800 0 08 Ayka Textile 17,000 20,000 85.0 90.0 1800 90.0 18000 90.0 18000 90.0 18000 90.0 1800 0 09 Adama Spinning 8,600 10,000 86.0 90.0 9000 90.0 9000 90.0 9000 90.0 9000 90.0 900010 Edget Textile 2,867 4,000 71.7 80.0 3200 90.0 3600 90.0 3600 90.0 3600 90.0 3600 Total 73,881 107,500 68.0 9145 96750 96,750 96,750 9675 0 0 Sum (ton/year) 25858 37625 3200 33863 33863 33863 3386 8 3 Note: 350 working days is considered and utilization of 90% as benchmark, source NITRA, at 80% recovery from fiber to yarn is considered. Source: Textile and Garment Support Institute report 2009/10 54   
  • 67. Lint Cotton Requirement for Yarn ProductionLint cotton passes through various processing stages of spinning machines to produce yarn.Considering the wastage of lint cotton when it is processed from the blow room to the finaltwisting and winding, it is essential to estimate the amount of lint cotton to be consumed. In anefficient factory, the lint cotton wastage is estimated to be 11%. For example, to produce a1000kg of yarn, ginned cotton of 1,124 kg is required; that is estimated to be 3,038 kg of seedcotton (37% of seed cotton). Usually the yield of lint cotton is 37-42% of seed cotton.2.16 Yarn Production and Foreign Exchange Earning Plan of Textile Industry, 2010/11-2014/15According to export strategy plan it is expected to earn a foreign exchange of 7 million USD in2009/10 through yarn export. To obtain this revenue, 25,858 tons of yarn per year needs to beproduced. After five years in 2014/15, a foreign exchange of 100 million USD is envisaged (i.e.an average of 18.6 million USD foreign exchange earnings per year). The production capacity ofwarp and weft threads of textile industries has to increase to 170,097 metric tons. Table 2.24Table 2.24 Five year foreign exchange earning strategy of medium and large scale spinning industry (USD in millions)S. Fiscal YearNo Product Type 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15.1 Warp and weft (for 4.5 11 25 38 55 weaving) 72 Warp and weft (for knitting) 5.5 9 20 32 45 Sum 7 10 20 45 70 100Source: Textile and Garment Support Institute 2009/10The above production capacity can be achieved by increasing the production efficiency ofexisting textile industries from 68.0% to 90% and through expansion, by considering the newlyestablished textile mills and planned five year investments in the sector.The overall five year production target of warp and weft threads is 170,097 ton. From this 55  
  • 68. 76,544 ton is warp and weft threads would be used for weaving sector while 93,533 ton is thewarp and weft threads for knitting sector. Table 2.25Table 2.25 Five year yarn production plan of medium and large scale spinning industries 2009/10 Expected yearly production, tonS. Product Type production, 2010/11 2011/12 2012/13 2013/14 2014/15No. MT1 Warp and weft (for 14222 21052 27387 42059 57474 76544 weaving)2 Warp and weft (for 11636 25373 33473 51406 70246 93553 knitting) Sum 25858 46425 60860 93465 127720 170097 Source: Textile and Garment Support Institute 2009/10 There are ten textile industries manufacturing yarn undertaking either expansion or construction.Among these, the factories under expansion are Bahir Dar textile factory, Combolcha textilefactory and Dare Dawa textile factory. In five years time, expected yarn output from thesefactories is 86,476 ton. Refer Table 2.262.17 Projected production from new investment in spinning factoriesAs it can be seen from export strategy, the amount of yarn production to earn foreign exchangeof 7 million USD in 2009/10 is 25,858 ton. After five years in 2014/15, it is required to produce170,097 ton of yarn per year to earn a foreign exchange of 100 million USD. Since it isimpossible to achieve this target only from existing spinning factories, it is required to have newinvestment in the sector to produce an additional 4,470 ton in 2012/13, 31,716 ton in 2013/14and 67,084 ton in 20014/15. 56  
  • 69. Table 2.26 Expected warp and weft yarn production from textile industry undertaking expansion and constructionSN Name of Installed/ Expected Yearly Production, ton Textile Expanded Remark Industry capacity 2010/1 2011/1 2012/ 2013/1 2014/ (ton/day) 1 2 13 4 151 Kombolcha 8.5 2678 2678 2678 2678 2678 Starts production in mid 2010/112 Dire Dawa 3 472.5 945 945 945 Starts production in mid 2011/123 Bahir Dar 2 630 630 630 630 Starts production at the Textile end of 2010/114 Else 20 6230 6230 6230 6230 6230 Starts production in Textile mid 2010/115 Saygin 40 12600 12600 12600 12600 12600 Infrastructure and Dima machinery erection will end at mid 20116 MAA 10 3150 3150 3150 3150 3150 Starts production in Garment mid 2009/107 Metro 25 7875 7875 7875 7875 Starts production in Shegger mid 2011/128 Spintex 112.5 3504 14018 21026 28035 35044 Starts production in mid 2010/11. Increment of Production Potential of 22.5 ton/day for eight consecutive years.9 Selenteks 45 14175 14175 14175 14175 Starts production at the end of 2010/1110 Ayka 10 1575 3150 3150 3150 3150 Starts production in expansion mid 2010/11Total 276 29737 64978 72459 79468 86476Note: 350 working days is considered and utilization of 90% as benchmark, source NITRA, at 80%recovery from fiber to yarn. Source: Textile and Garment Support Institute 2009/10 2.18 FIVE YEAR LINT COTTON DEMAND OF SPINNING INDUSTRY For the current production of 25,858 ton of warp and weft threads, it is required to have 32,323 ton of lint cotton and 87,358 ton of seed cotton. For producing 170,098 tons of yarn, it is 57   
  • 70. required to have 212,623 ton of ginned cotton and 574,656 ton of seed cotton. Refer Table 2.27for details. Table 2.27 Five year raw material requirement of medium and large scale spinning industrySN Type Expected Production (MT/year) 2009/10 2010/11 2011/12 2012/13 2013/14 2014/151 Warp and weft yarn 25858 46783 60860 93467 127721 1700982 Required lint cotton 32323 58478 76076 116833 159652 2126233 Required seed cotton 87358 158049 205609 315765 431491 574656Source: Textile and Garment Support Institute 2009/10Long staple cottonThe long staple cotton fiber requirement of spinning factories is expected to increase for the nextfive years according to the following proportion: 10% long staple cotton fiber in 2010/11, 15%long staple cotton fiber in 2011/12, 25% long staple cotton fiber in 2012/13, 30% long staplecotton fiber in 2013/14 and 40% long staple cotton fiber in 2014/15. Seed cotton requirement oflong staple cotton is presented in the following Table 2.28 Table 2.28 Projected seed cotton production for long staple fiberStaple length Seed Cotton (MT/year) 2010/11 2011/12 2012/13 2013/14 2014/15Medium staple 142244 185048 284189 388342 517190Long staple 15805 20561 31577 43149 57466Sum 158,049 205,609 315,765 431,491 574,656Source: Textile and Garment Support Institute 2009/102.19 Existing capacity and future production potential of ginneryThere are 11 ginneries however only 9 are operational. Although the aggregate capacity of theginning is estimated at about 200,000 tons, actual utilization is below 50% due to low cotton 58  
  • 71. production and obsolete ginning equipment. Table 2.29 shows the capacity and location of 11ginneries. Table 2.29 Installed capacity of ginneries and their location # Name Capacity Location Ownership Status (tons/day) 1 Tendanho 300 Dubti Public Closed 2 Awash 200 Werer Private Working 3 Arba Minch 80 Arba Private Working Minch 4 Gambela 60 Gambela Public Closed 5 Edget 50 Addis Private Working Ababa 6 Showa 15 Addis Private Working Ababa 7 Gonder 30 Gonder Private Working 8 Hiwot 300 Densha Private Working 9 Dese 90 Gonder Private Working 10 Turea 75 Addis Private Working Ababa 11 Berale 100 Addis Private Working Ababa 1,300 tonsSource: Privatization and Public Enterprise Supervising AgencyThe ginning and supply of cotton in Ethiopia is concentrated in the hands of two following twosuppliers who procure seed cotton from farmers and supply ginned cotton lint to local spinningmills and exporters. • Hiwot (Sister company of Effort group/ Almeida Textiles) • Middle Awash Agriculture Development EnterpriseAll the seed cotton produced by state farms and private commercial farmers and about 20% ofsmall-holders production is ginned. Since seed cotton production of the country is limited tillnow, full capacity utilization of the ginneries is not yet achieved. To utilize the excess capacityof ginneries currently idled, the raw cotton production of the country needs to be increased. Thiscan be achieved either by expanding cultivated cotton area or production intensification throughimproved agricultural practices and technologies to increase the yield per hectare. 59  
  • 72. 2.20 Short and medium-term strategy to satisfy domestic and international demand of cotton (2010/11-2014/15) According to the existing development situation of the sector, lint cotton demand of domestic textile factories and international market will be expected to increase by an average of 66% per year. Thus, the necessity of expanding cotton cultivation area, additional seed varieties, increasing irrigation, and new ginneries is obvious. Planned Cotton Demand of Textile industry and Export Market Medium and long staple lint cotton demand of textile industry is expected to increase from 58,478 ton in 2010/11 to 212,623 ton in 2014/15. This is about 90% of total lint cotton production of the country. Thus, the demand of export market will be 10% of total lint cotton production of the country. Refer Table 2.30 Table 2.30 Export and domestic market demand of lint cotton, ton/yearLint Cotton 2010/11 2011/12 2012/13 2013/14 2014/15 Remark Status in 2008/09Medium staple 52630 68468 105150 143687 191361 Textile industry 47000- 16986 19364 22075 25166 28689 Export market 50000Sub-total 69616 87832 127225 168853 220050Long staple --- --- 11683 15965 21262 Cultivated 5848 7608 --- --- --- ImportedSub-total 5848 7608 11683 15965 21262Total domestic 58478 76076 116833 159652 Textile industry 212623Grand Total 75464 95440 138908 184818 Textile industry 47000- 241312 & export market 50000 Source: Cotton Cultivation and Marketing Strategic Plan, Ministry of Agriculture and Rural Development, 2009/10 Seed cotton production plan Based on the above lint cotton demand, seed cotton demand will increase from the existing 127.6 thousand ton in 2008/09 to 188.2 thousand ton in 2010/11 and finally reach 659.2 thousand ton per year at the end of the next five years. Since a 0.2 ton per ha per year increment in productivity of cultivated land is estimated, the productivity will be 1.7 ton per ha in 2010/11 and 2.5 ton per ha in 2014/15. Therefore, cotton cultivation area should be expanded from 75.375 thousand ha in 2009 to 262.7 thousand ha in 2014/15. Refer to the Table 2.31. 60   
  • 73. Table 2.31 Seed cotton demand in ton per year and the land to be cultivated in hectare Seed Cotton and 2010/11 2011/12 2012/13 2013/14 2014/15 Status in Cultivation Area 2009 Medium staple 188,151 237,384 343,851 456,359 594,730 Long staple 35,403 48,379 64,430 Total 188,151 237,384 379,254 504,738 659,161 Above 127627 Cultivated land Medium staple 110,677 124,939 163,739 198,417 237,892 Long staple 17,702 21,034 24,781 Total 110,677 124,939 181,440 219,451 262,673 Above 75375Source: Cotton Cultivation and Marketing Strategic Plan, Ministry of Agriculture and Rural Development, 2009/10Based on the above data, 171.6, 193.7, 375, 453.5 and 542.9 thousand ha of land is required forcotton cultivation from 2010/11 to 2014/15 respectively. Refer Table 2.32. Table 2.32 Planned Cultivation Area, 2010/11 – 2014/15 2010/11 2011/12 2012/13 2013/14 2014/15 Status in 2001-2002 English cale Land Required 114367 129103 187488 226766 271429 Increment % 50 50 100 100 100 Total land required 171550 193655 374977 453533 542858 Above 75375Source: Cotton Cultivation and Marketing Strategic Plan, Ministry of Agriculture and Rural Development, 2009/10Plan for new ginneriesSince cotton cultivation area and production is expected to increase according to the strategyoutlined above, improving the existing efficiency (presently less than 50%) of ginneries to themaximum level will not be sufficient to satisfy lint cotton demand. Therefore, if the averageginning capacity of each ginnery is estimated to be 30,000 ton per year, the need for new ginneryis shown in the following Table 2.33 61  
  • 74. Table 2.33 Demand for Additional Ginnery Description Year Status in 2010/11 2011/12 2012/13 2013/14 2014/15 2009 Expected seed cotton 291635 329214 637460 771006 922856 Saw gin 1 7 3 3 10 Roller gin 4 2 2 0 Total 1 11 5 5 Source: Cotton Cultivation and Marketing Strategic Plan, Ministry of Agriculture and Rural Development, 2009/10 2.21 Financial requirement for the implementation of the strategy The financial requirement to meet the above mentioned growth plan strategy is given in Table 2.34 Table 2.34 Financial requirementsExpansion of Qty Unit Unit Implementation Year Totalcultivation area, price ‘00000 Birr pricenew factory and per ha 2010/11 2011/12 2012/13 2013/14 2014/15 X00000equipment x000 Birr BirrAdditional land to be ha 40.0 2862.0 3746.2 10999.1 14141.3 17714.3 49492.9cultivatedAdditional ginnery Saw gin 14 No. 4.2 41.6 16.6 16.6 79.0 Roller gin 8 No. 23.1 9.2 9.2 41.5Oil factory 3 No. 44.0 44.0 44.0 132.0Cotton testing No.laboratoryHVI in Addis Ababa 1 No. 20.0 20.0Four other centers 4 No. 6.0 6.0Seed cotton 33 No. 1000.0 100.0 70.0 60.0 50.0 50.0 330.0warehouseTotal sum 2988.0 3820.0 11168.0 14261.0 17834.0 50071.4 Source: Cotton Cultivation and Marketing Strategic Plan, Ministry of Agriculture and Rural Development, 2009/10 The above data certainly indicates that the Government of Ethiopia is serious to push forward the ambitious development plans for cotton, textile and garment sub-sectors in the next five years and years to follow. 62   
  • 75. CHAPTER 3 NEED FOR DEVELOPMENT OF GRADING SYSTEM FOR ETHIOPIAN COTTON3.1 IntroductionCotton, a cellulosic fiber about 96% pure, is one of the world’s most important textile fibersaccounting for more than half of all the fibers used in clothing and household furnishings. Thetotal world production of cotton being 22.04 million metric tons, the four leading producingcountries, China (mainland) (6.8 million MT), the United States (5.10 million MT), India (2.65million MT) and Pakistan (2.13 million MT) accounted for 75% of cotton production.In Africa, Northern, Francophone Africa (West and Central) and Southern Africa produced 1.023million MT of cotton from 3.20 million Ha of land (ICAC, 2010). Most of the cotton produced isbeing traded and exported as a commodity in an international market.Though Ethiopia’s status as a cotton producing country is low, cotton occupies a unique positionin Ethiopia’s agrarian economy. Ethiopia has enormous potential for the production of cotton. Astudy of the Ministry of Agriculture in 2008/09 indicates that there is 3,000,810 ha(approximately 3 million Ha) of land suitable for cotton production, which is equivalent to thatof Pakistan, the fourth largest producer of cotton in the world.The bulk of cotton produced in Ethiopia has a fiber length of 26-28 mm. From this material, 30-40S counts of yarn can be manufactured. It is hand-picked, but not comparable to theconsistently clean hand-picked cotton found in some countries. Payment by weight and lack ofpremiums for pickers result in a trashy and almost single-grade seed cotton. The moisturecontent of seed cotton arriving at ginneries is reported to be much higher than the recommendedlevel. Such post-production mishandling of the crop dilutes efforts and investments made toevolve varieties capable of producing quality cottons and therefore better yarns. It isconsequently regarded as poor by international standards. The impurities impair the quality ofraw cotton which in turn affects the quality of yarn and fabric, and thus preventing manufactureof a final product with high value added. Lack of quality control is the main deficiency of thecotton marketing system in Ethiopia.The quality of ginned cotton has deteriorated over the years. There is no incentive to improveginning procedures and produce quality cotton. The ginners are probably mixing all types of 63  
  • 76. cotton to obtain the maximum benefit from a cotton pricing and marketing system based onweight.There is no recognized or scientifically devised standardization and grading system. As aconsequence, the country is losing a significant amount of foreign exchange because raw cottonis being sold at a discounted price. The yarn export price remained much lower than theprevailing prices for similar grade yarns of other countries. This adversely affects the foreignexchange earnings, badly needed for the development programs of the nation. The problemsrelating to the quality of raw cotton represent important obstacles to the development of thetextile industry in Ethiopia. For these reasons, it is absolutely essential and urgent need toundertake a national program with substantial funding for quality standardization and gradingsystem of cotton. Since the country has the potential to become a key player in global cotton andtextile markets, the government has been giving priority to research and development programfocusing on quantitative and qualitative improvements in cotton quality and its scientific grading.3.2 International importance of cotton gradingThe major cotton importing countries are integrating instrument based cotton quality data in thetrade. Cotton with insufficient verification of its quality will result in price discounts for theproducers or exclusion from the market. Only a worldwide harmonized control and testingsystem can favor a frictionless business for all participants in the whole commercial chain.Developed cotton growing countries, like USA, have already built up their national cottonquality assessment systems and instrumental classification has resulted in a competitiveadvantage for USA in global marketing. Such marketing advantages are also derived by othercotton growing countries which have adopted instrumental cotton classification or gradingsystems. It is obvious that the establishment of an adequate instrumental cotton testing systembased on high volume instruments for the cotton producing countries in Africa includingEthiopia and elsewhere would facilitate the access of their cotton to diverse global markets. Theavailability of high volume cotton testing instruments solely is not satisfactory to producereliable test results - examples from all over the world show that, without certified testingprocedures, the results will be disregarded and therefore are worthless. The results have to bereliable and at an internationally agreed level. Cotton producing developing countries will bedisadvantaged in their market position, if they do not manage to participate in an international 64  
  • 77. quality assessment system. The introduction of internationally accepted cotton grading systemwill enable the cotton developing countries including Ethiopia to meet the emerging qualityassessment demands of the global cotton market so as to strengthen or at least maintain theircompetitive position in the world market by keeping up with modern market developments.Therefore, it is essential to enable these countries to supply their cotton with objective andreliable instrument-based quality information, according to internationally accepted test rules andprocedures.3.3 Need for development of cotton quality standard and grading systemIn view of the above problem statement and the present status of the Ethiopian cotton sector, it isabsolutely essential that the Government of Ethiopia and the International agencies like ecbp,GTZ, etc. which are actively helping to develop Ethiopian economy, realize the importance andneed of quality standardization and grading system for Ethiopian cotton with an objective toimprove the competitiveness of Ethiopian cotton, yarn and final cotton products to ensure betterreturns for cotton growers, ginners, textile mills, garment manufacturers and the nationaleconomy.The cotton quality standardization and grading system should include the grading of seed cottonand classification of the resulting lint according to international standards. It is also essential thatthe responsibility of such a nationally important project may be assigned to the Institute ofTechnology for Textile, Garment and Fashion Design (IoTex), Bahir Dar University, Bahir Dar,which is a nationally recognized and the only national textile institute in the country. Theinstitute is also receiving scientific inputs from ecbp for its overall academic developments andbringing it to the level of International Standards by introducing postgraduate and PhD levelprograms and augmenting academia, research and development facilities.3.11 Brief history of IoTexThe present Institute of Technology for Textile, Garment and Fashion Design (IoTex) is the onlynational institute in Ethiopia offering textile technology (spinning, weaving, finishing), garmentmanufacturing, fashion designing and general textile education courses to satisfy the technicalmanpower needs of the textile and garment industry and the TVET in the country. It wasoperating in the name of Department of Textile Technology as a part of Bahir Dar Polytechnic 65  
  • 78. Institute which was established in 1963 in collaboration with Russian Government. At thebeginning of establishment, the department was offering program in Textile Technology at aDiploma level. The Diploma level program was then upgraded to B.Sc. program in TextileEngineering in 1997 to satisfy the demands of Textile, Garment and other related industries.Another B.Sc. program in Textile Education (Regular and Summer) and also Garment Education(Summer) was started in the year 2003 to fulfill the teacher training requirements of theTechnical Schools spread all over Ethiopia. In the year 2008/09 a new B.Sc. program in GarmentEngineering has been launched to produce a qualified manpower to meet the demands of thegarment sector. Under the Engineering Capacity Building Program (ecbp), currently in operationin Ethiopia in collaboration with Germany, the Department of Textile Engineering has beenupgraded to Institute of Technology for Textile, Garment and Fashion Design (IoTex), Bahir DarUniversity (2009/10).The IoTex has introduced a postgraduate program (M.Sc in Textile Technology) from the secondsemester of the academic year 2010-2011. There is also a plan to start additional undergraduateprogram in Fashion Designing.Bahir Dar University is the only educational institution offering Textile Engineering, Garment &Textile Education degree programs in Ethiopia. The institute has deep rooted history of morethan 45 years of experience and feels proud that most of technical personnel in Textile andGarment industries of Ethiopia are graduates from the institute. It has thus satisfied the needs oftechnical manpower requirements of the textile and garment industry and making furtherendeavors in this direction with plans of introducing Ph D level programs by research.IoTex has well equipped laboratories in the areas of spinning, weaving, and finishing andgarment technology along with fashion designing. IoTex has well qualified faculty memberswith a total strength of 32 including two expatriate professors. Many of the faculty membersacquired their postgraduate degrees from abroad.3.5 Objectives The objectives of the development of cotton grading system in Ethiopia could be divided intotwo parts viz. immediate and long term objectives. 66  
  • 79. Immediate objectives:1. To initiate cotton quality standardization and grading program based on internationally acceptable cotton classification and grading system2. To establish fiber testing and classification laboratory3. Develop cotton quality standardization and grading system using internationally accepted instrumentation (HVI) and introduce cotton grading system for marketing of Ethiopian cotton4. Initiate application of quality-control measures5. Set quality standards for seed cotton and lint cotton to ensure their full value in local and international markets6. Upgrade operating facilities at some of the principal ginneries to improve the quality of lint through application of standardization and quality control measures7. Provide training for cotton pickers, graders and classersLong term objectives:1. Establish a permanent institute and a cotton grading program based on an internationally acceptable grading and classing system2. Initiate dialogue with Ethiopian Government and International Agencies for the recognition of the Ethiopian Cotton Grading Institute3. To train new generation of graders, classers, arbitrators and instructors4. To establish regional centers for cotton quality testing and provide trained manpower5. To prepare Replicas of seed cotton grades and standards boxes for lint cotton for international acceptance and international trading with value addition6. Arbitrate grading disputes between seed cotton growers and ginners and between ginners and spinners.3.6 What is cotton grading?Cotton grading, cotton classification and cotton classing are the terms used to express the qualityof cotton in terms of its physical quality parameters. A system of marketing cotton on the basisof its physical quality parameters is known as cotton grading or cotton classing.The quality of cotton is determined on the basis of its physical properties. Being natural fiber thequality of cotton in terms of its physical properties is highly variable making it difficult todetermine its commercial value or price. Cotton quality is a function of its variety, growing 67  
  • 80. conditions, harvesting and ginning. Growth conditions change every year depending on theenvironment (weather and soil). In addition, agricultural, harvesting and ginning methods usedfor cotton production vary widely in different countries around the world. All these factorsattribute to a wide range of cotton qualities available in the international cotton market. In cottonspinning, raw material costs make up 50-70% of the overall yarn manufacturing costs. Therefore,Cotton purchasing is the highest risk for a spinner, and it is often based on trust gained overgenerations between cotton buyer (mill owner) and seller (merchant). Other stakeholders in thecotton supply chain are cotton seed breeders, producers, and ginners. All have a high interest inan objective method of assessing the quality of cotton. Cotton classification or cotton gradingprovides this objective assessment of cotton quality, and it is the basis for determining the cottonprice.Thus, the term cotton classification or cotton grading refers to the application of standardizedprocedures developed by United States Department of Agriculture (USDA) for measuring thosephysical attributes of raw cotton that affect the quality of the finished product and/ormanufacturing efficiency. Thus a system of marketing cotton on the basis of its physicalattributes is known as cotton grading or cotton classing. USDA classification currently consistsof determinations of fiber length, length uniformity, strength, micronaire, color, ginningpreparation, leaf and extraneous matter. Research and development for the technology to rapidlymeasure other important fiber characteristics, such as maturity, stickiness and short fiber content,continues.While classification is not mandatory, cotton growers generally find it essential formarketing their crop and to get better value.Cotton classing or grading methodology is constantly updated to include state-of-the-art methodsand equipment to provide the cotton industry with the best possible quality information forcotton marketing and processing. The system is rapidly moving from reliance on the humansenses to the utilization of high-volume, precision instruments (HVI) which perform qualitymeasurements in a matter of seconds. 68  
  • 81. 3.7 Essential quality parameters for cotton gradingAccording to the Universal Cotton Standards of United States Department of Agriculture(USDA), it is essential to test and standardize the following cotton quality parameters for cottongrading using High Volume Instrument (HVI). 1. Fibre length (Upper Half Mean [UHM] length in inches) 2. Length Uniformity Index (UI %) 3. Fibre strength (g/tex) 4. Micronaire (HVI micronaire) 5. Color (HVI color Rd, +b) 6. Trash (HVI trash area %)Instruments requiredThe indispensable instrument required for quality testing and grading of cotton is High VolumeInstrument (HVI) for determination of 6 quality parameters listed above. In addition,analytical balances for sample weighing, drying oven for moisture measurement and hygrometerfor humidity measurement will be essential. The list of essential instruments and their use isgiven in Table 3.1 Table 3.1 List of essential instruments S.No. Instrument Purpose 1. HVI Testing of cotton quality grading parameters 2. Analytical balance Weighing of samples up to 200 gm, accuracy 0.0001 gm 3 Electronic balance Weighing of samples up to 2 kg, accuracy 0.01gm 4. Moisture balance Moisture measurement 5. Hygrometer Humidity measurement3.8 Expected outcome of the project phase IThe major outcome of Phase I of the project will be: a. The HVI evaluation of quality parameters of lint cotton. b. Grading of cotton according to quality parameters c. Preparation of standard samples of graded cotton for national and international acceptance 69  
  • 82. Other important outcome of the project are listed below 1. Training of cotton pickers and standardization of cotton picking, storage, packing and transportation of seed cotton to ginneries with minimum contamination and appropriate moisture content of fiber. 2. Training of technical staff of ginnery for evaluation of fiber parameters and proper setting of ginning machines to get lint cotton with minimum fiber breakage, neps and contamination. 3. Training of technical staff of ginnery for packing and coding of each bale of cotton as per International practices 4. Training of marketing staff of ginnery for dissemination of cotton quality parameters to textile mills according to cotton grades and also to decide the differential price according to cotton grade and not a uniform price as the present practice. 5. Training of spinning technical staff of textile mills for analysis of grading data provided by ginneries and setting the spinning machine parameters according to cotton grades. This will enable the spinning mills to use graded cotton singly or in mixture to produce quality yarn of required count.3.9 Benefits and beneficiariesBenefits1. There will be improvement in quality of seed as well as lint cotton from ginnery.2. A new cotton marketing system will be developed based on quality and grading of cotton rather than cotton weight as it is existing presently. Thus premium cost benefits can be received by cotton growers and ginneries.3. The completion of the project will provide a scientifically devised cotton grading system for national and international marketing of cotton.4. The textile mills will receive better quality of lint cotton improving the quality of yarn, fabric and the final products acceptable in the export market with premium price.5. Textile mills will thus be benefited in terms of improved productivity, quality and marketability of products both in domestic and export markets.6. Quality standardization and grading system will improve cotton handling. Ethiopia will be able to compete with best cotton fibers in the world. 70  
  • 83. 7. Experience of other countries show that cotton quality standardization and grading system motivates all parties, growers, ginners, spinners and exporters, to collaborate to meet consumer demand and compete in the global market.8. Scientific technical support will be available to train pickers, handlers and transporters and ginners for introducing quality measures at all stages of post-harvesting activities.9. Trained manpower will be available for introducing quality measures and quality testing at ginneries.10. Establishment of an independent cotton grading institute will provide a national service to maintain the quality of cotton on a continuous basis year after year.11. The introduction of cotton grading system will help to expand the textile and garment sector and thus creating more employment opportunities to the technical and skilled manpower.BeneficiariesThe main beneficiaries will be cotton growers, ginners, textile, garment sector and the nation aswhole.Benefits which can be derivedThe expected outputs of establishment of cotton grading system can mean different things to thefollowing stakeholders: • Cotton cultivators • Ginneries • Spinning mills • The institute of technology for textile, garment and fashion design (IoTex) • Cotton traders (exporters) • Government agencies  Cotton CultivatorsThe present practice of seed cotton marketing is based on the variety of cotton rather than cottongrade. The state and big private farms can decide price of their seed cotton according to demandand supply of the market. However, the small scale farmers are at disadvantage because the priceof their cotton is decided by the merchants whose obvious intentions are to give less price tofarmers to earn large profits. Marketing of cotton according to grade will help to decide the 71  
  • 84. uniform price according to cotton grade. The benefits of this uniform pricing can be enjoyed bystate farms, private farms and small scale farmers. This will also help to eliminate theexploitation of cotton cultivators particularly the small scale farmers by unscrupulous traders.The benefits of high price for graded cotton will encourage the cotton cultivators for being morequality conscious.GinneriesGinneries are cotton processing industries that act as a bridge between cotton cultivators andspinning mills. The main purpose of ginning is to separate the lint cotton from the seed. It is animportant process which can retain the quality or deteriorate the quality of cotton dependingupon the type of the machine used, its working condition and precautions taken during ginningoperation. The cotton quality parameters such as fiber strength, breaking extension (elasticity),staple length and length distribution are affected in a ginning process. The efficiency and productquality of a spinning process and consequently the weaving process highly depend on thesecotton parameters. The roller setting in the drafting arrangement of ring spinning frame, forexample, depends on the fiber staple length (length uniformity), spinnability and the yarn countto be spun.The machine settings and the ginning technology itself (saw ginning and roller ginning) alsodepend on the seed cotton staple length to be processed. Therefore, the ginning factory mustoptimize its operating parameters based on the raw seed cotton to be processed and must alsoevaluate fiber quality parameters after ginning operation. Preparation (ginning process) is one ofthe criteria to be taken into account in cotton grading. Therefore, testing of cotton qualityparameters in cotton grading system gives the ginner the information necessary to optimizeginning operation and produce good quality lint. One of the essential requirements of the cottongrading program is to analyze cotton quality parameters of cotton from each bale and code thebale accordingly. This will facilitate the ginnery to segregate the bales according to cotton grade.This will help the spinners to purchase cotton at appropriate price and optimize the spinningprocesses for that specific lot of cotton. Therefore, development of the cotton grading system inEthiopia will help the ginners to evaluate their performance as their faults are multiplied in thesubsequent processes in quality deterioration of yarn. This has many technical and economicalimplications on the fact that Ethiopia could utilize only the insignificant portion of the AGOA 72  
  • 85. opportunity because of inability to satisfy the requirements of high quality textile products inUSA.Ginning faults that are likely to occur are: • Nep formation • Excessive fiber breakage • Fiber straining out of elastic regionThese faults propagate into all subsequent processes and produces faults like • Thin and thick places in yarn • Short-fiber-fly • Frequent yarn breakage in spinning and weaving, • Shade variation in dyeingSpinning MillsSpinning mills purchase lint cotton from ginneries. Their performance highly relies on theperformance of the ginneries from whom they procure their lint cotton. Spinning (especially ringspinning) is a very sensitive process where fiber length and length uniformity, fineness,spinnability, strength and maturity are crucial parameters to be considered. Spinnability, forexample, is a measure of the optimum count that can be safely produced from a given lot ofcotton with specific parameters. Therefore, if a mill produces a coarser yarn than can be naturallyproduced from a given cotton lot, the mill loses cost benefits purely due to under-spinning of thatcotton; obviously finer yarns are more expensive than coarser ones. Therefore, standard ways ofcotton grading systems will help the spinning mills to • To procure lint cotton at appropriate price from ginnery. • Optimize their processes to produce high quality yarn and subsequently high quality fabric, garment, and other products • Avoid over-spinning and under-spinning both of which are not admissible. • Spinning mills can communicate the parameters of their yarn easily and pass on the cotton grading data to the interested party. 73  
  • 86. The Institute of Technology for Textile, Garment and Fashion Design (IoTex)Educational institutes like IoTex are supposed to carry out the following activities as mandatoryduties: • Teaching-learning process • Research and development • Community serviceThe academic institutions in Ethiopia have not yet established the culture of research andcommunity service to the extent that they are supposed to. Some reforms in academicenvironment are now landing and taking ground to facilitate the research and development andcommunity service activities efficiently. The IoTex is one of the institutes of technologiesestablished in the country to play significant role in creating a technical man power to cater theneeds of textile and garment industry development of nation. Successful establishment of cottongrading system of national importance will give satisfaction to the institute for their obligationstowards propagating research and development activities and community service. It will alsoprovide motivation for such researches/projects in the future and boost the intellectual integrityamong the staff members and in the university as a whole. There is also a possibility that IoTexwould be the founder of the Ethiopian cotton grading institute and such institute may be hostedin the IoTex campus itself.Cotton Traders/ExportersCotton traders do not add any value to a cotton fiber. They make profit through market/pricemanipulations. These parties make arbitrations nationally and internationally by givinginformation about the cotton they are going to sell or buy. This information is more easilycommunicable if internationally accepted cotton grading system is developed in the country.This means easy domestic and export market access and saving of time and energy for cottontraders.Government AgenciesThe Ethiopian government has placed tremendous economic importance on the textile andgarment sector as it fits very well in the “Agriculture development led Industrialization” policyof the government. The hard foreign currencies obtained from textile product exports and theemployment potential of the sector; make this sector vitally important to the government. But, allthese opportunities can be exploited if the available raw materials are efficiently processed and 74  
  • 87. marketed. One key bottleneck in cotton processing is the inability in standardizing testing ofcotton quality parameters which have significance in cotton pricing and determining theprocessing parameters. Therefore, the government can use cotton grading data to make decisionsand manipulate the cotton market through taxes, subsidies and loans to encourage or discouragea production of specific cotton in the country. This will also help the government to makelicensing and control of cotton farms.Background informationThe background information relevant to cotton grading is briefly given under the followingheads 1. Impact of fiber parameters on yarn and fabric quality 2. Scientific information on Cotton grading system 3. Cotton grading systems of few countries 4. Status of Ethiopian cotton sector3.10 Impact of cotton fiber properties on yarn quality and pricingBefore we discuss the meaning and importance of cotton grading, it will be essential tounderstand the impact of cotton fiber properties on the yarn and fabric produced.Cotton, being a natural fiber, varies widely in its fiber characteristics, both physical and chemical(mainly physical), because of genetic, environmental, harvesting and ginning factors. Thephysical, chemical and related characteristics of cotton lint determine its textile processingperformance (including spinning and weaving machine productivity) and yarn and fabric quality.Ultimately these characteristics also determine conversion costs and product end-use, quality andprice.The fiber represents 50%–70% of the yarn manufacturing costs. Ideally, therefore, the price ofcotton should be linked to fiber characteristics. The relationship between cotton fiber price andproperties is given in the Table 3.2 75  
  • 88. Table 3.2 Average price contribution of quality attributes S.No. Quality Attribute Price Contribution, % 1 Staple length 20 2 Strength 5 3 Micronaire 22 4 Color 30 5 Trash 23Source Cotton trading manual, Edited by Secretariat of Cotton Advisory Committee, Woodheadpublishing Ltd, Cambridge, England, 2005.Relevance of fiber properties to spinning technologyThe relative importance of the fiber properties also depends on the spinning system, on whetheror not the cotton is combed, and on the fineness of the yarn being spun. Table 3.3 Order of importance of fiber properties for different spinning systems Order of Rotor (open-Importance Ring end) Air-jet Friction Length and length 1 Strength Fineness Friction uniformity 2 Strength Fineness Cleanliness* Strength Length and length 3 Fineness Strength Fineness uniformity Length and length Length and length 4 Cleanliness* uniformity uniformity 5 Friction Cleanliness**Absence of trash, dust, etc.Source Cotton trading manual, Edited by Secretariat of Cotton Advisory Committee, Woodheadpublishing Ltd, Cambridge, England, 2005.Relationship between fiber properties and yarn qualityThe major raw material used in spinning mills is cotton. Raw material accounts for about 80% to90% of the yarn quality.The optimal choice of cotton for producing yarns of desired property is rendered difficultbecause of two reasons: i) the raw material quality is determined by the interaction of several physical properties of the fibers and 76  
  • 89. ii) The inherent variation existing in all these properties among the fibers.Cotton grading therefore outline briefly those aspects of fiber quality which will enable thespinner to choose the material most suited from a wide range of cottons that differ in theirphysical properties.Although all cottons can be spun into yarns, the quality requirements of these yarns varydepending upon their specific end uses. Whereas a warp yarn is expected to be strong andextensible, the hosiery yarn should be uniform and reasonably free from imperfections. Tofacilitate the characterization of cotton, it is necessary to synthesize the important physicalcharacteristics into a single index.Fiber Quality Index (FQI)The different cotton quality characteristics are synthesized into a single index called FiberQuality Index (FQI) defined as follows: LSm FQI = f Where L = 50% span length in mm S = Fibre bundle strength (g/tex) m = Maturity coefficient and f = Fiber fineness (micronaire value)The achievable yarn CSP (Count Strength Product) for a given FQI of cotton under optimumTwist Multiplier is given by the expression: Lea CSP = 320 ( FQI + 1) − 13C............................(1) ( for carded counts ) = [320( FQI + 1) − 13C ] (1 + W / 100).........(2) ( for combed counts ) Where C = Count spun W = % waste extracted during combingTwist for maximum strength can be expressed by the following formula: 50 − L + f T max = 9 77  
  • 90. Where L = 50% span length F = Fiber fineness (micronaire value)If the actual CSP product is the same or more than the predicted value, the spinning performancecan be rated as good. If the actual CSP is lower by 5%, the spinning performance is rated asaverage and if it is lower by 10%, the spinning performance is poor.Note that the FQI and the yarn CSP estimates should be verified by conducting research work forthe type of raw material (cotton) of a given country and can be taken only as a broad guide linefor the spinning mills.The relationship between fiber properties and yarn quality is summarized in the Table 3.4 Table 3.4 Summary of interconnection between yarn characteristics and fiber quality Fiber property Characteristics co-relation to yarn 1. Staple Length Spinning Potential 2. Fiber Strength Yarn strength, less Breakages 3. Fineness Finer Spinning Potential 4. Maturity Yarn Strength and evenness, better dyeing 5. Non-Lint.content (Trash) Reduced Waste 6, Uniformity Ratio Better productivity and Evenness 7. Elongation Less end Breakages 8, Friction Cohesiveness 9.Stickiness Spinning problem by lapping & Dyeing quality 10. Grey Value Yarn luster 11. Yellowness Yarn Appearance 12.Neppiness Yarn neppiness 13. Moisture Content 8.5% moisture content optimum for spinning at 65% R HTable 3.5 shows the relative contributions of HVI fiber properties to predicting the strengths ofrotor versus ring yarns. It can be that strength, elongation, and color play a more significant rolein rotor yarn strength, whereas length and length uniformity play a more significant role in ringyarn strength. 78  
