Kunshan Investors Went To Ethiopia For $500 Million To Build A Textile Industrial Park. Sino Egyptian Cooperation Has Ushered In Good Times.

According to reports from Ethiopia broadcasting company on July 3rd, investors from Kunshan, Jiangsu, China, plan to invest 500 million US dollars in Ethiopia, to build a textile industrial park.

It is understood that investors in Kunshan will build a textile industrial park in the next 2 years, and share their experience in the development of industrial parks. Kedl, director of the Industrial Investment Bureau of the city, said the city government will do its best to support the construction of the industrial park. Lelis, chief executive of Ethiopia Industrial Park Development Company, said that Kunshan helped Ethiopia create employment and built a bridge between industrial parks and universities (Kunshan plans to use industrial parks as a practical base for university students).

It can be predicted that soon after that, Ethiopia will be busy with the Chinese investors. What is the charm of Ethiopia, which is known as "the ridge of Africa", has attracted the attention of Chinese investors frequently? Is there a smooth road on this hot land? What are the hidden dangers of investment?

FTA promotes business environment "more transparent"

　　 As one of the most important countries in East Africa, the formal implementation of the free trade area agreement has promoted its ability to attract foreign investment in Ethiopia. In July 7th, the agreement on the African continent free trade area was formally implemented. After the implementation of the FTA, the import and export trade between the members of the free trade area of the African continent will be liberalized. Zero tariffs, zero quotas and free circulation will help African countries to compete in the global market.

In recent years, the overall development of the African economy has been developing well. In 2018, the total GDP of the African continent amounted to 2 trillion and 300 billion US dollars. In 2019, the real growth rate of the African GDP will reach 4%, the highest in the past 7 years, and the fastest growing region in Asia after Asia.

Under the good momentum of development, the implementation of the agreement on the free trade area of the African continent will further enhance the economy of the region. Its advantages are mainly reflected in the following aspects. First, the free trade area will greatly promote trade, exchange and complementary advantages among African countries. In addition, as the African countries form a unified large market, this will greatly enhance the attractiveness of the African market for foreign investment and help African countries to attract foreign investment. It is understood that at present, among the 55 members of the Au, 52 member countries have signed the agreement on the free trade area of the African continent, except for 3 foreign countries such as Nigeria, Eritrea and Benin.

The analysis points out that the completion of the African free trade zone will greatly enhance the volume of intra African trade, promote intra regional trade and investment, and achieve free movement of goods, services, funds and personnel among countries, and a single market will contribute more to Africa's participation in the global industrial chain. Jeremy Stevens, an economist at standard bank group, said: "the convenience of access to the African continent will facilitate a better redistribution of resources, and will transform some African countries into regional trade and investment centers and attract investment in labor-intensive manufacturing industries." Ni Jierui, Ni Jierui said.

In addition, the African business environment will be further improved after the completion of the African continent free trade zone. At present, most African countries pursue high protection policies, which are closely guarded by customs and non-tariff and adopt foreign exchange control, which greatly limits the enthusiasm of foreign investment in Africa. After the completion of the African Free Trade Zone, the African countries will accelerate the marketization reform and economic restructuring so as to provide convenience for foreign investment.

It can be seen that after the completion of the African Free Trade Zone, the ability of attracting foreign capital will increase, and for investors, the most direct impact will be the further improvement of the business environment. As one of the East African economic engines, Ethiopia's manufacturing industry has made considerable progress in recent years, especially the light manufacturing industry represented by textiles and garments. Abe, the Prime Minister of Ethiopia, recognizes the great opportunities for development of the FTA, and stresses that the negotiation and implementation of the FTA on the African continent should be aimed at creating employment and speeding up industrialization in African countries.

Sino Egypt textile industry cooperation ushered in "good time"

In recent years, some textile and garment processing links in China have been transferred to Vietnam and Kampuchea. With this situation, many enterprises begin to focus on the African continent with abundant labor resources and low price, and regard it as the final destination of labor intensive industrial transfer.

The completion of the African free trade zone has made the business environment of Ethiopia more transparent, and the implementation of the "one belt and one way" has provided a good opportunity for China to cooperate with Ethiopia. Under the current situation and opportunities, the textile industry between China and Egypt is expected to make good use of the potential of resource sharing and complement each other's space to achieve common development.

