Will Ethiopia manage to meet its textile export target?
Just last week the Ethiopian Textile Industry Development Institute (ETIDI) made it known that exports in the first six months of the Ethiopian fiscal year 2015-16 fell short of the set target.
While the target was to earn $60.07 million from the export of textiles, the country could only manage to export goods worth $41.1 million. That is about 70% of the plan.
This despite the government formulating several ambitious plans to boost the sector’s performance by furnishing attractive incentives to investors.
Duty-free import of spare parts of 15% of capital goods for the first five years in business and the option to hire expatriates free from income tax provided they stay for no more than two years are some of these incentives.
Reconciliation of VAT was another incentive offered by the government. This is only offered for materials purchased locally during the project. It’s mandatory to declare the same within 6 months to avail the reconciliation.
At the time, the incentives were rolled out ETIDI director general Sileshi Lemma said, “We are working to be a leading country in light manufacturing in Africa which will lay the foundation for heavy and high tech industries by 2025.”
Given the incentives the ETIDI introduced it was optimistic that the sector would attract at least 152 investments. The textile industry development institute also hoped that the sector would earn $ 1 billion from export.
A push was also expected from Growth and Transformation Plan II (GTP II), a national five-year plan that was created by the Ethiopian Government to improve the country’s economy. The plan was expected to more than 170,000 jobs.
However, the country’s textile sector was dealt another a blow. It was revealed that the El Nino had wiped out 14,000 hectares of cotton crops. So instead of 262,000 hectares of land only 65,000 hectares will be used for cotton cultivation.
All is not high and dry for the Ethiopian textile sector yet. Abebe Kasse, the ETIDI planning and information management director said that the institute believes that the textile industry will be able to achieve its export targets by June 2016. The advantages cited were high-quality cotton grown domestically and duty-free access to U.S. through the African Growth and Opportunity Act (AGOA) and the EU market.
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