"Owing to its low cost capabilities, Ethiopia is slowly turning into a dynamic apparel-sourcing hub. Manufacturers from China, South Korea, India and other countries have opened new plants in the Africa’s second most populous nation while a growing number of European and US brands are sourcing garments from there."

Owing to its low cost capabilities, Ethiopia is slowly turning into a dynamic apparel-sourcing hub. Manufacturers from China, South Korea, India and other countries have opened new plants in the Africa’s second most populous nation while a growing number of European and US brands are sourcing garments from there.

The connectivity a big plus

The biggest factor in its favour is the planned opening of a new railway line to Djibouti, located on the Horn of Africa in the Arabian Sea. The railway will facilitate transport of goods from the landlocked country's industrial areas, like the Bole Lemi Industrial Park, an hour's drive from the capital Addis Ababa. Opened in 2015, the sprawling 150-hectare park is bustling with Chinese, Taiwanese and South Korean production facilities, conveniently clustering factories for textiles, apparel products and leather shoes in one area.

At a factory operated by Shin Textile Solutions, a South Korean company, workers sit at long rows of machines sewing mainly sportswear. According to the general manager, the plant's entire output is exported, with about 60 per cent going to Europe, 20 per cent to the US and the remaining to Asia.

Government’s initiatives

Ethiopia's main exports include coffee, gold and leather products, but the government is stepping up efforts to develop new industries. Arkebe Oqubay, Special Adviser to Prime Minister Hailemariam Desalegn, has pledged to transform Ethiopia from a farm economy into an industrial powerhouse. As part of its efforts to turn the country into an thriving, middle-income economy by 2025, the government has been building industrial parks. The newest is Hawassa Industrial Park, a one-hour flight from the capital. Among the 15 companies with manufacturing facilities there is US-based PVH Corp.

PVH's 280 employees produce garments for a number of international brands including Calvin Klein, and export them to Europe and the US. Ethiopia's low labour costs make it an attractive garment-sourcing destination, according to the company. The average monthly pay for a factory worker is about $50, compared with $140-160 in Kenya, $70-90 in Bangladesh, $150-170 in Vietnam and $400-500 in China. The country's young, low-wage workforce gives it the potential to grow into a major garment-sourcing hub with a vibrant market.

The inland nation used to depend heavily on trucking, hindering its transition to a more export-oriented economy. But the new railway connecting Addis Ababa to Djibouti will solve this problem. The government has built a distribution center in the Addis Ababa suburb of Mojo, where there is also a train station on the new line. Goods from Ethiopia's industrial parks will be sent to the Port of Djibouti via the center. Previously, it used to take three days to transport goods by truck from Addis Ababa to Djibouti. The railway will cut this to about nine hours.