Investors wishing to establish a new business must first apply for an investment permit at the Ethiopian Investment Commission (henceforth EIC).
Investors wanting to buy an existing enterprise or shares require approval from the Ministry of Trade and Industry.
To be approved for an investment permit, the project must meet the following capital requirement:
For the first visit to Ethiopia, a business visa can be obtained from an overseas diplomatic mission. Once an investment permit is obtained, the Department for Immigration and Nationality Affairs issues a residence permit. Foreign investors who are shareholders are then entitled to get a residence permit. For investors in industrial parks, multiple entry five year visas are provided.
Depending on the type of business form, investors need to take following steps to register their company after having contacted the Ethiopian Investment Commission (Information and Investment Promotion Department) for information on procedures and entitlements:
Private Limited Company (PLC)
Investors may benefit from the following investment incentives:
The environmental impact assessment system requires investors to conduct an initial environmental examination to determine whether the project requires a full EIA or not.
Environmental impact assessments are undertaken by the Ministry of Environment, Climate and Forest Protection. Clearance is required from ministry in order for the project to be approved.
|Relevant documents||List of Investment Projects that need EIA|
|Relevant institutions||Ministry of Environment, Forest and Climate Change Ethiopian Investment Commission|
Investors find the processing of obtaining the business approval easy and straightforward. They are particularly pleased with the professional and responsive attitude of the Ethiopian Investment Commission (EIC). However, there is a perception that the administrative apparatus outside EIC is not business friendly. The initial administrative procedures prove lengthy with many public agencies involved. Sometimes the required public officials are not present or do not have sufficient and reliable knowledge of the rules and procedures, leading to conflicting instructions and time wasted. Frequent changes in laws and regulations compound the issue.
Investors in industrial parks also noted the difference in treatment between the EIC and other government departments. For this reason investors in one of the industrial parks have set up an investor association to voice their concerns. EIC remained their preferred point of contact for solving individual matters.
Ethiopia’s population is estimated to be around 107 million, making it the second-most populous country of Africa after Nigeria.
|Relevant institutions||Ministry of Labour and Social Affairs|
Wages are set either at the company level or are based on negotiation between the employer and the employee. Wages shall be paid in cash, if mutually agreed to. Wages paid in kind may not exceed the market value and in no case may exceed 30% of the wages paid in cash.
Ethiopia does not currently have minimum wage legislation.
The prevalent average wage levels in Ethiopia are summarized in the table below.
|Unskilled labourer||USD||40||2018||per month|
|Semi-Skilled labourer||USD||150||2018||per month|
|Skilled labourer||USD||300||2018||per month|
The following, negotiable, non-wage benefits are payable to employees in addition to the leave entitlements in the table below:
|Type of Leave||Entitlement||Comment|
|Annual leave||14 days||Add one day of annual leave for every additional year of service|
|Special leave||3 days||The necessary supporting evidence should be presented at the request of the employer|
|Sick Leave||6 months||First month at full pay, next two months at half pay and next three months without pay|
Employers are required to provide pension contributions, according to the below table, for their employees excluding workers involved in cotton collection, sugar cane cutting and such other similar works regularly repeated in the course of the year. These contributions provide for the following benefits:
|From Employer||From Employee|
|Minimum Contribution (%)||11||7|
|Relevant institutions||Private Organizations Employees Social Security Agency|
Expatriates may be employed in Ethiopia with a view to developing local capacity. When calculating the number of expatriates that may be recruited, factors such as availability of local professionals, complexity of the investment and the need for high skilled professionals are taken into account.
The Ethiopian Investment Commission issues work permits to investors. A work permit is issued upon presentation of all the necessary documents and the issuance of a work permit takes about two hours.
Documents required for a work permit include:
Companies operating in Ethiopia confirm that labour costs are favourable.
However, investors also strongly encourage newcomers to familiarise themselves with and adapt their management techniques to the local culture. Cultural clashes between foreign managers and local workers are frequent, especially in the early stages of production when the two groups do not know each other very well. Investors agree that Ethiopian labourers tend to put emphasis on self-respect and appreciation of their national cultures and history. Commitment to work seems to vary and workers’ motivation may have to be fostered. Investors agree that the vast majority of labour force does not react to financial incentives. However, individual mentoring and investing in people’s food and shelter has proved effective in motivating people to improve their productivity.
