ETHIOPIATEXTILE AND CLOTHING VALUE CHAIN ROADMAP2016-2020

TEXTILE & CLOTHING VALUE CHAIN ROADMAP OF ETHIOPIA

TEXTILE & CLOTHING VALUE CHAIN ROADMAP OF ETHIOPIA

This value chain roadmap was developed on the basis of the process, methodology and technical assistance of the International Trade Centre ( ITC ) within the framework of its Trade Development Strategy programme.

ITC is the joint agency of the World Trade Organization and the United Nations. As part of the ITC mandate of fostering sustainable development through increased trade opportunities, the Export Strategy section offers a suite of trade-related strategy solutions to maximize the de-velopment payoffs from trade. ITC-facilitated trade development strategies and roadmaps are oriented to the trade objectives of a country or region and can be tailored to high-level economic goals, specific development targets or particular sectors, allowing policymakers to choose their preferred level of engagement.

The views expressed herein do not reflect the official opinion of ITC. Mention of firms, products and product brands does not imply the endorsement of ITC. This document has not been formally edited by ITC.

The International Trade Centre ( ITC )

Street address : ITC, 54-56, rue de Montbrillant, 1202 Geneva, SwitzerlandPostal address : ITC Palais des Nations 1211 Geneva, SwitzerlandTelephone : + 41- 22 730 0111Postal address : ITC, Palais des Nations, 1211 Geneva, SwitzerlandEmail : itcreg@intracen.orgInternet : http :// www.intracen.org

Layout: Jesús Alés – www.sputnix.es

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ACKNOWLEDGMENTS

This value chain roadmap was elaborated as a component of the ITC Supporting Indian Trade and Investment in Africa ( SITA ) project, a south-south trade and in-vestment initiative that aims to improve the competitiveness of select value chains through the provision of partnerships by institutions and businesses from India. SITA is funded by the United Kingdom Department for International Development ( DFID ).

The formulation of the value chain roadmap was led by the Ethiopian Textile Industry Development Institute ( ETIDI ) and the Ethiopian Textile and Garment Manufacturers Association ( ETGAMA ) with the technical assistance of ITC. This document repre-sents the ambitions of the private and public sector stakeholders for the develop-ment of the sector. Stakeholders’ commitment and comprehensive collaboration have helped build consensus around a common vision that reflects the realities and limitations of the private sector, as well as of policymakers and trade-related institutions.

The document benefited particularly from the inputs and guidance provided by the members of the sector team.

Name Organization Position

Mr. Sileshi LemmaEthiopian Textile Development Institute Director General

Mr. Fassil TadesseEthiopian Textile and Garment Manufacturers Association President

Mr. Asefa AgaEthiopian Cotton Producers Ginners Exporters and Association General Secretary

Miss. Aberash Alemu South Region TVET Bureau Training Materials Supply Head

Mr. Goshu Negash Vitcon Plc General Manager

Mr. Mustefa Jemal Kombolcha Textile S.C General Manager

Mr. Addisu Fulli Welkite University Engineering College Dean

Addisu Ferede (Asst. Professor)

Ethiopian Institute of Textile and Fashion Technology Scientific Director

Mr. Eyob Beklele Desta Garment Plc General Manager

Mr. Mohammed Umer Novastar Garment Factory Plc General Manager

Mr. Kehase G/michel Federal TVET

Mr. Yared MesfinEthiopian Textile Development Institute

Cotton and Textile Marketing Directorate Director

Mr. Yitbarek TilahunEthiopian Textile Development Institute Ginning and Spinning Directorate Director

Technical support and guidance from ITC was rendered through Eric Buchot, Alexandra Golovko, Olivier Marty, Hanna Bucher, Varun Vaid, Robert Kafafian, Carla Vaca and Carlos Griffin. Assefa Yohannes and Genzeb Akele Zewdie both provided valuable support as national SITA coordinators.

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CONTENTS

EXECUTIVE SUMMARY XII

GLOBAL TRENDS 2025 – LIVING THROUGH A TRANSFORMATIVE PERIOD 17

THE ONLY CONSTANT IS CHANGE 17

TEXTILES AND APPAREL IN ETHIOPIA : AN INDUSTRY OF GREAT PROMISE 23

A SECTOR IN FULL BLOOM AND ON THE VERGE OF FULL VALUE CHAIN INTEGRATION 23

STRATEGIC ISSUES AND COMPETITIVE CONSTRAINTS 35

Supply side issues 37

Business environment issues 42

Market entry issues 45

Socio-economic and environment issues 46

STRATEGIC IMPLICATIONS FOR THE VALUE CHAIN ROADMAP 48

THE WAY FORWARD 49

THE STRATEGIC OBJECTIVES 51

LEVERAGING MARKET OPPORTUNITIES 53

INVESTMENT TARGETING FOR SUSTAINABLE EXPORT GROWTH 55

FUTURE VALUE CHAIN 58

I. Foreseen adjustments in the textile segment� 60

II. Greater value addition in the garment segment as well as market and product diversification� 61

III. Further development and integration of industrial zones� 61

IV. Enhanced support services, particularly in the areas of TVET, quality management, finance and logistics�62

MOVING TO ACTION 62

THE PLAN OF ACTION 65

REFERENCES 86

APPENDICES 89

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FIGURES

Figure 1 : Trend towards greater value addition 18

Figure 2 : Ethiopia’s T & C value chain 25

Figure 3 : Ginning outturn of selected African countries ( 2013 ) 26

Figure 4 : Cotton lint production in Ethiopia, 1940 / 41 to 2010 / 11 27

Figure 5 : Ethiopia’s T & C exports, 2001–2014 ( US $ thousands ) 33

Figure 6: Ethiopia’s trade in clothing products, 2001–2014 (US$ thousands) 33

Figure 7 : Ethiopia’s trade in textile products, 2001–2014 ( US $ thousands ) 34

Figure 8 : The way forward 49

Figure 9 : Projections of Ethiopia’s apparel export growth 50

Figure 10 : Ethiopia’s T & C future value chain 59

APPENDICESFigure 1 : Decomposition of Ethiopia’s export growth of garments and textiles, 2004–2013 96

Figure 2 : Probability of export survival, 2002–2014 96

Figure 3 : Contribution to Ethiopia’s clothing trade deficit, 2014 97

Figure 4 : Top importers of Ethiopian garments, 2001–2014 ( US $ thousands ) 97

Figure 5 : Contribution to Ethiopia’s textiles trade deficit ( 2014 ) 99

Figure 6 : Top importing markets for Ethiopian textiles, 2001–2014 ( US $ thousands ) 99

TABLES

Table 1 : Top exporters of clothing, 2003-2013 20

Table 2 : Top exporters of textiles, 2003-2013 20

Table 3 : Comparison of costs and competitive factors between Ethiopia and competitors 31

Table 4 : Ethiopia’s top 5 textile exports, 2009 and 2014 ( US $ thousands ) 35

Table 1 : Ethiopia’s top 10 exported garments, 2009–2014 ( US $ thousands ) 98

Table 2 : Top changes in market share by product 98

Table 3 : Ethiopia’s top 10 textile exports, 2009–2014 ( US $ thousands ) 100

APPENDICESTable 1 : Potential investors based in India 101

Table 2 : Potential prospects in target markets 102

Photo: Kara Newhouse, Textile Factory.

ACRONYMS

The following abbreviations are used :

ACTIF African Cotton and Textiles Industries FederationAGOA African Growth and Opportunity ActCAGR Compound Annual Growth RateCMT Cut, Make & TrimCOMESA Common Market for Eastern and Southern AfricaCSR Corporate Social ResponsibilityEAC East African CommunityECAE Ethiopian Conformity Assessment EnterpriseECPGEA Ethiopian Cotton Producers, Exporters and

Ginners AssociationEC–EQM Enterprise Competitiveness ( section of ITC ) –

Export Quality ManagementEC–SCM Enterprise Competitiveness ( section of ITC ) –

Supply Chain ManagementEIA Ethiopian Investment AgencyEIC Ethiopian Investment CommissionEIIDE Ethiopian Industrial Inputs Development EnterpriseENAO Ethiopian National Accreditation OfficeERCA Ethiopian Revenues and Customs AuthorityERP Enterprise Resource PlanningESA Ethiopian Standards AgencyETGAMA Ethiopian Textile and Garment Manufacturers

AssociationETIDI Ethiopian Textile Industry Development InstituteEU European UnionFDI Foreign Direct InvestmentFOB Free on BoardGTP Growth and Transformation PlanHR Human ResourceHS Harmonized SystemIAF International Accreditation ForumICAC International Cotton Advisory CommitteeICT Information and Communications TechnologyIIHT Indian Institute of Hardware TechnologyIL&FS Infrastructure Leasing and Financial Services

( India )ILAC International Laboratory Accreditation CooperationIPDC Industrial Parks Development CorporationISO International Organization for StandardizationIT Information TechnologyITC International Trade CentreMFA Multi-Fibre ArrangementMLA Multilateral Recognition Agreement

MLS–SCM Modular Learning System – Supply Chain Management

MoFED Ministry of Finance and Economic DevelopmentMoU Memorandum of UnderstandingMRA Mutual Recognition ArrangementMSME Micro, Small and Medium-Sized EnterpriseNID National Institute of Design ( India )NIFT National Institute of Fashion Technology ( India )NMI National Metrology Institute of EthiopiaOECD Organisation for Economic Co-operation and

DevelopmentPoA Plan of ActionPPP Public–Private PartnershipREACH Registration, Evaluation, Authorization

and Restriction of ChemicalsSADC Southern African Development CommunitySC Sector Competitiveness ( section of ITC )SITA Supporting Indian Trade and Investment

in AfricaSME Small and Medium-sized EnterpriseT & C Textile & ClothingTFPB Trade Facilitation and Policy for Business ( section

of ITC )TIS Trade Information Services ( section of ITC )TISI Trade and Investment Support InstitutionTNC Transnational CorporationTS TISI Strengthening ( section of ITC )TVET Technical and Vocational Education

and TrainingUAE United Arab EmiratesUNIDO United Nations Industrial Development

OrganizationWTO World Trade Organization

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FOREWORD

MR. SILESHI LEMMA DIRECTOR GENERAL

ETHIOPIAN TEXTILE INDUSTRY DEVELOPMENT INSTITUTE

Ethiopia is the second largest popu-list country in Africa with over 95 million people and is known as the water tower of Africa, which provides one of the best competi-

tive environmentally friendly hydro-electric power supplies in the world as

well. It is also a well recognized fact that Ethiopia is ranked at the second fastest growing economy in Sub Saharan Africa. It has registered an average 11 % annual GDP growth over the last decade. The coun-try has achieved an average annual export growth of 27.4 % over the last decade where the manufacturing Industry contributes 13 % to the GDP. The Industry has been growing on average annually 10.2 % for the same period.

The adopted Industrial Development policy of the Government of Ethiopia focuses on transforming the agricultural led economy of the country to industry based, and for that strategic sectors have already been selected and prioritized based up on the facts and findings of actual situation of the country and the global environment.

Textile Industry is considered as number one priority sector by the Government‘s Industrial Development Strategy. It is believed that the textile industry would play major role in the industry development strategy of the nation due to its advantages such as its labour intensiveness, ability to mobilize the masses up to the micro level, long chain characteristics of the sector which could pull many players along the value chain, linkage to the cotton agriculture for which Ethiopia has a big potential.

In order to improve utilizations of the potential of the sector, the government has formulated the Second Growth and Transformation Plan ( GTP II ) based on the experience we have accumulated from the first Growth and Transformation Plan ( GTP I ) in the last five years ( 2010-2014 ). The GTP II ( 2015-2019 ) is a plan that aims at obtaining 1 billion USD from the sector export at the end of 2019 and also going to serve as a spring-board to realize the vision of the nation to put the country in the first rank in light man-ufacturing in Africa and also among the top ten world exporters by the end of 2025.

On behalf of the Ethiopian government, the Ethiopian Textile Industry Development Institute and on my own, I am very much grateful to the technical assis-tance extended by SITA / ITC on the development of this Textile & Clothing Value Chain Roadmap, which was made possible by funding from UKAID / DFID. I therefore, call upon our regional and global devel-opmental partners from all over the globe to unlock their development finance and technical assistance needed to enable us to translate the roadmap in to concrete action.

Once again, please allow me to extend our appre-ciation and thank for both the private and public sector for their unreserved collective hard work put towards in the preparation of this document, which will undoubtedly enable the successful launch of yet another visible and concrete milestone in our long journey to achieve the II Growth and Transformation Plan of the sector.

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FOREWORD

MR. FASSIL TADDESSE PRESIDENT

ETHIOPIAN TEXTILE AND GARMENT MANUFACTURING ASSOCIATION

While the African economy is based on agriculture, the way forward lies in indus-trialization. There are three reasons for which the textile and clothing value chain will play a critical role in this process. First, the textile and clothing sector acts as a link between agriculture and industry: industry obtains its input from agriculture and vice versa, thereby facilitating the shift towards a market-oriented economy. Secondly, it creates massive employment, both directly and indirectly. Lastly, textile and clothing exports are an important source of hard currency, which is then used to buy technology for further development. However, such change does not simply come. There are three key players that must act in concert as facilitators:

i. The private sector must drive the economy, although it is in an infant stage in some developing countries.

ii. The government plays a critical role in creating a conducive business environ-ment and investing in infrastructure.

iii. The development partners support in the creation of a conducive market environment with incentives, until the weak private sector becomes competi-tive in efficiency and price.

Understanding this process, and having become an attractive location for inter-national investors, Ethiopia is moving forward with a clear strategic Roadmap for its Textile & Clothing sector. 60% of the country’s budget is being invested in infrastructure, and both the public and private sectors are working closely with investors to understand and meet their needs. As such, we expect the textile and clothing sector will play a key role in Ethiopia’s process of industrialization.

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EXECUTIVE SUMMARY

The goal of Ethiopia’s Textile and Clothing Value Chain Roadmap

The goal of Ethiopia’s Textile and Clothing ( T & C ) Value Chain Roadmap is to set the sector on the course of strategic development by addressing constraints in a comprehensive manner and defining concrete opportunities that can be real-ized through the specific steps detailed in its Plan of Action ( PoA ). Ethiopia’s current model has performed well, yielding strong economic and social returns. Even so, performance has fallen short of the sector’s targets and it has become clear that the industry must unite and evolve in order to leapfrog into higher growth and value addition.

The sector’s strategic orientation should follow a twofold approach. Firstly, Ethiopia can build on its current success and leverage its cost competitiveness to expand market diversification and penetration. Secondly, the sector can capture greater value by pursuing full value chain integration,

first by bridging the skill gap to increase productivity, espe-cially considering upcoming wage increases, and later by enhancing weak upstream capacities. The PoA responds to this vision by setting four strategic objectives to support its implementation.

1. Improve productivity and employment outcomes through skills development.

2. Strengthen the enabling environment to favour sector development.

3. Establish conditions to harness foreign direct investment ( FDI ) as an engine for growth in T & C.

4. Foster product and market development through the use of trade information.

5. Enable market penetration and product development through trade intelligence.

The global T & C sector has been in a constant state of change since the turn of the century, characterized by a continual evolution in the location of both the most significant producing and exporting countries and regions, and the main end markets. Demand surged in developing countries, production was consolidated in Asia, and new countries such as Viet Nam, Myanmar and Cambodia emerged as fast-growing exporters of T & C products. Buyers are looking to shift more activities to their suppliers ( while at the same time demanding larger volumes and quicker turna-round times ) ; consumers are pressuring the industry to adhere to CSR standards ; information and communications technology ( ICT ) is becoming critical to modern production and inventory management ; and man-made fibres have taken their place as the sector’s preferred material.

Ethiopia’s T & C sector has experienced a boom in export-led growth in recent years, and today the sector is characterized by strong value addition throughout the entire value chain from cotton to clothing, with high local processing of cotton lint into textile and apparel products. Ethiopia’s comparative advantages – namely its low labour cost, cheap and sustainable electricity, preferential market access, and relative proximity to important markets – have been complemented by reforms to the business environment that have reduced trade hurdles. In conjunction with attractive incentives for investors, the sector has engaged significant capital from abroad. Over the past few years exports have expanded rapidly, due in large part to the arrival of foreign investment.

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[ EXECUTIVE SUMMARY ]

Nevertheless, the sector has yet to realize its full potential : sales are heavily concentrated among a few product

categories of fairly low value addition, and market di-versification is limited. While larger companies have

succeeded in entering global value chains, small and medium-sized enterprises ( SMEs ) continue

to be relatively excluded from external trade, having experienced only a limited amount

of economic integration with larger market players. Despite the influx of FDI, much of the value chain remains underdeveloped, including accessories, materials, textiles and higher value added garment activi-ties. Productivity meanwhile continues to suffer as a result of limited skills in the workforce, weak management capacities and reliance on outdated equipment, among other issues. In addition, remaining problems in the business environment create unnec-essary cost burdens and delays.

This diagnosis lends itself to certain key considerations that the value

chain roadmap should tackle. In order to move forward, public and private

stakeholders must work together and build on the successes achieved thus far.

To this end, the continued stimulation of FDI will play a crucial role. The Government must

do more to effectively target investors and pro-mote development of underserved opportunities in

Ethiopia’s value chain. Skills development must also be a priority, particularly with a view towards increasing

productivity, quality and the capacity for value addition. Lastly, the Government must do more to remove the remaining

policy and business environment roadblocks to competitiveness.

This value chain roadmap was the result of extensive consultations with public and private sector stakeholders, leading to unprecedented levels of cooperation among sector operators. Key private sector stakeholders and leading institutions facilitated an exhaustive analysis of the sector. Market-led strategic orientations, pri-oritized by stakeholders and embedded into a detailed implementation plan, provide a clear road map that can be leveraged to address constraints to trade, maximize value addition and support regional integration. In addition, the inclusive approach ensured that all stakeholders were committed to the process and a core team of key representatives of the sector has been formalized to carry on the implementation.

The value chain roadmap provides Ethiopia with a detailed PoA to achieve growth in the sector within the next five-year period. The value chain roadmap is articulated around four strategic objectives.

Photo: ITC

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The full implementation of the value chain roadmap aims to deliver the following production, ex port-related and developmental targets by 2020 :

� More than 200 firms have acquired new equipment and related technical capacities

� Six hundred new production lines developed by Ethiopian firms in yarn, textile and apparel production

� Exports of textiles and garments to increase annually by 35 % to US $ 320 million � More than 45,000 new jobs in the T & C sector � All companies comply with international standards related to working conditions,

quality management and sustainability.

Photo: www.tidi.gov.et.

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THE VALUE CHAIN ROADMAP FOR THE NEXT FIVE YEARS

Photo: (CC BY-SA 2.0) flickr.com/photos/ustr, Ambassador Kirk tours the Almeda Textile and Apparel Factory on August 7, 2009 in Axum, Ethiopia.jpg

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GLOBAL TRENDS 2025 – LIVING THROUGH

A TRANSFORMATIVE PERIOD

THE ONLY CONSTANT IS CHANGE

While the global T & C industry has always been a fast-evolv-ing sector, the structure of the sector has been constantly redefined by the changes that have occurred in the past 15 years. These changes have been characterized by a con-tinual evolution in the location of both the most significant producing and exporting countries and regions, and the main end markets. While disjointed production was consoli-dated in Asia and China grew to dominate the market, new players including Viet Nam, Myanmar and Cambodia have recently emerged as some of the fastest-growing exporters of T & C products. Changing demographics and economic performance, meanwhile, have resulted in a proliferation of demand in new and fast-progressing markets such as South Africa, the Russian Federation, the United Arab Emirates ( UAE ), China and India.

One of the key drivers behind these transformations is the ever-changing policy environment ; while the disman-tling of the Multi-Fibre Arrangement ( MFA ) facilitated a consolidation of production in Asia, the introduction of the African Growth and Opportunity Act ( AGOA ) catalysed re-newed competitiveness in Africa. In turn, the Trans-Pacific Partnership will surely redefine the competitive landscape once again. Changes in the policy environment have been complemented by technological evolutions that have stimu-lated remarkable gains in productivity, and product diversity and quality, thereby allowing polyester and blended fabrics to take their place as preferred materials. Together with ad-vancements in logistics and supply chain management that allow for greater and more flexible speed to market, these technical improvements have contributed to the increasingly rapid rotation of collections.

For now, Western countries have retained many of the higher value added portions of the value chain, including research, design, marketing and financial services. More tangible activities, which are frequently labour-intensive, continue to be concentrated in developing markets. Yet even this has been subject to the pressures of change in recent years. Given the low profit margins in the manufacturing segment of the value chain, one of the few ways for retailers

to reduce costs, and for producers to add more value, is to shift more of the design and development work to the manu-facturing country. This has stimulated a shift in developing countries, where suppliers who were once engaged only in cut, make and trim ( CMT ) activities are being entrusted with larger portions of the value chain.

Large international retailers ( transnational companies ( TNCs ) have grown to dominate the T & C value chain. They have gained significant influence over the choice of pro-duction locations and enjoy considerable bargaining power. These companies, which are generally based in the United States of America, the European Union ( EU ) and Japan, purchase large quantities of goods. Following the elimina-tion of the MFA they have been consolidating production in fewer and fewer countries. Where they exist, foreign affiliates of TNCs often account for the majority of T & C exports from developing countries.

While acceptable price levels are a condition that poten-tial suppliers must meet, the world’s leading buyers consider a number of fast-evolving criteria to be key success fac-tors, including quality production and assurance ( product testing ) ; timely delivery ; competitive pricing ; product devel-opment capacities ; social compliance ( health and safety, workers’ rights, environment ) ; adequate distribution capaci-ties ; and vendor-managed inventory capacities.1

From a macro perspective, buyers often take care to mitigate the following risks : inflation, poor energy and wa-ter provision, wage increases, unstable currency exchange rates, weak rule of law, barriers to trade, political instability, weak intellectual property protection, difficult physical ac-cess to markets and unattractive credit environments.

This highlights the role of government in ensuring a sta-ble and attractive overall business environment.

1.– Price Waterhouse Coopers ( 2008 ). Global Sourcing : Shifting Strategies.

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Figure 1 : Trend towards greater value addition

Cut, Makeand Trim (CMT)

Assembly, payment base on a processing fee and fabric sourced and owned by the buyer.

The contractor is trusted with the whole manufacturing process (from sourcing fabric to delivering to the retail outlet (FOB).

Includes design and whole production of a garment and may include distribution to the final customer.

Coordinate supply chain, contract manufacturing or invest in production in foreign markets.

Post production capabilities, product dev., the focus is on branding, marketing, retailing and consumer research.

OriginalEquipmentManufacturing(OEM)

Original DesignManufacturing(ODM)

Full PackegeService Provider

Original BrandManufacturing(OBM)

Source : Based on Gereffi, G. and Frederick, S. ( 2010 ).2

2.– In : Gereffi, G. and Frederick, S. ( 2010 ). The Global Apparel Value Chain, Trade, and the Crisis : Challenges and Opportunities for Developing Countries. In Global Value Chains in a Postcrisis World : A Development Perspective, Cattaneo, O., Gereffi, G. and Staritz, C., eds. Washington, D.C. : World Bank, pp.157–208 ; and Staritz, Cornelia ( 2012 ). Apparel exports – still a path for industrial development? Dynamics in apparel global value chains and implications for low-income countries. Working Paper, No. 34. Austrian Foundation for Development Research.

More specific to the T & C sector, suppliers such as Ethiopia wishing to enter the global value chain must be able to adapt to the following trends and market requirements.3

Lean retailing

Retailers increasingly want to focus on sales, while trans-ferring all other supply chain activities to their suppliers. Retailers are also beginning to engage more directly with producers, removing the middlemen of the past. As such, they are requiring suppliers to act as ‘full package’ service providers. Suppliers are expected to provide more services than before, from the sourcing of materials to logistics and delivery. While the ability to provide such full package ser-vices requires integration and significant management skills, it does present an opportunity for low-cost manufacturers to capture greater value.

Speed to market

Fast fashion brands such as Zara have revolutionized supply chain management. Point-of-sale technologies now allow re-tailers to analyse trends. This analysis is then used to quickly produce and stock goods according to the latest market dynamics. This has resulted in fast turnover, where prod-ucts have short life spans and suppliers need the capacity to respond to variable orders. Upstream and downstream service providers ( and material suppliers ) must also support clothing manufacturers in their efforts to turn around and deliver finished products in such a short time frame.

3.– Information for Development Programme ( 2008 ). The Global Textile and Garments Industry : The Role of Information and Communication Technologies ( ICTs ) in Exploiting the Value Chain.

ICT

The growing role of ICT is a direct response to some of the other trends. Disaggregated production and fast fashion both require efficient and timely information sharing. ICT also allows suppliers to vertically integrate and provide full package services to lean retailers. Technologies such as computer-aided design are required for modern produc-tion. ICT can also aid communication between supplier and buyer, allowing for the automated checking of orders, stocks and prices. Enterprise resource planning integrates orders, sourcing, manufacturing, account handling and lo-gistics, thereby helping companies optimize operations. In addition, modern ICT tools can allow manufacturers to track units throughout the production line in real time, facilitating more effective monitoring.

Consumer pressures

Consumers have become increasingly concerned about the treatment of workers in the T & C sector. This has put pres-sure on the industry to begin adhering to Corporate Social Responsibility ( CSR ) programmes and codes of conduct. These schemes, which also cover suppliers and subcon-tractors, require that firms be audited in order to ensure compliance with various health, safety and environmental issues. While this results in higher costs, some United States and EU buyers have begun excluding suppliers that do not meet such criteria.

Man-made materials

The past decade has seen a marked shift away from natural fibres and towards man-made materials. In 2013 man-made fibres accounted for 70 % of fibre production worldwide,

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compared with just 55.5 %4 in 2007.5 Spurred in part by tech-nological advancements that allowed for enhanced produc-tivity, increased quality, lower costs and greater diversity, a turning point came with the financial crisis of 2008. At this time retailers turned to synthetic materials as a means of cutting costs in an effort to survive.6 The trend was re-inforced when cotton prices spiked considerably in 2011. Consumers meanwhile have also developed a preference for synthetic or blended materials. In light of these trends, it is of the utmost importance that Ethiopia expands its multi-fi-bre expertise, particularly given that Ethiopia enjoys a higher preferential margin for man-made fibres under AGOA. This will require improved sourcing practices or the development of a parallel chemical industry for the production of synthetic materials.

Another important trend is the increased volumes re-quired by retailers. Retailers are growing in size and they

4.– Food and Agriculture Organization of the United Nations and International Cotton Advisory Committee ( 2013 ). World Apparel Fiber Consumption Survey. Washington, D.C. : ICAC 5.– Leonie Barrie ( 2015 ). Man-made fibres climb to 70 % of total production. Just-Style, 14 January. Available from http : / / www.just-style.com / news / man-made-fibres-climb-to-70-of-total-production_id124084.aspx.6.– Alexandra Wexler ( 2014 ). Cotton’s crown threatened by man-made fibers. The Wall Street Journal, 25 April. Available from http : / / www.wsj.com / articles / SB10001424052702304049904579516282130809074.

require significant quantities of product. While these vol-umes used to be sourced from a variety of locations during the MFA era, retailers want to streamline their production by reducing the number of countries / suppliers they source from. Suppliers must therefore be able to meet buyer vol-ume requirements, either alone or in partnership through consolidation, if they are to enter some of the most attractive supply chains.

In light of these trends, Ethiopian stakeholders must build capacities in a strategic manner so that their enterprises are enabled to meet the rigorous demands of today’s buyers. Growth must be consumer-oriented and ICT integration will be crucial. To this end, efforts must be made to attract FDI to specific domains that require investment, technology and knowledge transfer, including online inventory management and Enterprise Resource Planning ( ERP ). While technical skills must be enhanced in order to allow for greater produc-tivity, improved managerial skills will be required to engage in complex, full package service delivery. In addition, stake-holders must increase coordination so that they can supply adequate volume through consolidation and advocate for necessary policy support. The Government, meanwhile, must be sure to address policy constraints ( particularly with regards to CSR issues ), facilitate the upgrading of logistical infrastructure, and remove other trade hurdles so that en-terprises can bring goods to market without undue delays.

RESILIENT TRADE IN THE FACE OF GLOBAL UNCERTAINTY

Global T & C exports have grown by 6 % annually since the turn of the century, despite the 2008 financial crisis. Exports of clothing fell by only 12 % in 2009, whereas total exports declined by 23 %. This resilience is one of the reasons that the sector continues to attract investment. The steady de-mand for T & C products makes it a relatively stable source of foreign exchange earnings for many countries.

Valued at US $ 781 billion in 2013, sectoral exports cur-rently account for 4 % of international trade. The most im-portant product categories include knitted apparel ( US $ 192 billion ), woven apparel ( US $ 187 billion ), cotton fibre and tex-tiles ( US $ 55 billion ), made-ups ( US $ 50 billion ), man-made filaments and textiles ( US $ 38 billion ), and man-made staple fibre and textiles ( US $ 36 billion ).

Apparel accounts for 57 % of the global T & C sector. The largest markets for clothing imports are the United States ( 21.2 % ), Germany ( 9 % ), Japan ( 8 % ) and the United Kingdom of Great Britain and Northern Ireland ( 6.3 % ). A number of markets, including the Russian Federation, the UAE, Viet Nam, Korea, Australia and China have been growing at a very fast pace. The top 10 markets account for 65.5 % of total imports today, down from 77.3 % in 2003, highlighting the growing consumer base in developing and frontier markets.

Production has concentrated significantly over the past dec-ade : whereas the top 10 exporters accounted for 59 % of global exports in 2003, that share had grown to 73 % in 2013. This period saw China solidify its position as market leader, its share of exports having nearly doubled from 20 % in 2003 to 38.8 % today. Export growth in Bangladesh, Viet Nam and India has also been quite notable ; the former two have in fact gained relative market share with respect to China.

Clothing production has shifted steadily towards Asia, which now accounts for 65 % of world exports, compared with 32 % in 2004. This shift was stimulated by the disman-tling of the MFA, after which producers sought to consoli-date production in low-cost locations throughout Asia. In addition, international buyers have been steadily shifting greater responsibility to their suppliers. By moving away from simple CMT, larger portions of the value chain are now concentrated in supplier countries. It should be noted that despite the shift to Asia, a variety of countries still maintain competitive advantages based on factors such as proxim-ity to markets ( for example Turkey to the EU ) or access to specific markets under preferential trade agreements.

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Table 1 : Top exporters of clothing, 2003-2013 Table 2 : Top exporters of textiles, 2003-2013

No. ExportersExported

value in 2003 ( US $ )

Exported value in 2013 ( US $ )

CAGR * Share ExportersExported

value in 2003 ( US $ )

Exported value in 2013

( US $ )CAGR Share

1 China 45 757 114 165 044 601 13.7 % 38.8 % China 27 454 487 108 898 007 14.8 % 33.4 %

2 Bangladesh 5 040 792 26 258 818 17.9 % 6.2 % India 6 521 615 19 854 948 11.8 % 6.1 %

3 Italy 15 449 056 21 625 743 3.4 % 5.1 % Germany 13 973 846 16 493 995 1.7 % 5.1 %

4 Viet Nam 3 386 376 18 496 564 18.5 % 4.3 %

United States of America 11 888 902 16 080 252 3.1 % 4.9 %

5 Germany 9 127 940 18 320 287 7.2 % 4.3 % Italy 14 008 743 13 926 994 -0.1 % 4.3 %

6 India 5 916 206 15 702 657 10.3 % 3.7 %Republic of Korea 11 579 132 13 782 165 1.8 % 4.2 %

7 Turkey 9 546 445 14 961 774 4.6 % 3.5 % Turkey 5 430 513 12 560 332 8.7 % 3.9 %

8 Spain 3 384 396 11 065 848 12.6 % 2.6 %Chinese Taipei 10 052 788 10 920 608 0.8 % 3.3 %

9 France 6 580 732 10 079 791 4.4 % 2.4 % Pakistan 5 862 994 9 398 146 4.8 % 2.9 %

10 Belgium 5 167 839 8 678 581 5.3 % 2.0 % Japan 7 139 211 8 209 987 1.4 % 2.5 %

Source : International Trade Centre ( 2015 ) ( b ). *Compound Annual Growth Rate.

Textiles account for the remaining 43 % of sectoral trade. The structure of textile imports has remained fairly static over the last 10 years, and the United States and China have contin-ued to be the top two importers. Even so, a number of new markets have begun to grow in importance. These include Viet Nam, whose imports had a CAGR of 18.1 %, Bangladesh ( 15.9 % ), Indonesia ( 22.9 % ), the Russian Federation ( 15.9 % ) and the UAE. Markets meanwhile have become slightly less concentrated : the top 10 importers now account for 46.7 % of the market, down from 53.5 % in 2003.

As with apparel, the largest exporter is China, which en-joys a 29.7 % market share. The textile supplier base has also grown more concentrated : the top 10 exporters now account for 70.6 % of total exports, compared with 63 % in 2003. As textile production requires more technology and skill that the apparel segment, it is generally less flexible. It requires significant financial resources as well as time, and most developing countries are engaged in textile production

to only a limited extent. Nevertheless, a number of such countries, including China, India, Turkey and Viet Nam, have registered considerable growth over the past 10 years.

Trade statistics highlight the fact that the sector contin-ues to favour developing countries with competitive cost structures. This bodes particularly well for Ethiopia, which enjoys some of the lowest factor costs in the world. It should also be noted that while a significant portion of the market is dominated by the main exporters, smaller countries have recently succeeded in capturing greater market share. This, in conjunction with the sector’s continued growth even in times of crisis, indicates that there is ample space for rela-tively new entrants such as Ethiopia. Today, Africa contrib-utes only 2.3 % to global apparel exports, down from 3.7 % at the turn of the century. Even so, renewed interest in Africa may present Ethiopia with an opportunity to capitalize on its competitors’ diminishing advantages.

THE DECADE AHEAD

Experts indicate that these market trends are likely to contin-ue, helping to shape the sector throughout the next decade. The apparel market is expected to grow to US $ 2.1 trillion in 2025, up from US $ 1.1 trillion today. This will be driven largely by the growing consumption of T & C products in developing countries. Per capita spending on clothing will likely grow at the fastest pace in India ( 11 % ), China ( 10 % ), the Russian Federation ( 8 % ) and Brazil ( 4 % ). It should be noted that despite slower growth in developed countries, per capita spending on clothing will still be higher in the

West. Nevertheless, quicker per capita expansion, together with strong population growth, will help the developing world overtake the West as the main market for T & C products.7

The two fastest-growing markets will be China and India. This growth will be supported by the following trends in the two countries :

7.– Wazir Management Consultants ( 2013 ). The Road to 2025 : 5 Market, Trade, and Investment Trends That Will Define the Course of Textile and Apparel Industry.

[ GLOBAL TRENDS 2025 – LIVING THROUGH A TRANSFORMATIVE PERIOD ]

21

� Economic expansion and growth of disposable income � Population growth � Growing preference among Chinese consumers to buy

for fashion rather than utility � Increased exposure to organized retail and branded

clothing in India � Expansion of domestic brands � Growth of online retail.

By 2025, China will account for 27 % of the total market for apparel products, and the combined market size of China and India will surpass that of the EU and the United States.

Experts also note that the sector will require significant investment in the coming years. The T & C sector is relatively capital-intensive : the investment to turnover ratio is 1 :1 for spinning, 1 :1.5 for fabric production and 1 :4 for clothing production. Therefore an investment of $85 million ( land,

building, equipment and other fixed assets ) is required to produce a $100 million value of production at the garment stage of the value chain. Enterprises must make investments to both increase capacity and replace existing machinery.

Experts calculate that the growth in global apparel de-mand will require an additional US $ 165 billion of value of production by 2025.8 Given the investment turnover ratios, this will require US $ 142 billion of investments throughout the value chain. At the same time, the replacement / upgrading cost of current equipment is expected to be roughly $210 billion. The total investment required in the sector is therefore expected to be $350 billion.

8.– Apparel demand is expected to grow by US $ 1 trillion ( from US $ 1.1 trillion to US $ 2.1 trillion ). Given that this increase will be due to both price and volume growth, and assuming an average of 3 % price inflation, demand will grow by US $ 410 billion ( retail ) or US $ 165 billion value of production. ( Wazir Management Consultants ( 2013 ). The Road to 2025 : 5 Market, Trade, and Investment Trends That Will Define the Course of Textile and Apparel Industry, p. 22. )

Box 1 : Changing dynamics in China will lead to a US $ 100 billion trade gap

While China currently accounts for nearly 40 % of the sector’s total exports, its economy is at a crossroads in which private consumption will begin to overtake investment as the main driver of economic growth. This shift will likely result in structural changes to export-oriented sectors such as T & C.

As domestic demand for apparel grows, Chinese firms will become more oriented towards the local market, thereby reducing their ex-ports. In addition, supply-side shifts are expected to reduce garment

production. As a result of increasing costs and a greater focus towards service servitors, T & C output growth is expected to drop from 7 % to a more moderated 5 % to 6 % per year. The combination of these demand- and supply-side shifts will result in a global trade gap : worldwide clothing exports are expected to grow to US $ 1,700 billion by 2025 ( CAGR of 6.5 % ), whereas Chinese T & C exports will only grow by a CAGR of 6 %. The net result of this lag will be a US $ 108 billion market gap that represents an opportunity for other countries wishing to increase their share of the global market.

Source : Wazir Management Consultants ( 2013 ).

Box 2 : Implications for Ethiopia

Developments in the sector have a number of implications for Ethiopia as it seeks to find its place in the global value chain.

• Consumers are putting increased pressure on the T & C sector to improve social responsibility : suppliers are required to comply with CSR.

• The demand for full package services from lean retailers requires that suppliers expand their service offerings and create strategic partnerships with vendors rather than transaction-based relation-ships. This presents an opportunity for low-cost manufacturers to capture greater value.

• Firms must increase volume capacity, either internally or through consolidation / partnership agreements, to meet large and often unpredictable buyer requirements.

• Firms must increase their ability to supply the market quickly in response to fast fashion demands.

• Companies are encouraged to invest in quality, increase their product development competency, and develop their multi-fibre expertise.

• Increased management and ICT capacities will be required to satisfy buyer demands.

• So far, Asian countries have emerged as winners in global trade. In the next few years, some of them will become important markets as well. The increasing focus of China on the domestic market and value added production will result in multibillion dol-lar trade opportunities for suppliers in competing nations. Trade intelligence will be essential to tapping into these opportunities.

Photo: Jai79@pixabay, weaving.

[ TEXTILES AND APPAREL IN ETHIOPIA : AN INDUSTRY OF GREAT PROMISE ]

23

TEXTILES AND APPAREL IN ETHIOPIA : AN INDUSTRY

OF GREAT PROMISE

A COLOURFUL HISTORY

It was in the early twentieth century that Ethiopia’s cotton sector, and consequently the T & C sector, began to grow on a commercial scale. The Italians introduced the first garment factory in 1939, as well as the first modern, integrated textile mill. The sector continued to expand in line with the growing cotton production, and the 1960s saw the establishment of five large, private, integrated textile enterprises. While the socialist Government ( 1974 to 1991 ) nationalized textile and apparel companies, it also established additional enter-prises to fulfil domestic demand. Nonetheless, the sector eventually suffered under this regime : the lack of competi-tion, limited investment, and reliance on outdated technol-ogy eventually left the T & C sector significantly handicapped. Indeed, it was unable to meet international standards and was operating well below capacity.

Since the return to a market economy in 1991, the Government has identified the T & C sector as a priority for poverty reduction and economic development, given its la-bour intensity. From 2000 onward, the Government began to privatize state cotton farms and ginneries and to sell or lease state textile mills. However, it is only in the last few years that the sector has truly started to grow according to its potential.

As production costs in Asia continue to rise and Western buyers become more interested in ensuring ethical working conditions, a number of sourcing companies have turned away from Asia and towards Africa. Brands including H&M, Tesco and Primark have all begun to source from Ethiopia over the last few years as they seek to increase control of the entire supply chain from cotton to garment. They are drawn not only by low labour costs but also by the availability of raw materials and by the geographical proximity ; Europe can be reached easily via the Suez Canal, reducing delivery times by a third when compared with the Far East. In addi-tion, many companies are drawn to the perceived social responsibility of the sector in Ethiopia ; Ethiopian labour laws conform to International Labour Organization standards.9

Nowhere is Ethiopia’s potential more evident than in trade statistics since the turn of the century. Over the last decade, T & C exports have grown by a CAGR of 26 %, reaching US $ 82 million in 2014. During the same period, T & C subsector exports grew by CAGRs of 37 % and 19 % respectively.

9.– Ethiopian Textile Industry Development Institute ( 2014 ). Textile Industry Development in Ethiopia : an Overview of Facts and Opportunities.

A SECTOR IN FULL BLOOM AND ON THE VERGE OF FULL VALUE CHAIN INTEGRATION

The Ethiopian Government continues to actively engage with the T & C sector as part of its Industrial Development Strategy, with the ultimate goal of attracting investors and enhancing competitiveness in international markets. To this end, the Ethiopian Textile Industry Development Institute ( ETIDI ) was established by the Council of Ministers in 2010. In order to assist the sector in reaching the goals set by the Government five-year Growth and Transformation Plan ( GTP ) ( increase textile exports to US $ 1 billion by the end of

2015 ), ETIDI is mandated to provide investment promotion, training and consulting services ; engage in research and development ; and provide various testing and marketing support services. As such, it has become the focal point for activity in the sector and the main provider of support services.

Together with Government support, Ethiopia’s com-petitive advantages have allowed the sector to successfully attract key foreign investors and buyers including Asda,

[ ETHIOPIA TEXTILE AND CLOTHING VALUE CHAIN ROADMAP ]

24

H&M, Primark, Phillips Van Heusen, Tchibo, Tesco, Marks & Spencer, VF Corporation, and Inditex. These advantages include :

� Low labour costs ( for skilled and unskilled workers ) � Large and trainable workforce � Accessible and sustainable hydraulic energy � Lowest electricity costs in Africa � Relative proximity to Europe � Preferential market access ( AGOA, Everything But Arms,

Common Market for East and South Africa ( COMESA ) and soon the tripartite agreement for a Free Trade Area between COMESA, the East African Community ( EAC ) and the South African Development Community ( SADC ), and improved access to South Africa )

� Significant state support / incentive programmes � Availability of quality raw materials � Political stability and macroeconomic growth.

Foundations for growth

The sector produces a full range of products, from natural and man-made yarns, fibre, threads and textiles, to various garments, carpets and home textiles. Annual production is estimated to include 102,000 tons of yarn, 207 million metres of woven fabric, 50 million kg of knitted fabric, 63 million pieces of knitted garments, and 28 million pieces of woven garments. T & C production occurs in all regions of Ethiopia, although particular concentrations can be found in Oromia, Addis Ababa and, to a lesser extent, Amhara10.

The sector is an important source of income that pro-vides employment for over 450,000 people ( 2013 ), up more than 200 % from 2010 / 11. The majority ( 416,913 employees ) are employed by the textile segment. It should be noted that textile employment is predominantly rural ( 64 % of em-ployees ) and female ( 60 % ), whereas apparel is more urban ( 82 % of employees work in urban areas ) and male ( only 27 % of employees are female ).11

Large firms ( those with 50 or more employees ) consti-tute 78 % of companies in the textiles segment ( 2010 / 11 ).

