Next September, the United States’ African Growth and Opportunity Act (AGOA) is about to expire. With only one year left, East African countries are urging American purchasers to persuade the U.S. government to agree to renew the bill as soon as possible. On the other hand, they also issued a call to investors in the textile and apparel industry around the world: Welcome to invest in East Africa, where the textile and apparel industry will be revitalized.
Uganda: Considerable consumption potential
Recently, John Walugembe, executive director of the Uganda Small Industries Association (USSIA), signed a contract drafted by the American Chamber of Commerce regarding future investment intentions. He said that the American Chamber of Commerce described Uganda as an “important asset” that may be used in the future. Launch more investment projects. Being able to win the favor of investors from other countries is closely related to the ongoing initiatives of the Ugandan government to attract investment through diplomatic channels.
John Walugembe said: “The government has organized a series of trade activities aimed at promoting the signing of bilateral trade agreements between Uganda and other countries. For Uganda, the United States is a very critical market, but how to allow companies to effectively interact with this market? There are still some challenges in communication. In addition to the United States, we also very much welcome investors from other countries and regions. In the investment project, textile and apparel are our key industries, and Uganda will revitalize its textile and apparel industry through a series of initiatives.”
Although Uganda faces many challenges in infrastructure reconstruction, this landlocked country has obvious advantages. It not only has a sufficient labor force, but also a growing middle class. John Walugembe believes that the growing middle class in Africa has become a market for major international companies in the world, and Uganda has considerable potential as a consumer market in the future. In addition, Uganda is also working hard to reduce business costs. The signing of the US-Africa Growth and Opportunity Act (AGOA) and the US-East African Community (EAC) Trade and Investment Framework Agreement (TIFA) is very beneficial for investment companies to expand export trade.
Kenya: Building an Export Processing Zone
In Kenya, Uganda’s close neighbor, the Ministry of Industry and Commerce Development has made it clear that in the country’s industrialization process, the textile and clothing industry will become the main driving force for economic growth.
To this end, the government has set aside a piece of land on the Athi River not far from the capital Nairobi to build an export processing zone, which will eventually be built into a textile manufacturing center. At the same time, the Kenyan government is planning to carry out greater transformation of Kenya, such as upgrading the transportation system in northern Kenya and establishing a “Northern Corridor” in the capital Nairobi, the seaport Mombasa and the border port Malaba.
Joseph Wairiuko, assistant executive officer of the Kenya Textile Industry Association, said that Kenya’s economic growth is stable, with an average annual growth rate of about 4.7% from 2012 to 2013. This stable trend is very beneficial to foreign investors coming to invest.
The European and American textile industry has a market size of approximately US$300 billion a year. However, Asian textile processing companies have always occupied a dominant position. In order to gain a place in the European and American markets, Kenya has continued to promote the establishment of export processing zones and textile manufacturing centers, and has Tax exemptions and other methods attract global textile companies to invest.
Wairiuko said: “It can be said that in the field of garment exports, Kenya provides very favorable conditions for foreign businessmen. Investors can enjoy a tax holiday of up to 10 years here, which is enough to encourage them to recover investment costs and develop more businesses. potential market.”
In April this year, international apparel giants PVH and VF were invited by the Kenyan Ministry of Industry and Commerce Development to visit the Asi River Export Processing Zone. Later, PVH opened an office in Nairobi. Li & Fung Group of Hong Kong has also met with Adan Mohamed, Secretary-General of Kenya’s Ministry of Industry and Commerce Development, and discussed future plans to invest in textile and garment cities in the country’s export processing zones. There is no doubt that Africa has become a key inspection target for foreign investment in the clothing and textile industry.
Ethiopia: Blowout development of the garment industry
According to statistics, so far, Ethiopia’s garment and textile industry has received US$84 million in investment this fiscal year. In May, India’s Shrivallabh Pittie Textile Group invested US$550 million to build Africa’s largest textile factory in Ethiopia; Turkish textile company Akber also plans to invest US$175 million to build a factory; the person in charge of Swedish clothing brand H&M said that H&M’s clothing processing orders in Ethiopia Will reach 1 million pieces per month.
The Ethiopian Textile Industry Association stated that Ethiopia’s textile and garment industry is experiencing a blowout development. At present, the industry has become one of Ethiopia’s most important economic sources.
As the second most populous country in Africa, Ethiopia has many production advantages: in addition to abundant labor and low production costs, the country has the convenience of being close to the Suez Canal, and products can be shipped to European countries nearby. Compared with Far Eastern countries, it can save about 1/3 of the logistics transportation time.
The Ethiopian Textile Industry Association predicts that the country will achieve US$1 billion in textile and apparel exports by 2016.
Target market: Still unable to get rid of dependence on the United States
Although East African countries have invested heavily in the global textile and apparel sector,Businesses have shown good intentions, but they still cannot get rid of their dependence on the US market. It can be said that AGOA is a powerful tool for East African countries to attract foreign investment, and investors from various countries are willing to invest here precisely because of the favorable conditions for trade with the United States.
However, Julia Hughes, president of the United States Fashion Industry Association (USFIA), said that the U.S. Congress is unwilling to renew the African Opportunity and Growth Act early before September 2015, which is the expiration of the bill, which will undoubtedly hinder U.S. foreign businesses. It is expected that U.S. investors will gradually increase in investment in Africa until this bill is implemented.
She said: “The U.S. Congress is very likely to agree to renew the AGOA bill at the last minute, and they may even temporarily suspend the program. Based on this, U.S. companies dare not rashly purchase in Africa because they will be worried If I place an order now, can I maintain a long-term relationship with the supplier? Will the duty-free products they purchase suddenly be taxed next September?”
Once the protection of the AGOA Act is lost, the tariffs on clothing imported by the United States from Africa may be as high as 32%. Although suppliers in Africa are sometimes slower to deliver than those in other regions, the quality of products available here is relatively good, and they are effective at anticipating which products Western buyers will need.
At present, Kenya, Mauritius, and Ethiopia are the most favored investment and procurement destinations in Africa for American companies. Julia Hughes said that in the past year, the number of imported clothing products purchased by American companies from Kenya showed double-digit growth.
