Analysis of the Competitiveness of Ethiopian Textile Sub-Sector Under Africa Growth and Opportunity Act (AGOA) Using Porter Diamond Model

Abstract

Ethiopia is among Sub-Sahara African (SSA) countries which qualified for Africa Growth and Opportunity Act (AGOA). The Act, a U.S trade preference program, allows SSA countries to export qualified products to the U.S market free of tariff and quota. By using this act, Ethiopian textile sub-sector has been exporting its products since 2001. Its export performance has been improved dramatically in recent few years. However, the sub-sector has not fully able to use the AGOA chance and still ranks among the countries of the lowest level of competitiveness. Why then such disparity in this results?This study analyzed the competitiveness of Ethiopian textile sub-sector under AGOA using Michael Porter’s (1990) “diamond model” as a theoretical framework. In particular, the study investigated and analyzed the positive and negative factors affecting the competitiveness of Ethiopian textile sub-sector and pinpoints suggestions for intervention that enhance the sub-sector’s competitiveness. Fifteen respondents among those textile exporters under AGOA were selected and interviewed and secondary source of data were also used. The data collected were organized based on Porter’s determinants of competitive advantage.The study result revealed, on the one hand, that the poor and fragile related and supporting industries, unsophisticated local demand and poor firm’s strategy and structure are among factors that obstruct the competitiveness of Ethiopian textile subsector. On the other hand, a huge potential of factor endowments, duty free market access of AGOA, and the support of government are the positive factors that prompt the sub-sector’s competitiveness. This result implies that the government should exert further effort to avoid the constraints and to take advantages of the potential of subsector. So the competitiveness of Ethiopian textile sub-sector can be enhanced through new or increased investment on advanced factors, this in turn could assist the in maintaining or enhancing the current export level, thereby increase the competitiveness potential.