Ethiopia is to get two million units per annum capacity plant from Raymond, to manufacture and export woollen-blended, and cotton-blended jackets. This plant is being built at a total investment of $100 million and also to take advantage of a more favourable duty structure and local incentives.
The import duties of 1 per cent would not be applicable if Raymond exports from Ethiopia to the US, which it has to pay if it exports from India. Exporting to Europe from Ethiopia would save the company 8 per cent-12 per cent in terms of import duties while exporting to Japan would give it a preferential access. This is because Ethiopia has a 10-year duty-free trade agreement with the US, Europe and a preferential trade pact with Japan, whereas no such agreements or advantages are there for India.
The Ethiopian government is also providing land on long-lease to Raymond. It will also get electricity a third of the cost of power in India, apart from the labour charges, which are almost half of India. Therefore, the cost of production for Raymond would reduce in Ethiopia, with favourable trade pacts combined with lower operating costs. It would also provide greater access to two of the biggest market, the US, and Europe, and a preferential access to Japan, which is another large market, making it able to compete with other global companies.
Gautam Hari Singhania, Chairman and Managing director of Raymond, said about the move to Ethiopia that the growth prospects of Indian textile sector were ‘constrained by many challenges’ and globally, favourable trade policy reforms would allow the industry to expand its trade partners, improve its export competitiveness and contribute substantially to the nation’s income.