Lifting of Ethiopia’s state of emergency could open door for sourcing

The Ethiopian government’s lifting of a 10-month-long national state of emergency should help put it back on track to continue to attract investment from textile and apparel firms and other industries.

Lawmakers in the East African nation voted to end the emergency law that restricted a number of rights and led to the arrests of more than 21,000 people and impacted one of Africa’s fastest-growing economies.

More than 600 people were killed in nearly a year of protests that first ignited in the Oromia region and spread into the Amhara region and the capital, Addis Ababa. Demands included an end arbitrary arrests and respect for regional autonomy.

Rights groups have claimed that many people were beaten and subjected to arbitrary detentions under the emergency law. The government has maintained that those arrested by mistake were released and those who unwillingly took part in the unrest were released after what it described as “trainings.”

Restrictions under the state of emergency included arbitrary arrests without court orders; limits on radio, television and theater; and dawn-to-dusk prohibitions on unauthorized movements around infrastructure facilities and factories.

An advisory from the U.S. Department of State last year specifically warned against visiting the Amhara and Oromia regions. The Oromia area has been the site of most new textile and apparel manufacturing development.

According to the Ethiopian Investment Commission, the state of emergency has not deterred foreign investors, with half of the $1.2 billion worth of projects committed in the first six months of the 2016-17 fiscal year licensed in textile and garment manufacturing.

The Hawassa Industrial Park, the largest industrial park in Africa, was inaugurated in 2016, is fully occupied, and saw its first exports leave the facility earlier this year.

Ethiopia’s vision is to create a fully integrated vertical supply chain, from garment factories to fabric mills, accessories producers, spinning mills and high quality cotton cultivation.

Ethiopia’s Hawassa eco-industrial park has attracted 18 global apparel and textile companies as operations get under way.

Construction of the park, the first in its kind in the country, cost more than $250 million and was built in less than a year. Covering an area of 1.3 million square meters, the addition of the park is expected to bring Ethiopia’s revenue derived from textiles and garments to $1 billion over the long term from the current $150 million annually, according to the Ethiopian Investment Commission.

Consistent with the Ethiopian government’s commitment to build a green economy, Hawassa industrial park is designed, constructed and operated as an eco-friendly park. It has a water and waste treatment plant that uses the latest technology for treating and recycling about 90 percent of the water used in the park. To this end, a zero-liquid discharge facility has already been set up with a daily processing capacity of 11 million liters of effluent.

PVH Corp. is among the companies already establishing operations there, and six local companies are ready to start operations there, too. When fully operational, industries within the park are expected to create 60,000 jobs, EIC noted.

The Ethiopian government plans to construct 10 industrial parks across the country to enhance job opportunities, bring in revenue and promote technology transfer. Modeled after the Hawassa Industrial Park, the government has already moved ahead with development of similar parks, two of which will soon open in Kombolcha and Mekele.

In May, risk management firm Verisk Maplecroft stated in a risk briefing that land rights for cotton production are likely to get more controversial as droughts intensify, and the likelihood of future protests affecting the apparel sector was “high.”

At the time, the Verisk report noted, “the country’s reputation as a stable destination in an unstable region has been severely undermined by protests in 2016. When Verisk Maplecroft conducted on the ground research in February…we found that these issues, along with concerns over labor rights, would likely pose major risks for cotton producers over the coming five to ten years.”

Last week, India’s State Minister for Industry, Bogale Feleke Temesgen, told the Ethiopian Investment Promotion Workshop for the cotton, textile, and apparel sector said access to low-cost energy, easy access to land, a strong infrastructure and duty free and quota free market access to the European Union and the U.S. are major advantages for Indian investors in Ethiopia.

Stating that textile industry would play a major role in the industry development strategy of the nation, he said Ethiopia’s textile and clothing industry has been undergoing major development aided by low labor costs and highly motivated work force.

“There is huge potential for expansion of cotton cultivation in Omo-Gibe, Wabi Shebelle, Baro Akobo, Blue Nile and Tekeze River basins in Ethiopia,” the minister said. “With successful bilateral and multilateral agreements with the U.S. and the EU, the manufacturer can easily export their products all over the world.”