Light Manufacturing in Ethiopia

Abstract

The apparel export industry in Ethiopia has increased significantly since the 2000s. Apparel exports emerged due to low labour costs and preferential trade agreements with the United States and European Union, but more importantly to proactive government industrial policies and the decisions of US and EU buyers and core suppliers to invest in or source from Ethiopia. Foreign direct investment has played an important role in the growth of the apparel export industry, but there exist also locally owned export firms. Sector-specific industrial policies are divided into three phases: incentivizing local investment in apparel exporting; addressing constraints facing local export firms and attracting foreign direct investment; and promoting foreign and local investment within specialized industrial parks. This chapter provides an overview of the development of the apparel export sector in Ethiopia, highlighting the role of industrial policy and the performance of locally owned firms given their importance in economic transformation.