Ethiopia's economy is shifting from agriculture to the textile and clothing (T&C) sector, with significant growth in exports and foreign investment over the last five years. The country aims to achieve T&C exports of USD 1 billion by 2020, supported by favorable investment policies and trade agreements like AGOA and EBA. However, challenges remain, including limited raw materials and production efficiency issues, despite the government's initiatives to bolster the industry.

2. Country Overview
Ethiopian Economy: Background
Ethiopian T&C Sector
Garment Exports of Ethiopia
Investment Procedure in Ethiopia
Industrial Parks (IP) in Ethiopia
Logistics Scenario in Ethiopia
1
2
3
4
7
8
9
Trade Relationships of Ethiopia
5
Strength and Weakness Analysis10
Content
Challenges in Production11
Investment: A Major Source to
Boost T&C Industry6 About US12

3. 1. Country Overview
Region
Population
102.4 million
Surface
Area
Capital
Addis Ababa
Workforce
80% employment
is in agriculture
Sub-Saharan Africa
/ East Africa
11,04,300 square kms

4. 2. Ethiopia Economy: Background
4
A shift is seen from agriculture
to textile and garment sector
in last 5 years
Going from Fiber to Factory is
comparatively easy in Ethiopia
65 international textile
investment projects have
been licensed over the
years for foreign investors
Textile & apparel industry
has grown at an average of
51% in last 5 years

5. 3. Ethiopian T&C Sector
5
 The economic developments in the
textile and clothing sector show
enormous growth in comparison to the
starting phase back in FY 2010-11.
 Yarns export, grey fabric, garments and
traditional handloom together totaled
an export amount of just over USD 160
million in FY 2014-15 compared to USD
60 million in FY 2010-11.
 The Ethiopian government is eyeing to
achieve T&C exports of USD 1 billion by
2020.

6. 6
The apparel sector represents 6% of the country’s
total export value and is projected to achieve a
share of 22% by 2020
Export
Share
3.1 Ethiopian T&C Sector
The USA and EU are the major export destinations
for Ethiopia as, in FY 2016-17, it exported more
than 90% of T&C to the these markets.
Major
Market
At current, the textile and clothing sector consists
of around 130 medium and large scale factories of
which 37 are foreign owned.
No. of
Factory

7. 4. Garment Exports of Ethiopia
7
15%
52.60%
89.65%
30.90%
23.62%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
10
20
30
40
50
60
70
80
90
100
FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16 FY 2016-17
Value in USD million Y-o-Y % Change

8. 8
African Growth and Opportunity Act (AGOA)
enables Ethiopia to export products to the US
market with ‘Duty Free Quota Free’ privilege.
AGOA
5. Trade Relationships of Ethiopia
Everything But Arms (EBA) enables Ethiopia to
export products to the EU market with duty free
access.
EBA
Ethiopia enjoys the DFQF status extended by the
international markets including China, India,
Japan and Korea.
DFQF

9. 6. Investment: A Major Source to Boost T&C
Industry
9
- It is a well known fact that apparel manufacturing is
shifting from China. Now the question is, who all are
capable enough to absorb this shift?
- Due to law and order situation, political instabilities
and poor working conditions in the factories of some
Asian countries, the big retailers such as H&M, Tesco
and Primark are finding sustainable alternatives for
apparel manufacturing. Ethiopia is grabbing the
attention.
WhyEthiopiaisgrabbingtheEyeballs

10. 6.1 Investment: A Major Source to Boost T&C
Industry
10
Is Ethiopia a lucrative destination for the
manufacturers?
1
Do they get more benefits than emerging
Asian nations?
2
Are government policies strong enough to
attract more investment?
3
Why to set-up Factory in Ethiopia?
The answer lies in these points:

11. 6.2 Investment: A Major Source to Boost T&C
Industry
11
 Foreign investment in the
Ethiopian textile and clothing
industry has risen from 4.5
billion birr (US$ 166.5 million)
in 2013/14 to 36.8 billion birr
in 2016/17.
 Most investors that construct
factories themselves come
from Turkey, India and
Bangladesh but also bring
their clients along.
 Chinese manufacturer Jiangsu Lianfa
textile Co will boost 20,000 jobs but
brings its own client base
 Bangladesh DBL has invested US$ 30
million in Mekele
 PVH group just started construction of
large scale factory
 Indian denim giant Arvind will soon start
production of jeans in Ethiopia
 Turkish Ayka textiles runs a factory in
Ethiopia with 10,000 workers

12. 7. Investment Procedure in Ethiopia
12
1. Obtain Investment
License of EIC
2. Obtain business license
and construction permit
3. Notarization of
memorandum and articles
of
association
6. Issuance, renewal,
amendment or
cancellation of
firm name and work
permit
5. Grading of construction
contractor
4. Registration of
technology transfer
agreement
7. Customs duty
exemption of capital
goods for manufacturing
8. Secure land for the
project and obtain a bank
loan, resident permits
and contract for water,
power and telecom
9. Tax identification
number (TIN).

