Raymond plans to set up manufacturing unit in Ethiopia

Raymond Group is one of India’s largest branded fabric and fashion retailers. It is also one of the leading, integrated producers of suiting fabric in the world plans to set new manufacturing unit at Awasa in Ethiopia at a total investment of $100 million. The unit will have a 2 million per annum capacity to manufacture and export woolen-blended, cotton blended jackets.

It will be housed in Raymond’s fully owned subsidiary Silver Spark Apparel through its Middle East based unit in Sharjah. The unit is planned in Ethiopia to take advantage of a more favourable duty structure and local incentives.

If Raymond exports from Ethiopia to the US it would not pay import duties of 18% which it would need to pay if it exports from India. Again exporting to Europe from Ethiopia would save the company 8%-12% in terms of import duties while exporting to Japan would give it a preferential access.

That’s because Ethiopia has a 10-year duty-free trade agreement with USA, Europe and a preferential trade pact with Japan. India does not have such agreements or advantages.

Apart from the trade benefits, Raymond is also being provided land on long-lease by the Ethiopian government. It will also get electricity at a price which is a third of the cost of power in India, apart from the labour charges, which are almost half of India. Thus Ethiopia, with favourable trade pacts combined with lower operating costs, would in turn reduce the cost of production for Raymond, and provide greater access to two of the biggest markets – the USA, and Europe – and a preferential access to Japan, another large market, and make it able to compete with other global companies.

Gautam Hari Singhania, chairman and managing director of Raymond said that the move to Ethiopia comes with the gobally favourable trade policy reforms allowing the industry to expand its trade partners, improve its export competitiveness and contribute substantially to the nation’s income.

Silver Spark, a subsidiary of Raymond, was set up in 2003 for manufacturing suits and formal trousers, at a factory in Bengaluru which currently, makes close to 2 million jackets—primarily woolen-blended and cotton-blended jackets—and exports part of them to the USA, Europe and Japan.

In FY15, Silver Spark Apparel reported a 27% fall in profits at R16.24 crore, while its revenue grew 25% from a year earlier to R392.78 crore.