10.– See Appendice – section A Main Ethiopian T & C producing areas ( in pink )11.– See Appendice Section B - Number of employees in Ethiopia’s T & C sector, 2013 and 2014

The size of apparel firms is more varied, and they include 17 large, 16 medium ( 20-49 employees ), and 7 small ( 10-19 employees ) enterprises. Even so, large firms account for the majority of employment in both segments : 98 % of employ-ment in the textile segment and 92 % of employment in the apparel segment.

Although Ethiopia has made great progress in increas-ing its production capacities, it has yet to reach a level of output that will allow it to play a major role in world markets. Productivity must be increased through capital upgrades and skills development, stimulated by FDI and its accompa-nying spillover effects. Efforts must also be made to increase value addition through product development and diversifi-cation. These improvements will all lead to greater income and employment generation, solidifying the sector’s role as a driver of sustainable economic development in Ethiopia.

On the verge of full value chain integration

Ethiopia’s T & C sector is characterized by strong value addi-tion throughout the entire value chain, from cotton to cloth-ing, with high local processing of cotton lint into textile and apparel products. The sector currently counts over 130 ac-tive enterprises that cover the entire value chain, including ginning, spinning, weaving / knitting, dyeing and printing, home textiles, and knitted / woven garment production. The sector’s enterprises range from those with only a handful of employees to those employing over 6,000 workers. The majority of enterprises are privately owned, although there are two state-owned integrated textile mills and a number of joint ventures between the state and foreign investors.

Foreign investors have contributed significantly to growth in recent years and are expected to be the drivers of growth in an Ethiopian garment boom. Figure 3 shows that foreign firms dominate the design and sewing segment. Not only are foreign projects more numerous, they are larger on av-erage, better endowed technically and better connected to international markets. As foreign investors drive high growth in Ethiopia’s garment production and exports, a major chal-lenge to sector stakeholders will be ensuring that that growth is well-linked to other segments, translating into an evolution of the value chain as a whole.

Photo: Cottco Chiredzi.

25

Figure 2 : Ethiopia’s T & C value chain

Impo

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Inputs

Cotton

The most widely used input is cotton, which is supplied mainly by the local market. Ethiopia ranked thirteenth among African cotton-producing countries in 2013 / 14, and pro-duces a medium staple length cotton of 25-30 mm. Cotton production is concentrated in the Awash valley, although significant potential exists for expansion in the Omo-Gibe, Wabi Shebelle, Baro Akobo, Blue Nile and Tekeze river ba-sins.12 In total, only 123,000 hectares of land are cultivated, despite the availability of roughly 3 million suitable hectares. Seventy per cent of cotton is produced by commercial farms. Most of the cotton is grown under irrigation. The first organic cotton farm has just recently begun operations ; its output is expected to help the sector increase its penetration of the European market.13

According to the International Cotton Advisory Committee ( ICAC ), the average yield in Ethiopia is 321 kg of lint per hectare ( 2013 / 14 ). While close to the average yield in Africa, it is quite low for cotton cultivated under irrigation. The Food and Agriculture Organization ( FAO ) of the United Nations estimates that Ethiopia produced 600,000 tons of cotton seed in 2013, nearly double the levels achieved in 2010.14 Expansion of cotton cultivation is being hindered largely by two factors : ( i ) limited attractiveness of cotton

12.– Embassy of Ethiopia, Economy and Business Section ( n.d. ). Investing in Ethiopia : Textiles. Washington, D.C. : Embassy of Ethiopia.13.– Deloitte ( 2014 ). Ethiopia : a Growth Miracle, p. 10. Johannesburg : Deloitte & Touche. 14.– Food and Agriculture Organization of the United Nations ( 2015 ). Statistics database. Available from http : / / www.fao.org / statistics / en / . Accessed 7 June 2015.

when compared to other agro-speculative crops ( particular-ly considering that the average cotton yields are well below potential ) ; and ( ii ) insufficient availability of inputs ( seeds and pesticides ) for rain-fed culture, and limited access to finance for irrigated culture.

Ethiopia’s 20 ginneries have a total capacity of rough-ly 330,000 bales of cotton, or 70,000 tons of lint per year. Most of these ginneries are affiliated with textile firms and their outturn is relatively low ( 37 % ). Indeed, using the same amount of cotton seed, Ethiopian ginneries produce 12 % less lint when compared with ginneries in West and Central African countries of the franc zone ( see figure 4 ). Increasing productivity at ginneries will therefore be of paramount im-portance when seeking to increase profitability in the cotton sector and expanding local production of cotton to meet T & C sector demand.

Total lint production has varied wildly over the years ( see figure 5 ), reaching a peak of 48,000 tons in 2004 / 05. In 2013, Ethiopia produced 38,000 tons of lint, making it the thirteenth-largest producer in Africa.

Despite the widespread presence of cotton cultivation and its significant potential for expansion, the entire national production is consumed locally and T & C enterprises must import a portion of their cotton requirements in order to meet demand. Cotton fibres are imported from Egypt, India, Uganda, Sudan and Pakistan when needed. Imports have risen markedly over the last few years along with mill use 15.

With regards to locally produced cotton, Ethiopia is establishing a national enterprise that will be responsible for purchasing and selling Ethiopian cotton. This entity will strengthen the linkages between cotton producers and tex-tile mills in an effort to increase domestic value addition.

15.– See Appendice section C - Cotton supply and demand in Ethiopia 1990 / 91 to 2010 / 11

Figure 3 : Ginning outturn of selected African countries ( 2013 )

Source : ITC

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Figure 4 : Cotton lint production in Ethiopia, 1940 / 41 to 2010 / 11

Source : ICAC

Other inputs

Other inputs such as dyestuffs, agrichemicals ( for cotton production ), finishing / processing chemicals, man-made fibre, wool and machinery ( mainly from China and India ) are also imported from abroad ( handlooms are however sourced domestically ).16 / 17 With regards to employment, the sector relies on domestic workers. While labour costs are low and workers are motivated and highly trainable, labour productivity remains an issue. Water, electricity and fuel are also supplied domestically.

Yarn spinning and combing

Ethiopia’s spinning enterprises produce rotor spun carded yarn, ring spun carded yarn, combed yarn and sewing thread from cotton lint purchased from domestic ginner-ies and abroad.18 Enterprises have 288,480 ring frame and 14,480 open-end spindles available, and output is estimated to be roughly 102,000 tons of cotton yarn ( representing a uti-lization rate of roughly 70 % ). Spinning firms purchase local lint regardless of quality as a result of the underutilization of ginneries. Because local lint supplies are not large enough to cover demand, additional lint is imported.

There are eight stand-alone spinning companies that produce open-end, ring and combed yarn at quantities of roughly 357.3 tons per day. In addition, 19 semi-integrated mills and eight integrated mills also engage in spinning. It should be noted that Ethiopia was the only country in Africa

16.– Embassy of Ethiopia in China ( n.d. ). Profile of the textile industry in Ethiopia. Available from http : / / www.ethiopiaemb.org.cn / bulletin / 209 / 003.html.17.– Ethiopian Textile Industry Development Institute ( 2014 ). Textile Industry Development in Ethiopia : an Overview of Facts and Opportunities.18.– Ibid.

to register an increase in mill use from 2005 / 06 onwards. While the majority of output continues through the domestic value chain, a portion ( valued at US $ 14.3 million of cotton yarn in 2014 ) is exported directly. Most of these exports are sold to China and Turkey, the latter’s enterprises being the main investors in Ethiopia’s stand-alone yarn companies.

Weaving and knitting

The T & C sector contains a heterogeneous mix of compa-nies that are active in the weaving and knitting segment of the value chain, including three home textile companies, six fabric producing companies, four integrated fabric / textile enterprises, 19 semi-integrated mills and eight integrated mills, as well as various households operating handlooms. Total production is estimated to be roughly 207 million me-tres of woven fabric and 50 million kg of knitted fabric ( 50 % and 45 % capacity utilization respectively ).19 These enter-prises produce cotton fabrics, polyester fabrics, warp and Rachel knitted fabrics, jacquard fabrics, jersey fabrics, and various home textiles.

The materials for cotton fabrics are purchased mainly from domestic spinning companies, although some foreign supply must be imported in order to meet demand. Synthetic filaments are imported from a variety of countries including China ( US $ 100 million in 2014 ), India ( US $ 12,650,000 ), Korea ( US $ 3,535,000 ), Chinese Taipei ( US $ 2,520,000 ), Indonesia ( US $ 2,490,000 ) and Turkey ( US $ 1 million ).20

19.– Ibid.20.– Data calculated from United Nations Comtrade statistics.

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Textile finishing and processing

Increasing the finishing and processing content of textiles is one of the main ways in which the T & C sector has sought to increase value addition in recent years.21 ETIDI estimates that there are roughly 16 units throughout the value chain ca-pable of processing textiles ; this includes three stand-alone dyeing and printing enterprises as well as a number of the semi-integrated and integrated textile mills. Thirteen of these units are privately owned, two are state-owned, and one is a joint venture between the Government and Turkish inves-tors. The textile processing sub-segment employs around 2,000 people.

Seven enterprises process woven fabrics and three pro-cess knit fabrics. The remainder process a combination, while a few also engage in yarn and fibre processing. In total, the segment has the following daily processing ca-pacities : fibre dyeing ( 17 tons ), yarn dyeing ( 91 tons ), knitted finishing ( 72 tons ), woven finishing ( 555,200 square metres ) and garment processing ( 24,000 pieces ). In total 49 million metres of woven fabric and 18 million kg of knitted fabric are produced per year, representing a utilization of between 48 % and 54 %.

Capacities vary along with technological complexity : while some enterprises make use of modern machinery, others use semi-automated processes. Various technolo-gies are currently being used in Ethiopia’s textile process-ing / finishing segment22. It should be noted that while some of these equipment was recently purchased, other date back to the middle of the twentieth century.

The dyes and chemicals that form the backbone of the operations are mainly imported from Japan, China, India, Pakistan, Switzerland, Turkey, Germany and Italy.23 They are purchased directly from international manufacturers ( such as CHT / BEZEMA and Rose Color Inc. ) who sell their prod-ucts from bonded warehouses in Ethiopia. This allows for re-duced delivery times and decreased risk of spoilage during storage and transportation. Agents of other manufactures are also present in the country. It has been estimated that processing units consume roughly 15 million kg of these inputs per year.

Only 10 % of the fabric used by the garment segment is local, as domestic producers are unable to produce an adequate quantity and quality of textile. The fabric that is not used by the domestic value chain is exported to Turkey, China, Italy, Germany, the United States and the United Kingdom.

21.– Ethiopian Textile industry Development Institute ( 2012 ). An abstract to Ethiopia’s textile chemical processing / finishing industry. Available from http : / / www.tidi.gov.et / An %20abstract %20to %20Ethiopia %E2 %80 %99s % 20Textile %20Chemical %20ProcessingFinishing %20Industry.html.22.– Ethiopian Textile Industry Development Institute ( 2014 ). Textile Industry Development in Ethiopia : an Overview of Facts and Opportunities.23.– Ethiopian Textile industry Development Institute ( 2012 ). An abstract to Ethiopia’s textile chemical processing / finishing industry. Available from http : / / www.tidi.gov.et / An %20abstract %20to %20Ethiopia %E2 %80 %99s % 20Textile %20Chemical %20ProcessingFinishing %20Industry.html.

Sewing and design

Ethiopia’s 78 garment factories produce 63 million pieces of knitted garments and 28 million pieces of woven garments per year ( ~70 % utilization rate ).24 The sector produces a wide range of apparel products, including casual and for-mal menswear and womenswear, military wear and other uniforms, undergarments, accessories, sportswear, home textiles, and handwoven accessories and home furnishings.

The most basic enterprises operate low risk / low profit CMT businesses. Others specialize in uniforms and suits, while still more are diversified ready-made garment compa-nies. The majority of stand-alone garment companies rely on imported fabrics from China, India, Pakistan, Turkey and the UAE. The integrated textile mills, however, use local cot-ton. These mills are able to produce goods of internationally acceptable quality ( T-shirts, trousers ). Other enterprises that use domestic fabrics include the integrated fabric / garment companies and, at times, handloom undertakings. Trims, accessories, packaging, machinery and spare parts are imported from abroad.

Handloom products tend to be exported under Ethiopian brands to the United States and EU, while the remainder is sold on the local market. Garments are exported by a variety of companies, including some of the most important Western brands ( such as H&M, Tchibo, Tesco, Carrefour, George, PVH, VF, Lewis, Zara, Old Navy and Gap ). The most important markets for garment exports include the following.

Primary suppor t services

The value chain is supported by an array of public and private institutions. Chief among them is Ethiopian Textile Industry Development Institute ( ETIDI ), which formulates and implements strategies and programmes aimed at stim-ulating the cotton, textile and apparel industries. In its the focal point for the sectoral development, ETIDI conducts market studies and disseminate trade intelligence, advises potential investors, provides trainings and technical as-sistance to enterprises ( in production, quality and human resource ( HR ) management ), provides testing and quality evaluation services, helps textile companies improve waste-water treatment, provides quality and consulting services for inputs and finally, assists in all other areas related to sectoral development and sector-specific investment promotion.

The Ethiopian Textile and Garment Manufacturers Association ( ETGAMA ) is the private sector organization that represents the interests of enterprises in the T & C sec-tor. Its goal is to foster the development of the T & C sector. Its activities include : updating members on contemporary global business trends ; conducting seminars & dialogues with Government regarding policy issues ; holding train-ings & workshops with development partners ; promoting

24.– Ethiopian Textile Industry Development Institute ( 2014 ). Textile Industry Development in Ethiopia : an Overview of Facts and Opportunities.

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member factories & their products ; providing advisory ser-vices on technical & operational concerns ; building rela-tionships between exporters & international buyers ; [and helping] members meet national & international standards.25

The Ethiopian Investment Commission ( EIC ) and its regional equivalents look to attract investors to the country, while the Privatization and Public Enterprises Supervising Agency is responsible for implementing the Government’s privatization plan and supervising public enterprises, includ-ing the remaining public T & C enterprises.

Standards and quality management in Ethiopia are gov-erned by the following institutions : Ethiopian Standards Agency ( ESA ) provides a range of services in its role as the national standards body ; Ethiopian Conformity Assessment Enterprise ( ECAE ) provides inspection, laboratory and certification services ; Ethiopian National Accreditation Office ( ENAO ) provides various training, ac-creditation and monitoring services in its role as the national accreditation body and the National Metrology Institute of Ethiopia ( NMI ) maintains national measurement standards and provides various calibration, training and consulting services.

25.– Ethiopian Textile and Garment Manufacturers Association ( 2015 ). About ETGAMA. Available from www.etgama.com / about.php.

The Ethiopian Cotton Producers, Exporters and Ginners Association ( ECPGEA ) provides advocacy, consulting and trade promotion services to its members according to de-mand. It should be noted that, in general, public–private dialogue is weak and capacities at private sector associa-tions must be enhanced in the areas of policy advocacy, marketing and management.

The sector relies on about 500 technical and vocational education and training ( TVET ) institutions ( up from 153 in 2003 ),26 of which roughly 20 % are specialized in the tex-tile and garment sector. A number of universities also have textile engineering departments, including Addis Ababa Science and Technology University, the Ethiopian Institute of Textiles and Fashion Technology, and ETIDI.

Other organizations providing key support to the sec-tor include Mennonite Economic Development Associates, the Ethiopian Women Exporters’ Association and the Organization for Women in Self Employment. Key technical consulting services are also provided by the Transformation Triggering Facility, an EU project that seeks to assist Ethiopia in its economic development.

26.– Textiles Intelligence ( 2015 ). Sourcing apparel from Kenya and Ethiopia. Textile Outlook International, No. 173, February.

Box 3 : Salient issues of the current value chain

Ethiopian enterprises are actively engaged in nearly all areas of the value chain. As such, the industrial base for further expansion and value addition exists. While some manufacturers are already produc-ing high quality goods for demanding markets, the proliferation of such production will require lagging enterprises to increase skills and technical capacities.

Full value chain integration is being hindered largely by weak upstream capacities : cotton production is insufficient to meet de-mand, with regards to both quality and quantity, while the domestic provision of other inputs such as garment accessories is limited. The weak quality and limited diversity of the domestic inputs that do exist make it difficult for garment companies to produce high

value added goods. To this end, FDI will play a key role in improving domestic provision of inputs and enhancing the ability of SMEs to produce high quality goods. It is of the utmost importance that efforts are made to direct this FDI to the portions of the value chain where capacities are currently lacking.

Full integration will also require the increased participation of sup-port institutions. In particular, sectoral associations must improve their capacity to provide services to SMEs and coordinate value chain participants. Efforts must also be made to support necessary policy reform ( for example, with regards to CSR issues ), align the TVET system with industry needs, and facilitate the provision of better consulting, banking and logistical services.

STIMULATING GROWTH THROUGH A CONDUCIVE POLICY FRAMEWORK

Industrial and development policy

The Government strives to promote pro-market policies that will facilitate sustainable economic development and poverty eradication. To this end, Ethiopia’s current indus-trial policy is formalized in the GTP 2010–2015. ( The GTP

succeeded the previous five-year Plan for Accelerated and Sustained Development to End Poverty, while the National Development Plan for the period 2015-2020 is currently un-der preparation ). The GTP established the following priorities for policy support, regulatory reform, and public and private investment : agriculture and rural development, industry, trade, mining, infrastructure, health and social development.

Within this framework, the T & C sector was identified as a priority industrial sector for development. As such, the

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Government has supported the T & C sector both directly and by fostering a more conducive business environment. In particular, ETIDI was established as the focal point for the sector. In order to support the GTP goal of increasing T & C exports to US $ 1 billion by 2015, ETIDI provides various investment promotion, training and consulting, research and development, testing, and marketing services, among oth-ers. In line with the GTP, the Government is also promoting FDI through various incentive and promotional programmes ( a more detailed discussion of FDI policy will be presented in the following section ). In addition, the GTP calls for a num-ber of large-scale infrastructure projects that are expected to enhance T & C competitiveness by drastically improving trade facilitation and logistics in the country.

The Agricultural Development Led Industrialization strategy is relevant for the cotton sector. With the objective of enhancing agricultural productivity, this strategy seeks to promote organic cotton production, foster the creation of growth corridors, and improve input provision so as to facilitate rural development. It should also be noted that the Private Enterprise Programme Ethiopia ( funded by the United Kingdom Department for International Development ) is currently formulating a national cotton development strat-egy ( 2015 – 2030 ).

Trade policy

Ethiopia is party to a relatively small number of trade agree-ments, including the Sino-Ethiopian Agreement for Trade and the Ethiopia – Sudan Trade Cooperation Agreement. While it is a member of COMESA and benefits from reduced tariff rates, it has yet to become a part of the group’s Free Trade Area. Even so, in recent years the Government has stepped up its efforts to liberalize its trade policy. To this end, it is undertaking negotiations to finalize its membership at the WTO, complete the Economic Partnership Agreement with the EU as part of the Eastern and Southern African countries, and conclude the tripartite agreement for a Free Trade Area between COMESA–EAC–SADC.

The conclusion of the tripartite agreement is particularly promising : while it must be ratified by member countries, it is expected to come into force in 2017. Once it does, it will improve Ethiopia’s access to regional markets including South Africa, which imported US $ 1.8 billion of garments in 2013. The tariffs faced by Ethiopian clothing exporters are quite high in the South African region. The agreement will therefore significantly increase Ethiopian competitiveness in a large and growing market27.

In addition to these agreements, Ethiopia has taken a number of unilateral steps towards improving its trade en-vironment. In its efforts to promote industrial production, it has withdrawn export tariffs ( with some exceptions ). Even so, import tariffs remain quite high : the ad valorem applied tariff for special woven fabrics ( HS-58 ) is 32.6 % ( 29.5 % for neighbouring countries ) and man-made filaments ( HS-54 ) is 26.1 %. Of particular importance, the import tariff on wo-ven fabrics ( HS-540769 ) is 31.5 %. In addition, tariff rates rarely differ between neighbours and the rest of the world. As a result, there is little incentive for regional integration of the supply chain.

The Ethiopian Government has made great strides in im-proving the business environment through its industrial and trade policy reforms. The T & C sector now enjoys enviable market access and a supportive policy framework. In order to fully capitalize on these advances, however, the sector must increase awareness among potential investors of the opportunities offered by Ethiopia.

27.– See Appendice section D – Tariffs faced by Ethiopian apparel exports ( Harmonized System ( HS-61 )

Box 4 : Non-reciprocal preferential market access

Roughly 21 countries ( including the EU as a single entity ) grant zero tariffs or reduced rates to least developed countries’ goods in a non-reciprocal manner. It is important to disseminate this information in a more efficient manner in order to stimulate T & C

market diversification. Several studies on non-reciprocal preferential arrangements find that limited awareness in the private sector, and sometimes even in the public sector, is one of the main reasons that preferential duties are not leveraged to their full extent.

Photo: Activedia@pixabay, sewing machine.

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Ethiopia : the new buzzword among investors

Ethiopia has gained a notable reputation in investor circles over the past few years. There is a significant buzz surround-ing the opportunities offered and investment attractiveness of the country, and Ethiopia is frequently investigated as a potential location for investment by multinational firms. In the T & C sector, this buzz has led to concrete results in the form of ever-increasing investment : in 2014, 36 T & C FDI projects were licensed in Ethiopia, with an average capital investment of US $ 140 million. These projects employ an estimated average of 2,500 people each.28

Ethiopia’s attractiveness as a destination for investment in the T & C sector is the result of several features, including low factor costs, factor availability, duty-free access to major markets, a stable Government, good law and order, and the Government’s proactive efforts to attract investment in this labour-intensive and export-oriented industry.

One promising aspect of Ethiopia for T & C investment is cotton availability. The area under cotton cultivation in

28.– Averages are for 18 projects, for which capital and jobs data has been announced and / or estimated. Source : World Bank Group project in Ethiopia.

this period was reported to be 120,000 hectares. However, Ethiopia has 3 million hectares of land suitable for cotton production ( two-thirds identified as highly suitable ). This is almost equal to the amount of land under cotton cultiva-tion in Pakistan, the fourth-largest world cotton producer. Presently only 4 % of this area is under cotton cultivation. Improvement in farm yields from current levels, coupled with the possibility of an increase of the area under cultivation, will prove extremely attractive for cotton textile value chain producers, specifically spinners.

Labour and power are two key inputs that form a sub-stantial part of product costs ( e.g. raw materials ). It is therefore important that T & C companies can access a con-tinuous supply of labour and power at competitive rates. Ethiopia, fortunately, boasts labour and power costs that are among the cheapest in the world. The prevailing wage rate in Ethiopia is approximately US $ 50 per month and the power cost is US $ 0.03 per unit. Land lease rates in Ethiopia are also kept very competitive by the Government in order to attract investors. A quick comparison between Ethiopia and its regional neighbours and other T & C exporting nations highlights Ethiopia as the most cost-competitive manufac-turing base.

Table 3 : Comparison of costs and competitive factors between Ethiopia and competitors

Estimated values Kenya EthiopiaUnited Republic

of TanzaniaIndia China Viet Nam

T & C export value ( US $ millions, 2013 ) 377 94 248 40 192 273 959 21 534

Cotton production ( thousands of 480 lb. bales ) 32 175 375 30 000 30 000 17

Cost of labour ( US $ per month ) 110–150 50–60 70 175 550 180–200

Labour skills Low–medium Low Low High Very high High

Cost of electricity ( US¢ per kilowatt hour ), estimated average 16–18 2–5 12 7–12 9–15 8

Percentage of annual sales lost to electrical outages 5.6 2.6 5.5 2.0 0.1 1.1

Cost of construction ( US $ per ft2 ) 21 40 34 18–20 15–20 20–25

Lending rates ( Annual Percentage Rates, estimated ) 14–18 8.5 19 7–13 7 6–7

Time to clear Customs, inputs + exports ( days ) 31 37 44 12 17 15

Box 5 : The need to improve the qualified labour supply

While affordable labour is plentiful for the labour-intensive T & C sector, productivity remains quite low. Even so, at least one existing investor believes that his newly trained Ethiopian workforce will achieve the same productivity levels as his Vietnamese workforce after a year of experience and training. In terms of workforce development, the Government of Ethiopia created ETIDI and empowered it to provide training and consulting services. The Government has also sponsored

a skills gap assessment as a precursor to more effective intervention. Yet more efforts are needed : in Ethiopia, workforce development is mostly company-led, which is inefficient on a macroeconomic scale, can lead to inconsistent standards across the labour pool, and takes longer to ramp up. In countries such as India, China and Bangladesh, workforce development is government-led and can be managed to produce large numbers of work-ready trainees.

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Box 6 : A safe haven in a conflicted region

Ethiopia also has a very favourable law and order environment, which is sometimes the first point of concern for international investors. According to Ashish Agarwal, CEO of Kanoria Textiles, an Indian investor in Ethiopia ‘I can walk around at 10 p.m. with dollars in one hand and passport in the other without any fear whatsoever’. It is highly unlikely international investors in competing African

countries could say the same. One of the reasons behind the safe environment is the existence of a stable and progressive Government that is working hard to attract investors. The Government is not only providing special investment incentives ( see box 9 ), but also work-ing to foster a conducive business environment.

Trainable labour is also abundant : approximately 54 million people ( out of a population of 97 million ) are of working age.29 With regards to power, while Ethiopia enjoys a ready supply of hydropower, the transmission and distribution sys-tems need improvement.

Another advantage is the comprehensive market access that Ethiopia enjoys in major T & C markets ( such as the United States, EU and Japan ) as a result of its least de-veloped country status and various trade agreements / ar-rangements ( e.g. AGOA and Everything But Arms ). Under COMESA, Ethiopia has preferential access to regional mar-kets as well. In addition, Ethiopia is expected to be a part of the Tripartite Free Trade Area between COMESA, SADC and EAC, which will see its access to regional markets expanded significantly.

Chief among the Government’s business environment re-forms have been large public investments in infrastructure and power generation ; creation of industrial zones with dedi-cated infrastructure and special incentives ; and streamlin-ing of Government procedures through clarification of the commercial code and setting up of an effective one-stop shop. Most sectoral restrictions on FDI have been lifted, and investors enjoy standard protection from expropriation as well as unrestricted repatriation of profits, although a short-age of foreign exchange can cause delays 30.

Ethiopia does not rank highly in international business rankings compared with its competitors in the T & C sector31 . Even so, the country is making steady progress on all fronts. Policymakers are open and willing to learn from international examples and adopt best practices. These efforts attracted significant investment from notable companies. While word of mouth and more active investment promotion should at-tract even more investors, the Government must also make strides to remove the remaining hurdles to trade.

29.– Source : United Nations Population Division database.30.– See Appendice section E – Incentives for sectoral development in Ethiopia31.– See Appendice Section F – International business rankings of Ethiopia and its competitors

Trade growth is impressive but falls shor t of potentialEthiopian T & C exports have grown dramatically over the past few years, expanding from US $ 8 million in 2004 to US $ 82 million in 2014 ( 10-year CAGR of 26 % ). While the sector had been growing modestly since the turn of the cen-tury, it was not until the Government’s implementation of pol-icies to support the sector in 2010 that growth truly took off. While impressive, it should be noted that this growth falls far short of Government objectives. Whereas the Government called for sectoral exports of US $ 500 million by 2013 and US $ 1 billion by 2016, current levels are only a fraction of the latter target. As illustrated in figure 6, the majority of growth was due to an expansion of apparel exports ( five-year CAGR 74 % ), followed by home textiles and carpets ( 22 % ), and tex-tiles ( 10 % ).

Ethiopia has experienced a period of enviable market and product diversification that has served to increase in-come and decrease the risk of economic shocks that would otherwise be associated with significant market concentra-tions. Whereas Ethiopia exported only a handful of products to an average of five markets in 2004, it is now exporting a wide array of goods to over 20 destinations. The largest source of growth over the past 10 years has been the intro-duction of old products to new markets.

Despite significant progress, the sector continues to face a number of challenges. Of particular note is the difficulty with which Ethiopian companies maintain export relation-ships. The probability of an Ethiopian T & C company sup-plying exports to the same market for two consecutive years is about 42 %. This drops to less than 11 % for an additional year, and approaches 0 % as the horizon is extended32.

32.– See Appendice Section G – Trade Analysis — Fig.2 Probability of export survival, 2002–2014

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Figure 5 : Ethiopia’s T & C exports, 2001–2014 ( US $ thousands )

0

20.000

40.000

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Source : International Trade Centre ( 2015 ) ( b ).

Clothing

Ethiopian firms exported US $ 46.1 million of clothing prod-ucts in 2014, up from US $ 2.9 million in 2009 ( five-year CAGR 74 % ). Clothing is an increasingly important source of income and foreign exchange, and exports have been steadily increasing as a share of Ethiopia’s total exports, ris-ing from 0.2 % in 2009 to 1.6 % in 2014. Even so, the country continues to be a net importer of garments ( total imports of US $ 275 million, trade balance of minus US $ 229 million ). Imports have increased dramatically over recent years in order to meet a surge in domestic demand.

Seventy-five per cent of the negative trade balance is due to the eight most-imported products, which include menswear, T-shirts, womenswear and technical wear. These product categories may represent interesting opportunities

for import substitutions, should Ethiopian firms be able to increase production capacity in line with market demand33.

The most important importing market for Ethiopian cloth-ing is Germany, which receives 76 % of the subsector’s total exports, followed by the United States ( 14 % ), Sudan ( 6 % ) and the United Kingdom ( 3 % ). Until 2010 the United States was the largest market due to the market access provided under AGOA, at which point it was overtaken by Germany. The impressive growth of exports to Germany is due to the relocation of many German-oriented Turkish firms to Ethiopia. These companies were attracted by Ethiopia’s low labour costs and preferential market access to the EU under the Everything But Arms programme34.

33.– See Appendice – Section G – Trade Analysis – Fig.3 Contribution to Ethiopia’s clothing trade deficit, 201434.– See Appendice – Section G – Trade Analysis – Fig.4 Top importers of Ethiopian garments, 2001–2014 ( US $ thousands )

Figure 6: Ethiopia’s trade in clothing products, 2001–2014 (US$ thousands)

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0 100.000 200.000 300.000 400.000

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Source: International Trade Centre, Trade Map database <www.trademap.org>

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In 2004 there were only two countries to which Ethiopia ex-ported more than US $ 100,000 of garments, including one country that imported over US $ 1 million. In 2014 there are seven countries importing over US $ 100,000, including four that import more than US $ 1 million. Despite its success in the United States and Europe, Ethiopia is not exporting to many other developed, emerging or frontier markets, even if many of them offer Ethiopia duty-free market access as a result of its least developed country status.

Ethiopia’s most important garment exports were T-shirts ( 19 % ), Men’s underpants, pyjamas, bathrobes, etc. ( 12 % ), Women’s blouses & shirts ( 9 % ), Women’s suits, jackets, dresses, skirts, etc. ( 7 % ), Jerseys, pullovers, cardigans, etc. ( 7 % ), Women’s suits, jackets, dresses, skirts, etc., knit-ted / crocheted ( 7 % ).Growth has been impressive for all of these products, ranging from a five-year CAGR of 63 % for jerseys, pullovers, cardigans, etc., to a CAGR of 393 % for pantyhose, tights, stockings and other hosiery 35. Exports have become significantly less concentrated over the past decade as the sector diversifies its product offerings. Today, the top five products account for 55 % of total garment ex-ports, as opposed to 70 % in 2004. In addition, today there are 12 products that export more than US $ 1 million worth of goods, while in 2004 there were none 36.

Textiles

Ethiopian firms exported US $ 35.9 million of textile products in 2014 ( including home textiles ), up from US $ 14.9 million in 2009 ( five-year CAGR 19 % ). Nevertheless, the trade defi-cit has nearly tripled over the past decade ( trade deficit of US $ 235 million in 2014 ) because the rapidly expanding garment sector has relied largely on foreign inputs ( see figure 8 ).

The majority of the textiles trade deficit is due to imports of man-made filaments ( 52 % ) and home textiles ( 26 % ). The

35.– See Appendice – Section G – Trade Analysis – Table 1 Ethiopia’s top 10 garment exported garments, 2009–2014 ( US $ thousands )36.– See Appendice – Section G – Trade Analysis – Table 2 Top changes in market share by product

US $ 152 million and US $ 28 million trade deficits with China and India respectively account for 65 % and 12 % of the total trade deficit 37 .

The most important importing market for Ethiopian tex-tiles is Turkey, which receives 58 % of total exports, followed by Germany ( 14 % ), Italy ( 13 % ), China ( 11 % ) and the United States ( 2 % ). The heavy concentration in Turkey is due to significant investments in Ethiopia made by Turkish firms who are integrating this textile production into their global value chains.

Despite the increase in textile exports, recent trends have been less than enthusiastic. Market concentration has worsened : in 2004, the top five destinations imported 83 % of total textile exports, whereas today the top five import-ers account for 98 % of sales. In addition, there were eight markets in 2004 that purchased more than US $ 100,000 of textile goods from Ethiopia. In 2014, there were only seven markets in this category. It is also worrisome that exports have fluctuated significantly over recent years. Exports to Turkey and China fell by 10 % and 67 % respectively in 2014, following significant upswings in the year prior38.

Ethiopia’s most important textile exports were cotton yarn ( 39.8 % ) ; cotton fabrics ( 14.5 % ) ; bed, table, toilet and kitchen linens ( 13.6 % ) ; and special woven or tufted fabric, lace, tapestry, etc. ( 8.1 % ). Growth has been impressive for all of the top product categories, although the baseline is quite low ( see table 9 )39.

It should also be noted that exports have become slightly less concentrated over the past five years. The top five and top 10 products ( four-digit HS level ) accounted for 74 % and 91 % of textile exports respectively in 2014, as opposed to 81 % and 95 % in 2009. Even so, product concentrations re-main significant.

37.– See Appendice – Section G – Trade Analysis – Fig.5 Contribution to Ethiopia’s textiles trade deficit ( 2014 )38.– See Appendice – Section G – Trade Analysis – Fig.6 Top importing markets for Ethiopian textiles, 2001–2014 ( US $ thousands )39.– See Appendice - Section G – Trade Analysis – Table 3 Ethiopia’s top 10 textile exports, 2009–2014 ( US $ thousands )

Figure 7 : Ethiopia’s trade in textile products, 2001–2014 ( US $ thousands )

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Source : International Trade Centre ( 2015 ) ( b ).

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Table 4 : Ethiopia’s top 5 textile exports, 2009 and 2014 ( US $ thousands )

Product label 2009 2014 Five-year CAGR Share ( % )

Total 14 957 35 975 19.2 % 100.0 %

Cotton yarn 6 187 14 334 18.3 % 39.8 %

Cotton fabrics 3 108 5 214 10.9 % 14.5 %

Bed, table, toilet and kitchen linens 55 4 894 145.4 % 13.6 %

Special woven or tufted fabric, lace, tapestry, etc. 65 2 904 113.8 % 8.1 %

Furnishing articles n.e.s., excluding 94.04 783 2 855 29.5 % 7.9 %

Source : International Trade Centre ( 2015 ) ( b ).

Trade statistics make it clear that the T & C sector has yet to find a strategy that will allow it to expand to new markets and ensure its survival in existing ones. Product and market con-centrations continue to be worrisome, and enterprises are not taking advantage of Ethiopia’s preferential market access to the fullest extent. While growth has certainly been impres-sive, it has fallen well short of the Government’s ambitious targets. The sectoral analysis sheds light on a number of is-sues that seem to be inhibiting greater competitiveness and

stronger growth. Skills are often unaligned to the demands of the industry, value addition and integration are lacking, and institutional support is limited. Although the Government has made positive strides with regards to policy, a number of issues continue to constrain the business environment. It is necessary to analyse these competitive issues in more depth, using evidence from the field. A greater analysis of these challenges will allow stakeholders to develop an effec-tive roadmap that can adequately tackle the key constraints.

STRATEGIC ISSUES AND COMPETITIVE CONSTRAINTS

Traditionally, the scope of export strategies and value chain roadmaps has been defined in terms of market entry, such as market access, trade promotion and export development. This ignores several important factors in a country’s com-petitiveness. For an export strategy to be effective it must address a wider set of constraints, including any factor that limits : the ability of firms to supply export goods and ser-vices ; the quality of the business environment ; and the de-velopment impact of the country’s trade, which is important to its sustainability. This integrated approach is illustrated by the four gears framework schematic on the right.

To increase the specificity of constraint analysis for the T & C sector, a detailed constraint overview is provided for each subsector of the industry, namely : textiles and clothing. In cases where the same constraints are shared, they will be detailed under the subheading ‘across the value chain.’

Supply-side issues affect production capacity and in-clude challenges in areas such as availability of appropriate skills and competencies, diversification capacity, technol-ogy, and low value addition in the sector’s products.

Business environment constraints are those that influ-ence transaction costs, such as regulatory environment, ad-ministrative procedures and documentation, infrastructure bottlenecks, certification costs, Internet access, and cost of support services.

Market entry constraints are essentially external to the country ( but may also be manifested internally ), such as

market access, market development, market diversification and export promotion.

Social and economic concerns include poverty reduc-tion, gender equity, youth development, environmental sus-tainability and regional integration.

Border IssuesBorder-In Issues

Border-Out IssuesDevelopment Issues

CapacityDevelopment

Cost ofDoing Business

Developinig skills

and Entrepreneurship

Capac

ity

Diversi

ficati

on

Infrastructure and

Regulatory Reform

Trad

eFa

cilita

tion

Market Accessand Policy Reform

National Promotion

and Branding Trad

e Su

ppor

t

Serv

ices

Poverty Alleviationand Gender Issues

Regional Development

and Integration

Envir

onm

enta

l

Sust

aina

bilit

y and

Clim

ate

Chan

ge

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Box 7 : Competitive constraints in the Ethiopian T & C sector

Border-in ( supply-side )

CapacityDevelopment

Developinig skills

and Entrepreneurship

Capac

ity

Diversi

ficati

on

Across the value chain

Skill gap :

• Limited availability of skilled specialists hinders productivity, quality and value addition – Inadequate TVET system impacts the development of a qualified labour supply – Insufficient in-company training hinders the development of a qualified labour supply – Weak HR management capacities reduce incentives and lead to high turnover – Other factors

• Limited availability of competent managers limits operational, systems and process efficiency – Inadequate education affects the development of necessary management skills – Inexperienced T & C managers and resistance to change – Limited access to foreign expertise

• Lack of modern information technology ( IT ) systems hinders the ability of enterprises to increase value addition and access demanding markets

• Lack of a market-driven approach within companies leads to a disconnect between the sector and foreign demand• Difficulties adhering to quality standards reduce competitiveness in international markets

Machinery : Obsolete equipment diminishes productivity and quality, and hinders value addition

Textiles Input supply :

• Limited quantity and quality of local cotton reduces competitiveness and diminishes opportunities for local value addition

– Limited quality of local cotton – Limited and unpredictable production of cotton

• Low quality of yarn diminishes profitability and reduces quality throughout the value chain• Low capacity utilization limits profitability

Clothing Input supply :

• Suboptimal sourcing practices reduce cost competitiveness and hinder product development• Limited value addition reduces competitiveness in international markets

Border ( business environment )

Cost ofDoing Business

Infrastructure and

Regulatory Reform

Trad

eFa

cilita

tion

Across the value chain

Trade facilitation issues : Inefficient Customs system leads to high costs and delays

Organization :

• Limited institutional capacity and poor sector coordination• Weak quality management infrastructure hinders compliance with market requirements

Infrastructure :

• Weak communications infrastructure diminishes the ability of companies to meet buyer requirements• Energy shortfalls reduce profitability and diminish the ability of companies to meet buyer requirements

Cost of doing business :

• Limited access to finance hinders investment in value addition• Expensive and unreliable transportation reduces the price competitiveness of Ethiopian goods in international

markets and hinders the ability of enterprises to deliver goods in a timely fashion

Border-out ( market access )

Market Accessand Policy Reform

National Promotion

and Branding Trad

e Su

ppor

t

Serv

ices

Across the value chain

Trade information :

• Limited awareness of preferential trade agreements hinders export expansion• Inadequate access to and use of trade intelligence limits growth opportunities

Trade promotion :

• Lack of a national branding strategy hinders market development• Lack of trade promotion capacities hinders the sector’s strategic development• Lack of targeted investment promotion efforts reduces the attraction of foreign capital, technology and expertise

Market access policies : Prevalence of short-term export relationships hinders the sector’s strategic development

Development issues

Poverty Alleviationand Gender Issues

Regional Development

and Integration

Envir

onm

enta

l

Sust

aina

bilit

y and

Clim

ate

Chan

ge

Across the value chain

CSR :

• Subpar working conditions have the potential to pose health and safety risks• Environmentally and socially responsible practices are not an integral part of doing business in the sector,

threatening negative social impacts and ineligibility to supply socially concerned buyers

Textiles Water pollution :

• Outdated dyeing methods pollute waterways• Rapid expansion of cotton fields may impact indigenous livelihoods and local ecosystems

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SUPPLY SIDE ISSUES

Box 8 : Supply-side constraints in Ethiopia’s T & C sector

Border-in ( supply-side )

CapacityDevelopment

Developinig skills

and Entrepreneurship

Capac

ity

Diversi

ficati

on

Across the value chain

Skill gap :

• Limited availability of skilled specialists hinders productivity, quality and value addition – Inadequate TVET system impacts the development of a qualified labour supply – Insufficient in-company training hinders the development of a qualified labour supply – Weak HR management capacities reduce incentives and lead to high turnover

• Limited availability of competent managers limits operational, systems and process efficiency – Inadequate education affects the development of necessary management skills – Inexperienced T & C managers and resistance to change – Limited access to foreign expertise

• Lack of modern IT systems hinders the ability of enterprises to increase value addition and access demanding markets• Lack of a market-driven approach within companies leads to a disconnect between the sector and foreign demand• Difficulties adhering to quality standards reduce competitiveness in international marketsMachinery : Obsolete equipment diminishes productivity and quality, and hinders value addition

Textiles Input supply :

• Limited quantity and quality of local cotton reduces competitiveness and diminishes opportunities for local value addition

– Limited quality of local cotton – Limited and unpredictable production of cotton

• Low quality of yarn diminishes profitability and reduces quality throughout the value chain• Low capacity utilization limits profitability

Clothing Input supply :

• Suboptimal sourcing practices reduce cost competitiveness and hinder product development• Limited value addition reduces competitiveness in international markets

Across the value chain

Skill gap

Limited availability of skilled specialists hinders productivity, quality and value addition

‘I do not encounter problems in finding workers for my firm. People that I recruit are also very open to the learning process. The problem that I face is that workers have not had the experience of working in modern industrial plants; they are not aware of some basics related to the functioning of this environment. I need to start from scratch, and it takes time… and money.’

