Download 1) Ethiopia:- Macro economic Indicators - german

1) Ethiopia:- Macro economic Indicators
Ethiopia:- Second Largest population in Africa with slightly Over 90mill
people.
Ethiopia:- Forth largest economy and second fastest growing economy in
Sub Saharan Africa with a GDP by PPP of 86.1bill USD
(29.7bill nominal GDP ) in 2010.
Ethiopia:-An average 11.3% annual GDP growth and 8.3% annual average
real per capita growth over the last ten consecutive fiscal years.
Ethiopia:-Average annual export growth was 27.4% over the last seven
consecutive years and reached around 3 billon USD in 2010/11
budget year.
Ethiopia:- Manufacturing Industry contributes 13% to the GDP. The
Industry has been growing on average annually 10.2% for the
last seven years.
History
The Textile and Garment Sector has a long tradition in
Ethiopia
Ethiopia has a long History of cotton farming and
dressmaking of traditional Ethiopian clothes
1939 - the first integrated textile mill was established
1961 - there is already a capacity of 175,000 spindles
1995 - the government highlights the sector as a key
Industry for growth and investment
2003 - with international support the sector association
ETGAMA is reestablished
2013- the export value of the Textile and
Garment Sector reached 100 Million USD
2016 - Export value of 500 million USD
is expected from the textile and garment sector
11/3/2014
Trends in Textile and Apparel Export of Ethiopia
120
100
80
60
in million USD
40
20
0
2008/09
11/3/2014
2009/10
2010/11
2011/12
2012/13
• Export performance of textile and garment industry
increased on average annually 51% for the last eight
years though infant yet.
SN
Product
Types
Budget year (USD million)
2005/06 2006/07 2007/08 2008/09 2009/10
2010/11
2011/12
2012/13
1
Yarn
-
-
-
3.7
8.5
9.1
8.9
23
2
Fabric
4.2
4.4
4.6
3.7
6.3
22.9
8.3
10
3
Apparel
6.9
8
9.7
6.6
6.7
26.7
63.09
61
4
Handloom
products
0.1
0.2
0.4
0.4
1.7
3.4
4.36
5
Total
11.1
12.6
14.6
14.4
23.2
62.2
84.6
99
Annual growth
(%)
57.9
13.7
15.8
-1.6
61.1
168
36
17
VISION
•
•
BE HUB of TEXTILE and Garment in Africa
•
Be African Chinese
Strategy
•
Industrial Development Strategy--- issued in written
after national consensus reached.
A) Initial principles of the strategy
1. Accept that the private capitalist is the engine of the industrial
development strategy.
2. Following the direction of Agriculture-- led Industrialization
3. Following Export-led Industrialization
4. Focus on Labor Intensive Industries
5. Using Coordinated Foreign and Domestic Investment
6. Mobilizing the whole society for industrial development
a) Coordination Between Government and Private Capitalist.
Opportunities
Textile Industry Considered as number one priority by
the Government‘s Industrial Development Strategy.
Availability of some 3 million hectare of land which is
size of Pakistan cotton growing area, the fourth supplier
of cotton in the world and climate suitable for cotton
cultivation, but only some 5 % utilized so far.
Huge potential for organic cotton cultivation.
Ethiopia, known as the water tower of Africa, Provides
one of the Cheapest environmentally friendly
hydroelectric power supplies in the world (5US
cents/kwh).
Competitive labor cost than average African
Opportunities
• Government providing several investment and export incentives to
attract investments
• Availability of newly-established industry zones one USD/m2
• Established Textile Development Institute to care the Textile
• Establishing of Institute to provide inputs for factories
• Availability of cheap Land ( 0 to 3 cents/m2/per year for 60-80
years and very cheap water or dig own well easily and get for free
• The emergence of major international buyers such as H&M,
George, Tschubo, KIK, Alde, and Tesco
…Opportunities contd
• Existence of young and easily trainable workforce.
• Skilled labor in the sector is increasing rapidly as a
result of fast growing education and training
institutions in Textile Technology; two institutes, a
couple of textile Engineering departments in different
Universities and a lot of TVET Schools and private
training institutions.
• Quota and duty free market access to the US and EU as
well as COMESA markets. Also to over 16 nations
including China, India, Turkey ans Russia
• Ethiopia offers one of the largest domestic markets in
Africa, given its popn. size and rapidly growing
economy .
…Opportunities contd
• Provision of infrastructure and service furnished
(specialized) economic zones, eg Kombolcha Textile
Cluster, Dire Dawa Industrial Zone, Hawassa Industrial
Zone, Gondar Industrial Zone, Mekele Industrial Zone,
Jimma Industrial Zone and Addis Ababa Industrial Zone
• Proxmity to EU and the Middle East
• English is widely used in the business sector as it is the
medium of instruction in secondary and tertiary schools of
the country.
Incentives
Aim; To encourage investment and promote the inflow of foreign
capital and technology into Ethiopia (both domestic and foreign).
