Low Ethiopian la­bor cost at­tracts Chi­nese in­vestors

More com­pa­nies are shift­ing part of their pro­duc­tion lines to the African na­tion to save money and also tap new mar­kets, Yao Jing re­ports

China Daily (Hong Kong) - - BUSINESS -

China’s ac­tive in­volve­ment in Ethiopia’s in­fra­struc­ture, such as con­struc­tion of roads and bridges, has been in the spot­light. Re­cently, Chi­nese in­vestors’ ris­ing in­ter­est in the plateau coun­try’s la­bor in­ten­sive in­dus­tries — a mix­ture of leather, steel and au­to­mo­biles — is com­ing into sharper fo­cus.

Against a back­ground of ris­ing la­bor costs and risky ex­cess ca­pac­ity in the do­mes­tic man­u­fac­tur­ing sec­tor, some Chi­nese producers are shift­ing part of their pro­duc­tion lines to Ethiopia to lower costs and also tap new mar­kets.

Un­like the noisy and dusty cap­i­tal Ad­dis Ababa, which is full of con­struc­tion sites, driv­ing 30 kilo­me­ters south­east to the Oro­mia re­gion, the East­ern In­dus­trial Zone presents a much more in­dus­trial look with tidy build­ings, or­derly work­shops and in­ter­na­tional com­pa­nies.

Win­ning the bid to be Sec­ond Over­seas Eco­nomic Co­op­er­a­tion Zone in Novem­ber 2007, spon­sored by China’s Min­istry of Com­merce, it now ac­com­mo­dates 18 com­pa­nies in its fin­ished 23,300 square kilo­me­ters since the first ten­ant moved in back in 2011.

“As the in­dus­trial sec­tor in Ethiopia is al­most a blank slate, the tran­si­tion of Chi­nese producers is not only driv­ing the coun­try’s in­dus­tri­al­iza­tion process, but also help­ing Chi­nese man­u­fac­tur­ers out of a dilemma,” said Qian Zhao­gang, com­mer­cial coun­selor at the Chi­nese Em­bassy in Ethiopia.

Two- way trade be­tween China and Ethiopia jumped 56.3 per­cent to $1.84 bil­lion in 2012. China’s ma­jor ex­ports to Ethiopia were me­chan­i­cal and elec­tri­cal prod­ucts, tex­tiles and gar­ments, while Ethiopia was mainly ship­ping se­same, leather and cot­ton to China, ac­cord­ing to the Min­istry of Com­merce.

By the end of 2012, China’s out­bound for­eign di­rect in­vest­ment in Ethiopia to­taled $600 mil­lion, fo­cus­ing mainly on in­dus­trial zones, au­to­mo­biles and leather.

Apart from the East­ern In­dus­trial Zone’s re­cent con­tract with multi­na­tional con­sumer goods com­pany Unilever Plc, which rents a workshop cov­er­ing 5,000 square me­ters, it is breed­ing Chi­nese producers, in­clud­ing footwear maker Hua­jian Group, au­to­mo­bile pro­ducer Li­fan Group and East­ern Steel Co Ltd.

“We can make 1.5 mil­lion pairs of shoes ev­ery year. Most of them are ex­ported to the United States and Europe.

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