The emergence of Ethiopia as a garment hub and the increasing quantum of investment flowing from India into the country has become a cause of worry for the Indian textile industry.
Some of the big textile and garment manufacturers that have gone to the African country in recent times include Raymond and Arvind. In the past few months, several Tiruppur-based garment manufacturers also got attracted by the prospects in Ethiopia. These include SCM Garments, the export arm of Chennai Silks, Jay Jay Mills, Best Corporation and KPR Mills.
Arvind has set up seven apparel factories at Hawassa Industrial Park in Ethiopia, covering a total area of 13.5 acres. Arvind has two more factories in Ethiopia outside the park. These facilities export products to the US and Europe. As per reports, with the new facilities in the industrial park, the total output would go up to 30 million pieces of garments.
Employment generation by Arvind in Ethiopia too would rise to 12,000 workers. Similarly, Silver Spark Apparel Ethiopia, a wholly owned subsidiary of Raymond, too has a facility in Hawassa Industrial Park and the company has invested around Rs 140 crore in the facility. SCM Garments is setting up a 500-machine garment unit in Ethiopia. Best Corporation is also setting up a 1,000-machine factory at a cost of Rs 30 crore.
“Ethiopia has been luring Indian companies during the past several years. A few years back, some of the companies had put up units there. But those attempts were not quite fruitful. However, in the past two years, we have seen increasing investments flowing into Ethiopia. Several companies now find it beneficial to operate from the African country,” said K Selvaraju, secretary general, Southern India Mills’ Association.
In recent years, Ethiopia has secured easy access to some of the major markets like the US, Canada and the EU at lower or nil duty. The country is eligible for preferential access to the US market under the African Growth and Opportunity Act (AGOA). Eastern and Southern African countries, including Ethiopia, have Economic Partnership Agreement with the European Union.
“Exports from India have to pay duties ranging from 12 to 15 per cent, and in some categories, this goes up to 25 per cent. In the absence of free trade agreements, our exports are less competitive than our peers,” said Chandrima Chatterjee, adviser, Apparel Export Promotion Council.
Further, power and labour is cheaper in Ethiopia and historically textile industry has been moving from one country to another depending upon the availability of cheaper labour. “If power is available for three cents in Ethiopia, it costs 10 to 12 cents in India. Labour is available there for $60 per month and here it costs $130 to $150,” said Selvaraju. Moreover, the Ethiopian government has become quite proactive towards attracting investments. It offers a plug and play facility for the investors and provides all the infrastructure amenities, including the building.