Industry opinion

Ethiopia’s T & C sector suffers from a lack of sufficiently skilled technicians and specialists, despite the presence of a large labour pool in the country. The lack of skills leads directly to lower productivity and quality, which inhibit the ability of the sector to add value, meet buyer requirements and increase profitability.

While the lack of qualified operators is the key problem for the textile segment, clothing companies lack both operators and designers : the lack of operators reduces productivity and quality, and the lack of designers hinders the ability of clothing companies to move up the value chain and pro-duce more value added goods.

Not only is the lack of skills a drag on growth in and of itself, but it also diminishes the positive gains that would otherwise be achieved through capital investment : though many companies have upgraded their capacities through the purchase of new equipment, for example, they lack the staff needed to operate it. As a result, much of this equip-ment either remains idle or operates below capacity, leading to lower productivity and questionable quality. The reasons for the dearth of adequately skilled workers are numerous, and include factors that are both internal and external to the sector’s enterprises.

Inadequate TVET system impacts the development of a qualified labour supply

The T & C sector requires both skilled and semi-skilled workers, and there are a number of universities and around 100 TVET institutions specialized in T & C. Nevertheless, these institutions find it difficult to prepare students in accordance with the sector’s requirements. The TVET system has seen few notable improvements over recent years with regards to the quality of training, teachers and infrastructure. The

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links between universities and TVET institutions and industry are weak, so trainings do not adequately reflect the needs of industry. In addition, the lack of internship programmes ( and the questionable quality of those that exist ) means that students are not gaining enough practical experience. It should be noted that there are no standardized certifications for trainings in the sector. There is also a lack of available training institutes in most regions outside of Addis Ababa. In addition, the TVET system does not have enough capac-ity to provide training for a sufficient number of trainees.

In the PoA, activities 1.1.1, 1.1.7, 2.3.1 to 2.3.6, 2.3.10, 2.3.11, and 2.4.1 to 2.4.3 respond to this issue.

Insufficient in-company training hinders the development of a qualified labour supply

In the absence of an adequate TVET system, compa-nies themselves should be preparing their own specialists. Nevertheless, few companies provide adequate training. While most companies do provide at least some training for operators, the scope of such trainings is quite narrow. Not many companies have internal training schools and ap-propriate HR development facilities. Some companies have hired foreign firms to perform more appropriate trainings, but it should be noted that local owners often lack access to such expertise. This may lead to a disconnect, wherein foreign owners gain an uneven edge in their competition with local entrepreneurs. However, the need for training goes beyond technical competency : employees also re-quire behavioural training ( dress code, basic security, time management, etc. ). All of these factors together would lead to more productive employees.

In the PoA, activities 1.1.1, 1.1.2, 1.1.5, 1.1.7, 1.2.1, 1.6.1, 1.6.2, 1.7.1 to 1.7.3, 1.8.1, 2.3.4, and 2.4.1 to 2.4.3 respond to this issue.

Weak HR management capacities reduce incentives and lead to high turnover

Salaries within the sector are quite low, averaging around US $ 50 per month. Low wages, together with the lack of other financial incentives, do little to promote productivity and en-hance loyalty. In addition, the low salaries lead to high levels of absenteeism, which are estimated to be as high as 10 %. Many workers skip work in order to pursue better-paying, opportunistic side jobs, knowing that they cannot be fired as long as they are not absent for more than five days at a time.

Another issue to be considered is poor working condi-tions, including inadequate housekeeping and lighting as well as unhygienic amenities.40 In addition, employers do little to promote a sense of belonging or loyalty among staff. Festivities and other team-building exercises, as well as the introduction of benefits such as transportation, medical services, subsidized meals would go a long way towards fostering allegiance among staff.

40.– Lee, David Yuen Hoi ( 2010 ). Benchmarking of the Ethiopian Textile Industry Vision 2015, p. 124. Project No. YA / ETH / 001. UNIDO.

In addition to affecting productivity, all of these issues lead to high employee turnover. This results in a constant brain drain in which trained workers leave a company, only to be re-placed by untrained substitutes. This in turn makes compa-nies less motivated to invest in the appropriate training and prevents companies from capitalizing on acquired skill sets.

In the PoA, activities 1.1.1, 1.1.2, 1.1.5 to 1.5.3, and 1.8.1 and 1.8.2 respond to this issue.

Limited availability of competent managers limits opera-tional, systems and process efficiency

Despite the fact that, overall, mid- and high-level man-agement skills are relatively good within SMEs, there is still room for improvement. Many managers continue to make use of outdated management methods that do little to spur higher productivity, reflecting the legacy of public sector planning41.

Quality management is neglected due to limited knowl-edge among management of both modern practices and market requirements ; this limits value addition and profit-ability. Lack of manager exposure to modern technologies is also a detriment : they lack knowledge about the latest machinery, hindering the upgrading of equipment. Similarly, limited knowledge of IT hinders the uptake of more inte-grated systems that would allow for greater value addition and service provision as required by modern TNCs. Lastly, managers have a poor understanding of HR management, thereby resulting in inadequately skilled specialists, high turnover, and limited workforce loyalty.

Inadequate education affects the development of neces-sary management skills

‘I entered the textile industry recently because it seemed to be very promising. I was a farmer before, and T & C looked very attractive to me. Now I am fac-ing some problems identifying the right product for my clients, and I do not know much about machinery in textiles. I came to know that this is a crucial aspect of this industry.’

Industry opinion

As with the training of specialists and technicians, a key constraint is the lack of adequate TVET and university pro-grammes. Weak linkages with industry result in an education system that does not reflect the needs of the T & C sector. Teachers lack adequate knowledge of how Ethiopia’s T & C companies operate : such knowledge would provide valu-able insight into current processes and needs for improve-ment. In addition, teachers lack knowledge of international

41.– Ibid. : p. 112.

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best practices within the sector, hindering their ability to stimulate modern management practices in Ethiopia. In addition to sector-specific topics, management also lacks training in generic management skills such as HR manage-ment, planning, costing and pricing.

In the PoA, activities 1.1.3, 1.1.4, 1.1.6, 1.4.6, 1.4.7, 1.8.1, 1.8.2, 2.3.2, 2.3.4, and 2.3.7 to 2.3.11 respond to this issue.

Inexperienced T & C managers and resistance to changeEthiopia’s T & C sector is relatively young. As such, many

managers do not have adequate sector-specific knowledge, having frequently worked in other sectors before moving to T & C. Most industrialists do not have an industrial back-ground but instead come from areas of the economy such as agriculture. As a result, it is even more important that the education system be able to offer adequate sector-specific training. It should also be noted that many managers have a strong resistance to change. This reinforces the status quo, preserving current production and technology levels.

In the PoA, activities 1.1.3, 1.1.4 and 1.5.3 respond to this issue.

Limited access to foreign expertiseAs with specialists, there is also a gap between the ex-

pertise that can be accessed by local companies and that which can be accessed by foreign-owned companies. As a result, locally owned companies generally have weaker management in place.

In the PoA, activities 1.1.6, 1.4.6, 1.4.7, 1.4.9, 1.5.3, 1.8.1 and 1.8.4 respond to this issue.

Lack of modern IT systems hinders the ability of enterprises to increase value addition and access demanding markets 42

The increasing importance of IT capacities for T & C sup-pliers is largely the result of two trends43. Firstly, international T & C buyers are shifting more towards lean retailing and they are looking for ‘full package’ service providers assuming most of the non-sale portions of the value chain, including the sourcing of materials, design and logistics. Secondly, fast fashion has revolutionized supply chain management and modern suppliers must be able to face fast turnovers. Given Ethiopia’s proximity to Europe when compared with Asian competitors, capturing the fast fashion market is a particu-larly attractive option for sectoral development. Both of these opportunities require IT capacities that allow companies to share, analyse and use information flows, and optimize systems processes. Ethiopia’s T & C companies lack mod-ern IT capacities such as Entreprise Resources Systems.

Improvements have been hindered by the limited ex-posure of company management to these modern IT sys-tems, and the education system does little to fill the gaps.

42.– Information for Development Programme ( 2008 ). The Global Textile and Garments Industry : The Role of Information and Communication Technologies ( ICTs ) in Exploiting the Value Chain.43.– See Global Trends

Increased awareness of the costs and benefits of such sys-tems will be needed to convince managers that such sys-tems are a worthy investment. Visits to companies abroad would also expose management to best practices and mo-tivate necessary upgrades.

While external to enterprises, it must be noted that Ethiopia suffers from poor ( slow and unreliable ) connectiv-ity. In order for Ethiopian T & C companies to be considered for the most attractive contracts, IT capacities and reliability will need to be improved.

In the PoA, activities 1.2.1 and 1.8.4 respond to this issue.

Lack of a market-driven approach within companies leads to a disconnect between the sector and foreign demand 44

‘I invested in a textile plant recently with some fairly new machinery. However it seems I cannot find any buyers for my products. So at the end of the day, I often operate under capacity.’

Industry opinion

A key constraint that lies at the root of many of the sector’s problems is the lack of a market-driven approach. Instead, enterprises are production-driven. Disconnected from final buyers, SMEs are unable to align product development, supply chain management and internal skills development with the requirements of final buyers.

The reasons for this disconnect are numerous and in-clude the lack of a market-oriented mentality among man-agers. This stems largely from limited trade intelligence, as both SME and trade support network capacities for gather-ing and using such intelligence is lacking. With regards to SME capacities, market research departments are poorly developed, their personnel lack adequate expertise, and there is little contact with potential customers in the field.

In the PoA, activities 1.8.1 to 1.8.3, and 2.2.3 to 2.2.4 re-spond to this issue.

Difficulties adhering to quality standards reduce competi-tiveness in international markets

There is a lack of awareness in the private sector, and especially among SMEs, regarding international voluntary standards related to T & C. This is due largely to the young nature of the industry, which lacks adequate exposure to ex-port markets. In addition to being unfamiliar with internation-al quality standards, firms are also unaware of the benefits of compliance for exports. There is poor understanding among businesses of the importance of establishing control sys-tems within their production structures. This is particularly

44.– Ibid. : p. 107, 108.

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problematic in the spinning and weaving subsegments of the chain.

In the PoA, activities 1.3.1-1.3.5 respond to this issue.

Machinery

Obsolete equipment diminishes productivity and quality, and hinders value addition

While many companies have upgraded their equipment over the years, SMEs in particular, continue to rely on out-dated technology. Retooling should be done ideally every 10 to 15 years, particularly in the textile segment, as rapid technological advancements result in improved productivity, quality and automation, all of which provide a cost advan-tage. Nevertheless, many companies suffer from a cost and quality disadvantage vis-à-vis both domestic and foreign competitors because of a lack of upgrading. For many com-panies, particularly spinning mills, the lack of newer machin-ery leads to overstaffing. Even where equipment has been upgraded, it is often not used to its full potential. This is due to both a dearth of adequately skilled workers and the pro-liferation of basic production. Access to finance is one of the key constraints hindering necessary upgrading.

Management often finds it difficult to identify the appro-priate technology. They generally lack exposure to interna-tional best practices, are unaware of what machinery is on the market, and are unable to appropriately evaluate their needs ( it should however be noted that ETGAMA works with the Italian Association of Textile and Apparel Manufacturers and Related Industries to ensure the transfer of technologi-cal knowledge ). Another problem is the lack of maintenance planning and budgeting. In some cases spare parts cannot be purchased : the equipment is so old that suppliers have stopped producing the parts.

In the PoA, activities 1.2.1 and 1.6.1 to 1.6.3 respond to this issue.

Textiles

Input supply

Limited quantity and quality of local cotton reduces com-petitiveness and diminishes opportunities for local value addition

The ability to integrate domestic cotton into the T & C value chain represents a key opportunity for local value addition. However, local production is unable to supply an adequate quantity and quality of cotton. Where quantity is limited, the sector has no choice but to import the differ-ence. When quality is poor, textile companies have the op-tion of producing lower-quality products or importing higher quality cotton.

Importing cotton is less than ideal because it creates a number of cost and operational burdens : importing adds roughly US $ 0.30 per kilogram of ginned cotton, reducing

profitability. It also reduces the flexibility with which the lo-cal sector can operate. Since cotton is subject to lengthy transport, a textile company would be less able to respond to rapid changes in market demand. The underlying reasons for limited quantity and quality of local cotton are as follows.

Limited quality of local cottonCotton quality is affected at both the production and gin-

ning stages of the value chain. Suboptimal production and post-harvest techniques limit quality at the production stage. Indeed, the fragmented farming system makes it difficult for farmers to access knowledge and extension services that would improve such techniques. Farmers also lack access to finance that would allow them to ensure quality through the use of appropriate inputs. Ginneries meanwhile use very outdated equipment, leading to frequent spoilage of cot-ton fibre. Their skills also need to be improved, and the im-provement of TVET services for the ginning segment would be welcomed.

Both producers and ginners have little motivation to in-vest in quality due to the existence of a preferential market-ing scheme : under this scheme, spinning mills are required to buy the totality of local production before importing. While ensuring a market and price for local cotton producers, it discourages them from improving quality. Similarly, the state enterprise tasked with acting as the sole buyer of cotton is not yet fully functioning. As a result, prices are still being set without regard to quality.

In the PoA, activity 1.2.3 responds to this issue.

Limited and unpredictable production of cottonQuantity is limited first and foremost by the fact that only

4 % of cultivable Ethiopian land is being used to grow cot-ton ; investors must be motivated to invest in production. Quantity is often unreliable as well, since farmers frequently shift to other crops. Since the cost to shift from cotton to another crop ( such as sesame ) is quite low, such switches will always remain a risk.

The other reason for low quantity is the low yields achieved by the cotton sector in Ethiopia. This is a result of inadequate harvest and post-harvest practices, and the limited use of appropriate inputs such as agrichemicals and improved seed varieties. The diffusion of best practices and inputs is hindered by the fragmented farming system and the inability of extension services to adequately reach pro-ducers. The availability of inputs is also limited : the quality of seed supply is quite low ( the varieties used are weak with regards to productivity and resistance ), research is inad-equate, Bt45 cotton is not yet allowed, and there is no institu-tion responsible for cotton inputs. Even where appropriate inputs exist, farmers cannot finance them.

In the PoA, activity 1.2.2 responds to this issue.

45.– A popular genetically modified variety of cotton that combats insect pests by producing Bacillus thuringiensis toxins.

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Low quality of yarn diminishes profitability and reduces qual-ity throughout the value chain

‘I am a supply manager in a garment company. It is not that I do not want to buy local yarn. I would love to contribute to the industry. But the level of quality of available yarn is insufficient for me to ensure the final product demanded by our clients. We also require some varieties of yarn that are simply not available on the local market.’

Industry opinion

Many Ethiopian spinning companies find it difficult to pro-duce high quality yarns. Only a few companies produce >25 % Uster. The reasons for the inability to improve qual-ity are numerous. Some spinning companies do not have laboratory instruments to measure yarn quality. In addition, there is a low awareness of current international standards when it comes to yarn quality. Both worker skill levels and outdated machinery play a role in diminishing yarn quality.

The effects of the dearth in quality are numerous. Not only are the spinning companies forced to sell their yarn for lower prices, it also means that the local T & C sector finds it difficult to purchase local inputs of an acceptable quality. A textile company might be constrained to produce lower-quality fab-rics, and the garment producer will in turn sew clothes that are less competitive in international markets. The alternative for T & C producers is to import the necessary materials with all of the cost and flexibility burdens that such imports entail.

In the PoA, activities 1.2.2 and 1.2.3 respond to this issue.

Low capacity utilization limits profitabilityOverall, Ethiopia’s textile mills operate well below capaci-

ty, particularly with regards to fabric production and finishing ( yarn spinning is approximately at 70 % capacity utilization, and fabric production and finishing at ~50 % capacity utiliza-tion ). Low capacity utilization has a number of effects on the industry. First and foremost, profitability is limited. In addi-tion, reduced productivity it may be a contributing factor to low wages, thereby contributing to the host of problems that arise in conjunction with weak HR practices. Low capac-ity utilization also affects the ability of enterprises to afford technological upgrades as it diminishes their ability to pay off the loans for that old equipment.

Although capacity utilization is 35 % lower than the in-dustry average in mills that use old equipment, it is still 10 % below average in mills with new equipment. It is thus clear that obsolete machinery plays a role in diminishing capacity utilization but that it does not account for 100 % of the de-ficiency. Part of the difference is accounted for by the lack of skilled labour and inefficient management, as detailed previously in this value chain roadmap.

In the PoA, activity 1.2.2 responds to this issue.

Clothing

Input supply

Suboptimal sourcing practices reduce cost competitiveness and hinder product development

Most of the garment sector’s requirements in terms of fabrics, accessories, threads and buttons are imported from abroad. This puts Ethiopia at a price disadvantage com-pared with most of its Asian competitors, who can leverage ample domestic supply and / or import inputs more easily. It also reduces the flexibility with which Ethiopian producers can respond to buyer demands. Similarly, most Ethiopian apparel factories have little experience in sourcing their own materials. At the moment, garment producers are unaware of best practices with regards to sourcing.

While integrated mills make use of their own fabrics, Ethiopia’s stand-alone textile producers offer inadequate fabric types with regards to diversity and, at times, quality. Garment producers must look outside the country for their fabrics in order to find greater variety. With regards to other in-puts ( such as accessories ), investors have been slow to enter the segment. Foreign investors have been concerned by the single borrower’s limit,46 the limited cost competitiveness of lo-cal supplies, and the size of the domestic market, which at the moment is seen as too small to be attractive. Local investors have also been unmotivated thus far to move into the segment.

It should be noted that the Government is trying to pro-vide incentives for investors who might be interested in mov-ing into accessories production. In line with this goal, EIC has conducted feasibility studies for accessories and is ac-tively seeking investors for the segment.

In the PoA, activities 1.2.3 to 1.2.6, and 2.3.3 responds to this issue.

Limited value addition reduces competitiveness in interna-tional markets

Despite the arrival of many large, Western buyers, much of Ethiopia’s garment sector continues to be focused on the production of basic, low-cost goods. However, a number of factors are hindering such a scenario. Chief among them is the lack of adequate design skills. Such skills have thus far not been fostered by universities or TVET institutions, or within companies themselves. Enhanced curricula and part-nerships with foreign design institutions would go a long way to enhancing design capacities. Closely related is the limited use of trade intelligence – which would alert enterprises to the changing demands of sophisticated consumers – as well as the continued prevalence of a production-driven mental-ity. In order to move up the value chain, enterprises will need to leverage a greater quality and variety of inputs that are selected based on characteristics of target markets.

In the PoA, activities 1.2.4 to 1.2.6, and 2.5.1 respond to this issue.

46.– Limit of US $ 22 million imposed for each borrower.

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BUSINESS ENVIRONMENT ISSUES

Box 9 : Business environment constraints in Ethiopia’s T & C sector

Border ( business environment )

Cost ofDoing Business

Infrastructure and

Regulatory Reform

Trad

eFa

cilita

tion

Across the value chain

Trade facilitation issues :

• Inefficient Customs system leads to high costs and delaysOrganization :

• Limited institutional capacity and poor sector coordination• Weak quality management infrastructure hinders compliance with market requirementsInfrastructure :

• Weak communications infrastructure diminishes the ability of companies to meet buyer requirements• Energy shortfalls reduce profitability and diminish the ability of companies to meet buyer requirementsCost of doing business :

• Limited access to finance hinders investment in value addition• Expensive and unreliable transportation reduces the price competitiveness of Ethiopian goods in international markets

and hinders the ability of enterprises to deliver goods in a timely fashion

Across the value chain

Organization

Limited institutional capacity and poor sector coordinationInstitutional capacities, and particularly those of sector

associations, are relatively weak. These organizations lack the necessary financing and expertise to provide relevant and quality services to exporters in the areas of policy ad-vocacy, market intelligence, trade promotion and quality management, among other issues. Sectoral growth will require the private sector to advocate for necessary regula-tory reform. Improvements in market intelligence and qual-ity management will allow enterprises to produce goods in accordance with market demand. Trade promotion services will facilitate market expansion through the effective and co-ordinated promotion of Ethiopian goods.

Institutions are also unable to coordinate sector partici-pants effectively. This lack of coordination is a key roadblock to greater vertical integration, which would require enhanced communication between the different segments of the value chain. Coordination would also allow for group bargaining and the consolidation of orders in order to meet larger or-ders flexibly. A key issue will be building trust and reducing competition between associations so that they come to view each other as partners rather than competitors.

In the PoA, activities 2.1.1 to 2.1.5, 2.2.1 to 2.2.54, and 2.5.1 and 2.5.2 respond to this issue.

Weak quality management infrastructure hinders compli-ance with market requirements

While the lack of quality management in the sector is due in part to deficiencies within companies, the problem is compounded by a weak national quality management infrastructure. ENAO is responsible for accrediting all con-formity assessment bodies in Ethiopia. Nevertheless, its accreditation is only valid at the national level, as it is not

yet recognized by International Laboratory Accreditation Cooperation ( ILAC ) and the International Accreditation Forum ( IAF ). The test results of Ethiopian conformity as-sessment bodies, such as laboratories, are therefore not recognized internationally. This means that even where en-terprises are able to produce goods of adequate quality, they are unable to prove compliance without resorting to expensive foreign testing.

‘If I want to certify my production to international standards, I need to send it to another country; sometimes even to Europe. This is adding to my costs tremendously. If national laboratories were ac-credited to do the same work it would have spared me a lot of money.’

Industry opinion

Laboratory capacities are also lacking. Not only are there not enough laboratories, those that do exist have limited abilities to test inputs such as fabrics and accessories for compliance with international quality requirements. In addi-tion, there is a lack of third-party consulting services avail-able to enterprises for quality issues. Of particular note, there are limited domestic capacities for chemical and en-vironmental certification. Each time an enterprise requires a relevant audit, an expert must be brought in from Egypt. This increases the cost of compliance and reduces the ability of enterprises to act in a timely matter.

In the PoA, activities 1.3.2, 1.4.1 to 1.4.3, and 2.5.1 to 2.5.4 respond to this issue.

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Trade facilitation issues

Inefficient Customs system leads to high costs and delays77 % of the time required to trade across borders is

needed for document preparation and customs clearance and inspections47. Indeed, documentation and clearance can also add over US $ 1,000 to the cost of the trade pro-cedure. To put this in context, document preparation and Customs clearance for import costs an average of US $ 1,090 in Ethiopia. This is roughly equivalent of the US $ 1,100.40 total cost of import registered in OECD countries : by the time documents are prepared and the goods are cleared, Ethiopian companies have already spent as much money as their OECD competitors will have spent on the entire trade operation.T & C stakeholders note that Customs IT infrastruc-ture needs upgrading in order to streamline their operations. In addition, Customs officials are not familiar with textile products and classifications. For example, imported fab-rics are taxed based on fabric type. Agents, however, have trouble identifying the fibre type. Clearance therefore takes a long time and agents sometimes apply the wrong taxation. Other problems include limited knowledge of international standards for commodities, as well as some cases in which the wrong price is set for products because duty prices were not updated at the Customs post. Significant strides could be made if agents were better trained in identifying and clas-sifying T & C products.

Clearly, simplification of trade procedures and docu-mentation requirements would go a long way to reducing costs and time burdens. Creating a streamlined process ( fast track ) for reputable exporters could be another solution in the absence of such reforms.

The high cost of trade is particularly troubling : most in-puts are imported, meaning that many exporting compa-nies are hit twice with the cost burden. The length of time required for trade procedures is just as worrisome, as it re-duces the ability of the sector to respond flexibly to buyer demands. After receiving an order from a buyer, T & C com-panies in Ethiopia might have to wait 1.5 months to receive materials. Exporting once the goods are ready would take an additional 1.5 months. In total, Ethiopian companies could require up to three months of lead time due solely to trade procedures, without accounting for production.

In the PoA, activities 2.7.1 to 2.7.4 respond to this issue.

Infrastructure

Weak communications infrastructure diminishes the ability of companies to meet buyer requirements

In addition to energy supply, another infrastructure con-cern is the poor communications network. Mobile communi-cation and high speed Internet are not available in all areas of the country and service can be quite inconsistent outside

47.– See Appendice Section H : Time and cost involved in trading across borders in Ethiopia

of major urban areas. Ethiopia continues to allow its national telecom company ( Ethio Telecom ) to have a monopoly and, despite some improvements over recent years, the lack of competition has hindered progress. While the market for mobile and Internet technologies is growing rapidly, albeit from a small base, the quality of such services remains questionable : Ethio Telecom has been unable to meet the growing demand.48 In addition, fixed-line penetration is ex-tremely low, hindering the development of Internet services. Despite deficiencies, it should be noted that the Government is committed to investing heavily in the ICT sector.

Success in the modern T & C marketplace, lean retailing and fast fashion buyers, requires connected ERP systems based on reliable and modern communications networks.

In the PoA, activities 1.3.1 to 1.3.5 respond to this issue.

Energy shortfalls reduce profitability and diminish the ability of companies to meet buyer requirements

Ethiopian enterprises enjoy some of the lowest electricity costs in the world thanks to the prevalence of affordable and sustainable hydropower. Costs are especially attractive in industrial zones with the preferential ‘low voltage time of day’ tariff. Nevertheless, and despite the generation of adequate electricity, power outages are common.

While the Government is working to address this prob-lem through the modernization of the substation network, the current power outages represent a pressing challenge for the T & C sector. Blackouts result in underproduction and can also lead to failure to deliver orders and breach of con-tract, resulting in both reputational and financial damage that may be irreparable. Lastly, the outages themselves may contribute to the continued reliance on basic, low value add-ed and low-risk goods.

In the PoA, activities 3.1.1 to 3.1.3 respond to this issue.

Cost of doing business

Limited access to finance hinders investment in value addition

‘As a small enterprise owner, it is still very difficult to get a loan. There are not many affordable services available. Additionally, there are only a few people in the enterprise and none of us is a specialist in financial management. As a result, we often do what we can with whatever we have at hand.‘

Industry opinion

48.– Baron, Dominique et al ( 2010 ). The Impact of Telecommunications Services on Doing Business in Ethiopia. Addis Ababa : Addis Ababa Chamber of Commerce and Sectoral Associations.

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Ethiopia ranked 165 in the World Bank Doing Business Report 2015 for getting credit. The financial system is not well-developed, and skills within local financial institutions, particularly for performing risk and loan analyses, are lack-ing. As a result, credit is offered to T & C enterprises at un-favourable terms with stringent collateral requirements that many SMEs cannot afford.

There is also a scarcity of working capital and a short-age of foreign exchange. In addition, banks tend to be both slow and inefficient. Bank services are also quite expensive : commercial banks charge 3 % for import letters of credit and 2 % for export letters of credit ; Chinese banks, in compari-son, charge less than 1 %. In addition, the National Bank of Ethiopia charges a 1.5 % foreign exchange commission for the dollars required to purchase inputs. In total, manu-facturers looking to import materials are penalized 4.5 %. It should be noted that the Development Bank of Ethiopia does provide specific schemes for T & C companies that are more advantageous than commercial banks. Nevertheless, while a special programme for MSMEs has recently been opened, the Development Bank of Ethiopia generally caters to larger companies.

Finally, one of the key constraints for foreign investors is the single borrower’s limit. This limit ensures that no entity can borrow more than US $ 22 million. It has been imposed due to a shortage of foreign currency, as well as to combat the ‘misuse’ of borrowing in the past.

The lack of a properly functioning financial system makes it difficult for T & C SMEs to engage in adequate capi-tal upgrading and to invest in value addition. Stakeholders note that even a common fund or a simplified machinery ( or spare parts ) purchase scheme would go a long way towards improving productivity within the sector.

In the PoA, activities 2.8.1 to 2.8.6, 3.2.1 to 3.3.9, and 3.4.1 respond to this issue.

Expensive and unreliable transportation reduces the price competitiveness of Ethiopian goods in international markets and hinders the ability of enterprises to deliver goods in a timely fashion

‘Overall I am happy that I chose Ethiopia as the place for my investment. The Government has been ex-tremely welcoming and supportive. However, I have to point out that by the time I transport my production to Djibouti, the cost of transport and the fees almost annihilate my margin. This is a crucial point, and the situation must be improved for us to really benefit from all the advantages Ethiopia has to offer.’

Industry opinion

As a landlocked country, Ethiopian goods must travel long distances before reaching the port of Djibouti, from where they are shipped throughout the world. It costs about US $ 4,000 to send a container from Ethiopia to Kenya : at this cost, fabrics from Asia are more price-competitive than those from Ethiopia, despite Ethiopia’s proximity and lower labour and electricity costs. Similarly, it costs 60 % more to ship through Djibouti to the United States and EU than it does to ship from China.

There are a variety of causes for the weak logistics sys-tem. Firstly, the road infrastructure in rural areas where many textile mills are located is quite poor. As a result, transport to and from these facilities can be slow and unpredictable. Next, transport from Addis Ababa to the port of Djibouti ( ~800 km ) is artificially high : it costs roughly US $ 2,000 to send a 40-foot container on this route. For comparison, transporting a container in India over the same distance would cost one-fourth as much.

A key constraint is the lack of competition within the trucking sector, which is dominated by a state-owned en-terprise. Not only is there no competition, but there is a shortage of trucks during certain times of the year ( it should however be noted that the Government has imported more than 300 additional trucks in an effort to support export-ers ). This is further complicated by the absence of duty-free trucking in Ethiopia. Exporters are legally allowed to have only two duty-free trucks, significantly below required capacity. High fuel taxes also play a role. Furthermore, the lengthy Customs procedures and costs of export finance detailed under the previous constraint also increase final logistics costs.

The Government is building a new railway to Djibouti which is expected to reduce transport costs by 25 %. In addi-tion, a new road and rail corridor is being built in conjunction with Kenya. While it won’t be completed for a few years, it will eventually connect the two countries and allow for more cost-efficient transportation as well as competition between the ports in Kenya and Djibouti.

In the PoA, activities 2.9.1 to 2.9.3 respond to this issue.

Photo: ITC

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MARKET ENTRY ISSUES

Box 10 : Market entry constraints in Ethiopia’s T & C sector

Border-out ( market access )

Market Accessand Policy Reform

National Promotion

and Branding Trad

e Su

ppor

t

Serv

ices

Across the value chain

Trade information :

• Limited awareness of preferential trade agreements hinders export expansion• Inadequate access to and use of trade intelligence limits growth opportunitiesTrade promotion :

• Lack of a national branding strategy hinders market development• Lack of trade promotion capacities hinders the sector’s strategic development• Lack of targeted investment promotion efforts reduces the attraction of foreign capital, technology and expertise

Across the value chain

Trade information

Limited awareness of preferential trade agreements hinders export expansion

Ethiopia enjoys various preferential market access con-ditions and its goods can enter duty-free to some of the most important regional and global markets. This has been a significant factor behind the growth of the T & C sector over the past decade. Even so, stakeholders have thus far been unable to fully leverage these market access opportunities.

The key constraint is limited awareness with regards to both the opportunities offered by these markets and the requirements of entry. With regards to the former, there is a lack of trade intelligence that explains to exporters the details and benefits of existing trade agreements. With re-gards to the latter, exporters do not understand the require-ments of these markets. Moreover, even where exporters understand the requirements, they find it difficult to meet the stringent demands of preferential markets ( i.e. price compet-itiveness, delivery time, quality, etc. ). To this end, advances in trade intelligence will require that enterprises improve the competitiveness of their products in parallel.

In the PoA, activities 4.2.1 to 4.2.7, and 4.5.1 respond to this issue.

Inadequate access to and use of trade intelligence limits growth opportunities

The T & C sector has little access to reliable and timely sourc-es of trade intelligence in areas such as market characteris-tics and buyer requirements. Some information is provided by ETIDI, ETGAMA and the Chambers of Commerce, but the data is often outdated and limited in quality. Good qual-ity trade intelligence is available from the private sector but the cost is quite high.

‘European consumption habits differ from those of the United States, African or Asian countries. The structure of the marketplace, the prices, the pack-aging, the contractual arrangements, etc. are also different. We will achieve effective and profitable trading relationships only if we understand the spe-cific market requirements of each of our existing and future trading partners.’

Industry opinion

SME staff lack the skills required to engage in their own mar-ket research and analysis, while the capacities of trade and investment support institutions ( TISIs ) are similarly lacking. Institutions do not provide any market studies with buyer contact information. Another roadblock is poor coordina-tion between domestic stakeholders and commercial and ministerial representatives stationed abroad : ideally, such representatives should be able to provide up-to-date in-formation on market dynamics. Nevertheless, these repre-sentatives currently do not serve as a major source of trade intelligence.

If Ethiopia’s T & C sector is to pursue sustainable market expansion, it must increase its ability to identify and respond to requirements and trends in target markets.

In the PoA, activities 2.2.5, 2.2.6, 2.3.3, 4.1.1 to 4.1.7, 4.4.1, 4.4.2 and 4.5.1 respond to this issue.

Trade promotion

Lack of a national branding strategy hinders market development

There has thus far been little interest in developing a single brand for Ethiopian T & C products. Companies, as-sociations and the Government could all work together to promote the sector’s goods under a common theme. Such

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a strategy would have far greater impact than a collection of small, disjointed initiatives. Due to the lack of a national branding strategy, there is limited name recognition for prod-ucts ‘Made in Ethiopia’. In the absence of strategic branding efforts, the country continues to be defined in part by its historical challenges. As long as they persist, these negative associations may continue to present roadblocks to market expansion and investment promotion.

In the PoA, activities 2.6.1, 2.6.2, 4.3.5 to 4.3.7, and 4.4.3 respond to this issue.

Lack of trade promotion capacities hinders the sector’s stra-tegic development

In order to successfully enter new markets and expand in existing ones, Ethiopia’s stakeholders must engage in more effective trade promotion efforts. SMEs lack skills in the ar-eas of marketing and promotion and they find it difficult to formulate and engage in effective marketing and sales strat-egies. A key challenge in this regard is the lack of sufficiently prepared managers : university curricula do not adequately reflect the needs of industry. Managers also have limited exposure to foreign markets, a fact that is further compli-cated by the lack of trade intelligence detailed above. In the absence of such market information, managers find it difficult to formulate and implement targeted marketing and sales strategies.

Institutional and Government support is also lacking. Little in-market support is provided to SMEs in areas such as trade fair participation or buyer–seller meetings. The abil-ity of sector associations to assist in trade promotion efforts is limited by weak financial and technical capacities. The re-cently formed Ethiopian Export Promotion Agency also lacks adequate capacities ; it engages in limited and unstructured participation in trade fairs. Marketing capacities within

Government support institutions are also weak and their efforts are uncoordinated. Similarly, embassies and trade attachés do little to promote Ethiopian products abroad.

In the PoA, activities 4.3.1 to 4.3.6, and 4.4.3 and 4.5.1 respond to this issue.

Lack of targeted investment promotion efforts reduces the attraction of foreign capital, technology and expertise

FDI has long been a driver of growth for the T & C sec-tor as foreign investors continuously look to leverage cost advantages around the globe. Such investment brings not only the capital required for strategic investment, it also stimulates the transfer of technology, expertise and know-how. Although Ethiopia has succeeded in attracting FDI over recent years, the scale of investment could be increased substantially given adequate Government support.

However, the Government has limited itself largely to se-curing investment from investors who have already shown interest in Ethiopia while helping those same investors iden-tify the most attractive opportunities. There is little activity in the way of identifying and approaching foreign investors from scratch : reaching out and introducing them to the idea of Ethiopia as a target for investment.

One of the key constraints is the lack of skills in relevant agencies : staff lacks the capacities to identify, approach and engage with potential investors. Another roadblock is the limited coordination among actors within this sphere ; in addition to the EIC, each region has its own investment pro-motion agency. As such, there is little coordination among agencies. More targeted investment promotion can best be achieved if mechanisms for greater cooperation are estab-lished between all interested parties.

In the PoA, activities 4.3.1 to 4.3.6, and 4.5.1 respond to this issue.

SOCIO-ECONOMIC AND ENVIRONMENT ISSUES

Box 11 : Social and economic constraints in Ethiopia’s T & C sector

Development issues

Poverty Alleviationand Gender Issues

Regional Development

and Integration

Envir

onm

enta

l

Sust

aina

bilit

y and

Clim

ate

Chan

ge

Across the value chain

CSR :

• Subpar working conditions have the potential to pose health and safety risks• Environmentally and socially responsible practices are not an integral part of doing business in the sector, threatening

negative social impacts and ineligibility to supply socially concerned buyersTextiles Water pollution :

• Outdated dyeing methods pollute waterways• Rapid expansion of cotton fields may impact indigenous livelihoods and local ecosystems

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Across the value chain

CSR

Subpar working conditions have the potential to pose health and safety risks

Some factories continue to maintain inadequate work-ing conditions, characterized by poor lighting, a lack of cleanliness, and unhygienic cafeterias and amenities.49 While these factors have been cited as contributing to em-ployee dissatisfaction, they also represent health and safety risks. Poor lighting can lead to accidents, particularly when working with heavy machinery such as in the T & C indus-try. Unhygienic facilities may foster the spread of disease. It should also be noted that in addition to the risks posed to physical health, working under these conditions could lead to psychological malaise, reducing the general sense of well-being among staff.

In the PoA, activities 1.3.2, 1.3.3, 1.4.1, 1.4.2, and 1.4.4 to 1.4.7 respond to this issue.

Environmentally and socially responsible practices are not an integral part of doing business in the sector, threatening negative social impacts and ineligibility to supply socially concerned buyers

Few Ethiopian factories are certified under ( or aware of ) the EU’s Business Social Compliance Initiative or the United States Worldwide Responsible Accredited Production. Factory workers frequently exceed the maximum number of working hours allowed per week and are sometimes subjected to unhealthy breathing environments. Machinery used is often technologically outmoded and environmentally

49.– Lee, David Yuen Hoi ( 2010 ). Benchmarking of the Ethiopian Textile Industry Vision 2015, p. 124. Project No. YA / ETH / 001. UNIDO.

dirty. Obtaining Business Social Compliance Initiative and Worldwide Responsible Accredited Production certifications can be useful in accessing European and North American markets – which are increasingly conscious of the negative environmental and social spillovers of textile and garment production – as well as in ensuring a healthy and happy workforce. Moreover, as Ethiopian fabrics and garments represent some of the country’s major manufactured goods, the sector’s environmental and social practices will set important precedents for the country as its economy grows.

In the PoA, activities 1.3.1 to 1.3.4, and 1.4.1 to 1.4.10 respond to this issue.

Textiles

Water pollution

Outdated dyeing methods pollute waterwaysEthiopia enjoys vast water resources50 which do not ex-

ist in isolation as many of its rivers continue through other countries. As such, any misuse of water resources has im-plications not only in Ethiopia but also in neighbouring coun-tries. The textile industry consumes a considerable amount of water resources in dyeing and finishing processes. In ad-dition, outdated dyeing methods release chemical waste, including persistent organic pollutants, into the water. New methods exist that would allow textile companies to use less water and minimize pollution. Such methods include optimi-zation of the dyeing process itself and improved wastewater treatment. Stakeholders, however, do not consider the is-sues to be a major concern. In addition, they are unaware of the benefits that might come from transitioning to more sustainable processes. Not only would improvements lead to environmental preservation, they could also be leveraged as marketing tools to add value to final products. Other mar-kets have strict regulations that must be met as a condition for import : as an example, the EU market restricts the use of azo dyes for any imported T & C product.

In the PoA, activity 2.6.1 responds to this issue.

Rapid expansion of cotton fields may impact indigenous livelihoods and local ecosystems

The Government goes to great lengths to help investors locate suitable land in their efforts to attract foreign invest-ment. Sometimes the best land is located in inconvenient areas : areas of great biodiversity and areas that have been traditionally occupied by indigenous peoples. With regards to the former, land is often designated for large-scale farm-ing without an appropriate environmental impact assess-ment.51 This is especially worrisome given that even land

50.– Encyclopedia of the Earth ( 2008 ). Water profile of Ethiopia. Last updated 10 June 2012. Available from http : / / www.eoearth.org / view / article / 156941 / .51.– Mursi Online ( 2013 ). Website. Available from http : / / www.mursi.org / .

Photo: ITC

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from national parks has been turned over to farming opera-tions ( 30,000 hectares of land in Mago National Park will be used for sugar cultivation ).

With regards to indigenous rights, there have been re-ports that land has been forcibly confiscated.52 In other cases, nearby land may be used for cultivation without a proper environmental impact assessment. The dramatic changes to the land may affect the local climate, thereby affecting the ability of nearby indigenous peoples to con-tinue their traditional agropastoral lifestyle. In either case, meaningful consultations with the local community seem to be lacking and impact assessments are not undertaken. The issue has gained enough prominence that some donors have passed legislation touching on the subject.53 For ex-ample, the United States created a law requiring that funds appropriated by American directors of international financial institutions for the Lower Omo and Gambela regions must be subject to consultation with affected populations and must not be used to support evictions, directly or indirectly.

These issues are further complicated by the fact that the Lower Valley of the Omo, home to many of Ethiopia’s indigenous peoples, is a United Nations Educational and Scientific Organization world heritage site. As such, every

52.– Human Rights Watch ( 2012 ). What will happen if hunger comes? Abuses against the indigenous peoples of Ethiopia’s Lower Omo Valley, 18 June. Available from https : / / www.hrw.org / report / 2012 / 06 / 18 / what-will-happen-if-hunger-comes / abuses-against-indigenous-peoples-ethiopias-lower. 53.– Mursi Online ( 2013 ). Website. Available from http : / / www.mursi.org / .

effort should be made to ensure that impacts to its eco-systems and cultural landscape are adequately assessed and considered before the implementation of large-scale projects.

In addition to the obvious human rights and environ-mental concerns, such practices could potentially damage the reputation of Ethiopia’s T & C sector. Indeed, CSR is be-coming a core requirement for many of the most important buyers. If these buyers believe that a part of the T & C value chain regularly benefits from unethical practices, the sector’s growth potential may be imperilled as TNCs look for more socially responsible suppliers.

In the PoA, activity 2.3.3 responds to this issue.

The need for coordinated action

The analysis of competitive constraints makes it clear that the sector’s sustainable development will require an integrat-ed set of interventions that holistically address challenges across the entire value chain. Roadblocks are not limited simply to enterprise capacities or Government policy, and many challenges are the result of a combination of factors that require wide-ranging remediation. It is for this reason that a comprehensive road map becomes all the more nec-essary ; individual stakeholders, and even small groups of stakeholders, will not be able to adequately deal with the constraints on their own. It is only through strategic coopera-tion that the most effective results will be achieved.

STRATEGIC IMPLICATIONS FOR THE VALUE CHAIN ROADMAP

Since identifying the T & C sector as a priority area for devel-opment in the GTP 2010–2015, the Government has suc-ceeded in fostering a policy environment that is conducive to investment. Ethiopia’s comparative advantages, namely its low labour cost, cheap and sustainable electricity, preferen-tial market access and proximity to important markets, have been complemented by reforms to the business environ-ment that have reduced trade hurdles. In conjunction with attractive incentives for investors, the sector has engaged significant capital from abroad. Indeed, over the past few years exports have expanded rapidly due in large part to the arrival of foreign investors.

