Ethiopia is aiming to be a major exporter of textile products. Attractive incentive packages have been extended to the manufacturing industry. The aim is to be a leading country in light manufacturing in Africa, which will lay the foundation for heavy and high tech industries by 2025.

The country is building at least 10 industrial zones. The government has provided incentives for the private sector to attract more investment. Among the incentives are: 100 per cent duty free import of machinery and equipment; duty free import of spare parts of 15 per cent of capital goods for the first five years of operation; the possibility to hire expatriates free from income tax provided they stay for no more than two years; and reconciliation of VAT for materials purchased locally during the project period if declared in six months.

The textile industry has been given priority by the government. However, the sector's performance has not been satisfactory. Annual earnings from export do not exceed a $100 million. The sector has also been affected by shortage of raw materials, inefficiency and lack of technological applications.