　　 Ethiopia's textile and garment industry is dominated by small and medium-sized enterprises. In recent years, the Ethiopia government has carried out a series of policy and regulation reforms to revitalize the textile and garment industry, making it internationally competitive, and strives to build Ethiopia into an emerging market production center of the global textile and garment industry and a regional center for OEM manufacturers. At present, the textile and garment industry has become the top priority of the Ethiopia government in introducing foreign direct investment, promoting exports and the overall industrial development plan. In the second phase of the government's growth and transformation plan (GTP), it was proposed that the export of Ethiopia's textile and garment industry reached $1 billion by 2020 and the goal of solving the 300 thousand employment problem.

Ethiopia has great potential for cotton cultivation, and has the possibility of developing from cotton to clothing full textile industry chain. The current lint yield in the country is only about 70 thousand tons a year, but the land area of cotton can be as high as 3 million hectares. The current utilization rate is less than 10%, and the potential is very great.

In recent years, Ethiopia's textile and clothing exports have increased dramatically. The export products are mainly clothing, yarns, textile fabrics and cultural costumes. The industry has attracted substantial growth in attracting foreign investment. At present, the leading international brands such as PVH, H&M, Wuxi cotton and Jiangsu sunshine group have been successfully introduced, and the integration of the vertical industrial chain of textile industry has been realized on the basis of internationally renowned enterprises. About 50% of the textile and garment items have been wholly or partly funded by China.

A number of infrastructure advantages to enhance the strength of attracting foreign investment

In recent years, Ethiopia has studied China vigorously to develop industrial parks, and has provided land export-oriented enterprises with various preferential policies such as land, various taxes (corporate income tax, consumption tax, property tax, business tax, etc.), tax exemption for machinery and raw materials import, and "one-stop" service. In terms of industrial investment, the Ethiopia government takes textile and clothing as a priority development industry, and promotes the development strategy based on special industrial parks and various incentive policies. Its specific advantages are mainly embodied in the following aspects:

The labor cost is low: Ethiopia has a large population, abundant labor force, abundant potential labor resources and low salary level. Ordinary laborers earn 30~70 dollars a month, skilled technicians 70~130 dollars, senior managers 130~350 dollars. Therefore, the cost of employment in Ethiopia is highly competitive.

　　 Abundant basic energy: Ethiopia has abundant water power resources and low electricity price. Ethiopia has the unique advantage of hydropower development in Africa, and its construction capacity will reach 6 million kilowatts per year, and the country's annual output will reach 8 million kilowatts soon. Low cost hydropower brings huge cost advantages to industrial development. It is understood that the electricity price in Ethiopia can be as low as 3 cents at one time, which has great attraction for the huge consumption of cotton spinning and other links.

Cotton planting potential is huge: if Ethiopia's cotton planting and production can enter a virtuous circle with cotton spinning industry, its resources and cost advantages can be brought into full play. In addition, the country's raw materials for wool and linen are also abundant.

High labor mobility is a constraint.

Although Ethiopia has all kinds of advantages in attracting foreign capital, investors should pay attention to the risk factors resulting from the low cost of labor force and the unbalanced development of industrial structure for a long time.

According to foreign media, in recent months, several factory workers in the HA SAR Industrial Park, 140 miles south of the capital city of Addisababa, have been moving frequently in Ethiopia. The park is one of the five industrial parks established by the government since 2014. Currently, it has about 25000 employees and is expected to grow to 60000. The park produces products for brands such as Levi, Strauss, Guess, PvH, H&M and Hanesbrands.

　　 Ethiopia ha SAR Industrial Park

The main reason for the frequent movement of workers in the park is the lower basic salary. It is understood that the junior workers in the clothing manufacturing industry (mostly young women) usually earn only $26 a month, which makes it difficult for them to survive.

It is understood that there is no statutory minimum wage standard for private enterprises in Ethiopia. In the first year of operation of the park in 2017, the overall staff turnover rate hovered around 100%, which means that the factory once every 12 months to replace workers, improve training costs and reduce efficiency. From this perspective, making a basic T-shirt in HA's is more expensive than a supplier in Bangladesh.

In addition to the labor problem, Ethiopia's industry is not matching. At present, the garment accessories enterprises in Ethiopia need basically imported materials, which will lead to a long manufacturing cycle and can not meet the stringent requirements for quick response orders. The same problem exists for fabric enterprises. The quantity and quality of yarns in Ethiopia are difficult to guarantee.

On the whole, investment in Ethiopia is in good time. The "Africa free trade zone" and "one belt and one way" positive policy are narrowing the distance between Chinese investors and Ethiopia manufacturers. But at the same time, we should pay attention to some problems, such as setting up a suitable salary level, caring for local staff's needs, and at the same time, in building textile factories, we should plan rationally and avoid the imperfect industrial chain.