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The textile industry is undergoing reform to increase foreign currency earnings.
The Ethiopian Textile Industry Development Institute, which is under Ministry of Industry stated that they were studying how to improve export earnings and better develop the manufacturing sector.
“According a Central Statistical Agency study, most of the textiles and garments made in Ethiopia are sold locally,” Sileshi Lemma, Director General of the Ethiopian Textile Industry Development Institute, said.
“We are now working export more products by coming up with incentives,” he added. According to the head of the the textile institute, up to 60 percent of garment and textile production goes to the local market. “The local market is more profitable and attractive than exports,” he explained.
Some of the policy and incentive schemes will be improved to encourage manufacturers to focus on the export market, according to the institute head.
A few years ago there were 80 textile and garment makers now there are 220. “In the past four or five years textiles have grown rapidly,” Sileshi said. However, export earnings have remained stagnant.
The last few years textile exports have brought in USD 120 million but the goal was ten times that amount.
According to Sileshi, for the current budget year the Institute plans to generate USD 240 million from textiles and related exports, which is twice the amount of the 2017/18 budget year.
In relation to the hard currency shortage some international brands that were planning to invest in Ethiopia have instead gone to other destinations like Kenya. Sileshi has accepted the reality and says the country has to work strongly to improve hard currency earnings.
Some factories fear it will be hard for them to transfer their profits to their mother company because of the scarcity of hard currency.
The government has focused on the textile and garment sector as it transitions to an industrial based economy. The industry parks are also targeted to attract textile companies.
However, the parks are not running as expected. For instance, the Hawassa Industry Park that secured the investment cost from the euro bond was expected to generate USD one billion in just a few years but so far has not surpassed USD 25 million, according to the sector leaders.
Textiles are one of the oldest industries in the country. Currently it employs around 10,000.