The rise of "made in Ethiopia"
Peter Wan is smiling from ear to ear. The 50-year-old walks past huge warehouses, where dozens of Ethiopians are busy working on spinning and thread-dyeing machines.
“We are in the production test stage,” he says, at the Chinese factory of JP Textile at the entrance of the industrial park of Hawassa, some 270 kilometers south of the Ethiopian capital of Addis Ababa.
Soon, the labor force will transform the thread imported from China into cloth fabric, explains Wan. Then this fabric will be shaped into “Made in Ethiopia” shirts for brands such as Calvin Klein or Tommy Hilfiger, so they can be exported to wealthy customers in Europe and the United States. This park, which was built by the Chinese in just nine months, is officially operational.
The 260 million US dollars project is proof of the quick industrialization of Ethiopia. China, its first trade partner, is leading this process: whether it's construction, transportation, or telecommunications, Beijing has invested in all sectors in this Horn of Africa country, the continent's second most populous nation with nearly a 100 million inhabitants. China has also built a new railway between Addis Ababa and Djibouti.
Ethiopia needs Djibouti, a small country through which it routes 95% of its exports. China is also betting on this area to be an important part of its "new silk roads” project.
Through the Suez Canal, transportation to Europe from Djibouti only takes a couple of days. The same goes for central Asia, through the Indian Ocean. Such ambitious plans require infrastructure to make the trade of goods easier. China is ahead in Ethiopia, where it has already built roads, a highway, and where its influence is doubtless.
All in all, the 279 Chinese companies operating in Ethiopia registered more than 550 million US dollars in financial capital over the past five years. In 20 years, Chinese investments have totaled more than 4 billion US dollars and are said to have created 111,000 jobs.
A mainly farming country, Ethiopia wants to become the “industrial hub” of Africa. To become a middle-income country by 2025, Addis Ababa is strictly applying the second phase of its growth and development plan (GTPII) with Beijing's unfailing support.
For now, the manufacturing sector only represents 5% of the country’s GDP. On July 8, top Ethiopian authorities and foreign investors inaugurated with great pomp the industrial park of Kombolcha, 380 kilometers north of the capital. The following day, it was the inauguration of another park, this time in Mekele, 760 kilometers north of Addis Ababa.
The Chinese want to make the most of Ethiopian industries such as textile and clothing, which should soon turn the country into a new Bangladesh. "Even better than Bangladesh,” says Yang Nan, the president of JP Textile.
Yang Nan knows what he’s talking about. The Wuxi Jinmao Foreign Trade Company, where he chairs the executive board, has been producing fabric in Bangladesh for 12 years. Only five months after his first trip to Ethiopia, he decided to open branches here: JP Textile now stands in Hawassa and C&H Garment is housed in Bole Lemi, another industrial park, near Addis Ababa.
“Ethiopia has two advantages,” he says. On the one hand, he says, there is a profusion of cheap energy harvested from hydroelectric projects across the country. On the other, there's the possibility of benefiting from tax exemptions thanks to the African Growth and Opportunity Act.
It is this American piece of legislation that allows some African countries, including Ethiopia, to be exempted from customs duties for goods exported to the U.S., to ensure the economic development of the continent. “Everyone knows the U.S. is the biggest textile importer across the world,” Yang Nan says.
In some ways, Ethiopia is serving as a re-exportation hub towards more promising markets for Chinese firms, says Xavier Aurégan, an independent researcher for the French Institute of Geopolitics.
Another major advantage for Ethiopia is the country’s young, cheap and abundant labor force. “Labor cost here is the lowest in the world,” says Yang Nan — just like China 30 years ago. But nowadays the average wage in China is more than 800 million US dollars a month, too much to remain the world’s factory. China's future therefore depends on Ethiopia, where there is no minimum wage. At JP Textile, for instance, most workers are paid less than 35 US dollars a month.
By relocating its factories, China is also exporting the country’s work methods and discipline. At JP Textile, workers who arrive late have to do push-ups or clean up the storehouse, says Selam Negusie, a 23-year-old supervisor, who was trained in Wuxi on China's eastern coast, and speaks fluent Mandarin.
She says it's in China that she learned “hard work and punctuality” — two values written on banners everywhere around the factory, and translated into English, Mandarin, and Amharic, the official language of Ethiopia.
“When the Chinese scream at you, they’re doing it in a positive way!” she says. “To develop an industry, we need hardworking people,” adds Yang Nan.
The goal here is to train local supervisors who will take over from their Chinese counterparts. And their methods? “I haven’t punished anyone yet but, if I have to, I will,” She says.
China is Ethiopia’s “most reliable partner,” Chinese Foreign Minister Wang Yi said during his visit to Addis Ababa in June.
“Until now, China has been the most generous with us,” says Arkebe Oqubay, special counsel to the Ethiopian Prime Minister and author of the 2015 book Made in Africa: Industrial Policy in Ethiopia. He sweeps away accusations of neo-colonialism. “Who blames China? The formers colonial powers. Ethiopia doesn’t have any preferences for any country. We are only taking care of our own interests.”
This is a “win-win partnership,” says Sisay Gemechu, CEO of the Ethiopian Industrial Parks Development Corporation, adding that the country needs China because it needs investment and infrastructure.
Nevertheless, “Ethiopia represents only 2% of the commercial relations between China and Africa,” says Xavier Aurégan, the French researcher. Indeed, the African country imports 90% of finished products from China, which makes the trade balance highly uneven. Despite the advantages, the business climate is complex in Ethiopia and transportation costs are high.
“Ethiopia is not the only one to dream about all the possibilities China is offering: Djibouti, Kenya and Tanzania could be serious competitors to attract Chinese capital and projects,” Aurégan warns. In any case, the two countries will continue to have a good relationship. The Chinese-Ethiopian industrial park of Dongguan is under construction in the suburbs of Addis Ababa. In 2020, it will be the country's biggest special economic zone.