Ethiopian economy hit by closure of major clothing manufacturer
NAIROBI, Kenya (AP) – Ethiopia’s once rapidly growing economy suffers yet another blow from its one-year war, as global clothing maker PVH Corp. announced that it was closing its facilities there due to “the speed and volatility of the escalating situation”.
The company’s statement, emailed to The Associated Press, comes two weeks after President Joe Biden announced he would withdraw Ethiopia from a US trade program, the African Growth and Opportunity Act, in because of “flagrant violations of internationally recognized human rights”. The sanction comes into effect on January 1.
PVH, whose brands include Calvin Klein and Tommy Hilfiger, has been a prominent occupant of Ethiopia’s Model Industrial Park in the town of Hawassa, where Africa’s second most populous country has made clear its aspirations for rapid development. Chinese style. PVH has said in the past that AGOA helped convince her to move to Ethiopia.
H&M, another high-profile occupant of Hawassa Park, did not respond to a request from AP regarding their plans.
The war in Ethiopia and the many atrocities reported from all quarters have led some in the business community to pressure Prime Minister Abiy Ahmed and his government for a ceasefire and humanitarian access to the blockaded Tigray region. , echoing the ongoing efforts of envoys from the United States and African Union.
Thousands of people have been killed as Ethiopian and allied forces fight the Tigray who long dominated the national government before Abiy came to power in 2018. The conflict has been marked by gang rapes, forced evictions and a man-made famine.
“We continue to press the Ethiopian government on the need for all parties to facilitate the delivery of humanitarian aid and supplies to those in need, and we see this as a first step towards the cessation of hostilities. and a process that will result in peace, ”Stephen Lamar, president of the American Apparel & Footwear Association, told the AP in an email.
“As the crisis spreads – and if Ethiopia loses AGOA eligibility – businesses will increasingly be unable to source from Ethiopia. This will hurt Ethiopia’s economy, especially women who make up the bulk of the workforce in the country’s garment industry, ”Lamar added.
The harm done to low-income workers away from the war is an argument the Ethiopian government made as it openly lobbied against losing AGOA eligibility. Ethiopia’s chief trade negotiator Mamo Mihretu said millions of workers would be affected.
But the Biden administration, which said last week it was not imposing sanctions on the Ethiopian government and rival forces in Tigray “to allow time and space” to see if diplomatic efforts progress, has lost patience.
AGOA’s announcement “makes people in the business world particularly anxious. It certainly makes it less economically smart to be there, ”Mike Posner, assistant secretary of state for democracy, human rights and labor in the Obama administration told the AP.
“I would say that we now have very little time to try to calm the rhetoric and find a way to get to the negotiating table,” Posner said, addressing the Ethiopian leadership. “It could be disastrous for the economy.”
Warnings about the economy are mounting as the Ethiopian government invests resources in the war. In its World Economic Outlook report last month, the International Monetary Fund said projections for 2022 to 2026 “are omitted due to an unusually high degree of uncertainty.”
Companies like PVH had entered Ethiopia because of government pressure in recent years to build a network of industrial parks to make clothing and footwear for export, as well as the country’s large population of over 110 million. locals and wages that are “considerably lower than places like Bangladesh and Cambodia,” Posner said.
But instability has brought business thinking to a tipping point, he said.
Chinese and other companies could continue to operate in industrial parks, but Ethiopia is a small market in the global economy, Posner said: Indian customers, I think he’s going to be disappointed.