Nevertheless, Ethiopia’s T & C sector has yet to realize its full potential : sales are heavily concentrated among a few product categories of fairly low value addition, and market diversification is limited. While larger companies have suc-ceeded in entering global value chains, SMEs continue to be relatively excluded from external trade, having experienced only a limited amount of economic integration with larger market players. Despite the influx of FDI, much of the value

chain remains underdeveloped, including accessories, ma-terials, textiles and higher value added garment activities. Productivity meanwhile continues to suffer as a result of lim-ited skills in the workforce, weak management capacities and reliance on outdated equipment, among other issues. In addition, remaining problems in the business environment create unnecessary cost burdens and delays.

This diagnosis lends itself to certain key considerations that the value chain roadmap should tackle. In order to move forward, public and private stakeholders must work together and build on the successes that have been achieved thus far. To this end, the continued stimulation of FDI will play a crucial role. The Government must do more to effectively target investors and promote development of the under-served opportunities in Ethiopia’s value chain. Skills devel-opment must also be a priority, particularly with a view to increasing productivity, quality and the capacity for value addition. Lastly, the Government must do more to remove the remaining policy and business environment roadblocks to competitiveness.

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THE WAY FORWARD

Figure 8 : The way forward

The previous sections of this document delineate various aspects of the T & C value chain in Ethiopia – and examine the current state of the sector. In other words, the previous sections comprehensively answer the question ‘where are we now?’ The following sections discuss the way forward and the implementation modalities through the PoA. In doing so, the sections discuss two questions – ‘where do we want to go?’ and ‘how do we get there?’

Through the definition of broad sector targets and specific strategic objectives, the value chain roadmap sets the goals to be achieved in the following five years. The depiction of the ‘future value chain’ ( see figure 11 ), the highlighting of specific market opportunities, and the identification of target areas for investment will then outline the concrete steps required to achieve these goals. These steps are then further detailed in a structured and prioritized manner in the PoA.

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The current model on which the sector has based its growth has certainly yielded strong economic and social returns. Indeed, sectoral development has progressed despite con-strained productivity and the continued reliance on a narrow set of products and markets. Even so, there are signs that the approach must be modified in accordance with evolving global conditions. True sustainability will only be achieved through increased competitiveness and investment in great-er value addition.

The sector’s strategic orientation should follow a twofold approach. Firstly, Ethiopia can build on its current success and leverage its cost competitiveness to expand market diversification and penetration. Secondly, the sector can capture greater value by pursuing full value chain integra-tion, first by bridging the skill gap to increase productivity, especially considering upcoming wage increases, and later by enhancing weak upstream capacities.

In order to realize these goals, structural deficiencies identified as competitive constraints ( based on the four gear approach including supply-side, business environment, market entry and development issues ) will be addressed and opportunities will be leveraged. The following is a de-lineation of the sector development targets and strategic objectives to achieve them.

Indicative sector development targets

One of the main focus areas of this value chain roadmap will be to build on the current conjuncture and benefit from the growing interest of international investors in T & C in the East Africa region. FDI can lead to transformative effects in a country’s home-grown sector, as international investors are likely to possess and transfer a wide range of assets oth-erwise unavailable to local enterprises. These may include technologies, skills, management practices, operational ex-perience, economies of scale and international distribution channels.

Ethiopia’s apparel exports were worth US $ 40 million in 2013, having grown at a remarkable CAGR of 49 % from 2010. Although the growth rate will slow as the base ex-pands, apparel exports are still expected to grow by 40 % in the next five years, and then by 20 % in the following five years. At these rates, Ethiopia’s apparel exports would reach US $ 215 million by 2018 and US $ 540 million by 2023.

An additional US $ 500 million of export value through 2020 will have an impact on the entire value chain :

� Clothing : it will call for the production and export of an-other 100 million to 125 million pieces of apparel. This will require an investment of approximately US $ 135 million on garment production facilities alone, including 25,000 sewing machines, 3 million square feet of built-up area, and roughly 45,000 workers.

� Textiles : On the textile front, this would mean an addition-al demand of approximately 225 million metres of fabrics and 35 million to 40 million kg of yarn.

Figure 9 : Projections of Ethiopia’s apparel export growth

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Based on the logic above, the value chain roadmap aims to deliver the following production, ex port-related and devel-opmental targets by 2020 :

� More than 200 firms have acquired new equipment and related technical capacities

� Six hundred new production lines developed by Ethiopian firms in yarn, textile and apparel production

� Exports of textiles and garments to increase annually by 35 % to US $ 320 million

� More than 45,000 new jobs in the T & C sector � All companies complying with international standards

related to working conditions, quality management and sustainability.

The indicative targets have been set in collaboration with national stakeholders and international sector experts. They are based on the hypothesis that the current socioeconomic conditions and political stability, as well as the investment climate overall, will remain unchanged.

THE STRATEGIC OBJECTIVES

The strategic objectives aim to define the main thrusts that will guide the value chain roadmap design process and implementation. They represent the final goals and effects expected by the policies or the actions to be undertaken. To achieve the twofold approach of the T & C sector’s strategic orientation and related indicative targets, four strategic ob-jectives have been identified as being the cornerstones to en-hance the competitiveness of Ethiopian T & C export sector.

Strategic objective 1 : improve productivity and employment outcomes through skills development

Although Ethiopia enjoys a large workforce, it requires ex-tensive training in a wide range of areas and at different lev-els of specialization. This training, which will ensure that the industry’s growth is supported by an adequate labour sup-ply, is all the more necessary in light of upcoming, progres-sive wage increases. In particular, workers as well as line managers must be trained in the latest techniques and best practices so as to improve plant efficiency. Given the recent investment of many Ethiopian companies in new machinery, a priority will be ensuring that firms have the necessary skills to fully capitalize on these capital investments. This will re-quire increasing worker skills, while at the same time helping managers understand the functioning, as well as the pro-ductivity and diversification potential, of the new equipment.

At the managerial level, skills need to be strengthened in the areas of input sourcing, quality assurance and compliance, as well as HR management. The latter will not only allow the industry to retain quality workers but will also help it to meet the international market’s growing demand for socially re-sponsible products. Finally, specific focus needs to be given to the handloom subsector and MSMEs to ensure that they are fully integrated in overall sector growth. These issues are therefore of the utmost priority and will require immedi-ate action on a variety of fronts, including the Government, institutions and enterprises themselves.

The first strategic objective is therefore : improve pro-ductivity and employment outcomes through skills development.

The following operational objectives have been defined to achieve the first strategic objective.

1.1 Increase the level of technical and supervisory skills at T & C firms.

1.2 Improve sourcing and supply chain management performance.

1.3 Improve quality management skills in line with interna-tional standards.

1.4 Design and implement a nationwide compliance programme.

1.5 Improve HR policies, employee retention and incentives at T & C firms.

Photo: www.tidi.gov.et.

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o: w

ww.dw.com, L

ow wages draw international textile companies to Ethiopia.

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1.6 Ensure maximum equipment usage within Ethiopian firms.

1.7 Develop skills specific to the handloom subsector.1.8 Develop skills specific to MSMEs.

Strategic objective 2 : strengthen the enabling environment to favour sector development.The second focus area is to ensure that the sector’s devel-opment is supported by an appropriate enabling environ-ment. The Ethiopian Government is strenuously working to support business by fostering conducive policies and conditions. Even so, much remains to be done, particu-larly with regards to improving the quality of institutional support. To this end, a priority will be aligning the offer-ings of training institutions and universities to the needs of the sector.

An effective framework for cooperation must also be established in order to ensure synergies between larger companies and SMEs. Another area for improvement is international accreditation and quality infrastructure ; Ethiopian companies must be able to certify their production to the relevant standards of their target markets. To support these changes, key regulations must be adjusted so as to streamline the sector’s functioning. Lastly, additional efforts must be made to improve Customs services, access to fi-nance, and transportation and logistics services.

Those issues will also constitute a specific pillar of this value chain roadmap, through the second strategic objec-tive : strengthen the enabling environment to favour sector development.

The following operational objectives have been defined to achieve the second strategic objective.

2.1 Reinforce sector coordination to favour workforce devel-opment and policy advocacy.

2.2 Provide high quality institutional support and business services to T & C firms.

2.3 Improve existing training and educational offerings and align them to industry’s needs.

2.4 Enable the development of skills through lead firm and cluster arrangements.

2.5 Ensure that national quality management infrastruc-ture responds to industry’s needs and international ambitions.

2.6 Improve the legal and regulatory framework relevant to the T & C industry.

2.7 Increase the capacity of the Customs service to regulate imports of T & C products.

2.8 Ensure availability of accessible financial tools for MSMEs.

2.9 Improve the efficiency and cost competitiveness of transportation and logistics.

Strategic objective 3 : establish conditions to harness FDI as an engine for growth in T & C.

Due to the growing importance of FDI, it is crucial that Ethiopian TISIs establish the conditions that will allow the sector to take advantage of the capital and skills flowing into the country. Investment is therefore another key strategic focus area of the value chain roadmap. As a prerequisite, initial efforts must be made to guarantee that the operating environment is suited to investment. A key priority will then be to ensure that a high level of institutional support is pro-vided in the areas of investor identification and attraction. To this end, stakeholders must reinforce the promotion of Ethiopia as an attractive destination for investment. Ethiopia can be promoted as more than a ‘low wage’ country, and efforts may include the showcasing of ongoing efforts in skills development and social and environmental standards compliance. Lastly, specific schemes must be developed to guarantee that SMEs are included in the global value chain.

Thus the third strategic objective of the value chain road-map : establish conditions to harness FDI as an engine for growth in T & C.

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ww.dw.com, L

ow wages draw international textile companies to Ethiopia.

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The following operational objectives have been defined to achieve the third strategic objective.

3.1 Establish an internationally competitive oper-ating environment conducive to T & C sector development.3.2 Increase capacity of TISIs to identify and at-

tract appropriate investments for the sector.3.3 Further promote Ethiopia as a key desti-

nation for FDI.3.4 Increase collaboration between local

SMEs and FDIs to ensure synergies.

Strategic objective 4 : foster product and market development through the use of trade information.

The analysis of the sector makes clear that there is much scope for Ethiopian firms to

further diversify their markets and products. The first requirement is that high-end and up-

to-date trade and market access information is made available to all stakeholders. In parallel,

firm-level capacities must be increased to ensure that this information is properly analysed and used

as a basis for product development and market diversifi-cation efforts. In order to support market diversification, Ethiopian T & C products must be promoted through a vari-ety of channels, including trade fairs, side events, branding strategies, etc. Finally, handloom firms and MSMEs need to be promoted in a targeted manner ; this will begin with an assessment of the domestic and regional market opportuni-ties for their products.

The fourth strategic objective of this value chain road-map is therefore : foster product and market development through the use of trade information.

The following operational objectives have been defined to achieve the fourth strategic objective.

4.1 Ensure easy and timely access to strategic trade intel-ligence for T & C firms.

4.2 Increase firms’ capacity to understand regional and international market requirements and how to best align product development / offerings.

4.3 Expand market access and promote Ethiopia’s T & C products.

4.4 Provide targeted assistance on market information analysis to handloom firms.

4.5 Assess the Ethiopian T & C market in order to identify domestic and regional opportunities.

LEVERAGING MARKET OPPORTUNITIESAs indicated in figure 11, the most attractive course of action will be for Ethiopia to focus on exports of finished goods ( apparel and home textiles ) in order to capture greater value addition and generate the most employment.

Focusing sector development effor ts to connect with TNCsEthiopian garment producers ( except for technical wear ) will most certainly need to connect with TNCs if they aim at international markets such as Europe and the United States, or fast-growing markets such as India and China. However, it is important to keep in mind that the global T & C sector is fast-evolving and very competitive, as put forth in the first section of this value chain roadmap. It is also governed by different dynamics depending on whether we look at the textile or garment segments. TNC requirements evolve with every fashion trend, making it particularly difficult to provide recommendations on products’ development and related design. Nevertheless, the following success factors need to be taken into account by Ethiopian garment firms to be able to target TNCs successfully as a market segment.

iv. As consumers are putting increased pressure on the T & C sector to improve social responsibility, there will be an absolute need for Ethiopian firms to comply with CSR.

v. The demand for full package services from lean retailers requires that Ethiopian garment suppliers expand their ser-vice offerings and create strategic partnerships with ven-dors rather than purely transaction-based relationships.

vi. Ethiopian firms must increase volume capacity, either internally or through consolidation / partnership agree-ments, to meet large TNCs’ requirements.

vii. Ethiopian firms must increase their ability to quickly sup-ply the market in response to fast fashion demands.

viii. Companies are highly encouraged to invest in quality, increase their product development competency, and develop their multi-fibre expertise.

ix. Increased management and ICT capacities will be re-quired to satisfy buyer demands and to secure partner-ships with TNCs in the long term.

x. So far, Asian countries have emerged as winners in global trade. In the next few years, some of them will become important markets as well. The increasing focus of China on the domestic market and value added pro-duction will result in multibillion dollar trade opportunities for suppliers in competing nations. Trade intelligence will be essential to tap into these opportunities.

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All points except point ( iv ) also apply to textile and technical garment producing firms that aim to connect with TNCs. Finally, considering TNCs’ paramount focus on cost com-petitiveness, Ethiopian firms should leverage the duty-free advantages for garments that have been granted through various preferential trade agreements.

Whatever market segment is chosen by Ethiopian firms ( TNC, regional or national market peers ), the market diver-sification phase must be accompanied by a trade regime that allows for the hassle-free import of inputs ( fabrics, trims, accessories, etc. ). Upstream capacities will be developed later on.

Gaining market share in traditional growing marketsEthiopia’s T & C exports are concentrated in a few import-ing markets which rank among the largest in the world and present stable import growth. The market penetration strat-egy is less uncertain since it leverages the sector’s existing resources and current business linkages. In a growing mar-ket, simply maintaining market share will result in growth. In this way, the Ethiopian T & C sector should seek to achieve growth with its existing products in its traditional importing markets. Thus the apparel segment should focus its initial efforts on expanding its exports to TNCs or medium-sized apparel companies in its main importing country, Germany, followed by the United States, the largest world importer. Ethiopia has constantly increased its exports over the last four years in its two top destination markets and could eas-ily build on its success. Yarn spinners could also further increase their market penetration to the textile mills of its main importers, Turkey and China, the world’s biggest and fastest-growing yarn importer.

However, Ethiopia’s T & C exports’ concentration in and dependency on a few importing markets carries a risk of significant losses in the event of a drop of demand or in-crease in the level of competition. Therefore, the sector has to strengthen its market and product diversification efforts and look for opportunities.

Leveraging existing market linkages to build capacities for more value added textiles and garments

When looking to sell new products, enterprises can leverage existing market linkages and enter product categories that can be distributed either to existing TNC buyers in Germany and the United States or along the same distribution net-work, such as other overseas buying offices of mass mer-chandise stores and department stores.

At the same time, textiles enterprises can build capaci-ties to produce more value added fabrics. Cotton and woven moisture management fabrics, and synthetic and blended yarns, are products in high demand by textile mills in Turkey.

In the medium term, Ethiopia should take steps to develop upstream capacities in order to reduce import dependency and drive domestic value addition. As the Ethiopian garment sector will keep developing, local textile producers could target manufacturers in Ethiopia and in regional markets for high quality cotton fabrics.

Taking advantage of preferential market access to penetrate new large marketsMarket development options include the search for new market destinations for currently exported products, espe-cially where the country benefits from preferential market access conditions. The garment sector can thus leverage the duty-free advantage that Ethiopia has been granted for garments in many of the larger markets, in particular EU markets such as the United Kingdom, where Ethiopia is al-ready gaining market share, or Italy and France. Yarn spin-ners could also target major COMESA yarn importers such as Egypt, Mauritius and Madagascar.

It should be noted that, to do this, enterprises must be able to provide larger orders. The recent signature of the tripartite agreement between COMESA-EAC-SADC is also an opportunity to enter South Africa, the largest African gar-ment importer.

Diversifying in intermediate products in regional markets and local supply of accessories and embellishments

In the medium term, the Ethiopian T & C sector should con-sider new product and market development opportunities. With regards to its existing exported products portfolio, the sector could develop its exports of intermediate products ( yarn and fabrics ) in the regional market. The development of the garment industry in the region will increasingly require the provision of value added inputs, fabrics and embellish-ment products. However, the main focus of developing in-termediate products should be indigenizing the entire value chain. These new value added and higher quality fabrics should target Ethiopian garment manufacturers and could also be exported to new markets, in particular the regional market. Additionally, as Ethiopia’s T & C sector further de-velops with its current buyers, valued added garments will integrate locally produced accessories and embellishments.

Box 15 summarizes the product and market opportunities available to Ethiopia’s T & C sector based on consultations with international experts and feedback from leaders of the industry in the country.

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Box 12 : Ethiopia’s product and market opportunities

Existing products New productsExisting markets

Market penetration

• Apparel to TNCs or medium-sized apparel firms in Germany and the United States, and to regional buyers in Ethiopia and Sudan

• Yarn to textile mills in Turkey and China

Product development

• Woven trousers, skirts and outerwear, and knitted jerseys to TNCs in Germany and the United States, and other overseas buying offices of mass merchandise stores and department stores

• Cotton and woven moisture management fabrics, and synthetic and blended yarns to textile mills in Turkey

• High quality cotton fabrics dyed and finished to garment factories in Ethiopia and regional markets

New markets Market development

• Apparel – other large European markets ( Italy, Spain and France ) through new TNCs or medium-sized apparel firms ; and South Africa with new preferential access

• Yarn – to textile mills in major COMESA markets ( Egypt, Mauritius and Madagascar ), the Russian Federation and EU markets ( Italy and Spain )

Diversification

• Fabrics ( shirting, bottom weight and denim ) to garment firms in regional markets• Woven trousers, skirts and outerwear, knitted jerseys to other EU markets through new TNCs

or medium-sized apparel firms• Accessory / embellishment manufacturing for garment factories in Ethiopia and regional markets

INVESTMENT TARGETING FOR SUSTAINABLE EXPORT GROWTH

FDI has long been a driver of growth in the T & C sector as investors look to capture the comparative advantages of-fered by low-cost destinations. Global greenfield FDI in the T & C sector reached US $ 24 billion in 2013, an all-time high, and more than double the level achieved in 2012. Moreover, Africa is receiving a greater share of this investment as ris-ing wages in China, compliance issues in Bangladesh, and labour unrest in Cambodia, together with other factors, have accelerated a shift to new locations. Total FDI inflow to Africa in 2013 was valued at US $ 57 billion, of which US $ 1.75 bil-lion was in the T & C sector.

TARGET FDI BY COUNTRY WITH A SPECIAL FOCUS ON INDIAIn recent years the Ethiopian T & C sector has received sig-nificant FDI inflows from Chinese, Turkish and Indian inves-tors. While these countries will continue to be sources of FDI, additional investments may be attracted from Germany, France, the Republic of Korea, the United States, Italy, Bangladesh and Israel. While attracting FDI from Japan may also be possible, it will require more time given the stringent quality, technical and product development orientation of Japanese companies. It should therefore be only a medium-to-long-term objective.

Special attention needs to be paid to attracting FDI from India. India is not only one of the largest T & C producing and exporting nations, it is also a large market which is grow-ing in the double digits. T & C exports from India currently stand at approximately US $ 40 billion, whereas its domestic consumption is estimated to be US $ 75 billion ( including apparel, home textiles and technical textiles ). Continuous growth of consumers’ disposable income has ensured high demand growth.

For Indian T & C investors, Ethiopia’s low input costs and duty-free access to important markets will be the biggest attractions. Some Indian investors, including Arvind Ltd. and Kanoria Textiles, have already invested in Ethiopia, and there have been a few other major investment announcements as well. There are several other T & C companies in India willing to invest overseas in order to cater to their traditional buyer base while benefiting from foreign advantages. It will be im-portant and fruitful for Ethiopian authorities to invest time and effort to identify and reach out to potential Indian inves-tors and showcase the advantages of investing in Ethiopia.

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Box 13 : Trade as a precursor to Investment

Trade initiation is the first step towards investment. Consider an example of an Indian company buying certain inputs from East Africa for its production in India. If imports remain profitable, then with growth of its business, the company will weigh imports ( using trade intermediaries such as agents ) vis-à-vis establishing an East African affiliate to procure the material. Having its own office can reduce the bulk sourcing cost and give better supply chain control to the company. Over time, successful procurement operations in East Africa might evolve into a manufacturing facility and continue to add

other higher value functions over time, such as design, research and development, or regional sales and distribution.

In short, trade and FDI are very often part of the same continuum. As more and more Indian businesses evolve further down that continuum, trade and investment linkages between India and East Africa will strengthen and there will be greater spillovers of technol-ogy and skill in East Africa. This will help East African businesses become more efficient, improve the marketability of their products and services, and deepen their participation in global value chains.

FDI TARGETS IN SUBSEGMENTS OF THE T & C VALUE CHAINThere is broad consensus within the sector that Ethiopia’s garment sector is at the start of a significant boom, and there is immediate opportunity to invest profitably in gar-ment manufacturing and assembly for basic ( i.e., low-skill ) garments to be marketed to the EU and United States.

The boom in garment manufacturing will in turn create high demand for fabrics and yarns, which the Ethiopian manufacturing value chain is currently not positioned to ca-ter to. Enterprises that can establish yarn and manufacturing set-ups that are capable of producing export-quality goods for garment producers can meet domestic and regional de-mand by leveraging comparatively lower costs and short delivery times.

Sector experts also see an opportunity for foreign inves-tors to produce accessories and embellishments in Ethiopia, such as thread, labels, hangtags, buttons, zippers and elas-tics. These are almost completely imported, and China is historically the most important supplier for many of these products. Accessories and embellishments may represent a significant value option for domestic or foreign investors in Ethiopia. Such products generally require low technological and capital investments.

The most promising short- and medium-term oppor-tunities for private investment are listed below. They are promising because both cost data and the experiences of existing investors suggest that investment projects with similar products and target markets could operate not only profitably and securely, but more so than if the project were in a competing location.

� Garment manufacturing – CMT and FOB ( and original design manufacturers in the medium term )Products : T-shirts, shirts, uniforms, jeans and other simi-lar products with low design variationTarget investors : companies that are qualified suppliers to low- and mid-range retailers and brand apparel com-panies from the United States, the EU, China, India and the Republic of Korea

� Fabric manufacturingProducts : high quality cotton fabrics, dyed and finishedTarget companies : Turkey, India, China, domestic firms

� Accessory / embellishment manufacturingProducts : thread, labels, hangtags, buttons, zippers, elasticsTarget investors : companies from China, which domi-nate global production but are losing their price advan-tage as labour costs in China rise

� Sector infrastructureProducts : engineering, construction and management of private industrial zones, water purification facilitiesTarget investors : firms that have built and / or managed zones and related facilities for T & C clusters in China, Viet Nam and India. The Government of Ethiopia for possible PPPs.Target markets : Ethiopia investors and Industrial Parks Development Corporation ( IPDC ) ( through the Ministry of Industry )

� Trucking and logistics providersTarget investors : domestic firmsNote : liberalization of the sector would almost certainly attract quick investment from a number of investors and have the knock-on effect of strengthening T & C competi-tiveness

Photo: fl ickr.com

/photos/ustr, Am

bassador Kirk tours the Almeda Textile and Apparel Factory on August 7, 2009 in Axum, Ethiopia.

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ATTRACTING NEW INVESTORS AND DEVELOPING INVESTMENT AFTERCARE PROGRAMMES

Beyond creating a favourable business environment for the T & C sector, the Government of Ethiopia must broadcast the advantages of doing business in Ethiopia to those compa-nies considering international expansion. Some companies will invest without any government information or assistance, some will not invest under any circumstances, and some are in between those two extremes, where they might be persuaded to choose Ethiopia over other locations if the right information and assistance is provided to them at the right time.

Identifying investors in this last group, securing meet-ings with them, and persuasively making the case for one’s country over others is known as investor targeting, and it is arguably the most difficult function for the typical investment promoter to perform. One of the main reasons for this is the difficulty in identifying high-potential investors. Before each investor is approached, the investment promoter should take the time to ‘qualify’ the investor. This means research-ing the company to see that its products and markets correspond to Ethiopia’s strengths and that it is at a strategic and financial point where international ex-pansion is likely. To this end, the following types of investors can be targeted.

Existing investors

In developed economies, reinvestment from existing investors is recognized as the largest source of new FDI. Moreover, significant reinvestment is the only path to large-scale sectoral develop-ment and economic diversification. Reinvestments represent growing commitments from foreign investors to doing business in a country, often increasing production volume or mov-ing the company into new value chain segments. This can bring levels of local sourcing, exports, technology, worker skills and general value added, which first-time investors might not. Furthermore, from the perspective of an investment-promoting institution, it is much less expensive to court the community of existing investors than to find new investors among the scattered global pool of companies with no demonstrated interest in the promoter’s country.

In Ethiopia, to date, Government relationships with investors have tended to be developed very little beyond the issuance of permits, certificates and licences, or the provision of industrial park space and services. Recognizing

this and seeking to better maximize benefits from existing investors, the Ethiopian Government has committed to im-plementing a programme of investor aftercare through EIC and IPDC. Still under development as part of a World Bank project, this programme of investor aftercare would involve a range of investor services and business environment ad-vocacy designed to achieve the objectives summarized in ‘the aftercare provider’s C.R.E.E.D.’, or :

� Conversion of announced investments into operational projects, minimizing the number of investors who cancel investment plans because of unexpected problems dur-ing the start-up process ;

� Retention of existing investment projects, by assisting their smooth operation and ensuring investor satisfaction with their experiences in the country ;

� Expansion of existing investment projects, by produc-tion volume, number of employees and number of local facilities ;

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� Embedding of projects more deeply in the local econo-my, through greater use of domestic inputs and labour and / or greater sales to a domestic market ;

� Diversification into new product lines, value chain seg-ments and business lines, which typically entails higher value addition, new technologies and new worker skills.

These would be accomplished through a system of account management, whereby an EIC or IPDC staff member – de-pending on the location of the project – would be assigned to take primary responsibility for the customer service and long-term success of each investor, directing a programme of regular company visitation, ongoing problem-solving, in-vestor surveys, investor seminars and networking events, and participation in a planned public-private forum for busi-ness environment reform.

At the core of every activity employed in the delivery of aftercare is a relationship-building initiative. An investment facilitator transitioning into the position of aftercare provider must stop thinking of his work as transaction-based, where each investor coming into the office represents a bureau-cratic problem to be solved and then forgotten. Rather, he must become an account manager, providing tailored sup-port at every stage of the life of a business and proactively

finding ways to help the investor achieve long-term goals and identify new opportunities.

Investors having expressed interest in the sector

This category of investor is the low-hanging fruit ; companies that have been in contact with the Ethiopian Government at their own initiative. EIC, IPDC, ETGAMA, privately managed industrial parks, the Ethiopian Chamber of Commerce and Sectoral Associations, and the Addis Ababa Chamber of Commerce and Sectoral Associations are among the stake-holders that have likely received many inquiries from inter-ested investors. These should be consolidated by this value chain roadmap’s implementing team for direct follow-up or for tracking of the stakeholder’s follow-up, as appropriate.

Potential investors

Before potential investors can be ‘qualified,’ investment pro-moters need a ‘long list’ of investors in each of the countries where they think they might have success in targeting inves-tors. See the example from India in Appendice F - List of potential investors based in India.

FUTURE VALUE CHAIN

Unlocking the potential of the T & C sector will require trans-formations throughout the value chain. These adjustments, as reflected in the future value chain schematic ( figure 11 ), will be the result of the targeted efforts detailed in the PoA that address the constraints identified in the four gears anal-ysis. The future value chain will be characterized by :

1. Greater use of domestic inputs, including raw materials ( cotton, dyes and chemicals ) and intermediary inputs ( fabrics, accessories and packaging materials )

2. Greater value addition in the garment segment as well as market and product diversification

3. Further development and integration of industrial zones4. Enhanced support services, particularly in the areas of

TVET, quality management, finance and logistics.

Of the value chain segments depicted in figure 11, FDI in garment manufacturing will be the sector’s main engine of growth over the next several years. Realizing a future value chain with the four aforementioned characteristics depends heavily on the ability of sector stakeholders to :

� Create linkages between garment FDI and domestic sup-pliers

� Nimbly address the infrastructural, bureaucratic and lo-gistical constraints which harm Ethiopia’s competitive-ness vis-à-vis other destinations for garment FDI

� Proactively develop the workforce needed for this highly labour-intensive industry.

FDI in support services and industrial zone development would follow closely. As domestic supply of yarn and thread improves, and power-and water-related constraints are al-leviated, a greater proportion of FDI may flow to integrated textile mills, thereby further reinforcing the national value chain from spinning onward.

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Figure 10 : Ethiopia’s T & C future value chain

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Loca

l m

arke

t

Yarn

s:C

hina

, Tur

key,

maj

or C

OM

ESA

mar

kets

( E

gypt

, Mau

ritiu

s an

d M

adag

asca

r), R

ussi

an

F ede

ratio

n an

d E U

mar

kets

(Ita

ly a

nd S

pain

)

Expo

rts

Sta

nd-a

lone

spi

nnin

g co

mpa

nies

Pro

duce

: ope

n-en

d, r

ing

and

com

bed

yarn

50%

dom

estic

fabr

ic

Expo

rts

Impo

rts

Fini

shed

clo

thin

gIm

port

is s

tron

gly

regu

late

d

Fabri

cs:

Turk

ey, C

hina

, Ita

ly, G

erm

any,

U

nite

d S

tate

s, U

nite

d K

ingd

om,

r egi

onal

mar

kets

Gre

ige

fabr

ics:

Ital

y, T

urke

y

Loca

l / r

etai

l mar

kets

Ger

man

y

Dep

artm

ent

stor

es

Impo

rts

Yarn

s (m

ore

impo

rts

than

na

tiona

l pro

duct

ion)

: In

dia,

Chi

na

Han

dloo

mB

ette

r st

ruct

ured

and

con

nect

ed to

oth

er te

xtile

pro

duce

rs

Dye

ing

& fi

nish

ing

Des

ign

and

sew

ing

Wea

ving

and

kni

tting

Yarn

spi

nnin

g

Indu

stri

al z

ones

Engi

neer

ing,

con

stru

ctio

n an

d m

anag

emen

t of p

riva

te in

dust

rial

zon

es, w

ater

pur

ifica

tion

faci

litie

s an

d be

tter

elec

tric

ity d

istr

ibut

ion

(Bol

e Le

mi,

Ale

m G

ena,

Duk

em, G

elan

, Kom

bolc

ha +

Tur

key/

Chi

na/R

epub

lic o

f Kor

ea z

ones

und

er c

onst

ruct

ion)

Fabr

ic m

anuf

actu

ring

Inte

grat

ed fa

bric

/gar

men

t ent

erpr

ises

Sui

ts ta

ilori

ng

Div

ersi

fied

read

y-m

ade

garm

ents

Dye

ing

and

prin

ting:

in

trodu

ce m

ass

dyei

ng o

f yar

n an

d fa

bric

Uni

form

s

Inte

grat

ed m

ills

Mas

s m

erch

andi

se

chai

ns

Spe

cial

ty

stor

es

Dep

artm

ent

stor

es

Mas

s m

erch

andi

se

chai

ns

Spe

cial

ty

stor

es

Dep

artm

ent

stor

esM

ass

mer

chan

dise

ch

ains

Spe

cial

ty

stor

es

Fact

ory

outle

ts, o

ff-pr

ice

or m

ail o

rder

s

Fact

ory

outle

ts, o

ff-pr

ice

or m

ail o

rder

s

Fact

ory

outle

ts, o

ff-pr

ice

or m

ail o

rder

s

Hom

e te

xtile

sN

atio

nal

ente

rpri

se to

pu

rcha

se a

nd

sell

cotto

n

Sp

inn

ing

Dye

ing

Se

win

gW

ea

vin

g/k

nitti

ng

Gar

men

t man

ufac

turi

ng–

CM

T an

d FO

B (

and

orig

inal

des

ign

man

ufac

ture

rs in

the

med

ium

term

)

Free

impo

rt

o f in

puts

(f

abri

cs, t

rim

s,

acce

ssor

ies,

etc

.)

Dut

y-fre

e ad

vant

ages

fo

r ga

rmen

ts

Acc

esso

ry/e

mbe

llish

men

t m

anuf

actu

ring

(at

leas

t one

ac

cess

orie

s’ p

rodu

ctio

n):

thre

ads,

lab

els,

han

gta

gs,

butt

ons,

zip

pers

, el

asti

cs:

Ken

ya,

Chi

na,

Indi

a, T

urke

y

Expo

rts

Truc

king

and

l o

gist

ics

prov

ider

sTa

rget

inve

stor

s:do

mes

tic fi

rms

Oth

er la

rge

Euro

pean

mar

kets

(Ita

ly, S

pain

and

Fra

nce)

Gar

men

ts

expo

rts

Han

dloo

m e

xpor

ts

(und

er E

thio

pian

br

and:

U

nite

d S

tate

s, E

U)

Ethi

opia

n C

ham

ber

of C

omm

erce

and

Sec

tora

l Ass

ocia

tions

, Add

is A

baba

Cha

mbe

r of

Com

mer

ce a

nd S

ecto

ral A

ssoc

iatio

ns

Qua

lity

man

agem

ent b

odie

s: E

thio

pian

Sta

ndar

ds A

genc

y (E

SA

), E

thio

pian

Con

form

ity A

sses

smen

t Ent

erpr

ise,

Nat

iona

l Met

rolo

gy In

stitu

te o

f Eth

iopi

a (N

MI)

and

Eth

iopi

an N

atio

nal A

ccre

dita

tion

Offi

ce (

ENA

O)

Ethi

opia

n Te

xtile

and

Gar

men

t Man

ufac

ture

rs A

ssoc

iatio

n (E

TGA

MA

)

Ethi

opia

Inve

stm

ent C

omm

issi

on (

EIC

)

Ethi

opia

n C

otto

n P

rodu

cers

Ex

port

ers

and

Gin

ners

A

ssoc

iatio

n (E

CP

GEA

)

Uni

vers

ities

that

hav

e te

xtile

eng

inee

ring

dep

artm

ents

: Add

is A

baba

Sci

ence

and

Tec

hnol

ogy

Uni

vers

ity (

AS

TU),

Eth

iopi

an In

stitu

te o

f Tex

tile

& F

ashi

on T

echn

olog

y (E

iTEX

), E

thio

pia

Text

ile In

dust

ry D

evel

opm

ent I

nstit

ute

Tran

spor

tatio

n se

rvic

es -

Incr

ease

the

num

ber

of p

orts

: Nor

th K

enya

por

t and

Por

t Sud

an

Ethi

opia

n R

even

ues

and

Cus

tom

s A

utho

rity

(ER

CA

)

Min

istr

y of

Tra

de

TVET

: ca

paci

tate

TVE

T st

ruct

ure

with

the

requ

ired

trai

ning

Tech

nica

l and

mai

nten

ance

ser

vice

s –

on

the

leve

l of c

ompa

nies

; Tra

nsfo

rmat

ion

Trig

geri

ng F

acili

ty (

TTF)

, Ind

ustr

ial P

arks

Dev

elop

men

t Cor

pora

tion

(IP

DC

)

Ban

ks -

Fin

anci

al s

ervi

ces:

cre

dit g

uara

ntee

trus

t fun

d

Pri

vatiz

atio

n an

d Pu

blic

Ent

erpr

ises

Sup

ervi

sing

Age

ncy

Men

noni

te E

cono

mic

Dev

elop

men

t Ass

ocia

tes

(MED

A),

Eth

iopi

an W

omen

Exp

orte

rs' A

ssoc

iatio

n (E

WEA

), O

rgan

izat

ion

for

Wom

en in

Sel

f Em

ploy

men

t (W

ISE)

Ethi

opia

n Te

xtile

Indu

stry

Dev

elop

men

t Ins

titut

e (E

TID

I)

Min

istr

y of

Agr

icul

ture

Inpu

ts

Mac

hine

ry

Cot

ton

fibre

Incr

ease

d lin

t pro

duct

ion

a nd

ginn

ing

capa

city

Wat

er, e

lect

rici

ty,

fuel

and

aux

iliar

y ch

emic

als

Labo

ur fo

rce

Man

-mad

e fib

re

Cot

ton

fibre

Few

er q

uant

ities

Fabr

ic m

anuf

actu

ring

: hig

h qu

ality

cot

ton

fabr

ics,

dye

d an

d fin

ishe

d. T

arge

t co

mpa

nies

: Tur

key,

Indi

a, C

hina

, dom

estic

firm

s. M

arke

ts: G

arm

ent f

acto

ries

in

Ethi

opia

, reg

iona

l mar

kets

Gar

men

t man

ufac

turi

ng–

CM

T an

d FO

B (

and

orig

inal

des

ign

man

ufac

ture

rs in

the

med

ium

term

): T

-shi

rts,

men

’s d

ress

shi

rts,

uni

form

s, je

ans,

men

’s s

uits

, and

ot

her

sim

ple

prod

ucts

with

littl

e de

sign

var

iatio

n

Impro

ved s

ocia

l and e

nvi

ronm

enta

l co

mplia

nce

as

wel

l as

HR

managem

ent

in f

irm

s

Impro

ved

farm

ing p

ract

ices

Trai

ning

cen

tre

in

each

Indu

stria

l zo

ne

ENA

O to

bec

ome

mem

ber

of In

tern

atio

nal L

abor

ator

y A

ccre

dita

tion

Coo

pera

tion

Mut

ual R

ecog

nitio

n A

rran

gem

ent a

nd In

tern

atio

nal

Acc

redi

tatio

n Fo

rum

Mul

tilat

eral

Rec

ogni

tion

Agr

eem

ent

P&

P p

artn

ersh

ip p

latfo

rm o

n ed

ucat

ion

Sup

port

inst

itutio

ns: T

&C

con

sulti

ng s

ervi

ces,

Indi

an tr

aini

ng s

uppo

rt in

stitu

tions

: NIF

T, N

ID, I

IHT,

etc

.

Pack

agin

g:

intro

duce

loca

l pa

ckag

ing

mat

eria

l m

anuf

actu

ring

co

mpa

nies

that

w

ould

pro

duce

pap

er

cone

s, p

aper

tube

s,

cart

ons,

etc

.

Dye

s an

d ch

emic

als:

lo

cally

pro

duce

som

e of

th

e au

xilia

ries

requ

ired

for

dyes

, and

pro

duct

ion

of

n atu

ral d

yes

from

flow

ers

for

hand

loom

Lege

nd:

Nat

iona

l com

pone

ntIm

port

sEx

port

s

UTIL

IZATIO

N:

90

%U

TIL

IZATIO

N:

70

%U

TIL

IZATIO

N:

abou

t 9

0%

UTIL

IZATIO

N:

70

%

[ ETHIOPIA TEXTILE AND CLOTHING VALUE CHAIN ROADMAP ]

60

a

b c

d

e

I. FORESEEN ADJUSTMENTS IN THE TEXTILE SEGMENT

a. Overall compliance to CSR is achieved through better HR management practices and implementation of envi-ronmental standards

b. Diversification of yarn exporters is realized to major COMESA markets, the Russian Federation and the EU

c. Fabrics exports to regional markets are increasedd. Half of domestic fabric demand for the clothing industry

is provided by local textile firmse. Stand-alone dyeing and printing plants are created, act-

ing as service providers to fabric producers

II. GREATER VALUE ADDITION IN THE GARMENT SEGMENT AS WELL AS MARKET AND PRODUCT DIVERSIFICATION a. Accessories and embellishment manufacturing and

exports are developedb. Finished clothes imports are strongly regulatedc. Duty-free advantages for garments are set upd. Free on Board ( FOB ) garments manufacturing and

original design manufacturers are introduced into the value chain

e. Packaging manufacturing and companies producing paper cones, paper tubes, cartons etc. are created

a b

c

d

e

[ THE WAY FORWARD ]

61

III. FURTHER DEVELOPMENT AND INTEGRATION OF INDUSTRIAL ZONESa. Fabric manufacturing ( high quality cotton fabrics, dyed

and finished ) has grown in quality and quantity in the

framework of industrial zones due to cost advantages provided

b. CMT and FOB garment manufacturing and original de-sign manufacturers are present in Industrial zones

c. Training centres of excellence are established in each Industrial zone

a b

c

IV. ENHANCED SUPPORT SERVICES, PARTICULARLY IN THE AREAS OF TVET, QUALITY MANAGEMENT, FINANCE AND LOGISTICSa. Public–private partnership ( PPP ) platform on education

( TVET and university education ) is launchedb. ENAO becomes a member of the ILAC Mutual

Recognition Arrangement ( MRA ) and the IAF Multilateral Recognition Agreement ( MLA )

c. TVET institutions are equipped with the required training machinery, second-hand and miniature models ( through agreements with major machinery providers )

d. New T & C consulting services are developed and partnerships with Indian training support institutions are brought into Ethiopia : National Institute of Fashion Technology ( India ) ( NIFT ), National Institute of Design ( India ) ( NID ), Indian Institute of Hardware Technology ( IIHT ), etc.

e. Transportation services are improved : increased number of ports ( North Kenya Port and Port Sudan )

f. Financial services to T & C enterprises are improved : a credit guarantee trust fund is created

Ethiopian Chamber of Commerce and Sectoral Associations, Addis Ababa Chamber of Commerce and Sectoral Associations

Quality management bodies: Ethiopian Standards Agency (ESA), Ethiopian Conformity Assessment Enterprise, National Metrology Institute of Ethiopia (NMI)

and Ethiopian National Accreditation Office (ENAO)

Ethiopian Textile and Garment Manufacturers Association (ETGAMA)

Ethiopia Investment Commission (EIC)

Ethiopian Cotton Producers

Exporters and Ginners

Association (ECPGEA)

Universities that have textile engineering departments: Addis Ababa Science and Technology University (ASTU), Ethiopian Institute of Textile & Fashion Technology (EiTEX), Ethiopia Textile Industry Development Institute

Transportation services - Increase the number of ports: North Kenya port and Port Sudan

Ethiopian Revenues and Customs Authority (ERCA)

Ministry of Trade

TVET : capacitate TVET structure with the required training

Technical and maintenance services – on the level of companies; Transformation Triggering Facility (TTF), Industrial Parks Development Corporation (IPDC)

Banks - Financial services: credit guarantee trust fund

Privatization and Public Enterprises Supervising Agency

Mennonite Economic Development Associates (MEDA), Ethiopian Women Exporters' Association (EWEA), Organization for Women in Self Employment (WISE)

Ethiopian Textile Industry Development Institute (ETIDI)

FeMSEDA (Ethiopian entreprise development and handicrafts)

Ministry of Agriculture

ENAO to become member

of International Laboratory

Accreditation Cooperation Mutual

Recognition Arrangement and

International Accreditation Forum

Multilateral Recognition

Agreement

P&P partnership platform on education

Support institutions: T&C consulting services, Indian training support institutions: NIFT, NID, IIHT, etc.

Primary support services

a b

c

d

e

f

[ ETHIOPIA TEXTILE AND CLOTHING VALUE CHAIN ROADMAP ]

62

MOVING TO ACTION

The development of the future value chain for the T & C sec-tor is a 5 year project defined through a consultative process between public and private sector stakeholders in Ethiopia.

