In 2016, then-Ethiopian Prime Minister Hailemariam Desalegn inaugurated the $250 million, 300-hectare Hawassa Industrial Park that the government hoped to transform and expand the country’s economy. It was a bold social and economic experiment with big ambitions: to make Ethiopia the new link in the global supply chain for Western apparel.
When fully operational, it was expected that the park would employ 60,000 workers—largely poor rural women—and generate a total export value of $1 billion. The government promised to build 30 such industrial parks by 2025 that would together generate $30 billion in revenue.
At first glance, it seemed unlikely that Ethiopia could compete with countries like China, but the project attracted attention from global manufacturers that set up factories in the Chinese-built facility, including the Swedish brand H&M and America’s PVH Corp., one of the world’s largest apparel companies, which owns Calvin Klein and Tommy Hilfiger. Suppliers from India, Sri Lanka, China, and other countries also opened factories at the facility. Its biggest draw was the rock-bottom wages, which are significantly lower than in such countries as Bangladesh and Cambodia. Indeed, Ethiopia has the lowest pay in the global garment supply chain. The monthly minimum wage in the garment industry in China is $326, compared to $182 in Cambodia and $95 in Bangladesh. In Ethiopia, it’s just $26.
While Ethiopia has no legally mandated minimum wage for the private sector, Kassahun Follo, president of the Confederation of Ethiopian Trade Unions, said his organization had long been advocating for its introduction. However, a specific figure is yet to be determined.
“Economic security should be a priority for government,” said Auret van Heerden, former head of the Fair Labor Association. “There’s always going to be someone cheaper than you. It’s a mistake to compete on labor standards, as it becomes a constant race to the bottom and the country doesn’t progress.”
Arkebe Oqubay, a senior minister and special advisor to Hailemariam, was the architect of Ethiopia’s plans to become a leading supply chain for Western apparel. In his 2015 book, Made in Africa: Industrial Policy in Ethiopia, he argued that the country has the attributes needed to become the manufacturing capital of Africa.
“Africa has a chance to exploit trade, financing, and investment opportunities with emerging countries. Increased labour costs in China and other emerging economies are also an opportunity,” he wrote.
Arkebe recognized that for Ethiopia to be successful it would require the right political and institutional framework, along with an understanding of market opportunities. Key elements to Ethiopia’s success—as demonstrated in his study on China, South Korea, and Singapore—would be tax breaks on exports and duty-free imports of capital goods and raw materials. But the country would also need political stability—something that perhaps was overlooked at the time.
The African Growth and Opportunity Act (AGOA), a U.S. initiative in place since 2000, was a major reason why Hawassa Industrial Park was set up in the first place. AGOA enabled duty-free access to the U.S. market for almost all of Ethiopia’s exports, including ready-made garments. In 2020, Ethiopia’s exports to the United States under AGOA totaled $238 million, of which $219 million were from the garment industry.