Apparel companies make a beeline for Ethiopia

MUMBAI: Even as the Modi government aggressively pushes its 'Make in India' programme, a host of home-grown apparel makers are putting in millions of dollars in Ethiopia, a promising sourcing destination for global manufacturers. The Ethiopian government is offering attractive incentives to draw foreign investors, such as land on decades-long lease, cheap power and duty-free exports to key markets like the US and Europe.

Indian enterprises, both large and mid-sized, have taken note of the benefits and are setting up manufacturing facilities in Africa's oldest independent country. Fabric-to-apparel maker Raymond will be investing $100 million over the next two-three years for a garmenting unit in Awasa, a lake-side city, which will be one of its largest facilities.

"There are two major manufacturing costs - labour and power. We looked at various options including Ethiopia, Vietnam and Myanmar, and decided to go for Ethiopia because of its favourable political and economic climate," said Sanjay Behl CEO, Raymond. Behl explained that labour costs in Ethiopia are 50% cheaper compared to India and power tariffs one-third.

Arvind, another Indian textiles major, will set up a six-million-piece garment plant in Ethiopia. Its director and CFO Jayesh Shah pointed out that, among various factors, the long-term lease for factories that the Ethiopian government offers is one of the main attractive propositions for the company's decision to invest in this east African nation. There is also single-window clearance for industrial projects. Kanoria Textiles, too, is setting up a project there.

Ethiopia is emerging as a favoured low-cost destination for apparel makers on the lines of Vietnam, Bangladesh and India. It is not only Indian textile companies that are making a beeline for Ethiopia - companies from China, Korea and Turkey too are investing in this African nation.

Aditya Rao, partner, PWC Advisory Services, said, "While foreign investors like Saudi Arabia, US, China, India and Turkey continue investing in agriculture, deep interest has developed in textiles. With its value proposition similar to that of Bangladesh which includes large population, cheap and young labour, Ethiopia also offers cheap power and a highly committed government. Ethiopia, without doubt, is set to be the epicentre of textiles across Africa."

Source: http://retail.economictimes.indiatimes.com/