Achieving the strategic objectives and realizing the future value chain of the T & C sector in Ethiopia depends heavily

on the ability of sector stakeholders to start implementing and coordinating the activities defined in the Value Chain Roadmap’s Plan of Action. For this reason, a list of key pri-ority activities has been identified in order to kick-start the implementation of T & C Value Chain Roadmap.

The plan of priority actions to kick start implementation

Activity Target measures Leading national institution and possible implementing partners

Strategic objective 1 : Improve productivity and employment outcomes through skills development

1.1 Increase the level of technical and supervisory skills at T & C firms.1.1.1 Conduct a skills gap and needs assessment study covering the entire value chain from workers up to managers, and develop course curricula, assessment standards and infrastructure requirements for training programmes. The skills gap assessment should also factor in learnings from leading T & C manufacturing nations. Build this analysis on the 10-year skills development plan and gap assessment study carried out by Adama Science and Technology University and ETIDI.

• Reports indicating specific numbers to be trained for various activities

• Course curriculum for each area, based on skills gap assessment, assessment standards for certification agency, and identification of ways to train ( on-job, theory, mix )

ETIDI, ETGAMA, Adama Science and Technology University, Federal TVET Agency, TVET centres responsible for curriculum development under regional departments, Ministry of Education, regional support from African Cotton and Textiles Industries Federation ( ACTIF )

1.5 Improve HR policies, employee retention and incentives at T & C firms.1.5.1 Support companies in developing HR policies and practices – after comprehensive review of appli-cable local laws, international compliance standards and global best practices – leveraging the experience from other successful countries, which can help Ethiopian firms recruit, develop and retain a productive workforce.Foster the development of HR departments within companies to encompass a wider scope of services, in-cluding learning and development.

• At least 40 companies ( of which 20 are SMEs ) trained per year on HR practices

ETIDI, ETGAMA, regional support from ACTIF in terms of benchmarkingEthiopian HR professional associa-tions

1.6. Ensure maximum equipment usage within Ethiopian firms.1.6.1 Conduct training, involving machinery suppliers’ representatives, at firm level for middle-level and high-level managers on :

• Knowledge of existing equipment and their advantages in order to ensure proper identification and purchase of equipment within companies

• Understanding the potential of newly purchased equipment and the training requirements for operators to ensure its full-capacity functioning

• Modern budgetary practices that account for regular equipment upgrading.Machinery suppliers should not be involved to ensure that the data is unbiased. This should be done by :

a. Using industry experience-sharing platformsb. Institutionalizing technology comparison studies through universities or technical experts.

• One hundred and sixty company technical machinery supply managers trained per year

ETIDI, ETGAMA, regional support from ACTIF, Ministry of Education and Ministry of Industry,universities

Strategic Objective 2 : Strengthen the enabling environment to favour sector development2.1. Reinforce sector coordination to favour workforce development and policy advocacy2.1.1 Set up a high-level PPP platform to represent the interests of the industry and to ensure alignment between ETIDI, ETGAMA, public universities and vocational schools, with a view to upgrading the quality and capacity of the T & C training and educational offering. The partnership platform should comprise representa-tives of lead firms / foreign buyers / retailers.

• High-level PPP set up, comprised of ETIDI, ETGAMA, universities and TVET institutions

Ministry of Industry, ETIDI and ET-GAMA

2.3 Improve existing training and educational offerings and align to industry’s needs2.3.1 Reinforce existing TVET offering targeting both textile and clothing companies. Specific technical areas requiring skill reinforcement are :

• Spinning operations for ring spinning, open end and airjet• Weaving and weaving preparatory operations for major shuttleless technologies – airjet and rapier• Knitting operations• Fibre / yarn / fabric dyeing and finishing processes• Garment manufacturing operations• List of skills to be completed based on the assessment study.

In each of these areas, create highly specific short-term courses ( one to three weeks ), adapted to the time constraints of employees. For more specialized training, a higher period of four to six weeks may be re-quired. The timeline should be decided while developing the courses.

• At least two new courses created and available in each field within the five- year period

PPP, ETIDI, ETGAMA

[ THE WAY FORWARD ]

63

Activity Target measures Leading national institution and possible implementing partners

Strategic objective 3 : Establish conditions to harness FDI as an engine for growth in T & C3.4 Increase collaboration between local SMEs and FDIs to ensure synergies3.4.1 Support the implementation of the existing programme ( of the Ethiopia Chamber, the Addis Ababa Chamber ) to help establish linkages between new international investors and local suppliers in a more sys-tematic manner, taking into account the SMEs’ perspective. E.g. Ensure that foreign-owned firms in industrial zones begin to provide more systematic and organized in-house training, opened to local firms.

• Assist in finding new local suppliers• Facilitate transfer of knowledge from investors ( includes product technology, process technology and

organizational managerial know-how and assistance, etc. )• Provide training on pertinent issues to enhance meaningful relations between investors and local SMEs

( includes cooperative learning among suppliers ; internal training to affiliates ; in-plant training ; etc. ).

• Exchange mechanism established within at least four Industrial zones using the training centres created ( linked with activity 2.3.4 )

ETIDI, IPDC and ETGAMA

Strategic Objective 4 : Foster product and market development through the use of trade information 4.1 Ensure easy and timely access to strategic trade intelligence for T & C firms.4.1.1 Create a strategic monitoring cell, hosted at ETIDI, then co-shared with ETGAMA, to gather up-to-date and T & C-specific trade information, and to detect early signals on targeted markets and products. The web-site of ETIDI can be used to host the monitoring cell and connected to the Ethiopia Chamber of Commerce website.This implies supporting ETIDI and ETGAMA to subscribe to important textile journals and websites to be able to update its members with latest market information. These include : http : / / www.emergingtextiles.com / ; www.fibretofashion.com ; www.cotlook.com

• One monitoring cell set up in ETIDI• Recommendation report on

implementation of the competitive intelligence system

ETIDI,co-responsibility with ETGAMA and ECPGEA

4.2 Increase firms’ capacity to understand regional and international market requirements and how to best align product development / offerings4.2.3 Provide training on the contemporary trends of fashion design ( e.g. colour palettes silhouettes, etc. ), as well as the role and importance of fashion designers.

• At least two training institutions acquire knowledge and competences to replicate trainings

• Minimum of 10 companies trained per year

ETIDI, ETGAMA,regional support from ACTIF

Photo: www.tidi.gov.et,

THE PLAN OF ACTION

The PoA contains a detailed list of activities organized by operational objec-tives and strategic objectives. The PoA serves as an exhaustive framework for the implementation of the Value Chain Roadmap.

Photo: pixabay, Phil Shettig.

[ ETHIOPIA TEXTILE AND CLOTHING VALUE CHAIN ROADMAP ]

66

Stra

tegi

c ob

ject

ive

1 : Im

prov

e pr

oduc

tivity

and

em

ploy

men

t out

com

es th

roug

h sk

ills

deve

lopm

ent.

Oper

atio

nal

objec

tive

Activ

ities

Prio

rity

1=hi

gh,

3=lo

w

Star

ting

perio

dTa

rget

mea

sure

sLe

adin

g na

tiona

l in

stitu

tion

and

poss

ible

impl

emen

ting

partn

ers

Ongo

ing

/ fut

ure

deve

lopm

ent

prog

ram

mes

+

inte

rnat

iona

l par

tner

s

1617

1819

20

1.1

Increa

se th

e lev

el of

tech

nical

and

supe

rviso

ry sk

ills a

t T &

C fir

ms.

1.1.

1 Co

nduc

t a sk

ills g

ap an

d ne

eds a

sses

smen

t stu

dy co

verin

g th

e ent

ire va

lue c

hain

from

wor

kers

up to

man

ager

s, an

d de

velo

p co

urse

curri

cula,

asse

ssm

ent s

tanda

rds a

nd in

frastr

uctu

re req

uirem

ents

for t

rainin

g pr

ogram

mes

( link

ed w

ith ac

tiviti

es 2

.1.2

and

2.1.

3 ).

The s

kills

gap

asse

ssm

ent s

houl

d als

o fac

tor i

n lea

rning

s fro

m le

ading

T & C

man

ufac

turin

g na

tions

.Bu

ild th

is an

alysis

on

the 1

0-ye

ar sk

ills d

evelo

pmen

t plan

and

gap

asse

ssm

ent s

tudy

carri

ed o

ut b

y Ad

ama S

cienc

e and

Tech

nolo

gy U

niver

sity a

nd E

TIDI.

1X

• Re

ports

indi

catin

g sp

ecifi

c nu

mbe

rs to

be t

raine

d fo

r vari

ous

activ

ities

•

Cour

se cu

rricu

lum

for e

ach

area,

base

d on

skill

s gap

asse

ssm

ent,

asse

ssm

ent s

tanda

rds f

or

certi

ficati

on ag

ency

, and

id

entif

icatio

n of

way

s to

train

( on-

job,

theo

ry, m

ix )

ETID

I, ET

GAM

A, A

dam

a Sc

ience

and

Tech

nol-

ogy U

niver

sity,

Fede

ral TV

ET A

genc

y,TV

ET ce

ntres

resp

on-

sible

for c

urric

ulum

de

velo

pmen

t und

er re

-gi

onal

depa

rtmen

ts,M

inistr

y of E

duca

tion,

regio

nal s

uppo

rt fro

m

Afric

an C

otto

n an

d Te

x-til

es In

dustr

ies F

eder

a-tio

n ( A

CTIF

)

Inter

natio

nal t

rainin

g ag

encie

s suc

h as

Waz

ir an

d Inf

rastru

cture

Leas

ing

and

Finan

cial S

ervic

es

( IL&F

S ) fr

om In

dia

1.1.

2 Pr

ovid

e tec

hnica

l trai

nings

to T

& C m

achin

e ope

rator

s on-

site a

nd in

selec

ted tr

aining

cent

res to

inc

rease

pro

ducti

vity a

nd q

ualit

y of s

kills.

Train

ing to

wor

kers

: fou

r to

six w

eeks

.Sp

ecifi

c foc

us ar

eas r

equir

ed ar

e :

• Sh

ift w

orke

rs / m

achin

e ope

rator

s fro

m sp

inning

up

to g

armen

ting

• Lin

e lea

ders

and

prod

uctio

n flo

w su

pervi

sors

• M

iddl

e man

ager

s•

Patte

rn m

aker

s and

com

puter

-aid

ed d

esig

n op

erato

rs •

Quali

ty ins

pecto

rs •

Lab

techn

ician

s •

Fash

ion

desig

ners

• M

ercha

ndize

rs•

Indus

trial

engi

neer

s•

Elec

tronic

s / el

ectri

cian

skill

s•

Mec

hanic

s•

Prac

tices

on

mac

hiner

y main

tenan

ce.

1X

• Te

n th

ousa

nd w

orke

rs pe

r yea

r in

seve

n tra

ining

loca

tions

• At

leas

t 5,0

00 em

ploy

ees t

raine

d pe

r yea

r und

er o

ther

categ

ories

( to

be r

efine

d ba

sed

on th

e skil

l ga

p as

sess

men

t und

er ac

tivity

1.

1.1 )

ETID

I, ET

GAM

A, re

gion

-al

supp

ort f

rom

ACT

IFTV

ET in

stitu

tions

/ un

i-ve

rsitie

s

Inter

natio

nal t

rainin

g ag

encie

s suc

h as

Waz

ir an

d IL&

FS fr

om In

dia

1.1.

3 Pr

ovid

e on-

the-

job

man

ager

ial tr

aining

to li

ne m

anag

ers w

ho h

ave s

uper

visor

y rol

es, t

o en

sure

work

flows

expe

ditio

usly

along

the l

ine. T

rainin

g to

supe

rviso

rs : t

wo to

four

wee

ks.

2X

• On

e tho

usan

d lin

e sup

ervis

ors

per y

ear i

n m

ultip

le lo

catio

ns

( inclu

ding

train

ing w

ithin

facto

ry an

d, fo

r som

e, in

a trai

ning

cent

re )

ETID

I, ET

GAM

A, re

-gi

onal

supp

ort f

rom

AC

TIF,

Kaize

n Ins

titut

e,TV

ET in

stitu

tions

/ un

i-ve

rsitie

s,pu

blic–

priva

te pl

atfor

m

Inter

natio

nal t

rainin

g ag

encie

s suc

h as

Waz

ir an

d IL&

FS fr

om In

dia

1.1.

4 Tra

in pr

oduc

tion

flow

supe

rviso

rs to

bes

t ove

rsee t

he p

ace o

f the

wor

k and

ensu

re sto

ppag

es ar

e m

inim

ized,

mon

itor p

rodu

ction

leve

ls, tr

ain n

ew w

orke

rs, an

d m

anag

e con

stant

pro

blem

solvi

ng. T

rain-

ing m

anag

ers :

two

week

s ( to

be l

inked

with

activ

ity 1

.3.3

).

2X

• On

e hun

dred

and

sixty

man

ager

s pe

r yea

r in

mul

tiple

loca

tions

( in

cludi

ng tr

aining

with

in fac

tory

and,

for s

ome,

in a t

rainin

g ce

ntre

)

ETID

I, ET

GAM

A, re

-gi

onal

supp

ort f

rom

AC

TIF,

Kaize

n Ins

titut

e,TV

ET in

stitu

tions

/ un

i-ve

rsitie

s

Unive

rsitie

s,e.g

. Add

is Ab

aba,

Bahir

Da

r, W

ollo

;int

erna

tiona

l trai

ning

agen

cies s

uch

as W

azir

and

IL&FS

from

Indi

a

[ THE PLAN OF ACTION ]

67

Stra

tegi

c ob

ject

ive

1 : Im

prov

e pr

oduc

tivity

and

em

ploy

men

t out

com

es th

roug

h sk

ills

deve

lopm

ent.

Oper

atio

nal

objec

tive

Activ

ities

Prio

rity

1=hi

gh,

3=lo

w

Star

ting

perio

dTa

rget

mea

sure

sLe

adin

g na

tiona

l in

stitu

tion

and

poss

ible

impl

emen

ting

partn

ers

Ongo

ing

/ fut

ure

deve

lopm

ent

prog

ram

mes

+

inte

rnat

iona

l par

tner

s

1617

1819

20

1.1

Increa

se th

e lev

el of

tech

nical

and

supe

rviso

ry sk

ills a

t T &

C fir

ms.

1.1.

5 Su

ppor

t firm

s to

prov

ide s

ystem

atic t

rainin

g / i

nduc

tion

proc

ess t

o ne

w op

erato

rs an

d de

velo

p tra

ining

man

uals

on m

anuf

actu

ring

oper

ation

s – pr

oduc

tion,

qua

lity,

main

tenan

ce an

d ho

usek

eepi

ng –

for o

perat

ors.

2X

• Pu

blish

ed h

andb

ooks

with

sta

ndard

ope

rating

pro

cedu

re fo

r ea

ch ac

tivity

• Tra

in 40

com

panie

s per

year

to

deve

lop

proc

ess a

nd tr

aining

m

anua

ls•

Traini

ng o

f trai

ners

unde

r ex

chan

ge p

rogr

amm

e in

one y

ear

ETID

I, ET

GAM

A,

regio

nal s

uppo

rt fro

m

ACTIF

Inter

natio

nal t

rainin

g ag

encie

s suc

h as

Waz

ir an

d IL&

FS fr

om In

dia

1.1.

6 Sh

owca

se to

oth

ers t

he le

vel o

f effo

rt m

ade b

y suc

cess

ful c

ompa

nies i

n sk

ills d

evelo

pmen

t, an

d ho

w th

eir p

rodu

ctivit

y lev

els an

d co

st eff

icien

cy h

ave i

mpr

oved

as a

resul

t. 2

X•

At le

ast f

ive su

cces

s sto

ries

show

case

d th

roug

h ET

GAM

A an

d ET

IDI

ETGA

MA

and

ETID

I

1.1.

7 M

onito

ring

and

evalu

ation

of t

he tr

aining

pro

gram

mes

bas

ed o

n th

e skil

ls ga

p as

sess

men

t ( un

-de

r 1.1

.1 ) c

reate

a lab

our d

ataba

se to

refle

ct th

e cur

rent s

ituati

on id

entif

ied in

the s

tudy

( sho

wing

num

-be

rs of

wor

kers

at ea

ch le

vel o

f spe

cializ

ation

), an

d m

onito

r evo

lutio

n an

d qu

antif

y trai

ned

empl

oyee

s in

each

categ

ory.

2X

• On

e mon

itorin

g da

tabas

e crea

ted

and

man

aged

by E

TIDI,

with

ET

GAM

A’s i

nput

s

Mini

stry o

f Lab

our a

nd

Socia

l Affa

irs, E

TIDI,

ETGA

MA

1.1.

8 So

licit

large

-sca

le inv

estm

ents

and

world

-clas

s man

agem

ent t

o va

stly r

amp

up th

e cou

ntry’

s ca-

pacit

y for

garm

ent w

orke

r trai

ning

that

is bo

th te

chnic

ally e

xcell

ent a

nd so

cially

resp

onsib

le.Fu

rther

buil

d on

the S

wedf

und

/ H&M

pro

ject i

n Et

hiopi

a to

build

the t

rainin

g pr

ogram

mes

requ

ired,

lia

ising

with

oth

er fi

nanc

ial an

d tec

hnica

l par

tner

s exp

erien

ced

in lar

ge g

armen

t wor

ker t

rainin

g ini

tia-

tives

in A

sia an

d / o

r Afri

ca. T

his w

ill li

kely

inclu

de p

rivate

inve

stors,

dev

elopm

ent a

genc

ies o

f majo

r ga

rmen

t-pro

ducin

g co

untri

es, s

tate-

run

vent

ure c

apita

l firm

s ( su

ch as

Swe

dfun

d ), c

onsu

ltanc

ies,

inter

natio

nal o

rgan

izatio

ns, a

nd n

on-g

over

nmen

t org

aniza

tions

( Ben

efits

for B

usine

ss an

d W

orke

rs pr

o-gr

amm

e in

India

and

Bang

lades

h is

an ex

ampl

e of s

uch

a larg

e-sc

ale p

rojec

t, rea

ching

ove

r 350

,000

wo

rkers

).

2X

• At

leas

t one

larg

e-sc

ale

inves

tmen

t pro

gram

me i

nitiat

ed,

invol

ving

indus

try-w

ide t

rainin

g

ETID

I and

ETG

AMA

1.2

Impr

ove

sour

cing

and

supp

ly ch

ain

man

agem

ent

perfo

rman

ce.

1.2.

1 Pr

ovid

e ove

rall t

rainin

g to

firm

s on

quali

ty inp

ut so

urcin

g, fi

nanc

ial m

anag

emen

t and

supp

ly ch

ain o

ptim

izatio

n.To

incr

ease

the a

waren

ess o

f ent

erpr

ises o

n th

e nee

d to

sour

ce h

igh

quali

ty inp

uts,

com

plem

ent t

rain-

ings b

y org

anizi

ng fa

ce to

face

mee

tings

with

Japa

nese

com

panie

s ( du

e to

their

hig

h qu

ality

requir

e-m

ents

– to

be s

uppo

rted

by th

e Jap

an In

terna

tiona

l Coo

perat

ion

Agen

cy ) a

nd A

mer

ican

com

panie

s to

see t

he le

vel o

f qua

lity r

equir

ed b

y sou

rcing

firm

s.

2X

• Th

ree to

four

T & C

custo

mer

wo

rksho

ps p

er ye

ar•

One h

undr

ed an

d six

ty co

mpa

ny

man

ager

s trai

ned

per y

ear

ETID

I, ET

GAM

A,

regio

nal s

uppo

rt fro

m

ACTIF

,Et

hiopi

an In

dustr

ial In

-pu

ts De

velo

pmen

tEn

terpr

ise ( E

IIDE )

Japa

n Int

erna

tiona

l Co

oper

ation

Age

ncy,

Supp

ortin

g Ind

ian Tr

ade

and

Inves

tmen

t in

Afric

a ( S

ITA ) /

Sec

tor C

ompe

ti-tiv

enes

s ( SC

) ( se

ction

of

ITC ) –

Enter

prise

Com

-pe

titive

ness

( EC )

( sec

tion

of IT

C ) –

Sup

ply C

hain

Man

agem

ent (

SCM

), lo

-ca

l ins

titut

ions

, inc

ludi

ng

BCaD

Con

sulti

ng ( E

thio

-pi

a Mod

ular

Learn

ing

Syste

m –

Sup

ply C

hain

Man

agem

ent (

MLS

–SC

M ) p

artn

er )

1.2.

2 En

sure

that

exter

nal p

rivate

secto

r sup

port

on so

urcin

g is

avail

able

to en

terpr

ises :

• Inv

olve

sour

cing

com

panie

s / tr

ader

s in

the s

ourc

ing o

f T &

C pr

oduc

ts ( a

nd lo

gisti

cs ) f

or th

ose f

irms

that

do n

ot h

ave t

his ca

pacit

y int

erna

lly ye

t – ge

t ass

istan

ce fr

om lo

cal o

r reg

iona

l priv

ate tr

ader

s and

rep

licate

it in

the g

armen

t sec

tor,

invol

ving

leadi

ng fi

rms (

pilo

t in

leath

er in

dustr

y with

FeM

SEDA

) ;•

Prom

ote d

evelo

pmen

t of E

thio

pian

sour

cing

com

panie

s ( in

cludi

ng re

achin

g ou

t to

the k

ey p

layer

s in

the s

ourc

ing in

dustr

y to

bring

them

into

Eth

iopi

a ).

2X

• At

leas

t 10

com

panie

s with

out

sour

cing

divis

ions

conn

ected

wi

th so

urcin

g co

mpa

nies /

tra

ders

• At

the e

nd o

f five

years

, at

least

two

new

T & C

sour

cing

com

panie

s in

Ethio

pia

ETID

I, reg

iona

l sup

port

from

ACT

IFPil

ot in

leath

er in

dustr

y wi

th F

eMSE

DA

[ ETHIOPIA TEXTILE AND CLOTHING VALUE CHAIN ROADMAP ]

68

Stra

tegi

c ob

ject

ive

1 : Im

prov

e pr

oduc

tivity

and

em

ploy

men

t out

com

es th

roug

h sk

ills

deve

lopm

ent.

Oper

atio

nal

objec

tive

Activ

ities

Prio

rity

1=hi

gh,

3=lo

w

Star

ting

perio

dTa

rget

mea

sure

sLe

adin

g na

tiona

l in

stitu

tion

and

poss

ible

impl

emen

ting

partn

ers

Ongo

ing

/ fut

ure

deve

lopm

ent

prog

ram

mes

+

inte

rnat

iona

l par

tner

s

1617

1819

20

1.2

Impr

ove

sour

cing

and

supp

ly ch

ain

man

agem

ent

perfo

rman

ce.

1.2.

3 Co

ach

com

panie

s on

how

to p

ut in

to p

ractic

e the

mos

t suit

able

syste

ms a

nd p

roce

sses

for m

an-

aging

ope

ratio

ns an

d inv

ento

ry ( e

.g. s

ourc

ing an

d pl

annin

g fo

r con

stant

avail

abili

ty of

inpu

ts us

ed in

pr

oduc

tion

such

as ra

w m

ateria

ls, sp

are p

arts,

dye

s and

chem

icals )

.

1X

• On

e hun

dred

and

sixty

com

pany

m

anag

ers t

raine

d pe

r yea

r•

Twen

ty SM

Es co

ache

d pe

r yea

r on

inve

ntor

y man

agem

ent

ETID

I, ET

GAM

A,

regio

nal s

uppo

rt fro

m

ACTIF

, EIID

E

SITA

/ EC

–SCM

, loc

al in-

stitu

tions

, inc

ludi

ng B

CaD

Cons

ultin

g ( E

thio

pia

MLS

–SCM

par

tner

)

1.2.

4 Pr

ovid

e con

sulti

ng ad

vice t

hrou

gh in

terna

tiona

l exp

erts

to se

lected

pro

gres

sive a

nd co

mm

itted

co

mpa

nies t

o he

lp th

em im

plem

ent l

ean

man

agem

ent,

logi

stics

man

agem

ent a

nd o

ther

tech

nique

s for

pr

oduc

tivity

and

quali

ty im

prov

emen

t.

2X

• At

leas

t 40

com

panie

s ( of

whic

h 20

are S

MEs

) trai

ned

per y

ear o

n lea

n / l

ogist

ics im

plem

entat

ions

ETID

I, ET

GAM

A,

regio

nal s

uppo

rt fro

m

ACTIF

, EIID

E

SITA

/ SC

/ EC

–SCM

, W

azir,

loca

l ins

titut

ions

, inc

ludi

ng B

CaD

Cons

ult-

ing ( E

thio

pia M

LS–S

CM

partn

er )

1.2.

5 Co

ach

com

panie

s to

impl

emen

t cos

t-effi

cient

and

buye

r-orie

nted

sour

cing

strate

gies

and

tech-

nique

s ( al

so en

surin

g th

at res

pons

ible

staff

have

fina

ncial

skill

s rela

ted to

pur

chas

ing in

puts

and

coor-

dina

ting

prod

uctio

n sc

hedu

les ).

1X

• At

leas

t 40

com

panie

s ( of

wh

ich 2

0 are

SM

Es ) t

raine

d pe

r yea

r in

sour

cing

strate

gy

impl

emen

tatio

ns

ETID

I, ET

GAM

A,

regio

nal s

uppo

rt fro

m

ACTIF

, EIID

E

SITA

/ SC

1.2.

6 Ex

plor

e new

sour

cing

mark

ets fo

r inp

uts (

yarn

s, fab

rics a

nd ac

cess

ories

), id

entif

ying

poten

tial

supp

liers

and

facili

tating

long

-term

relat

ions

hip b

uildi

ng.

2X

• Lin

kage

s dev

elope

d wi

th 1

0 ne

w su

pplie

rs fro

m d

iffere

nt so

urcin

g de

stina

tions

•

Ten

per c

ent r

educ

tion

in co

sts

of se

lected

inpu

ts, o

r im

prov

ed

deliv

ery t

ime

ETID

I, ET

GAM

A,

regio

nal s

uppo

rt fro

m

ACTIF

, EIID

E

SITA

/ SC

1.3

Impr

ove

quali

ty m

anag

e-m

ent s

kills

in lin

e wi

th in

terna

tiona

l sta

ndard

s.

1.3.

1 Pr

omot

e the

adop

tion

of in

strum

ents

relate

d to

qua

lity a

ssur

ance

and

stand

ards (

such

as E

COTE

-CO

, Kaiz

en, I

SO, s

ocial

resp

onsib

ility

and

envir

onm

ental

/ en

ergy s

tanda

rds )

and

servi

ces i

n su

ppor

t to

enter

prise

s.

• Gu

ide :

‘Exp

ortin

g clo

thing

and

textil

es to

targ

et m

arkets

’ •

Guid

e : ‘M

anag

ing q

ualit

y in

Ethio

pia :

a di

recto

ry of

servi

ces’

2X

• Gu

ide :

‘Exp

ortin

g clo

thing

and

textil

es to

targ

et m

arkets

’ mad

e av

ailab

le•

Guid

e : ‘M

anag

ing q

ualit

y in

Ethio

pia :

a di

recto

ry of

servi

ces’

mad

e ava

ilabl

e

ETID

I, ET

GAM

A,

regio

nal s

uppo

rt fro

m

ACTIF

,ESA

( inc

ludi

ng

ECAE

, NM

I, an

d EN

AO )

SITA

/ EC

–Exp

ort Q

ualit

y M

anag

emen

t ( EQ

M )

1.3.

2 Co

nduc

t sen

sitiza

tion

works

hops

on

man

dato

ry an

d vo

lunt

ary re

quire

men

ts in

targe

t mark

ets

( Indi

a, reg

ion,

EU )

for S

MEs

and

TISIs.

This

woul

d co

ver i

nter

natio

nal a

nd o

ther

requ

irem

ents,

buy

ers’

requir

emen

ts, la

belli

ng, p

acka

ging

, clo

thing

size

, and

the R

egist

ratio

n, E

valu

ation

, Aut

horiz

ation

and

Restr

ictio

n of

Che

mica

ls ( R

EACH

) reg

ulati

on :

• Br

eako

ut se

ssio

ns to

iden

tify t

he q

ualit

y-rel

ated

need

s of p

artic

ipati

ng S

MEs

( and

TISI

s )•

Ident

ifica

tion

of a

way f

orwa

rd fo

r a p

ool o

f ent

erpr

ises (

ISO

9001

, ISO

140

01, I

SO 5

0001

, pr

oduc

tivity

impr

ovem

ent,

5S, b

asic

quali

ty to

ols,

lean

man

ufac

turin

g, p

acka

ging

, lab

elling

)•

Ident

ifica

tion

of a

way f

orwa

rd fo

r TIS

Is ( la

bs, c

ertif

icatio

n bo

dies

, ins

pecti

on b

odies

, con

sulta

ncy

com

panie

s ).

2X

• At

leas

t 40

com

panie

s ( of

whic

h 20

are S

MEs

) per

year

sens

itize

d on

man

dato

ry an

d vo

lunt

ary

requir

emen

ts in

targe

t mark

ets•

Ten

TISIs

sens

itize

d on

man

dato

ry an

d vo

lunt

ary re

quire

men

ts in

targe

t mark

ets

ETID

I, ET

GAM

A,

regio

nal s

uppo

rt fro

m

ACTIF

, ESA

, ESA

( in

cludi

ng E

CAE,

NM

I, an

d EN

AO )

SITA

/ EC

–EQM

1.3.

3 Co

nduc

t cap

acity

-buil

ding

for a

poo

l of s

electe

d SM

Es to

com

ply w

ith m

anda

tory

and

volu

ntary

req

uirem

ents

and

impl

emen

t req

uired

certi

ficati

on sc

hem

es ( I

SO 9

001,

ISO

1400

1, IS

O 50

001,

pro

-du

ctivit

y im

prov

emen

t, 5S

, bas

ic qu

ality

tool

s, lea

n m

anuf

actu

ring,

pac

kagi

ng, l

abell

ing ).

1X

• At

leas

t 40

com

panie

s ( of

whic

h 20

are S

MEs

) per

year

coac

hed

to im

plem

ent a

ppro

priat

e ce

rtific

ation

sche

mes

and

man

agem

ent t

ools

per y

ear

• Tra

ining

mate

rials

avail

able

ESA

and

ETID

I ( in

-clu

ding

EC

AE, N

MI,

and

ENAO

)

SITA

/ EC

–EQM

1.3.

4 Tra

ining

on

unde

rstan

ding

, and

guid

ance

on

impl

emen

tatio

n of,

the R

EACH

regu

latio

n.2

X•

One w

orks

hop

for p

erso

nnel

from

fo

ur re

levan

t reg

ulato

ry bo

dies

, SM

Es an

d rel

evan

t stak

ehol

ders

• Ro

ad m

ap to

impl

emen

t REA

CH

regul

ation

ESA

and

ETID

I ( in

cludi

ng E

CAE,

NM

I, an

d EN

AO )

SITA

/ EC

–EQM

1.3.

5 In

orde

r to

ensu

re th

e sus

taina

bilit

y of t

he ce

rtific

ation

; esta

blish

par

tner

ship

s with

buy

ers t

o pr

o-m

ote t

he ce

rtific

ation

pro

cess

amon

g Et

hiopi

an co

mpa

nies.

2X

• At

leas

t one

buy

er in

volve

dET

IDI,

ETGA

MA,

ESA

[ THE PLAN OF ACTION ]

69

Stra

tegi

c ob

ject

ive

1 : Im

prov

e pr

oduc

tivity

and

em

ploy

men

t out

com

es th

roug

h sk

ills

deve

lopm

ent.

Oper

atio

nal

objec

tive

Activ

ities

Prio

rity

1=hi

gh,

3=lo

w

Star

ting

perio

dTa

rget

mea

sure

sLe

adin

g na

tiona

l inst

itutio

n an

d po

ssib

le im

plem

entin

g pa

rtner

s

Ongo

ing

/ fut

ure

deve

lopm

ent

prog

ram

mes

+

inte

rnat

iona

l par

tner

s

1617

1819

20

1.4

Desig

n an

d im

plem

ent a

na-

tionw

ide c

ompl

i-an

ce p

rogr

amm

e.

1.4.

1 De

velo

p a r

eferen

ce b

ook o

n ex

isting

socia

l and

envir

onm

ental

guid

eline

s app

lied

in th

e T &

C se

ctor i

n Et

hiopi

a, inc

ludi

ng th

e mon

itorin

g an

d rep

ortin

g m

echa

nism

s in

plac

e 1

X•

Refer

ence

boo

k on

exist

ing so

cial

and

envir

onm

ental

guid

eline

s cr

eated

with

impl

emen

table

recom

men

datio

n ba

sed

on g

loba

l pr

actis

e

ETID

I as l

eadi

ng in

stitu

tion

Mini

stry o

f Lab

our a

nd S

ocial

Af

fairs

; ETG

AMA ;

Con

feder

a-tio

n of

Eth

iopi

an Tr

ade U

nions

, ; Na

tiona

l Fed

erati

on o

f Tex

-til

e, Le

ather

and

Garm

ent I

ndus

try Tr

ade U

nions

;M

inistr

y of T

rade

1.4.

2 Es

tablis

h an

advis

ory c

omm

ittee

com

pose

d of

buy

ers,

empl

oyer

s’ an

d wo

rkers’

org

aniza

-tio

ns, T

ISIs,

and

othe

r rele

vant

stak

ehol

ders

and

agree

on

impl

emen

tatio

n of

glo

bal c

ompl

iance

sta

ndard

s and

mod

alitie

s in

the c

ount

ry an

d fo

r the

clot

hing

and

textil

e sec

tors,

inclu

ding

mon

itor-

ing an

d rep

ortin

g.

2X

• Co

mm

ittee

on

com

plian

ce

prog

ramm

e set

up

1.4.

3 Es

tablis

h m

odali

ties f

or b

uyer

and

enter

prise

enga

gem

ent i

n im

plem

entat

ion,

mon

itorin

g,

repor

ting

and

taking

corre

ctive

actio

ns re

lated

to co

mpl

iance

.2

X•

Over

all te

rms o

f refe

rence

draf

ted o

n bu

yer a

nd en

terpr

ise im

plem

entat

ion

• Inv

olve

men

t of i

ndivi

dual

buye

rs de

fined

thro

ugh

respe

ctive

term

s of

refere

nce (

at le

ast t

wo )

1.4.

4 Ag

ree o

n an

d sig

n a c

ount

rywid

e com

plian

ce fr

amew

ork f

or th

e T &

C ind

ustry

in E

thio

pia.

1X

• Co

untry

wide

com

plian

ce fr

amew

ork

signe

d1.

4.5

Wor

k with

buy

ers t

o bu

ild co

mpl

iance

buy

-in th

roug

h bu

ilding

trus

t and

own

ersh

ip w

ith m

an-

agem

ent a

nd w

orke

rs –

estab

lish

a wor

king

team

( man

agem

ent a

nd w

orke

rs ) a

t the

enter

prise

leve

l to

pro

mot

e com

plian

ce.

2X

• At

leas

t 20

worki

ng te

ams

estab

lishe

d in

Ethio

pian

com

panie

s

1.4.

6 Tra

in wo

rkers,

empl

oyer

s and

oth

er st

akeh

olde

rs on

the a

gree

d-up

on co

mpl

iance

fram

ewor

k fo

r the

T & C

indu

stry i

n Et

hiopi

a, inc

ludi

ng so

cial a

nd en

viron

men

tal st

anda

rds a

nd th

eir im

plica

-tio

ns fo

r attr

actin

g FD

I and

glo

bal b

uyer

s.

2X

• At

leas

t 2,0

00 w

orke

rs an

d 50

m

anag

ers t

raine

d pe

r yea

r ( fro

m

parti

cipati

ng co

mpa

nies )

1.4.

7 Tra

in em

ploy

ers a

nd w

orke

rs on

the l

ink b

etwee

n co

mpl

iance

and

impr

oved

wor

king

cond

i-tio

ns fo

r qua

lity,

prod

uctiv

ity, c

leane

r pro

ducti

on an

d HR

man

agem

ent.

2X

• At

leas

t 2,0

00 w

orke

rs an

d 50

m

anag

ers t

raine

d pe

r yea

r ( fro

m

parti

cipati

ng co

mpa

nies )

1.4.

8 Ag

ree w

ith b

uyer

s on

an ap

prop

riate

verif

icatio

n sy

stem

for t

he co

untry

, inc

ludi

ng th

e use

of

accr

edite

d Et

hiopi

an se

rvice

pro

vider

s ( se

lect a

nd tr

ain ad

visor

y ser

vice p

rovid

ers t

o ca

rry o

ut

facto

ry-lev

el as

sess

men

ts, m

onito

ring

and

repor

ting

( ser

vice c

ould

be i

nteg

rated

with

in a T

ISI o

r es

tablis

hed

using

the I

nter

natio

nal L

abou

r Org

aniza

tion

Bette

r Wor

k pro

gram

me a

ppro

ach )

).

2X

• Al

l mod

alitie

s of a

verif

icatio

n sy

stem

dev

elope

d•

Verif

icatio

n sy

stem

impl

emen

ted

1.4.

9 Tra

in ad

visor

y ser

vice p

rovid

ers o

n ho

w to

follo

w up

and

work

with

com

panie

s to

impr

ove o

n co

mpl

iance

gap

s. 2

X•

At le

ast f

ive co

nsul

tancy

firm

s tra

ined

per y

ear

1.4.

10 E

stabl

ish a

syste

m to

regu

larly

publ

ish h

ighl

ight

s abo

ut ef

forts

to ad

here

to g

loba

l soc

ial

and

envir

onm

ental

prin

ciples

bein

g un

derta

ken,

via v

ariou

s out

lets a

nd in

colla

borat

ion

with

buy

-er

s and

inve

stmen

t pro

mot

ion

agen

cies,

to b

uild

glob

al tra

nspa

rency

abou

t the

coun

try’s

effor

t to

adhe

re to

glo

bal s

ocial

and

envir

onm

ental

prin

ciples

.

2X

• Ce

ntral

ized

com

mun

icatio

n sy

stem

on

com

plian

ce es

tablis

hed

Mini

stry o

f Lab

our a

nd S

ocial

Af

fairs

; ETG

AMA ;

Con

feder

ation

of

Eth

iopi

an Tr

ade U

nions

, ETID

I as

a pa

rtner

; Nati

onal

Fede

ra-tio

n of

Texti

le, Le

ather

and

Garm

ent I

ndus

try Tr

ade U

nions

;M

inistr

y of T

rade,

EIC

[ ETHIOPIA TEXTILE AND CLOTHING VALUE CHAIN ROADMAP ]

70

Stra

tegi

c ob

ject

ive

1 : Im

prov

e pr

oduc

tivity

and

em

ploy

men

t out

com

es th

roug

h sk

ills

deve

lopm

ent.

Oper

atio

nal

objec

tive

Activ

ities

Prio

rity

1=hi

gh,

3=lo

w

Star

ting

perio

dTa

rget

mea

sure

sLe

adin

g na

tiona

l inst

itutio

n an

d po

ssib

le im

plem

entin

g pa

rtner

s

Ongo

ing

/ fut

ure

deve

lopm

ent

prog

ram

mes

+

inte

rnat

iona

l par

tner

s

1617

1819

20

1.5

Impr

ove H

R po

licies

, em

-pl

oyee

reten

tion

and

incen

tives

at

T & C

firm

s.

1.5.

1 Su

ppor

t com

panie

s in

deve

lopi

ng H

R po

licies

and

prac

tices

–aft

er co

mpr

ehen

sive r

eview

of

appl

icabl

e loc

al law

s, int

erna

tiona

l com

plian

ce st

anda

rds a

nd g

loba

l bes

t prac

tices

– le

verag

ing

the e

xper

ience

from

oth

er su

cces

sful c

ount

ries,

which

can

help

Eth

iopi

an fi

rms r

ecru

it, d

evelo

p an

d ret

ain a

prod

uctiv

e wor

kforc

e.Fo

ster t

he d

evelo

pmen

t of H

R de

partm

ents

with

in co

mpa

nies t

o en

com

pass

a wi

der s

cope

of s

er-vic

es, i

nclu

ding

learn

ing an

d de

velo

pmen

t.

1x

• At

leas

t 40

com

panie

s ( of

whic

h 20

are

SM

Es ) t

raine

d pe

r yea

r on

HR

prac

tices

ETID

I, ET

GAM

A,

regio

nal s

uppo

rt fro

m A

CTIF

in ter

ms o

f ben

chm

arking

Ethio

pian

HR

prof

essio

nal a

s-so

ciatio

ns

1.5.

2 Su

ppor

t firm

s to

crea

te a p

rope

r wor

king

envir

onm

ent,

incen

tivizi

ng w

orke

rs to

gain

skill

s and

de

velo

p in

T & C

secto

r com

panie

s :

• Tra

in rec

ruiti

ng st

aff to

iden

tify p

rope

r sof

t skil

ls se

ts du

ring

inter

views

( for

all t

ypes

of r

oles

–

from

ope

rator

s to

man

ager

s )•

Estab

lish

a col

labor

ation

with

Kaiz

en In

stitu

te to

tran

sfer i

deas

on

com

pany

corp

orate

subc

ultu

re m

anag

emen

t•

Increa

se ca

reer g

rowt

h op

portu

nities

for o

perat

ors (

and

incen

tivize

thro

ugh

mer

it-ba

sed

salar

y gr

owth

)•

Reco

gnize

well

-per

form

ing w

orke

rs an

d pr

ovid

e the

m w

ith a

traine

r’s ro

le•

Ensu

re tra

nspa

rency

of t

he co

mpa

ny’s

func

tionin

g an

d m

erito

crac

y cul

ture

• Es

tablis

h a r

egul

ar int

erac

tion

mec

hanis

m b

etwee

n m

anag

emen

t and

wor

kers

• Re

quire

grea

ter d

edica

tion

to tr

aining

new

com

ers a

nd in

terns

• Co

nnec

t the

com

pany

subc

ultu

re to

the n

ation

al br

and

‘Mad

e in

Ethio

pia’

in or

der t

o cr

eate

a se

nse o

f prid

e am

ong

worke

rs.

2x

• At

leas

t 40

com

panie

s ( of

whic

h 20

are S

MEs

) trai

ned

per y

ear /

per

categ

ory

• At

leas

t 160

recr

uiting

staff

train

ed

per y

ear

• M

emor

andu

m o

f Un

derst

andi

ng( M

oU ) w

ith K

aizen

sig

ned

• At

leas

t 10

com

panie

s esta

blish

an

inter

actio

n m

echa

nism

per

year

ETID

I, ET

GAM

A,

regio

nal s

uppo

rt fro

m A

CTIF

in ter

ms o

f ben

chm

arking

Ethio

pian

HR

prof

essio

nal a

s-so

ciatio

ns

1.5.

3 Tra

in m

anag

ers o

n th

e dev

elopm

ent o

f a co

mpa

ny su

bcul

ture

in th

eir fi

rms t

o ret

ain w

orke

rs’

intere

st in

caree

r dev

elopm

ent,

and

impr

ove w

orkin

g co

nditi

ons.

