investment opportunities in Ethiopia
investment opportunities in Ethiopia
investment opportunities in Ethiopia
INVITATION BY THE MINISTER INCHARGE;
Mehreteab Mulugeta, Minister Councilor (II), Economic & Business Ethiopia, said there is a lot of scope for trade and investment in Ethiopia. His team participation in Punjab International Trade Expo has been fruitful to the extent that they have been able to fathom the possibilities and opportunities of enhancing the bilateral trade between the two countries especially, the northern India and particularly Punjab and Haryana.Ethiopia is looking forward to garner the expertise in agricultural techniques and the latest technology being used there for better output.
He shared that Ethiopia, has lots of opportunities in agriculture. It has lot of surplus land available for agriculture. The Ethiopian government provides the Indian farmers going there with many facilities.
He also informed that under an Ethiopian Government policy, last year, the government has established a land bank under the ministry of agriculture. A total of 1.7 million hectares has been reserved under this policy for Foreign Direct Investment. This land is given on a lease for 25 to 45 years. Anybody investing in Ethiopia is facilitated with a seven year tax holiday. Moreover, he said that if an investor exports 75 percent of their produce, he is eligible for a loan from local banks to the tune of 70 percent of the total project.Any investor can repatriate 100 percent equity to any country out of Ethiopia.
An investment of one lakh US dollars is the minimum requirement for trade and investment in Ethiopia. He further informed that anybody investing here is given full support to reach out to relevant authorities and settle one's trade in the country.
About 40 enterprising farmers are presently exploring the opportunities to set up their farms in Ethiopia, informed the minister.
INCENTIVES TO INVESTORS;
The Ethiopian Government feels that the private sector is an engine of growth and that private capital should play an important role in the economy. The government has eliminated most of the discriminatory tax, credit and foreign trade treatment of the private sector, simplified administrative procedures, and established a clear and consistent set of rules regulating business activities. Despite the promotion of the private sector, state-owned enterprises and ruling party-owned entities dominate the major sectors of the economy.
Though bureaucratic hurdles continue to affect implementation of projects, the Ethiopian Investment Agency (EIA), the main contact point for foreign investors, has improved its services and provides an expedited "one-stop shop" service that significantly cuts the time and cost of acquiring investment and business licenses.
A National Foreign Investment Promotion Advisory Council operates with the goal of conducting foreign investment promotion on textiles and garments, leather and leather products, fruits and vegetables, and agro-processing areas. The Council's major tasks are to collect and make available basic data regarding land allocation, utilities connection, investment opportunities, market and other relevant information.
Foreign investors do not face unfavorable tax treatment, denial of licenses, discriminatory import or export policies, or inequitable tariff and non-tariff barriers.
CHANGES IN POLICY DECISIONS:
In 2009, the Ethiopian Government shifted its agricultural policy focus towards encouraging private investment in larger-scale commercial farms. The Ministry of Agriculture and Rural Development (MoARD) created a new Agricultural Investment Support Directorate that is currently negotiating long-term leases (all land is owned by the government) on more than 7 million acres of land for these commercial farms.
The new Directorate's goal is to boost productivity, employment, technology transfer, and foreign exchange reserves by offering incentives to private investors.
