Garment firms eye cost-friendly Ethiopia for expansion

With the cost of business going up in India and the competition increasing from neighbouring countries, top garment makers like Raymond, Arvind and Best Corporation are looking at Ethiopia to set up manufacturing units.

Indian firms, which have lined up over ~600 crore in investments in that country, said Ethiopia gives duty-free access to Europe and US markets.

Raymond is investing about ~130 crore in a plant to manufacture 2 million jackets. The company has expanded its footprint through the acquisition of a garment unit in southern Ethiopia.

The rationale behind choosing Ethiopia was to get cost advantages in terms of labour, power, duties, Sanjay Behl, chief executive officer Lifestyle, Raymond, had said earlier.

Labour costs in Ethiopia is half that of in India, and the local government does not insist on investing in land and buildings.

Power cost is also below ~2 a unit against ~7 a unit in India. Besides, there are duty advantages when exporting to Europe and the US, making its products competitive for global markets.

R Rajkumar, managing director, Best Corporation, said, “We need to be competitive to stay in this business, for which we need lot of support from the local government, including tax advantages, which Ethiopia is giving.”

Duty-free exports to the US and Europe is a key attraction, which India doesn’t have. At present, this is the reason for the Indian players not being able to compete with Bangladesh, Sri Lanka and other countries that have the duty benefit.

The Ethiopian government is developing industrial estates, and the Indian companies just need to move with their machines.

Of course, there are challenges, such as training people, and creating an ecosystem, but Africa is going to be the next destination for garment manufacturing, they say.

Best Corporation, which will start production in the next six months, is setting up a factory with 1,000 machines at a cost of ~30 crore, and it will cater mainly to the US.

Arvind Ltd said it had decided to set up a garment factory in Ethiopia to take advantage of lower labour cost, duty savings and lower shipment time to the US markets. The company is planning to invest around ~100 crore.