  • 91. Table 3.5 Relative contributions of HVI Fiber Properties in Predicting the Strengths of Rotor versus Ring Yarns HVI Property % of property % of property Contributing to Contributing to Rotor yarn strength Rotor yarn strength Strength 24 20 Length Uniformity 17 20 Length 12 22 Micronaire 14 15 Elongation 8 5 Color or Reflectance 6 3 Unexplanined 13 12Source: Menachem Lewin, Cotton fiber chemistry and technology, CRC Press, London/New York, 20073.11 Effect of fiber quality on weaving performanceIncreasing quality and performance demands are being placed on the entire textilemanufacturing, from raw material to end-product. For example, some 20 years ago 15 non-repairable faults per 100 meters of cotton fabric were permitted, today it is 5, and this maybecome 3 in the future. Seconds have also come down from 3% to 0.5%, with 0.3% possible inthe future. Weaving machine stops have decreased by 50% over the same period, some 20%–30% of such stops being due to yarn defects, it is known that thin yarn places having extensionand strength below certain minimum limits cause weaving end-breaks, such thin places and otherdefects in the yarn being influenced by fiber properties and spinning mill conditions.In view of this, it is understandable that efforts are continuously being directed towardsimproving the desirable properties of cotton and eliminating or minimizing any undesirableproperties. Such efforts are aimed at breeding, farming and ginning practices as well as at textileprocessing systems and conditions. Furthermore, it is hardly surprising that for over a century somuch effort has gone into developing instrument methods for accurately measuring cotton fiberproperties (preferably testing each bale of cotton), and quantitatively relating the measuredproperties to processing performance and yarn and fabric properties, so as to improve andoptimize quality all-round. 79  
  • 92. 3.12 Cotton grading and its needCotton grading, cotton classification and cotton classing are the terms used to express the qualityof cotton in terms of its physical quality parameters. The term cotton classification or cottongrading refers to the application of standardized procedures developed by USDA for measuringthose physical attributes of raw cotton that affect the quality of the finished product and/ormanufacturing efficiency. Thus a system of marketing cotton on the basis of its physicalattributes is known as cotton grading or cotton classing.USDA classification currently consists of determinations of fiber length, length uniformity,strength, micronaire, color, preparation, leaf and extraneous matter using HVI instrument.Research and development for the technology to rapidly measure other important fibercharacteristics, such as maturity, stickiness and short fiber content, continues.Need of cotton grading Grading of cotton by the evaluation of its quality parameters is essential for the followingreasons: a. To get optimum quality at lowest price b. To decide whether cotton purchased can be processed to spin Yarn of desired specifications c. To check the quality of sample cotton with quality of delivered cotton d. To decide about correct machine settings and speeds for processing the cotton e. To estimate profitability of purchase decisionsCurrently popular instrument called HVI (High volume instrument) gives ready information onvarious quality parameters of cotton to make correct purchase decisions.It may not be possible to get all the desired qualities in one variety or one lot of cotton. In suchcase, an intelligent decision to select best combination of different varieties or lots to get desiredyarn quality is necessary to get optimum yarn quality at optimum cost. If correct evaluation ismade, profits are large. Hence, evaluation of quality is essential for optimum profit making andalso makes the customers happy with supply of correct quality of yarn.Expert classers can manage to achieve reasonable level of correct evaluation. Now, withavailability of better instruments, it is better to check qualities to make sure that desired quality 80  
  • 93. of cotton is procured. These details should give cotton buyer reasonable guidance to makecorrect evaluation of cotton quality and ensure its suitability for producing required quality ofyarn.3.13 Cotton grade standardsA cotton grade standard is a physical cotton standard that represents a specific cotton quality.Grade standards are necessary in any grading system (Manual as well as instrumental) formaintaining the integrity of cotton grading/classing. They represent the various grade levels foreach quality parameter of cotton. Physical cotton standards are a prerequisite for classing cottoneither by hand (manual) or by instrument. In both cases, they serve as reference for comparison.The most recognized and widely used grade standards are the Universal Upland GradeStandards. These standards are maintained and distributed throughout the world by the UnitedStates Department of Agriculture (USDA). In addition to the Universal Grade Standards, manycotton producing countries have developed their own grade standards in order to more closelyrepresent their own cotton. Thus, when the buyer invests in the purchase of cotton bales, he mustknow what quality of cotton he is getting; hence the cotton must be graded for its quality or itsphysical attributes.3.14 Manual gradingTraditionally cotton is graded manually and practiced in many countries. Manual grading iscarried out by expert graders also known as classers. The method is based on appearance andfeel, and is accomplished mainly through the senses of sight and touch. Manual grading includesdeterminations for such factors as color grade, leaf grade, staple length, preparation and theidentification of foreign or extraneous matter. These determinations are made by trained cottonclassers based upon visual comparisons with physical and descriptive standards. The use ofstandards helps to promote uniformity of classing. Since manual classification of cottondepends on human perceptions of sight and touch, and involves the exercise of human judgment,the grade determinations of manual classers are somewhat subjective in nature. Any two graders,even if expert, seldom grade cotton alike, and it is by no means certain that the same gradercould twice grade the same cotton in exactly the same way. The difficulty is often complicatedby incompetence and sometimes by dishonesty. 81  
  • 94. 3.15 Development of instrument cotton gradingThe increasing cotton production made it difficult to provide consistent and timely classingresults by means of manual grading. In the three decades from 1940 to 1970, variousmeasurement instruments for cotton fiber testing had been introduced to the industry. Most ofthese instruments contributed to a more systematic measurement of quality characteristics. Thedisadvantage was that each instrument measured just one cotton quality parameter at a time. Theoperating time to determine individual quality parameters as well as the operator influence on thetest results was considerably high. The USDA played an important role in replacing the humanclasser with instrument classing. Their objective was to determine all the quality characteristicsof a cotton bale in a short period of time. The instrument developed to meet this objective wasnamed as the High Volume Instrument (HVI) developed by USTER® technologies Inc. USA.Today, the entire US cotton crop is classed every year using 295 HVI instruments located in 12classing laboratories across the US cotton belt. Official cotton classing results includemeasurements for: • Fiber Length • Length Uniformity Index • Fiber Strength • Micronaire • Color GradeThe Leaf Grade is still assigned by a human classer who also determines other extraneousmatters such as bark or grass. In 1995, USDAs calibration standards for HVI measurementswere incorporated into the Universal Standards Agreement.Instrument used for Cotton gradingThere is a consensus that instrument testing of cotton is superior to traditional manual classing.Instrument test results provide information to spinners that allow more efficient use of cotton,thereby enhancing demand. The benefits of instrument over manual cotton classing are indicatedthrough an increase in the interest of these programs by cotton growing countries outside theUnited States. 82  
  • 95. The US cotton classing system is a good example of such benefits. Since 1991, all balesproduced in the United States are instrument classed. In 2005, 23.7 million cotton bales wereclassed on HVI instruments within 4 to 5 months of cotton season. The fiber quality data wasreported back to the cotton producer within 72 hours of receiving the bale samples at one of the12 classing offices operated by the USDA. Accurate instrument classing is the very foundationof this system without which these accomplishments would not be possible.3.16 Quality and pricing mechanismsIn the United States, the cotton classification system is used to determine premiums anddiscounts for the most important fiber properties measured by the HVI instrument. Pricediscounts (reductions) are automatically applied when the cotton quality is below the “base”quality, and price premiums (increases) are given when the cotton quality exceeds this “base”quality. Thus, the USDA classification results are very important to the US cotton producer sincethey determine the price of the cotton crop. Instrument classification as the objective method forevaluating the annual cotton crop has not only been adopted by the United States but also bymany other cotton producing countries, such as Australia, Brazil, Uzbekistan and Zimbabwe,Tanzania, , Egypt, India, Pakistan, China etc.3.17 International cotton marketingThe steps involved in international cotton marketing presently, are schematically shown in thefigure 3.1 Figure 3.1 International cotton marketing systemSource Cotton trading manual, Edited by Secretariat of Cotton Advisory Committee, Woodheadpublishing Ltd, Cambridge, England, 2005. 83  
  • 96. The major components of this system of process and quality controls include: • Well engineered and constructed HVI • Representative sampling • Laboratory conditioning • Sample conditioning • Calibration • Check-tests • Cotton Standards • Transportation • Certification and communication3.18 Global status of HVI instrumentThere is a consensus that instrument testing of cotton is superior to traditional manual classing.Instrument test results provide information to spinners that allow more efficient use of cotton,thereby enhancing demand. The benefits of instrument over manual cotton classing are indicatedthrough an increase in the interest of these programs by cotton growing countries outside theUnited States. Major counties using HVI based cotton grading system are given in the Table 3.6 Table 3.6 Examples of cotton classing operations using HVI instruments Classing Organization Ownership USA (USDA) Government China Government India (MAHARASTRA) Government Pakistan Government Uzbekistan Government Brazil (BOLSA) Private Brazil (SGS) Private Australia Private Egypt Government Tanzania Government Zimbabwe Private Source: Hossein Ghorashi,UsterR HVI Classic, 2004 84  
  • 97. The global estimate for the use of HVI instrument based cotton grading in 2006 was 1950. Thenumber of countries, where HVI instruments were in operation, was 76. Table 3.7 Table 3.7 Worldwide distribution of HVI for cotton grading Country Number of HVI utilized Asia, excluding China 518 China 350 USA 295 Africa 63 Indonesia 32 Thailand 26 Philippines 09 Malaysia 04 Vietnam 01 Others 662 Total 1950 R Source: Uster HVI Classic, Hossein Ghorashi, 20043.19 Advantages of HVI classificationThe advantages of HVI classification may be summarized as follow • Standard cotton classification–worldwide • Improved accuracy of cotton classification • Provides “common language” in international cotton transactions both for the seller and buyer of cotton • Verifies cotton quality and ensures the buyer that he received what he paid for • Ensures desired yarn quality • Process optimizationSince it is a fully automated operation, output is 700 –800 samples per 8-hour shift with 1operator. HVI instrument measurement reduces operator influences to a minimum. It measuresboth roller-and saw-ginned cotton according to ASTM standards. 85  
  • 98. Figure 3.2 Instrument for Cotton Grading Uster RHVI 1000 Source: UsterR HVI Application report The role of cotton classification in the textile industry 20063.20 Implementation of instrument cotton classification systemsThere are several requirements to consider when implementing an instrument-based cottonclassification system. These requirements fall into two different categories, one that theorganization responsible for the implementation should meet, and the other that the instrumentmanufacturer should meet in order to make instrument classing successful and effective.The following initiatives are recommended for the organization responsible for theimplementation of an instrument-based cotton classification system: • Establish government approval in the form of legislation or industry support in funding and promotion of this program • Arrange for funding through government, private or international sources • Establish infrastructure and procedures for logistics regarding laboratory locations, sample handling and transport, testing and data communication • Establish education programs for growers • Establish education for more accurate and timely bale information • Assure both segments of the integrity of the overall system’s operation and performance of classing instruments. 86  
  • 99. The instrument manufacturer should meet the following requirements: • Experience and history in providing accurate and reliable instruments for such programs • Comprehensive technical and service support • Innovations to reduce operator influence on test results through automation • Methods to reduce laboratory climatic requirements resulting in higher data integrity as well as reduction of overall operational costs • Effective training for use of instrument and logistics • Development of applications and data utilization across the cotton supply chain • Development of international standards, statistics and certification programs3.21 Sustenance of national HVI systemLooking at the importance of cotton grading as a tool of quality control of the raw material andsubsequent products produced, the cotton producing countries should develop a national HVIcotton classification system with large sustained funding. Besides funding, the governmentshould provide an enforceable rule-of-law, which is necessary for the classification system toreach a threshold level of trust within the global market.China’s efforts on cotton gradingChinese mills have utilized over 90 HVIs to ensure product quality in the country. In 2004, theChina Fiber Inspection Bureau (CFIB) started the evaluation of 22 HVI units in an effort toconvert from manual to instrument classing using a similar system used in the United States. Thesuccessful completion of this evaluation phase led to the official initiation of a large scaleprogram by acquisition of 62 HVI units in 2005 and 66 units in 2006. When the project iscompleted in 2010, over 350 HVIs will be in operation in over 100 classing laboratories. Thiswill make the Chinese classing program the largest in the world. This is a major accomplishmentnot only for China, but for the international cotton market as well. As the largest producer anduser of cotton in the world, the conversion to instrument classing using the HVI will furtherencourage the application of instruments. It will ensure that a common language in cotton qualitytesting is spoken in the market worldwide.3.22 Technical details of cotton grading systemLaboratory Conditions 87  
  • 100. Atmospheric conditions influence the measurements of cotton fiber properties, especiallystrength and fineness. A difference of 2% in moisture may result in one gram per tex differenceof strength. Therefore, the temperature of laboratories for testing on HVI should be maintainedat a standard 70° Fahrenheit (21° Celsius) ± 1° and relative humidity maintained at 65% ± 2%.Conditioned cotton samples will have moisture content between 6.75 and 8.25% (dry weightbasis).Brief History of development of US Cotton StandardsUSA was the first country to introduce cotton standards which are now internationally acceptedby many countries. Prior to the development of official cotton standards in USA was marketedprimarily on the basis of its variety and where it was grown. The United States Cotton FuturesAct of 1914 authorized the Department of Agriculture (USDA) to establish physical standards asa means of determining color grade, staple length, strength, and other qualities and properties.These standards were thereafter agreed upon and accepted by the leading European cottonassociations and exchanges. They were accordingly termed and referred to as the "UniversalStandards for American Cotton." When in 1923 the US Department of Agriculture (USDA)signed the Universal Cotton Standards Agreement with nine leading cotton associations in sevenmajor European countries, the US classing system entered into increasingly global use. Currentlythere are twenty-four signatory cotton associations representing twenty-one countries agreed touse only Universal Standards to arbitrate US grown American upland cotton. In addition to useby signatory countries, Universal Standards are routinely used in over twenty-five non-signatorycountries as the standard for US and non-US grown cottons.Whereas other countries started developing their own classification system, the USDA keptcommitted to continual development and improvement efforts in the area of cotton classificationstandards. Since 1991, USDA cotton classification has relied on instrumental measurements. Allinstrument measurements currently utilized in USDA are performed by High Volume Instrument(HVI) patented by Uster Technologies, a leading company in textile quality controlling. Giventhe international acceptance of HVI testing, in 1996 the Universal Cotton Standards Agreementwas amended to recognize USDA-produced HVI calibration cotton standards for strength, lengthand uniformity index. The new standards were named Universal HVI Calibration CottonStandards and continue to serve today as the most recognized standards for HVI calibration.USDA is continuing its effort toward global HVI standardization. 88  
  • 101. Cotton grading parametersUSDA classification currently consists of HVI determination of the following cotton qualityparameters. 1. Fibre length (Upper Half Mean [UHM] length in inches) 2. Length Uniformity Index (UI %) 3. Fibre strength (g/tex) 4. Micronaire (HVI micronaire) 5. Color (HVI color Rd, +b) 6. Trash (HVI trash area %)A brief description of these quality parameters will be useful.Fiber lengthFibre length is defined as the average length of the longer one-half of the fibres (upper half meanlength). Fibre length is basically an inherited/genetic character of the seed variety. However,weather, nutrient deficiencies, as well as excessive cleaning and/or drying at the gin may alsoaffect the fibre length which in turn affect yarn strength and evenness, and the efficiency of thespinning process. The length of the fibre has a great influence on quality and price.There are the following length classes for cotton species: short staple, medium to short staple,long staple and extra-long staple.According USDA’s classing methodology, length measurement of American upland cotton isperformed by HVI in accordance with standard test methods. The length of staple, measured ininches and fractions of an inch, is classed as 32nds and given different codes. e.g. code 24=24/32 in. According to the following codes, the upland cotton length conversion chart is given inTable 3.8 89  
  • 102. Table 3.8 Upland cotton length conversion chart (USDA) Inches 32nds Inches 32nds 0.79 & shorter 24 1.11 – 1.13 36 0.80 – 0.85 26 1.14 – 1.17 37 0.86 – 0.89 28 1.18 – 1.20 38 0.90 – 0.92 29 1.21 – 1.23 39 0.93 – 0.95 30 1.24 – 1.26 40 0.96 – 0.98 31 1.27 – 1.29 41 0.99 – 1.01 32 1.30 – 1.32 42 1.02 – 1.04 33 1.33 – 1.35 43 1.05 – 1.07 34 1.36 & longer 44 & longer 1.08 – 1.10 35Source: Cotton classification, USDA, AMS Cotton program, 2004Length Uniformity IndexThe Uniformity Index is defined as the ratio between the mean length and the upper half meanlength of the fibers. It is measured on the same beards of cotton that are used for measuring fibrelength and is reported as a percentage. The higher the percentage, the greater the uniformity is. Ifall the fibers of a sample were of the same length, the mean length and the upper half meanlength would be the same, and the uniformity index would be 100. As there is a natural variationof length, the Uniformity Index will be always less than 100, typically in the range of 77 to 85for Upland cottons. The range of length uniformity index is shown in the Table 3.9 Table 3.9 HVI Length Uniformity Index Degree of Uniformity Length Uniformity Index % Very high Above 85 High 83-85 Intermediate 80-82 Low 77-79 Very low Below77Source Cotton trading manual, Edited by Secretariat of Cotton Advisory Committee, Woodheadpublishing Ltd, Cambridge, England, 2005. 90  
  • 103. Fiber strengthCotton fiber strength is measured in grams per tex (g/tex). A tex unit is equal to the weight ingrams per kilometer of fibers (or yarns). The strength of fibers is reported in grams (force)required to break a bundle of cotton fibers of the size of one tex fineness.For HVI measurements, strength measurements are made on the same fiber beard (fiber bundle)that is used for measuring fiber length. The fiber beard is clamped between two sets of jaws 1/8inch apart. The force required to break the fibers is determined, the amount of fibers calculatedand the resulting strength in gram per tex reported. The descriptive terms listed in Table 3.10may be helpful in explaining the measurement results. Table 3.10 Fiber strength Descriptive Designation Strength (grams per tex) Weak 23 & below Intermediate 24 – 25 Average 26 – 28 Strong 29 – 30 Very Strong 31 & aboveSource Cotton trading manual, Edited by Secretariat of Cotton Advisory Committee, Woodheadpublishing Ltd, Cambridge, England, 2005.Micronaire (HVI micronaire)‘Micronaire’ is an arbitrary unit and lacks a precise engineering definition. An airflow instrumentis used to measure the air permeability or resistance to airflow through a plug of constant mass ofcotton fibers compressed to a fixed volume. It is measured on an arbitrary scale developed andmaintained by USDA. Micronaire measurement gives an indication of fiber fineness andmaturity as well as additional surface properties. In principle, coarse fibers would have high airpermeability, high micronaire value, while fine fibers would result in low air permeability, lowmicronaire value. The range of micronaire values for international cotton species is from about2.5 to 8, the usual range of upland cotton being from 3.5 to 5.5. Table 3.11 gives the range ofmicronaire values and cotton quality. 91  
  • 104. Table 3.11 Micronaire values and cotton quality Micronaire Above Fiber Quality Under 2.9 Very fine 3-3.9 Fine 4-4.9 Medium 5-5.9 Light coarse Above 6 CoarseSource Cotton trading manual, Edited by Secretariat of Cotton Advisory Committee, Woodheadpublishing Ltd, Cambridge, England, 2005.Micronaire values include both fineness and maturity. A low micronaire cotton can be eitherimmature or fine, while a high-micronaire cotton can be coarse or mature.ColorThe color of cotton fibers is primarily determined by conditions of temperature and/or humidity,cotton lint exposure to sunlight and cotton varieties. Action by parasites or micro-organism, aswell as technical defects in harvesting and subsequent storage and transport, may all affect thecolor of cotton.The color of cotton ranges from white to yellowish and is classed into the groups "White", "LightSpotted", "Spotted Tinged" and "Yellow Stained", in descending order of quality. There are 25official color grades of American upland cotton.Color of cotton is measured by the degree of reflectance (Rd) and yellowness (+b). Reflectanceindicates how bright or dull a sample is, and yellowness indicates the degree of color pigment. Athree-digit color code is used to indicate the color grade. In cotton classification, the color gradeof American upland cotton is determined using the HVI Color Chart (instrument measurement),and referenced to color grade standards.Trash (HVI trash area %)Trash is the non-lint material in cotton, such as leaf and bark, stems and other parts of the plant.Trash is generally included in cotton classing grade, like color, determined by classer’s eye andcompared to cotton standards.Trash is measured in two ways: first, by scanning the surface of a cotton sample with a videocamera, the percentage of the surface area occupied by trash particles can be calculated; second,the classer’s leaf grade is a visual estimate of the amount of cotton plant leaf particles in cotton. 92  
  • 105. There are seven leaf grades, designated as leaf grades 1 to 7, and all are represented by physicalstandards. In addition, there is a below-grade, which is descriptive. The range of average trashvalues for US Upland cottons is 0.12 to 1.21%. Refer Table 3.12 Table 3.12 Relationship of HVI trash measurement to classer’s leaf grade (US Upland cotton) Trash measurement (% Area) Classers Leaf grade 0.12 1 0.20 2 0.33 3 0.50 4 0.68 5 0.92 6 1.21 7Source Cotton trading manual, Edited by Secretariat of Cotton Advisory Committee, Woodheadpublishing Ltd, Cambridge, England, 2005.Fiber quality demands for future Classing and selected measurementsMoisture contentThis data product is particularly important for gin-based classing, which may increase inimportance in the future. Exact testing needs moisture control. Moisture content is the waterweight relative to the dry weight of the cotton.Short fiber contentShort fiber content of cotton is commonly defined as fibers shorter than 0.5 inch or 12.7 mm.Short fibers contribute to yarn irregularities, lower yarn strength and increased hairiness. Toproduce fine and regular cotton yarns, combing out of short fibers (along with neps andimpurities) is necessary. Short fiber content may be measured by Advance Fiber InformationSystem (AFIS) instruments.ElongationElongation may be measured on single fibers, as applied to man-made fibers, but manyindividual fibers have to be measured. Results of single fiber elongation measurement may rangefrom 4 to 25% in a sample. Instruments to measure single fiber strength and elongation areavailable, but these are too slow for commercial application (e.g. Textest Fafegraph). Elongationmay also be measured on bundles, e.g. by HVI instruments, but here precision is low. The HVImean elongation for typical cottons may range from 5 to 10%. 93  
  • 106. CIE – ColorThe common system for color measurement is CIELAB color measurement (CIE), whichmeasures L (lightness or reflectance) expressed on a ‘y’ scale, a (red–green component),expressed on an ‘x’ scale, and b (yellow–blue component), expressed on a ‘z’ scale in three-dimensional color. Numbers produced from these scales give the exact color value of cotton. CIEmeasurement instruments have applications in cotton classing in the future.Trash identification by size, shape, trash color and type (extraneous matter)Optical determination of different trash particles by image analysis systems and usage of truecolor measurement systems are used.Neps, seed coat fragmentsNeps are visible entanglements of fibers in the size range of about 1mm diameter, which cannotbe separated to single fibers. Neps may be formed directly by ginning or by mechanical openingand cleaning processes.Modern nep testing is possible by AFIS, but this is too slow for commercial HVI testing. Newsystems are being developed, and the Fiber Quality Tester (FQT) by Lintronics, for example, isable to measure neps and seed coat fragments in cotton as well as stickiness. The basic dataproduct is neps per gram. Seed coat fragments are parts of the seeds, destroyed in ginning orcleaning, with adhering lint fibers, which makes it difficult to separate seed coat fragments fromlint.StickinessStickiness on cotton lint can be caused by secretions from insects (honeydew) or natural plantsugars resulting from nectars on the cotton plant or cellulose precursors in the cotton boll. Otherreasons include occasional seed oil or other oily contaminations and in some cases fungi andbacteria. Most stickiness problems are related to insect honeydew contamination on cotton lint.Insect honeydew is most often caused by aphids, whiteflies and mealy bugs, all members of theinsect order Homoptera. These insects ingest plant juices, extract proteins and other nutrientsfrom them and then expel excess sugars in the form of honeydew. These sticky liquid dropletsfall on the lint and may cause severe stickiness problems in the yarn manufacturing process.Insect honeydew is not evenly distributed in cotton and may consist of different sugar types. Atthe field level, insect infestation may reduce yield or even destroy the complete harvest. Naturalsugars are produced by leaf and floral nectar on the cotton plant as well as sugars present on 94  
  • 107. fibers from newly opened bolls. Stickiness caused by natural sugars is evenly distributed andusually disappears on storage. Stickiness accumulating over a period of days in a mill may causesufficient build-up that even machine destruction is possible.International Textile Manufacturers Federation (ITMF) recommended measurement of stickinessis the Manual Thermo detection device, according to CEN–Standard Proposition CEN/TC 248.Automatic systems for determination of cotton fiber stickiness are being developed and tested.MaturityMaturity is the degree of fiber wall development. It may be expressed as either relative wall areaor relative wall thickness. Relative wall area is the cross-sectional area of the fiber (excludinglumen) divided by the area of a circle having the same perimeter as the fiber. Relative wallthickness is twice the average wall thickness divided by the diameter of a circle having the sameperimeter as the fiber. Maturity ratio is defined for maturity measurement and has no units.The IIC-Shirley Fineness/Maturity Tester (FMT) is the ITMF recommended test method,working on the principle of a double compression airflow instrument. Standards are ISO andASTM D3818-1979.Additional Cotton Fiber Quality ProblemsContaminationCotton contamination means foreign matter other than non-lint plant parts, such as fabric, string,organic and inorganic matter, oily substances and sticky residues on cotton, such as honeydew.Colored contamination parts can be detected by the foreign fiber detection systems of modernyarn clearers, if big enough. It is still nearly impossible to detect undyed or light yellow dyedpolypropylene and polyethylene films and fibrillous parts of such materials. Complete detectionis impossible, so contamination has to be prevented on the cotton fields and during harvesting.Storage and module averagingStorage of seed cotton can result in reduced cotton fiber quality if, for example, humidity is toohigh and bacteria or other microbes develop on the cotton. USDA research in 1972 showed thatstorage of seed cotton at certain conditions is possible without damage. A density of 12 poundsper cubic foot and less than 8 to 10% moisture content allows one month of storage withoutquality problems. This finding led to the development of module-building on the fields andtransportation of complete modules to the gin. 95  
  • 108. Storage of seed cotton is necessary, as not all the harvested cotton can be ginned at the same timeand later harvesting would result in reduced cotton quality. There is also an additional advantagein the blending of seed cotton by building up modules. Module averaging allows for more evendistribution of cotton in the bales and better processing stability, but is only possible for large-scale cotton production areas.Open stores (go-downs) or mountain stores are the most common storage systems in developingcountries with low rainfall. Stored seed cotton is in some cases used for manual blending, forexample, the Farfalla system used for long staple cotton in Egypt and in Sudan. Warehousing isexpensive but commonly used in Europe and some Central Asian cotton-producing countries.Trailers are still in use for transportation and short-term storage, if smaller areas have to beharvested.3.23 Impact of cotton ginning on qualityAfter cotton variety and growing conditions, ginning is the next important factor for cottonquality to be considered. Bad ginning conditions will reduce the fiber quality, while optimumginning conditions will maintain it.New measurement principles used during ginning, such as the ‘Intelli-Gin’ from Zellweger-UsterInc. and the ‘Gin-Wizzard’ from Schaffner Technologies can optimize quality control duringginning and adaptation of ginning machinery conditions. Quality control at the gin, sampling ofevery bale produced and online measurement of quality parameters are already the basis of HVIclassing and will underlie internet cotton trading into the future.Ginning principlesThe two ginning principles used widely in industry are saw ginning and roller ginning. Rollerginning is applied for long and extra-long staple cottons; saw ginning is used for medium stapleand short staple cottons.Saw ginningA typical two-stand ginning system of 25–32 bales per hour capacity would have the followingsteps for spindle-harvested cotton: Module feeding system, input control, tower drier, inclinedcleaner, stick machine, tower drier, inclined cleaner, impact cleaner, gin feeder, gin, lint cleaner,output control, battery condenser, bale press, sampling and wrapping. 96  
  • 109. Seed cotton is fed into the gin where a roller creates a seed cotton roll in the roll box. As this rollrotates and presses against a wall of ribs through which saws are protruding, individual fibers arepulled from the seed. The spacing between each saw and rib is such that seed cannot passthrough. The ginned seed is discharged at the bottom of the stand and the lint transported to thelint cleaners or to the bale press. Cotton fibers can withstand the forces applied during ginning,but fiber shortening is inevitable. Increased cylinder speeds can damage seed cotton, and poorlymaintained gins lead to higher short fiber contents, seed coat fragments and fiber neps. Trashmay be destroyed and pepper trash may be found in over ginned cotton.Saw-ginned cotton has a totally different appearance from roller-ginned cotton: it looks fluffy,cleaner and has a more regular surface.Roller ginningRoller gins are used for ginning long staple and extra-long staple cottons, in developing countriessuch as India and Pakistan and elsewhere. Old-type reciprocating knife roller gin stands (capacity50 to 80 pounds of lint per hour and stand) are still used for medium and short staple cottons too.Roller ginning is gentle to lint, and seed separation for long staple cottons is easier.Modern roller ginning technology uses a rotary knife roller gin stand (capacity 600 to 700pounds of lint per hour and stand). The rotary knife roller gin separates lint from seed by usingfrictional forces between a moving roller and a fixed stationary knife surface. Maintenance ofknifes, knife-to-roller distances and speed control are essential for good ginning. Over-ginningwill produce fiber knots, which can be seen in bale cotton and are difficult to process in the millor lead to fiber destruction. Roller-ginned cotton is irregular in appearance, and can becharacterized as striped and knotty.Sampling procedureSampling for cotton quality determination (HVI) and classing is done directly after baling or byshippers, forwarders, trade representatives and customers at seaports or destination locations.Commonly two samples of 200–300 grams are taken. The samples are identified by balenumbers, weight, gin and other original information printed as a ‘green card’ or similaridentification systems, including computer readable barcodes or numbering systems.Storage and transportationBales are stored in warehouses or sometimes on open spaces and transported in containers or onopen trucks to their destination. Container sea transportation has become increasingly important. 97  
  • 110. Variation from bale to bale and within balesCotton quality may vary from bale to bale in a lot and within the bales. Nevertheless the balesample is taken by the cotton trade and industry to represent statistically the quality of thatuniquely identified bale.The premise is that statistical variation is similar within a bale and within the bales of a lot ofdesignated origin, gin or production area from a specific harvest time. This is particularly true forlarge production areas, with large fields of cotton of the same quality harvested at the same time.Measurement of the quality of each bale therefore will deliver a good ‘picture’ of a certain cottonlot. If only some few bales are represented and measured, e.g. every tenth bale, the quality of theinformation is poorer.Smaller fields and greater quality differences from field to field give rise to higher variation ofquality parameters of a lot. The same would be true for re-pressed bales from different origins. Inthat case, the bale sample may differ totally from the mean of the whole bale. No HVI instrumentis able to detect such differences, and only visual appraisal of the bale itself will clarify thesituation. In these cases, arbitration by sworn classers is necessary for the trade, cottonexchanges and customers.3.24 Cotton grading systems of some countriesThere is a worldwide movement toward the increased use of instrument measurements such asthe HVI in characterizing cotton quality and in cotton classification. This is encouraged byinternational bodies such as the International Cotton Advisory Committee (ICAC) and theInternational Textile Manufacturers Federation (ITMF). The cotton grading systems developedby some countries are briefly given in this Appendix.USAUniversal Cotton Standards (USDA–Upland cotton)The Universal Cotton Standards Agreement, the US-classing system, established by the USDA,is used not only for US cotton in international trade, but also for cottons produced in Mexico andCentral America, Australia and West Africa. Under the auspices of the Agreement, currentlytwenty-four signatory cotton associations representing twenty-one countries agreed to use onlyUniversal Standards to arbitrate US grown American upland cotton. In addition to use by 98  
  • 111. signatory countries, Universal Standards are routinely used in over twenty-five non-signatorycountries as the standard for US and non-US grown cottons.The basic grades are: Good Middling Strict Middling Middling Strict Low Middling Low Middling Strict Good Ordinary Good OrdinaryChinaIn 2003, China unveiled a cotton classification reform plan aimed at transitioning from thecurrent manual classification system to an instrument-based classification system within 5 years.The reform plan includes transitioning to UD bales, two-sided bale sampling, and HVIinspection of all Chinese cotton (bale form). The China Fiber Inspection Bureau, responsible forcotton classification, has acquired 75 HVI systems in 2004 and 2005 as part of a process to shiftfrom a hand-class system, based on grades and staple length to the U.S. style HVI system.IndiaThe Indian cotton is classed in a way resembling the Egyptian system and not based on theAmerican system. The system takes into account species, variety, grade, and length. Place ofcultivation and ginning method are also mentioned. East India Cotton Association prepares andmaintains grades and staple standards. There are five principal grades: extra superfine, superfine,fine (basis), fully good, and good.PakistanThe official Pakistan Cotton Standards Institute (PCSI) gives six standards. Grade Nomenclature 1 Super 2 One 3 Two 4 Three 5 Four 6 Five 99  
  • 112. TurkeyThe following cotton grades are used in Turkey. Grade Nomenclature 1 Extra 2 Grade I 3 Grade II 4 Grade IIIAfrican countriesEgyptIn Egypt, the country with the most famous cotton worldwide, a special long staple classificationsystem, i.e. Egyptian Standards (long staple and extra-long staple cotton) was developed,incorporating seven grades. Arbitration of Egyptian cotton is restricted to the Cotton TestingGeneral Organization (CATGO) based in Alexandria, Egypt. The following grades and standardsare used: S. No Grade Abbreviation 1 Extra EX 2 Fully Good FG 3 Good G 4 Fully Good Fair FGF 5 Good Fair GF 6 Fully Fair FF 7 Fair FFrancophone AfricaFor most of the former French colonies that are now independent countries in Africa, as well asin many other African countries, cotton cultivation management, ginning, and fiber marketingare operated by one company. Cotton classing is also operated by the company’s classing office,and is based on types and grades. Some HVI lines are in operation but are not used for classingas such. Classing is performed by trained classers visually and micronaire measurements aremade by instrument. Length is estimated with the pulling method and expressed in l=32 in.Grade is visually estimated according to the color, trash, and preparation. There is a specificgrade standard system for cottons of French-speaking countries in Africa. The system is based onsix grades 0, 1, 2, 3, 4, 5, from best to worst. 100  
  • 113. SudanIn Sudan, cotton is classified twice, as seed cotton before the gin and as lint at the port ofshipment. The handpicked cotton is piled up on covers where trash and other contaminants areremoved. Grades are assigned to the piles and the graded cotton is transported to the gin. Thefield classification system is felt to be key to implementing quality control measures such astimely and early picking, which can reduce stickiness. The ginned cotton is baled and transportedto Port Sudan where the lint is reclassified and samples are taken for fiber testing.South AfricaIn South Africa prior to ginning, producers submit samples of seed cotton both handpicked andmachine picked for classification processes by using RSA Seed Cotton Standards for grade toobtain information on the expected quality of their crop. When buying seed cotton, it alsodetermines the price paid to the farmer whether buying or contract ginning; accurate pre-selection of seed cotton and homogenous blending of lots prior to ginning is viewed by ginnersas important to ensure that the lots of cotton lint are uniform in grade and quality. Ginners arecurrently extensively using HVI evaluation, and the seed cotton grading function is viewed byginners as a control measure. The Quality Control Division of Cotton, South Africa, is mainlyresponsible for the grading and classification of the South African cotton crop but this is not acompulsory service. Ginners who participate submit samples from each bale to receive a gradingcertificate that is used for the local marketing of their crop. Ginners who are responsible for theirown grading and classification are required to use the same grade and quality specifications. TheQuality Control Division uses HVI for fiber analysis. The system measures color, trash, fineness,length, strength, elongation, and length uniformity of cotton. The determination of grade is donevisually in accordance with the South African lint standards, namely Deal, Dirk, Doly, Duns, andLfy, which are comparable to U.S. lint standards good middling, strict middling, middling, strictlow middling, and low middling, respectively.TanzaniaThe Tanzania Cotton Board (TCB) has established cotton quality standards. The grade of cottonis determined in terms of color, leaf, and preparation. In reference to these factors, cotton isclassed into the groups "TANG" (the superior quality), "GANY" (the fair average quality), and"YIKA" (the inferior quality). These grades (referred to as "Physical grade standards") are allrepresented by physical samples in the custody of TCB. In addition, there are four "descriptive 101  
  • 114. grade standards" for GANY and one descriptive "under grade" ("UG"). Finally, three descriptivecolor standards (named "Slight dull mixed stain" (SDM), "Dull mixed stain" (DM), and "Stain")are introduced for lint contaminated by insects or in the field for a long time after balls opening.Cotton grade is assessed on the basis of the above standards by classers.3.25 Impact and future of HVI systemsHVI has totally revolutionized the way in which cotton is marketed and processed in the moderntextile industry. By purchasing cotton bales based on HVI measurements the textile industry isnow able to systematically store, retrieve, and form multi bale input lay downs designed foruniformity of process and product quality. In addition to product uniformity, HVI data allows forselection of appropriate raw materials at reduced costs while maximizing product quality andprofit. Despite the obvious assets of HVI, at this time, it still does not produce information ofcertain fiber properties that are critical to process optimization and control. Included among theseare true short fiber content, fineness and maturity, seed coat fragments, and sugar. It is hoped thatresearch now carried out, especially in the United States, will lead to further enhancement ofHVI systems.In December 2003, the International Cotton Advisory Committee (ICAC) formed an ExpertPanel on Commercial Standardization of Instrument Testing of Cotton (CSITC). The purpose ofthe CSITC is to promote instrument testing of cotton on a global basis. The driving force behindthis is to enhance the competitiveness of cotton with synthetic fibers in the global market place.At a meeting at Mumbai, India, in 2004, the panel set for itself several goals to encourageworldwide testing of cotton with standardized instruments. These included:1. Definition of specifications for cotton trading2. Definition of international test rules3. Implementation of test rules4. Certification of testing laboratories5. Definition and provision of calibration standards6. Specification of commercial control limits for trading7. Establishment of arbitration proceduresThe two primary agencies proposed to help implement this program are the Bremen FiberInstitute and the United States Department of Agriculture’s (USDA) Agriculture marketingservice (AMS) Cotton Program. 102  
  • 115. CHAPTER 4 ASSESSMENT OF TEXTILE SUB-SECTOR4.1 IntroductionEthiopia has a long history of traditional cottage textile sub-sector. Traditionally yarn fromcotton fiber supplied by small hold cotton farmers, is home spun using age old spinning dropwheel. The yarn is then converted into fabric using handlooms. The fabric thus produced is usedfor making traditional clothes like Netala, Gabi. Kamis, Kuti etc. This traditional cottage industry is inherited and continues to grow even today making animportant contribution to satisfying people’s requirement for textiles and providing large scaleemployment to rural and urban households.The introduction of modern integrated mills is a recent phenomenon introduced by Italiansduring the Second World War (1939). Dire Dawa Textile Mill, was the first integrated textileMill established by foreign capital in 1939. This has marked the starting point of textile sub-sector in Ethiopia. During 196o’s, 5 large-scale integrated textile enterprises were establishedmainly by private capital, achieving a spinning capacity of 175,000 spindles. The socialistregime, which reigned from 1974 to 1991, nationalized private textile and apparel firms and atthe same time established 4 more integrated textile mills to expand the sector in order to satisfythe domestic demand for regular textiles and substituting imported products. The development ofthe modern textile sub-sector has made historical contribution to satisfying domestic textile need,generating employment opportunities and promoting national economic development, in additionto establish the basic foundation for manufacturing industry in Ethiopia.The dictator economy eventually took a toll on the sector. Because of neglect, lack ofcompetition, and outdated technology, the sector could not meet international market standards.As a result, the cotton farming and textile and apparel sectors were producing well belowcapacity. Since the overthrow of the Marxist dictatorship in 1991, the current government hasbeen transforming the economy from one based on a centrally planned structure to an economybased on free market principles. 103  