The knowledge base of unskilled workers may sometimes be poor, which then complicates the early stages of training and upskilling. Vocational training still does not result in the needed skilled workers. Investors also note a high staff turnover after staff acquire new skills around 5-8% of staff per month, sometimes rising to 10%. Skilled workers tend to be scarce, particularly outside Addis Ababa and expensive with costs on a par with middle-income countries.
Investors also sometimes complain about cumbersome and time-consuming procedures for bringing expatriate workers.
All private operators in industrial parks contract their workers through the grading centre of the industrial park and are satisfied with this approach. Investors are pleased with the technical abilities of their staff and concur that new workers can be quickly brought up to speed. Companies usually start with a relatively high number of expatriate staff but they steadily replace them with local workers by referring to in-house training. As many of the companies operating in the park are multinational, they bring their newly hired engineers and middle management staff from sites in other parts of the world (e.g. in Asia or Europe) to train them for several months. They report satisfaction with this approach of training their staff even though wage expectations may rise following these trainings that usually last between three months to one year. Soft skills, such as communication, teamwork and time-keeping also require particular attention.
The current power generation capacity is approximately 4,180 MW with an average performance of 52 percent. More power plants with an additional cumulative capacity of 6,300 MW are under construction, including the Grand Ethiopian Renaissance Dam, which is set to be the largest hydro-electric power dam in Africa, which alone will create an additional generation capacity of 6,000 MW. The Dam is expected to commence full operation by 2022 GC.
Industrial parks enjoy access to reliable electricity supply as each of them features a dedicated power station.
|Industrial low voltage three phase||USD||0.02||2018||per KWh|
|Industrial high voltage (15 KV) three phase||USD||0.02||2018||per KWh|
|Commercial three phase||USD||0.03||2018||per KWh|
Ethiopia has significant water resources. Most of the river courses become full and flood their surroundings during the rainy season (June to August). Recent research suggests that the country has about 124.4 billion cubic metres of river water, 70 billion cubic metres of lake water, and 30 billion cubic metres of groundwater resources. The country has the potential to develop 3.8 million ha of irrigated land and 45,000 MW of hydro-power production.
|Consumption of 300 to 500 m3 per month||USD||0.34||2018||per month at this consumption level|
|Consumption of over 500 m3 per month||USD||0.42||2018||per month at this consumption level|
Ethiopia’s telecommunications services have been growing extensively in terms of area coverage and the number of telephone subscribers (currently at 54 million). The percentage of rural population with access to telephone services within a 5 km radius stood at 96 percent in 2014.
International links are maintained via satellite earth stations and fiber-optic networks providing telephone and digital data transmission.
The EthioTelecom provides landline, mobile telephone, internet and data communication services.
Additionally, as part of the partial privatization initiative to further boost the country's economy through the significant engagement of the private sector, EthioTelecom is the first major enterprise to be put on the table and the process is now in its final stages.
|4 GB||USD||22||2018||per month|
|30 GB||USD||108||2018||per month|
The government has been extensively developing new road infrastructure. In 2016, Ethiopia registered 113,066 kilometres of all-weather roads, including the expressway between Addis Ababa and Adama. The country’s road network is planned to expand to 220,000 kilometres by 2020. A new expressway connecting Addis Ababa with Hawassa is currently under construction.
Ethiopia is currently expanding its railway network.
Ethiopian Airlines (Ethiopian) is the flag carrier of Ethiopia. During the past seventy-plus years, Ethiopian has become one of the continent's leading carriers, unrivaled in Africa for efficiency and operational success, turning profits for almost all the years of its existence. Operating at the forefront of technology, the airline has also become one of Ethiopia's major industries and a veritable institution in Africa. It commands a lion's share of the pan African network including the daily and double daily east-west flight across the continent. Ethiopian currently serves 100 international and 21 domestic destinations operating the newest and youngest fleet.
