As labor, raw material and tax costs rise in China – the world’s foremost textiles producer – the East African country is scrambling to offer a cheaper alternative, and go up against established low-cost garment makers like Bangladesh and Vietnam.It is still early days, and most of the clothing companies to source production in Ethiopia are testing the waters with small volumes, but the government is working hard to attract their business with tax breaks, subsidies and cheap loans. The landlocked nation is also about to open the final stretch of a 700 km (450-mile) electric railway to Djibouti’s coast.

This is part of a drive to turn a nation that is among the poorest in Africa into a manufacturing center that is no longer held hostage by fickle weather patterns which…