  • 116. 4.2 Diversification of ownershipDue to the economic reforms undertaken by the Ethiopian government, such as privatization andthe favorable conditions for the inflow of foreign and domestic private investment into the textilesector, ownership of the industry has diversified. Various type of ownership, such as publicenterprises, privately owned enterprises, Shareholding Corporation, partnership enterprise andindividual enterprises, joint ventures etc have come into existence.Broadly classifying the enterprises into public and private, there are currently 19 public and 16private enterprises which make a total of 35 enterprises. Most public enterprises are large scale,playing leading roles in terms of employment and productivity. Most textile enterprises aresituated in densely populated large or medium cities. Out of the total 35 textile enterprises inEthiopia, 18 are in Addis Ababa, the capital city. Textile enterprises located in Amhara andSouthern (S.N.N.P) regions are 6 and 5 respectively.Thus Ethiopias textile industry embraces both medium and large public and private enterprises.Their main activities include spinning, weaving, chemical processing (Finishing), knitting andgarments The Ethiopian textile sector mainly produce 100% cotton textiles. The spinning,weaving and finishing enterprises are mainly in the public sector and are of large size employing700-800 employees per establishment. Whereas, knitting and garment units are of small size.The Table 4.1 gives an idea of the number of manufacturing units and employment generation bypublic and private enterprises.   Table 4.1 Number of textile and garment establishments and employment 2000/2001 Enterprise type units/Employment employment Public /Government 19 13888 Privately owned 07 7060 Partnership 01 Share holding 01 Individual 07 Total 35 20918Source: Report on Large and Middle Scale Manufacturing and Electricity Industries Survey,April 2002. Central Statistical Authority 104  
  • 117. The statistics of yarn spindles and looms in major textile enterprises is was as followsCotton yarn spindles 274,754Woolen yarn spindles 1144Number of looms 2962Out of 35 textile units there are 7 knitting enterprises. Some integrated textile enterprises, such asAddis Izmir Textile Factory, Kombolcha Textile Sh. Co., Akaki Textile Sh. Co., Awassa TextileSh. Co., Bahar Dar Sh Co. etc. are equipped with printing and dyeing facilities. However, thereis no upgrading of the equipment in major enterprises and parts and accessories are in shortsupply. The production capacity of major enterprises is given in the Table 4.2 Table 4.2 Production and export capacity of Major enterprises Name of Major outputs Annual production Export capacity enterprise capacity Almeda textile Yarn, poplin, 36 mil m2 per annum Terry towels: factory sheeting, 240,000 mts Finished canvas, terry clothes: 14.4 mil. mts towels Almeda knitting T-shirt, shirt, 4.8 mil. T-shirts No data available and garment trousers, single 0.72 mil. shirts factory jersey, work 0.72 mil. trousers clothes Awassa textile gray 100% 36.1 mil. m2 poplin 720,000 factory cotton, drill cretonne gray, poplin 960,000 dyed twill 720,000 quilt covers - 12 containers Kombolcha textile poplin, bed 22 mil. sq. mts. of plain fabric: fact sheet, drill gray, fabrics 1,000,000 mts twill, terry poplin: 900,000 mts. towel drill: 700,000 mts. bed sheets: 800,000 mts. Arbamich textile twill, poplin, 27.6 mil. m2 No data available fact. drill, bed sheets Adei Ababa yarn yarn, garment 1.2 mil kg yarn > 0.7 mil kgs. of yarn s.co. 720,000 overcoats 400,000 pieces of garment 700,000 m2 blankets Adei Ababa (Addis yarn, T-shirt, T-shirts: 290,000 pcs. No data available 105  
  • 118. Izmir) jeans, blanket jeans: 240,000 pcs., yarn: 747,500 kgs., blanket: 448,500 pcs Dire Dawa textile cotton yarn, 3.1 mil. kg yarn, No data available fact. acrylic, 26 mil. m2 fabrics cotton fabrics, synthetic fiber Bahir Dar textile gray fabrics, > 12 mil. m2 fabrics No data available fact. gray sheets, and 500,000 kg. yarn gray sheets, poplin Addis garment S.C shirts 420,000 shirts 420,000 shirts Edget yarn&thread yarn, sewing N.A. 150,000 tons (for fact. thread both) Edget garment graduation 132,000 pieces 132,000 pcs. PLC gown, military uniform, work gowns and uniforms, shirts, trousers Progress garment men and 264,000 pieces 264,000 pcs fact women garment trousers, skirt, shirt, overcoat, jackets Garment express sports wear and 1,800,000 pieces 1,800,000 pcs PLC material Spectrum business shorts, shirts, 250,000 pieces 250,000 pcs. group uniforms bed sheets, kids clothing G.G. fashion ladies garment, 148,800 pieces 148,800 pcs uniforms Gulele garment shirts, trousers, 372,000 shirts (basic > 160,000 shirt S.C gowns style) equivalent raincoats, 235,000 (equivalent overcoats of cloths) Sara garment ladies skirts and 15,000 skirts and same as the prod. designers and jackets scarves jackets capacity manufacturers 15,000 hand woven scarves Nazareth garment shirts, polo, T- 2.4 million shirts > 550,000 shirts S.C. shirts equivalent equivalent Akaki textile S.C. fabrics, thread, > 8.1 mil. mts. No data available 106  
  • 119. blanket, socks fabrics, 850,000 kgs. thread, 767,000 mts. blanckets and 10 mil. pair of socks Akaki garment shirts > 220,000 shirts No data available factory Ethio-Japan nylon nylon, ribbon > 5 mil. m2 nylon No data available textile S.C Ambassador suits No data available No data available garment and trade PLC Debre Birhan blankets blanket factorySource: http://www.bds-ethiopia.net/textile/index.htmlAmong the raw materials used by textile enterprises, cotton is primarily from local suppliers.Other materials, including chemical fiber, wool, dyestuffs and chemicals are imported.4.3 Distribution and marketing system of textile productsProducts such as yarn, fabric and blanket made by Ethiopian textile enterprises are usuallydistributed by private trading companies to the local market. The specialization level of thesetrading companies has been gradually improving. The export of the product is mainly handled bythe enterprises themselves.Trading of the imported textiles hold a large market share in Ethiopian market and nearly onethousand small-scale family-owned trading firms and a small number of larger tradingcompanies are engaged in the import business of textiles.4.4 Education and training systemTextile College of Bahir Dar University which is currently known as Institute of technology fortextile, garment and fashion designing (IoTex) is the only advanced institute for textile educationin Ethiopia. The institute mainly provides 4-year academic degree education and 3-yearvocational technical education.The enterprises fail to provide sufficient training in technology, skill and knowledge to workers.Moreover, rarely do enterprises collaborate or exchange with other enterprises or university.Thus there is shortage of technically qualified production and management personnel and also 107  
  • 120. the skilled workers. In the expanding scenario of textile and garment sub-sectors, there is a needto upgrade the textile education programs and the vocational training programs for skilldevelopment. In the absence of such efforts, the development of textile sector will be hampereddue to non-availability of technically qualified man-power.However, through ongoing Engineering Capacity Building Program (ecbp) in collaboration withGermany, Government has ambitious plans to expand the vocational and technical education atUniversity level to meet the demands of skilled labor and technical, marketing and managementmanpower needs of industry.4.5 Potentials for developing the textile sub-sectorAbundant Cotton Resources Domestic cotton production has already developed to a certain scale and for a long time it hasmade major contribution to satisfy the requirement of fiber by the textile sub-sector. Ethiopia hasa large area of irrigated farmland which is very suitable for planting cotton. There is also greatpotential for further expanding the cultivation and increase the current yield. There are two broadcategories of cotton in Ethiopia, i.e. Selam from the Gondar region in the Northwest of thecountry, and Awash from the Awash region in the East. There are different grades within eachcategory, but in general Awash is of a better quality. Factories usually use a mix of the differenttypes of cotton.Abundant cheap labor resourceWith a population of more than 75 million, and with cheap cost of labor, Ethiopia can providesufficient labor force with cost-competitiveness for the development of labor intensive textilesub-sector. The cost of labor in the Ethiopian textile sector is not only lower than some Asiannations with developed textile sector, such as China, India, Pakistan but also less than someAfrican countries such as Tunisia, Mauritius, Kenya, etc. Support through policy and incentivesEthiopian Government has identified textile as the key industry to the development ofindustrialization as well as the exploitation of local resources to promote export in accordancewith the policy of Agriculture Development led Industrialization (ADLI). The long-term strategyof the Ethiopian government is not only to develop the textile and garment industry and expand 108  
  • 121. shares in domestic market, but also to develop a competitive, profitable industry in the exportmarket.The Ethiopian government has been steadily pushing towards market-oriented reform by meansof developing the private sector, deregulating rigid control over the economy, liberalizing foreignexchange, lowering tariff rate, etc. Given that export promotion is of paramount importance, thegovernment has issued a series of export incentives. The Ethiopian government has created anenabling environment for the development of textile sub-sector.The Ministry of Trade and Industry has launched textiles and garment export forum to attractdomestic textile and garment exporters into the discussion of issues and future development fortextile and garment sector in order to promote the export of textiles and garments.Increased domestic demand With the increase in population at the rate of 2.7%, and as a result of the development ofeconomy and the progress in reduction of poverty as well as the improvement of people’s livingstandards, it is believed that not only the present market demand would increase, but also a newmarket demand will arise. Currently the Ethiopian per capita fiber consumption is roughly 1kg,which is far below the worlds average level of 8.7kg and Africa average level of 3.2 kg. It isestimated that domestic fiber demand will increase at an annual rate of 5% and the large andcontinuously increasing domestic market will fuel the development of the textile sector.International textile sub-sector relocation Countries with developed textile sub-sector are gradually moving spinning and weaving base tothe lower-cost developing countries. For instance, Japan and Germany have already transferredpart of the textile production to India, Pakistan, Indonesia. Turkey etc. The production of greyfabrics is done in the developing countries where fiber resources are rich, then the product istransported back for finishing in order to cut down the spinning and weaving costs and get addedprofit. Asian countries and regions which had already achieved rapid development of textileindustries, began seeking opportunities for overseas relocations in an attempt to mitigate impactsof quotas and tariffs barriers in export market as well labor cost rise in domestic market. Thepreferential terms of “AGOA”, for USA market and“Everything but arms” policy for EU markets given to African countries have attracted the shiftof trade towards African countries including Ethiopia For this reason there are very highchances of foreign investments in Ethiopian textile sector. 109  
  • 122. 4.6 Challenges for the development of textile sub-sectorIn spite of several international and national growth opportunities the development textile sub-sector is insignificant compared to some of the African countries such as Kenya, Lesotho,Tunisia, Mauritius etc. Some of the challenges faced by the Ethiopian textile sub-sector asenumerated in the report prepared by China Textile Planning Institute of Construction Beijing(2003) are given in brief here. Slow privatization of public enterprisesThe Ethiopian Government has launched the privatization of public enterprises plan since 1995-96 and 8 textile public enterprises are on the government’s list for privatization. However,because of undue large scale as well as large number of employees, obsolete equipment andlong-time poor performance of the privatization public enterprises has made slow progress.Obsolete equipmentThe majority of equipment in these public textile enterprises are in operation for several decades,and in the absence of effective maintenance over a long Period of time, many equipment havebecome obsolete. Shortage of spare parts and accessories is the general problem faced by theseenterprises. Because of the poor capacity in supplying accessories by domestic suppliers, spareparts required mostly depend on import, thus increasing the cost of maintenance and delayingthe repairs.The age of spinning equipment and spinning speeds operating at some of the public enterprisesare given in the Table 4.3 Table 4.3 Equipment age and spinning speeds Textile factory Equipment Spinning Installation year speed Akaki Textile SC Co. 1959 7000-8500 Adei Abeba yarn SC Co. 1961 8000 Awassa Textile SC Co. 1989 11430 Bahar Dar Textile SC Co. 1961 Kombolcha Textile SC Co. 1986Source: Study Report on The Development Strategy of Ethiopian Cotton/Textile/Garment Sub-sectors: China Textile Planning Institute of Construction, Beijing, China, June 2003The limited variety of products and the low quality level 110  
  • 123. In Ethiopia textile enterprises are mainly producing pure cotton products, with the low turnout ofsynthetic fiber/cotton blends. Since production is mainly for domestic market, these enterpriseshad no innovation in quality control, product development and other marketing aspects over along period of time. The products of each enterprise are similar, and the variety is small; whilethe quality is low. They have not established the product structure of multi-levels and largevariety. The product is primarily concentrated on cotton yarn, gray drills. khaki, bed sheet cloth,and cloth for Ethiopian dresses. The deficiency caused by the singular product structure can beseen in at least three aspects: First, it cannot compete with imported textiles. Second, the marketopportunity for export is low, Third, it cannot satisfy the demand of garment sub-sector ofdiverse fabric requirements. In addition, the product quality check system is in poor state.Though these enterprises possess certain lab equipment, some of these equipments have been inservice for more than 20 years. Some of the most precision instruments like Uster yarn evennesstester are out of order because of damaged parts. Furthermore, the enterprises seldom examineproduct quality under standard experimental conditions.Shrinking market shareFor developing export-oriented textile sub-sector, it is necessary to understand the demand,technology, management and development trend in international textile market, and continuouslyupgrade the product quality to provide competitive product and swiftly adjust to the changes inthe market.For a long time, the products made by Ethiopian textile enterprises have been primarily targetingat the domestic consumer market. The enterprises are poor in market awareness, cost-awarenessand competition-awareness. As a result, product quality has not been improved over a longperiod of time. In addition, product varieties have been limited. The enterprises are poor inmanagement and marketing, insufficient in the means and ability for quality control, high in theproduct cost. The Ethiopian textile products therefore cannot compete in export market in termslarge quantity, high-quality and low-price.Market concept in the formationFor a nation in an attempt to transform from an agricultural society into an industrial society andfrom a controlled economy to a market economy, old inflexible idea, or perception are majorbarriers to the fast development of economy. 111  
  • 124. Governmental administration over enterprises is unable to break away from the restriction ofplanned economy mode, with the result that the enterprises are still suffering from excessiveinterference and restriction. Implementation mechanism therefore fails to remain adequatelyhealthy, transparent, and efficient.Without market economy or competition awareness, commitment the employees are low inefficiency and weak in responsibility.The market role of public enterprises is unclearThe Board of Directors of Public Enterprises Supervision Authority holds much right to makedirect decisions in management for the public enterprises. Sometimes the regulated procedure istoo rigid and complex for the enterprise executives to make timely and effective decision. Thelack of effective incentives will make it difficult to arouse enthusiasm of production personneland workers.Social security system should to be established It is difficult for enterprises to dismiss employees, yet the low efficiency of current employeesis severely affecting the profit of the enterprises. When public enterprises are to be privatized;investors who purchase the enterprises are required not to dismiss an employee As a result, thesepublic enterprises cannot be sold out. The problem could be resolved through the introduction ofsocial security system by the Government.Poor raw and auxiliary material supplying capacitiesThe industry structure is singular with poor foundation. The domestic supplying ability for rawand auxiliary material and spare parts for textile production is weak. It is highly dependent onImport. Except cotton raw material, other raw and auxiliary materials, such as synthetic fibers,dyestuff and chemicals and accessories for textile equipment, etc. all need to be imported.Moreover; Ethiopian cotton has not been improved for a long time, so there exist the problems ofshort fiber length, lower maturity, higher content of short fibers, and higher content of sugarresidues. All these factors restrict the development of intermediate and high quality textileproduct. The very high import-dependence not only increases the production cost, but also restricts thefurther development of the textile sub-sector and greatly weakens the competitiveness. 112  
  • 125. Incomplete marketing network The textile product trade is mostly run by small-scale trading companies owned by families, inaddition to those run directly by textile enterprises. Import-export business in textiles and rawand auxiliary material is scattered. Complete and highly efficient marketing network has notyet been established. The native enterprises have fewer channels to actively get out of thecountry to get the international market information to develop export opportunity.Absence of industrial management organizationsEthiopian textile sub-sector hasn’t formed a complete industry system. There are only individualenterprises, but there is no comprehensive coordinating and supporting managementorganizations for the textile sub-sector to develop. Absence of research organizationsAt present, the domestic textile sub-sector does not have research organizations, and theenterprises have not established their own Research and Development sections, either.In Ethiopia, there is only one Textile College at Bahir Dar, whose size is rather small. Thecollege laboratory is fully equipped with advanced devices, but the utilization rate is not high andsome individual instruments have never been used. In terms of the course and syllabus,systematic teaching material and detailed educational plans are required. Between university andthe enterprises there is no effective cooperation mechanism for research and development andthe cultivation of talented persons.Backward quality inspection and standardizationQuality and Standard Authority, as the sole quality inspection and standardization Authority inthe country, is still far from establishing complete quality inspection and standardizationsystem. Also, it has done little in carrying through and implementing quality standards.Currently, textile product standard only contains part of cotton fiber, yarn standard and standardfor a few kinds of fabrics. Because of the lack of systematic quality inspection instruments andfacilities, the status of the raw material and product quality testing is poor.Shortage of management, marketing personnel and technicians Management, marketing and technical personnel are critical for the development of theenterprise. Because of the poor economic performance and low salaries, the enterprise can hardlyprevent the brain drain of the talented persons, which results in the shortage of management,marketing and technical personnel. 113  
  • 126. Poor quality of labor forceEthiopia owns ample human resource, but the level of education remains low. In 2000, theproportion of literate adults was 38%.According to investigation of textile enterprises, employees with primary school and beloweducation occupy 57% and those with senior high school and above education only occupy 6.5%.The proportion of employees with higher education level is obviously low. The enterprises lackpractical and systematic employee training programs and implementation methods. Even they doprovide employee training, it becomes formalistic, and cannot really improve employees’operational skills and production efficiency.Infrastructure to be improvedThe electric power supply is erratic. Monthly planned power failure and unexpected powerinterruption often take place. Sometimes in a month there are more than 100 unexpectedinterruptions, which greatly affect the enterprises normal production and product quality.Main transportation method is by means of road. There is urgent need of improvement of roadsto developing good road linkages. There is already a communication network of considerablescale, but the distribution is not even. In some region, it is very backward, and thecommunication cost is very high. Today, when we have entered the information era, the countrythat has no planned communication and network system will find it difficult to take part andsucceed in the international markets.4.7 Measures to be taken for the development of textile sub-sectorSome of the measures suggested in the report prepared by China Textile Planning Institute ofConstruction, Beijing (June 2003) are summarized.Enhance the competitiveness of public textile enterprisesThe state owned enterprises still have a major share in the textile sub-sector. Though, theGovernment is making sincere efforts to privatize these enterprises, there is no taker due toseveral problems related to their technology status, management and labor issues. Till thishappens the Government should not allow these enterprises to slow down in their manufacturingactivities on the contrary the Government should make efforts for the development of theseenterprises to put them on sound footing for making major contributions in the domestic and 114  
  • 127. international textile markets. Following measures on the part of the Government will help toimprove the situation. 1. Reform the management system and the operational mechanism to establish the status of market entity and competitiveness. 2. It is necessary to push forward the scientific management, strategic reshaping, and work hard to cultivate the culture large enterprise group of international competitiveness. 3. Make efforts for capital investments for technology improvements and reduction of liabilities. 4. Introduce the social guarantee scheme to reduce the redundant workforce. 5. Merger few State owned enterprises, optimize the enterprise property and form bigger enterprise to make it strong and giant enterprise as soon as possible. This will reduce the internal competition to capture larger domestic and international market share. 6. The nation should select 3-5 enterprises with better technology, equipment condition, large potential export ability and introduce management reforms and help turning them from deficit to profit. It should invest, introduce capital or raise fund by different means to concentrate limited capital to support and cultivate the advantageous enterprises, and produce the model effect. 7. Cotton textile sub-sector is an industry with many work procedures. It is believed that operation is based on the principle “30% technology and 70% of management’ indicating that technique is the foundation for the product to enter the market, and management is the guarantee for the product to sustain in the market. The enterprises should emphasize on improvement of product quality, productivity and profitability. 8. The education level of production personnel is low, which makes it difficult to execute the enterprise’s quality management, equipment utilization efficiency, safety management, etc. 9. Mobilize textile workers’ enthusiasm in valuing quality, saving raw materials, improving technique, increasing production. 10.Improve machine utilization efficiency through replacement of damaged spare parts and regular machine maintenance. 11. It is necessary to improve cost management. Establish “cost priority” management mechanism, determine the competitive price of certain product according to market. Analyze 115  
  • 128. all the sections in the production of the enterprise which cause the rise of cost. Adopt powerful measures to lower consumption, reduce wastage, increase efficiency and minimize production cost. 12. It is necessary to reform wages and introduce competition mechanism to activate employees positive attitude and link employees’ wages to productivity and quality. 13. Enhance equipment maintenance; maintain a stock of spare parts to lower equipment failure rate, to increase the production capacity. 14. Appropriate measures should be taken, through the absorption of foreign capital to replace the out dated equipments to improve the quality and productivity 16. It is necessary to study the market trends and develop products according to market trends and plan the production accordingly. Develop the new variety to products to capture new markets. Expand market share with more intensive marketing promotion. Establish clearer market identification and more stable market channels. 17. Currently equipment in Ethiopian textile sub-sector are primarily used to produce coarse yarn products made of pure cotton. To broaden the product range denim, twill and other types of products can he added to production. Moreover, the production and quality of the present bulk products, such as bed sheet cloth, pure cotton grey cloth can be further be increased. 18. By means of increasing some key equipment, Ethiopian textile sub-sector can gradually develop the products of polyester/cotton blended cloth and synthetic fabrics to continuously expand product variety and increase the comprehensive capacity. This will also be able to replace some of the imported garments which are entering into Ethiopia. 19. It is necessary to train the employees with loyalty to enterprise and dedication spirit so that the employees wi1l work with enthusiastic mental state and produce top grade products. It is necessary to enhance the employee’s full awareness of market, quality, cost, labor discipline, vocational commitment and dedication etc; so that the enterprises will be more attractive and dynamic.To set up the industrial clustersIndustrial cluster refers to the phenomenon of geographical concentration of similar enterprisesand organizations in a particular area. The formation of industrial clusters should be one of themost important strategies of any Government for industrial development. This becomes even 116  
  • 129. very important in the developing countries like Ethiopia and in the atmosphere of globalizationof trades and avenues for global open markets. The industrial cluster can generally be divided into two types: 1. The preliminary form of industrial cluster, namely the production of similar products is relatively concentrated in certain area with advantageous market condition. Other elements like labor market, affiliated industry and specialized service industry are gradually formed to achieve economic benefits. 2. The mature form of industrial cluster is the concentration of certain sectors of the industry chain (e.g. weaving, knitting, garment manufacturing, spare parts, accessories etc.) in one locality. This kind of concentration shows large enterprises being concentrated in certain area in perfect organizational manner and leads to the emergence of more enterprises of the same kind. There are several advantages of the formation of industrial cluster/s. The most important are 1. The enterprises are benefitted with lower trade cost, availability of market information and technology propagation. It also increases the pressure for each enterprise to improve its competitiveness and to develop its own special features. 2. Market transformation continuously promotes the specialized division of labor within the industrial cluster, and increases the overall efficiency of the enterprises. At the same time, the industrial clusters also promote the development of specialized market. 3. The industrial cluster effect also continuously pushes the government to increasingly adapt to the internal requirement of the industrial development in its implementation of policy, for example, providing land, industrial and commercial administration, social service and other preferential treatment. The government will also positively develop the advantageous factors such as geography, humanities, and commercial tradition to develop the economy with local feature and promote the formation of regional industry chain. 4. The industrial cluster is the choice because the backward domestic infrastructure condition greatly restricts the absorption of foreign investment and economic development. Yet the perfection of infrastructure in the specialized limited district is easier than to do so in whole nationThe construction of textile industrial zone and the industrial cluster can concentrate the limitedfunds to provide better infrastructure conditions such as water, electricity, transportation, 117  
  • 130. communication network etc. and create the environment that is advantageous in the attraction offoreign investment.Establishing a textile industry zone/parkIt is necessary to exploit the advantages of the capital city of Addis Ababa in terms of centrallocation, transportation, and logistics etc. and take measures on priority to plan and set up textileindustry zone in this region. This can be programmed together with the garment exportprocessing area in order to fully share the infrastructure and service. On the basis of continuousassessment of experiences it can gradually extend the scale of textile industrial park and increasethe number of parks to push economic development all over the country.Appropriate measures should be taken to create an ideal infrastructure condition for textileindustrial zone. It is necessary to formulate preferential policies, provide excellent services, andattract domestic and international investors to settle in the zone, so as to extend the industryscale, increase export, make profit and lay the foundation for the further establishment ofindustry concentration.The government should positively explore to establish the linking and cooperative mechanismamong enterprises both inside and outside the industrial park to turn the park into a new growthpoint for the domestic economy. The industrial zone can promote the development of the relatedauxiliary industry, logistics and outside enterprises.Promoting the development of industries relevant to textile sub-sectorThe development of textile-related industry can not only reduce the dependence on import, lowerthe textile sub-sector’s production cost, promote the common development with textile sub-sector, but also can provide plenty of employment opportunities. Relatively complete industrialstructure, strong domestic supply chain of raw and auxiliary materials, all these can greatlyattract foreign investment and also benefit the sound and all-round development of textile sub-sector.The development of textile-related industry can start with small-investment and low technicalrequirement industry, such as the establishment of textile chemical material enterprises andprovide policy, financing and technical support for the establishment and operation of theseenterprises to increase the quantity and quality of this type of auxiliary products and reduce theproduction cost, realize the substitution for imported products and increase the domestic supplyof auxiliary materials for textile sub-sector. 118  
  • 131. Establishing trade market of raw and auxiliary material as well as textilesAt present, there are a few private companies engaged in the distribution of local fabrics, yarnand blanket, and they are gradually becoming specialized. As for the raw material and auxiliarymaterial and parts and spares for textile sub-sector production except cotton, almost everythingneeds to be imported. Also these enterprises directly import from foreign suppliers, thetransaction cost is high and the cycle is long. The government should consider the situation andgive directions in this regard. Gradually establish specialized market of raw and auxiliarymaterials, textile product transaction market and market for loom and machine parts.Through the establishment of specialized market, the industry can reduce transaction, shorten thepurchase time, promote the prosperity of the market, and realize the benign interaction betweenthe textile sub-sector park and the specialized market.Meanwhile, it can establish logistics center where the specialized markets are concentrated. Themain function of the logistics center includes display, trade, conveyance, warehouse, loading andunloading, packing, circulation and processing. This will create enabling environment to attractforeign capitalForeign capital is important for developing textile sub-sectorTextile sub-sector, as the traditional labor intensive industry, is the primary industry for mostdeveloping countries while preparing economic development strategy, and the major choice forforeign investors. The development of export-oriented and open textile sub-sector can benefit theupgrading of the industrial structure and the enhancing of the competitiveness. Ethiopia at present is at the initial stage for the growth of industrial economy. Domestic savingsand investment capability are both low, so the shortage of funds has become the primary factorrestricting the development of textile sub-sector. Therefore the use of the foreign capital can bethe important source to make up the shortage of domestic funds. Foreign direct investment cannot only directly bring the capital urgently needed for construction and development, also alongwith it, new ideas, technology, management, marketing and market network can come in. Theentry of foreign investment is beneficial to improve technology and management, increase workefficiency and productivity as well as the quality of economic growth. 119  
  • 132. Priories in attracting foreign investment As a national policy for the attraction of foreign investment, the government can establishspecial measures, concentrate on a certain region to build industrial park, establish specialservice facilities to attract investment from target countries.Diaspora in the United States should also be the priority. Ethiopia’s failure to sign agreement forthe exemption of tax with the United States has become an important reason for the hindering ofinvestment from Diaspora.The relevant government departments can establish a mechanism to have the dialogue andcommunication with foreign investors and cooperators, be aware of their problems in theoperation, listen to their suggestions, support their reform and innovation activity, and adjustpolicy measures on time so that both foreign investors and the economy of Ethiopia will prosper.Their successful experience will definitely become the most effective and most convincingexample for other investors.Expanding efforts for human resource developmentThough Ethiopia has favorable factors like raw material, labor force, domestic and marketpotentials, the urgent need is to develop human resources to take advantages of favorable factors.Low cost, high quality labor force is an important factor to highlight the comparative advantageof the industry, and for attracting foreign Investment. Therefore, there is a need to establishvocational training institutes to develop skilled technical workforce.Professionals are the key for an enterprise to acquire continuous competitive advantage, and highquality talent resource is the real force for the development of the country. Trained talentedprofessionals are needed for the textile sub-sector in technology, management and marketing.Therefore, it is essential to establish multi-level and all-direction talent education system withscientific research institutes, higher education institutes and management institutes.There should be planned and gradual education program for engineering technical personnel,management personnel and marketing personnel to study and receive training in foreigncountries, to promote the leaping development of the enterprise in technical level, managementlevel and the ability to expand the markets.It is necessary to attach special importance to education. Appropriate measures should be takento enhance policy support and capital input for higher education and vocational technical 120  
  • 133. education. At the same time, it is necessary to underline efficiency in the use of funds, andmaximize the benefit of the limited funds.Comprehensively improving labor qualityIt is necessary to enhance the education and training for employees of the enterprises. Adopt thein-service training as the focal point and completely improve the quality of employees. Stresspractical results as the primary goal and eliminate formalism in employee training. It is alsonecessary to carry out various contests of skill and technical ability to improve the workingcapacity of the employee. Measures should also be taken to increase Ethiopian people’s national pride and sense ofcommitment, promote the concept of Developing economy is the mission of every EthiopianEstablishing and improving supporting organizationsEstablishing textile associationEthiopian textile sub-sector has not formed a complete industry system, and enterprises exist asindividual enterprises, with no comprehensive administration institution to manage the industryas a whole. In order to establish comprehensive industry development program and theimplementation scheme, a non-governmental organization like Textile Association should be inplace.The Textile association can play the following roles: as entrusted by the government • Propose industry development strategy: serve as the link between the government and enterprises: offer consultative service for the progress of industry • Industry development strategy study: Conduct statistical study for the production and operation condition of the whole industry, to understand the industry’s development level: follow technical development level in relation to global technology developments and disseminate the information to member enterprises through technical forum and other methods. Enhance the communication and the experience sharing among different enterprises: strengthen enterprises’ adaptability to the market changes, On behalf of the government, enhance communication with enterprises, fully publicize the significance of the nation’s strategy in developing textile sub-sector and the development of export business so that the enterprises and employees can reach consensus with the government on the development strategy. 121  
  • 134. • There are many public enterprises in textile sub-sector, so in the process of ownership transformation or privatization, inevitably a lot of conflicts between labor and Management will arise. The harmonious labor-management relation is the important factor in increasing the productivity and attracting investment. The industry sector can lead to establish the entrepreneurs’ association to represent the employers’ benefits, which will be in dialog with the labor union looking at the interests of workers. Such an arrangement will effectively regulate the relation between employers and workers, hence relieving enterprises from the complicated conflicts between labor and management, and greatly promoting the development of the economy. Labor union should also adjust its attitude, and should particularly avoid strike in pursuit of excessive salaries, etc. which can affect the productivity.Establishing quality standards Measures should be taken to accelerate to establish raw material and product quality standardsat par with international standards. These standards should be acceptable to both the enterpriseand market and also conforms to international practice. These efforts will promote the technicaladvancement of textile sub-sector. It is necessary to expand the field of textile product qualityexamination and service, establish quality testing instrument laboratory, and perfect a completequality supervision and service system. Measures should be taken to promote the productquality, and make internationally competitive quality products.Establishing textile R&D organizationsAccording to the plan, textile scientific research organizations can be established inside theTextile College of Bahir Dar University. It is necessary to increase investments into research anddevelopment, and training of personnel for the use of state of art testing equipments andanalytical techniques. This will facilitate to strengthen scientific study and technicaldevelopment capacity, and promote the core competitiveness of textile sub- sector.It is necessary to establish the cooperation mechanism between scientific research organization,textile education institutes and enterprises.Improving infrastructureIt is necessary to expand investment in energy, transportation; communication network andimprove infrastructure in industrial parks and export processing areas in order to attract foreigninvestment. It is necessary to push forward the information communication sector. The 122  
  • 135. information industry is nowadays the world’s fastest industry sector in economic development,and is also the basis for the further progress of economic globalization. The number of Internetusers reached 50 million within four years, and it represents the fourth generation of mediumwhich enjoyed the most rapid development (it took radio 28 years to reach this number ofaudience and 13 years for TV). Measures should be taken to expand the effort to invest intoinformation industry infrastructure, provide speedy and cost-effective information technologyservice for enterprises and customers. It is necessary to take information technology as thebreakthrough point to promote the nation’s economy to integrate into the trend of worldeconomy.Emphasizing environmental protection for sustainable developmentRight now Ethiopia does not have integrated planning in terms of water utilization by textilePlants. Generally the enterprises directly use the river water, lake water or self provided wellwater. In most Ethiopian textile plants there is no sewage works and the waste water from textilePlants is discharged to the surrounding region, damaging the environment. Even for textile millswith sewage works, the lack of professionals with ability and qualifications, or because of thelack of funds to purchase chemical engineering product and other facilities, they can’t effectivelyuse and maintain the waste water treatment equipment. The nation should properly plan andeffectively manage the use of water by textile enterprises and encourage the textile enterprises tosave water, and to protect water resources. Industrialization should not be attained at the cost ofpolluting environment and resources. Establish and implement wastewater discharge standardand control measures.In the long run it will be essential to adopt energy conservation measures, clean productiontechnologies, waste minimization techniques and environment prevention at source for theprevention of environment pollution. Planning could also be done to locate dyeing and finishingunits which consume large volumes of water and are major source of water pollution, atcentralized place so the effluent treatment plants can be used as a common facility on costsharing basis 123  
  • 136. 4.8 Three phase development strategyThe China report had suggested the following short term, medium term and long termdevelopment strategy and strategy to achieve the suggested targets assuming the year 2002 as abaseline. The development targets are summarized in the following Table 4.4 Table 4.4 10 year Development targetsPeriod Years Production Export Other Objectives value Value ETB USDShort term 2003- 1 Billion 12-15 Revive the existing2 years 2004 Million enterprises, make them to produce at full capacity, increase productivity, and profits. Improve investment environment to lay sound foundation for the development in the next stage.Med. term 2005- 1.7 Billion 80 Number of Employees: Push forward the foundation5 years 2008 Birr Million 60.000 of the previous stage to Spinning capacity: continuously expand the 700,000 spindles, scale of textile sub-sector Weaving capacity: production with improved 0.25 billion meter quality of textiles. Expand Printing and dyeing the variety of textiles export capacity: 0.15 billion for large profitability. meterLong term 2009- 8 Billion 0.2-0.25 Number of Employees: increase the industry’s10 years 2012 Billion 120,000 productivity, increase the Spinning capacity: 1.5- percentage of higher and 1.8 million spindles intermediate level product, Weaving capacity: 1 and develop the complete billion m industrial structure. Impart Printing and dyeing training for high-quality capacity: 0.7 billion m labor force and qualified technical, managerial and marketing personnel. market expansion to attain stronger competitiveness in international and domestic markets. Source: Study Report on The Development Strategy of Ethiopian Cotton/Textile/Garment Sub-sectors: China Textile Planning Institute of Construction, Beijing, China, June 2003 124  