Indicative costs for a basket of goods are displayed below.
|Water||USD||0.2||2018||Natural water of 0.6 L|
|Beer||USD||0.5||2018||Locally manufactured beer of 0.3 L|
|Coke/Pepsi||USD||0.4||2018||A bottle of 0.3 L|
|Milk||USD||1.03||2018||A regular milk of 1 L|
|Eggs||USD||1.7||2018||A regular habesha egg of 12 pieces|
|Fitness Club||USD||60||2018||Monthly Fee for 1 Adult in a full-fledged fitness center|
|Cinema||USD||2.85||2018||International Release, 1 Seat|
|Preschool (or Kindergarten)||USD||195.56||2018||Full Day, well-known private school, Monthly for 1 Child|
|International Primary School||USD||17,900||2018||Full Day, Yearly for 1 Child|
|Apartment||USD||526.34||2018||(1 bedroom) in City Center, Monthly|
|Relevant documents||Advertising Costs for Branding|
Investors note that electricity costs are low but do not see supply as reliable and often use their own power generators. Moreover, getting production sites connected to the electricity grid may be delayed by months as companies wait for a compulsory inspection.
Getting connected to the water and sewage system is more straightforward but companies often drill their own wells to ensure supply.
In spite of a significant improvement in telecommunications and internet services, investors still believe that the internet connection is thought to be rather slow and unreliable.
Investors also think that it is still expensive to move goods around the country. The road to Djibouti can get blocked and takes a toll on trucks, which may then break down.
Customs are usually very slow and inefficient. The port of Djibouti is often congested and represents a bottleneck. Transit and clearance usually takes between three to four days but sometimes up to two weeks and on occasions even several months.
Some companies operating in industrial parks outside Addis Ababa provide their own potable water because a water treatment facility in the park premises has not yet been built. Investors in industrial parks consider electricity costs low in spite of a recent price hikes, but they keep back up generators. They appreciate the ongoing infrastructure drive.
Foreign nationals are not allowed to buy land. However, foreign investors enjoy the right to own acommodation and other immovable property needed for the investment.
Investors do not find the rules on land allocation to be very clear. Moreover, they criticise the fact that many lots that would be suitable for investments have been assigned in the past but now remain idle, limiting the land supply. On the other hand, companies that have benefitted from land set aside by the government have faced no issues and found the process of land acquisition straightforward.
Most companies operating in industrial park are not sensitive to the land cost and access even if they allege that the rental costs are relatively high. They appreciate the services provided, including reliable and affordable water and electricity.
|Relevant documents||Land Prices in Detail|
Investors may lease land and enjoy their land use rights for a limited period of time. The lease cannot exceed 99 years but is renewable. Lease of land in Ethiopia is categorized into housing, urban and rural land lease and can be obtained through negotiation with the government or through the sub-lease of an existing lease.
Any lease holder may transfer or undertake guarantees on their lease-hold and may also use it as a capital contribution to the amount of the lease payment they have made.
Construction permits are issued at district, municipality, or ministry level depending on the location of the construction.
Applications for permits must be made at the urban administration or designated organ at the location of the construction. The application should contain the following:
A plan which has been approved constitutes a construction permit. The respective constructions bureaus of the investment area are responsible for approving a plan.
|Relevant institutions||Ministry of Construction|
Disputes over land rights are mainly dealt with by courts. Federal and Regional land laws and court establishment laws stipulate provisions for land dispute settlement. Regular courts (Woreda/First instance, High, and Supreme) have binding power over all disputes including those regarding land. However, in some instances, administrative authorities entertain land related disputes even without having specific authority under the law.
Industrial parks are the centrepiece of the government's strategy to attract foreign direct investment.
A number of laws regulate the parks and their constituents (i.e. developers, enterprises and operators) to ensure that industrial park objectives set by the government are met and observed. Parks in Ethiopia are developed by either the government or private developers. Private developers who wish to develop their own parks have to submit detailed project proposal along with other mandatory documents to the Ethiopian Investment Commission.
Industrial parks tend to be located along economic corridors, connected to ports by roads and railways. Their facilities are ready to accommodate tenants and equipped with all the necessary infrastructure.
