FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA MINISTRY OF INDUSTRY 1
ETHIOPIAN TEXTILE INDUSTRY FACTS, OPPORTUNITIES & CHALLENGES Of TEXTILE INDUSTRY DEVELOPMENT IN ETHIOPIA Ministry of Industry, Ethiopia March, 2017 2
The Country s Manufacturing Industry Vision The vision for the Manufacturing sector is to build an industrial sector with the highest manufacturing capability in Africa which is q Diversified, q Globally competitive, q Environmentally friendly, and q Capable of significantly contributing to the improvement of the living standard of the Ethiopian people by the year 2025. 3
Textile Sector Vision & Targets q Vision:-The government envisions putting the country as The leading Textile Sourcing Nation in Africa by 2025. q Targets:-GTPII-(2014/15-2020) Textile sector: 1billion US $ export per annum. 152 New investment 174,000 new jobs opportunity 4
Industrial Development strategy of Ethiopia. Fundamental pillars of the Industrial Strategy 1. Consides the Private Sector as an Engine of development. 2. Implement Agricultural Development Led Industrialization. 3. Implement Export-led Industrialization. 5
4. Focuses on the expansion of labor Intensive Industry. 5.Implementing effective domestic foreign Investment partnership method. 6.Implementing the direction where, the government will play a leading managerial role. 7.Implementing the Principle that encourage the active participation of the public. 6
WHY TEXTILE AND GARMENT SUB SECTOR IDENTIFIED AS A PRIORITY q It is labor Intensive, q Low start up investment Cost, q For its high value addition & source of foreign Currency, q For its competitive and comparative advantages, q It has multiple effect for other industries related to the sector etc, q Domestic resource potential (cotton, labor etc) 7
History of Ethiopian Textile Industry q The first Ethiopian Textile Manufacturing mill was established back in 1939 in DireDawa Town by the name DireDawa Textile Factory. q The Industry had been growing sluggishly until 1991; by then there were only 19 Textile and Garment factories. q As a result of the free market economy declared in 1991, Textile and Garment manufacturing companies now reached over 176. 8
Current status (M & L) S. No. Area of Operation Number of Factories 1 Ginning 19 2 Integrated Textile Mills 22 3 Spinning 5 4 Weaving and/or Knitting and/or finishing and printing 5 Handloom (medium size) 6 6 Blanket Factory 6 18 7 Garment Factory(knitted/woven) 100 Total 176 9
STATUS OF THE TEXTILE INDUSTRY Production proportion 10.3% of the total industrial production (cotton production of 10%, fabric and garments production of 90%) No. of companies 163 of cotton plants, 176 of ginning, textile and garments manufacturing companies (2016) Employment 60,000 people (one of the largest employment sources in Ethiopia), >7% of the whole employees in manufacturing industry. GDP 0.6% of GDP, 17% of the whole manufacturing amount, 2.9% of the whole export (2015/16) 10
STATUS OF THE TEXTILE INDUSTRY Sales scale Production Exportation Importation Level technology of Average yearly export sales scale of about 100 million US dollars from GTP I Possible to produce natural textile such as cotton, hemp, ramie fabric, linen, bamboo, silk Export to USA has sharply increased by virtue of export benefits customs free/quarter-free under AGOA since 2001 synthetic fiber/thread, wool, dyes are fully imported Basic/intermediate level of Technology Textile machine Textile and garment machineries are imported (from China, Italy, Germany, Japan, Korea, etc.) 11
Product Composition / Varity/ q The product range of the sector includes: Lint cotton - stable length 26-30mm Variety of yarns (cotton and cotton blended, acrylic, mélange) Fabrics (cotton & its blend) Blanket (woolen, waste cotton, others) Bed-sheets, Shirts, Carpets, Bags Hosieries (socks, stockings, pantyhose, and tights) Wearing apparels, sweater, etc 12
Capacity Created in the Textile Sector S/N Product Type Existing Capacity 1 Lint cotton ( 000ton/annum) 60-70 2 Ginning (ton/day) 763 3 Spinning (ton/day) 293 4 Weaving ( 000meter/day) 591 5 Knitting (ton/day) 144 6 Finishing Knitted (ton/day) 191 Woven ( 000meter/day) 419 7 Garment Woven ( 000pcs/day) 90 Knitted ( 000pcs/day) 197
Opportunities and Incentives for Investment of the Textile Sector in Ethiopia
Opportunities q Textile industry is considered as number one priority sector by the Government s Industrial Development Strategy. q Availability of around 3 million hectares of land suitable for cotton cultivation q Huge potential for organic cotton cultivation. q Ethiopia, known as the water tower of Africa, Provides one of the Cheapest environmental friendly hydroelectric power supplies in the world. (3-5 US cents/kwh).
q Low cost and easily trainable unskilled labor force, (wages on average 60 USD/month). q Skilled labor in the sector increase rapidly as a result of fast growing education and training institutions in Textile Technology; a large number of TVET Schools and private training institutions.