  • 137. 4.9 Strategy to achieve the targetsShort term, 2 years (2003-2004)I. Increase investment into textile sub-sector revival and enhance the current enterprise’sprofitability.2. Improve enterprise management to improve quality and productivity.3. Increase the exportable product varieties4. Establish textile sub-sector association and textile and garment export promotion associationto promote the coordination within the industry, and increase the integrated competitiveness oftextile sub- sector.5. Establish total quality management system for textiles.6. conduct education and training for employees in form of overseas training, domestic technicaleducation, employees’ in-service technical training etc.7. Plan and set up special zone for textile sub-sector to greatly enhance commercial attractionsfor domestic and foreign investments.Mid-term 5 years (2005-2008)1. Further improvement in the investment environment conducive to the development of textilesub-sector.2. Introduce modern textile printing and dyeing equipment, develop relatively integratedsupporting production capacity for spinning, weaving, printing and dyeing. Measures should betaken to develop textile finishing products, machine spare parts and other textile auxiliaryindustry.3. Expand product variety according to market trends.4. Improve quality management system for textiles.5. Establish international and domestic marketing channels.6. Establish relatively complete education and training system at three levels of higher education;secondary education and enterprise employee training. Measures should be taken to increase thescientific research and development and technical innovation ability of the higher educationinstitutes.7. Establish an industrial park in Addis Ababa, where textile and garment enterprises areconcentrated, so as to set up an industrial center. 125  
  • 138. 8. Due attention should be paid to environmental protection and integrated planning for textile,printing and dyeing enterprises to discharge wastes. Policy for pollution prevention andEnvironment protection should be drafted.Long-term, 10 years (2009-2010) 1. Establish a R&D institution and promote the development of the textile auxiliary sub- sectors 2. Make preferential policies for investments in new technology and new product development with emphasis on development of technical capabilities to absorb and manage new technologies. 1/3 of technical equipment should reach the middle late 1990s international standards. 3. Improve the technological level of the textile sub-sector. so as to possess certain capabilities in independent product designing and development, computer aided designing and manufacturing etc. Efforts should be made to develop wide product range with particular features and international competitiveness. 4. Establish and improve a complete supervision and monitoring system and standardization system for textiles quality. Appropriate arrangements should be made to encourage and assist enterprises in establishing international quality certification systems, for example 1S0 9000 and ISO 14000 certification system. etc. 5. Establish textile enterprises in large and medium-sized densely populated cities. 6. Promote environmentally friendly production techniques in the whole industry.The work of this stage is to completely increase the industry’s productivity, increase thepercentage of higher and intermediate level product, and develop the complete industrialstructure with strong integrated capacity of key textile sub-sectors. By the time a team of highquality technical, managerial and marketing personnel and large number of trained/skilled laborforce will be in place. The industry will possess stronger innovative capacity and marketexpansion ability to attain stronger competitiveness in international and domestic markets. Thetextile sub- sector will become an industry with sustainable development ability. 126  
  • 139. 4.10 Present status of Ethiopian textile industryIntroductionTextile and Clothing manufacturing is an important industry in Ethiopia. The industry employsover 30,000 people in the formal sector with foreign exchange earnings from exports at USD14.6 million (2008-09).Besides, there are thousands indirectly employed in the informal, artisanal handloom weavingsector comprising small, medium and micro enterprises engaged in production of traditionalfabrics. The livelihood of thousands of cotton growers depends on the textile industry.Under the Industrial Development Strategy, high priority is accorded to the development of thetextile and garment industry. The salient features of the government policy for the developmentof the textile and garment industry are: • Export led growth • Recognizing the development of industry led by the private investor • Focus on and using agriculture led industry development strategy • Focus on labor intensive industries • Effective integration of domestic and foreign investors • Effective management role by the governmentThe government has ambitious vision for the textile and garment industry to achieve the exportearnings from textiles and garments from a level of USD 11.5 million in 2005-06 to USD 500million by 2010-11.4.11 Structure of the Ethiopian Textile IndustryThere are 16 textile mills in the organized or formal sector in Ethiopia which are presentlyactive. Majority of the textile mills were set up by the government in 1960’s, many of whichwere privatized in terms of ownership and/or management. In terms of product manufacturingactivities the 16 textile mills are shown in Table 4.5 127  
  • 140. Table 4.5 Manufacturing activities of textile mills No. of units Manufacturing activity 3 Spinning (Yarn production only) 1 Weaving (Production of grey fabric only) 3 Knitting (Production of knitted fabric 9 Composite mills having spinning, weaving Processing facilities Out of nine composite mills 2 mills have knitting activity 5 mills have garment unitsLocation of textile mills The textiles mills are located in different parts of the country as shown in Table 4.6 Table 4.6 Location of textile mills in Ethiopia Region No. of textile mills Oromia 5 Tigray 2 Amhara 2 Addis Ababa 4 Dire Dawa 1 SNNPR 2 Total 16 Source: Gherzi analysis (cited in Benchmarking of the Ethiopian Textile Industry UNIDO draftreport, April 2010)OwnershipIn terms of ownership, the government policy encourages privatization. Out of the total 16 textilemills, 8 mills are still state owned. Two textile mills (Dire Dawa textile Factory, Ethio JapanTextile SC) which had been operating on a lease basis for job work are also in the process ofbeing handed over to private owners. The government policy has attracted FDI in the sector with 128  
  • 141. the setting up of 2 textile companies from Turkey and a proposed large textile project with FDIfrom India.Installed CapacityThe installed manufacturing capacity in the Ethiopian textile industry is shown in Table 4.7The actual capacity utilization however is lower (68-70%), due to obsolete equipment which isnot in current operation coupled with erratic power supply. Table 4.7 Installed textile manufacturing capacity Technology Unit Number Spinning No. of ring spindles 231,084 (80% in No. of open end rotors operation) 5,768 Weaving No. of shuttle-less weaving machines 1,064 No. of shuttle looms 500 Knitting No. of knitting machines (circular) 95 No. of knitting machines (flat) 14 Processing Linear meters (million) per annum 78 (Capacity utilization below 50%)Source: Benchmarking of the Ethiopian Textile Industry, UNIDO Draft report, April 2010Production CapacityThe Table 4.8 shows the analysis of the production capacities at different stages of textilemanufacturing (spinning, weaving, knitting and processing) and capacity utilization. There areseveral reasons for shortfall between installed and actual capacity utilization.The annual production of processing woven fabrics is estimated at 34.7 million meters against aninstalled processing capacity of 75.4 million meters indicating a capacity utilization of 45% only.There are a lot of imbalances in the processing equipment in terms of in-process mismatch ofcapacity such as pre-treatment and finishing or the actual width of the equipment beingincompatible with the width of fabrics demanded by buyers.The situation in knitting processing was similar to that of woven fabric processing. The totalproduction was 8103 tons against a capacity of 16,134 tons. The capacity utilization inprocessing of knitted fabrics was about 49%. 129  
  • 142. Table 4.8 Production and actual capacity utilization by textile mills S.No. Mill Production Spinning Weaving Knitting Processing Kg/day m/day tons/annum Woven Knitted m/annum tons/annum 1 Arbaminch textiles 5856 10,000 (10,000)* (43,383) 2 Awassa textile 7,500 420 6535496 350 4,000 (25,768 (1050) (16,747,500 (1750) (7,000) 3 Adie Abeba 4,323 0 2100 605 (7,000) (1,130) (5543) (2019) 4 Bahir Dar Textile 5,241 15,000 4,550,000 (7,500) (23,000) (13,535,496) 5 Dire Dawa Textile 8,794 8,273 2,895,672 (12,000) (16,932) (9,652,240) 6 Kombolcha Textile 6,200 36,846 7,134,448 (10,000) (60,273) (12,369866) 7 Almeda Textile 11,000 35,289 818 9,600,000 1312 (20,000) (52,083) (2,333) (15,000,000) (2625) 8 Ayka Textile 17,000 (20,000) 9 Adama spinning 8,600 (10,000) 10 Edget Textiles 2,867 (4,000) 11 Ethio.Japan Textile 11,504 4,026,300 (21,236) (7,150,000) 12 Crown Textile 3543 (7800) 13 Africa Garments 525 936 (1050) (2340) 14 Maa Garments 1801 1750 (2275) (2450) 15 Iliyas Textile 1532 (2275) 16 Almehdi Industry 415 1750 (1481) (2450) Total 73,881 127,955 7610 34,741,916 8103 (107,500) kg/day (251,605) (15976) (75,455,101) (16134) m/day Tons/annum Linear m Tons/annum Total 25,858 192 52,113 (37625) tons/annum (377) (111,683) X1000 sqm X1000 SqmSource: Textile & Apparel Industry Development Institute/Gherzi research (Cited in Benchmarking of the Ethiopian Textile Industry Draft report April 2010)*Figures in parenthesis indicate installed capacity 130  
  • 143. Product RangeThe Ethiopian textile industry produces a wide range of products such as: • Yarn – cotton yarn, polyester blended yarn • Grey cloth • Finished fabrics – bottom weights, work wear, denim, knits and industrial fabrics, printed sheeting • Made ups – curtains, terry towels, blankets, sheeting and mosquito nets.Cotton yarn includes both ring spun (carded and combed) and open end (OE) in the count range6 to 20’s. The three stand alone spinning mills supply yarn for weaving and knitting as well ashandlooms. The composite mills also sell yarn to third parties. Yarn is supplied on cones totextile and knitting mills and in hank form to handloom weavers.Yarn and grey cloth are also exported. Finished fabrics such as dyed and printed bed sheets andmattress ticking are supplied in widths up to 214 cm (maximum) while grey cloth is exported inwidths of 160-170 cm.ExportsThe present level of export of textile and garments from Ethiopia is actually insignificant (Table4.9). Trends for the last five years show that exports have been increasing although still at a verylow growth rate as seen from the following export data.2005/06 USD 11.5 Million2007/08 USD 14.6 Million2008/09 USD 14.4 Million2009/10 USD 21.8 MillionThere was a decline to USD 14.4 million in 2008/09 however exports recovered to a record levelof USD 21.8 million in 2009/10 (Ministry of Trade and Industry estimate) 131  
  • 144. Table 4.9 Export of textiles and garments (USD million) S. No. Product types Budget year (USD million) 2005/06 2006/07 2007/08 2008/09 2009/10 1 Yarn - - - 3.7 9.4 2 Fabric 4.2 4.4 4.6 3.7 4.5 3 Apparel 6.9 8 9.7 6.6 7.3 4 Handloom 0.1 0.2 0.4 0.4 0.6 products Total 11.1 12.6 14.6 14.4 21.8 Annual growth 57.9 13.7 15.8 -1.6 51.5 Average growth 27.4Source: Benchmarking of the Ethiopian Textile Industry UNIDO Draft report April 2010)The trends reveal that cotton yarn exports are showing a remarkable increase which is due to thenew, state of the art spinning capacities being created in Ethiopia.Products exportedMajor textile and clothing products exported from Ethiopia include readymade garments, cottonyarn, grey cloth and made ups. Table 4.10 illustrates various textiles and made ups exported bythe Ethiopian textile industry. Generally, the products cater to the low end of the market asreflected in the unit value realization (UVR) and quality standards. Table 4.10 Typical products exported from Ethiopia Cotton yarn Ne 20/1 carded yarn Direct export Grey cloth 20/20 60/60 165 cms closed Direct export selvedge Finished fabric 14X14 108/56 190 cms For indirect export in the form of garments Made ups Fitted bedsheet 90x190 cms Direct export (dyed) with pillow case set, curtains Source: Benchmarking of the Ethiopian Textile Industry UNIDO Draft report April 2010) 132  
  • 145. The bulk of Ethiopian textiles are destined to EU, particularly Italy. Cotton Yarn is also exportedto China and Turkey. Ethiopia enjoys preferential market access to USA and EU in addition tothe regional market in COMESA.DistributionEthiopian textile companies rely on traders and agents for distribution to export markets. A fewtextile mills also do indirect exports by supplying intermediate products such as grey and dyedfabrics for further processing to exporters of made ups and garments.Unit value realizationThe Table 4.11 shows the prevailing (2009/10) prices at which Ethiopian textile products aresold in the international market. Table 4.11 Prices (USD) of textiles & made ups for export 100% cotton yarn Ne 20/1 ring spun 2.00/kg China Grey cloth 20x20 60/60 65” 0.75/m Italy Made ups Fitted bed sheet 2.57/Pc Italy (knitted) Source: Benchmarking of the Ethiopian Textile Industry UNIDO Draft report April 2010)Notably above prices are significantly lower than prices for like product in the local market. Forexample, the price of 20/1 carded cotton yarn prevailing in March 2010 was Ethiopian Birr 33-37/kg (net) ex-mill or USD 2.35/kg.LogisticsGoods are shipped through Djoubuti port. It takes about 30 days to main European port. The costof transportation is as follows:Inland haulage (Addis Ababa to Djbouti) ETB 15,000 (USD 1,100) for 40 feet container4.12 Factors affecting the export competiveness of Ethiopian textile industryThe UNIDO draft report on Benchmarking of the Ethiopian Textile Industry, April 2010prepared on behalf of Ministry of Trade and Industry has analyzed the various factorsresponsible for and suggested some of the measures to improve the competiveness of the textileindustry. The analysis of the UNIDO draft report is summarized in this section. 133  
  • 146. The productivity analysis given in Table 5.7 indicates that the overall efficiency of spinning,weaving, knitting and processing is much lower than the installed capacity. There are severalfactors responsible for this state of affairs. Some of the most important factors influencing theproductivity and export performance as discussed in UNIDO draft report are given below.Human resourcePrimary textile industry requires sophisticated management skills in terms of • Organizing and manufacturing. • Selection of plant & equipment, • Factory layout, • Sourcing of raw materials, • Production planning, working • Capital management and • Marketing and salesAll these require a very high degree of entrepreneurial and management skills. Due to thesophistication of equipment and quality requirements it takes nearly 3 - 5 years to bring up atextile factory to an acceptable level of operation. It requires higher level of operator andsupervisory skills.Highly sophisticated technology in primary textile manufacturing needs highly skilledsupervisory and technical/engineering staff as well as management The textile & apparel sectorwhich is highly labor intensive also faces constraints with respect to finding adequate number ofskilled workers.Increased emphasis on exports requires a different set of workers with ability to meetinternational standards of efficiency and productivity and customer serviceWith sector improvement being envisaged, there is a need for younger and skilled workforce tobe inducted into the industrySkill requirements in Textile IndustryThe textile industry in Ethiopia has certain strengths and weaknesses with respect to humanresources. Among its strengths are availability of experienced management and supervisory staffwho have been in the textile industry for several years. It was also observed that the companieshave well established systems and planning processes which is a result of the public sectorplanning and budgeting needs at the central government level. The companies operate with 134  
  • 147. budgeting and costing systems managed by skilled middle level staff. However, there is a need toimprove the ability of the existing supervisory staff to acquire skills to carry out the taskefficiently. Improvement of attitudinal skills is another area for middle managers.Adaptability to new technologyThere is a need to adapt the textile education curriculum to include latest concept, technologiesand processing techniques being used in other textile producing countries. The same applies toacquainting the practicing technicians. For instance, most companies still seem comfortable withrapier weaving technology even for products where air-jet weaving technology has been clearlyproven to have an edge. There is a lot of emphasis on reducing energy and material consumptionin modern textile manufacturing which requires familiarization and re-orientation of technicalstaff.ManagementOn the management of the textile mills, following aspects are important.PlanningThe routine planning and budgeting aspects in the mills appear to be sound and the millmanagements appear to be following the process systematically.Delegation of authorityThere seems sufficient delegation of authority to middle levels of management as reflected intheir awareness and ability to bear responsibility.Technical skillsThe technical skills at both top and middle management need to be strengthened. This aspectshould be addressed by exposing the senior managers to modern textile technology, andmanagement practices. The appreciation of IT at senior levels also needs to be improved toreduce the reliance on paperwork and improve communication.Market and customer orientationThis appears to be a weak area across mills, especially public sector mills where the seniormanagement as well as the middle managers seem to be disconnected from customer needs.There is a general lack of awareness regarding market shares and understanding of competitors.There seems to be over dependence on a few distributors or traders who are the only interfacebetween the customer and the textile mill. In most mills, it is common that staff designated as so 135  
  • 148. called “market research” officer had never been to the market and merely handles salesadministration activities involving billing and dispatch of goods to distributors.There is a need to strengthen the training processes in the mills by establishment of propertraining schools to impart theoretical and on job training to operators.Sales and marketing staff require training to conduct proper market research both in local andexport markets to understand customer requirements and disseminate information to topmanagement and production department to meet customer needs and adapt to changing markettrends.Greater exposure to customers and markets would be essential to develop an export orientationamong mill managements and enable them to make sound decisions while purchasing the rightequipment to satisfy customer needs.Commercial orientationThere is also a need to sharpen the commercial orientation of senior managers since textileindustry requires day to day decisions involving costing and pricing and weighing of variousalternatives. This would be possible by disseminating costing information to various levels,introduction of cost and profit centre concepts and value engineering.Private sector influenceIt was observed that mills which worked on lease basis or management contract showed betterperformance both in terms of improvement in productivity, capacity utilization and utilization ofgiven resources. Although there seem concerns about managing the labor relations in sucharrangements, there is no doubt that privatization is likely to enhance accountability in the sectorand improve the long term sustainability of the enterprises. There is ample evidence of this inChina which gradually and successfully privatized large state owned textile mills.Systems & processesAs stated above, due to the well established record management and reporting system prevalentin the public sector units, the planning system in the mills appear to be strong. They need to beimproved with respect to customer and market orientation.IT orientation of senior managers needs to be improved by introduction of modern systems andtools of enterprise resource planning (ERP) and integrated Material Accounting Personnel andSales (MAPS) prevalent in the Indian textile industry. 136  
  • 149. At the apex level it would be helpful to constantly retrain and improve the interaction betweenthe Textile & Apparel Industry Development Institute and the industry players throughETGAMA.Attitude to changeThis seems to be a weak area whereby it is perceived that the middle management resist change,particularly to adapt to new working methods and improved customer service delivery. Thiswould require training and retraining on changes to attitudes towards work practices. WagesAverage wages given to workers in the textile industry are ETB 650 or USD 50/month. Thewage level ranges from ETB 560 to 800/month. The comparison of wages in different countriesis given in Table 4.12 Table 4.12 Average Wages given to workers in reference textile producing countries. Country Av. monthly wages (USD/month) Turkey 600 China 175 India 125 Pakistan 80 Ethiopia 50 Source: Gherzi analysis; wages pertain to unskilled/semi-skilled workers (Cited in Benchmarking of the Ethiopian Textile Industry UNIDO Draft report April 2010) The wages in Ethiopia are much lower compared to other countries, highest being in Turkey.However it is pertinent to mention that wages are not the same thing as labor costs. Labor costsdepend to a great extent on efficiency and productivity.FinanceEthiopiaThe Ethiopian Development Bank accords high priority to the textile industry in line withgovernment policy to encourage export oriented agro-allied industries. The Bank provides termloans at a concessional rate of interest of 7.5% per annum as against a commercial lending rate of11.5% per annum, from the private banks. The loan covers not only the capital cost but also 137  
  • 150. working capital needs of the textile industry. The bank has reportedly provided funds to the tuneof ETB 3 billion (USD 250 million) to the textile industry in the last three years. (2007-2010)This has benefited existing as well as new entrants. The Bank is contemplating extension ofconcessional funds to commercial cotton farming and ginning.As per standard terms and conditions, the promoter has to contribute minimum 30% of theproject outlay while the bank covers 70%. The repayment period of the loan is 5 to 15 years witha moratorium period of 1 to 3 year. The Bank also provides technical assistance during theproject.Other countriesIn China, India and Pakistan, exporters get concessional pre and post shipment credit to meettheir working capital requirements. Moreover, there are special funds for long term capital needssuch as capacity expansion and purchase of new plant and equipment. India has set up a USD 6billion facility called Textile Up gradation Fund (TUF) under which a 4 to 5 percentage pointinterest subsidy is given to textile and garment mills willing to purchase new equipment Table 4.13 Interest rates in reference textile producing countries. Interest Commercial rate on bank term loan lending rate (% pa) (% p a China 5.5 5.5 22 22 India 7.0 12.0 22 27 Pakistan 7.5 13.0 Turkey 10.0 10 Ethiopia 7.5 * 16.5* Source: Gherzi analysis (Cited in Benchmarking of the Ethiopian Textile Industry, UNIDO Draft report April 2010)*Interest rate for local currency loan 138  
  • 151. Transport and Logistical costThe transport and logistics cost is very high for the land locked countries in sub Saharan Africa.Bulk of exports and imports of Ethiopia are shipped through Djibouti port. The inland haulage ofgoods from Addis Ababa to Djibouti port is estimated at ETB 15,000 (USD 1,100) per 40 ftcontainer. The ocean freight to main European ports is about USD 2,200 and to the US EastCoast about USD 3,000 per 40 ft container.Table 4.14 shows the cost of transportation borne by the industry: Table 4.14 Ocean Freight Costs Port of shipment Ocean freight per 40 ft container to Hamburg (USD) Shanghai 2,200 Bombay 2,500 Karachi 2,500 Source: Gherzi analysis (Cited in Benchmarking of the Ethiopian Textile Industry, UNIDO Draft report April 2010)Power & Fuel CostAfter raw material, power constitutes the second most important cost component for the textileindustry due to high power intensity of the textile machinery, especially spinning. The powercost in Ethiopia is internationally competitive at ETB 0.4086 per KwH (US Cents 3.1) howeverthe industry suffers from an acute scarcity of power.The government has recognized power as a major factor for the economic development of thecountry and is taking steps to address the demand/supply gap. Export oriented mills enjoypriority in power supply. Unlike other countries, such as India where it’s quite common for thetextile mills to generate captive power, the Ethiopian textile mills almost entirely rely on thepublic grid for their power needs. The price of fuel oil (imported) differs from mill to milldepending on their location and ranges from ETB 6.88 to 10 per liter (average ETB 8/liter)Table 4.15 shows the comparative tariffs on grid electricity and price of furnace oil used forgenerating steam for processing (dyeing and finishing). 139  
  • 152. Table 4.15 Energy costs in reference textile producing countries. Country Power tariff (USD per KwH) Grid China 0.09 India 0.10 Pakistan 0.08 Turkey 0.10 Ethiopia 0.03 Source: Gherzi analysis (Cited in Benchmarking of the Ethiopian Textile Industry, UNIDO Draft report April 2010)Technology Level The equipment used in production of textiles needs to be upgraded to keep pace with technologyand meet international quality standards at an economical costThe equipment needs re-tooling every 10 to 15 years in textiles due to the rapid technologicaladvancement in highly productive, high quality and automated equipment which gives the costadvantage. It is evident that Ethiopian textile industry suffers from a considerable disadvantagein terms of age of equipment. The production cost on old equipment is high due to higher powerconsumption; lack of automation requires more number of operators and poor quality. In case ofmany state owned mills the mill management complain of non-availability of spare parts formachines which had become outdated and in many cases even the original equipmentmanufacturers (OEM) are no longer in existenceTable 4.16 shows the age structure of the textile machinery in Ethiopia in relation to majortextile producing countries 140  
  • 153. Table 4.16 Age structure of installed machines in reference textile producing countries. Installed Installed short Installed Installed shuttle short staple spinning shuttle less less loom capacitiy staple capacitiy loom newer than 10 spinning newer than 10 capacitiy years (shipments capacitiy years during 1999-2008) (till 2007) (shipments during 1999- 2008) Ethiopia 200,000 19,824 500 - * Bangladesh 6,360,367 3,521,268 14,429 18,460 China 99,000,000 36,594,220 474,600 361,154 Turkey 6,550,000 2,847,840 40,000 21,919 15 India 34,871,953 15,389,578 16,642 22,968 15 Pakistan 10,514,000 5,552,660 27,000 11,686 Source: ITMF, Gherzi analysis (Cited in Benchmarking of the Ethiopian Textile Industry Draft report April 2010) * Excludes about 30,000 power looms and 500,000 hand looms in the non-mill sectorThe data shown in Table 4.16 reveals the low degree of modernization for the removal ofobsolescence of spinning and weaving in Ethiopia. The age of the machines is an indicator ofthe generation of technology. In China, out of the total installed spinning capacity of 99 million,about 36 million spindles are less than 10 years old or 36% of spinning capacity. In case of Indiathe percentage of modern spinning machines is 43%. However in contrast, out of the 200,000spindles installed in Ethiopia as at end of 2008, only 19,824 were less than 10 years old,indicating a high degree of obsolete spinning technology. Similar picture emerges in weavingmachines. Against this, China has 76% modern weaving machines while Pakistan has 40%.Therefore, it’s critical that the Ethiopian textile mills should be modernized to be competitive. Afew mills have already embarked on this mission.Enabling environmentFor the textile industry to function effectively; especially to improve its export competitivenessthere is need for an enabling environment that includes government policy and itsimplementation, simplification of procedures, efficient banking services and physicalinfrastructure (power, water, roads, port). 141  
  • 154. Bureaucratic EfficiencyThe general perception is that the bureaucracy in Ethiopia lacks responsiveness to the needs ofthe private sector. The Ministry of Trade & Industry in Ethiopia is actively involved in thedevelopment of the textile industry through policy initiatives and capacity building measuresimplemented through the Textile & Apparel Industry Development InstituteThere is tremendous scope for customs to improve efficiency and to curtail illegal imports oftextile and clothing to address concerns of the local industry. There is also a need to streamlineprocedures relating to import of inputs for re-exportDoing BusinessDoing Business is a benchmarking exercise which provides a quantitative measure of regulationsfor 10 regulations which include starting a business, protecting investors, hiring workers andtrade facilitation.Table 4.17 shows absolute ranking of Ethiopia among 183 countries and benchmarks toreference textile producing countries. Table 4.17 Ease of Doing Business rank Ethiopia China India Pakistan Turkey Employing workers 98 140 104 146 145 Protecting investors 119 93 41 27 57 Getting credit 127 61 30 61 71 Trading across 159 44 94 78 67 borders Overall ease of Doing 107 89 133 85 73 Business rank Source: Doing Business 2010; Gherzi Analysis (Cited in Benchmarking of the EthiopianTextile Industry, UNIDO Draft report April 2010)On the “Protecting Investors” parameter, Ethiopia ranked 119 among 183 countries whereas allother benchmark countries were ranked higher. Companies grow by raising capital-eitherthrough a bank loan or by attracting equity investors. Investors worry about getting the moneyback and look for laws that protect them. 142  
  • 155. Doing Business measures the procedural requirements including the number of necessarydocuments and the associated time and cost (excluding tariffs) for importing and exporting. Thisis known as “Trading across borders” The following picture emerges (Table 4.18) Table 4.18 Trading across borders UOM Ethiopia China India Pakistan Turkey Documents to export No. 8 7 8 9 7 Time to export Days 49 21 17 22 14 Cost to export USD 1,940 500 945 611 990 per cont. Documents to import No. 8 5 9 8 8 Time to import Days 45 24 20 18 15 Cost to import USD 2,993 545 960 680 1,063 per cont. Overall rank among 181 159 44 94 78 67 countries Source: Doing Business 2009; Gherzi analysis (Cited in Benchmarking of the Ethiopian Textile Industry, UNIDO Draft report April 2010)As seen in the Trading across borders ranking, Ethiopia did not fare too well compared to Chinawhich emerged the best among reference countries. The more time consuming the export orimport process, the less likely that a trader will be able to reach markets in a timely fashion. EvenChina was ranked no. 44 in the survey. Quite importantly, there is high cost of transportation inEthiopia. This was two to four times over China (USD 500 per container) and even much higherthan in Turkey (USD 1,063 per container)Plant utilization and efficiencySpinningThe benchmarking related to spinning parameters are shown in Table 4.19 143  
  • 156. Table 4.19 Benchmarking of spinning: International Best Practice Parameter International Ethiopia Remarks Best Practice industry Plant utilisation – spinning 98.5% 50 - 86% Plant efficiency-spinning 93.5% 50 - 94% For a mill based on coarse counts Automation in spinning Auto-doffing in Non- existent Only partially in new ring spinning in old mills mills with OE Productivity 300 100 - 178 Based on spindle speed (grams/spindle shift on Ne of 21,000 RPM with 20 carded cotton yarn) fully automatic ring frame and Indian/Pakistan cotton Quality – Uster% 15% 50% Only new mills achieve 10% No. of working days 350 - 360 302 In China, India and Pakistan mills operate 8,400 – 8,600 hours/year No. of operatives per 1000 8 12 - 36 World best norm based spindles on 200 workers for a 25,000 spindle mill producing coarse yarns; Ethiopia 12 workers /1,000 spindles is in case of best mill Source: Benchmarking of the Ethiopian Textile Industry, UNIDO Draft, UNIDO report April 2010The ring frame utilization in the Ethiopian textile industry varies from 50% to 86%. It is farbelow the international best practice of 98.5% in world class mills in Asia.The low utilization in Ethiopian spinning mills is due to obsolete machinery, lack of spare partsand deficiencies in planning process. Most Ethiopian spinning mills operate at a very lowefficiency. Out of the 9 spinning mills, 8 mills had efficiency of 75% or below; only in one newspinning mill, the efficiency recorded was 94%. 144  
  • 157. Mill working daysThe plant utilization is further reduced by number of working days due to holidays. The bestEthiopian mill operated for 301 days a year only or about 7,200 hours compared to theinternational best practice of 8,400 hours (350 days) in China, India, and Pakistan. Figure 4.1For a developing country, the mill hours worked / year are quite low compared with thereference countries. This results in a low level of utilization of the capital intensive spinning,weaving and processing equipment in Ethiopia and adds to the fixed cost. The low capacityutilization is attributed to three main factors:The working method in the Ethiopian textile industry is on 5 - 6 days basis unlike a 7 day shiftworking in the Asian countries with each worker putting in up to 60 hours a week and takingtime off by rotation and not necessarily on a fixed day such as a Sunday. Figure 4.1 Mill working hours/yearSource Gherzi/ITMF (Cited in Benchmarking of the Ethiopian Textile Industry, UNIDO Draft report April 2010)QualityThe quality of yarn is measured in terms of Uster or simply U% which is a universallyacknowledged indicator of the number of imperfections in the yarn. Lower the U%, higher theevenness in the yarn or lower the imperfections. Out of 8 spinning mills where quality data wasavailable, two did not even have the laboratory instruments to measure yarn quality. Two millsreported yarn evenness in the range of 50 - 75% Uster standards while only two new spinning 145  
  • 158. mills could boast of Uster 10% standards. This means that only the new spinning mills couldmeet international standards to sell in the world market and the others who were below 25%Uster standards could only sell for low end uses in the local market and are likely to experiencevery low weaving efficiency due to poor yarn quality. In a world class mill, the prevailing qualitystandard is Uster 15%Machine and labor productivityEthiopian spinning mills have very low machine productivity as reflected in ring spinningproductivity expressed in grams per spindle shift. This is due to poor quality of the material fromthe back process (pre-spinning) and the old ring spinning machines which run at low speedscompared to prevailing speeds of up to 17,000-21,000 on modern ring frames in world classmills. The productivity (grams per spindle shift based on a yarn count of Ne 20) ranges from 100to 180 grams vis-a-vis a global standard of 280 to 300 grams based on normal Asian cotton(India/Pakistan). Even the new spinning mill in Ethiopia with state of the art equipment aims toachieve a speed of 17,500 rpm only due to quality of cotton (high trash content and short staplecoupled with low labor skills). A 12 year old spinning mill is able to run its ring frames at 14,000to 15,000 rpm for an average yarn count of Ne 24. On combed yarn (Ne 20), the internationalproductivity norm would be 340 to 350 grams per spindle shift due to cleaner cotton.In terms of labor productivity, Ethiopian spinning mills suffer from over staffing which is mainlydue to old machinery, lack of automation and deficiencies in operator skills. Notably, it wasobserved that even in the new spinning mills in Ethiopia, the labor productivity appears to be lessthan the international standard by at least 50%. As against a modern mill with 25,000 spindlesbased on an average count of Ne 20 which employs about 200 workers (inclusive of productionand maintenance workers), the equivalent number in the Ethiopian spinning mills is 300, addingto its un-competitiveness. The norm in world best mills is gradually shifting towards fixing thelabor productivity standard at about 130 to 150 kg/worker/day. In other words, the daily outputin a spinning mill employing 200 workers should be 26 tons. In contrast even the best mill withnew equipment in Ethiopia aims to achieve a 10 ton/day output with 170 workers (60 kg perworker).WeavingThe benchmarking for weaving is shown in Table 4.20 146  
  • 159. . Table 4.20 Benchmarking of weaving: International Best Practice Parameter International Ethiopia Remarks Best Practice industry Plant utilisation – 97-98% 22%-68% weaving % Loomshed 93-94% 58-85% For a mill based on coarse efficiency % counts Productivity 450 metres NA Based on airjet speed @ 900 (Metres per loom (Air jet) 147 metres RPM and Rapier 650 RPM shift on 20x20 350 metres (Rapier) 60/60 165 cm cloth) (Rapier) Quality – Uster% <10 defects 15-20 On 4 Point quality inspection per 100 system square metres of fabric No. of working 350 300 In China, India and Pakistan days mills operate 8400-8600 hours/year No. of looms per Air jet Air jet World best norm based on 75 operator 12 NA (direct + indirect excluding m/c’s/operator Rapier weaving preparation) workers Rapier < 2 m/c’s for a 120 looms mill producing 16 m/c’s /operator standard fabrics ; operator Work load per operator Airjet – 12 m/c’s Rapier -16 m/c’s Source: Benchmarking of the Ethiopian Textile Industry, UNIDO Draft report April 2010Plant utilization & efficiencySimilar to the trends observed in spinning mills, the utilization and efficiency of machines inweaving is also low. The utilization factor in 10 weaving mills varies from mill to mill in therange of 22% (very old mills), 50% (average mill) and 90% in a new weaving shed reflecting avery low utilization in comparison to an international benchmark of 97 to 98% in a world classweaving mill in Asia.The loom shed efficiency level obtainable in Ethiopian weaving mills ranges from a low of 58%to a high of 85% in a mill with state of the art rapier looms. In view of an international norm of 147  
  • 160. 93%, the efficiency levels in existing weaving mills in Ethiopia are 35% lower and in mills withnew equipment are about 10% lower.In an average weaving mill in Ethiopia, producing a simple sheeting or drill fabric, theproduction per weaving machine (rapier machine) per day comes to 147 meters/day in contrast toan international standard of 350 meters/day. With the state of the art equipment in a newweaving mill in Ethiopia, however international production norms have been achieved. Howeverwhether this could be sustained on a consistent basis would still need to be established.Labor productivityThe labor productivity in weaving is also low as reflected in the number of workers per loomshed. In a relatively efficient mill, there were 348 operatives for an installed capacity of 213rapier looms (<2 looms/operator/shift).TechnologyAn important issue facing the Ethiopian weaving mills is the choice of weaving technology. Itwas observed that even for standard items which require mass production; the mills have beenusing rapier and projectile weaving machines as opposed to high speed air jet weaving. In thelast 50 years there have been remarkable advancements in the weaving technology with a tenfold improvement in performance. Needless to emphasize, modern shuttle-less weavingmachines require flawless yarn quality in terms of basic yarn quality(spinning and winding) andweaving preparation (warping and sizing) to perform under highly demanding conditions.A brief comparison between three major weaving technologies is shown below to serve as aguideline. (Table 4.21) Table 4.21 Technical attributes of 3 Shuttle-less weaving technologies Feature Rapier Projectile Air jet Product range Wide range of Furnishing Mass production apparel,house ,Denim, standard fabrics for hold and Industrial apparel and industrial fabrics fabrics sheeting,terry towel Weft insertion rate 1,400 m/min 1,400 m/min 2,500 m/min (metres/minute) Maximum width of 190 - 350 cm 160 - 540 cm 190 - 430 cm fabrics Source: Benchmarking of the Ethiopian Textile Industry, UNIDO Draft report April 2010 148  
  • 161. KnittingThere are 6 companies involved in knitting. Although, still small in terms of capacity (7,000tons/year-production), compared to weaving, this is a growing sub-sector as seen in some recentprojects with state of the art knitting and processing mills. Moreover, most knitters have forwardintegration in garmenting which encourages value addition.It was observed that the operating parameters in knitting mills are at least 30% belowinternational standards. A major factor for low knitting machine productivity is attributed to lowyarn quality. Knitting yarns require higher yarn evenness in terms of a uniform yarn with lowimperfections. The labor productivity in knitting mills is very low compared to international bestpractice due to a combination of low skills, poor yarn quality and machine condition. (Table4.22) Table 4.22 Benchmarking of knitting: International Best Practice Internationa Parameter l Best Ethiopia Remarks Practice industry Plant utilization – 95 30 % to 80 New plants utilize 70-80% knitting (%) capacity Machine efficiency 85 40-60 For a mill based on coarse counts (%) Productivity 180 117-180 Based on single jersey fabric 30’s (Kg/shift) yarn count 96 feeders and 24 gauge m/c Quality 40 50 - 55 As per 4 point system; Ethiopia, * (points/100 yard) best mill standard No. of working 350 300 In China, India and Pakistan mills days operate 8,400-8,600 hours/year No. of m/c’s per 4 1 - 1.5 In mills using good quality yarn operator the allocation was 3 m/c’sSource: Benchmarking of the Ethiopian Textile Industry, UNIDO Draft report April 2010 * The defects are classified as per the Four-Point System. As per the acceptance criteria,40points per 100 yards is an acceptable defect rate. Typically at least 10% of the total fabricproduced should be inspected as a representative sampleImport duty on textile and clothing exportsThe import duty on various textile related items is given in Table 4.23 149  
  • 162. Table 4.23 Import duty on textile & clothing imports Material / tariff Import Excise VAT WHT Surcharge duty duty [%] [%] [%] [%] [%] Cotton lint 10 0 15 3 10 Man made fibers 5 0 15 3 10 Yarn (cotton & MMF) 20 0 15 3 10 Fabric (grey & finished) 35 10 15 3 10 Made–ups 35 10 15 3 10 Apparels 35 10 15 3 10Source: Ethiopian customs (Cited in Benchmarking of the Ethiopian textile industry, UNIDOdraft report April 2010The above table shows the tariffs applicable to import of various textile inputs. The governmentpolicy provides a higher level of import duties to protect the local industry.The import duties and other taxes on various textiles and articles thereof in Ethiopia are twice ashigh compared to even other African countries. The fabrics, made-ups and garments attractexcise duty in addition in addition to basic import duties to bring parity between locallyproduced and imported fabrics. No distinction is made between intermediate products such asunfinished (grey) fabric and finished (dyed & printed) as both are subject to same tariffpercentage (35%).4.13 Other issues affecting the competitiveness of Ethiopian textile industryMacro levelOwnershipTextile is a highly entrepreneurial industry by nature requiring a lot of commercial managementinputs. The predominance of state owned mills is perceived as a major limitation for the futuredevelopment of the industry. Experience of major textile producing countries in Asia shows thatthis industry flourished where private entrepreneurs were encouraged through consistent 150  
  • 163. government policies. It’s in recognition of this situation that the government embarked on apolicy of privatization and has successfully attracted FDI, although it is still in a nascent stage.Therefore, the government policy of privatization of ownership and attracting FDI should besustained in the long term.InfrastructureAdequate supply of power is essential to the competitiveness of the sector. The primary textileindustry consisting of spinning, weaving, knitting and processing is highly capital intensive. TheEthiopian Electric Power Corporation (EEPCo) has embarked on new hydro power projectswhich are expected to increase the current generation capacity of 870 mW from six hydro powerplants. The current demand for power is estimated at 1,200 mW. The two hydropower projects inthe pipeline are expected to augment the existing capacity by 700 mW during 2010 – 2015. Theelectricity tariff of the EEPCo is internationally competitive at ETB 0.4086 per kWh (3 UScents) and if it could be sustained with adequate power supply, it would accelerate thedevelopment of the textile industry.Ethiopia depends on Djibouti port for its import/exports. The port has been undergoing aremarkable increase in containerized traffic which went up from 356,462 TEUs in 2008 to519,950 TEUs in 2009 (48%). The new state of the art Doraleh Terminal (DCT) has a modern,deep sea container terminal which complements the existing multipurpose Port of Djibouti(PAID).Banking According to companies engaged in exports/imports, the efficiency of the banks in dealing ininternational transactions leaves much to desire. • Time taken in processing payment is slow and inefficient • Lack of online banking • Shortage of foreign exchange • Fund scarcity for working capital needs of the sectorThere is a need to improve the ability of the banks to communicate faster with their internationalcorrespondents for negotiation of letters of credit (L/C) within 48 hours.This requires the intervention of the Ethiopian central bank to ensure adequate allocation offoreign exchange to this priority sector and on the other ask the banks to provide a minimumstandard of service delivery to be monitored on a periodic basis 151  