The criteria for Ethiopia's industrial parks include the following:
|Relevant institutions||Industrial Parks Development Corporation|
The Mekelle Industrial Park opened in 2017:
The Kombolcha Industrial Park opened in 2018:
The GoE is developing the 4 IAIPs to attract private sector investments into agro-industrial parks in Tigray (North), Amhara (North West), Oromia (Central) and Southern Nations, Nationalities and People (SNNP) (South) Regions, respectively, to enhance a much-desired agricultural transformation of the country, create jobs, boost exports, and reduce urban and rural poverty. The Integrated Agro-Industrial Parks are accompanied by Rural Transformation Centers (RTC) for an improved supply of raw materials to the industries.
The IAIP support project sites are located in:
Bure (in Amhara Region)
Location – South west Amara
RTC location- Merawi, Finote Selam, Dangila, Enjibara, Chagni, Amanuel and Motta
Population - Over 2,600,000 people in 100 KM radius
Specialization - Maize and sesame, soybean processing, fruits and vegetables, dairy, meat and other animal products.
Land size - Phase I: 260.35 hectares
Location – central eastern Oromia
RTC location- Shashemene, Dodola, Robe, Bekoji, Ete Eteya, Welenchiti, Meki & Biyo Biske
Population - Over 1,800,000 people in 100 KM radius
Specialization – wheat, Barley, Haricot bean, fava bean, tomato, potato, fruits and vegetables, fish, poultry, dairy, honey, and meat.
Land size/Phase I: 258.62 hectares
Location – Sidama Region
RTC location - Dilla, Yirgachefe, Bule, Daye, Aletawondo, and Hawala Tula
Population - Over 3,700,000 people in 100 KM radius
Specialization – Cereal, coffee, fruit and vegetable, dairy, meat, and other animal product
Land size - Phase I: 176 hectares
Location – Western Tigray
Specialization – sorghum and sesame, fruits and vegetables, honey, dairy and meat, and other animal products
Population - Over 450,000 people
RTC location - Maykadra, Setit-humera, Adigoshu, Adi-hirdi, Maygaba, Dansheha and Shire-Indaselassie
Land size - Phase I: 258.62 hectares
Investors do not find the rules on land allocation to be very clear. Moreover, they criticise the fact that many lots that would be suitable for investments have been assigned in the past but now remain idle, limiting the land supply. On the other hand, companies that have benefited from land set aside by the government have faced no issues and found the process of land acquisition straightforward.
Most companies operating in industrial parks are not sensitive to the land cost and access even if they allege that the rental costs are relatively high. They appreciate the services provided, including reliable and affordable water and electricity.
Tax payers are classified into the following three categories:
Tax returns must be filed annually as follows:
|Relevant documents||Income Tax Proclamation Taxation in Ethiopia|
|Relevant institutions||Ministry of Revenue and Ethiopian Customs Commission|
All companies are required to pay 30% tax on their annual profit (net of all deductibles). However, businesses other than companies are subject to progressive tax rates.
The following expenses shall be deducted from gross income in computing taxable income:
|Income category (Birr)||Tax rate (%)|
|0 - 7200||0|
Employment income can come in the form of salaries, wages, allowances, bonuses, commission, gratuities, or other remuneration received by an employee. Employment income tax on an employee is imposed monthly.
|Income category (Birr)||Tax rate (%)|
|0 - 600||0|
|601 - 1650||10|
VAT is paid at a rate of 15 percent of the value of every taxable transaction by a registered person and all imports of goods and services other than those exempted.
Registration is compulsory where the annual turnover is expected to be 1,000,000 Ethiopian Birr (approximately 36,000 USD) or more.
If at least 25 percent of the value of a registered person's taxable transactions for an accounting period is taxed at a zero rate, the Authority shall refund the amount of VAT applied as a credit in excess of the amount of VAT charged for the accounting period within a period of two months after the registered person files an application for refund, accompanied by documentary proof of payment of the excess amounts.
|Category||Tax rate (%)|
Excise tax is levied on selected items when produced locally or imported.
|Relevant documents||Excise tax rates by type of goods|
|Relevant institutions||Ministry of Revenue and Ethiopian Customs Commission|
Withholding tax is imposed on imported goods on the sum of cost, insurance and freight).
|Category||Tax rate (%)|
|For business entities, non-governmental organizations, private not-for-profit institutes and government agencies||2|
Turnover tax is collected from non-VAT registered taxpayers. Filing of tax returns and payment can be done either at the end of each Ethiopian calendar month or at the end of every quarter of the tax year (that is every three months starting from 8th of July (11 month in Ethiopian Calendar).
