Dhaka: Ethiopia's civil war has reached its climax. Tiger rebel regional forces have already moved closer to the capital, Addis Ababa. However, there are no signs of an end to the civil war. The ongoing civil war has put foreign entrepreneurs who have come forwarded to invest in Ethiopia are in danger. Far from sustaining the business, the entrepreneurs are in big trouble to bring back the capital invested in the country. DBL Group of Bangladesh is also on the list of such organizations.
Ethiopia was once the fastest growing economy in Africa after a long civil war. From 2010 to last year, the country achieved an average annual growth rate of 9.4 percent. Ethiopia, a multi-ethnic and politically unstable country, has been plagued by allegations of human rights abuses for years. Even then, the country has received extensive support from the Western world, including the United States and the European Union (EU). The country was made attractive to investors by providing various facilities in the industrial and trade sectors. In addition, cheap labor and land prices were an additional attraction.
Over the past decade, investors from many countries have flocked to Ethiopia to take advantage of duty-free exports to various countries in the Western world, including the United States. Buyers from Europe and the Americas are also urging Asian suppliers to invest in Ethiopia. Responding to such a call, the Bangladeshi company DBL Group went ahead with investment in the country. However, within a few years, the situation in Ethiopia has become quite unfavorable for running a business.
According to sources, Sweden-based H&M is one of the biggest buyers of DBL Group. At the urging of this organization, the DBL leaders decided to invest in Ethiopia. The goal of H&M and DBL Group was to gain duty-free access to the US market by producing garments in Ethiopia. But in the aftermath of the war, the country's ambitions have almost faded.
The ongoing civil war in Ethiopia began in November last year. Forces loyal to Prime Minister Abi Ahmed launched a military operation in the country's Tigris region. Massive bombings were also carried out in the area as part of the operation. At that time, a bomb had also exploded at the factory premises of DBL Group in Tigre. At that time Bangladeshi workers and officials got stuck. Later they were brought back to their country through diplomatic activities.
One year later, Ethiopia's civil war has intensified. Entrepreneurs from other countries, including Bangladesh, who have formally and informally invested in the country, are in trouble. Although international pressure to end the war has begun to grow, there is no reflection of this. On the other hand, the industrialists have started worrying about the future of the invested capital.
Garment industry insiders say there were special facilities for exporting goods from Ethiopia to the United States. The US government has recently canceled this facility. The Biden administration's announcement is expected to take effect in January. Before the start of the civil war, there was no tariff on exports from Ethiopia to the United States. Land prices were also relatively low. Labor is also cheap. It is mainly on these issues that many investors from outside Africa, including South Asia, have gone out of business to promote and persuade the West. Bangladesh's DBL group also went ahead.
The one-time outcry of the Western world over the country has now turned into condemnation and punitive action. One after another, trade benefits, including budget assistance to Ethiopia, are being withdrawn. The rebels, meanwhile, have moved closer to the capital, Addis Ababa. Prime Minister Abi Ahmed continues to fight back with the help of neighboring Eritrea. Deprived of the blessings of the West, he leaned towards Iran, Russia and China. Given the current context, observers fear the country's civil war could drag on. They do not see any way to save the investors from the ongoing crisis.
In Ethiopia, the DBL Group factory is built on a total of 78 hectares of land. Initially, the potential cost of the project was estimated at 10 crore 40 lakh dollars. Later, about 10 crore dollar was invested. Funding for the project was ensured from a total of three sources. This included funding from the Swedish Fund and the Development Bank of Ethiopia, including DBL Group's own funds.
DBL Group has had to go through hardships from the beginning to invest in the country. Problems such as currency devaluation and shortage of skilled manpower have also been faced. As a result, the plan to come into production was delayed. Many Bangladeshi entrepreneurs also questioned the viability of the DBL Group's investment in Ethiopia, given the existing capacity of the textile and garment sector and the weak economic base.
Although Ethiopia has some potential for backward linkage in the garment sector, it is very small compared to Bangladesh. The annual yarn production capacity of Bangladesh is more than 240 crore kg. On the other hand, the annual yarn production capacity of Ethiopia is about 7.25 crore kg. The country's annual oven fabric production capacity is much more than 20 times that of Ethiopia. There are about 150 textile and garment factories in Ethiopia. There are only about 3,500 active garment factories in Bangladesh.
Besides, there is no opportunity for any organization registered in Bangladesh to invest freely abroad. There is no specific policy in this regard. According to the Foreign Exchange Regulation Act, there is an opportunity to transfer capital outside the country subject to special approval and on a case-by-case basis. Following this policy, DBL Group was approved to invest outside Bangladesh in 2015. The company is also allowed to use the money from the export retention quota account for investment. After all these processes, the factory of Bangladeshi company DBL Group started production in Ethiopia in 2018. The company was forced to suspend operations in Peru for two years.
Asked about the overall situation, MA Jabbar, managing director of DBL Group, told that buyers and international organizations like Mackenzie call Africa the Next Frontier. But the reality is that except for a few countries in the region, most do not have large exports. In this case, their preparation is not very significant. The United States recently withdrew Ethiopia's duty-free export facility. Bangladesh will benefit at least a little. Again, in the context of the war, the investment there is stuck. Whoever has factories in the country, they will surely suffer. The United States, India and Sri Lanka, along with Bangladesh, have investments in Ethiopia. The country is still a war zone. If this situation is overcomed, then the country must look for good investors and brand buyers. In this case, our strategic relationship with the buyers who buy clothes from Bangladesh is also quite good. So we will definitely go there again. We are ready. Our position is also quite strong in the context of bargaining. Significantly, the country's own investment in the project is much higher. There is also the Sovereign Fund of the European Union. As a result, they are also involved. That is why we are united. As a result, we see that our investments are equally secured. That is what we believe. Now we have to wait.