Traini

ng o

f mid

-leve

l man

ager

s wi

ll als

o fo

cus o

n pr

oper

floo

r man

agem

ent t

echn

ique

s and

requ

ired

soft

skill

s.

2x

• On

e hun

dred

and

sixty

com

pany

m

anag

ers t

raine

d pe

r yea

rET

IDI,

ETGA

MA

and

Natio

nal

Texti

le Un

iversi

ties

1.5.

4 Pr

omot

e skil

l dev

elopm

ent c

ontra

cts b

etwee

n em

ploy

ers a

nd w

orke

rs wh

ereby

empl

oyee

s rec

eive a

dvan

ced

traini

ng fr

om fi

rms i

n ex

chan

ge fo

r com

mitm

ents

to st

ay w

ith th

ose f

irms f

or an

ag

reed

perio

d, th

ereby

ince

ntivi

zing

empl

oyer

inve

stmen

t in

labou

r.

2x

• At

leas

t 15

com

panie

s ado

pt su

ch

sche

mes

per

year

ETID

I, ET

GAM

A

1.6

Ensu

re m

axi-

mum

equip

men

t us

age w

ithin

Ethio

pian

firm

s.

1.6.

1 Co

nduc

t trai

ning,

invo

lving

mac

hiner

y sup

plier

s’ rep

resen

tative

s, at

firm

leve

l for

mid

dle-

level

and

high-

level

man

ager

s on :

• Kn

owled

ge o

f exis

ting

equip

men

t and

their

adva

ntag

es in

ord

er to

ensu

re pr

oper

iden

tifica

tion

and

purc

hase

of e

quip

men

t with

in co

mpa

nies

• Un

derst

andi

ng th

e pot

entia

l of n

ewly

purc

hase

d eq

uipm

ent a

nd th

e trai

ning

requir

emen

ts fo

r op

erato

rs to

ensu

re its

full-

capa

city f

uncti

oning

•

Mod

ern

budg

etary

prac

tices

that

acco

unt f

or re

gular

equip

men

t upg

rading

.M

achin

ery s

uppl

iers s

houl

d no

t be i

nvol

ved

to en

sure

that

the d

ata is

unb

iased

. This

shou

ld b

e do

ne b

y :

a. U

sing

indus

try ex

perie

nce-

shari

ng p

latfo

rms

b. In

stitu

tiona

lizing

tech

nolo

gy co

mpa

rison

stud

ies th

roug

h un

iversi

ties o

r tec

hnica

l exp

erts.

1x

• On

e hun

dred

and

sixty

com

pany

tec

hnica

l mac

hiner

y sup

ply

man

ager

s trai

ned

per y

ear

ETID

I, ET

GAM

A,

regio

nal s

uppo

rt fro

m A

CTIF,

M

inistr

y of E

duca

tion

and

Mini

s-try

of I

ndus

try,

unive

rsitie

s

Inter

natio

nal t

rainin

g ag

encie

s suc

h as

Waz

ir an

d IL&

FS fr

om In

dia

( coo

rdina

tion

with

ma-

chine

ry su

pplie

rs )

1.6.

2 Pr

ovid

e sys

temati

c on-

site t

rainin

g to

com

panie

s’ op

erato

rs on

the u

se o

f new

ly pu

rcha

sed

mac

hiner

y and

bes

t prac

tices

in it

s han

dling

( e.g

. bes

t prac

tices

in p

roce

ss co

ntro

l and

mac

hine

main

tenan

ce ).

2x

• Te

n th

ousa

nd w

orke

rs pe

r yea

r in

seve

n tra

ining

loca

tions

ETID

I, M

inistr

y of I

ndus

try,

Mini

stry o

f Edu

catio

n an

d un

i-ve

rsitie

s

[ THE PLAN OF ACTION ]

71

Stra

tegi

c ob

ject

ive

1 : Im

prov

e pr

oduc

tivity

and

em

ploy

men

t out

com

es th

roug

h sk

ills

deve

lopm

ent.

Oper

atio

nal

objec

tive

Activ

ities

Prio

rity

1=hi

gh,

3=lo

w

Star

ting

perio

dTa

rget

mea

sure

sLe

adin

g na

tiona

l inst

itutio

n an

d po

ssib

le im

plem

entin

g pa

rtner

s

Ongo

ing

/ fut

ure

deve

lopm

ent

prog

ram

mes

+

inte

rnat

iona

l par

tner

s

1617

1819

20

1.6

Ensu

re m

axi-

mum

equip

men

t us

age w

ithin

Ethio

pian

firm

s.

1.6.

3 En

able

exch

ange

pro

gram

mes

for t

echn

ical s

taff w

ith in

terna

tiona

l com

panie

s ( an

d lea

ding

Et

hiopi

an fi

rms )

, mac

hiner

y sup

plier

s and

inter

natio

nal t

rainin

g ins

titut

es ( f

orem

en, f

itter

s, jo

bber

s, se

wing

tech

nician

s, de

signe

rs, et

c. ).

2x

• At

leas

t five

exch

ange

pro

gram

mes

ca

rried

out

targ

eting

30

com

panie

sET

IDI,

Mini

stry o

f Ind

ustry

, M

inistr

y of E

duca

tion

and

uni-

versi

ties

Waz

ir ( c

oord

inatio

n wi

th

instit

utes

) ; No

rther

n Ind

ia Te

xtile

Rese

arch

Asso

ciatio

n an

d So

uth

India

Texti

le Re

searc

h As

socia

tion

for f

orem

en,

fitter

s and

jobb

ers ;

Na-

tiona

l Ins

titut

e of F

ash-

ion

Tech

nolo

gy ( I

ndia )

( N

IFT ) ;

Pearl

Aca

dem

y an

d Ap

parel

Train

ing &

De

sign

Cent

re( In

dia )

for

desig

ners

1.7

Deve

lop

skill

s spe

cific

to

the h

andl

oom

su

bsec

tor.

1.7.

1 Le

arn fr

om In

dia’s

rich

han

dloo

m w

oven

cultu

re :

• Or

ganiz

e skil

ls up

grad

ing tr

aining

for s

electe

d Et

hiopi

an w

eave

rs in

India

• Es

tablis

h lin

ks b

etwee

n ha

ndlo

om p

rodu

cers

and

Indian

train

ing in

stitu

tions

( pos

sibly

with

NIFT

, NI

D an

d IIH

T ) fo

r wea

vers

to le

arn va

rious

wea

ving

techn

ique

s : sc

reen

print

ing /

bloc

k prin

ting,

jac

quard

/ do

bby w

eavin

g, p

repara

tion

and

use o

f natu

ral d

yes,

etc.

1x

• At

leas

t 20

hand

loom

firm

s adv

ised

per y

ear

• At

leas

t thr

ee li

nkag

es es

tablis

hed

with

Indi

an p

artn

er tr

aining

ins

titut

ions

ETID

I, ET

GAM

A, re

gion

al su

p-po

rt fro

m A

CTIF

SC–W

azir

( coo

rdina

tion

with

Indi

an p

artn

ers )

, NI

FT, N

ID, I

IHT

1.7.

2 Co

nduc

t trai

ning

in th

e fol

lowi

ng ad

ditio

nal a

reas :

• Sa

les an

d m

arketi

ng•

Trend

rese

arch

– co

lour

s, sh

apes

, etc.

• Tra

nslat

ing tr

ends

into

uniq

ue /

mark

etabl

e pro

duct

item

s•

Dive

rsific

ation

of p

rodu

cts ( w

ith In

dian

supp

ort )

• Br

andi

ng o

f han

dloo

m te

chno

logi

es•

Use o

f hom

e dye

s •

Finish

ing te

chniq

ues.

1x

• At

leas

t 50

hand

loom

firm

s adv

ised

per y

ear

ETID

I, ET

GAM

A, re

gion

al su

p-po

rt fro

m A

CTIF

SC–W

azir

( coo

rdina

tion

with

Indi

an p

artn

ers )

1.7.

3 Se

ek co

oper

ation

with

the O

ffice

of t

he D

evelo

pmen

t Com

miss

ione

r for

Han

dloo

ms a

t the

Ind

ian M

inistr

y of T

extil

es to

dev

elop

a nati

onal

hand

loom

dev

elopm

ent p

rogr

amm

e for

Eth

iopi

a. Si

mila

rly to

the I

ndian

Nati

onal

Hand

loom

Pro

gram

me,

the E

thio

pian

sche

me s

houl

d m

erge a

ll th

e m

ajor c

ompo

nent

s, na

mely

an in

tegrat

ed h

andl

oom

s dev

elopm

ent s

chem

e, a m

arketi

ng an

d ex

port

prom

otio

n sc

hem

e, an

d a d

iversi

fied

hand

loom

dev

elopm

ent s

chem

e.

2x

• Na

tiona

l han

dloo

m d

evelo

pmen

t pr

ogram

me c

reated

ETID

I, ET

GAM

A,

regio

nal s

uppo

rt fro

m A

CTIF

Conf

eder

ation

of I

ndian

Te

xtile

Indus

try ( C

ITI ),

SC–W

azir

( coo

rdina

tion

with

Indi

an p

artn

ers )

1.8

Deve

lop

skill

s spe

cific

to

MSM

Es.

1.8.

1 Ide

ntify

spec

ific s

kill d

evelo

pmen

t nee

ds o

f MSM

Es ( c

an b

e ent

erpr

ises i

n th

e inf

orm

al ec

onom

y ) an

d de

velo

p tai

lor-m

ade o

n-sit

e trai

ning

to in

crea

se th

eir ca

pacit

y and

pro

ducti

vity,

and

for m

aking

the t

ransit

ion

to th

e for

mal

econ

omy.

2x

• At

leas

t 20

SMEs

advis

ed p

er ye

ar E

TIDI,

ETGA

MA,

regi

onal

sup-

port

from

ACT

IF

1.8.

2 Co

nseq

uent

ly tra

in M

SME

owne

rs an

d m

anag

ers o

n sk

ills t

hat c

an b

e of i

mm

ediat

e use

and

are re

levan

t to

their

scale

of o

perat

ions

.2

x•

At le

ast 2

0 SM

Es ad

vised

per

year

ETID

I

1.8.

3 Co

nduc

t aud

its an

d di

agno

stics

of i

ndivi

dual

units

and

prov

ide s

uppo

rt to

obj

ectiv

ely se

-lec

ted M

SMEs

thro

ugh

the d

evelo

pmen

t of a

strat

egic

techn

olog

y plan

, con

sider

ing th

eir p

rodu

ct ran

ge, p

rodu

ct di

versi

ficati

on p

oten

tial a

nd ex

isting

pot

entia

l buy

ers’

need

s.

1x

• At

leas

t ten

SM

Es ad

vised

per

year

and

techn

olog

y plan

s dev

elope

dET

IDI

1.8.

4 Inc

rease

MSM

Es’ c

apac

ity to

sour

ce q

ualit

y inp

uts f

or th

eir p

rodu

ction

thro

ugh

cluste

r ar-

range

men

ts, in

ord

er to

incr

ease

barg

aining

pow

er an

d en

sure

know

ledge

diss

emina

tion

on so

urc-

ing p

ractic

es. C

luste

rs sh

ould

gro

up M

SMEs

in co

mm

on p

rodu

ction

area

s.Su

cces

sful e

xam

ples

of s

mall

wea

vers

shou

ld b

e diss

emina

ted ac

ross

clus

ters a

nd a

com

mon

br

andi

ng fo

r Eth

iopi

an h

and-

mad

e garm

ents

shou

ld b

e dev

elope

d.

2x

• At

leas

t five

MSM

E clu

sters

crea

ted

in th

e five

-yea

r per

iod

• Su

cces

s sto

ries d

evelo

ped

and

diss

emina

ted am

ong

MSM

Es ( e

.g.

Saba

har,

Muy

a, Sa

lem’s

Desig

n )•

Bran

d fo

r Eth

iopi

an h

andm

ade

deve

lope

d

ETID

I, ET

GAM

A, re

gion

al su

p-po

rt fro

m A

CTIF

[ ETHIOPIA TEXTILE AND CLOTHING VALUE CHAIN ROADMAP ]

72

Stra

tegi

c ob

ject

ive

2 : S

treng

then

the

enab

ling

envi

ronm

ent t

o fa

vour

sec

tor d

evel

opm

ent.

Oper

atio

nal

objec

tive

Activ

ities

Prio

rity

1=hi

gh,

3=lo

w

Star

ting

perio

dTa

rget

mea

sure

sLe

adin

g na

tiona

l inst

itutio

n an

d po

ssib

le im

plem

entin

g pa

rtner

s

Ongo

ing

/ fut

ure

deve

lopm

ent

prog

ram

mes

+ in

tern

atio

nal

partn

ers

1617

1819

20

2.1

Reinf

orce

sec-

tor c

oord

inatio

n to

fav

our w

orkfo

rce

deve

lopm

ent a

nd

polic

y adv

ocac

y.

2.1.

1 Se

t up

a hig

h-lev

el PP

P pl

atfor

m to

repr

esen

t the

inter

ests

of th

e ind

ustry

and

to en

sure

align

-m

ent b

etwee

n ET

IDI,

ETGA

MA,

pub

lic u

niver

sities

and

voca

tiona

l sch

ools,

with

a vie

w to

upg

rading

th

e qua

lity a

nd ca

pacit

y of t

he T

& C tr

aining

and

educ

ation

al of

fering

. The

par

tner

ship

plat

form

shou

ld

com

prise

repr

esen

tative

s of l

ead

firm

s / fo

reign

buy

ers /

retai

lers.

1x

• Hi

gh-le

vel P

PP se

t up,

co

mpr

ised

of E

TIDI,

ETGA

MA,

univ

ersit

ies an

d TV

ET in

stitu

tions

Mini

stry o

f Ind

ustry

, ETID

I and

ET

GAM

ABu

ilding

on

exist

ing P

PP ex

peri-

ence

s in

Ethio

pia

2.1.

2 Ba

sed

on st

anda

rds f

or sk

ill d

evelo

pmen

t set

by le

ad fi

rms,

the p

latfo

rm co

ordi

nates

the d

evel-

opm

ent o

f cur

ricul

a and

train

ing m

odul

es an

d m

ateria

ls.2

x•

Cour

se cu

rricu

lum

for e

ach

area,

asse

ssm

ent s

tanda

rds

for c

ertif

icatio

n ag

ency

, an

d id

entif

icatio

n of

way

s to

train

( on-

job,

theo

ry,

mix )

– ( l

inked

to ac

tivity

1.

1.1 )

PPP,

ETID

I, ET

GAM

A

2.1.

3 Th

e par

tner

ship

plat

form

play

s a le

ader

ship

role

in th

e des

ign

of a

natio

nal f

acto

ry im

prov

emen

t pr

ogram

me (

as an

effec

tive a

nd n

ation

wide

mea

ns o

f inc

reasin

g Et

hiopi

an en

terpr

ises’

capa

city a

nd

com

petit

ivene

ss ).

The p

rogr

amm

e is b

ased

arou

nd th

e deli

very

of se

ven

prog

ramm

e mod

ules

:

• W

orkp

lace c

oope

ratio

n•

Quali

ty•

Prod

uctiv

ity•

Clea

ner p

rodu

ction

and

cont

inuou

s im

prov

emen

t•

HR m

anag

emen

t•

Healt

h •

Safet

y.

2x

• Inp

uts p

rovid

ed b

y PPP

du

ring

desig

n sta

ge•

Impl

emen

tatio

n m

echa

nism

dev

elope

d•

Adm

iniste

r im

plem

entat

ion

prog

ramm

e

PPP,

ETID

I, ET

GAM

A

2.1.

4 Th

e par

tner

ship

plat

form

cont

ribut

es to

mob

ilizin

g an

d se

curin

g res

ourc

es fo

r pro

gram

me i

m-

plem

entat

ion

and

puts

in pl

ace t

he p

rope

r mec

hanis

ms t

o m

onito

r and

audi

t its

exec

utio

n.2

x•

Reso

urce

s mob

ilize

d fo

r th

e pro

gram

me

• Im

plem

entat

ion

agen

cies

iden

tified

PPP,

ETID

I, ET

GAM

A

2.1.

5 M

embe

rs of

the h

igh-

level

partn

ersh

ip p

latfo

rm b

uild

a com

mon

pos

ition

ing o

n ke

y iss

ues a

f-fec

ting

the s

ecto

r and

buil

d th

e nec

essa

ry ad

voca

cy to

supp

ort r

equir

ed p

olicy

or r

egul

ation

chan

ges.

2x

• At

leas

t five

doc

umen

ts pr

oduc

ed to

conv

ey

com

mon

pos

ition

ing

( dec

larati

ons,

white

pa

pers,

etc.

)

PPP,

ETID

I, ET

GAM

A

2.2

Prov

ide h

igh

quali

ty ins

titut

iona

l su

ppor

t and

bus

i-ne

ss se

rvice

s to

T & C

firm

s.

2.2.

1 Ca

rry o

ut an

insti

tutio

nal b

ench

mark

ing p

rogr

amm

e for

ETID

I and

ETG

AMA

to im

prov

e the

ir pe

r-fo

rman

ce b

y mea

surin

g th

e effe

ctive

ness

and

effici

ency

of t

heir

busin

ess p

ractic

es. T

he p

rogr

amm

e sh

ould

surve

y all

activ

ity ar

eas,

inclu

ding

strat

egy a

nd g

over

nanc

e, res

ourc

es an

d pr

oces

ses,

prod

-uc

ts an

d se

rvice

s, an

d res

ults

mea

surem

ent.

2x

• Be

nchm

arking

repo

rts

prod

uced

and

valid

ated

by

the T

ISIs

• Bo

th in

stitu

tions

repo

rt pe

rform

ance

impr

ovem

ent

thro

ugh

surve

y qu

estio

nnair

es•

A 20

% im

prov

emen

t in

benc

hmark

ing sc

ore b

y the

en

d of

the p

rojec

t

Regi

onal

supp

ort f

rom

ACT

IF SI

TA /

TISI S

treng

then

ing ( T

S )

( sec

tion

of IT

C )

[ THE PLAN OF ACTION ]

73

Stra

tegi

c ob

ject

ive

2 : S

treng

then

the

enab

ling

envi

ronm

ent t

o fa

vour

sec

tor d

evel

opm

ent.

Oper

atio

nal

objec

tive

Activ

ities

Prio

rity

1=hi

gh,

3=lo

w

Star

ting

perio

dTa

rget

mea

sure

sLe

adin

g na

tiona

l inst

itutio

n an

d po

ssib

le im

plem

entin

g pa

rtner

s

Ongo

ing

/ fut

ure

deve

lopm

ent

prog

ram

mes

+ in

tern

atio

nal

partn

ers

1617

1819

20

2.2

Prov

ide h

igh

quali

ty ins

titut

iona

l su

ppor

t and

bus

i-ne

ss se

rvice

s to

T & C

firm

s.

2.2.

2 Se

nsiti

ze te

xtile

and

appa

rel co

mpa

nies t

o inv

est i

n an

ERP

solu

tion

which

is cu

stom

ized

to

their

requ

irem

ents,

and

help

them

strea

mlin

e pro

cess

es an

d im

prov

e con

trol.

ETID

I / E

TGAM

A sh

ould

co

nduc

t col

lectiv

e barg

aining

with

ERP

solu

tion

prov

ider

s on

beha

lf of

the e

ntire

indu

stry a

nd em

-pa

nel a

few

of th

em. E

TIDI /

ETG

AMA

shou

ld al

so m

obili

ze fu

nds t

o pa

rtiall

y fina

nce t

he co

st of

ERP

im

plem

entat

ion

in co

mpa

nies.

2x

x•

Orga

nize f

our w

orks

hops

in

partn

ersh

ip w

ith in

dustr

y, ex

perts

and

ERP

solu

tion

prov

ider

s•

Nego

tiate

with

and

enlis

t fo

ur E

RP so

lutio

n pr

ovid

ers

with

pro

ven

expe

rienc

e in

the T

& C

secto

r•

Prov

ide 2

5 % o

f the

cost

of

ERP

impl

emen

tatio

n in

10

selec

ted co

mpa

nies

ETID

I, ET

GAM

AAd

ama S

pinn

ing h

as in

trodu

ced

this

syste

m w

ith W

orld

Ban

k su

ppor

t

2.2.

3 Re

infor

ce E

TIDI’s

capa

cities

:

1. In

the l

atest

inter

natio

nal b

est p

ractic

e and

tech

nolo

gy av

ailab

le to

the s

ecto

r, to

ensu

re up

-to-d

ate

capa

city-

build

ing p

rovis

ions

2. In

the l

atest

traini

ng p

ractic

es an

d to

ols

3. T

o es

tablis

h pr

ofes

siona

l stan

dard

s, jo

b pr

ofile

s, qu

alific

ation

s, tes

ting

cent

res an

d ce

rtific

ation

s4.

To

facili

tate t

ransfe

r of k

now-

how

from

Indi

an in

stitu

tions

to d

evelo

p vo

catio

nal t

rainin

g pr

ogram

mes

.

1x

• At

leas

t one

train

ing

prov

ided

to al

l rele

vant

ET

IDI s

taff o

n po

ints 1

, 2,

and

3 pe

r yea

r•

MoU

with

one

Indi

an

instit

ute s

igne

d

ETID

I,reg

iona

l sup

port

from

ACT

IFSI

TA /

SC /

TS, W

azir

( coo

rdina

-tio

n wi

th in

stitu

tes ),

Indian

texti

le res

earc

h as

socia

tions

( NIFT

, ICT

an

d IIT

, Nor

ther

n Ind

ia Te

xtile

Rese

arch

Asso

ciatio

n, S

outh

Indi

a Te

xtile

Rese

arch

Asso

ciatio

n,

Ahm

edab

ad Te

xtile

Indus

try’s

Re-

searc

h As

socia

tion,

etc.

)2.

2.4

Reinf

orce

ETG

AMA’

s cap

aciti

es :

1. T

o pr

ovid

e for

mal

inter

nal t

rainin

g on

qua

lity c

ontro

l, lo

gisti

cs, m

anag

emen

t, m

arketi

ng an

d sa

les2.

To

have

grea

ter b

argain

ing p

ower

and

advo

cacy

to in

fluen

ce se

ctor-r

elated

pol

icies

3. In

fund

raisin

g an

d res

ourc

e mob

iliza

tion,

dire

cting

pub

lic an

d do

nor f

unds

towa

rds t

he ac

quisi

tion

of w

orld

-clas

s cur

ricul

a and

the l

atest

man

ufac

turin

g tec

hnol

ogy t

o tra

in on

4. T

o red

uce t

he so

urcin

g co

sts o

f its

mem

bers

thro

ugh

colle

ctive

sour

cing

for n

on-c

ompe

titive

inp

uts (

i.e. b

ulk o

rder

s to

ensu

re be

st po

ssib

le pr

ices f

or al

l play

ers )

.

1x

• At

leas

t one

train

ing

prov

ided

to al

l rele

vant

ET

GAM

A sta

ff on

poi

nts 1

, 2,

3 an

d 4

per y

ear

ETGA

MA,

regio

nal s

uppo

rt fro

m A

CTIF

SITA

/ TS

2.2.

5 Su

ppor

t ETID

I to

dem

onstr

ate th

e pot

entia

l of t

he h

andl

oom

secto

r for

job

crea

tion

and

incom

e ge

nerat

ion :

• Or

ganiz

e a st

udy t

our t

o Ind

ia fo

r sele

cted

supp

ort i

nstit

utio

ns to

und

ersta

nd th

e vas

t pot

entia

l of

hand

loom

wea

ving

and

the p

ossib

ilitie

s of o

perat

ing as

a lar

ge m

anuf

actu

ring

unit ;

•

Link M

SMEs

with

educ

ation

al ins

titut

ions

, TIS

Is, et

c. to

allo

w th

em to

ben

efit f

rom

sim

ilar

oppo

rtunit

ies an

d ac

cess

in ar

eas s

uch

as re

searc

h, m

arket

intell

igen

ce, f

inanc

ial su

ppor

t, tra

ining

, etc

. as t

he te

xtile

and

garm

ent s

ubse

ctors

; •

Facil

itate

infor

mati

on ex

chan

ge b

etwee

n ke

y acto

rs in

the T

& C

and

hand

wea

ving

supp

ort

instit

utio

ns to

share

skill

s and

know

-how

ben

eficia

l to

both

;•

Ensu

re th

e nee

ds o

f the

han

dloo

m se

ctor a

re du

ly co

nsid

ered

and

reflec

ted in

T & C

dev

elopm

ent

strate

gies

.

2x

• On

e stu

dy to

ur to

Indi

a ca

rried

out

ETID

I, ET

GAM

A, P

PP,

regio

nal s

uppo

rt fro

m A

CTIF

Waz

ir ( c

oord

inatio

n wi

th In

dian

pa

rtner

s ), N

IFT, N

ID, I

IHT

SC

2.2.

6 Pr

omot

e and

facil

itate

the c

reatio

n of

loca

l con

sulti

ng fi

rms a

nd b

usine

ss se

rvice

s of i

nter

na-

tiona

l con

sulti

ng fi

rms t

o pr

ovid

e ass

istan

ce an

d eff

ectiv

e bus

iness

supp

ort t

o T &

C co

mpa

nies.

2x

• Bu

sines

s ser

vices

and

pool

of

loca

l adv

isers

in th

e area

of

qua

lity (

ISO

9001

, ISO

14

001,

ISO

5000

1, 5

S,

quali

ty to

ols )

ETGA

MA

and

ETID

I SI

TA /

EC–E

QM

2.2.

7 En

cour

age g

reater

use

of m

oder

n m

achin

ery b

y hav

ing th

e Gov

ernm

ent g

uaran

tee lo

ng-te

rm

cred

it arr

ange

men

ts be

twee

n Et

hiopi

an b

uyer

s and

forei

gn su

pplie

rs.2

x•

At le

ast f

ive su

ch

arran

gem

ents

in th

e five

-ye

ar pe

riod.

Mini

stry o

f Fina

nce a

nd

Econ

omic

Deve

lopm

ent

( MoF

ED ),

ETID

I

ETID

I, ET

GAM

A

[ ETHIOPIA TEXTILE AND CLOTHING VALUE CHAIN ROADMAP ]

74

Stra

tegi

c ob

ject

ive

2 : S

treng

then

the

enab

ling

envi

ronm

ent t

o fa

vour

sec

tor d

evel

opm

ent.

Oper

atio

nal

objec

tive

Activ

ities

Prio

rity

1=hi

gh,

3=lo

w

Star

ting

perio

dTa

rget

mea

sure

sLe

adin

g na

tiona

l inst

itutio

n an

d po

ssib

le im

plem

entin

g pa

rtner

s

Ongo

ing

/ fut

ure

deve

lopm

ent

prog

ram

mes

+ in

tern

atio

nal

partn

ers

1617

1819

20

2.3

Impr

ove e

xist-

ing tr

aining

and

educ

ation

al of

fer-

ings a

nd al

ign

to

indus

try’s

need

s.

2.3.

1 Re

infor

ce ex

isting

TVET

offe

ring

targe

ting

both

texti

le an

d clo

thing

com

panie

s. Sp

ecifi

c tec

hni-

cal a

reas r

equir

ing sk

ill re

infor

cem

ent a

re :

• Sp

inning

ope

ratio

ns fo

r ring

spinn

ing, o

pen

end

and

airjet

• W

eavin

g an

d we

aving

prep

arato

ry op

erati

ons f

or m

ajor s

huttl

eless

tech

nolo

gies

– ai

rjet a

nd ra

pier

• Kn

itting

ope

ratio

ns•

Fibre

/ yarn

/ fab

ric d

yeing

and

finish

ing p

roce

sses

• Ga

rmen

t man

ufac

turin

g op

erati

ons

• Lis

t of s

kills

to b

e com

pleted

bas

ed o

n the

asse

ssm

ent s

tudy.

• In

each

of t

hese

area

s, cr

eate

highl

y spe

cific

shor

t-ter

m co

urse

s ( on

e to

three

wee

ks ),

adap

ted

to th

e tim

e con

strain

ts of

empl

oyee

s.For

mor

e spe

cializ

ed tr

aining

, a h

ighe

r per

iod

of fo

ur to

six

week

s may

be r

equir

ed. T

he ti

meli

ne sh

ould

be d

ecid

ed w

hile d

evelo

ping

the c

ourse

s.

1x

• At

leas

t two

new

cour

ses

crea

ted an

d av

ailab

le in

each

field

with

in th

e five

- ye

ar pe

riod

PPP,

ETID

I, ET

GAM

AInt

erna

tiona

l trai

ning

agen

cies

such

as W

azir

and

IL&FS

from

Ind

ia

2.3.

2 W

ork w

ith In

dian

and

loca

l trai

ning

instit

utio

ns to

dev

elop

or u

pdate

the h

andl

oom

wea

ving

traini

ng cu

rricu

lum

to in

clude

adva

nced

tech

nique

s :

• Tra

in sta

ff an

d m

anag

emen

t to

estab

lish

and

man

age q

ualit

y sys

temati

cally

to m

eet c

lient

nee

ds•

Estab

lish

a fee

dbac

k mec

hanis

m b

etwee

n M

SMEs

and

buye

rs fo

r con

tinuo

us im

prov

emen

t to

satis

fy bu

yers’

nee

ds an

d ex

pecta

tions

.

1x

• M

oU si

gned

with

one

Ind

ian in

stitu

te •

Obtai

n tw

o ex

perts

or a

n ag

ency

on-

board

• At

leas

t two

new

cour

ses

for h

andl

oom

wea

vers

on

quali

ty•

Feed

back

loop

mec

hanis

m

estab

lishe

d

ETID

I, P

PPInd

ian co

nsul

ting

firm

such

as

Waz

ir ( c

oord

inatio

n wi

th In

dian

ins

titut

es, a

genc

ies an

d ex

perts

)

2.3.

3 Re

plica

te in

Ethio

pia g

loba

l bes

t prac

tices

for c

otto

n pr

oduc

tion,

in co

nsul

tatio

n wi

th ex

perts

, e.g

. con

tract

farm

ing, r

ainwa

ter h

arves

ting,

etc.,

and

link w

ith in

terna

tiona

l ins

titut

es fo

r see

d re-

searc

h.

1x

• Si

gn o

ne M

oU w

ith an

int

erna

tiona

l see

d res

earc

h ins

titut

e

ETID

I and

ECP

GEA,

EIID

E, re

-gi

onal

supp

ort f

rom

ACT

IF

2.3.

4 Es

tablis

h a t

rainin

g ce

ntre

in ea

ch in

dustr

ial zo

ne : B

ole L

emi a

nd th

e zon

es u

nder

cons

tructi

on :

Alem

Gen

a, Du

kem

, Gela

n, K

ombo

lcha a

nd th

e Tur

kish

/ Chin

ese /

Rep

ublic

of K

orea

zone

s. In

prio

rity,

equip

the f

ollo

wing

zone

s with

train

ing ce

ntres

: Aro

und

Addi

s Aba

ba ; M

akale

to st

art c

on-

struc

tion

in Au

gust ;

Kom

bolch

a ; H

awas

sa, D

ireda

wa, J

ima a

nd A

dam

a ind

ustri

al zo

ne

Whe

neve

r an

addi

tiona

l ind

ustri

al zo

ne is

plan

ned,

a tra

ining

cent

re sh

ould

be s

ystem

atica

lly in

-clu

ded.

1x

• At

leas

t 7tra

ining

cent

res

estab

lishe

d in

indus

trial

zone

s with

in th

e five

-yea

r pe

riod.

• Re

gulat

ion

issue

d by

go

vern

men

t on

the

requir

emen

t for

a tra

ining

ce

ntre

in ea

ch n

ewly

plan

ned

indus

trial

zone

PPP,

ETID

I, ET

GAM

A, IP

DC,

regio

nal s

uppo

rt fro

m A

CTIF

2.3.

5 Sy

stem

atize

the u

se o

f TVE

T by c

reatin

g a r

equir

emen

t to

unde

rgo

a rele

vant

three

-wee

k cou

rse

( bas

ed o

n th

e spe

cifica

tions

) for

each

new

ope

rator

in E

thio

pian

com

panie

s. Fo

r som

e trai

nings

, a

highe

r per

iod

of fo

ur to

six w

eeks

may

be r

equir

ed. T

he ti

meli

ne sh

ould

be d

ecid

ed w

hile d

evelo

ping

th

e cou

rses.

Estab

lish

an M

oU b

etwee

n T &

C co

mpa

nies a

nd TV

ET in

stitu

tions

to sh

are co

sts fo

r the

train

ing.

2x

• At

leas

t 10

firm

s im

plem

ent m

anda

tory

traini

ng fo

r new

ope

rator

s ea

ch ye

ar•

An M

oU is

sign

ed b

etwee

n TV

ET in

stitu

tions

and

firm

s

PPP,

ETID

I, ET

GAM

A

2.3.

6 Ca

pacit

ate th

e TVE

T stru

cture

with

the r

equir

ed tr

aining

equip

men

t to

teach

train

ees t

he p

rope

r ha

ndlin

g of

new

equip

men

t use

d in

the i

ndus

try.

Seco

nd-h

and

/ sm

all sc

ale m

odels

of m

achin

ery c

an b

e im

porte

d fro

m cu

rrent

indu

stry l

eade

rs ( In

dia

for i

nstan

ce ).

Mac

hiner

y sup

plier

s can

also

be a

ppro

ache

d to

don

ate so

me o

f the

mac

hiner

y for

train

ing p

urpo

ses.

2x

• Ob

tain

a lett

er o

f sup

port

from

two

to th

ree

com

panie

s or m

achin

ery

supp

liers

PPP,

ETID

I, ET

GAM

AW

azir

( coo

rdina

tion

with

Indi

an

com

panie

s and

mac

hine s

up-

plier

s ) ; l

arge I

ndian

texti

le co

mpa

nies –

Arvi

nd, V

ardhm

an,

Alok

, Ray

mon

d ;m

achin

ery s

up-

plier

s – La

kshm

i Mac

hine W

orks

, Ri

eter,D

ornie

r, etc

.

[ THE PLAN OF ACTION ]

75

Stra

tegi

c ob

ject

ive

2 : S

treng

then

the

enab

ling

envi

ronm

ent t

o fa

vour

sec

tor d

evel

opm

ent.

Oper

atio

nal

objec

tive

Activ

ities

Prio

rity

1=hi

gh,

3=lo

w

Star

ting

perio

dTa

rget

mea

sure

sLe

adin

g na

tiona

l inst

itutio

n an

d po

ssib

le im

plem

entin

g pa

rtner

s

Ongo

ing

/ fut

ure

deve

lopm

ent

prog

ram

mes

+ in

tern

atio

nal

partn

ers

1617

1819

20

2.3

Impr

ove e

xist-

ing tr

aining

and

educ

ation

al of

fer-

ings a

nd al

ign

to

indus

try’s

need

s.

2.3.

7 St

rengt

hen

linka

ges b

etwee

n Et

hiopi

an u

niver

sities

and

enter

prise

s.

• Cr

eate

a par

tner

ship

plat

form

betw

een

the i

ndus

try, a

nd u

niver

sities

and

traini

ng in

stitu

tions

( a

ctivit

y 2.1

.1 ).

• Inv

ite in

terna

tiona

l pro

fesso

rs in

orde

r to

share

bes

t prac

tices

on

TVET

and

impr

ove i

nter-

unive

rsity

partn

ersh

ips.

• Se

nd te

ache

rs on

nati

onal

and

inter

natio

nal i

ndus

try vi

sits t

o pr

ovid

e the

m w

ith fi

rst-h

and

learn

ing

expe

rienc

es an

d to

help

buil

d ind

ustry

link

ages

.•

Invite

gue

st tea

cher

s fro

m in

dustr

y to

deliv

er sp

ecial

train

ing se

ssio

ns fo

r Eth

iopi

an st

uden

ts.•

ETID

I / E

TGAM

A to

initi

ate re

searc

h stu

dies

cove

ring

spec

ific c

halle

nges

face

d by

indu

stry t

o ge

nerat

e tho

ught

lead

ersh

ip an

d fin

d ap

prop

riate

solu

tions

( diss

emina

te res

ults

thro

ugh

their

ne

twor

k and

thro

ugh

unive

rsitie

s ).

• Inv

olve

stud

ents

and

teach

ers i

n int

erna

tiona

l exp

osur

e / ex

chan

ge an

d int

erns

hip p

rogr

amm

es.

Spec

ifica

lly cr

eate

a par

tner

ship

betw

een

NIFT

and

the I

ndian

Insti

tute

of Te

chno

logy

Delh

i, an

d Et

hiopi

an u

niver

sities

.•

Give

rese

arch

/ stu

dent

pro

ject b

riefs

to in

dustr

y and

get

indus

try fe

edba

ck an

d su

gges

tions

in

orde

r to

impr

ove r

esea

rch

/ stu

dent

pro

jects.

2x

• At

leas

t five

pro

fesso

rs inv

ited

per y

ear

• Re

quire

men

t put

in p

lace

to h

ave a

nati

onal

or

inter

natio

nal i

ndus

try vi

sit

per y

ear

• At

leas

t one

indu

stry

repres

entat

ive vi

sits

unive

rsitie

s per

curri

culu

m•

At le

ast f

ive n

ew st

udies

ini

tiated

• At

leas

t five

exch

ange

pr

ogram

mes

carri

ed o

ut

per y

ear

• M

oU si

gned

with

three

to

four

expe

rts o

r ins

titut

es•

Syste

mati

ze co

nnec

tions

be

twee

n stu

dent

s and

co

mpa

nies f

or p

rojec

t rev

iews

PPP,

ETID

I, ET

GAM

A, u

ni-ve

rsitie

sSI

TA /

SC ( c

oord

inatio

n wi

th In

-di

an in

stitu

tes an

d ex

perts

)

2.3.

8 Es

tablis

h un

iversi

ty co

oper

ation

with

selec

ted le

ading

T & C

coun

tries

’ univ

ersit

ies th

at ha

ve

up-to

-date

mark

et an

alysis

curri

cula.

In ad

ditio

n to

incr

easin

g m

arket

analy

sis ca

pacit

y, th

is wo

uld

estab

lish

links

with

coun

tries

that

coul

d be

com

e pot

entia

l mark

ets fo

r Eth

iopi

an T

& C p

rodu

cts.

2x

• M

oU si

gned

with

one

to

two

Indian

and

inter

natio

nal

instit

utes

PPP,

ETID

I, ET

GAM

A, u

ni-ve

rsitie

sW

azir

( coo

rdina

tion

with

Indi

an

instit

utes

), Ind

ian In

stitu

te of

Te

chno

logy

, DKT

E So

ciety’

s Tex

-til

e & E

ngine

ering

Insti

tute,

Tech

-no

logi

cal I

nstit

ute o

f Tex

tile a

nd

Scien

ces,

Uttar

Prad

esh

Texti

le Te

chno

logy

Insti

tute,

SITA

–SC

2.3.

9 Ba

sed

on th

e agr

eem

ents

reach

ed b

y the

univ

ersit

y par

tner

ship

plat

form

and

inter

natio

nal

benc

hmark

ing, u

pdate

curri

cula

with

in un

iversi

ties a

nd tr

aining

pro

gram

mes

of t

rainin

g ins

titut

ions

.2

x•

Deve

lopm

ent o

f cou

rse

curri

cula

for t

extil

e en

gine

ering

pro

gram

mes

in

unive

rsitie

s and

train

ing

intuit

ions

PPP,

ETID

I, ET

GAM

A, u

ni-ve

rsitie

sInt

erna

tiona

l trai

ning

agen

cies

such

as W

azir

and

IL&FS

from

Ind

ia

2.3.

10 B

ased

on

a gap

asse

ssm

ent s

tudy

and

cour

se cu

rricu

lum

dev

elopm

ent i

n lin

e with

indu

strial

req

uirem

ents

and

inter

natio

nal s

tanda

rds,

help

insti

tutes

to li

nk w

ith :

• Int

erna

tiona

l ins

titut

es fo

r stu

dent

and

facul

ty ex

chan

ge /

know

ledge

exch

ange

pro

gram

mes

• He

lp in

stitu

tes d

evelo

p a s

trong

indu

stry i

nter

face –

gue

st lec

tures

, sch

olars

hips,

spon

sorsh

ips,

traini

ng, p

lacem

ents,

etc.

2x

• At

leas

t five

exch

ange

pr

ogram

mes

dev

elope

d•

At le

ast t

hree

inter

faces

de

velo

ped

PPP,

ETID

I, ET

GAM

A, u

ni-ve

rsitie

s

2.3.

11 A

dver

tise a

vaila

ble c

apac

ity-b

uildi

ng se

rvice

s to

firm

s and

illu

strate

succ

ess s

torie

s to

show

qu

ick b

enefi

ts fro

m in

vesti

ng in

hig

hly q

ualif

ied la

bour

.Inv

ite su

cces

sful E

thio

pian

T & C

com

panie

s to

give

spee

ches

at u

niver

sities

( cam

paig

ns to

be p

ro-

mot

ed b

y ETG

AMA

and

ETID

I ).

2x

• Inf

orm

ation

cam

paig

n de

velo

ped

and

runn

ingPP

P, ET

IDI,

ETGA

MA,

uni-

versi

ties

[ ETHIOPIA TEXTILE AND CLOTHING VALUE CHAIN ROADMAP ]

76

Stra

tegi

c ob

ject

ive

2 : S

treng

then

the

enab

ling

envi

ronm

ent t

o fa

vour

sec

tor d

evel

opm

ent.

Oper

atio

nal

objec

tive

Activ

ities

Prio

rity

1=hi

gh,

3=lo

w

Star

ting

perio

dTa

rget

mea

sure

sLe

adin

g na

tiona

l inst

itutio

n an

d po

ssib

le im

plem

entin

g pa

rtner

s

Ongo

ing

/ fut

ure

deve

lopm

ent

prog

ram

mes

+ in

tern

atio

nal

partn

ers

1617

1819

20

2.4

Enab

le th

e de

velo

pmen

t of

skill

s thr

ough

lead

fir

m an

d clu

ster

arran

gem

ents.

2.4.

1 Ha

ve le

ad fi

rm /

forei

gn b

uyer

s ( e.

g. H

&M, P

VH et

c. ) e

stabl

ish p

olici

es an

d pr

oced

ures

for

loca

l firm

s to

follo

w. Le

ad fi

rms t

o di

rectly

enga

ge lo

cal f

irms i

n th

eir im

plem

entat

ion

thro

ugh

the

exch

ange

of p

erso

nnel

betw

een

firm

s and

thro

ugh

the d

evelo

pmen

t of n

etwor

king

activ

ities

. In

som

e ca

ses l

ead

firm

s will

pro

vide t

he fa

ciliti

es an

d pe

rsonn

el to

deli

ver t

rainin

g.

2x

• Ex

chan

ges b

etwee

n fo

ur

firm

s per

year

ETID

I, ET

GAM

ASC

/ SI

TA

2.4.