All goods imported to Ethiopia are subjected to customs duties and taxes, unless exempted.
An additional surtax is charged on all imports.
In addition, imports may be subject to VAT, excise tax and withholding tax (see above).
Ethiopia has concluded double taxation avoidance agreements with the following countries: Cyprus, Egypt, India, Ireland, Kenya, Malta, Netherlands, Poland, Portugal, Saudi Arabia, Seychelles, Singapore, Slovakia, Sudan, Switzerland, Uganda, United Arab Emirates, United Kingdom and Qatar.
While investors are pleased with the 10 years tax holiday incentive (and most say that it is one aspect that attracted them to Ethiopia), investors are not always pleased with the operation of tax authorities. They bemoan a lack of transparency of calculating the tax assessment base and frequent changes in regulations. Insufficient internal communications at the tax office also means that companies have to keep starting over with the same process as assigned staff might change. Companies have also been asked to pay taxes that were settled years earlier. Investors state that tax controls are infrequent and that errors found by tax collectors during these sporadic visits may have significant consequences for the management.
Issues of transparency and reliability are also reported in relation to the customs office, including with regards to treatment of incentives in industrial parks.
Finally, investors find that the voucher system where producer companies are allowed duty free raw materials lacks full transparency and expose them to penalties.
The Federal Democratic Republic of Ethiopia follows the civil law legal system. The Constitution is the supreme law. Next in hierarchy are the substantive and procedural laws codified in codes, proclamations, regulations and directives. There are proclamations addressing various issues that are passed down by Parliament, followed by regulations that are enacted by the Council of Ministers and implementing directives passed by Ministries or Agencies. All proclamations and regulations are published in the official gazette, Federal Negarit Gazette.
Investments may not be expropriated or nationalised neither directly nor indirectly except for the public interest and only in conformity with the requirements of the law. This is a primary investment guarantee and protection provided in the Constitution and specific investment laws as well as the investment treaties that Ethiopia is party to.
The Constitution as well as the investment law guarantee the right of a person to lodge complaints with regards to the treatment of their investments.
The Bilateral Investment Treaties (BITs) to which Ethiopia is party also provide for specific dispute settlement mechanisms.
Ethiopia has concluded legal and treaty measures that provide investment protection. These are detailed below.
|Relevant documents||Ethiopia-Algeria Ethiopia-Austria Ethiopia-China Ethiopia-Denmark Ethiopia-Egypt Ethiopia-Finland Ethiopia-France Ethiopia-Germany Ethiopia-Iran Ethiopia-Israel Ethiopia-Italy Ethiopia-Kuwait Ethiopia-Libya Ethiopia-Netherlands Ethiopia-Sudan Ethiopia-Sweden Ethiopia-Switzerland Ethiopia-Tunisia Ethiopia-Turkey Ethiopia-Yemen|
The Ethiopian Investment Law provides that all foreign investors shall have the right to the remittance of its profits, dividends, principal, interest payments and compensation paid, out of Ethiopia in a convertible foreign currency. This right is subject to meeting certain requirements set out by the National Bank of Ethiopia.
Any foreign investor shall have the right, in respect of his approved investment, to make the following remittances out of Ethiopia in convertible foreign currency at the prevailing rate of exchange on the date of remittance:
Ethiopia has put in place a system for the protection of intellectual property which include trademarks, certification and collective marks. There are established legal and institutional regimes safeguarding intellectual property rights. Accordingly, the country's national and international commitments are as follows.
|Relevant documents||Copyright and Neighboring Rights Protection Trademark Registration and Protection Access to Genetic resources and Community Knowledge, and Community Rights Plant Breeders’ Right Inventions, Minor Inventions and Industrial Designs Commercial Registration and Business Licensing Investment Proclamation|
Ethiopia has established a competition law to protect consumers from anti-competitive acts of traders or firms. The legal framework on competition prohibits abuse of market dominance, anti-competitive agreements, concerted practices and decisions, protects against unfair competition and provides consumer protection.
