GD Topic: Ethiopia - New Destination of Apparel Sourcing

Outsourcing has always been the most prudent and cost-effective way to stay competitive. Low wage countries such as China, Bangladesh and India are increasing the labour wages due to the increasing work content. As the apparel retailers are looking for cheaper options of garment sourcing in order to bring down the cost price, they cannot help being attracted towards Ethiopia because of its plenty and cheap labor. Let's see few points in For and Against for Ethiopia being a new destination for Apparel Sourcing.

  1. A single place for going through all the phases from fiber to the garment and hence the production time shortens.
  2. Cheap and plentiful labour (US$ 52/month). (50% lesser than India)
  3. Workforce is educated
  4. Ethiopian government offering attractive incentives to foreign investors.
  5. Facilities like decade-long land lease, duty-free exports to US and Europe
  6. Cheap power (1/3rd to that of India).
  7.  Abundant raw material availability especially cotton.
  8. Favourable political and economic climate.
  9. Ethiopia making active efforts to achieve the social standards which in turn will attract more buyers.
  10.  Free Trade Agreement with the US.
  11. Indian apparel giants like Raymonds and Arvind are setting up plants in Ethiopia.

  1. Lack of competent local sourcing networks
  2. Production inefficiencies
  3. Top three future sourcing destinations are Bangladesh, Vietnam, and India and are highly likely to remain so for the next 5 years according to McKinsey & Co. survey of 40 top apparel retailers. Ethiopia is at the seventh position.
  4. Still not ready for more sophisticated work due to lack of infrastructure and skill
  5. Landlocked country which hampers free trading through sea and ocean
Image Source: Wall Street Journal 

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