  • 164. BureaucracyCompanies involved in exports and import emphasized the need for improved service deliveryfrom the government officials, especially customs and excise. In several cases the exportshipment was delayed due to delay in clearing of the consignment of imported inputs. Often itturned out to be a case of minor discrepancy in documents. It is suggested that there should beclear, written down guidelines with respect to import/export procedures and various incentiveschemes. For established exporters with a track record, there should be even a green channel or“fast track” system under which goods could be cleared under bond to avoid disruption in supplychain. This is practiced in other reference countries. For example, the Advance LicensingScheme in India clearly defines the input/output norms applied to duty free import of inputs suchas raw materials and consumables against re-export.The refund of import taxes after exports have been accomplished also takes excessive time,running into months and years instead of weeks. There should be a clear scope of improvementin this area to reduce the burden on exporters and make Ethiopian exports more competitive.Fiscal policyIt is observed that the tariffs and taxes on textile goods in Ethiopia are on the higher sidecompared to international best practice. Therefore, there is a need to rationalize the structure toreduce the existing duties (import and excise) of 40 to 60% respectively on intermediate (yarn)and finished goods to no more than 20 to 30% respectively.Availability of inputs used in the textile industryThe Ethiopian textile industry faces a major disadvantage resulting from a lack of localavailability of inputs such as spare parts, dyes and chemicals and accessories used in garmentmaking. Companies are obliged to hold high level of inventory adding to the cost of production.Notably, in Asian countries, textile mills maintain just in time inventories of most inputs whichcould be easily sourced locally. It is suggested that textile mills and importers/traders of suchinputs may be allowed to keep inventory of fast moving items in a bonded warehouse fromwhere they could be cleared on demand basis upon payment of applicable duties and taxes.Cotton productionImproving the quantity and quality of cotton in Ethiopia is critical to the future development ofthe textile industry in Ethiopia. This is proved by the success achieved by the three major cottonproducing viz China, India and Pakistan. 152  
  • 165. This effort should be mainly in the hands of the government to encourage cotton farming in thecountry.Improved irrigation facilities would result in improving the productivity of cotton. As per a studycarried out by ICAC, 60% of the world cotton area is irrigated and 40% is rain fed. The averageyields are in irrigated areas are usually double the average rain fed yield. Therefore access toirrigation facilities would boost cotton production.Besides irrigation, other factors that affect cotton yields include soil quality, seed quality,pesticide and fertilizer use and crop management. In recent years Kenya witnessed doubling ofcotton production from 4,000 (2004/05) tons to 8,000 tons (2008/09) due to expansion in cottonarea and government support to the cotton sector through provision of free certified plantingseeds, and improving seed cotton prices.Therefore an active government support in Ethiopia through following measures is suggested toboost cotton production to improve the competitiveness of the cotton-textile industry: • Supply of inputs standardized quality seeds for planting • Supply of fertilizer at subsidized price • Upgrading ginneries by encouraging textile mills to go into backward integration in ginning with modern equipment • Encouraging organic cotton production in the country • Improved irrigation facilities in the long runMicro levelTechnology up-gradationAll modernization and expansion plans should be undertaken after a detailed market survey andevaluation of alternative technologies. It was observed that in the past, the investment plansundertaken by the mills were based on internal situation and did not fully take into account thecustomer. Also, there were process imbalances whereby the capacity in subsequent process wasenhanced, neglecting the back processes. There is a need to give priority to improvement ofcotton quality and ginning and modernization in spinning to enable the knitting and weavingperformance to be improved. 153  
  • 166. ManagementIn case of public sector mills, there is a need to overhaul the mill management. This should beachieved by a combination of retraining and induction of new blood. The focus should be onfollowing key aspects of mill management.Commercial orientationTo sharpen management skills about supply chain management, especially planning for constantavailability of inputs used in production (raw materials, spare parts, dyes and chemicals).Thenegotiating abilities of mill management need to be sharpened to evaluate various alternativesFinancial accountingThere is also a need to orient the management staff about financial accounting and costingtechniques to assist in rational decision making. This is being practiced in a few mills and needsto be spread to others.Market orientation needs to be considerably improved to understand customer needs,conducting market research, strengthening the distribution channels, quality assurance andimproving customer service. While on the one hand marketing staff need to be impartedfunctional skills, there is an equal need to orient the senior management and technical stafftowards customer requirementsTechnical skillsTechnical skills of the managers should be improved by exposing them to new technology,international best practices in process control and machine maintenance. The maintenancepractices need to be improved to lay more emphasis on preventive maintenance of machinesrather than typical `fire-fighting’ approachHuman resource developmentThere should be a combined effort of the government, industry and technical educationinstitutions. Although ultimately, it is at the firm level that the training efforts should be mosteffective, the government should seek the assistance of international development institutionsand governments of reference countries for human capacity building. In Turkey, the governmentshares the employee cost where the mills relocate to less developed regions in order to encouragethem to invest in setting up in house training schools. It was observed that in Ethiopia, only a fewmills have an internal training school for training of operators and supervisors. To encourage themills to investment in this area, it is suggested the government should share 80% of the cost of 154  
  • 167. the training school. To overcome the resistance faced from the unions, it’s also suggested toexpose opinion leaders to international best practices by arranging mill visits in referencecountriesInformation technologyUse of information technology in the mills was found to be at a minimum. In most casescomputers are used for data entry and not for effective control of resources. There is a need toprovide IT tools to managers, especially those interacting with customersCommunicationThe ability to communicate effectively with the outside world would be a key to the success ofbuilding export oriented enterprises. This should be achieved by improving the professional andbusiness communication skills, especially the proficiency to communicate in English language.It is hoped that the analysis given in the UNIDO report will be useful to the Ministry of Tradeand Industry to chalk out the future path of the development and to place the cotton, textile andgarment sub-sectors on sound footing to make it competitive in the global market. 4.14 Foreign Direct investment in Textile and garment industryTextile and Clothing Sector, as a light manufacturing industry provides a common area fordiversification of the economy and employment generation in Ethiopia. Therefore, priority hasbeen accorded to the development of the long term strategy for the Ethiopian Textile andClothing Sector, along with other priority agro-allied and export oriented sectors such as leather,horticulture and floriculture. The government has also developed the Textile and Apparel SectorMaster Plan and drawn up a Strategic Action Plan which specifically targets an ambitious levelof exports of USD 500 million by year 2010/11. In order to achieve this target the Ministry ofTrade and Industry is envisaging to attract Foreign Direct Investment worth USD 1.6 billion toinstall around 48 spinning units, 31 for grey textile production, 22 in knitted sector, 53 in woven,31 in garments and 6 for finished textiles making a total of 191 units.As a result of above initiatives, the government has embarked on specific measures to developthe textile and clothing sector. These measures include attracting FDI, modernization andprivatization of state owned enterprises and encouraging cotton cultivation. A comprehensivecapacity building program was launched with the support of NITRA (Northern India Textile 155  
  • 168. Research Association), a textile research institute under the Ministry of Textiles, Government ofIndia.Ethiopia has adopted an import tariff regime which provides a harmonized platform for thedevelopment of the sector. This is an important element especially considering the contentiousnature of tariff policies on textile and clothing articles in some other regions in Sub SaharanAfrica.4.15 Incentives for foreign direct investmentThe Ethiopian Development Bank provides financial support to export led industrialization. Theobjective is to boost economic diversification. The incentives offered to new projects include:Long term funds at concessional rate of interestThe Bank provides long term funds to new textile projects at an interest rate of 7.5% per annumas against a commercial lending rate of 11 - 12% charged by commercial banks.The term loan is payable over a period of 5 to 15 years which includes a moratorium period of upto 3 years.As per terms and conditions, the promoters of the project are required to contribute a minimumof 30% of the project outlay while the bank covers the remaining 70%.The bank has provided about ETB 3 billion to the textile and apparel sector in the last threeyears. Five major projects funded by the bank in recent years are: • Ayka (Turkish FDI ; Spinning to garments) • Kebir (backward integration into spinning) • Else Textiles (Turkish FDI; Spinning to garments) • Adama (Spinning) • Dire Dawa (leasing to third party)In addition to term loans, the bank also provides technical support for the successful execution ofthe project. At the time of initial term lending, working capital requirements of the project arealso covered. Notably, the bank is also encouraging lending for development of large scalecommercial farming and ginning of cotton to help bridge the gap between demand and supply ofcotton to the textile industry.Other incentives (fiscal and non-fiscal) 156  
  • 169. • Duty free import of plant and machinery and spare parts can be made under different schemes such as duty drawback scheme, voucher scheme and bonded warehouse, subject to use of imported raw materials and inputs used for export production • Tax holiday for a period of 2 to 7 years depending on location • Capacity building support by way of meeting the cost of hiring expatatriate personnel and towards cost of training (local and overseas) • Allotment of land at a nominal cost • Other incentives are negotiable on the merits of the case4.16 Preferential Market Access and other Incentive ProgramsFollowing are some important but general export promotion measures and bilateral arrangementsrelevant to Ethiopia. Although these are not exclusive to the textile industry as they relate tointernational trade.Africa Growth Opportunity Act (AGOA)AGOA provides duty free preferential market access to textile and clothing, among several otherproducts, for export to the US. The Act is valid till 2015. In 2008 the export of textiles andapparels from Sub-Sahara African countries (SSA) to USA was USD 1.1 billion.The most important clause which attracts the export of apparels under AGOA is the third countryfabric provision under which Least developed countries (LDC) could use fabric from a third (nonSSA) country to be used in apparels assembled for export under AGOA. This provision whichhad been extended from time to time is due to expire in September 2012. Notably majority ofgarments exported to USA benefit from this provision and could be threatened by its expiration.However, this also provides an opportunity to Ethiopia which has already developed backwardlinkages between the local textile and apparel industry and therefore will be able to meet the newrules of origin which would require regional sourcing of fabrics used in assembly of apparelsexported under AGOA. In addition to direct exports of apparels made from local yarn andfabrics, Ethiopia could also export intermediate products such as yarn and fabrics to other subSaharan countries which export to the U S A.Notably, under AGOA IV law effective since 2006 export of all textile articles (fibre, yarn,fabrics, made ups) is also eligible for duty free market access to the U S A 157  
  • 170. Everything but Arms (EBA) of the European UnionThe European Union (EU) has given preferential trade policy to the Lesser DevelopedBeneficiary Countries (LDBC) including Ethiopia. Accordingly, Ethiopia is a beneficiary ofEverything but Arms initiative of the EU in which all Ethiopian export products except arms canenter the EU market free of duty and without quota restrictions.Common Market for Eastern and Southern Africa (COMESA)Ethiopia is a member of the Common Market for Eastern and Southern Africa (COMESA)agreement consisting of 23 countries in Eastern and Southern Africa with a population ofapproximately 353 million. Exports and imports with member countries enjoy preferential tariffrates.Bilateral AgreementEthiopia has signed bilateral trade agreements with 16 nations such as Russia, Turkey, Yemenetc which provide legal framework for enjoying most-favored-nation treatment and removingtariff barriers. According to Generalized System of Preference (GSP), most of the products madein Ethiopia enjoy tariff treatment in the United States, Canada, Switzerland, Norway, Sweden,Finland, Austria, Japan and the majority of EU member nations.4.17 Foreign investmentsThe government of Ethiopia invites companies to participate in the investment of Ethiopiastextile industry by establishing cooperation with Ethiopian public enterprises. Foreign companiescan participate in this industry in the following three forms: a) Joint venture b) Wholesale ownership c) Contract ManagementThe enterprises, which are in the process of privatization by the government, have their ownfuture prospects and plans. Some wish to expand their enterprises by installing new and modernmachinery and equipment, some would like to develop their human resources through training.Some would like to study new market opportunities, etc. Therefore, there are various ways ofcooperation with these enterprises, which may require discussion with specific enterprises. TheEthiopian public enterprises engaged in the textile and garment sectors who are seeking foreignpartners are listed below: 158  
  • 171. 1. Ethio-Japanese Synthetic Textile Share Co. 2. Bahir Dar Textile Share Co. 3. Kombolcha Textile Share Co. 4. Awassa Textile Factory 5. Arbaminch Textile Share Co. 6. Dire Dawa Textile Factory 7. Debre Berhan Blanket Factory 8. Ediget Yarn and Sewing Thread Factory 9. Adei Ababa Yarn Share Co. 10. Akaki Garment Share Co. 11. Addis Garment Share Co 12. Gulele Garment FactoryThe Ethiopian Government has sent high power trade delegations to various countries to attractFDI. It is envisaged that from the target countries which include Turkey, India and China will beattracted to put giant textile projects in Ethiopia. These efforts of the Government have bornefruits. Some the FDI which have been materialized are summarized below: .4.18 Turkey InvestmentAYKA Textile Industry relocates to EthiopiaOne of the largest Turkish textile factories, AYKA Textile Industry and Trade Incorporated,founded in 1988 in Istanbul, has relocating its garment factory to Ethiopia. It is hoping thatcheap labor force as well as nominal taxes and investment incentives the federal government hasprovided to the textile sector would make it internationally competitive.The Turkish company has established, in June 2006, a local subsidiary company, AYKA AddisPlc, with a capital of US$ 100 million and registered under three shareholders: AYKA Textile,Yusuf Aydaniz and Gurkay Kavalikli.The company also wants to make use of the African Growth and Opportunity Act (AGOA), aquota and duty free privilege the United States has granted to African countries; Ethiopia has 159  
  • 172. been one of the countries so far unable to take advantage from it. With its 50 million dollarsexport worldwide in 2004, AYKA is the largest such an investment to have entered into EthiopiaThe company has been granted 15,000 sqm of a plot in Alem Gena, 18Km west of Addis Ababa,from the Oromia Investment Commission. The factory was inaugurated by the Minister of Tradeand Industry, and Oromia State Chief in 2008. The Minister while speaking on the occasion saidthat new textile mill demonstrates the resolve of the government in the nation’s development. Hesaid the government was working towards attracting more such foreign investments. Accordingto the directors of the company, this unit has the capacity to process 20 tons of cotton per dayand when fully operational will provide 1,000 jobs by end of 2009. The company maintained itschedule of its operation and has fully became operation on April 29, 2010 with the inaugurationat the hands of the Ethiopian Prime Minister Meles Zenawi. The AYKA was first established inIstanbul, Turkey in 1988, plans to add 5,000 employees to meet its target of exporting worth 70million USD products every year. It will focus on handling all procedures from spinning togarment production. That is an amount seven times higher than what 11 textile and 40 garmentfactories of Ethiopia had managed to have made in the year 2006/07. The introduction of afactory with the scale of AYKA will, better the possibility of competing with other textile andgarment industries elsewhere in the world.Authorities at the Ministry of Trade and Industry are convinced that the country needs companiessuch as AYKA, with an established global market presence, for it to succeed in its export plans.AYKA is most welcomed by the garment industry, though it has difficulties in receiving locallymade fabrics of high quality. Therefore, the Ayka management will have to resort to importingthe material of their choice from aboard. Thus AYKA’s moving to Ethiopia is much appreciatedby Ethiopian Government.AYKA Addis has plans to manufacture its products in two phases, according to the company’sproject proposal submitted to the Ministry. The first phase will involve spinning and knitting,while the second phase will incorporate finishing and garment production.The shifting of Ayka Textile Industry of Turkey, has made the local Government optimisticabout the possibility of other big textile companies relocate their bases in Ethiopia.The establishment of the biggest textile factory in Ethiopia, Ayka Textile Plc, a subsidiary of oneof the giant Turkish textile companies has also been attracting other prospective Turkishinvestors in Ethiopia. 160  
  • 173. The number of Turkish investors motivated to invest in Ethiopia is steadily but surely increasingover the last few years.Saygin Dima Textile FactoryA joint venture, between the Government of Ethiopia and investors from Turkey, has establisheda new textile unit with an investment of US $78.5 million in Sebeta. It is located at a distance ofabout 24 km from Addis Abba, which falls under the Oromia Special Zone. This unit will startthe manufacturing process in January, 2011.The industrial unit was named as Saygin Dima Textile Factory, after the Turkish company –Saygin and the region where the unit is located – Dima. It is going to start three units on a plot ofland that was approved by the Investment Board of Oromia Regional State. The approval alsoextended a lease right of 80 years. This was done after the farmers of the region were paid thecompensation.The company plans to set up facilities for spinning, weaving, and dyeing of textile products. ThePrivatisation and Public Enterprises Supervising Agency (PPESA) owns 60 percent and 40percent ownership is held by the Turkish company. It is mandatory to export at least 45-50percent of its output in the global market.The textile sector is expected to expand by four more textile units together with Saygin whichwill be operational in the 2010/11 fiscal year. MoTI is expecting to generate $50 million fromthe functioning of these units.Nepsa Textile PlcNepsa Textile Plc, which is a subsidiary of one of the major textile producers in Turkey, isopening a factory in Ethiopia with an initial investment capital of ETB 25 million.According to the Vice Commissioner of the Oromia Investment Commission, Mr. MohammedIbrahim, the regional government has already provided a 7.5 hectare plot of land to the companyin Sebeta, Oromia zone. The company is in talks with the officials from Oromia regardingfinalizing the deal and starting the construction of the factory in Sebeta, which is a town 25 Kmwest of Addis Ababa, where there has been a tremendous increase in the number of real estatedevelopment, steel manufacturing, textile and other investment ventures.As per its production program, Nepsa Textile Plc will supply 50 percent of products to thedomestic market and will export the other half to the world market, including Turkey.According to the industry observers, Nepsa Textile’s investments in Ethiopia will be beneficial 161  
  • 174. in terms of technology transfer and job creation as it is one of the biggest textile companies inTurkey. Nepsa Textile Company decided to invest in Ethiopia, after a trade delegation fromEthiopia visited Turkey, including officials from the ministry of foreign affairs. 4.19 Indian InvestmentThe Export Credit Guarantee Corporation (ECGC) of India rates Ethiopia second to South Africaas being suitable for investment. This will boost Indian investment in Ethiopia and the bilateraltrade relations between the two countries.ECGC is essentially an Indian export promotion organization which functions under theadministrative control of the Ministry of Commerce and Industry, Department of Commerce ofIndia.A visit by Indian Minister of State for Commerce and Power, resulting an agreement on fiveareas of bilateral relations was evidence of the surge of Indian investment in Ethiopia.An agreement has been reached between the two countries to collaborate in the financial sector,hydroelectric power generation as well as leather and textile industries. India is also considering, opening a representative office of an Indian bank in Ethiopia for whichdiscussions with the Ethiopian government have started. Major Indian companies are planningto engage with the Ethiopian Electric and Power Corporation (EEPCo) to sign a Memorandum ofUnderstanding (MoU) for the development of a hydroelectric power plant in the public-privatepartnership mode. The same Indian infrastructure company also showed interests in the farmingand textile sectors. The other two areas of co-operation, are training and capacity building in theareas of leather and apparel design. With $ 3.5 billion, India is the second-largest foreigninvestor in Ethiopia. Of this $2 billion is in the agriculture and floriculture sectors.Spintex IndiaSpintex, an Indian textile company has promised to the Ethiopian Prime Minister and theMinister of Trade and Industry that “it will export one billion dollar worth of products a year inseven years time,""The history of the Ethiopian textile industry will completely change," Director of the EthiopianTextile and Leather Development Centre, told. His conviction is based on the level of foreigndirect investment in the country 162  
  • 175. Spintex was established in India in 1972 with four companies under it specializing in differentareas of the textile industry. The group has been producing different machinery for spinning;weaving and knitting.The company will fully own the factory it will establish in Ethiopia. But ithas indicated that it would need a loan from local banks. An official at the Ministry of Trade andIndustry (MoTI) confirmed the award of loan.The Development Bank of Ethiopia, alone, has the capability to extend loans counted inhundreds of millions of Birr. Spintex has already received support in the form of 50,000 hectareof land in the Awi Zone of the Amhara Regional State for cotton farming.Spintex, has also received 50 hectare of land at the Kombolcha Industrial Zone in the AmharaRegional State to construct what could become the largest textile factory with five times thecapacity of the current leader. It will produce 100 Ton of yarn a day, which is five times thecapacity of Ayka Addis.Spintex has promised to the Prime Minister and the Minister of Trade and Industry that it willexport one billion USD worth of products a year in seven years time. The arrival of Spintex isexpected to be a major boon for the sector. 4.20 U.S. Firms Partner with Ethiopia’s Almeda Textiles in Long-term Apparel DealAlmeda Textiles, a member of the Effort Group, and two U.S. companies, Atlas ManufacturingGroup and Pinnacle Textiles, signed agreements in Addis Ababa, Ethiopia establishing longterm relationships in the apparel sector. Atlas is placing orders with Almeda worth $3million forT-shirts and other garments for delivery throughout 2010, while Pinnacle has forecast orders ofkitchen wear valued at $7 million for the same period.Atlas Manufacturing Group is a leading corporation in the U.S. uniform, corporate wear, andmedical garments market. Pinnacle is the U S leader in kitchen wear and hospitality garments.Almeda textiles is one the largest vertically integrated textile and apparel firms in Ethiopiaspinning, weaving and finishing fabrics in its own textile mill and manufacturing apparel in itsown garment factory.These partnerships will lead to initial production volumes of more than one million units of T-shirts, kitchen wear and uniforms per year, providing jobs to over 1000 Ethiopians. Thesecommercial agreements are a result of several initiatives undertaken by COMPETE’s East andCentral Africa Trade Hub (ECA Hub). COMPETE provided technical assistance to Almeda and 163  
  • 176. sponsored the company to exhibit at the MAGIC Apparel Trade Show in August 2009. TheAfrica Pavilion at MAGIC has become the premier platform for African Apparel exporters toaccess the U.S. market. There is a sustained ECA Hub support to the Ethiopian Apparel sectorunder the U.S. African Growth and Opportunity Act (AGOA) initiative.4.21 The Italian Intervention on Textile and Garment SectorSince the textile and garment sector suffers from inefficiency and low capacity utilization in alllevels, the focus for rehabilitating the sector is on restructuring, rehabilitation, modernization,and finally privatization.In line with these needs of modernization and rehabilitation, Program Aid of Italy decided toassist the Ethiopian Ministry of Trade and Industry with the rehabilitation of seven textile andgarment public industries already included in the list of public enterprises to be privatized with abudget of 9 million Euros.Currently, these textile and garment factories are either on their way to be or are alreadyprivatized. Gulele Garment was bought by a local investor while Adey Ababa and Ediget Yarnare under negotiations to be leased by Italian and local entrepreneurs with an option to buy.Akaki Garment has garnered the interest of a Turkish investor. The Privatizing Agency isevaluating the purchasing offers for Addis Garment. The Kombolcha Textile and the Ethio-Japanese Synthetic Textiles are in the pipe line to begin the privatization process.4.22 Ethiopian government may ban cotton exportsA proposal to ban raw cotton exports had been drafted by the Ethiopian Textile IndustryDevelopment Institute (ETIDI) and in all likelihood, the Ethiopian government is planning toimpose the ban. According to Assefa Aga, general manager of Ethiopian Cotton Producers,Ginners, and Exporters Association (ECPGEA), the local demand for cotton this year (2010/11)is expected to be 57,000tn while supply is expected to be 51,000tn. If there is no ban on exports,local textile producers will be forced to import cotton from other countries for a lot of foreignexchange. The reason for the ban, aside from the gap in supply and demand, is the gap in theforeign exchange earned when raw cotton is exported as opposed to when value has been addedto it. According to Endalkachew Sime, secretary-general of ETGMA, a kilogram of raw cotton 164  
  • 177. may be sold for a maximum of 2 dollars," whereas a kilogram of garments that requires 1.2kg forits production can be sold for 15 dollars."This is consistent with the draft Five-year Growth and Transformation Plan (GTP), which aimsto increase export earnings and import substitution.The textile sector has been insisting on banning exports of raw cotton for the main reason thatdomestic demand for the white gold has outstripped the supply, and if it runs short, cotton willhave to be imported by spending valuable foreign exchange.However cotton exporters are up in arms and have raised concerns over the proposal as they havealready taken orders from international clients and if the ban was to be imposed, it would meanreneging on commitments. Another viewpoint put across by experts is to add value to the rawcotton in Ethiopia itself rather than exporting cotton, as it will help generate seven times morevalue against that generated by raw cotton exports, which could help in bring in much neededforeign exchange4.23 Apparel export earnings likely to rise to $1 billionEthiopia has come out with a plan to hike the annual export earnings that it draws by exportingits garments. It intends to hike its export earnings to US $1 billion, over the period of next fiveyears. The country, intending to attend this mark of export earnings worth $1 billion, has alreadyinitialized its efforts on this front.Industry sources believe that, the nation during the concerned phase would cut down on domesticgarment consumption, which almost comes to 90 percent as on date, and would add the same tothe export volume. The revenue target that the country intends to attain over the stipulated periodof time comes to almost 40 times that of the revenue of $25 million, reaped by the country in itsimmediate preceding financial year (2009/2010). The country for the existing financial year, eyesto generate revenue of $100 million from textile exports.The sector has shown remarkable development in the last five years. The amount of foreigncurrency secured from export of garments has reached 25 million US dollars in 2009/10 fromonly four million USD some eight years ago. According to the experts, around 42 medium andhigh-scale enterprises in Ethiopia, those functional in the textile sector either directly orindirectly, participated in the export trade. 165  
  • 178. CHAPTER 5 ASSESSMENT OF GARMENT SUB-SECTOR5.1 IntroductionEthiopia has a long history for traditional garment manufacturing either in the form of individualtailoring or on Cottage industry scale. This style of manufacturing has satisfied the demands ofthe people for centuries.Garment manufacturing on industrial scale started in the 1950s with the establishment of theAddis Garment factory by an Italian followed by establishment of the public Akaki garmentfactory in 1963, the Guide garment factory in 1983 and the Nazreth garment factory in 1992.These 4 state-owned garment factories have dominated Ethiopia’s garment sub-sector for a longtime.In the 1990’s.with the development of market economy, private and foreign capitals began tomake investment in garment sub-sector, and over the period 24 private garment enterprises wereestablished with more than 10 workers, among which, 20 survived until this time. However,these factories are generally of small scales, except the Express garment factory, which wasfounded lately by an American Ethiopian. Ethiopia’s garment sub-sector, which started fromscratch, has finally got onto the road of industrialized development. According to the estimate ofthe report prepared in 2007 by Corporate Solution, Nad Nauheim, Germany, on behalf ofEngineering capacity building program (ecbp) there are presently 70-80 garment units.Development of Ethiopia’s garment sub-sector has made its contribution to satisfy the demandfor apparel on the one hand and on the other hand, it has helped to earn foreign exchange for thecountry through the exports. In the 1980’s, almost all Ethiopian garment factories made efforts toexport their products. The exports relied on government subsidies. As the government withdrewthe subsidies in 1991, the factories slowed down exports and turned to the domestic market tomake uniforms for schools, military, government agencies and private companies. Since 2001due to Government incentives and the favorable conditions in the international tradeenvironment, export by the garment sub-sector is on the rise. 166  
  • 179. 5.2 Manufacturing scale and equipment levelIn the year 2000-01 there were 24 large scale enterprises with the top 4 state owned in thedominant position. The overall manufacturing capacity was 5.2 million standard shirts per year.The sewing equipments were mostly medium speed Lockstitch Sewing Machine and over-locksewing machines of the 1970’s from Korea Japan and Italy. Sewing machines for specialpurposes were rarely seen. However, the factories which are recently established (2005 onwards)are equipped with most modern machines. Key products of Ethiopia’s garment sub—sectorinclude shirts. Knitwear, sport wear, work wear and uniforms.Fabrics and accessory supplyProducts for the domestic market are mainly uniforms, work-wear and some casual-wear madeof medium/low count pure cotton yarn. The fabrics used are mainly domestically produced.While in majority of cases the clothes for exports are made from imported fabrics. Even the useof accessories such as lining cloth, buttons and zippers depend on import, due to the absence ofdomestic manufacturing .Ownership structureThe 24 garment factories in 200-01 had the following ownership structure. Table 5.1 Ownership structure for the garment sub-sector in the year 2000/01 S No. Owenership Number 1. State owned 04 2. Partnership 01 3. Limited corporation 02 4 Co-operatives 01 5 Private companies 07 6 Individual business 09 Total 24 Source: Study Report on The Development Strategy of Ethiopian Cotton/Textile/Garment Sub-sectors: China Textile Planning Institute of Construction, Beijing, China, June 2003Regional distribution The regional distribution of these companies is given in the Table 5.2. Out of 24 factories, 19are located in the capital, Addis Ababa, accounting for 80% of the total number. 167  
  • 180. Table 5.2 Area distribution of garment companies Area Tigray Oromiya S N N P Addis Ababa Total Number 2 2 1 19 24 Proportion 8% 8% 4% 80% 100% Source: Study Report on The Development Strategy of Ethiopian Cotton/Textile/Garment Sub-sectors: China Textile Planning Institute of Construction, Beijing, China, June 2003After 2001, particularly 2005 onwards many more private units have come up with most modernequipments. The present number is estimated to 70-80.The public garment factories are mainly focusing their efforts on the manufacturing of uniformsand work clothes, with barely any sales network or agents. Many garment factories adoptfranchises to sell their products. There’s no specific quality inspection organization. Qualitystandards for export products are completely controlled by the companies themselves.Science and educational structure and relevant organizationsThere are only very few garment sub-sector oriented vocational schools in Ethiopia. The BahirDar University Textile College presently known as Institute of technology for textile, garmentand fashion design (IoTex) is the only higher education institute for textiles in Ethiopia.Recently (2009), with technical guidance from North India Textile Research Association, India,Ethiopian Government has established a national scientific research institution known asTextile and Apparel Institute (TAI) at Addis Ababa.5.3 Development opportunities for the garment sub-sectorAfrica Growth Opportunity Act (AGOA)In May 2000, the United States issued AGOA which granted preferential trade policies to 48African countries in the Sub-Sahara Region. Ethiopia was granted the membership of AGOA inAugust 2001. It is also one of the 18 countries suitable for the special preferential clauseregarding textile and garments. Till 2015, Ethiopia’s textiles and garments can be exported tothe United States free from custom duties and quota restrictions. Even more favorable conditionis that listed Ethiopia as one of the Least Developed Countries (LDC). Ethiopia is entitled toaccess the U S market with apparel processed with materials imported from any other thirdcountry duty free and quota free. 168  
  • 181. Export to EU European Union has granted the LDCs including Ethiopia with most favored trade policies.Ethiopia may export all of its products, except arms to the European Union market; duty- freeand quota-free.Bilateral AgreementsEthiopia has signed bilateral agreements with 16 countries, including Russia, Turkey andYemen. According to the Generalized System of Preference (GSP), most products made inEthiopia are eligible for the tariff-free treatment in the United States. Canada,Switzerland,Finland, Austria, Japan and most EU countries.Common Market for Eastern & Southern Africa (COMESA)Ethiopia is a member state of the Common Market for Eastern & Southern Africa, which consistsof 23 countries in eastern and southern Africa and having a total population of 300 million.Imports and exports among member states receive tariff preferences.Continued relocation of the international garment processing industry Worldwide industrial structure realignmentsSome developed industrial countries, which had established good export potentials in traditionalindustries like textile and garments, have given up the manufacturing activities in their homeland due to increase labor cost, high energy consumption and environment pollution problems.These countries in order to gain higher profits have relocated these activities from theirhomeland to other developing countries with under developed economies but having rich rawmaterial resources and cheap labor costs. The process of such Industrial structure realignment istaking place since 1960’s.In line with the relocation trend the garment sub- sector is in the steady process of inter-regionalrelocation. In 1960’s the relocation of garment sector shifted from USA and EU to Asiancountries and regions like Japan, Korea., Singapore and China’s Taiwan province, acceleratingthe development of the garment processing industries in these areas. The garment processingindustry began its second relocation from the United States and Europe toward surroundingcountries such as Turkey and Mexico, to Asian countries like Thailand, Philippines andIndonesia in the initial stage and to China, India, Pakistan and Vietnam in the later stage. 169  
  • 182. Impact of CBTPA and AGOA on the pattern of the garment sub- sectorIn May 2000, the United States issued the Trade and Development Acts, such as CaribbeanBasin Trade Partnership Act (CBTPA) and Africa Growth Opportunity Act (AGOA). These twoimportant acts provided duty-free and quota-free preferential access to the Caribbean countriesand African countries south of Sahara, for their garment exports to the United States.Since AGOA became effective in October 2000, garment sub-sector in Africa has had aprosperous development. The duty and quota free treatment has directly lowered processingcosts in the region, Plus, with the labor costs of comparative advantage. Africa has attracted theshift of garment industries.Urgent task of export product restructuringEthiopia’s export product structure has been relying on agricultural products, primarily coffee.Agricultural exports account for 90% of the entire exports, coffee exports consisting half of thevolume. This single product pattern has got Ethiopia in a Disadvantageous position in the exportbusiness. The steady falling of the coffee prices since 2000 has incurred heavy losses forEthiopia’s foreign exchange income. Establishing a diversified export product structure hasbecome an imminent task for Ethiopia.Pressure from the rapid development of other African countriesContinued relocation of the world garment sub-sector since I990s, some African countries, suchas Mauritius and Madagascar have already taken the lead to exploit the resource and policyadvantages to develop their garment industries. As a result of AGOA, a number of other Africancountries, including Botswana, Kenya and Lesotho have made considerable development in thegarment industries. The development of garment industries in other parts of Africa has posedgreat pressure on Ethiopia that it cannot afford to neglect.A brief account of the development and the status of garment industry in few African countries isgiven below to keep the record of developments.MauritiusMauritius is a small island in the eastern Indian Ocean with an area of 1,865 square kilometersand a population of 12 million. However it is the largest African garment supplier to the UnitedStates and Europe.Garment sub-sector started in the middle 1970’s in Mauritius. EU’s duty-free and quota- freepreference for its products to access the European market has helped it to attract a large number 170  
  • 183. of investors from Hong Kong, France and the Great Britain. In the 1970’s, Mauritius establisheda large-scale Export Processing Zone. Most enterprises in the zone were engaged in textile andgarment exporting business. The 1980’s witnessed a rapid development of Mauritius’ garmentsub-sector, which employed 81,000 workers. In the l990’s, Mauritius’ garment sub-sector had astable development, with an annual export value of roughly about USS 800-900 million.Currently; there are totally 239 garment factories with 72,000 workers.Madagascar:Madagascar is a small country in the Indian Ocean, with a population of 16 million. Textile andgarment exports contribute 38% to its overall export value. Textile and garment sub-sectoremploys 80% of the entire labor force in its Export Processing Zone.Madagascar Export Processing Zone was established in 1990. Currently, there are 140 garmentfactories with approximately 70,000 workers in the zone. Each year it exports about 44 milliongarments worth USD 48 millions, about half of which is exported to the United States.The increase in Madagascar’s export in the 1990’s is related to the successful overseas marketexpansion efforts of its neighbor, Mauritius. The rapid expansion of export resulted in higherlabor cost in Mauritius, forcing many companies to move to Madagascar, where labor cost wascheaper.Madagascar is one of the beneficiaries of AGOA. At the same time, it is also a member of theLDC. Many foreign investors, in order to lower their production costs have moved intoMadagascar. One of such companies from Hong Kong has employed over 10,000 workers.However, the riot in the presidential election has had some negative impact on Madagascar’stextile and garment sub-sector, severely damaging its reputation as one of the garment exportingbases. A Hong Kong company even withdrew its investment as a result of this incident.Lesotho:Lesotho is a small country with an area of 30,355 square kilometers and a population o 2.34million. Lesotho is the biggest beneficiary of AGOA. In 2001 Lesotho’s textile and garmentexport to the United States accounted for 36.4% of all of such exports by AGOA beneficiaries.Lesotho exported USD 140 million worth of garment to the United States in 2000. USD 215million in 2001 and USD 321 million in 2002; increasing by 51.3% annually. AGOA hasenabled Lesotho’s garment sub-sector a leaping growthAGOA has stimulated foreign investors, many from Taiwan, China to come to Lesotho. 171  
  • 184. With the completion of the establishment of 11 new factories and the expansion of 4 existingones, textile labor force in Lesotho doubled in 2001 increasing to 40000 from 20,000.Road of developing garment export inevitableAfrica is considered by international business agencies as “the last virgin land in the world’semerging markets”. With political situation in African states gradually getting stable,international capital began to flow into Africa. Many western countries are adjusting their Africapolicies to shift their priorities from assistance to trade and investment. A number ofinternational financial institutions have increased loans to African countries. Among the 264preferential development loans that the World Bank granted in 2000, 71 were to the countriessouth of Sahara. In the recent years, Ethiopia has signed a number of loan or transferringagreements with the World Bank, EU, Germany and many international organizations.With the world garment sub-sector moving steadily to areas of low costs, Ethiopia, prominent inits competitive cost advantage of the preferential status, is endowed with an opportunity ofdeveloping its garment sub-sector. It is no longer a dream to create job opportunities and increaseforeign exchange incomes through the development of the garment sub-sector, provided that itcould seize the opportunity to fully exploit the advantageous environment, adjust its economicpolicies and improve its investment environment, so as to attract more international and domesticcapital. In the past few years, Ethiopia has already made some achievements in exports. Thedevelopment of the garment sub-sector is an inevitable choice of the domestic demands as wellas the international situation.5.4 Ethiopia’s garment export picking up speedEthiopia has had continued increase in its garment export during the past several years,particularly with the enforcement of AGOA as seen from the Table 5.3. Table 5.3 Ethiopia’s garment export value during 1998-2001 Year Export value Annual increase USD % 1998 485462 1999 599783 23.5 2000 221893 -63 2001 801314 261 Source Ethiopia Custom Office (through Study Report on The Development Strategy of Ethiopian Cotton/Textile/Garment Sub-sectors: China Textile Planning Institute of Construction, Beijing, China, June 2003) 172  