13. 8. Industrial Parks (IP) in Ethiopia
13
 The Ethiopian Industrial Development Zones Cooperation was established in 2014.
 Initially China and India were set to construct Industrial Parks but, later, the
government decided to overtake those initiatives and launch the Industrial Parks
itself.
 The World Bank supports the creation of Industrial Parks within the Competitiveness
and Job creation Project (CJC)
 Ethiopia is a latecomer to IP development and as such can
profit to avoid any missteps other nations have made.Benefits
for
Ethiopia  The failure in other nations of these zones is attributable to a
number of factors which Ethiopia can avoid.

14. 8.1 Industrial Parks in Ethiopia
14
S. No. Industrial Park Area (in hectares
of land)
Developer
1. Addis Industrial Village 8.7 Government
2. Bole Lemi Industry Zone 342 Government
3. Eastern Industry Zone 200 China
4. Kilinto Industry zone 243 Government
5. Kombolcha Industry Zone 1123 Government
6. Dire Dawa Industry Zone 1051 Government
7. Mekele Industry Zone 1000 Government
8. Hawassa Industry Zone 1000 Government
9. Tigray/Amhara/Oromia/SNNP Integrated Agro
Industrial Parks
Government

15. 9. Logistics Scenario in Ethiopia
15
 It takes up to 44 days from the time a
clothing consignment leaves the factory to
when it reaches buyers in Europe, compared
to an average 28 days in Bangladesh and 21
days in China.
 The above scenario drives up costs. It costs
up to US$ 1,870 to export a 40-ft container,
compared with US$ 1,290 in Bangladesh and
US$ 679 in Vietnam, according to Reuters.
 But, a US$ 4 billion electric railway between
Addis Ababa and the Red Sea, will be
inaugurated shortly that will reduce the
transit time to the Port of Djibouti from 2-3
days to eight hours.
Djibouti is the closest and single Port used for
exports of Ethiopian textiles

16. 10. Strength and Weakness Analysis
16
Strengths
 Availability of abundant labor at
low cost
 Cheap electricity- up to 8 times
less than other manufacturing
nations
 Water is free. Most garment
companies use tap water/ground
water/river water
 Import duty is free on equipment,
machinery and on spare parts
needed to realize production
Weaknesses
 Limited availability of raw
materials, only cotton is available
easily in the country
 Lack of manmade fibers and
Ethiopia depends on imports for
MMF sourcing
 Lack of middle management and
merchandisers in garment units
 Inefficient production (45%
maximum)

17. 10.1 Strength and Weakness Analysis
17
Strengths
 Backward integration possibilities
with raw materials: local cotton
availability
 Low rent and lease up to 1-2 USD
per square/meter for factory
buildings
 All business processes controlled
by government: “do not pay
without receipt”- to fight
corruption.
Weaknesses
 Lack of IT and CAD/CAM in
production
 Social compliance is a big issue
 Lack of PPE: workers do not want
to use personal protective
equipment
 Limited options for trims,
accessories and printing
equipment

18. 11. Challenges in Production
18
Due to limited
capacity
usage the
industries
production
output is still
limited.
The efficiency
on weaving
and knitting
as well as
garment
assembly is
less than
45%.
Most
factories,
either fully
integrated or
partially
integrated
run on a
profit margin
of 0-2%,
mostly on
break even
for exports
Due to low
efficiency the
production
cost per
minute (SCM)
comes to 9
cents

19. 11.1 Despite Challenges, Future is BRIGHT
19
Capacity
Projection by
2020:
37 million
kilograms of
yarn
88 million
meters of
woven fabrics
30 million
kilograms of
knitted fabrics
18 million
pieces of woven
garments
62 million of
knitted
garments

20. 11.2 Because of the Government Initiatives
20
 Ethiopia has over 30 bilateral investment promotion and protection
agreements
 Ethiopian government invests largely in infrastructure
 Ethiopian government has installed a scheme of incentives for business
financing and trading terms: opening an LC regularly would cost a company 3%
during the production lead-time in Ethiopia
 Ethiopian government has reduced the cost of freight and transport with 25%
and is about to launch its own transportation company providing trucks that
run to Djibouti port.

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