Low Ethiopian labor cost attracts Chinese investors

More companies are shifting part of their production lines to the African nation to save money and also tap new markets, Yao Jing reports

China's active involvement in Ethiopia's infrastructure, such as construction of roads and bridges, has been in the spotlight. Recently, Chinese investors' rising interest in the plateau country's labor intensive industries - a mixture of leather, steel and automobiles - is coming into sharper focus.

Against a background of rising labor costs and risky excess capacity in the domestic manufacturing sector, some Chinese producers are shifting part of their production lines to Ethiopia to lower costs and also tap new markets.

Unlike the noisy and dusty capital Addis Ababa, which is full of construction sites, driving 30 kilometers southeast to the Oromia region, the Eastern Industrial Zone presents a much more industrial look with tidy buildings, orderly workshops and international companies.

Winning the bid to be Second Overseas Economic Cooperation Zone in November 2007, sponsored by China's Ministry of Commerce, it now accommodates 18 companies in its finished 23,300 square kilometers since the first tenant moved in back in 2011.

"As the industrial sector in Ethiopia is almost a blank slate, the transition of Chinese producers is not only driving the country's industrialization process, but also helping Chinese manufacturers out of a dilemma," said Qian Zhaogang, commercial counselor at the Chinese Embassy in Ethiopia.

Two-way trade between China and Ethiopia jumped 56.3 percent to $1.84 billion in 2012. China's major exports to Ethiopia were mechanical and electrical products, textiles and garments, while Ethiopia was mainly shipping sesame, leather and cotton to China, according to the Ministry of Commerce.

By the end of 2012, China's outbound foreign direct investment in Ethiopia totaled $600 million, focusing mainly on industrial zones, automobiles and leather.

Apart from the Eastern Industrial Zone's recent contract with multinational consumer goods company Unilever Plc, which rents a workshop covering 5,000 square meters, it is breeding Chinese producers, including footwear maker Huajian Group, automobile producer Lifan Group and Eastern Steel Co Ltd.

"We can make 1.5 million pairs of shoes every year. Most of them are exported to the United States and Europe.

That accounts for 90 percent of our production," said Wei Yongquan, general manager at Huajian International Shoe City (Ethiopia) Plc.

One order for high-heeled black sandals, labeled in the US as the fashion brand Guess, had just been completed and was awaiting packaging and shipping.

All of the workers in the busy workshop were local young people.

"We employ 3,300 local people. Their average age is 22," said Wei.