Last month leaders of Tigrayan forces in northern Ethiopia started launching attacks aimed at sparking a war in Ethiopia. Currently, they continue to attack foreign and government troops based and coming into the Tigrayan region. Because of the conflict, hundreds of people on both sides have died, and the war threatens to destabilize other parts of Ethiopia. Many Ethiopians have run away from the northern state in Ethiopia into Sudan, seeking safer shelter.
DBL Factory Destroyed
Before the fighting began in Ethiopia, the country was the garment industry’s brightest new frontier. Ethiopia presented cheap labor, and the government provided companies ready to set up shop with tax breaks and cheap loans. Thus, the Bangladeshi textile firm DBL, which mainly makes clothes for Swedish fashion giant H&M decided to start manufacturing in Ethiopia.
However, when the fighting began last month in the northern Tigray region, the DBL company found itself in the Tigrayan and Federal Ethiopian forces’ crossfire. The DBL compound was rocked by a heavy explosion that blasted out the factory’s windows, radically altering its business calculus. Currently, DBL is one of at least three foreign garment makers who have suspended operations in Tigray.
An official present at the factory that day told reporters what he witnessed during the explosion. Mr. Abdul Waseq said all he and his colleagues could do was pray out loud. He added that most of those at the factory were crying as they thought they would die.
Start of the War in Ethiopia chases away Investors
In 2017 Ethiopia was the world’s fastest-growing economy. The country invested billions of dollars in improving its infrastructures, such as railways, roads, industrial parks, and hydro-electric dams. At the time, the government had a plan to transform the poor, mainly rural nation into a manufacturing powerhouse. But when Prime Minister Abiy Ahmed took office, the new leader had a different goal in mind. Prime Minister Abiy looked to loosen Ethiopia’s grip on an economy with over 100 million people by liberalizing telecoms. The move fuelled something akin to glasnost-era headiness among investors in Ethiopia.
Two years later, with Prime Minister Abiy still in office, Ethiopia has been battered by numerous challenges. The country has been facing floods, locust swarms, ethnic clashes, and the coronavirus pandemic. Moreover, the government now faces a war that erupted on November 4 between the Tigray and Federal Ethiopian forces. Ethiopians worry that the war could signal a prolonged period of unrest in Ethiopia. Meanwhile, investors have been hit by a harsh reality check with the current state of the nation.
If investors pull out of business deals established in Ethiopia, this could spell trouble for the country. Ethiopia’s manufacturing export push is not yet generating enough foreign currency needed to pay for the country’s importations or keep up to speed with rising debt service costs. If investors abandon Ethiopia, especially while the country faces the pandemic and war, it will be at high risk of debt distress. However, Prime Minister Abiy assured that even amid the crises affecting Ethiopia, his government would push ahead in building the foundations of a modern economy.
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