19-September-2018 | 5 mins read
The increasing production and labour costs in all the major manufacturing destinations including China, Vietnam, and Bangladesh have forced many brands, retailers and even manufacturers to look for cheaper alternatives. Taking advantage of the same, the sub-Saharan nation of Ethiopia — capitalising on the African Growth and Opportunity Act (AGOA) and backed by a government working hard to attract business with tax breaks, subsidies, and cheap loans — has emerged as a strong contender.
Encouraged by the duty benefits for exports from the African nation to US markets, DBL Group from Bangladesh has become the first from the country to set up an integrated textile and garment factory in the Tigray region of Ethiopia.
“We started operations in May this year and from August we have also started to export,” maintained MA Jabbar, Managing Director of DBL Group while speaking to Apparel Resources, he further added, “But there are a lot of challenges still”.
DBL had to train up around 1800 people while taking in 200 more from Bangladesh to kick start its operations in Ethiopia.
However, even if Ethiopia is moving faster than its continental rivals on many aspects, there is a long road ahead, especially considering the bottlenecks that it faces including lack of skilled labour, logistical issues, and many more. A landlocked country, Ethiopia’s road link with the port in Djibouti is reportedly outdated and congested in many parts, leading to longer lead times and thereby, undermining the benefits of being closer to European markets than most of its Asian rivals.
As per a Reuters’ report, 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, which cited a report from the Ethiopian Textile Development Institute. It further noted that the cost involved for the same goes up to US $ 1,870 to export a 40-foot container, compared to US $ 1,290 in Bangladesh and US $ 679 in Vietnam.
“Yes, it’s a landlocked country and as such has its own shortcomings,” accepts Jabbar. Within the continent itself, Ethiopia is facing tough competition from the likes of Kenya, Mauritius, and Madagascar. The country stands 5th in the tally of Sub-Saharan African countries which export apparels to its largest market, USA. The first four apparel exporters to USA from this part of the world are Kenya, Lesotho, Madagascar, and Mauritius, according to an analysis by Apparel Resources.
Notably, Kenya exported apparels worth US $ 120.67 million in the first four months of 2018 as against US $ 101.66 million in the corresponding period of prior-year, growing by 18.70 per cent in just one year, while second in the tally is Lesotho which earned US $ 98.60 million from its apparel export to US, posting a noteworthy increase of 19.88 per cent on year-on-year basis.
Markedly, Madagascar too stood far ahead of Ethiopia in apparel exports to USA as the value of apparel shipment from Madagascar was almost double than that of Ethiopia in the review period. Apparel exports from Madagascar to USA were US $ 59.10 million in the period with a whopping 25.73 per cent rise over last year. Even Mauritius, which stands 4th in the tally, posted 10.48 per cent growth to reach US $ 48.19 million in apparel export values in Jan.-Apr. ’18 from US $ 43.62 million in the same period of 2017.
Nevertheless, it is also true that Ethiopian apparel exports have witnessed a massive growth of 126.63 per cent in the first four months of 2018, which still tilts the scale in its favour.
“Even the labour cost is almost similar to that in Bangladesh. We are, however, making all the investments with the future in perspective,” states an optimistic Jabbar, and there seems to be reason enough for his optimism. Though an H&M facility, DBL’s Ethiopian unit has grabbed the attention of many other brands including PVH, Decathlon, and Lacoste, lately.
“Even the top management from Lacoste visited our facility recently and hopefully more buyers will come in the coming days,” winds up Jabbar on a positive note.