China steps up production in Ethiopia with drill instructors, investors
“They do this in the morning,” Vice President Helen Hai, herself a recent recruit, explains about the exercise. “This is how we train to have a military mind set.”
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Huajian is one of the latest Chinese companies to move into Ethiopia. While the government has long leaned on Western support to feed the needy and provide social services, it is increasingly attracting Asian finance and investment for industry and infrastructure.
“China’s presence in Ethiopia is filling a huge gap,” says Deborah Brautigam, an expert on the Asian giant’s presence on the continent at American University. “The West sees Ethiopia as a country that needs to be saved. The Chinese see multiple business opportunities and a way to ‘do well by doing good.’ “
But while international actors from China to the World Bank see significant potential for Ethiopia to grow as a manufacturing hub, logistical challenges such as unwieldy customs procedures and costly transportation are preventing the country from realizing its potential.
100,000 workers making $4 billion worth of shoes, clothes
Meles Zenawi, a former Marxist rebel and Ethiopia’s leader for more than two decades, has long had practice soothing Western diplomats alarmed at a worsening trend of political repression. Now he’s proving to be adept at wooing investors as well.
Before Prime Minister Meles headhunted Huajian on a September trip, “We had never thought about Ethiopia,” says Hai. Just over three months later, the first pair of shoes from Huajian International Shoe City Plc in Dukem town was boxed and on its way to the US.
Back in China’s Guangdong Province, the company produces 20 million pairs of footwear annually from operations that resemble small towns. Huajian Ethiopia plans to relocate to its own industrial zone on the fringes of the capital, Addis Ababa, where it hopes that more than 100,000 workers will be employed producing $4 billion worth of shoes and clothes for export after a decade.
After 15 years, the master plan is for it all to be Ethiopia-run, says Hai. “We want to build a system for Africa to produce blood themselves,” she says. “That’s better than giving them blood.”
Ethiopia: good potential, but 30 years behind China
Ethiopia’s exports totaled just $2.8 billion last year, with coffee making up almost a third of that figure. Imports cost $4.5 billion more than the value of goods sold abroad over the past seven months, local newspaper Capital reported on March 25. The government hopes that new revenue streams from mining and electricity sales will soon help balance the economy of the landlocked country.
The World Bank’s Chief Economist Justin Yifu Lin believes that Ethiopia also has the potential for light manufacturing in clothes, leather, metal, wood, and agribusiness, given the low-set up costs and abundance of cheap labor and raw materials such as livestock and land.
“I am sure a low-income country like Ethiopia can also start the industrialization process” if it reduces the cost of doing business, he said at the bank’s launch of a book titled “Light Manufacturing in Africa.”
Despite wages being half those of Vietnam and a fifth of China’s, logistics in Ethiopia are preventing a manufacturing take-off. “Currently it’s not competitive because of the cost of production,” Lin says.