Sunday, September 25, 2022

Ethiopia’s economy hit hard: major clothing maker closes store

NAIROBI, Kenya (AP) – Ethiopia’s once-fast growing economy is hit by another year of war as global apparel maker PVH Corp. states that it is closing its plant there due to “the speed and instability of the escalating situation.”

The company’s statement, emailed to the Associated Press, came two weeks after President Joe Biden announced he would shrink Ethiopia. from the US Trade Program, Africa Growth and Opportunity Act, due to “gross violations of internationally recognized human rights.” The sanction comes into force on January 1.

PVH, whose brands include Calvin Klein and Tommy Hilfiger, has been a permanent contributor to Ethiopia’s Model Industrial Park in Hawassa, where Africa’s second most populous country has signaled its pursuit of rapid Chinese-style development. PVH has stated in the past that AGOA helped convince him to start a company in Ethiopia.

H&M, another notable resident of Hawassa Park, did not respond to AP’s request for plans.

War in Ethiopia and numerous reports of atrocities from all sides pushed some in the business world to pressure Prime Minister Abiy Ahmed and his government for a ceasefire and humanitarian access to the blocked Tigray region, echoing the ongoing efforts of US and African Union envoys.

Thousands have been killed as Ethiopian and Allied forces fought those who long dominated the country’s government prior to Abiy’s rise to power in 2018. The conflict was marked by gang rape, forced expulsions and artificial starvation.

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“We continue to draw the attention of the Ethiopian government to 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 an end to hostilities and a process that will lead to lasting peace,” he said. AP in an email to Stephen Lamar, president of the American Apparel and Footwear Association.

“As the crisis spreads – and if Ethiopia does lose AGOA eligibility – companies will no longer be able to ship from Ethiopia. This will harm Ethiopia’s economy, especially women, who make up the bulk of the workforce in the country’s garment industry, ”Lamar added.

Harming disadvantaged workers away from war is an argument that the Ethiopian government has openly lobbied against losing AGOA eligibility. Ethiopia’s chief trade representative, Mamo Mihretu, said it would affect millions of workers.

But the Biden administration, which said last week it was not the imposition of sanctions on the Ethiopian government and the rival Tigre forces to “give time and space” to see if diplomatic efforts were being made, patience ran out.

AGOA’s announcement “is of particular concern to people in the business world. This certainly makes it economically less sensible, ”Mike Posner, assistant secretary of state for Democracy, Human Rights and Labor in the Obama administration, told AP.

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“I would say that now we have very little time to try to suppress the rhetoric and find a way to the negotiating table,” – said Posner, referring to the leadership of Ethiopia. “This could be disastrous for the economy.”

Economy warnings rise as Ethiopia’s government pours resources into the war. In its World Economic Outlook report last month, the International Monetary Fund said its projections for 2022–2026 were “lowered due to unusually high levels of uncertainty.”

Companies like PVH entered Ethiopia because the government pushed for a network of industrial parks in recent years to produce apparel and footwear for export, along with the country’s large population of over 110 million and wages that “Significantly lower than even places like Bangladesh and Cambodia,” Posner said.

But instability has pushed business thinking to a tipping point, he said.

Chinese and other companies may continue to operate in industrial parks, but Ethiopia is a tiny market in the global economy, Posner said: “If the Ethiopian government thinks it can achieve this by shutting down the US or Europe and selling products only to the Chinese, or I think Indian customers will be disappointed. “

Nation World News Desk
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