As labor, raw material and tax costs rise in China – the world’s foremost textiles producer – the East African country is scrambling to offer a cheaper alternative, and go up against established low-cost garment makers like Bangladesh and Vietnam.It is still early days, and most of the clothing companies to source production in Ethiopia are testing the waters with small volumes, but the government is working hard to attract their business with tax breaks, subsidies and cheap loans. The landlocked nation is also about to open the final stretch of a 700 km (450-mile) electric railway to Djibouti’s coast.

This is part of a drive to turn a nation that is among the poorest in Africa into a manufacturing center that is no longer held hostage by fickle weather patterns which periodically devastate the agrarian economy and leave its people hungry.There has been some progress; foreign investment in the textile industry has risen from 4.5 billion birr ($166.5 million) in 2013/14 to 36.8 billion in 2016/17, the Ethiopian Investment Commission, a government agency, told Reuters.“This is a huge success,” Arkebe Oqubay, a prime ministerial adviser directing the industrialization drive, said during the inauguration of an industry park in the northern Ethiopian town of Kombolcha this summer. “The challenge now is to bring the world’s biggest companies into the country.”Some have already arrived, most of them sourcing some production locally, like Gap and H&M, but a few building factories themselves.Those to set up factories this year include U.S. fashion giant PVH, whose brands include Calvin Klein and Tommy Hilfiger; Dubai-based Velocity Apparelz Companies, which supplies Levi‘s, Zara and Under Armour; and China‘s Jiangsu Sunshine Group, whose customers include Giorgio Armani and Hugo Boss.French retailer Decathlon and over 150 companies from China and India will begin sourcing production from Ethiopia soon, said the investment commission.However, while Ethiopia is moving faster than its continental rivals, there is a long road ahead. Logistical, bureaucratic and cotton-quality problems are threatening its ambitions and there are no guarantees it will ever be able to compete with the big global players.The gulf in textiles exports is huge; Ethiopia’s totalled about $115 million in 2015, against Vietnam’s $27 billion, Bangladesh’s $28 billion and China’s $273 billion, according to the World Bank’s latest figures.Ethiopia’s fledgling sector can ill afford the kind of working conditions scandals that have dogged the low-cost garment industry elsewhere, and officials said they were sending representatives to Asia to learn best practices.ROUTE TO RED SEA Ethiopia’s road link with the port in Djibouti is outdated and congested in many parts and, together with the limited capacity and dense bureaucracy of its customs service, slows companies’ supply chainsคำพูดจาก สล็อตเว็บตรง. This is undermining the benefits of being closer to European markets than most of its Asian rivals.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, according to a report from the Ethiopian Textile Development Institute compiled for investors this year.This drives up costs. It costs up to $1,870 to export a 40-foot container, compared with $1,290 in Bangladesh and $679 in Vietnam, according to an internal report compiled by a major European clothes retailer and seen by Reuters.However officials say the $4 billion electric railway between Addis Ababa and the Red Sea, to be inaugurated in the coming weeks, will reduce the transit time to the Port of Djibouti from 2-3 days to eight hours.Bill McRaith, PVH’s chief supply chain officer based in New York, told Reuters his company saw sub-Saharan Africa as a promising new manufacturing frontier at a time of rising costs and labor shortages in established countries.PVH arrived in Ethiopia this summer and is building a factory in Hawassa, south of Addis Ababa As labor, raw material and tax costs rise in China – the world’s foremost textiles producer – the East African country is scrambling to offer a cheaper alternative, and go up against established low-cost garment makers like Bangladesh and Vietnam. an investment which McRaith said was based on a long-term expectation that Ethiopia would become one of the most competitive locations in the world to make apparel for the West.He said PVH aimed to produce $100 million worth of clothes a year at the factory to be exported.“Basics operating costs are very attractive but offset by transportation,” said McRaithคำพูดจาก สล็อตเว็บตรง. “The transportation infrastructure, skills training, banking sector … will all have to be improved,” he added. “But the Ethiopian government is further ahead on this than many other countries.”QUALITY CONTROL Cotton quality and pricing also present a big obstacle to Ethiopia’s aspirations – one that is blunting its competitiveness and deterring foreign investment.While it has an estimated 2.6 million hectares suitable for cotton cultivation, only 130,000 has so far been used, and textile company owners say output from them is 10 times more expensive to purchase than the average international price. They are also often substandard for exports owing to contamination and poor processing, resulting in poor fabric.While the government has sought to entice investors into its cotton farming industry, this has been complicated by ineffective land management and complex property rights.Velocity Apparelz Companies started production six months ago at a $50 million factory in Mekelle, northern Ethiopia. It produces 1.5 million pieces of clothing a month but aims to double that within two years, said Erica van Schaik, executive assistant to the executive chairman of Velocity.However domestic fabric quality problems mean the company has to import their denim, van Schaik said. Good local material could reduce Velocity’s costs by up to half, freeing up cash that could be invested in Ethiopian production.It would also cut the company’s lead time – from the beginning of production to arrival in shops – from 110 to 90 days, she said. “That would be like a day-and-night kind of difference. A game-changer.”Investors face other challenges too: foreign currency shortages complicate trade, in addition to ever-changing regulations. The limitations of the financial system mean many foreign-owned textile firms use offshore banks to conduct their trade, depriving Ethiopia of vital hard currency.With workers’ conditions and safety a big concern for investors, the Ethiopian Textile Development Institute said its leadership was traveling to India – another leading global garment producer – for training on best practices.“The industry in this country is very young – we are taking our very first steps and so everything will not go seamlessly,” said communications chief Banteyihun Gessesse. “Countries such as India have vast experience in the field.”Whether Ethiopia can overcome these hurdles remains to be seen.In Africa itself, it faces competition in textiles manufacturing from the likes of Kenya, Mauritius and Madagascar, but has moved more aggressively to attract business.The government will spend $1 billion building 15 industrial parks by 2020. Two opened in July, another two will be completed this year. The state bank, meanwhile, provides up to 60 percent of factory expansion costs for companies that sell 70 percent of their products overseas, as well as a 10-year tax exemption and low-interest loans.Ethiopia can also offer companies lower power costs than most of its continental rivals, thanks to its hydroelectric dams. Electricity costs $0.06 per kilowatt-hour in Ethiopia, compared with $0.24 in Kenya, for example.