Last month, during the conflict in the northern Tigray region, an explosion at DBL's compound caused extensive damage to the factory and forced the company to reassess its business strategy. Adbul Waseq, an official at the company which produces clothing for H&M, described the terrifying experience and the suspension of operations in Tigray. Ethiopia has made significant investments in infrastructure and industrial development in recent years, aiming to boost its economy and become a leading manufacturing hub. As of 2017, Ethiopia was the world's fastest growing economy. One year after, Prime Minister Abiy Ahmed assumed office, promising to reduce the government's control over an economy with more than 100 million people and open up industries like telecommunications, sparking investor optimism reminiscent of the glasnost era. However, over the past two years, Ethiopia has faced numerous challenges including ethnic conflicts, natural disasters, and COVID-19 lockdowns. The recent conflict between the military and Tigray's former ruling party, along with concerns about prolonged unrest, have sobered investors. This hesitation could pose problems as the country's efforts to boost manufacturing exports have not yet generated enough foreign currency to cover imports or debt service costs. Even before the pandemic, the International Monetary Fund (IMF) had cautioned that Ethiopia was at a high risk of debt distress. Abiy's government stated that despite the challenges it is currently facing, Ethiopia is continuing with reforms that will lay the groundwork for a modern economy. Mamo Mihretu, a senior policy adviser in the prime minister's office, told Reuters that despite the impact of COVID and ongoing insecurity in various parts of the country, the Ethiopian economy has shown impressive resilience. Ethiopia's textile production is relatively small compared to countries like Vietnam and China, with exports totaling $94 million in 2016. The country's main exports are agricultural products such as coffee, tea, spices, oil seeds, plants, and flowers, but its expansion into the textile industry in recent years reflects its ambitions in manufacturing. As the conflict approached Mekelle, the capital of Tigray, textile companies started closing down and evacuating their staff. Cristiano Frati, an electrician evacuated from a factory run by Italian hosiery chain Calzedonia, expressed concern about not being able to leave as the fighting drew nearer to the city. Calzedonia suspended operations at their plant, which employs around 2,000 people, on November 13 due to the conflict. They have not provided any further comments on the situation. A broad perspective reveals the Hawassa Industrial Park in the Southern Nations, Nationalities, and Peoples region of Ethiopia on November 17, 2017. Meanwhile, DBL has evacuated its overseas employees from Ethiopia due to the current uncertainty. Managing director M.A. Jabbar expressed concerns about the ongoing war and its duration. Another foreign company, Velocity Apparelz Companies, which supplies to H&M and Children's Place, has also temporarily closed down, according to a company official who spoke to Reuters. H&M expressed their concern and stated that they are closely monitoring the situation. The company mentioned that production has stopped at their three suppliers in Tigray, but they will continue to source from Ethiopia where they have a total of around 10 suppliers. Indochine Apparel, a Chinese company that supplies Levi Strauss & Co, reported that their operations in the Hawassa industrial park remain unaffected. Levi Strauss stated that they are keeping an eye on the situation and confirmed that there has been no impact on their supply chain thus far. Ethiopia's clothing industry was facing difficulties before the conflict in Tigray due to the economic impact of the COVID-19 pandemic. Some factories closed down, while others reduced wages or let go of employees. This economic downturn was not only limited to the garment sector, as insurance companies had also stopped providing coverage for political risk outside of certain regions. A risk consultant working with corporate clients described the current situation in Ethiopia as unfavorable. Similar to many other individuals interviewed by Reuters, the consultant preferred to remain anonymous due to concerns about potential repercussions from government officials. Prior to the conflict in Tigray, Prime Minister Abiy's attempts to alleviate a restrictive political environment had already led to ethnic violence. This violence, which escalated in 2019, had caused disruptions to various projects, particularly in the agricultural sector. A project leader in the agricultural industry shared that their investment had to be postponed last year due to the conflict coinciding with the planting season. Workers are sewing clothes at the Indochine Apparel textile factory in Ethiopia's Hawassa Industrial Park. Swedish furniture retailer IKEA had opened a purchasing office in the country but closed it in September due to political and social issues, COVID-19, and changes in the cotton market in Africa. Coca-Cola Beverages Africa, a bottling partner of Coca-Cola, has also faced challenges in Ethiopia, with the conflict in Tigray impacting about 20% of its sales volumes and delays in the construction of new bottling plants due to the pandemic and tax increases. 'There are limited options available' After the capture of Mekelle in the previous month, Abiy announced triumph over the former ruling party of Tigray (TPLF). Abiy's advisor Mamo stated that the rapid, resolute, and purposeful conclusion of the military operation will address any remaining concerns about political instability for investors. The TPLF has committed to continue fighting. The government must be extremely cautious as Ethiopia's foreign debt has increased drastically over the last ten years due to heavy borrowing, particularly from China, for infrastructure and industrial projects. Foreign direct investment has been decreasing consistently since reaching a high point in 2016, dropping to approximately $500 million in the first quarter of this fiscal year. Inflation is currently at a level of about 20%. Finding solutions to this economic situation is challenging, as obtaining additional funds from the IMF or through market borrowing is not feasible. Menzi Ndhlovu, a senior country and political risk analyst at Signal Risk, an Africa-focused business consultancy, stated that their best hope is for a global economic recovery next year. Despite ongoing challenges, Ethiopia made significant strides with the passage of a landmark investment law and currency reforms. Additionally, the government is moving forward with plans to liberalize the telecommunications sector by opening tendering for new licenses and selling a minority stake in Ethio Telecom. According to sources, interested companies are not discouraged by the current unrest and see this as an opportunity to inject much-needed dollars into the struggling economy. However, Ethiopia's ambitious plans for manufacturing have been delayed for now. DBL's Waseq, who has gone back to Bangladesh, questioned who would want to invest in such a situation.