  • 185. The rise in the garment export has direct connections with the establishment of a number ofexport oriented garment factories.5.5 Potentials for the development of garment sub-sectorInternational garment marketBecause of preferential trade policies of USA (AGOA), Caribbean Basin Trade Partnership Act(CBTPA), EU (Everything but Arms), status of least developed country (LDC), Common Marketfor Eastern and Southern Africa (COMESA) and several bilateral agreements, Ethiopia hasseveral International opportunities for the development of textile and garment sub-sectors.Domestic market demand increasing gradually With the development of Ethiopia’s economy, there will be a section of population whosedisposable income will continue to increase, creating great potential for increase in apparelconsumption. According to the general rule, with every percentage of GDP increase, there willbe a 0.8% of consumption increase and a 0.4% of apparel increase. With further expansion of theopening up and more frequent communication with the outside world, more Ethiopians,particularly those in rural areas, which accounts for 85% of the total population will graduallywear the more convenient, more durable, more comfortable and more beautiful modern clothes.It is predicted that Ethiopia’s domestic garment market will maintain an annual growth rate ofover 10%.Larger potential for manufacturing capacitiesImproving equipment utilizationMost of the garment factories in Ethiopia are not able to operate at full capacity, with actualmanufacturing capacity below 50% of their installed capacity, or half of their capacity unutilized.Garment output could be easily doubled simply through equipment maintenance, operationmanagement and equipment utilization improvement.Improving productivityProductivity in the 4 state owned garment factories is very low, with an average output of 5 to 7shirts per worker per shift. In some of the other developing countries the average output couldreach 20 to 25 shirts per worker under the same condition. With appropriate productivityimproving measures, the output could be at least doubled. 173  
  • 186. 5.6 Challenges for the development of the garment sub- sectorMarket economy concept still to be formedEthiopia began to enter free market economy concept from the year 1992-93. However, theestablishment of market economy order is a gradual process. Under the free market economystructure, the Government needs to transfer its role, trying to get its hands out of frequentexecutive interference. On the other hand, companies need to be fully aware of their status asmarket players. They should accept and participate in competitions, with the company’s profitsas their primary operational objective.Market roles of state owned enterprises unclearSince the beginning of the restructuring initiatives, the Ethiopian government, wishing to get itshands out of direct interference into the operation of the public enterprises, has commissionedthe decision making rights over public enterprises’ operations to the board of directors under thePublic Enterprises Supervision Authority. Under this arrangement, the public enterprisecompanies do not have the full operational decision making authority to participate into marketcompetitions. They do not have enough autonomy over the appointment of managers, industrialstructure realignment, layoff of employees and payment criteria. Managers of public enterprisesusually have multiple objectives, among which the maximization of profits is not necessarily thetop priority. Managers’ incomes are not directly linked with the performance of their companies.Absence of a social security system for the workersThe labor structure in the Ethiopian public enterprises has a serious problem that many workersare getting too old for the highly intense garment processing industry. In the internationalgarment sub-sector, the average age of workers is usually below 25. Due to the characteristics ofpublic enterprises and restrictions of the Labor Law, the companies cannot dismiss their workerseasily. However, the low productivity of existing workers has severely affected the profit of thecompanies. The primary reason is that, without a social security system, companies have toassume the responsibilities of the society, seriously impairing their capability of participatingmarket competitions.Geographical disadvantagesEthiopia is a land locked country without its own seaport. This directly restricts the developmentof its export and trade. Currently, its imports and exports are mainly carried out through theseaport in the neighboring Djibouti. High port taxes and complicated Custom procedures have 174  
  • 187. increased the cost of trade. According to the Addis Ababa based shipping company, the customapplication fee for a 20 feet container is as high as 3250 Birr while only about 200 Birrequivalent in China.Ethiopia’s garment sub-sector is mainly located in Addis Ababa, 800 km from the nearestseaport. As most of the fabrics for garment processing depend on import, the transportation feesin the import and export process directly increases the production Cost. What’s more, the enroute time also increases the cost indirectly. For production time sensitive industries such as thegarment processing industry, this impact is especially significant. According to Ethiopiancompanies, it takes 165 days for a garment export contract order to be delivered. In India andChina, it takes only 60 days to accomplish the same procedure. Therefore, geographical factorsdo have direct Impact on the garment factories for their ability to accept orders.Import restrictionsAlthough there’s no restriction on the quantity of import, nor does import license pose as a realtrade barrier, it doesn’t mean that the country does not have any import restrictions. Customclearance delay is a prominent problem in Ethiopia. Custom clearance is extremely slow. Inaddition, custom evaluation is very random. Sometimes even if the exporting custom has alreadyconfirmed the invoice value, the Ethiopian custom officials would re-evaluate the imported cargousing their own methods at will. In addition the Ethiopian Government requests that all import becarried out through officially registered importers or agents; who must be Ethiopian citizen.Import delay also shows in the Pre-shipment Inspection Scheme Establishment Proclamation(PSISEP). To ensure the imported cargo matches the foreign exchange paid, to facilitate thepassing of the PSISEP, to create a highly efficient and healthy trade environment and to preventthe state revenue from being stolen by under proclaimed invoice values, the PSISEP requests thatall imports valued at or above US$ 2,000 (FOB) be inspected prior to shipment. Theseprocedures add additional trade cost indirectly.High surchargeCustom brokers, shipping companies, insurance companies and other channels are still at amonopolized stage. The lack of competition has resulted in high service prices and increasedtrade costs. 175  
  • 188. Insufficient quality of human resourcesAlthough Ethiopia’s labor force possessed absolute advantage in terms of numbers, it does notmean that there’s sufficient amount of qualified labor resource. Today most of the Ethiopiansstill have only very low educational level. Since 2000, the country has trained some peoplethrough vocational education. However, as number is very limited and, on the other hand, thesestudents graduating from the vocational school usually do not have on job experience, therewould still be a serious shortage of skilled technical manpower.Shortage of technicians, managers and marketing personnelGarment factories in Ethiopia are seriously short of technicians, managers and marketingpersonnel. There’s scarcely any designer, pattern maker and marketing professionals who hasreceived real high education. Even though Bahir Dar University Textile institute has already setup the garment subject and received its first batch of students in 2002, it takes 4 years for thesestudents to graduate. On the other hand, it is by far insufficient with only one educationalinstitution that too with the shortage of qualified teachers and practical experience will greatlyimpair the actual effect of the education.Absence of professional managersTo expand export, the garment sub-sector has to face intensified competition from all over theworld, it is therefore essential to build up production capacities and modern marketing andmanagement strategies have to be adopted. It is very hard for Ethiopia’s garment sub-sector toparticipate into international competitions without a team of qualified professional managers.These professional managers generally have the following features: prominent work ethic andprofessional maturity, professional advantage capable of integrating their education, training andprofessional experience into their work. Without professional managers there could be no realdevelopment of corporate governance.Shortage of fabric and accessory manufacturing capacityFabricsMost of the textile factories in Ethiopia are cotton textile factories, capable of producing limitedcategories including low to medium yarn count pure cotton gray fabrics for khaki, twills, bedsheet fabric, canvases, dyed poplin and printed sateen. These factories are incapable of supplyingfabrics for the export of the garment sub-sector. What’s more as today’s Ethiopian tend to choose 176  
  • 189. the more convenient and easier-to-wear synthetic fabrics, there’s little choice for thedomestically made fabrics even in the domestic market.Garment factories in Ethiopia depend heavily on import for most of their fabrics (70% of fabricsfor knitted garment depend on import), which mainly come from China. Korea, India andTaiwan.AccessoriesCurrently, there is no accessory and spare parts manufacturing system for the garment Sub-sectorAccessories needed in garment manufacturing such as buttons, zippers, lacework and liner clothhave to be imported.Packing materialThere is also a serious shortage of packing material supply capacity in Ethiopia. Many packingmaterials have to be imported. In addition there are only few modern packing methods andpacking equipments in the country. For example, some companies do not have their own packingshops or packing platforms. Packing materials such as corrugated boxes are of poor quality andinadequate for the long distance shipment.Vulnerable infrastructureCompared with other developing countries, Ethiopia’s industrial basis and infrastructure arerelatively underdeveloped, despite the fact that tremendous efforts have been made on theinfrastructure construction. Particularly, its power supply, telecom and transportationinfrastructure are far from being able to satisfy the demand of the development of manufacturingindustry. Ethiopia is a landlocked country. Currently, according to agreements with neighboringcountries, it has accesses to 9 seaports. The nearest and most frequently used is the port ofDjibouti, which is 847 km from Addis Ababa by road. Apart from this, the port of Sudan is also afrequently used, which is 1881km from Addis Ababa by road.With respect to its transportation, only air transportation is relatively developed in Ethiopia.There is only one railway in the country leading to the port of Djibouti which has been inoperation for over a century. The transportation of containers mainly, depends on the roadbetween Addis Ababa and Djibouti. There are only 3.924 km tar road in the country. By the year2001/02, road intensity is 29km/1000sq km in the country, while the average figure is 177  
  • 190. 50km/l,000 sq km in Asia. Currently, about 70% of the areas across the country do not havemodem transportation means.Ethiopia is one of the countries with low rates of telecommunication facilities. In today’snetwork era, it is very difficult to participate in the international market without advanced network system. Currently net works in Ethiopia are hampered with low speeds and high costs. Marketing networks absentThere is no distributor in Ethiopia specifically engaged in the wholesale and retail ofdomestically made garments, as most of the factories only make work clothes and uniforms oncustomer orders. However, some of the factories have their own agents. Others directly markettheir products to the retailers.Most of the export channels for garments made in Ethiopia were established long time back orbrought in by foreign investors. Local enterprises rarely explore any new export channel.Although Ethiopia does host some commodity fairs or participate in some international ones, yetcompanies complain that it is very difficult to secure stable supply channels with USbusinessmen. Most of them would just look around in exhibitions and rarely make any deal.Many of the garment enterprises in Ethiopia are of small scale, incapable of taking direct part ininternational trade. There’s no professional trade company with a preliminary scale of handlinggarment export business. At the same time, garment manufacturers in Ethiopia generally lack theawareness of international market information as well as professionals capable of internationaltrade.Unable to keep in track with the small-quantity-multi-variety trendWith the rising of life standard, garment consumption tends to be more individualized andfashion oriented. Since the 1990’s, textile and garment markets in developed countries have hadthe trend of small quantity and diversified variety, with the batch for every order getting smallerand smaller and product life cycle getting shorter and shorter. It usually takes only half a year fora fashion style to get into its peak and fall down dramatically, with the steadily emerging of newproducts as well as new materials. Delivery period tends to be shorter and shorter. At the sametime, marketing structure for textile and garment sub-sectors has experienced significant changesin the recent years. With the emergence of business patterns like transnational acquisition centersand chain franchises, the distance between suppliers and customers has been shortened. 178  
  • 191. In view of the future development, major garment purchasers in the world will continue thetrends of small quantity, diversified range and short delivery periods. Currently retailers, garmentmanufacturers and textile factories in the United States, EU and other developed countries havegenerally established a rapid reaction system to address market demands. In addition, they areattaching more and more importance to the development of new products and the establishmentof marketing networks.In terms of hardware as well as software, garment enterprises in Ethiopia is striving hard to getprepared for these rapid changes both psychologically and practically.Aging equipment without technological support systemToday, while advanced garment processing equipment such as automatic cutting machines,computer controlled Lockstitch sewing machines, virtual garment graphic system and stereoiron-ordering machines are widely used in overseas garment factories. Many garment factoriesare still using medium speed Lockstitch sewing machines and over-lock sewing machinesintroduced from Korea, Japan, Italy and other countries in the 1970’s. However, garmentfactories established after 2005 are well equipped with modern machines, but they are not usedto their full production capacity. A lot of garment factories have additional idled equipmentoutside their production lines, further lowering the overall equipment utilization ratio of garmentfactories in Ethiopia.Productivity to be improved The average output for a worker in an Ethiopian garment factory is 5 standard shirts perman/shift versus 20 to 25 in an average scale international garment factory. Ethiopianproductivity is very low, only about 1/4 to 1/3 of the normal level. The major reasons for thisinclude: • Serious ageing of the employees • Inadequate operational skills of the workers • Absence of efficient management system.Serious impact of imported and smuggled garmentsImported clothes have basically dominated Ethiopia’s domestic garment market. According toEthiopian custom office statistics, the gross garment import value was 278 million Birr in theyear 2001/02, most of these imports were low-end products made of synthetic fabrics. However,the actual figure of Ethiopia’s garment import is far larger than that provided by the custom 179  
  • 192. statistics. Large number of smuggled or second hand garments can be seen everywhere in themarket.Lack of inter-industry institution cooperationEthiopia’s garment sub-sector is still far from a complete industrial system. Companies existonly as individual entities. There’s no integrated industrial administration institution tocoordinate the overall development of the industry, nor inter-industry auxiliary institution tosupport such development.According to the quality standard authority, currently there’s no quality standard or exportquality standard for Ethiopia’s garment manufacturing. There’s no specific quality managementinstitution responsible for controlling the industry-wide product quality.5.7 Strategy and measures for the development of the garment sub-sectorPromoting the development of processing tradeWith the acceleration of the economic globalization and the development of international labordivision, processing trade has become an important way for countries around the world toparticipate in international labor division. It is playing a more important role in fully exploitingthe comparative advantages of different countries, promoting technological advances andindustrial up-gradation and expanding exports.Processing trade is a new form of manufacturing. It plays a significant role for developingcounties to attract international capital, promote the development of nations and regions andachieve rapid development of industries. Processing trade is composed of production with client-provided material and production with imported material. Considering Ethiopia’s currentsituation, it is more appropriate to begin with processing with client provided material andsubsequently enter into manufacturing activities with own material and product and designdevelopments. The experience of many countries particularly China shows that processing and assembling withimported materials plays a significant role in creating more job opportunities, increasing foreignexchange incomes, and addressing capital shortages. It is also helpful to introduce advanced andappropriate technology, equipment and scientific management to get more international marketinformation, to promote the quality and standard of exported products and to Increase fiscalincome of the country. Through the introduction and integration of foreign capitals and 180  
  • 193. technologies this kind of integrated trade can exploit the advantage of abundant resource ofcheap labors and avoid the disadvantage of fabric shortage by processing more products withfabrics from international markets for export. In this way earning more foreign exchange andpromoting economic development.Thus, considering its current situation of capital, technological and market access shortage, itwill be an appropriate choice for Ethiopia to promote the development of its garment sub-sectorbeginning with the development of processing trade while taking advantage of its abundant laborresources and preferential international market accessing opportunities.Export processing zones (EPZs) emerging all over the worldEPZ is a special economic zone specifically established for the purpose of promoting thedevelopment of processing trade. Over the past 30 years, EPZs have been emerging all over theworld. EPZs are becoming the industrial areas with the largest amount of foreign investment andthe most active foreign trade business in their respective countries and regions. These EPZs havegreatly promoted the economic development of various countries and regions. The establishment of EPZs in Africa started in the 1980’s. The development of these EPZshould be attributed to the following advantages for the investors: 1. Tariffs are exempted in addition income taxes are exempted for a considerably long time for example, 5 years in Libya and 10 to 20 year in Egypt. Profits earned may be transacted abroad freely. 2. It is only necessary to deal with the single institute of the EPZ administration office, instead of with numerous government institutions, free from being hampered by bureaucracies in local countries. Therefore, business operation is of high efficiency. 3. Construction sites, power supply, water supply, communications and transportation infrastructures are provided on preferential basis. 4. Political risks such as nationalization could be kept away from the EPZs. 5. Local governments, benefiting from the management of the EPZs have had more job opportunities and developed local resources. They have also learned advanced production management techniques ensuring the political stabilities.For a country with a long history of domestic market oriented economy like Ethiopia, it isabsolutely necessary to develop its export and establish EPZs. 181  
  • 194. EPZ enjoy special policy or a special systemThe establishment of an EPZ is also the establishment of a special policy zone or special systemzone. Although Ethiopia has already established the export tax exemption system, the drawbacksystem and the bonded warehouse system, these measures could only solve the problem oftaxation restriction for Ethiopia’s export to a certain level. EPZs should not only get taxexemptions but should also permit fast custom clearance. There has to be a specific EPZmanagement system in the custom office with this kind of new arrangement model. The customoffice responsible for the EPZ is linked with the custom offices in the ports through computernetworks, for electronic data transmission and custom clearance. Cargo import export ofenterprises in the EPZ can go through fast custom clearance through “one application, onecertification and one inspection” at the responsible custom office.More supportive infrastructureIn terms of infrastructure it is much easier to accomplish supportive infrastructure within oneclosed area than in the whole country. Currently, Ethiopia is seriously short of water and powersupplies, as well as communications, road traffic and other transportation infrastructures, whichcost very high. Infrastructure capability shortage has directly restricted the development of itsexport. Without sufficient improvement of the infrastructures, it is difficult to expand the export.The establishment of an EPZ and appropriate industrial distribution projection will ensure thesupply of infrastructures and attract the foreign capital flow. Therefore, it is possible not only toprovide an ideal operation environment for both domestic and overseas investors, but also to finda way to develop the country’s industry at a lower cost.Paving the way for industrial centralizationIn many international competitive industries, it is usually the case that a lot of competitors gatherin a certain city or a certain area, For example, most of the Italian wool textile companies arelocated in Biella and Prato. Herning is the base for Denmark’s windmill enterprises, while inBasel, Switzerland three largest pharmaceutical companies are located. The centralization ofclients, competitors and suppliers can improve the effectiveness of business and promote theirspecialization. Geographical centralization can bring the following advantages: • increasing the industrial impact by innovations and advances, • Encouraging the emergence of new comers in relevant industries and promoting the centralization of information and activities. 182  
  • 195. • Geographical centralization will optimize interactions within the industries promoting the development of such industries.Industrial clusters can generally be divided into two categories.Preliminary form of the industrial cluster: Under this form, there would be a comparativecentralization of similar products in a certain advantageous area. In addition to the mainstreammarket for the leading products of the cluster, there will be gradually emerging labor markets,accessory industries and specialized service industries, jointly achieving advantages ofeconomies of scale.Mature form of the industrial cluster : consisting of core industries and supporting industries.These clusters, usually with large companies could bring in more similar companies. Theirprominent economic advantages of large-scale manufacturing could lead to the development oftechnologies and equipments, the development of labor and trade organizations leading tolowering of trading costs and improve efficiencies. The establishment of the garment EPZ maypave the way for the development of future cluster effects.Thus in order to expand export, there is a need to be an appropriate environment for thedevelopment of the export industries. The establishment of an EPZ is what Ethiopia needs.Through this initiative, it can improve the infrastructures in the identified cluster area andsimplify the numerous and dragging bureaucratic procedures. It can also create an appropriatebusiness environment for both domestic and overseas companies and lay the foundations for thefuture industrial developments.Construction of the dry portIn the absence of own seaport to improve its custom clearance efficiency, Ethiopian governmentis considering the construction of a dry port which could be an option as the Custom procedurescause serious delay, significantly impacting the development of international trade. The dry portconstruction has already been proposed and is in discussion with the Djibouti government. Theconstruction of the dry port will be beneficial to the development of the EPZ.Establishing communication and cooperation channels with enterprises outside the zoneA centralized and exclusively managed EPZ should not sacrifice the communication betweenenterprises inside and outside the zone for the improvement of its management efficiency. As amatter of fact, EPZs in many countries are seeking and trying policies and measures for bettercommunication and cooperation between enterprises in and out of the zones, so as to turn the 183  
  • 196. zones into not only imported material processing bases for export to foreign market, but alsogrowth points for their respective domestic companies. There are some arrangements that couldhave encouraging effects. For example, products sold to companies in the EPZ by those outsidethe zone could be regarded as export and enjoy relative preferences similar to export products.Laying solid foundation to attract investorsEthiopia’s capital Addis Ababa is the political, economical and cultural center of the country. Itis also the area with the most developed infrastructures. Addis Ababa has the largest airport inEthiopia or even in the whole Africa. In addition, it is connected with the port Of Djibouti withgood quality road and a railway, thus possessing the basic conditions for the establishment ofan EPZ.Currently, there are 18 textile enterprises and many garment factories in Addis Ababa, which isthe highest density of textile and garment sub-sector in Ethiopia. With proper planning it ispossible to establish an industrial base at Addis Ababa and produce industrial cluster effect todrive the development of the garment industries across the county.An important part of this is to increase investment into the planned EPZ with improvedtransportation, water, power, gas and communications facilities. On top of these, it is necessaryto issue preferential policies and provide comprehensive services to attract large and powerfulcompanies both in the country and abroad, so as to expand the size of the garment sub-sector,increase export, make profits and paving the way for further accomplishment of industrialclusters.Strengthening policy implementation initiativesIn order to promote the development of its garment sub-sector, particularly to stimulate itsgarment exports, the Ethiopian government has issued a series of preferential policies concerningexport investment, credit and finance. There’s a lot of work to do for these policies to beproperly implemented. Besides, it is necessary to make continued changes in accordance with theactual implementation experience.Improving government efficiencyGarment sub-sector is a highly time sensitive industry, usually with strict time limit for itsproducts. In addition, since fabrics as well as accessories of Ethiopia’s garment sub- sector haveto be imported. Every single deal has to undergo both procedures of import and export. Underthese circumstances the government efficiency is critical. There are two basic ways to improve 184  
  • 197. the efficiency. The first is to improve the service awareness and professional abilities ofgovernment personnel. The second is to introduce advanced executive management methodssuch as the online certification and other modern ways. During the past two decades ofdevelopment, China has taken a lot of initiatives to improve government efficiency and itspersonnel’s service awareness, including the promulgation of the Executive Litigation Law, theestablishment of the public servant complaining system and the service commitment system forkey public servicing agencies. Some areas in China have adopted the 24 hour on line customapplication system. Administrative offices of various development zones have pledged foroffering more effective service. These policies and measures have brought more conveniencesfor the investors, improved business efficiency and promoted the development of the economy.Ethiopian Government can think of introducing such system for the rapid development ofgarment sub-sector.Expanding manufacturing scale with investmentsThe existing industrial basis for the garment sub-sector is very weak with limited productioncapacity. Also, considering garment sub-sector’s unique characteristics that it requires onlysmall amount of investment and pays off very fast and is eligible for preferences of AGOA, EBAand other concessions, it is suitable to make greater effort to attract investments for the garmentsub-sector to expand its scale and escalate its production capability.Like many other African countries, Ethiopia is seriously short of capital, mainly due to heavyforeign debt burdens, low internal saving ratios and decreased international aids. Private capitalsin Ethiopia are generally weak, incapable of making investments. Therefore, attracting foreigndirect investment (FDI) is essential. It is also important to attract Ethiopian Diaspora living inUSA, EU and other parts of world to invest in Ethiopia. Key elements that attract the FDIinclude: high economic growth rate, more attractive tax preferences, better infrastructure etc.Increasing infrastructure investmentIt is impossible to develop an industry without modern infrastructure. In order to improve thecompetitiveness of the garment sub-sector, it is imminent to increase infrastructure.Due to power shortages, unexpected power interruptions have become the biggest problems forthe garment sub-sector, it is an essential requirement for the development of the garment sub-sector to ensure the power supply capability. In view of the low power generation capacity, it isnecessary to establish an EPZ and to ensure it prioritized power supply. 185  
  • 198. It is necessary to increase telecommunications capacity. It is necessary to develop network andmobile communications. Information development has become a trend for economic and socialdevelopment in today’s world as quick means to communicate with the outside world.In addition, it is also essential to invest into the construction of roads and railways.Endowing special preferential policies for the garment sub-sectorMost countries, during their economic development process, some industries of high prioritiesare endowed with more preferential policies. Some countries also categorize their industries so asto differentiate their preferential policies.Ethiopian government has identified garment sub-sector as a priority industry. In order tostimulate domestic and foreign investment to flow into this industry, it is necessary to make anumber of preferential industrial policies with respect to taxation preferences, foreign exchangeretaining ratio, custom clearance procedures and even subsidies to strengthen its support for thedevelopment of the garment sub-sector.Improving human resource quality in three tiersIn view of the poor status of human resources in Ethiopia’s garment sub-sector, it is necessary toimprove human resource quality at least in three tiers, so as to be able to acquire sufficientqualified human resource.The first tier is through vocational training. The second tier is through the establishment ofprofessional technical team. The third tier is through the establishment of professional managerand marketing teams.Steps are initiated to improve the first and second tiers with proper measures.However, the third tier i.e. professional manager and marketing teams are yet to be improved.Learning from successful experience of foreign invested and joint venture companiesThe establishment of foreign invested and joint venture Companies will bring in advancedtechnologies, respectful work ethics and modern perception, which will in turn become ajuncture for integrating the country with the world. It is important to summarize effectively anddisseminate the successful experience of these companies.Arousing national pride and national responsibilityIt is necessary to get the government’s economic development strategy recognized and supportedby the people, through large-scale propaganda. It is also necessary to make people to be aware ofthe significance of economic development. The inevitability of Ethiopia’s choice of market 186  
  • 199. economy and the strategic importance of expanding export for the economic development of thecountry, it is important to intensify the national sense of pride as well as the national sense ofresponsibility of the Ethiopian people promoting the idea that economic development is amission of every individualThe rejuvenation and development of many economies are possible only with the devotion of thewhole nation, for example, it is with the overwhelming recognition of the “Science andtechnology based country” strategy across the country that Japan has achieved the post wareconomic growth. Also, China’s reform and opening up has been based on the recognition andsupport of its objective of “achieving the prosperity of the nation and the common richness of thepeople” by the entire nation.Improving the competitiveness of the companiesIntensifying product structural realignment in line with market demandsJudging from the demand situation in American and European markets, the trend of fashion andraw material availability for Ethiopia’s garment factories, Ethiopia’s garment sub-sector shouldtake the route of focusing on cotton knitwear and leisure wears at this stage.Textile factories in Ethiopia primarily produce medium to low yarn count textiles, suitable formaking denim and jean. Therefore, garment factories in Ethiopia may develop leisure apparelincluding jean garments and denim leisure clothes.Enhancing management and improving marketing channelsWith the rapid development of buyers’ market with more supply than demand, Garmentsector is in more intensified competition. For garment enterprises in Ethiopia, it is inevitable tointroduce marketing ideas and establish marketing channels. More importantly, the marketingmodels for its export development should keep in track with international markets andinternational trends.Reforming the salary structurePublic enterprises in Ethiopia are trapped by a lot of problems, including low salary level. As aresult, many enterprises are not able to flexibly use the payment leverage in line with theproductivity. On the other hand, worker’s enthusiasm is dampened, seriously impacting theimprovement of the productivities. Income and welfare of manager are not directly connectedwith the performance of the companies, inadequate for stimulating their enthusiasm. It is 187  
  • 200. necessary to establish the payment-for-achievement salary system for the managers, while givingfull consideration to their capabilities and market achievements.For the garment workers, it is more suitable to use piecework payment system with differentpayment standards for different garment processing work, depending on the level of difficulty ofthe specific work so that the workers’ payments are determined by the quality and quantity oftheir work. In this way the enthusiasm of the workers could be fully stimulated.Escalating existing manufacturing capacityFor existing factories with under-utilized equipment, appropriate measures should be taken fortheir technological up-gradation and operation system. For example, old companies may begranted a certain period of income tax exemption, tariff and import tax exemption for importedequipment for technological up-gradation. It is also advisable to provide bank loan support suchas long- term low interest loans.Establishment of number of auxiliary OrganizationsEstablishment of a quality inspection centerIt is essential to establish a quality inspection center for the inspection and examination of thegarments made in the country, so as to enable the quality of garments made in Ethiopia to keepin track with the international standards. Establishment of an export garment inspection systemwill ensure the overall quality level of the products and enhance the internationalcompetitiveness of the garment sub-sector.In China there is a mandated inspection system for the export garment, which is responsible tosign the official export release declaration prior to its custom application. With this declarationthe export products are randomly inspected at custom. Companies with specific qualitycertification could be exempted of quality inspections. The system has played an active role inwarranting the quality of export garments made in China. According to the request by ChinaImport and Export Commodity Inspection Bureau, every enterprise involved in export garmentprocessing should have a quality inspector trained and qualified by the bureau. This measure hasgreatly increased the quality awareness of the enterprises.Establishing a garment standardization committeeIt is necessary for Ethiopia to form its own standards for the size of its garments and otherrelevant export garment inspection standards with reference to garment standards in China andother countries to ensure the quality standards. China started to implement its new standards on 188  
  • 201. polyester/cotton yarn, cloth and printing and dyeing in October 1989. On top of that, China hasalso established another 78 standards including the national garment size standard, productstandards for wool, silk etc. By the end of 1989; there were total number of 934 standards in thetextile sub-sector including 390 national standards and 435 industrial standards. Most of thebasic standard and method standards were adopted from international standards or advancedforeign Standards.Establishing garment human resource training centers and garment research and designcentersEthiopia has abundant human resources, which is, nevertheless of low quality and seriously shortof skilled professionals. It is therefore, necessary to establish a number of garment humanresource training centers and garment resource and design centers to produce a large number ofgarment business management professionals, technicians, garment designers and technologists assoon as possible. China has cultivated professionals at different levels to address the need of thegarment sub-sector since the beginning of its reform. Currently, there are more than 40universities and colleges, which provide subjects like garment design, garment engineering,garment trade and garment machines specifically to train high-level professionals for the garmentsub-sector. In addition, there are over I000 secondary garment technical schools for the trainingof medium/low level professionals.Estab1ishing a garment associationIt is necessary to establish a garment association to enhance inter-industry and Government –industry interactions thus acting as a “bridge” between the government and the enterprise, orbetween the enterprises. The association should provide services for:The government: When commissioned by the government, it should make proposals concerningindustrial policies and legislations. It should be responsible for the industrial developmentstrategy research and the drafting of industrial development programs. It should take part in theestablishment of national and industrial standards and thereafter, promoting the implementationof such standards. It should also play a role in quality management and supervision. Whencommissioned, it should make initial feasibility studies for key technological upgrades,technology introduction, investments and development projects in the industry. Besides, itshould also undertake other work commissioned by relevant government agencies. 189  
  • 202. The members and the industry: It should be responsible for the establishment of industrialregulations and a self-discipline mechanism. It should submit enterprises’ requirements to theGovernment, coordinate relations between various parties and protect legitimate interests of theenterprises. It should establish an information network and publish an industrial periodical toprovide relative industrial information. It should provide all kinds of consultancy services andsponsor different kinds of professional trainings. It should organize specialized commodity fairsand exhibitions-both domestic and international. It should sponsor national and internationalgarment design competitions. It should facilitate cooperation between domestic and overseasparties. It should organize scientific and technological conferences, workshops, seminars etc. Itshould provide other services in line with the needs of the enterprises.Establishing labor service organizationsThe garment sub-sector is highly labor-intensive, where labor-management disputes occurfrequently. In addition, there are usually many such disputes during the process of equity reformor privatization processes of the state owned enterprises. A good relation between the labor andthe management is one of the key factors for improving productivity and attracting investment.So it is feasible to establish an entrepreneur association for the interests of the employers, whichwould make coordination with the labor union for the interests of the workers, so as toeffectively coordinate the relation between the employees and the workers, freeing theenterprise from disturbing labor-management disputes which hampers the economicdevelopmentEstablishing specialized large garment markets and logistics centersIt is necessary to establish a number of specialized large garment markets in Addis Ababa withproper government support. For example, it is advisable to establish a garment accessorymaterial market to meet the requirements of garment manufacturers. Proper arrangementsshould be made to create a fairly competitive business environment for interaction of theindustry community and the commerce community. At the same time, it is desirable to establisha logistics center in the area where specialized markets are centralized. Major functions of thelogistics center should be among others, exhibition, trade, transportation, storage,loading/unloading, handling, packing etc. 190  
  • 203. 5.8 Overall development perception and objectivesThe “three step” development strategyThe report by China Textile Planning Institute of Construction, Beijing, China (2003) hasrecommended following three step/term strategy for the development of Ethiopian Garment sub-sector in 10 years (2012). The main features of this strategy are summarized here:With the third largest population in Africa, Ethiopia should have its proper position in garmentsub-sector. With 10 years of efforts, Ethiopia should become one of the primary garmentmanufacturing countries in the sub-Sahara Region, as well as one of major garment exportingcountries in Africa.The 10-year (2012), objective for Ethiopia’ s garment sub-sector is to achieve an annual outputof over 400 million standard shirts, with a work force of 50,000 to 70,000 people, an annualgross product value of 4-5 billion Birr and an annual foreign exchange income of US$ 400-500million through export.Development objectives over 10 year period (2012)Short termPeriod 2 years (2002-2004)Production and value 20-30 million standard shirts, 500 million ETBExport value 20-30 million USDObjectivesAfter 2 years of development and through active efforts to attract investments. Ethiopia’sgarment sub-sector is expected to have a good start. Existing enterprises will begin to operatesoundly through realignment of their production and management. It is also planned to establish8 to 10 enterprises each with manufacturing capacity of 1-2 million standard shirts per year.Mid termPeriod 5 years (2005-2008)Production and value 100 million standard shirts, 1 billion ETBExport value 110 million USDEmployment 25000ObjectivesUpon the accomplishment of the short-term objectives, the industry should be capable ofproviding strong support to the development of the garment sub- sector. The middle terms 191  
  • 204. should be the fast expanding period for the industry when large-scale investments will occur andmanufacturing scale and capability will increase.Long termPeriod 10 years (2009-2012)Production and value 400 million standard shirts, 5 billion ETBExport value 400-500 million USDEmployment 50000 – 70000Objectives The objective for the long-term development strategy is to upgrade the industry and increase the garment export as well as sales in domestic market. This will ultimately, enable Ethiopia’s garment sub-sector, to be competitive without preferential policies. At the same time, textile and other accessory industries will also be facilitated to develop, forming a garment industrial cluster in Ethiopia.Strategy to achieve the targetsShort term 2 years (2002-2004)Products The garment market position is for the medium low-class, with primary categoriesincluding sportswear, T-shirts, knitwear shirts, household clothes and uniforms. Among which,T-shirts and round collar knit-wear are the priorities suitable to local conditions in Ethiopia. In order to achieve the set targets the following strategy may be adopted.Establishment of a garment export processing zone (EPZ)Planning should be made to establish an EPZ at a selected location in accordance with thescheduled EPZ policy. The EPZ should provide well-established infrastructure and competitivepolicy environment to attract domestic and foreign investor. Proper measures should be taken tolower the risks for the investors, shorten their profitability period and assure them of realisticprofits. Experience and lessons learned should be summarized regularly to steadily makeimprovements and lay the cornerstone for further expansion of the EPZ.Improving the efficiency of the government institutionsIt is necessary to further improve and enhance the “one-stop” service by governmentadministrative agencies. Propagandas should be made among the public servants to emphasizethe determination of the government to develop the economy and its significance of, raising theirsense of responsibilities. On the other hand, it is necessary to introduce management methods, 192  