The implementing organ is the Trade Competition and Consumer Protection Authority.
|What is the procedure?||Download Ethiopia's Trade Competition and Consumers Protection Law|
|Relevant institutions||Trade Competition and Consumers’ Protection Authority|
Investors feel that their property rights are generally protected and do not fear expropriation. However, investors also remain wary of political unrest, which may affect their business operations.
Foreign exchange shortages have also been identified as a major challenge.
In terms of competition, there is also a sense that some state-owned companies can operate with an in-built advantage.
With more than 112 million people (2019), Ethiopia is the second most populous nation in Africa after Nigeria, and the fastest growing economy in the region. Ethiopia aims to reach lower-middle-income status by 2025. Ethiopia’s economy experienced strong, broad-based growth averaging 9.8% a year from 2008/09 to 2018/19, Ethiopia’s real gross domestic product (GDP) growth rebounded to 9% in 2018/19. Industry, mainly construction, and services accounted for most of the growth. Agriculture and manufacturing made lower contribution to growth.
Ethiopia’s strategy for growth, industrialization and international trade integration is reflected in the Government’s Growth and Transformation Plan (GTP) that was launched in 2009/10 in two phases covering the period of 2010-2015 and the later covering 2016-2020. With the Country’s homegrown economic reform and 10 years development plan covering the period 2020-2030, Ethiopia is set to continue its ambitious development agenda based on its agriculture-based, manufacturing-driven, and export-led growth strategy. The main principles of this strategy are to build to the largest possible extent on linkages between manufacturing industries and agriculture, to focus on the development of the most labor-intensive sectors to generate employment, and to concentrate government support on a selected number of strategic sectors.
The Home-Grown Economic Reform envisages boosting the private sector’s contribution to the overall economy by opening up major public enterprises (Ethiopian Airlines, Ethio telecom, Ethiopian Electric Power Corporation, and Ethiopian Shipping & Logistics Services Enterprises) to private and foreign investment.
Ethiopia’s economy is pre-dominantly based on agriculture. However, the government is working to diversify into light manufacturing such as agro-processing, leather and leather products, textile and textile products and import substituting sectors (chemicals, basic iron, steel and pharmaceuticals).
Exports: Ethiopia exported US$3.2 billion worth of goods in 2017. Ethiopia’s export trade is largely dominated by agricultural commodities such as coffee, tea, spices, vegetables, cut flowers as well as gems, precious metals, hides, leather and footwear.
Imports: Ethiopia bought US$14.7 billion worth of imported products in 2017. Ethiopia imports manufactured industrial and consumer goods. Its major import products are machinery, vehicles, electronic equipment, mineral fuels, iron and steel, and pharmaceuticals.
Ethiopia is a
member of a number of bilateral, multilateral, and international
free trade and preferential duty-free agreements.
With a total population of over 750 million people, the African market represents an important area of potential for investors in Ethiopia. Ethiopia is a member of COMESA with preferential market access to a regional market of 400 million people. Ethiopia also entertains duty-free, quota-free access to the USA and EU markets through AGOA and EBA, respectively. Additionally, duty-free, quota-free access to Japan, Canada, China, Turkey, Australia, and New Zealand covering substantially all export goods from Ethiopia. Preferential market access to India.
The African Continental Free Trade Agreement (AfCFTA) has recently been launched including all fifty-four African countries with a population of more than one billion people and a combined gross domestic product (GDP) of more than US $3.4 trillion. According to the documents prepared to establish the free trade area, the major aim of AfCFTA is to create a single continental market for goods and services, which will ensure free movement of business persons and investments, as well as create an avenue for the establishment of the continental and the African Customs Union. Once finalized, It is a market access mechanism that is expected to deliver several benefits to the African Continent. AfCFTA will enhance Intra-African trade through trade liberalization.
Under European Union's Everything But Arms Initiative (EBA), least developed countries (LDCs) enjoy duty-free access to the EU market for all products except arms and ammunition. Sugar and other processed foods are permitted.
