2. Background of the leather sector
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1 August
2 2. Background of the leather sector The Ethiopian leather industry is relatively an older industry with more than 80 years of involvement in processing leather and leather products. The first two tanneries were established and vertically linked to two shoe factories: Asco Tannery & Asco Shoe Factory (the present Addis Ababa Tannery and Tikur Abbay Shoe Factory) and Darmar Tannery & Shoe Factory (the present Awash Tannery and Anbessa Shoe Factory). The leather industry bases itself on the country s livestock resources. Indeed Ethiopia possesses one of the world largest livestock populations of which is 52 million Cattle population that makes the country ranking 1 st in Africa and 6 th in the world, 27 million Sheep population which makes 3 rd in Africa and 10 th in the world and 23 million Goat population which makes 3 rd in Africa and 8 th in the world. The off-take rate for cow hides 13.87%, Goat skins 27.34% and Sheep skins 40.29%. The hides and skins supplied to the tanneries are reached 1.4 million cow hides, 6.7 million Goat skins and 13.2 million Sheep skins. 3. Current status of the leather sector 3.1. Tanning Industry: There are 29 tanneries converting hides and skins into different types of finished leather. The sector is successfully moved to the production & export of higher value-added (fully processed) finished leather. There is a possibility of producing up to 500 million square feet of finished leather per year. This industry relatively, having a better position due to mature in its age and huge investment Footwear Industry: It is a stage of development in the country in which there were only two factories before 1991 but currently 2
3 there are 16 medium and large scale footwear manufacturers. The production capacity of these shoe factories rise up to 15 million pairs per year. The shoe industry is emerging and promising industries Leather goods and garment industries: There are 15 garments and goods factories, three gloves factories, garments, bags & different kinds of leather articles. This industry is also an emerging segment & appears to be more promising Micro and Small Scale enterprises: There are 368 Micro and small scale enterprises producing leather products with small capital ranging from 2000 ETB to 220,000 ETB in different regions of the country. 4. Leather Industry Development Institute The level of industrialization in the country is very low, with the shares of the manufacturing sectors accounting for less than five percent of Gross Domestic Product (GDP) in the past decades. In an effort to turn this growth pattern and the vision of the government for the manufacturing sector into a reality, the government gives great attention and priority for the leather sector and established LIDI with the main objectives of leather sector development and competitiveness of the sector in the global arena by council of ministers regulation No. 181/
4 1.1. LIDI s Objectives According to regulation No. 181/2010 the objective of the Leather Industry Development Institute (LIDI) is to facilitate the development and transfer of leather and leather products industries technologies, and to enable the industries become competitive and beget rapid development LIDI s Powers and Duties Regulation No. 181/2010 establishes LIDI as an autonomous federal government office having its own legal personality and it is granted the following powers and duties: 1. Formulate polices, strategies and programs that assist in the facilitation of the development of leather products industries, and implement the same upon approval; 2. Collect, analyze, organize and transfer to the sector s data center and disseminate to users, as may be appropriate, Data necessary for the development of leather and leather products industries; 3. Prepare and disseminate project profile that may be helpful expanding investments in the leather and leather products industries; conduct feasibility studies for those investors desiring to engage in the sector; follow up project implementation and provide remedies concerning problems encountered during implementation. 4. Advise investors desiring to engage in the leather and leather products industries sector on the section of technology, negotiation construction, erection and commissioning; 5. Prepare and conduct practical trainings on technology, technical matters, marketing and management and other tailor made trainings, that assist the development and competitiveness of the leather and leather products industries sector; and issue certificates to trainees; 4
5 6. Conduct studies and researches to promote the development of the leather and leather products industries; 7. Provide support and consultancy services concerning production process, production planning and quality control; 8. Cooperate with government and private institutions with similar objectives, locally and abroad; and encourage similar co-operations between private institutions; 9. Undertake benchmarking studies that facilitate the development and competitiveness of the leather and leather products industries and assist those conducting similar activity in the sector; 10. Deliver product testing services to leather and leather products industries; 11. Extend support in the creation of input and output linkage; 12. Conduct market study for leather and leather products industries products; 13. Identify technologies that can be developed and undertake product development activities; 14. Cooperate with universities on product development and human resource development, conduct joint research and assist in the strengthening of local research capacity in sector; 15. Deliver its services to users at one stop shop; 16. Perform such other activities as are conducive to the attainment of its objectives. 17. Own property, inter into contracts and sue and be sued in its own name; 18. Perform such other activities as are conducive to the attainment of its objectives. 5