  • 205. such as e-governance, e-custom and other scientific techniques to improve the efficiency of theapproval procedure and custom clearance.Improvement in under-utilized capacities in existing garment enterprisesIt is necessary to re-vitalize the existing enterprises through leased and contracted operation, aswell as shareholding system restructuring and other means. Proper training should be providedto improve the quality of the management personnel, technicians and marketing personnel.Adequate measures should be taken to improve the manufacturing management and operationalmanagement for raising the equipment utilization to improve productivity and quality. Also itis expected to raise the production efficiency through improvement of workers’ skills. Inaddition, it is necessary to stimulate workers’ enthusiasm through the introduction of competitionand the reform of income distribution, so as to link their incomes with the quantity and quality ofthe products that they make.Accelerating the establishment of auxiliary organizations including:A garment quality inspection center:A garment standardization committee:A garment exporting promotion committee:Mid-term development objectives and priorities, 5 years (2004-2008) The garment market should be positioned at medium/ low classes, with larger portion for themedium class and diversified product structures. Major categories will still be sportswear, T-shirts, knitwear shirts, household clothes and uniforms. However, the portion of sportswear ofrelatively high value-added like jean garment, jean pants and jackets will be adequately raised. PrioritiesWith the expansion of the industry, one garment EPZ is obviously no longer able to satisfy allthe demands. It is necessary to make further investment to increase the number and improve thequality of the EPZs, and further consolidate the functions of the administrative organizations toprovide investors and enterprises with better services.Establishing a fabric/accessory supply systemWith the industry catching certain scale, it is neither economical nor practical in terms ofprocessing cycle for every enterprise to make its own overseas purchases. It will be essential tobuild a fabric /accessory supply system to allow the enterprises more convenient acquisition andlower costs. Furthermore, considering Ethiopia’s air transportation pivot position in Africa, this 193  
  • 206. supply system could also provide support to other African countries. Specifically, it is proposedto establish specialized fabric and accessory (such as button, zipper and lacework) wholesalemarkets and exhibition centers in areas with advanced transportation and communications, suchas Addis Ababa, so as to shorten the distance between fabric accessory suppliers and garmentmanufacturers.Shaping the overall collaboration of auxiliary organizationsBy the time various auxiliary organizations will have been in place and functional. It is necessaryto establish a garment association to enhance inter-industry administration and provide garmententerprises with substantial services, to include proper guidance, communication andinformation. It is necessary to establish a number of garment research and design centers,garment human resource training centers to further improve the garment training institutions, soas to train a considerable number of operation management personnel, technicians, garmentdesigners and technologists. It is necessary for the quality standard center to begin its effort topromote the 1S0 9000 and ISO 14000 quality systems, as well as certification for the enterprises.Long-term development priorities, 10 year (2009-2012)Major categories for garment processing will be diversified covering knit wear, sportswear,men’s and women’s shirts and trousers. At the same time specific measures will be made todesign and develop and market the products with Ethiopia Label.PrioritiesPromoting the development of industrial clustersWith the expansion of industrial scale, it is necessary to take specific measures to accelerate theprocess of setting up industrial clusters in different regions of Ethiopia. Promote quality certificationIt is necessary to promote the relevant quality certification systems among garmentmanufacturing enterprises to improve their competitiveness, and keep in track with thecontinuously adopting international textile and garment technological standards. For examplealthough there are less and less trade barriers in the EU market, more and more technologicalbarriers, such as the ecological environment protection labels, Social accountability standardsetc. are becoming a new trade obstacles. 194  
  • 207. Improving marketing networkWith the approach of AGOA expiration date, preferential trade policies in favor of LDCs likeEthiopia will possibly disappear, Ethiopia will have to compete with rivals from all over theworld. Therefore, it is extremely important to expand marketing channels and establish marketnetworks.5.9 Present status of garment industryMost of Ethiopian garment manufacturers (except few state owned units) have been set-uprecently, 2005 onwards. For that reason the factories are technically well equipped but oftenlack in own product development, pro-active export marketing and efficient managementstructure mainly due to non-availability of qualified specialists. Majority of recently establishedgarment production units are located in and around Addis Ababa usually having reasonableaccess to road transport.In general the self sufficiency or backward linkage in Ethiopian textile and garment sector is atpresent rather low compared to other competitors on international markets.5.10 Value chain assessment of garment sectorComplete value chain is observed in cotton knitted garment sector (Cotton cultivation, ginning,spinning, yarn dyeing, knitting, garment manufacture and finishing). Some textile factories inEthiopia are vertically integrated (e.g. finishing to garment production). However, the number ofsuch factories and their operating capacity is low and does not provide a self sufficiency for thedemand by Ethiopian garment industry regarding the fabric requirements of domestic orexport markets.Knitwear sectorThe knitted garment sector is slightly in better position than the woven garment sector, becausethe quality of domestically produced yarn is acceptable for some basic items like T-shirts or poloshirts. However, the quality of yarn and finished garments are not yet consistent. Therefore inaddition to the consumption of domestically produced yarn, the knitwear garment manufacturersare also importing necessary yarn qualities according to their requirements.Woven garment sector 195  
  • 208. The situation in woven garment sector is different and more complicated for the manufacturers.There are only very few weaving mills in Ethiopia which are offering a rather low and partly notsufficient quality standards for exports. Consequently the majority of fabrics which are requiredfor woven garment exports have to be imported. This means higher purchasing costs, moredependence on external suppliers affecting the delivery dates and also pricing disadvantages dueto higher import duties.For that reason capacity building within the spinning, weaving and knitting sectors would helpthe Ethiopian garment industry to be competitive in international markets. Even though it isrecommendable to support spinning, weaving and knitting sector, priority should be given toyarn and knitwear production as in this fields the value chain perspectives and market successchances are comparably higher than woven garments. Further more in the woven sector manyinternational customers are still working on a sub-contracting (CM) basis with the importerproviding the fabrics.The following figure 5.1 shows an overview of the value chain structure within the textile, hometextile and garment industry of Ethiopia. Figure 5.1 Structure of textile, garment, home textile industry of EthiopiaSource: Market and Potential Analysis of the Textile, Garment and Home Textile Sector inEthiopia, Corporate solution 2007 196  
  • 209. When looking at the value chain in the textile, garment and home textile sector in Ethiopia onehas to consider on the one hand the gross value addition for each production step and on theother hand the necessary investment or costs and their payback (net value addition). The netvalue added in spinning or weaving is rather low due to the relatively high share of raw materialcosts (e.g. raw cotton for spinning) and usually very high costs for production technology /investment. The net value addition in knitting or garment production is on the other handconsiderably high, requires low investment but is very labor intensive. For that reason thegarment industry has a much higher contribution to a value addition within the value chain thanthe textile industry (spinning and weaving). Nevertheless an efficient garment production usingdomestically produced yarn and fabric leads normally to a much better value addition than yarnor fabric imports and in addition to that it prevents the garment industry from depending toomuch on other supplying markets.The approximate gross value addition for different steps within the textile and garmentproduction is listed below. • Spinning 15 % • Weaving 15 % • Knitting 20 % • Dyeing / Finishing 12 % • Finished Garment / Product 35 % Source Corporate Solution, 20075.11 Trends in Garment sector and types of co-operationGarment imports by EU or US customers can be divided basically into two groups:1. The so called "Outward Processing Traffic" (OPT) or production subcontracting (CM)2. Imports of ready-made garments (RTS, ready to sell)Within the past 2-3 years many EU buyers, especially large types of retailers and also largebrand name manufacturers tend strongly towards ready-made garment imports (mainly RTSbusiness) because of strongly rising competition and therefore cost cutting pressure. As aconsequence, the suppliers have to be able to offer a basic product development (RTS productrange) besides an efficient production, purchase of materials and financing of materials andfinished goods. 197  
  • 210. The following overview shows the types of co-operation between garment suppliers andinternational customers. Table 5.4 Types of co-operation with international customers S No. Type of co-operation Task/Service provided by Export target groups manufacturer in Ethiopia Sub-Contracting 1 Sub-contracting (CM Production (Cutting, sewing, Garment industry business) pressing, finishing and Fabric, trims and packaging accessories provided by the buyer Advanced Sub-Contracting 2. Advanced sub- Production Garment industry contracting (CMT Purchase of trims (e.g. business). Fabric buttons, zippers, interlining provided by the buyer etc) 3. RTU (Ready to use) Production Garment industry Business. Purchase of trims Sales intermediaries Designs provided by Purchase of all fabrics, yarns Large retail buyer and accessories, packaging material etc. Ready made business 4 Readymade business Production Sales intermediaries (Ready to sell, RTS) Purchase of all fabrics and Large retail trims Development of basic product design Retail brand/private label 5. Collection business Production Sales intermediaries Purchase of all fabrics and Large retail trims Specialist retails Development of product line (multiple products) Brand name marketing Image cultivation Life style concept Source: Market and Potential Analysis of the Textile, Garment and Home Textile Sector in Ethiopia, Corporate solution 2007The majority of garment manufacturers in Ethiopia works on a CM / CMT or RTU basis for theircustomers meaning that production and sometimes procurement of fabrics, yarns or trims are 198  
  • 211. provided by the Ethiopian supplier whereas all product samples / designs and occasionally eventhe connection e.g. to fabric suppliers abroad is given by the customer.The Table 5.5 shows the main types of co-operation of major garment exporting countries (aspotential competitors of Ethiopia) and indicates the development potentials for Ethiopiangarment manufacturers. Table 5.5 Major types of cooperation by main garment producing countries Country CM CMT RTU RTS Collection Ethiopia X X China X X India X X Pakistan X Bangladesh X Thialand X Vietnam X X Turkey X X Poland X X Romania X X Bulgaria X X Ukrain X Moroco X X Tunisia X X Source: Market and Potential Analysis of the Textile, Garment and Home Textile Sector in Ethiopia, Corporate solution 2007As seen from the Table 5.5, China and India are already heading for RTS business whereas theeastern European countries are mainly focused on basic subcontracting concerning garmentexports. Own collections or brand names by Eastern European suppliers (e.g. in Romania orBulgaria) are at present primarily sold on their domestic markets. Turkish suppliers are alreadyfar more advanced (many companies offer own collections and have set up own brand nameconcepts especially on the EU markets) mainly due to increasing costs and low reliability ofsubcontracting business.The necessity to move from CM/CMT to RTU/ RTS type of co-operation is part of thedevelopment trends on the international garment markets which can be summarized as follows:• Continuous decrease of domestic garment production as well as rising readymade garment imports in most of the major markets in Western Europe and the USA. 199  
  • 212. • Increasing international demand for ready-made garments in terms of RTS businessIn order to move from CM/CMT to RTU/RTS business strategy there will be• Rising demand for qualified machine operators, quality control, production, and middle management personnel within supplying companies.• Increasing importance of short and flexible lead times as well as competitive price- performance especially for EU market.• Reduction of suppliers pool by international customers (concentration on limited number of suppliers) but likewise constant demand for qualified and specialized new suppliers as substitution of unprofitable production companies / suppliersThe supplier in Ethiopia should aim to move a step forward towards RTS (product development,product collection, production, marketing) as this offers a higher added value and morecompetitiveness on the market. The risk, merits and requirements for development from CMT /RTU business towards RTS or even an own collection are summarized in Figure 5.2 Figure 5.2 Risk, merits and requirements to move from CM/CMT/RTU to RTS/Collection business • High risk • High profits Source: Market and Potential Analysis of the Textile, Garment and Home Textile Sector in Ethiopia, Corporate solution 2007 200  
  • 213. As competition on the major international textile and garment markets (EU and USA) continuesto increase, Ethiopia as a "newcomer" has to face not only the requirements of potentialcustomers but performance and trends of competitors markets as well.5.12 Productivity and quality (Benchmarks)The major critical success factors in garment production are productivity and product quality.The figure 5.3 shows a basic benchmark regarding international levels of productivity in majorgarment producing countries. However this comparison should be considered as basic indicationbecause productivity always and strongly depends on the complexity of the respective productand specific / individual requirements by the customer. Figure 5.3 Average level of productivity garment sector 2007 in %1= Eastern and South China 2= Western and Northern China Source: Market and Potential Analysis of the Textile, Garment and Home Textile Sector in Ethiopia, Corporate solution 2007Turkey as well as many eastern European countries have a relatively high productivity level dueto their already very long co-operation with Western European customers (in some cases up to40 years) and because of intense investments into production organization, staff qualification andefficient technology. Some South Asian countries such as Pakistan or Bangladesh are still under 201  
  • 214. development concerning adaptation and improvement of productivity and quality. Theproductivity level of Chinese manufacturers varies from approx. 40 to 65 % as initially thegarment production in China started in the southern and eastern provinces including Hong Kongand then step by step moved to the western and northern parts of the country. In general theefficiency or productivity level of a garment company could be considered as excellent when itreaches 70 - 80 % or higher.A productivity increase can be achieved by increasing the working speed of machine operatorsand production planning.This system which is applied in many of the leading textile and garment producing countries isdisplayed in the figure 5.4 Figure 5.4 International systems for productivity increase Source: Market and Potential Analysis of the Textile, Garment and Home Textile Sector in Ethiopia, Corporate solution 2007Because of low labor cost, any improvement in productivity will provide a competitiveadvantage to Ethiopian garment sector. This should be possible because many garment factoriesare technically already very well equipped it would be important to improve the qualification ofthe machine operators and the internal production planning (e.g. material and work flow etc.) in 202  
  • 215. order to improve productivity. This means that a productivity increase would not require largeinvestments (compared to purchase of new machinery).Table 5.5 shows an international benchmark for average production output per machine operatorper hour for selected products as an indication for Ethiopian manufacturers ( based upon mediumproductivity of 60%).The time data shown in the table represent an average time as one machine operator does notcomplete all operations for one piece of garment. Table 5.5 Average production, time for selected products (Approx. in minutes per item) Products Countries Southeast Asia South Asia South Estern Ethiopia (e.g. China, e.g. India, Europe Vietnam, Pakistan, (e.g. Romania, Thailand) Bangladesh Bulgeria, Turkey) Basic T-shirt 6 9 8 35 Cotton Basic Polo shirt 7 10 10 45 cotton Basic mens casual 20 20 25 120 trousers, cotton Basic mens casual 18 20 20 80 shirts, long sleeve Mens formal jacket 150 130 120 300 Working overall, 25 25 28 200 cotton Source: Market and Potential Analysis of the Textile, Garment and Home Textile Sector in Ethiopia, Corporate solution 2007The average production time per item in Ethiopia is currently significantly higher than incompetitive supplying markets which shows, that the level of productivity is also comparablylow.The bench mark for production output of different garments is shown in the Table 5.6 Table 5.6 Benchmark on production output Products Average output per hour per operator (Approx. in No. of items per hour) Basic T-shirt 12-15 Cotton 203  
  • 216. Basic Polo shirt cotton 12-15 Basic mens casual trousers, cotton 2-3 Basic mens casual shirts, long sleeve 2-3 Mens formal jacket 1 item each 2-3 hours Working overall, cotton 2Source: Market and Potential Analysis of the Textile, Garment and Home Textile Sector inEthiopia, Corporate solution 2007Besides a low productivity Ethiopian garment manufacturers likewise show relatively largeproduction capacities but a capacity utilization on an average is approximately 20-30 % only.This was a result of lack in experience of the factory owners / investors regarding setup ofgarment production facilities and efficient production planning in general. The availability ofproduction capacities in Ethiopia might be a future advantage but currently responsible forrelatively high maintenance and depreciation costs.Quality standardThe main product groups of the garment industry in Ethiopia are listed belowKnitwear (mostly 100% cotton • T-Shirts, polo shirts, sweaters • Pyjamas, underwearWoven garments (Cotton and mixture) • Casual shirts • Trousers, shorts, Bermudas • Working garments/corporate fashion and uniforms • Outdoor jackets • Sports dressesRegarding the quality standard of the products in Ethiopia the quality of materials (yarns andfabrics) as well as the quality of workmanship has to be taken into consideration.The cotton yarn produced in Ethiopia meets only partly international quality standards andcustomer requirements because of medium or short staple of raw cotton that is used. In additionto that the finishing of cotton yarn is not yet up to international requirements because of lack ofknow-how regarding dyeing, softening and other chemical treatments. The same situation canalso be found in local fabric production. Furthermore the current capacities of yarn and fabric 204  
  • 217. production within the country at are not sufficient to satisfy the needs of the Ethiopian garmentindustry.In case of imported yarns and fabrics the material quality meets the export market requirementsbecause purchase is usually made in major supplying markets such as China, India or in co-operation with buyer recommendation of yarn and fabric suppliers.The quality of workmanship strongly depends on the technical equipment and qualification ofmachine operators in the garment factories. Even if there are many garment factories (especiallylarger ones) with partly excellent machinery, the lack of qualification and efficiency of operatorsand line inspectors / production management lead to quality problems and in many cases to anextremely low productivity. One of the reasons for this is the very recent setup of manyEthiopian factories and the fact that most of the factory owners / general managers do not havetheir origin in textile and garment business.5.13 Labor costOne of the competitive advantages of the garment industry in Ethiopia is relatively lowproduction costs due to a comparably low level of salaries for machine operators. This advantageis partly compensated by low productivity and poor production planning. This is on the one handalso related to productivity and on the other hand a result of lacking awareness among machineoperators and production management regarding product quality and quality requirements by thecustomer. A basic international comparison of labor costs per hour in garment industry is shownin the following Table 5.7 205  
  • 218. Table 5.7 Garment production cost in different countries Country Approx. cost per working hour In the garment industry 2006 in US $ Germany 21.30 France 16.60 USA 14.90 England 14.60 Japan 11.80 Hungary 3.20 Poland 2.50 Romania 2.00 Bulgaria 1.90 Thailand 1.00 Srilanka 0.80 India 0.60 Pakistan 0.40 Bangladesh 0.30 China 0.25 Vietnam 0.25 Ethiopia 0.15Source: Market and Potential Analysis of the Textile, Garment and Home Textile Sector inEthiopia, Corporate solution, 2007These figures are based upon a medium productivity level of approx. 60 % and an averagenumber of machine operators per production line of approx. 30.5.14 Status of product developmentCollection or product development oriented at international standards does not yet exist on theEthiopian market as most of the garment manufacturers were concentrating on setting-up thetechnical facilities and machinery park of their factories. Some Ethiopian companies started tocreate own design ideas or basic product designs for the domestic market but are not yet workingin an efficient and appropriate manner suitable for prospective export markets.5.15 Performance analysis (Case studies)Corporate solution on behalf of ecbp has carried a performance analysis of 14 Ethiopiantextile, garment and home textile manufacturers.The company analysis was focused on following main performance areas 206  
  • 219. • Main products and qualities • Present type of co-operation with potential export customer • Production performance • Export marketing performance • Management skills • Financial basis of the companyMost of the analyzed companies showed potential for basic or advanced subcontracting businessfor a co-operation with export customers (CM, CMT). A ready-made collection is not yetoffered by any of the analyzed companies.Many of the Ethiopian companies analyzed have a very good or even excellent technicalequipment but are lacking proper use and handling (low productivity / lack of qualified staff).Furthermore the basic quality of workmanship is acceptable for export markets however in caseof RTU products including yarn or fabric supply by the Ethiopian manufacturer the quality offinishing (yarn and garment finishing) needs generally to be improved.Most of the Ethiopian manufacturers are not yet ready for independent and proactive exportmarketing as they are lacking basic know-how and experience e.g. regarding product andcompany presentation, customer requirements and acquisition as well as customer service. Thefinancial situation in most of the analyzed companies is not a problem, even though an increasein export earnings could generate a further boost in company development.The current situation of the analyzed companies therefore can be summarized as follows: • Very good technical equipment, very low production costs but very low productivity as well • Inadequate staff qualification (e.g. production and marketing) and lack of intense export promotion / acquisition of export customers in order to generate and benefit from competitive advantages.5.16 Textile and garment ExportsThe textile and garment sector in Ethiopia currently plays a minor economic role for the countrywith an annual production volume of about USD 12 million, which represents approx. 0.1 % ofthe GDP. Also textile and garment exports of approximately USD 4 million in 2005/2006(approx. 0,5 % of total Ethiopian exports) are currently not significant compared to China with 207  
  • 220. just garment exports of USD 81billion or Turkey with USD 11 billion. According to ecbpestimates the Ethiopian textile and garment sector consists of about 70 to 80 medium to largesized companies with some 20000 workers employed. Since 2005 onwards the export hassteadily increased to a level of USD 14 million in 2008/2009.A large number of these companies and production units were established recently (2005/ 2006)by Ethiopian nationals who invested in very modern machinery and specialized technicalequipment. However many of these factories and their machine operators do have difficulties inusing modern machineries to full production capacities. This means that practically all Ethiopiangarment manufacturers are operating on a considerably low productivity level.Even though Ethiopia has a tradition in growing cotton, Ethiopian textile and garmentmanufacturers and their products are yet to penetrate in international markets, because of recententry in the garment export activities.The major competitors of Ethiopia regarding garment exports especially to the EU are China,India and Bangladesh (RTU and RTS business) or Rumania (for CM / CMT business) but alsoother Asian countries do have comparably large garment exports at good annual growth rates.The major garment items which are produced in Ethiopia are mainly related to cotton basedknitwear, leisure wear and work wear. Also synthetic fibers (yarns and fabrics) are used withingarment production e.g. acrylic, polyester, polyamide and mixtures with cotton or even wool.However those yarns and fabrics are mainly imported due to the fact that the local spinning andweaving mills are mainly adjusted to cotton processing. This means that most of mixed yarns andfabrics, other fashionable materials as well as trims and accessories have to be imported resultingadditional cost and delivery time.5.17 Institutional supportThe future potential and development chances of the textile and garment sector in Ethiopia willstrongly depend on appropriate steps by local manufacturers, organizations and institutions aswell as government strategy and support developing competitive advantages for manufacturers /suppliers in Ethiopia.Regarding the situation of organizations and institutions in the textile, garment and home textilesector Ethiopia is in the difficult position to have just one operational professional association(Ethiopian Textile and Garment Manufacturers Association - ETGMA) with approx. 50 208  
  • 221. members. The second association Textile and apparel development institution is recentlyestablished with technical assistance from North India Textile Research Association, India. TotalTextile and Garment Services (TTGS) is a private organization providing technical andmarketing services on consultancy basis.5.18 Government SupportThe government of Ethiopia is providing all possible support to the textile and garment sectorto facilitate trade and exports as well as improving export infrastructure and investmentincentives. The programs for skills development and SME capacity building are also initiated.Considering the present situation of the garment sector in Ethiopia the support by thegovernment / Ministry of trade and industry (MoTI) is most needed in the following areas:• Facilitation of credit access for SME• Launching support programs / financial aid for improving the qualification of machine operators and line managers / production managers as well as Quality control staff• Support for investments and co-operation with international partners regarding garment production and set up of suitable spinning and weaving mills in Ethiopia• Support of investment and trade promotion for the garment sector (developing the image of garments from Ethiopia in potential target markets).A government has taken initiative to build a textile and apparel development institute in AddisAbaba with the help of North India Textile Research Association, Delhi, India. The Institute ofTechnology for textile, garment and fashion design, Bahir Dar University, Bahir Dar is also nowoffering degree courses in textile technology (which includes spinning, weaving and finishing),garment manufacturing and fashion designing. The institute has also commenced M Sc. (TextileTechnology) and Ph D by research programs. It is expected that these initiatives will ease out thedifficulty of trained manpower to manage the technical requirements of the textile and garmentindustry in the countryBut despite such incentives the country currently doesnt produce enough fabric for domesticand export garment demands, chemicals have to be imported. There is problem of productdiversification and that the total capacity output is low. Compared to other countries, like China,Ethiopia is lagging behind in skills, especially in garments, and also has management problems,so most of the investors bring their own experts to fill the gap. 209  
  • 222. CHAPRTER 6 HANDLOOM CLUSTERS AND EXPORT POTENTIALS OF HANDLOOM SECTOR6.1 IntroductionEthiopia with its diversified cultural background and natural resources has a rich heritage ofcrafts skills. Handicraft (Micro enterprise) is therefore considered to be one of the mostimportant and widely spread occupations of most Ethiopians next to Agriculture. As part of thehandicrafts heritage, Ethiopia has diverse traditional handloom products. The handloom industrythat produces household and home furnishing textile products is a traditional industry thatgenerates employment to hundreds of thousands of households in the country. As such,handicraft including handloom is a very important industry for income generation both in therural and urban areas. In fact, the handicraft sector is the largest employer and most importantsource of revenue to the Ethiopian population after agriculture.In addition to its huge employment creation, the handloom sub-sector also has strategicimportance in the economic development of the country with respect to its strong linkage to theagricultural sector through raw material sourcing of lint cotton and the existence of growingdemand both in the domestic and international market for handloom household and furnishingtextile products.The traditional handloom weaving industry is categorized by the Central Statistical Authorities(CSA) of Ethiopia, as Cottage /Handicraft Manufacturing Industry. Cottage /HandicraftIndustries are defined as manufacturing establishments: Where goods are produced on small scale and made available for sale. No use of power driven machines during the manufacturing process Where employment is limited to the owner and the family members.Usually the Cottage/ Handicraft establishments are located in households or small workshops.Such establishments are mainly household type enterprises. Such activities can also be termedas “Microenterprises”6.2 Handloom establishments and handloom weavers in EthiopiaAs per the Central Statistical Authority (CSA) survey on Cottage /Handicraft ManufacturingIndustries the number of Cottage/Handicraft businesses in Ethiopia in the year 2002, was 210  
  • 223. estimated as 9,74,676 of which 63.27% were in rural areas and the rest (36.73%) in urban areas.The CSA report figured out Cottage Industries in Ethiopia as follows: Table 6.1 Cottage industries in Ethiopia Establishments Employment No Industrial Groups No. % No. % 1 Handloom weaving 221848 22.8% 296737 22.7% 2 Wearing apparel 24137 2.5% 32401 2.5% 3 Food and Beverages 524172 53.8% 720,895 55.2% Non-metallic mineral 4 products 92403 9.5% 109783 8.4% Wood and saw milling, 5 etc 60462 6.2% 70137 5.4% 6 Fabricated metals. 20788 2.1% 33535 2.6% 7 Furniture 16561 1.7% 24830 1.9% Tanning and dressing of 8 leather 12025 1.2% 15068 1.2% 9 Chemicals 1117 0.1% 2125 0.2% 10 Tobacco 966 0.1% 1116 0.1% 11 Publishing Printing, etc. 197 0.02% 240 0.02% Total 974676 100 1306867 100 Source CSA, Report on Cottage /Handicraft Industries, 2003With regard to the weaver’s demographics in Ethiopia, in the CSA report it is indicated that in2002 there were 221,848 weaving establishments in the country. Assuming the increase innumber to be half of population growth (2.7%), the number of weavers in 2010 was expected tobe 245,000. Table 6.2 illustrates the development and location of establishments using the followingassumptions. • The number of weaving establishment may increase by half of the population growth or 1.35% • Urban weavers (both male and female) are estimated to constitute 45% of total weavers in the country whilst the rest, 55%, are situated in rural areas.The female representation in the sector is 39%. 211  
  • 224. Table 6.2 Number of weavers in the informal sector in Ethiopia No. of Year Weavers Gender Weaving Female Male Establishments 1 2002 296,737 115727 181010 221035 2 2003 300,743 117290 183453 224019 3 2004 304,803 118873 185930 227043 4 2005 308,918 120478 188440 230108Source: Worku Alemayehu, Unleashing the Potential of MSMEs in Ethiopia, CDP - Handloom Clusters, diagnostic study report 2006.It could be possible to project the Number of weavers in Addis Ababa (Table 6.3) apart from thegeneral figures mentioned by the ReMSEDA and other stakeholders based on the followingassumptions. • The city’s population growth is 2.9% • the weaving population & establishments growth is 1.35% • About 20% of weavers are found in Addis Ababa. • Urban weavers constitute 45% of the total weaving population. • Women weavers constitute 39% of the total weaving population • Table 6.3 Number of weavers and weaving establishments in Addis Ababa City Administration S.No Year Addis Total No. of Weavers Gender(Addis) Weaving Population Nation Addis Female Male Establishments (000) Wide in Addis 1 2002 2642 296,737 59347 23145 36202 44207 2 2003 2719 300,743 60149 23458 36691 44804 3 2004 2797 304,803 60961 23775 37186 45409 4 2005 2879 308,918 61784 24096 37688 46022 5 2006 2962 313088 62618 24421 38197 46643 6 2007 3048 317315 63463 24751 38712 47273 7 2008 3136 321599 64320 25085 39235 47911 8 2009 3227 325940 65188 25423 39765 48558 9 2010 3321 330341 66068 25767 40302 49213 Source: Worku Alemayehu, Unleashing the Potential of MSMEs in Ethiopia, CDP - Handloom clusters, diagnostic study report 2006. 212  
  • 225. In general, most traditional weavers are within the in-formal sector. They are almost all self-employed and operate from homes, have no formal training, do not pay taxes and have almost noaccess to modern finance in whatever form.7.3 Handloom clusters at Addis AbabaA cluster is basically the concentration of economic activities within a certain sector producingsimilar and closely related goods. Essentially through the collective efficiencies enjoyed byclustered firms, clusters can enable participation in markets that may otherwise be inaccessible tothem. This is especially important in developing countries where industry is dominated bysmaller firms with limited access to capital. Through the division of production within anindustrial cluster, the capital requirement to enter the market can be significantly lowered, whichenables more producers to enter the market and achieve returns to investmentSince 1960s, the International agencies, such as UNIDO, World Bank, ILO and many other aredebating on the question of promoting the growth potential of micro enterprises in developingcountries.Micro enterprises are recognized to have potentials to reach out small and specialized markets.They also generate income and employment in labor intensive sectors engaging the poorestsegment of the society particularly women and unskilled labor. Yet, micro enterprises encountervarious constraints that affect their business environment and undermine their development.These constraints are often characterized by low productivity, poor information access, limitedtechnical know-how and lack of capital and market access, mostly serving local markets.Industrial clusters in developing courtiers are particularly common in traditional and laborintensive micro enterprises in rural and poor urban areas.UN Institutions like UNIDO initiated a clustering of weavers often operating through establishedcooperatives. The clustering way of handloom production is observed even in remote rural areasalthough its organizational structure is different from those in the urban centers. The handloomweaving cluster has economic and development importance in terms of very high employmentpotential and linkages with agriculture (cotton) economy. Availability of raw materials locally,traditional skills, increasing global market for niche hand woven home furnishings and theadvantages of export market access 213  
  • 226. Clustered handloom activities are apparent in Addis Ababa as well as in parts of the countryside.Within Addis Ababa, there are a number of neighborhoods where handloom production and salesare geographically concentrated such as Gullele, Shiro Meda, Ayertena and Akaki. Elsewhere inthe country, regions with longstanding cultural traditions of handlooms include Amhara(Gondor, Wollo), Oromia (Harar/Dire Dawa) and the Southern Nations Nationalities and Peoplesregion (Arba Minch/Dorze). Interestingly, the neighborhood clusters in Addis Ababa correspondethnically to these “source regions” (for example, most of the producers and traders of traditionalclothing in Shiro Meda come from the Arba Minch and Gamo area Dorze community in thesouth). In Addis Ababa, out of the estimated 60,000 micro enterprises in the sector, 20,000 of them arefound clustered in a district called Gullele in the northern part of the city. Shiro Meda, a sub-district located in the northern part of Addis Ababa, at the foot of the Entoto Hills is home tosome of Ethiopia’s most respected weavers. Over the last 60 years, several weavers havemigrated from the southern part of Ethiopia to Shiro Meda in an area now known as Kebele 19,20 and 21.The 306 weavers at Adisu Gebeya and about 196 weavers in the Shiro Meda area have organizedthemselves in 11 & 7 cooperatives/networks. The primary responsibility of the cooperatives is toAdvocate and lobby for the interests of their members. This form of network is very helpful forinterventions, like UNIDO-CDP, to make an impact for the development of the Handloomcluster in general. Currently, even though, the cooperatives are like a living-dead type ofinstitutions, the members have established an organizing committee which could do the groundwork for the establishment of cooperative unions in each location.Working premisesUnavailability of the working premise is the major problem for most of the micro enterpriseoperators in Ethiopia, in general. This general problem is also prevalent in the Handloomweaving sub-sector. The Addis Ababa Administration MSEDA is doing its very best effort inorder to alleviate this problem.The ReMSEDA is working strongly to alleviate working premises related problems permanentlyand prepared a plan to construct 100 multi-storied blocks (of G+4 each) capable ofaccommodating around 10,000 looms, and allocate them to the weavers at a monthly rent. Whilethe construction of such permanent work sheds is in progress, the city administration has 214  
  • 227. identified vacant sheds at two locations namely Adisu Gebeya and Shiromeda- within the subcity of Gulele. The weavers in the two locations have organized themselves in to 18cooperatives. Each of these cooperative member weavers was facilitated by the cityadministration to acquire the improved loomThe government is also encouraging the clustering of handloom weavers by making availableabandoned factory halls or other spacious buildings, at relatively favorable terms It is animportant phenomenon in a sector that is traditionally characterized as cottage industry, a part-time job, with irregular production, quality problems, distribution and management problems.Private companies like GiGi, Sara Garment and Woinu have participated in such Clusteringinitiatives and have set up larger production units, with a few hundred handlooms per unit, andworkers that come to the production facility instead of working from their homes. It givestremendous benefits in terms of production flow, productivity, quality management, training,motivation, storage, and distribution.Handloom clusters in Addis Ababa are expanded beyond the domestic market to capture theemerging export market. Some clusters formed associations and become market agents. Themarket established by handloom export companies, for instance, serves to reduce the marketingbarrier. These companies specialize in a special brand of handloom products for export. Thecompanies have developed and established business linkages through trade missions and tradefairs, whereby they promote innovative markets. They sub-contract local producers specializingfor export market with the specific brand design. The market destination is Europe at large andsome parts of African countries. The Ethiopian Diaspora living abroad also acts as a marketcatalyst for creating market linkages.Gender The statistics on handloom weavers indicates that both sexes are involved in this weavingbusiness, even though it is not equal in the distribution. As far as the cooperatives are concerned,justifiable number of women is not included as members and it is found that no woman isselected as member of the leading group of each cooperative or union. So in general it can besaid that there is some sort of gender inequality specifically the weavers in the cluster areconcerned. Almost all women are performing weaving business in their home. The fact thatwomen weavers work from home enables them to look after their own children. This, however,increases their responsibilities since they also have weaving duties to perform. Working outside 215  
  • 228. the home effectively separates women weavers from their children but makes it hard to employsomeone at home to look after them. Both responsibilities impose heavy burdens on womenweavers, though the option to work outside the home is more appealing.On the other hand it is observed that quite a few women entrepreneurs are involved in thehandloom business and are becoming successful entrepreneurs. This shows that handloomventure is a good opportunity equally for both male and female so as to integrate the issue ofgender in the cluster development strategic action plan.Working conditions and environmental issuesThose of weavers who became members of the cooperatives got a chance to access thetemporary working premise arranged by the ReMSEDA and get improved Handloom, whichseems ergonomically good for weavers. But most of the weavers did not get this improvedHandloom. Even those who are working in the arranged premises expressed that the building isnot conducive for working because it will become easily hot in the sunny times of the day andcold when the weather changes.The working conditions, health and safety issues are worse for those of the weavers who areoperating in their homes.With some of the weaving enterprises, like Muaya PLC and Menbis Design, there are goodworking conditions and healthy and safety care measures.The Table 6.4 summarizes the comparative advantages of using separate working premises forweaving. 216  
  • 229. Table 6.4 Comparison of advantages of working at home and using separate working Premise S.No Description Home Working premises 1 Extra Rent None There is extra rent 2 Transport cost None There is transport expense 3 Household management Easy Not so easy (for women weavers) 4 Rest Can be taken as Normally rest is regulated necessary and is taken with others at specified time. 5 Meals and snacks Can be taken fresh Cold food taken from home 6 Child rearing (women Own care, with Possibly joint childcare unit weavers) interference of work involving cost, but little work interference 7 Access to market Difficult and restricted Better access to market 8 Ventilation and lighting Likely to be poor Likely to be suitable 9 Possibility of installing Place unlikely to be Easy improved looms suitable 10 Safety and health Poor Better. Possibility for improvements 11 Traceability for Bad Good exportable products1 12 Opportunities for Poor Better trainings 13 Learning from one Remote Likely another 14 Flexible operations time Possible. Possible if arrangements are made, regulated 15 Absence from work due high probability Minimized. to cultural causes, like prolonged cultural post funeral mournings, days dedicated to saints, etc1 Refers to the international practice of importing products where accepted internationalstandards of working conditions, working age, labor practice, etc, are fully met.Source:Worku Alemayehu, Unleashing the Potential of MSMEs in Ethiopia, CDP - HandloomsCluster, Diagnostic study report, 20067.4 Cluster institutions and their functioningThe institutions involved in this Handloom Weaving cluster include both governmental,Cooperative Associations (Networks) and Non-governmental Organizations and sometimes                                                             217  