OPPORTUNITIES IN POWER SECTOR;
Rampant power outages forced factories and businesses to cease operations for several days per week in 2009. Power supply improved in late 2009, but demand still outpaces supply. The Ministry of Mines and Energy (MoME) is actively seeking additional investment in Ethiopia's energy sector to resolve its power crisis and even has plans to export electricity to neighboring countries. MoME is specifically interested in renewable energy sources and is finalizing a draft feed-in tariff bill which will establish the rates and conditions for independent power producers to sell electricity to the national grid. In June 1996, the Ethiopian Government issued a revised Investment Code which provided incentives for development-related investments, reduced capital entry requirements for joint ventures and technical consultancy services, created incentives in the education and health sectors, permitted the duty-free entry of capital goods (except computers and vehicles), opened the real estate sector to expatriate investors, extended the losses carried forward provision, cut the capital gains tax from 40 percent to 10 percent, and gave priority to investors in obtaining land for lease. Amendments to Ethiopia's Investment Proclamation were issued in September 1998 and July 2002, further liberalizing the investment regime and removing most of the remaining restrictions
SECTORS WHERE THERE IS NO ENTRY SECTORS RESERVED FOR LOCALS;
Ethiopia's investment code prohibits foreign investment in banking, insurance, and financial services. Other areas of investment reserved for Ethiopian nationals include broadcasting; air transport services; travel agency services, forwarding and shipping agencies; retail trade and brokerage; wholesale trade (excluding supply of petroleum and its by-products as well as wholesale by foreign investors of their locally-produced products); most import trade; export trade of raw coffee, chat, oilseeds, pulses, hides and skins bought from the market; live sheep, goats and cattle not raised or fattened by the investor; construction companies excluding those designated as grade 1; tanning of hides and skins up to crust level; hotels (excluding star-designated hotels); restaurants and bars excluding international and specialized restaurants; trade auxiliary and ticket selling services; transport services; bakery products and pastries for the domestic market; grinding mills; hair salons; clothing workshops (except by garment factories); building and vehicle maintenance; saw milling and timber production; custom clearance services; museums, theaters and cinema hall operations; and printing industries.
Another important change made in the 2002 amendment was the reduction in the minimum capital requirement of foreign investors from USD $500,000 to USD $100,000 per project for wholly-owned foreign investments and from USD $300,000 to USD $60,000 for joint investments with domestic investors.
INFLATION IN THE COUNTRY;
Ethiopia has been battling high inflation in recent years. Year-on-year inflation peaked at 64 percent in July 2008-In efforts to combat inflation, the Ethiopian Government enacted various measures beginning in late 2008, including capping the lending limits of banks; reducing government borrowing from domestic banks; eliminating the domestic fuel price subsidy; depreciating the local currency; importing wheat and selling at subsidized prices; and lifting import duties on food imports. Ethiopia's central bank, the National Bank of Ethiopia (NBE), retains a monopoly on all foreign currency transactions. The NBE supervises all payments or remittances made abroad. The local currency (Birr) is not freely convertible.
The Ethiopian Government depreciated the Birr more than 30 percent against the U.S. Dollar between 2004 and 2009. In January 2010, the Birr traded at 12.7 per U.S. Dollar. 16.5 in December 2010.
REMITTANCE FACILITIES;
Ethiopia's Investment Proclamation allows all foreign investors whether or not they receive incentives, to remit freely profits and dividends, principal and interest on foreign loans, and fees related to technology transfer. Foreign investors may also remit proceeds from the sale or liquidation of assets from the transfer of shares or of partial ownership of an enterprise, and funds required for debt service or other international payments. The right of expatriate employees to remit their salaries is granted in accordance with the foreign exchange regulations of the National Bank of Ethiopia (NBE). While these transfers are legally allowed, foreign companies face significant delay in the repatriation of profits as the NBE does not have enough hard currency to allocate to this process.
New investors engaged in manufacturing, agro-industrial activities or the production of certain agricultural products and who export at least 50 percent of their products or supply at least 75 percent of their product to an exporter as production input are exempt from income tax for five years.
An investor who invests in the relatively underdeveloped regions of Gambella, Benishangul and Gumuz, South Omo, Afar or Somali Region will be eligible for an additional one-year income tax exemption. The government has established a special loan fund through the Development Bank of Ethiopia (DBE) and made available land at low lease rates for priority export areas such as floriculture, leather goods, textiles and garments, and agro-processing related products.
DUTY FREE IMPORTS INTO THE COUNTRY;
Investors are allowed to import duty-free capital goods and construction materials necessary for the establishment of a new enterprise or for the expansion of an existing enterprise.
