After Asian countries, Ethiopia is beckoning garment exporters from Tirupur, the knitwear hub of the country, as they struggle to cope with goods and services tax (GST) implementation issues and withdrawal of export incentives in India. Already, a few units from Tirupur have set-up base in Ethiopia, which is tipped to become the next Bangladesh, one of India’s main rivals in garment exports. A combination of factors not available in India seems to be attracting exporters to Ethiopia.
“They provide the entire infrastructure with plug and play facilities. The labour is cheap and significantly, Ethiopia enjoys duty-free export access to both Europe and the US, two major markets for garments,” said R Rajkumar, MD of Best Corporation (P) Ltd., which has set-up a unit in the African country. Best Corporation’s $6 mn unit employs 1,000 workers and Rajkumar said it will be scaled upto 4,000 in future. Except the management staff, all workers are from Ethiopia. Indian garment exporters have suffered heavily due to competition from Bangladesh and Sri Lanka which enjoy duty-free access to Europe. Many exporters had started units there to take advantage of this facility but Bangladesh is rapidly losing its charm for exporters with declining productivity.
Ethiopia now appears to be more attractive as exporters can ship garments without duty to two major markets. “Ethiopian Government is quite helpful by providing subsidised electricity and infrastructure. Abundant and cheap labour is a great advantage,” said Arul Saravanan, Chief Marketing Officer of SCM Garments Pvt. Ltd., another Tirupur-based firm which has opened a garment unit in Ethiopia with 500 machines and 750 workers.
Ethiopia has put in efforts to woo companies, with officials from the country making regular visits to Tirupur. “They have been coming here for the past three years. Ethiopia understood the value of garment industry in providing employment to its people. India has much to learn from it,” said Raja M Shanmugham, Chairman of Tirupur Exporters Association.
Tirupur, which accounts for 46 per cent of the total knitwear garment exports from the country, saw its export decline by 8 per cent to 24,000 cr in 2017-18 for the first time in five years. “The first quarter of this year saw a negative growth of 14 per cent. We hope the second quarter would fare better,” said Shanmugham. The garment exporters have been requesting the government for at least partial restoration of export incentives and free trade access to Europe to boost shipments.