  • 230. research institutions. The main institutions involved in assisting, (directly or indirectly), theclusters are • FeMSEDA • Addis ReMSEDA • Productivity Improvement Centre • Sub -City MSE development Offices • Cooperatives Organizing Office • The City Administration • Kebele Administrations • Weavers Cooperative Associations • Cooperative Unions(in process to fulfill legal issues) • ILO Addis Ababa Office • Addis Ababa University, Institute of Ethiopian Studies • Addis Credit & Saving S.C.(Micro Finance Institute) • GTZ(Previously active in BDS provision Facilitation) • Private BDS ProvidersGovernmental institutions are playing their role in the provision of training, working premises,facilitating market linkages and improving the overall policy environments to promote weavingbusiness development.Working capitalEven though Capital is the basic requirement for the cluster activity in general and Weavers inparticular, the Addis Credit & Saving Institution has only provided loans to the weavers for theacquisition of the improved Handlooms. The weavers are still in short of working capital. Thismicro finance institute lacks to develop need based financial service delivery mechanisms.Cooperative Associations (Unions) are supposed to advocate for their members andfacilitate/provide services like bulk purchase of raw materials, receive and distribute bulk ordersamong members (cooperatives), assist members in sourcing inputs and available markets fortheir products, and provide other services to members as the need may be. According to the dataobtained from Addis ReMSEDA, there are 93 weavers cooperatives in Addis Ababa City. 70 ofthem are found in the Gulele Sub-City. The Table 6.5 shows the details of these cooperatives. 218  
  • 231. Table 6.5 Weavers cooperatives (Networks) in Addis Ababa city No. of Members Total Cooperatives Female Male Total Capital Birr 93 494 4744 5238 1,176,908 Gulele 440 3170 3610 243,272 Subcity(70) Gulele city 89 67 69 21 %age(75)Source: Worku Alemayehu, Unleashing the Potential of MSMEs in Ethiopia, CDP - HandloomsCluster, Diagnostic study report, 2006Here it can be observed that not sufficient number of weavers is organized in cooperatives(Networks) as compared to the estimation that about 60,000 weavers are found in Addis. Eventhe existing weavers cooperatives are not as such active in serving their members as they aresupposed to do so. They are a "Living-Dead" type of institutions.The functional relationship among the governing institutions in the cluster is very loose. Sogenerally it can be concluded that the cluster is under performing in terms of governing structureand system Figure 6.1 Handloom weaving cluster mapSource: Worku Alemayehu, Unleashing the Potential of MSMEs in Ethiopia, CDP - Handlooms Cluster, Diagnostic study report, 2006 219  
  • 232. 6.5 Handloom value chains Handloom is a simple value chain activity and is pivotal in the cotton sector as it binds the ruraland urban households together and is grown from the home-based traditional handcraft industry.Handloom weaving was established to meet household need and demand for clothing, thengradually grew to be an additional source of income as an off-farm activity. In fact, handloomweavers are the major demanders of raw cotton, and are engaged in weaving and preparation oftraditional fibers, especially woven dresses that are popular both at the rural and urban centersand are also exported to Ethiopians living abroad. The main providers of raw cotton tohandlooms are smallholder farmers. Although the handloom industry depends on simpletechnology and is characterized by low and fluctuating income with no access to markets,finance, and information, it is the most important handicraft group in terms of employment,providing the means of livelihood to the majority of weavers located in rural areas.In the value chain context, the major products of the handloom sector can be divided in to semi-finished fabrics and finished products. While the semi-finished fabrics are usually channeled tothe domestic garment factories for further processing, the finished products are divided intotraditional clothing categories like netela, gabi, kemis, and kuta which are sold mainly in thedomestic market and to Ethiopians living abroad, and home furnishing textiles, which aredestined to the international market. Modern handloom products are diversified and supportedwith infrastructure and technology innovation.The pathways of the value chain, is complex. Figure 6.2 shows the generalized chaincomponents for handloom marketing. There are set of actors in the chain: input suppliers areshown at left, weavers and traders in the middle, and output buyers on the right. Key institutionalactors, shown the top and bottom of the diagram, facilitate the business environment, as well asprovide inputs to the system (e.g. capacity building, access to financial markets. 220  
  • 233. Figure 6.2 Actors and institutions in Ethiopia’s handloom sectorSource: Gezahegn Ayele etal, Infrastructure and cluster development a case study of handloom weavers in Ethiopia, 20096.6 Generalized chain components for handloom marketingThe marketing chain for handloom products is shown in Figure 6.3 Figure 6.3 Generalized chain components for handloom marketing Source: Gezahegn Ayele etal, Infrastructure and cluster development a case study of handloom weavers in Ethiopia, 2009 221  
  • 234. Handloom Weavers in the cluster, sale their products using (Distribution System); • Open market (mostly week ends) • Receiving orders from Master Weavers and sometimes from some individuals who have an interest to export these products. Master Weavers are weavers who have become relatively successful in this business and graduated themselves to the level of receiving and giving bulk orders of Hand woven products. Most of them have their own permanent relationship with selected weavers (both individuals and Cooperative members) and of course some of the master weavers have their own employed weavers. • Taking Sub- Contracts from other well organized Enterprises and engaged in exporting of Handloom Weaving products, Like Menbis Design. This sub-contracting arrangement is functioning in such a way that sometimes the weavers will also be given with the required raw materials and mostly with down payments. This shows that there is a good vertical linkage with the big firms in the Handloom Industry. • Orders from individual users of the products. This is widely observed in the case of Gabi and Netela type of Traditional Cloths in the domestic market. • Traditional Cloth sales shops. The shop owners are sometimes give orders to the weavers with specifications for a specific item they want to buy. This is true in the case of those traditional cloth shops located in Shiromeda cluster area. But in the case of others who are located out of this area, the master weavers are suppliers of the finished hand woven products."Flying Traders" These are people who are simply collecting the hand woven products undernormal market circumstances i.e when the prices are low and supply to the traditional clothsshops or other interested parties at higher prices. Most of these buyers do not haveunderstandings of the weaving. They simply follow the price trends in the market. These buyersare called flying Traders because it is difficult to tress them in the actual operation anddistribution process of the cluster products.6.7 Production technologyThe production process for the household and home furnishing textiles in Ethiopia has a lowtechnology input. Practically all the stages in the production process are carried out manually,from spinning to weaving. In some cases (e.g. Woinu), some second hand machinery is used, but 222  
  • 235. even then, the majority of the work is carried out manually. Main tools used are hand spinningwheel and handloom. The manufacturing process is basically the same, whether the productiontakes place in a village as part of the cottage industry by a single household or in a factory hall ofa medium-sized enterprise.HandloomOriginally the Handloom is traditionally designed by the weavers themselves. This traditionalhandloom is not convenient for weavers and it affects their quality and productivity as well ashealth. There are consecutive efforts made by the ReMSEDA, FeMSEDA and other stakeholdersto improve the level of technology of traditional handloom and as a result substantialimprovements could be observed. These improvements in handloom help the weavers toincrease productivity & quality of their products. The first substantial improvement made withthe loom is the change of the wood frame to metal one. This change helps the frame to be strongso that the weavers could be easy and quick in the weaving process. And also it helped theweavers to be able to weave their legs being out of a pit, which they used to work with thewooden framed traditional handloom. There is still more scope for improvements to be made.The other major technological improvement made in such handloom is that of improving theprocess of throwing shuttle for the insertion of weft yarn. Previously the weavers were throwingthe shuttle right and left using their right and left hands. But the improved one avoids throwingof the shuttle horizontally by using their both right and left hands, which is basically saving theireffort and time, and consequently improve productivity and quality of the product. The loom istested in the MUYA PLC and it is possible that the loom cost can be significantly minimized byusing the wooden frame unlike the metallic frame which costs about Birr 2000 for each loom.This improvement is done & became successful with no negative effect on the productivity ofthe weavers in the aforementioned handloom weaving at MUYA PLC.The spare parts for the handloom are supplied by private suppliers and/or some weavers as well.Weavers explained that as such there is no a frequent need for the supply of handloom spareparts, but the shuttle is the one which is relatively needs frequent replacement because it isusually broken in the weaving process.The major steps involved in the process are the following • Spinning cotton fiber into yarn • Winding or packaging of warp 223  
  • 236. • Warping • Knotting of warp on loom (loom preparation) • Weft yarn winding on pirn • Weaving • Quality inspection for any defect in fabric • PackingIn case of production of fabric for garment manufacturing (e.g. in the case of Woinu industry),the fabric is packed and sent to the garment manufacturing plant, garments collected from themanufacturing plant, inspected and re-packed before final shipment.The detail production of the handloom Weaving is depicted in the Figure 6.4 Figure 6.4 Steps involved in handloom weavingProcurement  Inserting the  Exposing the      of yarn  yarn in a  yarn to  Fitting into  Warping  the Loom  boiled water  sunlight for  drying  Delivering/  Cutting &  Weaving Selling  Packing Source: Worku Alemayehu, Unleashing the Potential of MSMEs in Ethiopia, CDP - HandloomsCluster, Diagnostic study report, 2006With regard to the production layout of the weaving process, generally it can be said that there isno clear layout of the process as far as each individual Handloom weaver is concerned. It canalso be mentioned that the Handloom weavers are not very much aware of the necessity ofproper layout of their production process for saving their production time and increasing theirefficiency. As such relatively meaningful machinery layout can be observed with the handloomsinstalled in the temporary production shade arranged by the Addis Ababa AdministrationMSEDA for members of weaving cooperatives. But those Handloom Weavers who are workingin their premises are using their living room as production unit, dinning, sleeping, kids 224  
  • 237. entertainment, etc. Generally their residence is everything for them. Everything in the home canbe found around the handloom weaving.Raw MaterialsThe production of handloom textiles in Ethiopia is dominated by the use of cotton. Although insome cases wool, silk and synthetic fiber yarns are used. Cotton is by far the most important rawmaterial in the handloom industry.Essentially, the raw materials used for handloom production are • 100% cotton hand spun cotton yarn for weft. • 100% mill cotton yarn sourced from local market (dyed or bleached) for warp • MAG (Sizing agent) for warpOther fibers • Jute yarn from local market • Silk yarn – imported from China and India • Synthetic fiber yarn importedSourcing of cotton fiber and yarnTraditionally, the production of hand-woven fabrics in Ethiopia is dominated by the use of cottonthat is processed as input for yarn. Although in some cases wool, silk and synthetic fiber yarnsare used, cotton is by far the most important raw material in the industry value chain. The mainsource of cotton is smallholder cotton farms that are often found dispersed throughout thecountry. While all the cotton produced by state farms and private commercial farms go to theginneries, only 20% of the smallholder production is ginned. This is mainly because handloomweavers are the main buyers of raw cotton directly from smallholder farmers. The cotton fiberpurchased from smallholder farmers is used for hand spinning into yarn. The hand spun yarn isused as a weft yarn during handloom weaving. It is estimated that 200 tons of hand spun yarn isproduced in the country.Yarn for preparation of warpMill made yarn is used for warp preparation. Since the handlooms are scattered and structurallydisorganized most are operated at home. The raw material sourcing by the sector does not have apermanently established source. However, the major source of cotton yarn for warp preparationis the domestic textile mills. Adey Abeba Yarn Factory and Dire Dawa Textile Factory are onlytwo textile mills that specialize in yarn making. Although other textile mills also produce yarn, it 225  
  • 238. is often for their own consumption for further processing into fabrics. The very limited processing units that are engaged in the production and marketing of yarn together with their under-capacity performance has therefore created a major concern in the overall production of the handloom sector. This is further aggravated by shortage of good quality dyed cotton yarn material in the domestic market unable to meet the demands of the handlooms with the supply for demanded color. However, the clustering approach, by way of networking, created better linkage between weavers, spinners, and small and medium handloom exporting firms and minimized problem of inputs access. The raw material purchase The above mentioned raw materials are available from local sources. Of course hand spun Yarns and Mag are manufactured locally. The weavers are buying these raw materials from retailers, and even re-retailers. The channel of raw material acquisition is depicted in Figure 6.5 Figure 6.5 Raw material acquisition channelManufacturer Wholesaler  Retailer  Re‐Retailer  Weaver  /Importer  Source: Worku Alemayehu, Unleashing the Potential of MSMEs in Ethiopia, CDP - Handlooms Cluster, Diagnostic study report 2006. There is no problem with regard to the availability of the main raw materials. Specifically, the Re-Retailers are found around and/or near to the weavers working premises or residence, where they also work in their residence. Most of the big Retailers and wholesalers are located in Merkato area. Getaneh PLC, a private company in Addis Ababa is the major distributor of the locally produced raw materials, i.e., Yarns. The company is willing and of course has a plan to assist the weavers in terms of promoting their products for the purpose of securing wider market locally. The company is distributing the raw materials to the wholesalers in all parts of the country. Furthermore, the company is also willing to distribute the required raw materials for weaving to the Networks of weavers (Cooperative) directly if they could manage to make relatively a bulk purchase. 226   
  • 239. CostingOne can imagine that the actual cost of raw materials will be high because as it is indicated inthe Figure 6.5 above, the channel is long and at each step there are cost add ups. Theapproximate cost structure analysis could be as shown Figure 6.6 Figure 6.6 Cost structure analysisSource: Eyob Demessre etal., Fruits of the loom-Export potential of Ethiopian handmade,handloom and home furnishing textiles 2005Raw material is the biggest cost items (50%), followed by labor (40%) and packaging (5%).Given the character of the industry, low technology input, highly manual operations, lowstandard packaging, the cost structure seems realistic and quite representative.6.8 Problems during the production processCotton YarnMost of the weavers complain on the quality of the domestically manufactured Yarns, in theway that sometimes the raw materials are not to the standard strength to be comfortable in theweaving process and also sometimes there is a problem in bleaching them in maintaining theirappropriate white color.Volume and quality of dyed yarnOne of the problems faced in the production process is the shortage of good quality dyed cottonyarn. The dyeing of cotton yarn is a business that is controlled by state-owned companies andcannot meet the current demand, which interrupts the production process. This situation needs to 227  
  • 240. be addressed urgently, because it poses a serious threat to the operation and expansion of theindustry. Especially when targeting international markets where big volume, continuous supplyand Just-In-Time delivery are critical success factors.SubcontractingAnother problem reported by several of the organized companies manufacturing handlooms istimely processing and timely delivery, as well as quality management in case of subcontractingorders to workers in different locations. This is a common issue in subcontracting, which,however, can be effectively addressed by the concentration of workers into a central productionunit, a trend that is establishing in Addis Ababa.DesignA large part of the household and home furnishing textiles is produced without paying attentionto fashion trends in international markets. Usually, they are produced following traditional,customary designs, sometimes by imitating designs in the market, and sometimes according tobuyer specifications. There are only a few companies that are aware of the importance of fashionand design and who act in a pro-active manner. As a result, a lot of the household and homefurnishing textiles produced in Ethiopia does not match international market demand.For the household and home furnishing textiles market, design is a critical success factor,something, that is not sufficiently recognized in Ethiopia. There is for example an absenceof design schools for training professionals in this area. And the design centre at the handicrafttraining centre of FEMSEDA, that gives training in these matters to producers,is lagging behind not just in years, but ages. It is an issue that needs serious attention.Packaging and storageThe transport packaging materials used by the firms that are currently engaged in the exportingof handloom products are carton boxes and polyethylene bags which are obtained from localsuppliers. These packaging materials are not up to the required standard on the ground that: • They are not strong enough to protect products from damages • The capacity to resist moisture is limitedThe main factor responsible for the low standard of these materials is lack of technologicalcapacity by the few government owned production firms engaged in this production process.This issue needs serious attention, since it affects all export related businesses. 228  
  • 241. Another relevant obstacle is that there is no adequate printing press in Ethiopia that is able toproduce international standard printing and art work for the sales packaging. As a result, somecompanies import sales packaging from overseas. Even then, due to limited awareness of thecrucial importance of the sales packaging is below standard. So in terms of materials used,presentation, dimensions, graphic design, and colors, the sales packaging needs serious attention.Concerning storage, there is no eminent problem in storage area and space. The only issue ofrelevance might be the need for keeping adequate stock of raw material (like the dyed yarnwhich is regularly in short supply as mentioned earlier).6.9 Quality management systemMost of individual weavers who are working in their premises and using the temporary workingshade are unaware of systematic quality management or inspection activities. But in the case ofwell organized weaving industries like Muya PLC and Menbis Design, there is a wellestablished quality management system and every product at the finishing point will be checkedby a Quality Inspector and confirmation is given by the inspector.TrainingGenerally training could be classified as Technical and Business management trainings in thecontext of Handloom Weaving Business. So with regard to the technical training the weavers inthis cluster get the weaving skill informally from their ancestors and/ or informal employers. Itcan be concluded that none of them attend formal technical skill trainings to begin the weavingbusiness. Of course they have attended different weaving skill up-grading trainings (design, colormatching, weaving with the improved Handloom, etc) sponsored and organized by differentstakeholders.With regard to Business management related trainings, owners of few organized companieshave attended trainings like CEFE and even though, they have also expressed that the trainingwas helpful. It is observed that most of them are not exercising to manage their own weavingbusiness according to the inputs of the trainings.There is as such shortage of sufficient technical training institutions in Handloom Weaving. Theonly well organized institution which has the weaving training department is FeMSEDA.Even though a separate training need assessment (TNA) is not conducted, some of the majortraining needs are summarized be 229  
  • 242. 1. Technical Trainings in o Product Design o Color Selection o Improved Handloom Operation o Product Development o Product Diversification o How to increase productivity o How to improve the quality of the product o Raw materials selection 2. Business Management o Market Research o Customer Approach o Product Costing and Pricing o How to promote products o Financial Management o Record Keeping o Time Management 3. Cooperatives/Networks a. Cooperative Management b. Leadership c. Team work and division of labour d. Principles, rules and regulations of group e. Logistics management6.10 Handloom productsEthiopia has diverse handicraft heritage including traditional handloom products. The EthiopianGovernment through FeMSEDA is giving emphasis on the development and promotion ofEthiopian handloom products to generate more employment opportunities and foreign currencyearnings to the nation, thereby create wealth and reduce the impact of poverty. The growth ofthis sub sector necessarily requires the creation of demand of handloom products. One of themeans to achieve this goal is through seeking the export market. The report ”Ethiopian 230  
  • 243. Handloom Product Export Market Study” prepared by FeMSEDA and Ministry of Trade andIndustries joint study team Addis Ababa, reveals that there is high potential for export ofEthiopian Handloom products in the countries of the European Union particularly in Germany,UK and France.The handloom products produced in Ethiopia can be classified into two groups 1. Traditional Fabrics & Dressings: This major category of Handloom Weaving includes those fabrics produced for Traditional Clothes like Gabi, Netela, Kemis, Tibeb, and Shema. Every weaver can produce all the products under this category except Tibeb. These fabrics are popular in domestic market and among the Ethiopians staying abroad. 2. Home and household textiles and accessories suitable for export market.Profiles of exportable home and household textiles which are produced in the handloom sectorare grouped as follows: - • Bed furnishing; • Table linen (table cloth, table cover, table center, table runner and Napkin); • Kitchen linen (kitchen towel, dish towel or tea towels); • Window coverings (Net or lace curtains, curtains & draperies); • Wall and ceiling coverings, upholstery decorative pillowcases, throw rugs; • Scarves, Shawls, Fabrics for Shirts & Boxer • Home Accessories like Pillow Cover, Runners, Wall Hangings, Fashions Hand Bags etcA brief profile of some of these exportable products is given belowBed SpreadThe Ethiopian bed spread products are the Shema Alga Libse and Shema Trase Libse. TheShema Alga Libse is made from 100% cotton in different traditional patterns/different sizes andit is an eye-catching bedspread mostly used in urban community. Shema Trase Libse is usuallymade from plain white cotton fabrics in different traditional embroidery at the middle.Table linenThis group comprises of tablecloths, table covers, table-centers, table-runners and napkins withtwo functions of protecting the table and decoration an aesthetic appeal. Table napkins arealways sold in sets matching the tablecloth, particularly for expensive products. White or plaincolors with or without colorful printed/embroidered designs ‘Tibebe’ are most commonly 231  
  • 244. demanded products. Table lines are more affected by fashion trends than bed linens. It istherefore important for exporters to monitor changes in taste, color, material and texturesaccording to market trends. There are assorted table linen products known as Yeterebeza lebseand Memegebia Check. Yeterebeza Lebse is a hand loomed fabrics from cotton and wool, withdifferent Ethiopian traditional patterns. The Memegebia Check are mats made of hand loomedcotton fabrics. Both the products are manufactured in different Ethiopian traditional patternsproduced in different sizes. Materials can be flat, structured, printed, dobby, jacquard,embroidered, damask with all kinds of adornments and decorations. Table linen is mostly madeof cotton, however; materials other than cotton have a demand for high quality textile fibers e.g.silk or easy-to maintain such as polyester. However, the market share of pure cotton has so farremained sufficiently stable.Kitchen linenThere is also a demand of attractive kitchen linens, such as dish towels, terry towels, warmers,placemats etc.The market for dish towels is decreasing as a result of increasingly more households usingautomatic dishwashers, so that hand drying is no longer necessary. In the kitchen, two types ofcotton towels made of terry or flat woven structure are used. These products are not producedlocally but it is possible for Ethiopian producers to adopt them.Window coveringsThese are divided into net or lace curtains. Curtains and draperies have various functions: toprovide privacy; eliminate (sun) light; insulation (thermal, acoustic); aesthetic effects etc. Themore open the fabric construction, like net or lace curtains, the greater the visibility of outsideview and light penetration, but there is less privacy in which case the decorative function is thehighest priority. Net curtains adorn the window frame in many houses. The major fiber used fornet curtains is polyester filament. Other fibers are polyester staple and acrylic staple.Curtains are relatively lightweight and are in most cases hung without linings, while draperiesare heavy, often opaque, and usually have a lining. Curtains are largely sold readymade inlengths, which fit the standard window sizes. Buying curtain fabrics to sew one’s own curtains orletting an interior decoration firm make them up is also common, usually this applies toexpensive materials mainly for offices. Curtains and draperies are made from all types of fibersand fabric constructions; however, most curtains are made of synthetic fabrics this is because 232  
  • 245. cotton curtains require ironing after washing and they are heavy and thus inconvenient inhandling. There is also a market for expensive fibers such as silks, but it is fairly limited becauseof pricing and handling restrictions. The choice of curtains depends on the fashion in wallpapersand paints. ‘Megareja’ are Ethiopian hand loomed curtains; they are decorated by woven designs{tibebe} and embroideries.Wall and ceiling coveringsThese are made of fabrics, which are placed on wall and ceilings, can be visually interesting aswell as functional. Such fabrics reduce and absorb noise in a room. These are mainly used in thecommercial or contract interior industry. Usage in the residential sector is very limited becauseconsumers prefer wallpapers, plaster work or other non-textile applications; soft floor coveringsare also used as ceiling coverings.Upholsteries They are heavier fabrics (more ends and picks per cm), better dyed (color fastness) and mayhave a special finish (flame- and stain-resistant). Requirements are higher in the case of usage inthe contract sector (public buildings, hotels, offices etc.). Fabrics for upholstery are stretchedtautly over furniture frames and these require more durable fabrics and are also used forcushions. The major upholstery fabrics used are made of regenerated cellulosic fibers and cotton,like (heavy) corduroy, velour, velvet, damask, jacquard etc.Woven rugs:Hand-woven durries and similar flat woven rugs have enjoyed a long period of popularity. Theyare sold in cotton and wool with fringes at the ends. These flat woven rugs feature simpledesigns. It is very important that colors and designs are adapted over time to meet the mostrecent fashion and interior trends. Flat woven kelims have been very popular as a relativelycheap, colorful and decorative article for floors and walls. There is strong demand for carpet andrugs in coir, sisal, jute and other natural fibers. Natural-looking textures, colors and designs areimportant. Rugs in these materials, with borders in colors to coordinate with other interiorfurnishings, are extremely popular. Borders are available in a wide range of different fabricscolors and patterns. Jute, cotton, leather, imitation leather and decorative upholstery fabrics areall offered as borders.Local carpet companies (importers and manufacturers) specialize in customizing rugs forindividual customers, especially at the upper end of the market. Over supply of cheap poor 233  
  • 246. quality carpets have had a negative influence on this market sector, and demand has shifted moretowards Gabbeh and other designs. Wall and ceiling coverings, upholstery and woven rugs arenot produced in Ethiopia due to lack of local demand though these can be adopted and producedfor the export market.Traditional productsThe Shema Borsa {Hand woven bag}, Yanget Libse {Scarves}, Shema Kobe {Cotton cap},Sigaja Mentaf {Hand knotted Floor Cover/Carpet}, Sofa teras {Cushion cover}, Kumta {Boxershorts} are other products that are produced in the country and are exportable.‘Shema Borsa’/Hand woven bagShema Borsa is a hand loomed cotton fabric. Designs vary from colorful to plain fabrics. Itcan be used as lady bag or children school bag. The designs and sizes vary.‘Yanget Libse’/ScarvesIt is produced from cotton and wool using handloom. Designs vary from colorful to plain fabric.Qualities differ according to the market; highlanders mostly use it.‘Sofa teras’/Cushion coverHand loomed cushion covers decorated by traditional designs called "Tibeb" are specially madefor the royal/rich class.Other exportable handloom productsSome of the other exportable products are listed below: 1. Sofa cushion covers 2. Place mats 3. Prayer rugs 4. Bath linen 5. Floor covering 6. Lungis 7. Shopping bags, hand bags, shoulder bags 8. Bed room slippers 9. Hand woven cotton baby blankets, woolen blankets, nursery blanket 10. Carpet tiles 11. Wall hangings 12. Durries 234  
  • 247. 13. Cotton, wool and silk shawls 14. Hand knitted poncho 15. Woven wool cloak 16. Silk scarvesThese products are not manufactured in Ethiopia, but can be easily adapted.Based on the profiles of handloom products, as outlined in this section, it is evident that thecountry has huge potentials to produce exportable handloom products. This conclusion is alsosupported by the fact that some of these products have been produced traditionally and that thereare already some Ethiopian companies which have exported handloom products though at a verylow level. With the support and intervention to be provided by the Government and otherstakeholders, this very low-level market share may be expanded tremendously.Future plan of actionIt is apparent from the foregoing that the potentials to go for the export market of handlooms arehigh. Certain products that are highly demanded though not produced in the country may beeasily adapted. The niche market exists for table linen, curtains and other textile materials, thesehave high demand and fetch higher and relatively stable prices; this suggests that the export andproduction emphasis should go to these products. It has also been revealed that Germany is thebiggest market and that it offered premium prices over other countries in the EU.Though there are different approaches for the export to the new market, the direct export througha foreign-based agent/distributor is the best option for Ethiopian exporters.There are a number of Tasks that should follow:1. The formation of the Handloom Export Task Team (HETT) by the Ministry of Trade andIndustries is crucial. The team should comprise members from MOTI, FeMSEDA, Addis AbabaCity Administration, handloom producers Associations and exporters though FeMSEDA TheTeam should be given clear Terms of reference with specified time frame for theimplementation of the export strategy and be equipped with adequate resources. Each agencyshould immediately prepare the Action plan and be implemented.2. It is crucial to establish the volume of the Ethiopian Exportable handlooms and organize ameet of producers and export agents. It will be useful to prepare a database of all handloomstakeholders. 235  
  • 248. 3. Assess and determine all the supports and assistances required from the government andinvestments required from the handloom enterprises and exporters. Establish the support andinterventions, which are required by producers. This will be best done if stakeholders areinvolved to deliberate and decide; preferably in a way of a well organized regular forum andmeetings.4. The time is due for initiating enquiries from the identified potential buyers and if possibleorganizes meetings, visits and attend exhibitions. The MOTI and FeMSEDA should establish thecontacts and link identified agents to exporters and producers.5. The decision on price to make Ethiopian products competitive is important.The above efforts will definitely make Ethiopia ready to offer a rich blend of the traditional handmade products in the global market6.11 Product marketing and pricingHandloom Woven products are destined for both domestic and Foreign markets. However themajor portion of the handloom products is consumed domestically. Ethiopians abroad and otherforeigners are the users of these hand woven non-garment items like tablecloths, pillow covers,table linens etc,. The shop owners in different parts of the country are placing substantial ordersfor products that can be manufactured locally by the cluster weavers. Good opportunity for bulkorders in the domestic and export markets are coming into place for the cluster weavers. Based on the target market, handloom products could be classified as those produced fordomestic market and those which are targeted for international market. Handloom Weavers inAddis Ababa cluster area are using the following major marketing and distribution channels fortheir products.Products for domestic market are Netela, Kemis, Gabi and Kuta, whereas the products forInternational Markets includeTable cloths, (table cloth, table center, napkin, table runner, etc),Decorative scarvesBed furnishings (bed spread, quilt center, pillow case, etc),Window coverings (curtains and draperies, etc), Wall and ceiling coverings (for aesthetic and functional purpose including noise absorption). 236  
  • 249. Product Pricing StrategyConventionally the price of a given product is determined based on the cost of production,competitors price, buyers capacity to pay, producers margin and other factors. But in the case ofalmost all of the individual weavers in the handloom clusters, it is almost impossible to observesuch a practice is exercised in determining the price of their products. There is absolutely nostructured pricing system for the products manufactured by individual and cooperative weaversin the cluster.Consequently most of the individual/cooperative weavers do not have a clear strategy applied forpricing their products. They are price takers, which means that most of the time they simply takethe price that the master weavers, individual users, sub-contractors or any other buyers of theirproducts offer to them. Due to this scenario there is a wide fluctuation of prices.In the case of relatively well organized weaving enterprises, like Menbis design and Muya PLC,there is clear pricing system and strategies in price setting for each handloom product. Sources of FinanceThe Addis Credit and Saving S.C.(which is a micro Financing Institute) is the major source offinance to buy the relatively improved Handloom for those weavers who are members ofWeavers cooperatives. Basically because of the lack of collateral, the weavers are not able to getloans for working capital from any financial institute. Rather they are obliged to take moneyfrom individual lenders with high amount of interest, if they are urgently in need of it; otherwisecontribute their own limited income as working capital. The weavers also have an informal saving association, which is called "EQUB". In this EQUB,all interested members contribute some defined amount of money and give the collected moneyto one member at a time. This is as such a revolving type of fund that all the members will getthe saved amount at different time in turn.6.12 SWOT analysis of handloom sectorThe SWOT analysis of the handloom sector is summarized in the Table 6.6 237  
  • 250. Table 6.6 SWOT analysis of handloom sector Description Current Situation Future Strengths Weaknesses Opportunities ThreatsMarkets • increased demand • Competition • Good emerging • No organized marketing system both in domestic and • Impact of markets for • Little promotional efforts for international markets globalization traditionally Marketing of products • There is willingness (WTO rules) designed • No product diversification and commitment for products. • poor quality products support • Lack good market linkages • positive change of (vertical, sub-contracting, etc.) attitude for local • Low recognition for local products products in the national marketTechnology • Traditional technology • Availability of more • high cost for • Applies • Doesnt allow to produce all types improved Handloom acquiring more traditional of hand-woven products technology improved technology(pre handloom serve heritage) technology • Use of local materialsInputs • Raw material • Shortage of working capital • More Raw material • Low Quality of easily available • High Cost of Raw materials suppliers and/or Raw materials • Spare parts for • Sub-standard quality of Raw manufacturers are Handloom are materials coming in to business easily • Fluctuations in Raw material price available.Innovation • Good • No promotion and motivating • More favor and Innovativeness instruments for innovations. incentives for appropriate local innovationsSkills • Good • Poor design skill • More access for skill • Cost Un traditionally • Low skill in Business management development affordability acquired skill • Poor productivity for the • Willing to • Lack of appropriate training individual upgrade • No formal skill training weaversBusiness • Conducive • No coordinated effort among • both national & • StringentEnvironment policy stakeholders in the cluster. international market environment • Loose functional relationship Conducive policy requirements • Means of • No enough awareness on the environment Income for the significance of working together • No quota in the poor • Non-existence of appropriate international mkt. • High commercial institutes like private employment BDS providers potentials. • Lack Gender sensitiveness in leadership in Coops Source: Worku Alemayehu, Unleashing the Potential of MSMEs in Ethiopia, CDP – Handlooms Cluster, Diagnostic study report, 2006 238   
  • 251. 6.13 Strategic Issues The strategic issues are those issues which need to be addressed in the future in order to make the Handloom cluster competitive both in the domestic and international business arenas. The issues could be identified from the result of the Strengths, weaknesses, Opportunities and Threats (SWOT) analysis of the cluster. The detail action plan indicating when, how, by whom these activities to be performed should be done as far as the implementation is concerned. The budget details and contributions of each stakeholder in the implementation should also be indicated and agreed upon. Based on the SWOT Analysis done for the handloom cluster, the major strategic issues with respective strategic approaches, actions and level of priority, are identified and presented in the following Table 6.7 Table 6.7 Strategic issues and probable solutionsS. Strategic Strategy to Address Possible Actions Level ofNo Issue the issue Priority1 Strengthening • Awareness • Meetings/Discussions for awareness First Networks/ creation on Creation Cooperatives benefits of • Cooperatives/Networks Mgt Training working together • Select willing people • Closely work with • Clarifying mandates of cooperatives willing people at the beginning • Willingness based membership2 Strengthening • Sub-Contracting • Facilitation of Sub-contracting First Vertical & arrangements arrangements Horizontal • Bulk orders • Facilitate for Receiving bulk orders Linkages • Bulk Purchase • Facilitate for purchase of inputs in group.3 Technical & • Technical skills • Provision of need based technical and First Business Mgt development and business management trainings Skills upgrading • Business management trainings4 Marketing • Creation of • Promotion of weaving products through First Market Linkages Fairs, commercial attachés, media, etc. • Aggressive • Niche market researching Promotion • Sourcing market information • Skill Training in • Facilitate sales outlets. marketing • Facilitate establishment of organized 239   
  • 252. • Looking more for market places export5 Technology • Technological • Continuously Developing prototypes and Second improvement work on it • Low cost and • Improve the technology considering the appropriateness capacity of weavers and appropriateness.6 Inputs • Acquisition of • Frequent discussion with local RM First Quality Raw manufacturers for improvement materials and • Encourage manufacturers for import other inputs substitution. • Import • Minimize administrative costs substitution • Work to decrease the channel of distribution7 Gender • Gender Sensitivity • Awareness creation and training on First and equality gender issues • Encouraging w omen involved in cooperative membership • Help women weavers to establish networks • Encourage women to be leadership group members in networks/cooperatives8 Financial • Financial services • Encourage MFIs to develop specific need First Services provision for based financial services to cluster actors, cluster actors specifically to weavers • Continuous discussion with MFIs on the issue of financial service problems • Encourage Group Saving and Credit Associations9 Safety, Health • Improvement of • More awareness creation and/ or training First & Working the SH & Working on the SH issues Conditions conditions of • Technical expertise advise/training on weavers production layout and processing10 Working • Availability of • Availing working premises to all weavers First Premises enough working on rental basis premises • Asses the capacity of weavers for working premises • other facilities arrangement in the working areas11 Strengthening • Capacity Building • capacity building activities based on the First Support • Task reorientation identified gaps Institutions • Coordinating • Avoiding Institutional task duplications activities • Integrating efforts13 Private BDS • Developing/attract • Conducting Awareness creation and/or Second Providers ing Private BDS training on significance BDS Providers in the • Encourage cluster actors for BDS BY 240   
  • 253. cluster Using Cost sharing mechanisms at initial stages • Encourage Private BDS provides in the cluster14 Quality • Facilitating quality • Facilitate on-the site service for quality Second assurance certification certification system for • Developing common facility for quality exportable checking systems weaving products • Undertaking Quality awareness creation at affordable cost and /or training15 Business • Formulation of • Introducing incentives in the policy Second Environment Favorable policy • Develop flexible procedures for policy and revision of implementations existing policies16 Research & • Innovations • Initiating both private & Public R&D Second Development institutes17 Trust b/n and • Building Trust b/n • Undertaking frequent discussions in the First among and among cluster cluster Cluster actors actors • Encouraging working together • Developing activities that could be done together, like group purchasing and marketing18 Coordination • Coordinate all • Exchanging information regularly First of Efforts efforts to be • Planning together, if possible exerted to develop • Mobilizing resources the cluster19 Self-Help Establishment of • Conducting Awareness creation meetings Second Groups self-help on SHG Groups(SHG) • Starting with interested people • Helping in the process of SHG Formations • Facilitating the process by drafting rules and regulations and over all governing system20 Common • Development of • Conducting Awareness creation meetings Second Facilities common Facilities on the need of Common facilities in the cluster • Prioritizing common facility needs of the cluster for decision to establish • Drafting of common facility management issue and ownership titles • Facilitating the acquisition of requirements for common facility