2 Fo

reign

buy

ers t

o es

tablis

h sm

all-s

cale

traini

ng ac

adem

ies an

d tec

hnica

l ass

istan

ce p

rojec

ts fin

ance

d th

roug

h th

eir C

SR b

udge

ts, to

offe

r skil

l for

mati

on p

rogr

amm

es o

fferin

g TV

ET to

supp

ly th

e T &

C ind

ustry

with

qua

lified

wor

kers

at bo

th th

e ope

rator

and

mid

-man

agem

ent l

evels

.

1x

• At

leas

t two

train

ing

acad

emies

crea

ted b

y lea

d fir

ms

• At

leas

t fou

r trai

ning

cent

res su

ppor

ted b

y lea

d fir

ms w

ithin

the f

ive-y

ear

perio

d. ( l

inked

with

2.3

.4 )

ETID

I, ET

GAM

ASC

/ SI

TA

2.4.

3 Su

ppor

t int

er-fir

m ar

range

men

ts th

roug

h th

e for

mati

on o

f kno

wled

ge /

com

peten

cies s

harin

g clu

sters

( e.g

. kno

wled

ge sh

aring

and

prob

lem so

lving

; tran

sferri

ng kn

owled

ge o

n tra

ditio

nal g

armen

t de

sign

from

MSM

Es to

lead

firm

s ; jo

int m

arketi

ng an

d di

strib

utio

n ).

2x

• At

leas

t five

MSM

E clu

sters

supp

orted

in th

e five

-yea

r pe

riod

( link

ed w

ith 1

.8.4

)

ETID

I, ET

GAM

A

2.4.

4 ET

GAM

A inc

entiv

izes h

igh

perfo

rman

ce b

y enc

ourag

ing en

terpr

ises t

hat s

ignif

icant

ly im

prov

e th

eir p

rodu

ctivit

y and

appl

y new

man

agem

ent t

echn

ique

s ( th

roug

h ind

ustry

/ sta

te aw

ards )

. Sup

plier

clu

bs an

d as

socia

tions

may

be c

reated

, and

a ke

y foc

us o

f the

se o

rgan

izatio

ns is

the i

mpl

emen

tatio

n of

pro

ducti

on p

ractic

es, w

ork p

ractic

es an

d m

anag

emen

t sys

tems.

2x

• Re

ward

pro

gram

me

estab

lishe

d by

ETG

AMA

ETGA

MA

2.5

Ensu

re th

at na

tiona

l qua

lity

man

agem

ent i

nfra-

struc

ture

respo

nds

to th

e ind

ustry

’s ne

eds a

nd in

terna

-tio

nal a

mbi

tions

.

2.5.

1 Su

ppor

t ESA

to d

evelo

p an

d pu

blish

nati

onal

quali

ty sta

ndard

s for

garm

ents,

and

prom

ote t

he

use o

f tho

se st

anda

rds t

o m

embe

rs th

roug

h cir

cular

s and

sem

inars.

2

x•

Advis

ory s

ervic

e to

ESA

on co

de o

f prac

tice f

or th

e de

velo

pmen

t of s

tanda

rds

• Fiv

e stan

dard

s ado

pted

• Tw

o se

nsiti

zatio

n se

mina

rs co

nduc

ted•

Regu

lar ci

rcul

ars

ESA

( inclu

ding

ECAE

, NM

I, an

d EN

AO )

SITA

/ EC

–EQM

2.5.

2 Bu

ild E

TIDI a

nd E

CAE

capa

city a

s a te

sting

and

certi

fying

bod

y for

garm

ent q

ualit

y.At

tract

inter

natio

nal c

onfo

rmity

asse

ssm

ent b

odies

– e.

g. S

GS –

in o

rder

to co

ver t

he in

terna

tiona

l sta

ndard

s.

1x

• At

leas

t two

testi

ng an

d ce

rtifyi

ng b

odies

train

ed•

At le

ast o

ne in

terna

tiona

l ins

titut

ion

invol

ved

ETID

I, EN

AOSI

TA /

EC–E

QM

2.5.

3 Inv

olve

secto

r ins

titut

ions

in se

nsiti

zing

and

supp

ortin

g th

e priv

ate se

ctor o

n qu

ality

man

age-

men

t and

conf

orm

ity as

sess

men

t ( te

sting

, cer

tifica

tion,

insp

ectio

n ) :

• ET

IDI a

nd E

TGAM

A to

cond

uct a

waren

ess-

raisin

g co

urse

s for

MSM

Es ab

out i

nter

natio

nal

man

dato

ry an

d vo

lunt

ary st

anda

rds r

elated

to T

& C.

2x

• ET

IDI a

nd E

TGAM

A de

velo

p se

nsiti

zatio

n ca

mpa

igns

for

their

mem

bers

ETID

I, ET

GAM

A

2.5.

4 Ta

ke th

e fol

lowi

ng m

easu

res to

strea

mlin

e int

erna

tiona

l acc

redita

tion

of E

thio

pian

certi

ficati

on

and

accr

edita

tion

bodi

es :

• Su

ppor

t the

accr

edita

tion

of la

borat

ories

for k

ey te

xtiles

and

cloth

ing te

sts fo

r exp

orts

to IS

O /

Inter

natio

nal E

lectro

techn

ical C

omm

issio

n170

25•

Supp

ort t

he ac

cred

itatio

n pr

oces

s for

ENA

O to

bec

ome a

mem

ber o

f ILA

C M

RA an

d IA

F M

LA•

Guid

ance

on

selec

ting

forei

gn ce

rtific

ation

and

accr

edita

tion

bodi

es in

the a

bsen

ce o

f ade

quate

na

tiona

l bod

ies.

2x

• On

e tes

ting

/ cer

tifica

tion

body

upg

raded

• EN

AO re

ady t

o ap

ply f

or

ILAC

MRA

/ IA

F M

LA•

Guid

e on

forei

gn

certi

ficati

on an

d ac

cred

itatio

n bo

dies

av

ailab

le

ESA

( inclu

ding

ECAE

, NM

I, an

d EN

AO )

SITA

/ EC

–-EQ

M

[ THE PLAN OF ACTION ]

77

Stra

tegi

c ob

ject

ive

2 : S

treng

then

the

enab

ling

envi

ronm

ent t

o fa

vour

sec

tor d

evel

opm

ent.

Oper

atio

nal

objec

tive

Activ

ities

Prio

rity

1=hi

gh,

3=lo

w

Star

ting

perio

dTa

rget

mea

sure

sLe

adin

g na

tiona

l inst

itutio

n an

d po

ssib

le im

plem

entin

g pa

rtner

s

Ongo

ing

/ fut

ure

deve

lopm

ent

prog

ram

mes

+ in

tern

atio

nal

partn

ers

1617

1819

20

2.6

Impr

ove t

he

legal

and

regul

a-to

ry fra

mew

ork r

el-ev

ant t

o th

e T &

C ind

ustry

.

2.6.

1 Int

rodu

ce T

& C ( i

nclu

ding

ginn

eries

) -sp

ecifi

c reg

ulati

ons :

• Int

rodu

ce a

requir

emen

t for

pro

duct

orig

in lab

elling

• Es

tablis

h a r

equir

emen

t for

an o

rigin

certi

ficate

/ res

pect

of p

hyto

sanit

ary n

orm

s•

Fine-

tunin

g of

labo

ur la

ws to

mee

t ind

ustry

requ

irem

ents

while

ensu

ring

the i

ntere

sts o

f wor

kers

• Ad

voca

te fo

r the

appr

oval

of B

t cot

ton

• Int

rodu

ce re

gulat

ions

lim

iting

hum

an ex

posu

re to

harm

ful w

orkin

g co

nditi

ons,

and

crea

te pe

nalti

es

for f

ailur

e to

com

ply

• Int

rodu

ce re

gulat

ions

on

waste

water

and

pena

lties

for f

ailur

e to

com

ply

• Al

low

zero

FOB

tran

sacti

ons t

o CM

Ts ( f

ollo

wing

Mor

occo

exam

ple )

in o

rder

for f

irms t

o cir

cum

vent

th

e for

eign

exch

ange

shor

tage.

2x

• Se

ven

new

regul

ation

s de

signe

d an

d su

bmitt

ed fo

r ap

prov

al

ETID

I, M

inistr

y of J

ustic

e

2.6.

2 Fo

rmali

ze te

chnic

al as

sistan

ce p

rovid

ed to

subc

ontra

ctors

by g

loba

l bran

ds w

ith m

anag

emen

t an

d oc

cupa

tiona

l safe

ty tra

ining

pro

gram

mes

.2

x•

A ne

w reg

ulati

on re

lated

to

syste

mize

d ca

pacit

y-bu

ilding

for s

ubco

ntrac

tors

desig

ned

and

subm

itted

for

appr

oval

ETID

I, M

oLSA

Mini

stry o

f Ju

stice

SC–S

ITA

2.6.

3 Ad

voca

te fo

r law

s on

empl

oym

ent a

nd sk

ill d

evelo

pmen

t. Ar

ticul

ate re

gulat

ions

for t

he tr

ained

wo

rker r

etent

ion

claus

e and

enfo

rce t

hem

, so

that

empl

oyer

s and

wor

kers

may

enga

ge in

mea

ningf

ul

cont

racts

by w

hich

empl

oyee

s rec

eive a

dvan

ced

traini

ng fr

om fi

rms i

n ex

chan

ge fo

r com

mitm

ents

to st

ay w

ith th

ose f

irms f

or an

agree

d pe

riod,

there

by in

cent

ivizin

g em

ploy

er in

vestm

ent i

n Et

hiopi

an

labou

r.

1x

• Th

ree n

ew em

ploy

men

t an

d sk

ill d

evelo

pmen

t reg

ulati

ons d

esig

ned

and

subm

itted

for a

ppro

val

ETID

I, M

inistr

y of J

ustic

e

2.6.

4 Fa

cilita

te th

e pro

curem

ent o

f wor

k per

mits

for f

oreig

n tec

hnici

ans a

nd p

rofes

siona

ls fo

r per

iods

of

from

three

mon

ths t

o on

e yea

r, wi

th th

e pos

sibili

ty of

rene

wal,

so th

at Et

hiopi

an fi

rms c

an p

redict

-ab

ly fil

l crit

ical s

kill g

aps w

hile d

omes

tic sk

ills a

nd w

orke

r rete

ntio

n po

licies

are b

eing

impr

oved

.

2x

• Th

e am

endm

ent t

o th

e reg

ulati

on o

n wo

rk pe

rmits

is

desig

ned

and

subm

itted

fo

r app

rova

l

ETID

I, M

oLSA

, Mini

stry o

f Ju

stice

2.7

Increa

se th

e ca

pacit

y of t

he

Custo

ms s

ervic

e to

regul

ate im

ports

of

T & C

prod

ucts.

2.7.

1 Pr

ovid

e trai

ning

to C

usto

ms o

ffice

rs to

: rec

ogniz

e pro

duct

coun

try o

f orig

in ba

sed

on th

e orig

in ce

rtific

ate ; c

ompl

y with

new

impo

rt reg

ulati

on n

orm

s ; an

d ge

t the

m fa

mili

arize

d wi

th te

xtile

prod

ucts,

th

eir u

nique

ness

and

need

ed fl

exib

ility.

2x

• At

leas

t 20

offic

ers o

f the

Et

hiopi

an R

even

ues a

nd

Custo

ms A

utho

rity (

ERCA

) tra

ined

ERCA

and

ETID

I

2.7.

2 Int

rodu

ce m

oder

n tra

cking

syste

ms w

ithin

Custo

ms o

ffice

s and

cond

uct t

rainin

g of

Cus

tom

s of-

ficial

s in

class

ifying

( tari

ffs ) i

mpo

rt ite

ms c

orrec

tly.

1x

• Tra

cking

syste

m

estab

lishe

d•

At le

ast 2

0 of

ficer

s of E

RCA

traine

d on

the s

ystem

ERCA

, ETID

I

2.7.

3 Inc

rease

gov

ernm

ental

fund

ing to

capa

citate

the C

usto

ms s

ervic

e and

redu

ce ri

sks o

f brib

ery a

t th

e bor

ders.

Iden

tify g

ood

prac

tices

of o

ther

coun

tries

on

impr

oving

Cus

tom

s prac

tices

– to

redu

ce

room

for c

orru

ptio

n.

2x

• Fu

nding

to C

usto

ms

servi

ces i

ncrea

sed

by 1

0 %•

Good

prac

tices

to al

leviat

e co

rrupt

ion

impl

emen

ted

ERCA

, ETID

I

2.7.

4 Re

infor

ce th

e con

trol o

f int

er-bo

rder

area

s, sp

ecifi

cally

thos

e tha

t are

know

n to

be u

sed

for

smug

gling

of T

& C

prod

ucts.

2x

• At

leas

t two

new

cont

rol

point

s esta

blish

edER

CA, E

TIDI

[ ETHIOPIA TEXTILE AND CLOTHING VALUE CHAIN ROADMAP ]

78

Stra

tegi

c ob

ject

ive

2 : S

treng

then

the

enab

ling

envi

ronm

ent t

o fa

vour

sec

tor d

evel

opm

ent.

Oper

atio

nal

objec

tive

Activ

ities

Prio

rity

1=hi

gh,

3=lo

w

Star

ting

perio

dTa

rget

mea

sure

sLe

adin

g na

tiona

l inst

itutio

n an

d po

ssib

le im

plem

entin

g pa

rtner

s

Ongo

ing

/ fut

ure

deve

lopm

ent

prog

ram

mes

+ in

tern

atio

nal

partn

ers

1617

1819

20

2.8

Ensu

re av

ailab

ility

of

acce

ssib

le fin

ancia

l too

ls fo

r M

SMEs

.

2.8.

1 Inc

entiv

ize th

e dev

elopm

ent o

f fina

ncial

tool

s and

servi

ces t

ailor

ed to

MSM

Es in

the T

& C

sec-

tor,

inclu

ding

leas

ing an

d sm

all lo

ans w

ith lo

w co

llater

al.1

x•

At le

ast 5

0 em

ploy

ees o

f fin

ancia

l ins

titut

ions

train

ed

per y

ear o

n th

e T &

C se

ctor’s

fina

ncial

nee

ds

and

the d

evelo

pmen

t of

adap

ted fi

nanc

ial to

ols

MoF

ED, E

TIDI

Exist

ing sc

hem

es fo

r SM

Es u

nder

th

e Nati

onal

Bank

of E

thio

pia,

but m

icro

enter

prise

s are

servi

ced

by m

icrof

inanc

e ins

titut

ions

2.8.

2 St

rengt

hen

capa

city o

f fina

ncial

insti

tutio

ns o

n pa

ymen

t con

ditio

ns sp

ecifi

c to

inter

natio

nal c

li-en

ts, an

d sp

ecifi

c int

erna

tiona

l bes

t prac

tices

and

requir

emen

ts.2

x•

At le

ast 5

0 em

ploy

ees o

f fin

ancia

l ins

titut

ions

train

ed

per y

ear

MoF

ED, E

TIDI

2.8.

3 Ad

voca

te fo

r the

crea

tion

of a

cred

it gu

arant

ee tr

ust f

und :

dev

elopm

ent o

f a fr

amew

ork t

o id

en-

tify e

ligib

le inv

estm

ent t

ypes

and

borro

wers

; mec

hanis

m fo

r pro

viding

gua

rantee

( fun

ding

insti

tutio

ns,

proc

ess o

f ava

iling

cred

its, e

tc. ) ;

and

a mon

itorin

g sy

stem

.

2x

• Cr

edit

guara

ntee

trus

t fun

d cr

eated

MoF

ED, E

TIDI,

exist

ing m

icro-

finan

ce in

stitu

tions

( aro

und

10–1

2 )

Cred

it gu

arant

ee sc

hem

es w

ere

crea

ted u

nder

Men

nonit

e Eco

-no

mic

Deve

lopm

ent A

ssoc

iates

wi

th B

una B

ank (

priva

te ba

nk ),

espe

cially

for h

andl

oom

, des

ign-

ers,

retail

ers

2.8.

4 Pr

ovid

e trai

ning

( and

train

ing o

f trai

ners

) in

finan

cial l

iterac

y to

enab

le m

anag

ers t

o de

fine t

heir

finan

cing

need

s, de

velo

p a f

inanc

ing st

rateg

y, an

d ev

aluate

fina

ncing

opt

ions

. This

will

inclu

de tr

ain-

ing o

n m

oder

n bu

dgeti

ng te

chniq

ues a

nd ac

coun

ting

trans

paren

cy.

2x

• 16

0 co

mpa

ny m

anag

ers

per y

ear i

n m

ultip

le lo

catio

ns•

At le

ast o

ne tr

ainer

form

ed

per t

raine

d co

mpa

ny

MoF

ED, E

TIDI

2.8.

5 He

lp S

MEs

iden

tify a

ppro

priat

e len

ders,

und

ersta

nd le

nding

requ

irem

ents,

and

prep

are an

d su

bmit

adeq

uate

appl

icatio

ns to

vario

us so

urce

s of f

inanc

ing in

cludi

ng ex

port

insur

ance

, fac

torin

g /

rever

se fa

ctorin

g, cr

edit

guara

ntee

sche

mes

, lea

sing

and

tradi

tiona

l loa

ns, a

ccor

ding

to th

e nee

ds o

f ea

ch en

terpr

ise.

2x

• On

e hun

dred

and

sixty

com

pany

man

ager

s per

ye

ar in

mul

tiple

loca

tions

• At

leas

t one

train

er fo

rmed

pe

r trai

ned

com

pany

MoF

ED, E

TIDI

2.8.

6 Pr

ovid

e fina

ncial

ince

ntive

s to

MSM

Es to

adva

nce p

rivate

secto

r and

indi

vidua

l inv

estm

ent i

n tra

ining

( e.g

. lev

y gran

t sch

emes

; com

pulso

ry or

volu

ntary

taxe

s on

payro

ll or

out

com

e ; le

vy re

bate

sche

mes

, in

which

MSM

Es ar

e par

tially

reim

burse

d fo

r app

rove

d tra

ining

).

2x

• At

leas

t thr

ee n

ew in

cent

ive

mec

hanis

ms d

evelo

ped

by E

thio

pian

fina

ncial

ins

titut

ions

MoF

ED, E

TIDI

2.9

Impr

ove t

he

effici

ency

and

cost

com

petit

ive-n

ess

of tr

ansp

ortat

ion

and

logi

stics

.

2.9.

1 Inc

rease

the n

umbe

r of o

ptio

ns fo

r sele

ction

of p

orts

( to d

evelo

p ba

rgain

ing p

ower

) by l

iaisin

g wi

th th

e Nor

th E

thio

pia P

ort p

rojec

t and

Por

t Sud

an.

2x

• Tw

o ne

w po

rts av

ailab

le fo

r tra

ding

from

Eth

iopi

a at t

he

end

of th

e five

-yea

r per

iod

Mini

stry o

f Tran

spor

t,, M

inis-

try o

f Ind

ustry

and

ETID

I

2.9.

2 En

able

com

petit

ion

in th

e tru

cking

secto

r – an

d ca

ncel

dutie

s on

this

servi

ce to

redu

ce p

rices

–

thro

ugh

a pro

gram

me o

f priv

atiza

tion

and

best

prac

tice c

ompe

titio

n po

licy f

or E

thio

pia’s

truc

king

and

logi

stics

secto

r, in

colla

borat

ion

with

inter

natio

nal o

rgan

izatio

ns.

2x

• Ne

w reg

ulati

on o

n tru

cking

es

tablis

hed

to en

sure

liber

aliza

tion

• Du

ties s

ystem

on

truck

ing

servi

ces c

ance

lled

Mini

stry o

f Tran

spor

t and

M

inistr

y of I

ndus

try, E

TIDI

2.9.

3 Pr

omot

e and

facil

itate

the c

reatio

n of

T & C

-spe

cific

logi

stics

com

panie

s tha

t cou

ld re

spon

d to

th

e req

uirem

ents

of th

e T &

C se

ctor (

espe

cially

clot

hing )

, suc

h as

tim

e sen

sitivi

ty.1

x•

At le

ast t

wo T

& C-s

pecif

ic lo

gisti

cs co

mpa

nies

crea

ted b

y the

end

of fi

ve

years

ETID

I, M

inistr

y of T

ransp

ort

and

Mini

stry o

f Ind

ustry

[ THE PLAN OF ACTION ]

79

Stra

tegi

c ob

ject

ive

3 : E

stab

lish

cond

ition

s to

har

ness

FDI

as

an e

ngin

e fo

r gro

wth

in T

& C.

Oper

atio

nal

objec

tive

Activ

ities

Prio

rity

1=hi

gh,

3=lo

w

Star

ting

perio

dTa

rget

mea

sure

sLe

adin

g na

tiona

l in

stitu

tion

and

poss

ible

impl

emen

ting

partn

ers

Ongo

ing

/ fut

ure

deve

lopm

ent

prog

ram

mes

+

inte

rnat

iona

l par

tner

s16

1718

1920

3.1

Estab

lish

an

inter

natio

nally

co

mpe

titive

ope

rating

en

viron

men

t co

nduc

ive to

T & C

se

ctor d

evelo

pmen

t.

3.1.

1 Fo

llowi

ng th

e exa

mpl

e of B

ole L

emi I

Indus

trial

Park,

secu

re m

ore s

table

electr

icity

supp

ly fo

r T &

C clu

sters

by p

urch

asing

and

instal

ling

dedi

cated

elec

tricit

y sub

statio

ns at

each

of t

he co

untry

’s ind

ustri

al pa

rks

where

T & C

is b

eing

prom

oted

. This

wou

ld in

clude

indu

strial

park

s at B

ole L

emi II

( clo

thing

), Ko

mbo

lcha

( texti

les ),

Dire

Dawa

( tex

tiles

), an

d ev

entu

ally E

aster

n Ind

ustri

al Pa

rk ( c

loth

ing ) a

nd A

ddis

Indus

trial

Villa

ge

( clo

thing

), am

ong

othe

rs.

2x

• A

dedi

cated

elec

tricit

y su

bstat

ion

for e

ach

indus

trial

park

Mini

stry o

f Ind

ustry

, IP

DC, E

TIDI

3.1.

2 Ide

ntify

all t

he in

frastr

uctu

re req

uirem

ents

for a

texti

le m

ega c

luste

r in

line w

ith th

e typ

e of i

nves

tmen

t to

be a

ttrac

ted ( i

nteg

rated

, onl

y app

arel,

them

e-ba

sed,

targ

eting

inve

stors

from

a sp

ecifi

c cou

ntry,

etc.

) and

th

en p

roce

ed to

dev

elopm

ent.

1x

• De

tailed

pro

ject r

epor

t for

pr

opos

ed te

xtile

park

Mini

stry o

f Ind

ustry

, IP

DC, E

TIDI

Inter

natio

nal t

rainin

g ag

encie

s suc

h as

Waz

ir an

d IL&

FS fr

om In

dia

3.1.

3 Ba

sed

on th

e rep

ort d

evelo

ped

unde

r 3.1

.2, s

uppo

rt fu

rther

crea

tion

of te

xtile

meg

a clu

sters

thro

ugh

indus

trial

parks

with

all n

eces

sary

infras

tructu

res ( E

fflue

nt Tr

eatm

ent P

lants

( ETP

s ), d

orm

itorie

s, sh

eds,

unin-

terru

pted

pow

er an

d wa

ter su

pply,

expr

essw

ay co

nnec

tivity

to p

orts

/ main

citie

s, etc

. )

2x

• St

art o

f com

pany

ope

ratio

ns

at ind

ustri

al pa

rks B

ole L

emi

II, Ko

mbo

lcha,

Dire

Dawa

Mini

stry o

f Ind

ustry

, IP

DC, E

TIDI

3.1.

4 Ha

ving

estab

lishe

d a m

echa

nism

for r

apid

ly ram

ping

up

the n

umbe

r of t

raine

d ga

rmen

t fac

tory

worke

rs ( s

ee ac

tivity

1.1

.8 ),

mak

e agr

eem

ents

betw

een

garm

ent f

acto

ries a

nd tr

aining

insti

tutio

ns, w

hereb

y fac

torie

s gu

arant

ee a

fixed

num

ber o

f job

s in

retur

n fo

r the

train

ing in

stitu

tion

guara

ntee

ing th

e sam

e num

ber o

f wor

k-er

s with

agree

d sk

ills.

2x

• Fir

st 10

,000

wor

kers

empl

oyed

und

er p

lacem

ent

MoU

betw

een

facto

ries

and

parti

cipati

ng tr

aining

ins

titut

ions

ETID

I, M

inistr

y of

Labo

ur an

d So

cial

Affai

rs

3.2

Increa

se

capa

city o

f TIS

Is to

id

entif

y and

attra

ct th

e app

ropr

iate

inves

tmen

ts fo

r the

se

ctor.

3.2.

1 Bu

ild ca

pacit

y of E

IC an

d Et

hiopi

an In

vestm

ent C

omm

issio

n ( E

IC ) o

ffice

rs to

effec

tively

facil

itate

and

targe

t T &

C inv

estm

ent,

and

impr

ove t

heir

inves

tmen

t ana

lysis

and

targe

ting

capa

city /

tech

nique

s to

narro

w do

wn an

d be

st tar

get p

oten

tial i

nves

tors

base

d on

inve

stmen

t req

uirem

ents

and

spec

ifica

tions

( this

impl

ies

inves

ting

in da

ta ac

cess

and

man

agem

ent s

ervic

es su

ch D

un an

d Br

adstr

eet,

Finan

cial T

imes

, fDi

Mark

ets ).

2x

• Fir

st fab

ric an

d ac

cess

ory

proj

ects

com

e onl

ine as

a r

esul

t of E

IC ta

rgeti

ng

cam

paig

ns

EIC, E

IA

3.2.

2 St

rengt

hen

the c

apac

ities

of E

IC an

d EIA

in b

randi

ng an

d ou

treac

h ( e

.g. s

ocial

med

ia, ev

ents,

etc.

), inc

ludi

ng th

roug

h tra

de at

taché

s. 2

x•

At le

ast 2

0 sta

ff fro

m E

IC an

d EIA

train

ed in

bran

ding

and

outre

ach

EIC, E

IA

3.2.

3 Co

llabo

rate w

ith th

e Con

feder

ation

of I

ndian

Indu

stry (

CII )

and

the I

ndian

Exim

Ban

k to

furth

er st

rengt

h-en

exist

ing se

ctor–

prod

uct c

ompe

titive

ness

stud

ies fo

r fab

rics,

threa

ds, a

cces

sorie

s and

pac

kagi

ng.

• Co

llabo

rate w

ith C

II and

Exim

Ban

k to

furth

er id

entif

y the

subs

egm

ents,

com

panie

s and

coun

tries

from

wh

ich to

attra

ct FD

I :•

Deve

lopm

ent o

f cus

tom

ized

prom

otio

nal m

ateria

l to

attrac

t FDI

• Pr

epare

inve

stmen

t pro

files

for i

nves

tors.

2x

• De

velo

pmen

t of i

nves

tmen

t gu

ide,

feasib

ility

studi

es,

broc

hures

and

webs

ite

cont

ent (

two

to th

ree m

onth

s fo

r pro

mot

iona

l mate

rial )

• De

velo

pmen

t of p

rofil

es fo

r id

entif

ied p

rojec

ts,six

to

eight

wee

ks fo

r eac

h pr

ojec

t pr

ofile

( mor

e tha

n on

e can

be

take

n up

sim

ultan

eous

ly th

ough

)

EIC, T

IDI a

nd E

IASI

TA /

Trade

Fac

ilitat

ion

and

Polic

y for

Bus

iness

( T

FPB )

( sec

tion

of IT

C )

/ int

erna

tiona

l trai

ning

agen

cies s

uch

as W

azir

and

IL&FS

from

Indi

a

3.2.

4 St

rengt

hen

the a

bilit

y of E

IC–I

PDC–

ETGA

MA–

ETID

I to

respo

nd ef

fectiv

ely to

dire

ct inq

uiries

from

inve

s-to

rs th

roug

h a s

ystem

atic j

oint

appr

oach

, rely

ing o

n sh

ared

inves

tor d

ata an

d m

ateria

ls.

Also

stren

gthe

n th

ese i

nstit

utio

ns’ c

apac

ity o

n aft

ercare

servi

ces t

o ex

isting

inve

stors.

1x

• Si

gned

MoU

s am

ong

the

four

par

tner

s, an

d sh

ared

adop

tion

of te

chnic

ally

cons

isten

t and

unif

orm

ly br

ande

d pr

omot

iona

l m

ateria

ls fo

r the

secto

r

EIC–I

PDC–

ETGA

-M

A–ET

IDI

SITA

/ TF

PB

[ ETHIOPIA TEXTILE AND CLOTHING VALUE CHAIN ROADMAP ]

80

Stra

tegi

c ob

ject

ive

3 : E

stab

lish

cond

ition

s to

har

ness

FDI

as

an e

ngin

e fo

r gro

wth

in T

& C.

Oper

atio

nal

objec

tive

Activ

ities

Prio

rity

1=hi

gh,

3=lo

w

Star

ting

perio

dTa

rget

mea

sure

sLe

adin

g na

tiona

l in

stitu

tion

and

poss

ible

impl

emen

ting

partn

ers

Ongo

ing

/ fut

ure

deve

lopm

ent

prog

ram

mes

+

inte

rnat

iona

l par

tner

s16

1718

1920

3.3

Furth

er p

rom

ote

Ethio

pia a

s a ke

y de

stina

tion

for F

DI.

3.3.

1 Pr

omot

e and

ince

ntivi

ze n

ation

al / i

nter

natio

nal i

nves

tmen

ts in

the f

ollo

wing

spec

ific m

achin

ery r

e-qu

ired

in th

e valu

e cha

in :

• Sp

inni

ng : m

oder

nize l

aggi

ng sp

inning

mill

s•

Wea

ving

and

knitt

ing :

mod

erniz

e all

weav

ing lo

oms t

o air

jet an

d rap

ier te

chno

logy

• Dy

eing

and

finish

ing :

intro

duce

mas

s dye

ing o

f yarn

and

fabric

• Pa

ckag

ing :

intro

duce

loca

l pac

kagi

ng m

ateria

l man

ufac

turin

g co

mpa

nies t

hat w

ould

pro

duce

pap

er co

nes,

pape

r tub

es, c

arto

ns, e

tc.•

Acce

ssor

ies : i

nves

t in

at lea

st on

e acc

esso

ries’

prod

uctio

n pl

ant i

n on

e of t

he in

dustr

ial zo

nes i

n Et

hiopi

a•

Dyes

and

che

mica

ls : l

ocall

y pro

duce

som

e of t

he au

xiliar

ies re

quire

d fo

r dye

s to

increa

se re

activ

ity

( carb

onate

s, etc

. ) an

d pr

oduc

e natu

ral d

yes f

rom

flow

ers f

or h

andl

oom

pro

ducti

on.

1x

• ET

GAM

A an

d ET

IDI,

with

EIC

and

EIA as

mul

tiplie

rs,

adve

rtise

the s

ix ke

y are

as an

d ha

ve p

repare

d pr

omot

iona

l mate

rial f

or

each

of t

hem

ETGA

MA,

ETID

I and

Et

hiopi

an In

vest-

men

t Com

miss

ion

SITA

/ TF

PB

3.3.

2 Fa

cilita

te lin

kage

s and

inve

stmen

t in

hand

loom

tech

nolo

gy fr

om In

dia f

or va

lue a

dditi

on to

:

• Se

t up

scree

n pr

inting

shop

s•

Set u

p bl

ock p

rintin

g un

its•

Upgr

ade t

o ad

vanc

ed ty

pes o

f han

dloo

ms a

nd ac

cess

ories

.

1x

• At

leas

t thr

ee li

nkag

es

estab

lishe

d wi

th In

dian

pa

rtner

train

ing in

stitu

tions

ETGA

MA–

ETID

I

3.3.

3 Ca

rry o

ut in

vestm

ent p

rom

otio

n ac

tiviti

es in

targ

et co

untri

es ( I

ndia )

– ro

ad sh

ows,

facili

tating

dire

ct int

erac

tions

betw

een

Ethio

pian

firm

s and

targ

eted

inves

tors,

help

ing fo

reign

repr

esen

tative

s to

prom

ote t

he

secto

r, etc

.Us

e sid

e eve

nts t

o sh

owca

se in

vestm

ent p

rofil

es d

evelo

ped

as w

ell as

buil

d un

derst

andi

ng o

f the

bus

iness

/ inv

estm

ent c

limate

. Exa

mpl

e of s

ide e

vent

s cou

ld b

e Afri

ca–I

ndia

Conc

lave o

r Orig

in Af

rica.

Invite

pot

entia

l inv

esto

rs to

strat

egic

loca

tions

to sh

owca

se th

e inf

rastru

cture

and

busin

ess c

limate

.

2x

• On

e roa

d sh

ow ea

ch

in six

majo

r tex

tile

cities

- Lu

dhian

a, De

lhi,

Ahm

edab

ad, M

umba

i, Ba

ngalo

re an

d Tir

upur

• M

eetin

gs w

ith 8

–10

inves

tors

in ea

ch lo

catio

n•

Visit

s of i

ntere

sted

inves

tors

( total

8–1

0 ) to

Eth

iopi

a

ETID

I, ET

GAM

A,

regio

nal s

uppo

rt fro

m A

CTIF

SITA

/ TS

/ SC

/ TF

PB,

inter

natio

nal t

rainin

g ag

encie

s suc

h as

Waz

ir an

d IL&

FS fr

om In

dia

3.3.

4 St

rengt

hen

the i

nves

tmen

t pro

mot

ion

man

date

/ res

pons

ibili

ty pa

rt of

the d

iplo

mats

’ rol

e and

pro

vide

regul

ar tra

ining

to st

aff. R

evise

and

enha

nce t

he in

vestm

ent p

rom

otio

n pr

ogram

me f

or em

bass

ies, r

eflec

ting

lates

t tren

ds.

Subs

eque

ntly

supp

ort a

nd p

lan en

quiry

and

prom

otio

nal v

isits

to ap

prop

riate

and

targe

ted in

terna

tiona

l inv

es-

tors

by em

bass

y staf

f

2x

• M

oU an

d sta

ndard

ope

rating

pr

oced

ures

draf

ted an

d ag

reed

betw

een

EIC an

d th

e M

inistr

y of F

oreig

n Af

fairs

and

Mini

stry o

f Ind

ustry

• Co

nclu

de in

vestm

ent

prom

otio

n tra

ining

for

econ

omic

/ com

merc

ial

coun

sello

rs an

d se

creta

ries

at em

bass

ies an

d co

nsul

ates

in tar

get c

ount

ries

• Fin

alize

inve

stmen

t pr

omot

ion

man

ual f

or n

ew

dipl

omats

Mini

stry o

f For

eign

Affai

rs an

d M

inistr

y of

Indu

stry

SITA

/ TF

PB

[ THE PLAN OF ACTION ]

81

Stra

tegi

c ob

ject

ive

3 : E

stab

lish

cond

ition

s to

har

ness

FDI

as

an e

ngin

e fo

r gro

wth

in T

& C.

Oper

atio

nal

objec

tive

Activ

ities

Prio

rity

1=hi

gh,

3=lo

w

Star

ting

perio

dTa

rget

mea

sure

sLe

adin

g na

tiona

l in

stitu

tion

and

poss

ible

impl

emen

ting

partn

ers

Ongo

ing

/ fut

ure

deve

lopm

ent

prog

ram

mes

+

inte

rnat

iona

l par

tner

s16

1718

1920

3.3

Furth

er p

rom

ote

Ethio

pia a

s a ke

y de

stina

tion

for F

DI.

3.3.

5 Su

ppor

t the

dev

elopm

ent o

f ( ex

isting

and

new )

custo

mize

d FD

I pro

mot

iona

l mate

rial :

• De

velo

p we

ll-cr

afted

valu

e pro

posit

ions

for p

oten

tial i

nves

tors,

com

prisi

ng fe

asib

ility

studi

es o

n th

reads

, ac

cess

ories

and

pack

aging

• De

velo

p a c

ompr

ehen

sive s

ecto

r pro

file

• De

velo

p a c

entra

lized

data

base

of t

he cr

itica

l inf

orm

ation

and

intell

igen

ce re

quire

d by

inve

stors.

2x

• Pu

blica

tion

of te

chnic

ally

cons

isten

t, un

iform

ly br

ande

d an

d reg

ularl

y up

dated

pro

mot

iona

l m

ateria

ls fo

r the

secto

r, inc

ludi

ng w

ebsit

es, P

ower

Po

ints,

secto

r pro

files

, star

t-up

road

map

s and

supp

lier

datab

ases

ETID

I, ET

GAM

A,EIC

reg

iona

l sup

port

from

ACT

IF

SITA

/ TF

PB /

an In

dian

co

nsul

ting

firm

such

as

Waz

ir

3.3.

6 EIC

and

IPDC

, tog

ether

with

ETID

I and

ETG

AMA,

are s

uppo

rted

to co

llabo

rate w

ith ex

isting

garm

ent

man

ufac

turer

s to :

• Ide

ntify

the n

eeds

of e

xistin

g su

pplie

rs to

inve

st ne

ar th

eir cu

stom

ers (

e.g.

wate

r pur

ifica

tion

facili

ty to

red

uce w

ater h

ardne

ss at

Bol

e Lem

i to

a lev

el co

nduc

ive to

fabr

ic pr

oduc

tion )

•

Prep

are an

inve

stor-t

argeti

ng ca

mpa

ign

for m

anuf

actu

rers o

f fab

rics a

nd ac

cess

ories

.

2x

• Tw

o fo

reign

fabr

ic m

anuf

actu

rers a

nd

two

forei

gn ac

cess

ory

man

ufac

turer

s star

ted,

resul

ting

from

inve

stor-

targe

ting

EIC–I

PDC–

ETGA

-M

A–ET

IDI

SITA

/ TF

PB

3.3.

7 En

hanc

e col

labor

ation

and

partn

ersh

ip b

etwee

n EIC

and

Ethio

pian

Airl

ines,

using

Eth

iopi

an A

irline

s res

ourc

es to

help

pro

mot

e inv

estm

ent o

ppor

tunit

ies ( s

ee Tu

rkish

Airl

ines m

odel

).2

x•

First

adve

rtisin

g ca

mpa

ign

impl

emen

ted o

n fli

ghts

from

Ad

dis A

baba

to th

ree to

p tar

get m

arkets

for i

nves

tors

EIC, E

thio

pian

Air-

lines

, ETID

I

3.3.

8 Re

view

the c

urren

t Gov

ernm

ent D

iaspo

ra po

licy t

o fu

rther

enco

urag

e and

ince

ntivi

ze m

embe

rs of

the

Dias

pora

to en

gage

in in

vestm

ent a

ctivit

ies, e

.g. G

over

nmen

t offe

rs to

matc

h th

e am

ount

inve

sted,

par

tner

wi

th n

ation

al ba

nks a

nd in

terna

tiona

l fina

ncial

insti

tutio

ns to

redu

ce th

e cos

t of t

ransfe

r of r

emitt

ance

s.Su

ppor

t the

Dias

pora

Affai

rs Of

ficer

at E

IC to

raise

aware

ness

of t

he G

over

nmen

t Dias

pora

polic

y, to

enco

ur-ag

e Eth

iopi

an b

usine

sspe

ople

abro

ad to

inve

st in

Ethio

pia a

nd to

use

their

expe

rienc

e to

targe

t app

ropr

iate

and

realis

tic TN

Cs in

their

pro

mot

ion

effor

ts.

2x

• Th

e am

endm

ent t

o th

e reg

ulati

on o

n Di

aspo

ra is

desig

ned

and

subm

itted

for

appr

oval

Mini

stry o

f For

eign

Affai

r with

EIC

and

ETID

I

SITA

/ TF

PB

3.3.

9 Ha

ve E

IC an

d IP

DC im

plem

ent t

he W

orld

Ban

k-de

signe

d inv

esto

r afte

rcare

pro

gram

me –

curre

ntly

unde

r con

sider

ation

at IP

DC –

of r

egul

ar co

mpa

ny vi

sitati

on, o

ngoi

ng p

robl

em-s

olvin

g, in

vesto

r sur

veys

, inv

esto

r sem

inars

and

netw

orkin

g ev

ents,

and

parti

cipati

on in

a pu

blic–

priva

te fo

rum

for b

usine

ss en

viron

-m

ent r

eform

. This

pro

gram

me w

ould

supp

ort i

nves

tor r

etent

ion

and

expa

nsio

n, b

ut it

wou

ld al

so b

e a p

rimary

m

echa

nism

for e

xplo

ring

ongo

ing o

ppor

tunit

ies fo

r and

obs

tacles

to p

rivate

secto

r-led

valu

e cha

in de

velo

p-m

ent,

as w

ell as

for f

oster

ing b

ackw

ard li

nkag

es b

etwee

n fo

reign

inve

stors

and

loca

l sup

plier

s.

2x

• Ac

coun

t man

ager

assig

ned

to ea

ch in

vesto

r•

Bian

nual

mee

tings

of E

IC

with

stak

ehol

ders

carri

ed o

ut•

Annu

al inv

esto

r sur

vey

carri

ed o

ut

EIC, I

PDC

3.4

Increa

se

colla

borat

ion

betw

een

loca

l SM

Es

and

FDIs

to en

sure

syne

rgies

.

3.4.

1 Su

ppor

t the

impl

emen

tatio

n of

the e

xistin

g pr

ogram

me (

of th

e Eth

iopi

a Cha

mbe

r, th

e Add

is Ab

aba

Cham

ber )

to h

elp es

tablis

h lin

kage

s betw

een

new

inter

natio

nal i

nves

tors

and

loca

l sup

plier

s in

a mor

e sys

-tem

atic m

anne

r, tak

ing in

to ac

coun

t the

SM

Es’ p

ersp

ectiv

e. E.

g. E

nsur

e tha

t for

eign-

owne

d fir

ms i

n ind

ustri

al zo

nes b

egin

to p

rovid

e mor

e sys

temati

c and

org

anize

d in-

hous

e trai

ning,

ope

ned

to lo

cal f

irms.

• As

sist i

n fin

ding

new

loca

l sup

plier

s•

Facil

itate

trans

fer o

f kno

wled

ge fr

om in

vesto

rs ( in

clude

s pro

duct

techn

olog

y, pr

oces

s tec

hnol

ogy a

nd

orga

nizati

onal

man

ager

ial kn

ow-h

ow an

d as

sistan

ce, e

tc. )

• Pr

ovid

e trai

ning

on p

ertin

ent i

ssue

s to

enha

nce m

eanin

gful

relat

ions

betw

een

inves

tors

and

loca

l SM

Es

( inclu

des c

oope

rative

learn

ing am

ong

supp

liers

; int

erna

l trai

ning

to af

filiat

es ; i

n-pl

ant t

rainin

g ; et

c. ).