Developing countries benefit from preferential duty-free access to the United States for up to 5,000 products, under its Generalized system of preferences (GSP). Eligible include: most manufactured items; many types of chemicals, minerals and building stone; jewelry; many types of carpets; and certain agricultural and fishery products. Among the products that are not eligible are: most textiles and apparel; watches; and most footwear, handbags, and luggage products.
Under the African Growth and Opportunity Act (AGOA) Sub-Saharan African countries benefit from duty-free access to the United States for an additional range of 1,800 products that are excluded from the Generalized system of preferences. These include most textiles and apparel; watches; and most footwear, handbags, and luggage products. With regards to apparels, the textiles and yarns must in general originate from Sub-Saharan African countries or the United States.
COMESA forms a major market place in Africa bringing together as it does 19 member states covering a total population of 444 million. A Free Trade Area (FTA) was created in 2000 and now encompasses 15 of the 19 member states (all but Democratic Republic of the Congo, Eritrea, Ethiopia and Seychelles). A customs union is planned in the close future with the eventual elimination of quantitative and non-tariff barriers for goods originating from within the region. Common external tariffs are also foreseen. Given the technical and legal challenges posed by a number of countries being both members of COMESA and the EAC single market, it is likely that the conditions of the COMESA union will be harmonized with that of EAC.
Its member countries are: Burundi, Comoros, Democratic Republic of the Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia, Zimbabwe.
The East African Community (EAC) comprises Burundi, Kenya, Rwanda, Tanzania and Uganda. Its membership means being part of a single market with a population of 138 million and a GDP of $82.1 billion.
As a member of the EAC single market, all goods manufactured in one EAC country and sold in another are treated as if they were manufactured locally, by virtue of there being no internal tariffs between partner countries. Non-tariff barriers to trade are also being removed. The same countries also levy a common external tariff for goods entering the EAC, with the aim of promoting manufacturing and the processing of raw materials. Under this scheme, raw materials are imported duty free, intermediate goods are charged 10 percent and finished goods 25 percent.
Future steps being considered include a monetary union and a political federation. Expansion is also being considered. In 2011 South Sudan, with its petroleum industry, applied to join, at the invitation of Kenya and Rwanda. DRC, with its vast mineral reserves has observer status.
|Relevant documents||EAC map (UN cartography)|
The share of manufacturing in the country stands at about 6% of GDP and employs approximately 0.5% of the population. However, Ethiopia possesses huge investment potential in the sector especially in light manufacturing and import substituting sectors. Besides, the sector is regarded by the government as the engine of accelerated and sustained economic growth.
Relative strengths for Ethiopia include:
This is a priority sector, which has seen growth of more than 50 percent over the past six years mainly due to expansion propelled by foreign direct investment. The country’s comparative cost advantage in the sector is supported by investor friendly policies, industrial parks dedicated to the sector, attractive investment incentives, quota and duty-free access to a number of markets such as USA and Europe and affordable labour.
The sector has been able to garner many internationally known brands and companies such as H&M, PVH, Kanoria, DBL from Bangladesh, Ayka Addis (the Ethiopian subsidiary of the Turkish textile giant Ayka Textiles) and others.
The government is also looking to increase domestic cotton production in order to supply yarn for the sector. It has identified 3 million hectares of land suitable for cotton production and there would be opportunities in cotton production, spinning and weaving.
JP Textile was among the first firms to move into the Hawassa industrial park. The Chinese textile manufacturer started its production in July 2017 and currently sells its fabric within the park to other companies, including as PVH, Arvin, Century, Everest and PAL.
So far, JP Textile has made investments exceeding 30 million USD. Encouraged by its experience in the park and business results, the company is gearing up to carry out its future investment plans totalling 70 million USD by 2026. Having already secured the necessary lot, JP Textile wants to set up new dye production and associated printing production lines and expand into garment.
They have 570 local employees and 62 expatriate workers working for JP textile in the Hawassa Industrial Park. Like other manufacturers in the area, the management of JP Textile is takes measures to gradually bring the number of expats down.