Duty and Quota free Market access to the EU and US as well as COMESA markets. In addition Ethiopia signed more than 16 bilateral trade agreement, which include with China, India, Turkey and Russia. Ethiopia offers one of the largest domestic markets in Africa, given its population size and rapid economic growth.
Provision of infrastructure and service furnished specialized Industrial/Economic zones. Easy access to land on a minimal lease English language is widely used in the business sector as it is the medium of instruction in secondary and tertiary schools of the country. Ethiopian Airlines serves in almost every part of the world
Industrial Parks /Zone In Ethiopia S/N Name of industry Zone Location From Addis Ababa Developer 1 Addis Industry Village Within Addis Ababa Government 2 Bole Lemi industry Park/Zone (I, II) 15 km east Government (Operational) 3 Eastern industry Park/Zone 37 km east Chinese (Operational) 4 Kilinto industry Park/Zone 20km East Government 5 Kombolcha industry Park/Zone 376 km North East Government 7 Mekele Industry Park/Zone 700km North Government 8 Hawassa Industry Park/Zone 19 275km South Government (Operational)
Industrial complexes(zones) Bole Lemi Industrial complex ( 175.2 hectars of land, in which 11 factories are operatinal) Hawassa industrial park (300 hectares of land 37 shades of which 6 domestic investors /renewable/dedicated el. Power supply, Zero Liquid discharge ETP. Will hire 60000 citzins20 under two shifts
Incentives 1. Investment Incentives a. Tax related incentives:- q 100% Duty free importation of machineries, equipments, construction materials and vehicles (used as capital goods for the investment) as far as it is not producible locally in Ethiopia. q Duty free importation of spare part of 15% of capital investment for the first 5 years of operation. q Ownership Transfer of invested capital goods to third party enjoying similar privilege. q It is possible to hire international expatriates free from income tax as far as they stay for no more than two years. q Reconciliation of VAT for materials purchased locally during the project period is possible if declared in 6 months time.
b. Financial Incentives q Development Bank of Ethiopia (DBE) extends a 50% loan against 50% equity contribution in cash by the investor. q DBE s extends loan with an interest rate of 8.5% and with grace period of 5 years. q Co-financing, loan buyout, working capital and international loan repayments out of Ethiopia are some of the services DBE and many of the domestic banks extend to the private sector. q In addition, investments are constitutionally and by law (of Multilateral Investment Guarantee Agency of the World Bank) guaranteed of non commercial risks.
2. Operational Incentives a. Tax related incentives:- q Income Tax Holiday for 2-8 years depending on export performance. q Income Tax Holiday up to 15 years depending on export performance for industries in industrial park. q Exemptions of Customs Tax and Duties on raw material through a set of incentive schemes called duty draw back, voucher and bonded manufacturing warehouse.
q Refunding of customs tax of locally purchased raw materials used for export q On site/factory custom inspection of imported raw materials and exportable products. q Loss carry forward for maximum of half the income holiday period.
b. Financial Incentives:- q Export Guarantee Scheme to help exporters manage their cash flow constraints. q Long term non-collateral loans are also available in many banks on different loan modalities depending on export performances. q Remittance of profit and dividends out of Ethiopia is possible. q State owned logistics enterprises (Ethiopian Shipping Line, Ethiopian Airline, Dry Port Services and Maritime) provide their services at best price. q Training of operators is given free of fee.
Challenges q Low productivity of Cotton q Low level of technological as well as managerial capabilities, q Infant industrial working culture and low skill among local workers and managers q Strong competition from other developing countries in terms of attracting investment.
Why invest in Textile sector in Ethiopia? q Political and Social stability, q Commitment of Government towards the sector, q Macro-economic stability and growing economy, q Strategic location. Conclusion q Transparent investment law and procedures, q Abundant, competitive & trainable labor force, q Wide market opportunities, q Adequate guarantees & protection, q Ample investment opportunities, 27
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