1x

• Ex

chan

ge m

echa

nism

es

tablis

hed

with

in at

least

four

Indu

strial

zone

s usin

g th

e trai

ning

cent

res cr

eated

( li

nked

with

activ

ity 2

.3.4

)

ETID

I, IP

DC an

d ET

GAM

ASI

TA /

TFPB

[ ETHIOPIA TEXTILE AND CLOTHING VALUE CHAIN ROADMAP ]

82

Stra

tegi

c ob

ject

ive

4 : F

oste

r pro

duct

and

mar

ket d

evel

opm

ent t

hrou

gh th

e us

e of

trad

e in

form

atio

n.Op

erat

iona

l ob

jectiv

eAc

tivitie

sPr

iorit

y1=

high

,3=

low

Star

ting

perio

dTa

rget

mea

sure

sLe

adin

g na

tiona

l in

stitu

tion

and

poss

ible

impl

emen

ting

partn

ers

Ongo

ing

/ fut

ure

deve

lopm

ent

prog

ram

mes

+

Inte

rnat

iona

l par

tner

s

1617

1819

20

4.1

Ensu

re ea

sy

and

timely

acce

ss

to st

rateg

ic tra

de

intell

igen

ce fo

r T &

C fir

ms.

4.1.

1 Cr

eate

a stra

tegic

mon

itorin

g ce

ll, h

osted

at E

TIDI,

then

co-s

hared

with

ETG

AMA,

to g

ather

up-

to-

date

and

T & C-

spec

ific t

rade i

nfor

mati

on, a

nd to

dete

ct ea

rly si

gnals

on

targe

ted m

arkets

and

prod

ucts.

Th

e web

site o

f ETID

I can

be u

sed

to h

ost t

he m

onito

ring

cell

and

conn

ected

to th

e Eth

iopi

a Cha

mbe

r of

Com

merc

e web

site.

This

impl

ies su

ppor

ting

ETID

I and

ETG

AMA

to su

bscr

ibe t

o im

porta

nt te

xtile

jour

nals

and

webs

ites t

o be

ab

le to

upd

ate it

s mem

bers

with

lates

t mark

et inf

orm

ation

. The

se in

clude

: http

: / / w

ww.em

erging

textil

es.

com

/ ; w

ww.fi

breto

fashio

n.co

m ; w

ww.co

tlook

.com

1x

• On

e mon

itorin

g ce

ll se

t up

in ET

IDI

• Re

com

men

datio

n rep

ort

on im

plem

entat

ion

of th

e co

mpe

titive

intel

ligen

ce

syste

m

ETID

I,co

-resp

onsib

ility

with

ET-

GAM

A an

d EC

PGEA

SITA

/ Tra

de In

form

a-tio

n Se

rvice

s ( TI

S )

( sec

tion

of IT

C )

4.1.

2 Im

prov

e the

web

sites

of E

TIDI /

ETG

AMA

/ ECP

GEA

thro

ugh

web-

base

d so

lutio

ns fo

r effe

ctive

trad

e int

ellig

ence

gath

ering

and

diss

emina

tion,

and

insur

e a co

nstan

t sup

ply o

f tim

ely m

arket

intell

igen

ce, e

tc.Ad

ditio

nal a

ctivit

y : re

gular

upd

ates o

f com

pany

pro

files

on

ETGA

MA

webs

ite –

com

panie

s are

respo

nsi-

ble f

or th

e upd

ates.

ETGA

MA

to es

tablis

h a n

otifi

catio

n m

echa

nism

as a

remind

er.

2x

• Th

ree w

ebsit

es re

vam

ped

ETID

I,ET

GAM

A ( in

colla

borat

ion

with

Eth

iopi

a Cha

mbe

r of

Com

merc

e )

SITA

/ TIS

4.1.

3 Or

ganiz

e trai

nings

of c

omm

ercial

attac

hés b

ased

in ke

y targ

et m

arkets

and

trade

pro

mot

ion

offic

ials

to b

est c

oord

inate,

colle

ct, co

mpu

te an

d di

ssem

inate

trade

info

rmati

on an

d pr

omot

ion

matt

ers.

2x

• On

e trai

ning

orga

nized

an

d co

nduc

ted o

n a y

early

ba

sis

ETID

I, ET

GAM

A, M

inistr

y of

Forei

gn A

ffairs

SITA

/ TIS

4.1.

4 Pu

t in

plac

e a co

oper

ation

fram

ewor

k to

prom

ote t

he ex

chan

ge an

d di

ssem

inatio

n of

T & C

trad

e inf

orm

ation

amon

g go

vern

men

t age

ncies

, TIS

Is, m

edia,

acad

emia,

rese

arch

orga

nizati

ons a

nd th

e priv

ate

secto

r.

2x

• On

e netw

ork e

stabl

ished

ETID

I,co

-resp

onsib

ility

with

ET-

GAM

A an

d EC

PGEA

SITA

/ TIS

4.1.

5 Bu

ild ca

pacit

y of E

TGAM

A, E

TIDI a

nd th

e Eth

iopi

a Cha

mbe

r of C

omm

erce t

o de

velo

p m

arket

prof

ile

and

use m

arket

analy

sis to

ols a

nd re

searc

h m

ethod

olog

ies. T

hese

mark

et pr

ofile

s inc

lude

pro

ducti

on an

d co

nsum

ptio

n tre

nds,

trade

analy

sis, m

arket

requir

emen

ts, p

rice i

nfor

mati

on, d

istrib

utio

n ch

anne

ls, lo

gis-

tics (

tarif

f and

non

-tarif

f barr

iers )

and

key b

usine

ss co

ntac

ts

1x

• De

velo

pmen

t of t

wo

mark

et pr

ofile

s and

tra

ining

of E

TIDI,

ETGA

MA

and

Cham

ber s

taff t

o de

velo

p th

em an

d co

ach

them

for p

repari

ng tw

o m

ore s

uch

prof

iles

• Th

ree tr

aining

s on

com

petit

ive in

tellig

ence

an

d m

arket

prof

iles

orga

nized

and

cond

ucted

ETID

I, ET

GAM

A, E

CPGE

ASI

TA /

TIS /

inter

na-

tiona

l trai

ning

agen

cies

such

as W

azir

and

IL&FS

from

Indi

a

4.1.

6 Int

rodu

ce co

urse

s on

mod

ern

mark

et an

alysis

tool

s and

tech

nique

s, as

well

as o

n ho

w to

use

them

to

crea

te bu

sines

s plan

s, int

o th

e cur

ricul

a of e

duca

tiona

l ins

titut

ions

, and

cond

uct s

emina

rs at

facul

ties

/ univ

ersit

ies.

2x

• M

inim

um o

f 40

com

panie

s trai

ned

per

year,

of w

hich

at lea

st 20

are

SM

Es

ETID

I, ET

GAM

A, E

CPGE

ASI

TA /

Mark

et An

alysis

an

d Re

searc

h ( s

ectio

n of

ITC )

4.1.

7 En

cour

age e

xistin

g int

erna

tiona

l trad

ing co

mpa

nies i

n Et

hiopi

a to

crea

te T &

C tra

ding

servi

ces f

or

expo

rts an

d / o

r enc

ourag

e sou

rcing

com

panie

s fro

m m

ajor m

arkets

like

Indi

a to

open

offi

ces i

n Et

hiopi

a to

pro

mot

e mark

et lin

kage

s.

2x

• M

oU si

gned

betw

een

one

Indian

sour

cing

com

pany

an

d th

e Eth

iopi

an

Gove

rnm

ent

ETID

I, ET

GAM

A, E

CPGE

ASI

TA /

SC, W

azir

4.2

Increa

se fi

rms’

capa

city t

o un

der-

stand

regi

onal

and

inter

natio

nal m

arket

requir

emen

ts an

d ho

w to

bes

t alig

n pr

oduc

t dev

elop-

men

t / o

fferin

gs.

4.2.

1 Se

nsiti

ze fi

rms o

n th

e nee

d to

hav

e a m

arket

pros

pecti

ng fu

nctio

n an

d ho

w it

will

help

them

to

best

deve

lop

their

offe

ring

and

gene

rate n

ew b

usine

ss. S

ubse

quen

tly su

ppor

t sele

cted

firm

s to

estab

lish

mark

et pr

ospe

cting

dep

artm

ents

/ res

pons

ible

offic

ers w

ithin

firm

s. ET

IDI a

nd E

TGAM

A to

adve

rtise

this

amon

g fir

ms a

nd se

lect a

first

gro

up o

f firm

s for

pilo

t.

2x

• Es

tablis

hing

mark

et pr

ospe

cting

dep

artm

ents

in 10

firm

s per

year

ETID

I, ET

GAM

AW

azir

[ THE PLAN OF ACTION ]

83

Stra

tegi

c ob

ject

ive

4 : F

oste

r pro

duct

and

mar

ket d

evel

opm

ent t

hrou

gh th

e us

e of

trad

e in

form

atio

n.Op

erat

iona

l ob

jectiv

eAc

tivitie

sPr

iorit

y1=

high

,3=

low

Star

ting

perio

dTa

rget

mea

sure

sLe

adin

g na

tiona

l in

stitu

tion

and

poss

ible

impl

emen

ting

partn

ers

Ongo

ing

/ fut

ure

deve

lopm

ent

prog

ram

mes

+

Inte

rnat

iona

l par

tner

s

1617

1819

20

4.2

Increa

se fi

rms’

capa

city t

o un

der-

stand

regi

onal

and

inter

natio

nal m

arket

requir

emen

ts an

d ho

w to

bes

t alig

n pr

oduc

t dev

elop-

men

t / o

fferin

gs.

4.2.

2 Co

nduc

t trai

ning,

targ

eting

mid

-leve

l man

ager

s in

T & C

enter

prise

s, in

new

avail

able

textil

e con

-str

uctio

n tec

hnol

ogies

, late

st co

st eff

icien

cy te

chniq

ues,

prod

uct d

esig

n an

d m

ercha

ndisi

ng.

2x

• At

leas

t two

train

ing

instit

utio

ns ac

quire

kn

owled

ge an

d co

mpe

tence

s to

replic

ate

traini

ngs

• M

inim

um o

f 40

com

panie

s trai

ned

per

year,

of w

hich

at lea

st 20

are

SM

Es

ETID

I, ET

GAM

A,reg

iona

l sup

port

from

ACT

IFSI

TA, i

nter

natio

nal

traini

ng ag

encie

s suc

h as

Waz

ir an

d IL&

FS

from

Indi

a

4.2.

3 Pr

ovid

e trai

ning

on th

e con

tempo

rary t

rends

of f

ashio

n de

sign

( e.g

. col

our p

alette

s silh

ouett

es,

etc. ),

as w

ell as

the r

ole a

nd im

porta

nce o

f fas

hion

desig

ners.

1x

• At

leas

t two

train

ing

instit

utio

ns ac

quire

kn

owled

ge an

d co

mpe

tence

s to

replic

ate

traini

ngs

• M

inim

um o

f 10

com

panie

s trai

ned

per

year

ETID

I, ET

GAM

A,reg

iona

l sup

port

from

ACT

IFSI

TA /

SC

4.2.

4 Pr

ovid

e trai

nings

to to

p- an

d m

id-le

vel m

anag

ers a

bout

diff

erent

type

s of y

arn an

d tex

tiles

, and

po

ssib

le so

urce

s of i

nput

s for

their

enter

prise

s, in

orde

r to

increa

se ef

ficien

cy an

d pr

oduc

t ran

ge.

1x

• At

leas

t two

train

ing

instit

utio

ns ac

quire

kn

owled

ge an

d co

mpe

tence

s to

replic

ate

traini

ngs

• M

inim

um o

f 10

com

panie

s trai

ned

per

year

ETID

I, ET

GAM

ASI

TA /

SC, W

azir

4.2.

5 Tra

in fir

ms o

n ho

w to

enha

nce c

usto

mer

focu

s thr

ough

valu

e add

ed se

rvice

s suc

h as

vend

or-m

an-

aged

inve

ntor

y, m

ulti-

fibre

expe

rtise

, ICT

capa

city (

IT-en

abled

teac

hing )

, dro

p sh

ipm

ent.

2x

• At

leas

t two

train

ing

instit

utio

ns ac

quire

kn

owled

ge an

d co

mpe

tence

s to

replic

ate

traini

ngs

• M

inim

um o

f 10

com

panie

s trai

ned

per

year

ETID

I, ET

GAM

A, u

niver

sities

SITA

/ SC

, Waz

ir

4.2.

6 En

hanc

e und

ersta

nding

of p

rodu

ct de

sign

trend

s . A

ssist

com

panie

s to

inter

pret

and

unde

rstan

d co

nsum

er /

buye

r nee

ds in

spec

ific t

extil

e and

appa

rel p

rodu

ct ca

tegor

ies an

d tar

get m

arkets

. Mon

itor

the c

ompa

nies’

use o

f the

acqu

ired

know

ledge

.

2x

• At

leas

t two

train

ing

instit

utio

ns ac

quire

kn

owled

ge an

d co

mpe

tence

s to

replic

ate

traini

ngs

• M

inim

um o

f 15

com

panie

s trai

ned

per

year

ETID

I, ET

GAM

ASI

TA /

SC

4.2.

7 Co

nduc

t visi

ts wi

th se

ctor p

artic

ipan

ts ( in

dustr

ial as

socia

tions

, clo

thing

enter

prise

s ) to

regi

onal

and

inter

natio

nal t

rade s

hows

for T

& C

entre

pren

eurs

on p

rodu

ctivit

y tec

hnol

ogies

and

new

mac

hiner

y.2

x•

Parti

cipate

in at

leas

t two

tra

de sh

ow p

er ye

arET

IDI,

ETGA

MA,

regio

nal s

uppo

rt fro

m A

CTIF

SITA

/ SC

[ ETHIOPIA TEXTILE AND CLOTHING VALUE CHAIN ROADMAP ]

84

Stra

tegi

c ob

ject

ive

4 : F

oste

r pro

duct

and

mar

ket d

evel

opm

ent t

hrou

gh th

e us

e of

trad

e in

form

atio

n.Op

erat

iona

l ob

jectiv

eAc

tivitie

sPr

iorit

y1=

high

,3=

low

Star

ting

perio

dTa

rget

mea

sure

sLe

adin

g na

tiona

l in

stitu

tion

and

poss

ible

impl

emen

ting

partn

ers

Ongo

ing

/ fut

ure

deve

lopm

ent

prog

ram

mes

+

Inte

rnat

iona

l par

tner

s

1617

1819

20

4.3

Expa

nd m

arket

acce

ss an

d pr

omot

e Et

hiopi

a’s T

& C

prod

ucts.

4.3.

1 En

hanc

e awa

renes

s am

ong

Ethio

pian

firm

s ( th

roug

h ET

GAM

A ) o

f the

exist

ence

and

bene

fits o

f Et

hiopi

a’s re

gion

al an

d int

erna

tiona

l pref

erent

ial m

arket

acce

ss co

nditi

ons.

2x

• Br

ochu

re pr

oduc

ed an

d di

ssem

inated

to m

embe

rs of

ETG

AMA

• On

e wwa

renes

s crea

tion

traini

ng h

as to

org

anize

d pe

r yea

r

ETID

I, ET

GAM

A,reg

iona

l sup

port

from

ACT

IFSI

TA /

Mark

et An

alysis

an

d Re

searc

h ( s

ectio

n of

ITC )

4.3.

2 Tra

in Et

hiopi

an fi

rms o

n th

e nee

d to

susta

in ex

isting

buy

er–s

eller

relat

ions

hips /

mut

ual t

rust

and

prov

ide t

rainin

g on

mark

eting

and

after-

sales

servi

ces /

crea

tion

of a

com

pany

web

site /

com

mun

icatio

ns

/ pro

mot

iona

l mate

rials,

etc.

2x

• On

e hun

dred

and

sixty

com

pany

man

ager

s tra

ined

per y

ear

ETGA

MA

and

ETID

ISI

TA /

SC

4.3.

3 Se

t up

a com

pany

cost-

shari

ng m

echa

nism

to su

ppor

t the

cost

of m

arket

deve

lopm

ent u

nder

taken

by

the c

ompa

nies.

E.g.

Eth

iopi

an te

xtile

expo

rters

to p

artic

ipate

in im

porta

nt in

terna

tiona

l tex

tile f

airs

such

as Ya

rn F

air, H

eimtex

til, M

ateria

l Wor

ld, e

tc.

1x

• Co

st sh

aring

mec

hanis

m

set u

p an

d ru

nning

ETID

I, ET

GAM

A

4.3.

4 ET

IDI,

in co

llabo

ratio

n wi

th o

verse

as E

thio

pian

trad

e miss

ions

( em

bass

ies ) a

rrang

es b

uyer

–sell

er

mee

tings

to fa

cilita

te int

erac

tion

betw

een

Ethio

pian

expo

rters

and

forei

gn b

uyer

s in

targe

t mark

ets.

2x

• At

leas

t 20

buye

r–se

ller

mee

tings

cond

ucted

by

ETID

I with

targ

eted

mark

ets

ETID

I, ET

GAM

ASI

TA–S

C

4.3.

5 De

velo

p ap

prop

riate

natio

nal b

rand

/ sig

n pr

omot

ion

polic

y and

coor

dina

te im

plem

entat

ion

of

activ

ities

und

er a

‘Mad

e in

Ethio

pia’

tag. P

rom

ote t

he b

rand

thro

ugh

ETGA

MA,

the E

thio

pian

Cha

mbe

r of

Com

merc

e and

ETID

I, as

well

as th

roug

h ind

ividu

al co

mpa

nies.

Build

on

loca

l cot

ton

prod

uctio

n an

d ar

ticul

ate b

randi

ng ar

ound

it, t

ogeth

er w

ith co

mpl

iance

.

1x

• On

e nati

onal

bran

ding

str

ategy

dev

elope

dET

IDI,

ETGA

MA,

ECP

GEA

SITA

–EC

/ SC

4.3.

6 Su

bseq

uent

to 4

.3.5

, con

duct

traini

ng o

n de

velo

pmen

t of c

ompa

ny le

vel b

rands

to b

e link

ed w

ith

the n

ation

al br

and.

2x

• As

sistan

ce p

rovid

ed to

at

least

10 fi

rms t

o cr

eate

or

impr

ove t

heir

bran

ding

ETID

ISI

TA–E

C

4.3.

7 Or

ganiz

e an

annu

al pr

omot

iona

l eve

nt ( e

.g. t

rade f

air, f

ashio

n sh

ow o

n th

e mod

el of

Orig

in Af

rica )

in

Ethio

pia t

o ad

verti

se E

thio

pia’s

firm

s and

attra

ct fu

rther

inve

stmen

t / b

uyer

s. Al

so o

rgan

ize b

uyer

–se

ller m

eetin

gs an

d ot

her b

usine

ss g

ener

ation

even

ts th

at pr

ovid

e plat

form

s for

Eth

iopi

an co

mpa

nies t

o pr

esen

t the

ir of

fer to

Indi

an /

inter

natio

nal b

uyer

s and

inve

stors.

2x

• Or

ganiz

ation

of /

pa

rticip

ation

in at

leas

t th

ree ev

ents

in th

e ne

xt fiv

e yea

rs, w

ith a

mini

mum

par

ticip

ation

of

50

com

panie

s ove

r fiv

e yea

rs

ETID

I, ET

GAM

A, E

CPGE

A,reg

iona

l sup

port

from

ACT

IFSI

TA /

TS /

SC

4.4

Prov

ide t

argete

d as

sistan

ce o

n m

arket

infor

mati

on an

alysis

to

han

dloo

m fi

rms.

4.4.

1 Co

nduc

t a b

ench

mark

ing o

f sele

cted

hand

loom

wov

en p

rodu

ct pr

oduc

ers t

o ga

in ins

ight

on :

• Pr

oduc

t offe

rings

• Sk

ills (

desig

n, w

eavin

g, m

arketi

ng, q

ualit

y man

agem

ent )

• Ta

rget

mark

et( s )

( loc

al, to

urist

, exp

ort,

etc. )

• Cu

rrent

buy

ers

• Bu

sines

s plan

/ po

sitio

ning

strate

gy•

Man

agem

ent p

ractic

es in

cludi

ng H

R, fa

ciliti

es, s

trateg

ic pl

annin

g, d

ay to

day

ope

ratio

ns, e

tc.•

Acce

ss to

mate

rial i

nput

s, ya

rn, d

yes,

etc.

• Lin

ks w

ith in

stitu

tions

– ac

adem

ic, ( n

ation

al an

d int

erna

tiona

l ) an

d TIS

Is –

and

mod

e of e

ngag

emen

t / o

r in

what

capa

city

• Th

e obj

ectiv

e is t

o ga

uge m

arket

oppo

rtunit

ies fo

r MSM

Es an

d id

entif

y area

s for

impr

ovem

ent t

o ga

in sh

are /

expa

nd in

to o

ther

mark

ets.

1x

• Re

port

on E

thio

pian

ha

ndlo

om se

ctor a

s per

sta

ted co

verag

e

ETID

I, ET

GAM

A,

regio

nal s

uppo

rt fro

m A

CTIF

SITA

/ SC

/ int

erna

-tio

nal t

rainin

g ag

encie

s su

ch as

Waz

ir an

d IL&

FS fr

om In

dia

[ THE PLAN OF ACTION ]

85

Stra

tegi

c ob

ject

ive

4 : F

oste

r pro

duct

and

mar

ket d

evel

opm

ent t

hrou

gh th

e us

e of

trad

e in

form

atio

n.Op

erat

iona

l ob

jectiv

eAc

tivitie

sPr

iorit

y1=

high

,3=

low

Star

ting

perio

dTa

rget

mea

sure

sLe

adin

g na

tiona

l in

stitu

tion

and

poss

ible

impl

emen

ting

partn

ers

Ongo

ing

/ fut

ure

deve

lopm

ent

prog

ram

mes

+

Inte

rnat

iona

l par

tner

s

1617

1819

20

4.4

Prov

ide t

argete

d as

sistan

ce o

n m

arket

infor

mati

on an

alysis

to

han

dloo

m fi

rms.

4.4.

2 Es

tablis

h lin

kage

s betw

een

Ethio

pian

han

dloo

m p

rodu

cers

and

forei

gn b

uyer

s :

• Cr

eate

dem

and

for u

nique

han

dloo

m p

rodu

ct de

signs

in co

llabo

ratio

n wi

th lo

cal a

nd /

or in

terna

tiona

l de

signe

rs / b

uyer

s •

Link l

ocal

desig

ners

with

han

dloo

m w

eave

rs to

dev

elop

uniq

ue fa

brics

, whic

h ca

n th

en b

e use

d to

de

velo

p pr

oduc

ts fo

r loc

al / e

xpor

t mark

ets.

2x

• Tw

o to

three

Indi

an o

r int

erna

tiona

l des

igne

rs sig

n an

MoU

with

the

Ethio

pian

Gov

ernm

ent f

or

prod

ucing

a ha

ndlo

om

prod

uct r

ange

in E

thio

pia

ETID

I and

ETG

AMA

SC--

Indian

cons

ultin

g fir

m su

ch as

Waz

ir

4.4.

3 En

sure

prom

otio

n of

Eth

iopi

an h

andl

oom

pro

ducts

:

• Pr

omot

e han

dwov

en p

rodu

cts th

roug

h fai

rs, ex

hibiti

ons,

med

ia an

d ret

ail o

utlet

s•

Deve

lop

a han

dloo

m m

ark th

at id

entif

ies /

certi

fies i

t is i

ndee

d ha

ndm

ade

• Pr

omot

e the

valu

e of h

andm

ade p

rodu

cts•

Prom

ote t

he u

se o

f org

anic

or n

atural

fibr

es in

all h

andw

oven

pro

ducts

for t

he p

urpo

se o

f mark

et di

fferen

tiatio

n •

Deve

lop

hand

loom

secto

r / p

rodu

ct pr

omot

iona

l mate

rial.

2x

• Pa

rticip

ation

in at

leas

t tw

o tra

de fa

irs p

er ye

ar•

Spec

ific b

randi

ng

deve

lope

d fo

r Eth

iopi

an

hand

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86

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Ethiopian Textile Industry Development Institute ( 2014 ). Textile Industry Development in Ethiopia : an Overview of Facts and Opportunities.

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APPENDICES

Photo: ITC

90

SECTION A : MAIN ETHIOPIAN T & C PRODUCING AREAS ( IN PINK )

SECTION B : NUMBER OF EMPLOYEES IN ETHIOPIA’S T & C SECTOR, 2013 AND 2014

Sources : Ethiopian Central Statistical Agency ( 2014 ) ( a ) ; and Ethiopian Revenues and Customs Authority ( 2014 ) ( b ).

Country 2013 Urban areas only2013 2014

Textiles Total 416 913Urban 36.0 % 150 009 178 480

Female 60.3 % 43.4 %Share in T & C 86.0 % 72.8 % 76.0 %

Spinning, weaving and dyeing

Total 254 908Urban 41.1 % 104 655 134 199

Female 52.3 % 38.9 %Other textiles Total 158 854

Urban 27.8 % 44 203 44 281Female 72.8 % 57.3 %

Wearing apparel Total 68 148Urban 82.2 % 56 004 56 221

Female 26.7 % 21.4 %Share in T & C 14.0 % 27.2 % 24.0 %

Wearing apparel Total 53 350Urban 80.3 % 42 280 44 730

Female 24.3 % 16.4 %Knitted and crochet Total 11 137

Urban 100.0 % 11 137 9 558Female 26.0 % 39.7 %

Share in total manufacturing Textiles 21.9 % 16.3 % 18.7 %Wearing apparel 3.6 % 6.1 % 4.7 %

91

SECTION C : COTTON SUPPLY AND DEMAND IN ETHIOPIA 1990 / 91 TO 2010 / 11

Source : ICAC

SECTION D : TARIFFS FACED BY ETHIOPIAN APPAREL EXPORTS ( HARMONIZED SYSTEM ( HS-61 )

Source : International Trade Centre ( 2015 ) ( a ).

92

SECTION E : INCENTIVES FOR SECTORAL DEVELOPMENT IN ETHIOPIA

The Government of Ethiopia has implemented or encouraged a number of meas-ures in order to promote a favourable business environment and attract investment. Among these incentives, major ones are :

� International human resources are exempted from income tax if their stay is under two years ;

� Value Added Tax exemptions for locally purchased materials, subject to cer-tain restrictions ;

� The Development Bank of Ethiopia runs a number of programmes, including ( i ) the financing through loans of up to 70 % of capital requirements for new establishments ; ( ii ) loans that charge 8.5 % interest with five-year grace peri-ods ; and ( iii ) the operation of an Export Guarantee Scheme, which charges 1 % interest without collateral requirements for working capital ;

� Income tax holidays are granted based on export performance ; � A number of schemes, including the duty drawback, voucher, and bonded

manufacturing warehouse schemes, allow for the exemption of Customs taxes and duties for raw materials ;

� Investors can import machinery and fabrics free of duty for export production ; � Various other Customs and tax incentives ; � Availability of land and sheds for lease at competitive rates.

Ethiopia has low domestic supply of garment inputs yet strives to become a major producer of garments for export. The incentives allowing duty-free import of capital goods and raw materials are indispensable to this objective. Government provision of space and facilities at competitive rates further supports the bottom lines of gar-ment manufacturers, but it also establishes poles around which more manufacturers, and their suppliers and TVET partners, can cluster.

Value Added Tax exemptions on locally procured inputs and the Development Bank of Ethiopia’s preferential financing terms, which would be most important for domes-tic entrepreneurs, will be important in linking domestic suppliers and foreign garment manufacturers operating in Ethiopia.

Source : Ethiopian Textile Industry Development Institute ( 2014 ).

93

SECTION F : INTERNATIONAL BUSINESS RANKINGS OF ETHIOPIA AND ITS COMPETITORS

International benchmark

East African countries Selected Asian textile and apparel exporters

Ethiopia Kenya

United Republic

of Tanzania China India Bangladesh

Viet Nam Pakistan Myanmar

Ease of Doing Business ranking ( 1 ) 132 136 131 90 142 173 78 128 177

Competitive Industrial Performance ranking ( 2 ) 130 102 106 7 43 78 54 74

Not ranked

Global Competitiveness Index ( 3 ) 118 90 121 28 71 109 68 129 134

Inward FDI Performance Index ( 4 ) 120 129 59 86 97 114 22 110 52

Corruption Perception Index ( 5 ) 110 145 119 100 85 145 119 126 156

Economic Freedom Index ( 6 ) 149 122 109 139 128 131 148 121 161

1-World Bank Group, 2015 ) ; 2 United Nations Industrial Development Organization ( UNIDO ), 2010 ; 3 World Economic

Forum, 2014 ; 4-United Nations Conference on Trade and Development, 2010 ; 5-Transparency International, 2014 ; 6-Heritage

Foundation, 2015

94

SECTION G : TRADE ANALYSIS

The largest source of growth over the past 10 years has been the introduction of old products to new markets ( 53 % of 10-year growth ), followed by the continued pen-etration of old products in old markets ( 40 % ) and the introduction of new products to old markets ( 12 % ). Given the young state of the industry, together with the high levels of international competition, it should be no surprise that firms are not yet exporting new products to new markets.

Figure 1 : Decomposition of Ethiopia’s export growth of garments and textiles, 2004–2013

Source : International Trade Centre ( 2015 ) ( b ).

Figure 2 : Probability of export survival, 2002–2014

Source : International Trade Centre ( 2015 ) ( b ).

95

Figure 3 : Contribution to Ethiopia’s clothing trade deficit, 2014

25%

22%

13%

10%

10%

7%

5% 4% 4%

Other

Men's suits, jackets, trousers etc & shorts

T-shirts, singlets and other vests, knitted or crocheted

Women's suits, jackets,dresses skirts etc&shorts

Track suits, ski suits and swimwear; other garments

Babies' garments, knitted or crocheted

Shawls, scarves, mufflers, mantillas, etc

Women's blouses & shirts

Men's shirts

Source : International Trade Centre ( 2015 ) ( b ).

Figure 4 : Top importers of Ethiopian garments, 2001–2014 ( US $ thousands )

0 5.000

10.000 15.000 20.000 25.000 30.000 35.000 40.000

2001

20

02

2003

20

04

2005

20

06

2007

20

08

2009

20

10

2011

20

12

2013

20

14

Germany

United States of America

Sudan (North + South)

United Kingdom

Source : International Trade Centre ( 2015 ) ( b ).

96

Table 1 : Ethiopia’s top 10 exported garments, 2009–2014 ( US $ thousands )

Product label 2009 2010 2011 2012 2013 2014Five-year

CAGRShare

Total 2 915 11 786 33 971 37 156 40 262 46 177 74 % 100 %

T-shirts, singlets and other vests, knitted or crocheted 554 944 5 297 5 065 11 616 8 855 74 % 19 %

Men’s underpants, pyjamas, bathrobes, etc., knitted / crocheted 151 2 004 2 276 2 618 3 816 5 514 105 % 12 %

Women’s blouses & shirts, knitted or crocheted 33 0 165 12 695 4 375 166 % 9 %

Women’s suits, jackets, dresses, skirts, etc. & shorts 127 242 3 010 2 699 614 3 314 92 % 7 %

Jerseys, pullovers, cardigans, etc., knitted or crocheted 281 425 1 064 627 1 173 3 202 63 % 7 %

Women’s suits, dresses, skirts, etc. & shorts, knitted / crocheted 64 206 77 720 2 250 3 144 118 % 7 %

Men’s singlets, briefs, pyjamas, bathrobes etc. 124 166 1 691 2 303 2 125 2 954 89 % 6 %

Pantyhose, tights, stockings & other hosiery, knitted or crocheted 1 0 1 916 2 953 2 677 2 926 393 % 6 %

Men’s shirts, knitted or crocheted 85 180 1 707 330 2 603 2 837 102 % 6 %

Women’s blouses & shirts 109 148 5 523 4 117 1 768 1 806 75 % 4 %

Source : International Trade Centre ( 2015 ) ( b ).

Table 2 : Top changes in market share by product

Product label Export share 2004 Export share 2014 Difference

T-shirts, singlets and other vests, knitted or crocheted 2.90 % 19.18 % 16.27 %

Jerseys, pullovers, cardigans, etc., knitted or crocheted 0.16 % 6.93 % 6.78 %

Pantyhose, tights, stockings & other hosiery, knitted or crocheted 0.31 % 6.34 % 6.03 %

Women’s suits, jackets, dresses, skirts, etc. & shorts 1.19 % 7.18 % 5.98 %

Men’s shirts, knitted or crocheted 0.36 % 6.14 % 5.78 %

Men’s underpants, pyjamas, bathrobes, etc., knitted / crocheted 6.22 % 11.94 % 5.72 %

Women’s blouses & shirts, knitted or crocheted 4.35 % 9.47 % 5.12 %

Women’s suits, dresses, skirts, etc. & shorts, knitted / crocheted 1.71 % 6.81 % 5.10 %

Source : International Trade Centre ( 2015 ) ( b ).

97

Figure 5 : Contribution to Ethiopia’s textiles trade deficit ( 2014 )

52%

26%

16%

5%

1% Manmade filaments

Other made textile articles, sets, worn clothing etc

Manmade staple fibres

Wadding, felt, nonwovens, yarns, twine, cordage, etc

Other

Source : International Trade Centre ( 2015 ) ( b ).

Figure 6 : Top importing markets for Ethiopian textiles, 2001–2014 ( US $ thousands )

0

20.000

40.000

60.000

80.000

100.000

2001

20

02

2003

20

04

2005

20

06

2007

20

08

2009

20

10

2011

20

12

2013

20

14

Apparel Home textiles & carpets Textiles & yarn

Source : International Trade Centre ( 2015 ) ( b ).

98

Table 3 : Ethiopia’s top 10 textile exports, 2009–2014 ( US $ thousands )

Product label 2009 2010 2011 2012 2013 2014Five-year

CAGR

Share ( % )

Total 14 957 24 134 38 672 28 242 48 652 35 975 19.2 % 100.0 %

Cotton yarn 6 187 6 415 8 481 11 547 27 992 14 334 18.3 % 39.8 %

Cotton fabrics 3 108 10 094 12 621 5 228 6 730 5 214 10.9 % 14.5 %

Bed, table, toilet and kitchen linens 55 565 9 157 1 776 2 400 4 894 145.4 % 13.6 %

Special woven or tufted fabric, lace, tapestry, etc. 65 834 322 116 17 2 904 113.8 % 8.1 %

Furnishing articles n.e.s., excluding 94.04 783 722 1 290 3 413 4 455 2 855 29.5 % 7.9 %

Knitted or crocheted fabric 195 0 353 1 585 1 933 58.2 % 5.4 %

Man-made filaments 51 4 280 3 751 1 482 1 812 1 776 103.4 % 4.9 %

Man-made staple fibres 230 3 863 1 864 1 539 1 563 46.7 % 4.3 %

Sacks and bags of a kind used for the packing of goods 312 205 184 434 557 166 -11.9 % 0.5 %

Carpets and other textile floor coverings 30 151 100 163 297 165 40.6 % 0.5 %

Source : International Trade Centre ( 2015 ) ( b ).

SECTION H : TIME AND COST INVOLVED IN TRADING ACROSS BORDERS IN ETHIOPIA INVESTMENT

Nature of proceduresExport Import

Duration ( days ) Cost ( US $ ) Duration ( days ) Cost ( US $ )

Documents preparation 27 520 29 700

Customs clearance and inspections 7 290 5 390

Ports and terminal handling 3 270 3 270

Inland transportation and handling 7 1 300 7 1 600

Totals 44 2 380 44 2 960

Source : World Bank ( 2015 ).

99

SECTION I : INVESTMENT

Table 1 : Potential investors based in India

Company Products / activitiesTurnover

( US $ millions )

Vardhman Textiles Yarn, fabric, threads, fibre & garment 834

JBF Industries Ltd Synthetic fibre 772

Arvind Limited Denim, fabric, apparel, advanced materials 770

Trident Group Towels 624

Welspun India Ltd Home textiles and synthetic yarns 570

SRF Limited Tyre cord yarn 551

Garden Silk Mills Polymers, yarn, filament and fabric 495

SEL Manufacturing Company Ltd. Yarns, knitted fabric, terry towels, ready-made garments 477

Bombay Rayon Fashions Ltd Fabrics, apparel 469

RSWM Ltd Synthetic and blended yarn, fabric, denim fabric 463

Indo Rama Synthetic Ltd Synthetic fibre and filament 424

Lakshmi Machine Works Textile machinery 362

Nahar Spinning Mills Limited Yarn and fabric 356

Raymond Limited Suiting and shirting fabric, apparel 353

KPR Mill Limited Yarn and fabric 316

Sutlej Textiles Synthetic and blended yarn, fabric, home textiles 303

Filatex India Ltd Synthetic yarn 285

Mandhana Industries Pvt. Ltd Yarn dyeing, weaving, fabric printing, processing & garmenting 245

Century Enka Ltd Nylon & polyester filament yarns, polyfill yarn 237

Sangam India Limited Yarn, fabric, denim fabric 231

Indo Count Industries Ltd Yarn & knitted fabrics 227

Siyaram Silk Mills Ltd Suiting 210

Page Industries Knitwear 192

Spentex Industries Ltd Yarn and fabric 184

Gokaldas Exports Ltd Garments 179

Similar lists can be obtained for each target country from their respective sector associations or through independent sector research. As an example, the fol-lowing list offers the names of three of the top cloth-ing brands and retailers in each of Ethiopia’s most likely sources for T & C FDI. Investment promoters would investigate the top garment factories supplying such firms and target them for investment in Ethiopia.

100

Table 2 : Potential prospects in target markets

Likely FDI source countries Major brand, retailer or manufacturer Type of business

United States GAP Specialty store

Limited Brands Specialty store

Polo Ralph Lauren Specialty store

Republic of Korea Lotte Department store

Shinsegae Department store

Hyundai Department store

China Youngour Group Ready-made garment manufacturer

Hongdou Group Ready-made garment manufacturer

Heilan Group Ready-made garment manufacturer

Germany C&A Specialty store

H&M ( Sweden ) Specialty store

KiK Specialty store

Spain Inditex ( Zara ) Specialty store

Mango Specialty store

El Corte Inglés Department store

United Kingdom Next Specialty store

Marks and Spencer Department store

Heilan Group Ready-made garment manufacturer

Turkey Aksa Akrilik Kimya Ready-made garment manufacturer

Korteks Mensucat Ready-made garment manufacturer

Advansa Sasa Polyester Ready-made garment manufacturer

101

SECTION J: LIST OF PARTICIPANTS IN PUBLIC PRIVATE CONSULTATIONS

Name of Institution Name

1. Ministry of Trade - National AGOA Center Mr Tiglumanaye

2. Ministry of Trade - Trade promotion Directorate Mr.Yetsedaw Emagne

3. Ministry of Industry Mr.y.van Frausum

4. Ministry of Industry Mrs Selamawit H.Micheal

5. Ministry of Industry -Transformation Triggering Facility Mr. Shunum khalid

6. Ministry of Environment Mr.Tolosa Yadessa

7. Ministry of Industry Mr. Simon Baryou

8. Abeba Texilte and Garment Mr. Wolle Abegaz

9. Adama Spinning Factory Mr. Yimer Yimama

10. Addis Ababa science and technology university Mr. Kibebe Sahile

11. Addis Ababab Chamber of commerce Mr. Getache Regassa

12. Africa Center for Texitel Industries Federation Mr. Joseph Nyagari

13. Almeda Textile Plc Mr. Amanual Girmay

14. Awassa Textile S.C Mr. Eyasu Atnafu

15. Bahirdar Texitle S.C Mr. Abyay Melaku

16. COMESA Mr. Fred Kongongo

17. Commercial Bank of Ethiopia Mrs. Ejigayehu Demeke

18. Commercial Bank of Ethiopia Mr. Nigatu Wolde

19. Commercial Bank of Ethiopia Mr. Hirut Bekele

20. DFID Mr. John Primrose

21. Ethiopia Cotton producers Ginners and exporters Association Mr. Hadish Girmay

22. Ethiopia Cotton producers Ginners and exporters Association Mr. Assefa Aga

23. Ethiopia Textile and Garment Manufacturers Association Mr. Ageazi H Mariam

24. Ethiopia Textile and Garment Manufacturers Association Mr. Fassil Taddesse

25. Ethiopia Textile Industry Development Institute Mr. Sileshi Lema

26. Ethiopia Textile Industry Development Institute Mr. Yared Mesfin

27. Ethiopia Textile Industry Development Institute Mr. Enwagaw Nugusse

28. Ethiopia Textile Industry Development Institute Mr. Yitbarek Tilahun

29. Ethiopia Textile Industry Development Institute Mr. Epherm Bekele

30. Ethiopia Textile Industry Development Institute Mr. Fikr Tesfu

31. Ethiopia Textile Industry Development Institute Mr. Banthun Gessesse

32. Ethiopia Textile Industry Development Institute Mr. Demele Asrate

33. Ethiopia Textile Industry Development Institute Mr. Eshetu Shanko

34. Ethiopia Textile Industry Development Institute Mr. Erias Minda

102

Name of Institution Name

35. Ethiopia Textile Industry Development Institute Mr. Mulugeta Abera

36. Ethiopian chamber of commerce Mr. Wube Nengstu

37. Ethiopian Institute of Textile and Fashion Technology Mr. Addisu Ferede

38. Ethiopian Investment Commission Mrs. Meskerem Yeshitla

39. Ethiopian Investment Commission Mr. Dawit Lemma

40. Ethiopian Shipping & Logistics service enterprise Mr. Dereje Wassie

41. Ethiopian Standard Agency Mr. Wondale Mognehodie

42. FEMESEDA Mr. Esayas Tsegaye

43. Indian Business Forum Mr. Rajeev Sharma

44. Kebire enterprise Mr. Fassil Taddesse

45. Kestis Garment Production Plc Mr. Girima Wondimu

46. Kombolcha Textile S.C Mr. Mustefa Jemal

47. Konoria Africa Textile Factory Mr. Arun Gorodia

48. KOTRA Mr. Sewnet Hailu

49. KOTRA Mr. Kim Ju Hee

50. MAA Garment Mr. Kibrom Fitsum

51. PEPE TEAM Mr. Twodros Belachew

52. PEPE TEAM Mr. Addis alem Tesfaye

53. PEPE TEAM Mr. Nebil Kellow

54. PEPE TEAM Mr. Luc Boyolens

55. Private Enterprise Programme Mr. Tewodros Yilma

56. Raymond Ltd Mr. Ratesh Kr Singh

57. Saygindima Textile S.C Mr. Baye Hunegnaw

58. Saygindima Textile S.C Mr. Fatih Mehamet Yangin

59. Shashikant prabhudas & Co Ltd Mr. Kaushal Sheth

60. Velocity Apparel Mrs. Tesfanesh Lukw

61. Velocity Apparel Erica

62. Wollo University Mr. Negash Balcha

63. Women In Self Employment - WISE Mrs. Abeba Zenebe

64. Women In Self Employment - WISE Mrs. Etalem Yetayew Bekele,

65. Women In Self Employment - WISE Mrs. Misrach Kekonnen

66. Women In Self Employment - WISE Mrs. Worknesh Wade Oshie

67. Women In Self Employment - WISE Mrs. Kidist Buzuneh Yelesho

68. Women In Self Employment - WISE Mrs. Selemawit, Wondmagegnehu Eshete

Yirgalem Addis Textile Factory Mr. Nahom Aron

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