JP Textile currently imports all chemical products as well as yarn from abroad. The yarn supplier, Wuxi No.1 is set to open a spinning factory in the city of Dire Dawa. JP Textile looks forward to the establishment of the new production site in the East of Ethiopia, expecting a positive effect on its supply operations.
The annual pharmaceutical market in Ethiopia is estimated to be worth about US$ 500 million, and it is growing at 25 percent per year. More than 85 percent of the country’s demand for pharmaceutical products is met by imported drugs. In July 2015 Ethiopia became is the first country in Africa to establish a pharmaceutical strategy, one of the key priority sectors of the government.
The government has allocated industrial park space for pharmaceutical production just outside Addis Ababa and has put in place a procurement policy with advance payment of 30 percent of sales and 25 percent price protection when competing with foreign suppliers. There is also full exemption from payments of custom duties and other taxes levied on imports such as raw materials, capital goods and construction materials.
The government is also committed to the development of a pharmaceutical value chain and has more then ten pharmacy colleges.
|Relevant documents||National Pharmaceutical Industry Strategy|
The government has keen to add value to the country’s agriculture-oriented economy through the development of the agro-processing sector.
To this end, it has been developing agro-industrial parks equipped with specialized infrastructure consists of cold storage units, quarantine facilities, quality control labs, quality certification centers, raw material storage, and central processing centers.
There is strong demand for consumer goods in the form of processed food items and this can provide an import substitution opportunity.
The GoE is developing 4 Integrated Agro-Industrial Parks to attract private sector investments into agro-industrial parks in Tigray (North), Amhara (North West), Oromia (Central) and Sidama (South) Regions, respectively, to enhance a much-desired agricultural transformation of the country, create jobs, boost exports, and reduce urban and rural poverty.
Ethiopia’s economy is dominated by subsistence agriculture. The sector employs more than 80 percent of the population and accounts for around 46 percent of GDP. Ethiopia has generally good agronomic conditions for the cultivation of a wide variety of food crops, industrial crops, cash crops, beverage crops and oilseeds. Opportunities exist in the following areas.
Cereal crops: Wheat, barley, corn, rice and teff
Pulses: Soya beans, haricot beans, chickpeas, beans and lentils
Horticulture and floriculture
Oilseeds: Sesame, Niger seeds, canola, linseed, groundnuts and sunflower
Despite Ethiopia's many attractions, both natural and human made, and ten UNESCO World Heritage sites, the sector only contributes 4.1 percent to the country’s GDP, and 3.6 percent to total employment. Work on infrastructure enhancement is underway in a bid to increase the investment attractiveness of the sector.
Over 800 thousand tourists visited Ethiopia in 2016, bringing over 5.6 billion US dollars to the country.
The investment community in Ethiopia is enthusiastic about the country’s investment opportunities. In particular, they have highlighted manufacturing, agriculture, packaging, logistics, consumer goods, pharmaceuticals, health services (for both people and livestock), infrastructure and IT as sectors with particular promising growth prospects. Existing textile companies are planning to expand their operations and encourage more investors to invest in this quickly growing sector. Some of them plan to develop complementary business to reach vertical integration.
Local culture and arts also represent valuable intangible assets.
Investors have called for a clear legal framework for PPPs to encourage investment in new infrastructure projects.
Ethiopia has become a preferred destination for foreign direct investment and emerging hub for manufacturing in Africa due to its:
|Official name||Federal Democratic Republic of Ethiopia|
|Political system||Federal State with a multi-party system|
|Capital city||Addis Ababa, seat of the African Union (AU) and United Nations Economic Commission for Africa (UNECA)|
|Location||Horn of Africa, at the crossroads between Africa, the Middle East and Asia|
|Area||1.1 million square kilometers|
|Population||2nd most populous country in Africa with a population size of over 105 million|
|Language||Working Federal language - Amharic, English is widely spoken|
|Exports||Leading exports: coffee, oilseeds, gold, pulses, horticulture, live animals, growing manufacturing export (textile and apparel, leather and leather products etc.)|
|Climate||Temperate in the highlands: 20°C - 30°C, low in the lowlands: up to 45°C Rainfall ranges from 200 mm to 2000 mm and highly suitable for production.|
|GDP per capita||842 USD|
|Annual GDP||about 80billion USD|