1.Investment Incentives
Tax holidays: 100% Duty free importation of new or used machineries,
equipments, construction materials and vehicles (used as capital
goods for the investment) as far as it is not producible locally in
Ethiopia.
 Duty free importation of spar part of 15% of capital investment
for the first 5 years of operation and then after too
 Ownership Transfer of invested capital goods to third party
enjoying similar privilege.
 It is possible to hire international expatriates free from income
tax as far as they stay for no more than two years.
 Reconciliation of VAT for materials purchased locally during
the project period is possible if declared in 6 months time.
Incentives
Financial Incentives: Development Bank of Ethiopia (DBE) extends a 70% loan
against 30% equity contribution in cash by the investor for
Brand New Establishments.
 Development Bank of Ethiopia (DBE) extends a 60% loan
against 40% equity contribution in cash or in kind by the
investor for used machineries and equipments or existing
Establishments.
 DBE’s extends loan with an interest rate of 8.5% and
grace peiod of 5 years.
 Co-financing, loan buyout , working capital and
international loan repayments out of Ethiopia are some
of the services DBE and many of the domestic banks
extend to the private sector.
 In addition, investments are constitutionally and by low
(of Multilateral Investment Guarantee Agency of the
World Bank) guaranteed of non commercial risks.
Incentive Continued . . .
2. Operation incentives
Tax holidays: Income Tax Holiday for 2-8 years depending on export performance.
 Exemptions From Export Customs Duties through a set of incentive
schemes called duty draw back, voucher and bonded manufacturing
warehouse.
 Exemption from customs duty of locally purchased raw materials on
fast refund bases.
 On site (factory) inspection of imported raw materials and exportable
products.
 Loss carry forward for maximum of half the income holyday period.
… Incentives Contd
Financial Incentives: A one year non-collateral working capital loan scheme called
Export Guarantee Scheme with 1% interest is allocated in DBE to
help exporters manage their cash flow constraints. Long term noncollateral loans are also available in many banks on different loan
modalities depending on export performances.
 Remittance of profit and dividends out of Ethiopia a possible.
 State owned logistics enterprises (Ethiopian Shipping Line,
Ethiopian Airline, Dry Port Services and Maritime) provide their
services at BEP.
 Training of operators is given free of fee.
Above all, Ethiopia has relatively regionally stable socio-political and
economic system. Ethiopian labor law is in conformity with ILO standards.
Cotton Farming
11/3/2014
Reality
1. Access to affordable
finance encourages
Investment in sector
1. To encourage even government joins
on Joint venture with FDI in absence
of private
4. Government discusses consistently on
improvement of system to FDI and Local
5. Custom clearance done at factory
Reality contd.
3. Raw Material
Fulfilment
1. Encourages private cotton growers with
access to bank at low interest rate
2. Privatized state owned cotton farms
3. Tax free for all inputs of cotton growers
and tax exemption for cotton sales
4. Renovated public Textiles till buyer
comes to serve as Fabric supplier to
Garments
Reality contd.
4. Equal treatment for
both export oriented
and domestic market
industries (export and
import substitution)
1. Tax exemption in place to all Export
Sales
2. Voucher system in place for all
inputs to be used only for export
3. Now on way for local to exempt
excise tax so that they will be
encouraged to work at capacity to
improve efficiency
4. FDI to expand for value chain
through time highly encouraged
5. Some already taken cotton farm
Reality Contd.
5. Human Resource
Development
1.
A country should
advantage
by
create its competitive
‘Making
People
before
making Products’, to reap the fruits of
success.
2.
3 to 8 experts paid by government assigned
for six months on Garment and Textile
factories
to
implement
International
benchmarks which serves as control for
performance
3.
University made to specialize in Textile to
support deliver skilled manpower.
Reality Contd.
6. Auxiliary Industry
Development
(Accessories and
Chemicals)
7. Created private and
public forum
8. Form Monitoring body
9. Introduce Benchmark
1. Some local and Foreign private
companies in place but much
remaining,
2. To temporary resolve bonded
warehouse are established by private
sectors.
3. Vigorous diplomatic effort to win
investors in such opportunity as value
chain solution
4. Issues raised and discussed
5. Board led by Prime Minister formed
1. Benchmark is in place
Prospect of the sector
 Encouraging Investment Flow (build the National
Capacity), China, India, Turkish, Korean, Bangladesh
 Government working in policy fine tuning ( to make life
easy for the industry)
 Extension of market privilege like AGOA
 The Institute twine itself with India National Institute of
Fashion Technology (INIFT)
 Human Resource building ( Expansion of university
focused in textile and Garment in the selected growth
area and TEVE’s). Also work with World Bank, DFID on
capacity Building
 Huge government investment on infrastructure (Power,
train, Road, Dry port,…)
Value Addition Process happening
Fibre
Yarn
Fabric
Garment
Retail
1 Kg
0.75 Kg
3.35Mtr
2 Trousers
2 Trousers
1.6 US$
3.40 US$
8.5 US$
15.50 US$
38.80 US$
0.5 person
0.75 person
2.0 persons
4.0 persons
Next Action
• Is to see you in Ethiopia
Thank You