Land leasehold regulations vary in form and practice by region. Land has been made readily available by the authorities to foreign investors in the manufacturing and agriculture sectors, but less so for real estate developers. Investment, business, and other licenses for foreign investors can now be obtained from the Ethiopian Investment Agency in a matter of hours.
STATUS OF CORRUPTION;
While Ethiopia has been relatively stable and secure for investors, cases of ethnic or religious violence have become more frequent and political tensions are high.
The UN Investment Guide to Ethiopia (2004) asserted that routine bureaucratic corruption is virtually non-existent in Ethiopia. The guide added that bureaucratic delays certainly exist, but are not devices by which officials seek bribes.
COUNTRIES WHICH HAVE BILATERAL RELATIONS WITH THE COUNTRY;
Ethiopia has bilateral investment and protection agreements with China, Denmark, Italy, Kuwait, Malaysia, Netherlands, Russia, Sudan, Switzerland, Tunisia, Turkey, Yemen, Spain, Algeria, Austria, UK, Belgium/Luxemburg, Libya, Egypt, Germany, Finland, India, and Equatorial Guinea and a protection of investment and property acquisition agreement with Djibouti.
LABOUR AVAILABILITY;
Ethiopia's labor force is estimated at 35 million, of which 80 percent are employed in subsistence agriculture, mostly as farmers. The Ethiopian Government and armed forces are the most important sectors of employment outside of agriculture and provide work for almost 3 million people. Approximately 40 percent of the urban workforce is unemployed. The high urban underemployment is partially offset by an informal economy.
Labor remains readily available and inexpensive in Ethiopia. Skilled manpower, however, is scarce in many fields. Ethiopia's illiteracy rate is over 60 percent.
STATUS OF CHILD LABOUR;
Child labor is widespread in Ethiopia. While not a pressing issue in the formal economy, child labor is common in rural agrarian areas and the informal economy in urban areas. Employers are statutorily prohibited from hiring children under the age of 14. There are strict labor laws defining what sectors may hire "young workers," defined as workers aged 14 to 18, but these laws are infrequently enforced. Ethiopia generally enjoys labor peace.
STRIKES BY LABOUR;
There was no formal labor strike in 2009 possibly due in part to the government's prohibition on public demonstrations. There is no national minimum wage standard, and many workers find it difficult to attain a decent standard of living. There is no area designated as foreign trade zones and/or free ports in Ethiopia.
ABSENCE OF PORT TRUST;
Because of the 1998-2000 Ethiopian-Eritrean war, Ethiopian exports and imports through the Eritrean port of Assab are prohibited. As a result, Ethiopia conducts almost all of its trade through the port of Djibouti with some trade via the Somaliland ort of Berbera.
Floriculture, horticulture, and leather are the sectors that have attracted the most FDI. Recently, commercial farming has attracted Indian, Saudi, European, and U.S. investors. The stock of U.S. foreign direct investment since 1992 in Ethiopia reached USD $255 million as of September 2009, which includes both projects under implementation and operation.
US COMPANIES OPERATING IN THE COUNTRY;
U.S. companies with a significant presence and participation in Ethiopia's economy include Boeing, Cargill, Sheraton Hotels, Lucent Technologies, Cisco, Coca-Cola, Pepsi-Cola, Schaffer & Associates, Pioneer Hi-Bred Seeds, Federal Express, United Parcel Service, Caterpillar, Mack
Trucks, General Motors, Rank/Xerox Corporation, John Deere, Navistar, Rx for Africa, and Hughes Network.
FINAL CONCLUSION, ADVISES;
Dilip Sharma, regional director, PHD Chamber, said a delegation from India had visited Ethiopia recently and explored trade opportunities there. He said because of little population and availability of surplus land there were ample opportunities for investment in agriculture, food processing and mining in Ethiopia.
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