6 1.3. LIDI s Vision To see the share of the Ethiopian Leather Industry grow tenfold in 2023 in the global market LIDI s Mission By expanding the Ethiopian leather industry sustainably and fast, promoting investment, providing the investor with production and marketing, technologies, counseling and support services; making Ethiopia gain the most out of its leather resources LIDI s Core Values Customer oriented service Readiness for change Best and fair service Effective team work Professional ethics Occupational safety and health Decent working environment 1.6. LIDI s Services i. Services in investment phase Collecting, analyzing, sharing, and disseminating all necessary updated information as regards the leather sector. Prepare & promote project profile for investment opportunity, and provide feasibility study services. Provide consultancy services in technology selections, in dealing with technology, machinery installation and in commissioning to those involve in the sector Supervise and provide technical services for the projects in preimplementation, during-implementation and post-implementation 6
7 for the investors who engaged in leather sectors Providing maintenances, spare parts, production planning& controlling and consultancy services to the leather sector ii. Services in Production phase Providing different trainings which made the sector completive in productivity and quality in the world market. Providing research and development service which solve the bottle neck of the sector. Provide benchmarking services in collecting, analyzing and disseminating the information to facilitate the development of leather sector to the world index. Providing product standardization and testing to the leather industry. iii. Services in Marketing Phase Providing market researching, Market support in product value chain, collations and disseminating of market information. Monitoring, evaluating and take measure action to all the services rendered. 5. General Information: Investment Climate and Advantages in leather sector Advantages of Investing in leather sectors. i. Commitment of the government for the leather sector Legislative and procedural reforms Establishment of one-stop shop service Revision of the investment law to suit dynamic change 7
8 Improvement of investment climate Market oriented economic policy Direction towards export of finished leather Capacity building of the sector through twinning programs ii. Integrated to regional and international arena Member of COMESA (Common Market for Easter and Southern Africa) with 19 member countries Access to AGOA(African Growth and Opportunity Acts) market Access to EBA (Everything But Arms) of European Union General Special Preferences (GSP) Privileges with different countries Bilateral Investment Treaties with more than 24 countries In process of joining World Trade Organization (WTO) Double taxation avoidance agreement with more than 14 countries iii. Comparative Advantages: Geographical location of the country (at a cross-road of Africa, Middle East and Asia) Large resource base in hides and skins, An internationally recognized high quality Hides and skins, Strong government incentives Availability of skilled and easily trainable labor force Political, Social and Macro-Economic Stability Ever growing economy Wide domestic, regional and international market opportunities Competitive investment incentive packages Welcoming attitude of the people 8
9 Industries and Universities Linkage - currently there is one university offering first degree program in leather technology, - Leather Industry Development Institute is offering formal education on leather manufacturing technology, footwear manufacturing technology, leather garment and leather goods manufacturing technologies from I IV levels. - Other 16 Technical and Vocational Colleges are also offering on footwear and leather goods manufacturing technology lesson at various levels. iv. Competitive Advantages: Internationally known skins with the brand name of Red Hair Ethiopian sheep skins and Bati and Selale genuine of the Goat skins One of the most Politically Stable Country in the Region Socio-Economic and Financial Stability The establishment of industrial zones in all regions High Security (Low Crime Rate) Low Labor Costs compared to neighboring countries Liberal Laws and Regulations creating favorable business and investment environments Access to long-term credit with low interest rate 1.2. Investment opportunities in leather sector Footwear manufacturing Shoe accessories and components manufacturing Leather goods and garment manufacturing Glove manufacturing 9
10 Cow hide processing Leather chemical manufacturing Leather sector spare part and machinery manufacturing 6. Regulatory Authorities in Leather Sector Guarantee against expropriation or nationalization The right to employ expatriate experts and management staff Double taxation avoidance treaties Repatriation of capital and profits Ethiopia is a member of the world Bank-affiliated Multilateral Investment Guarantee Agency( MIGA) 7. General Customs, Tax System and Fiscal Incentives; Customs duty exemption on imported capital goods, construction materials, and spare parts worth up to 15% of the value of imported capital goods Income tax exemption (2-5 years). ( If the industry is established outside of Addis Ababa and Special Zone of Oromia, tax exemption will be for 6 years) Improving service delivery (shortening period of license, renewal of permits etc); Exemption of imported inputs for export purposes from indirect taxes; Credit guarantee scheme to avoid problems of working capital for exporters; Allotment of finance for loan for those engaged in export activities; Provision of access to infrastructure for those engaged in export. Creating linkages with foreign investors in marketing and 10
11 production; and Improving the transport and transit services. 8. Reporting on Investment Activities Any investor is expected to report the progress on implementation of its project to appropriate organ every three months The investor also cooperates and provides information with regard to its implementation whenever required by appropriate organ LIDI Structure 11
12 PRODUCTS OF THE SECTOR 12
13 LIFESTOCK POPULATION Sheep 27 million Goat 23 million O F F T A K E R A T E 1. FOR CAW 13.87% 2. FOR SHEEP 40.29% 3. FOR GOAT 27.34% 13
14 LIDI S FACILITIES Model Tannery Model Tannery Model Model Effluent Effluent Treatment Treatment Plant Plant Model Tannery Model Leather Goods & Garment Factory Footwear Factory 14
15 If you want to come to LIDI, just follow these routes For more information Contact LIDI Corporate communications Directorate Tel: / Fax P.o.box 24692, code
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