|Ethiopia - Econimic
Ethiopia is strategically located in northern part of Africa known as the “Horn of Africa”, at crossroads between Africa, the Middle East, and Asia. It covers an area of 1.14 million km2 (445,000 square miles). Ethiopia is bordered by Djibouti and Somalia to the east, Eritrea to the north, the Sudan to the west and Kenya to the south. It is strategically located in the horn of Africa, which is close to the markets of the Middle East countries and therefore export products can enter these markets with less transaction costs and prompt delivery time. Amharic is the official language of the Federal Government. English is the medium of instruction in secondary schools and higher education institutions. It is also widely used in business transactions, particularly in banking and insurance firms. Christianity and Islam are the major religions.
Ethiopia’s Economic Performance and Future prospects:
Ethiopian economy can be largely characterized as an agrarian economy and the Government has charted out an overall strategy, known as Agriculture Development – Led Industrialization (ADLI), which aims at the gradual transformation of the economy from Agriculture towards Industry and services through sustainable increase in Agricultural productivity. The strategy revolves around the productivity improvement of industrialization based on the utilization of domestic raw materials and labour intensive technology with an ultimate aim of boosting export.
Based on this Strategy, Ethiopia has been undertaking a drastic structural adjustment program and the government has put in place bold political reform programs, Marco economic polices and sectoral strategies. At present peace and stability have prevailed throughout the country, which is the main basic prerequisites for business development.
The political stability and the economic reform measures under taken so far have been bearing fruitful results. The economy has showed a marked improvement growing at annual average of about 8.5% per annum during the last three years.
The Government in its continued effort to develop a competitive industrial sector, has also recently launched an Industrial Development Strategy and clearly identified areas that deserve special attention and support by the government. Among these are:
- Textile and Garment Industries, leather and Leather Products manufacturing industries, agro-processing industries, construction industries and micro and small scale industries are the major ones.
To be able to fully support the private sector, the government of Ethiopia in its frame work for the five year period plan (2005-2010) for Accelerated and Sustained Development to End Poverty (PASDEP), has embarked upon major infrastructure development plans with various projects in the area of:
- Constriction of 20,000 km new roads, rural water supply construction of 1870 deep wells, 12755 shallow wells and others, construction of 5 major new dams, and a major telecommunications initiative is under way to increase the fixed telephone from 61037 to 4.3 million, the cellular mobile from 410 603 to 1.6 million and internet from 15,000 to 150,000 subscribers for which major funding is provided by the World Bank, African Development Bank, donor countries and others.
There are also various projects in other sectors like sugar, cement, mining and agriculture.
With the ultimate aim of facilitating investment, Ethiopia has widely opened its doors to foreign Investments to encourage and attract foreign and local investors to widely and actively participate in its development endeavors.
The incentives provided, just to mention a few are:
- Tax holiday ranging from 2-10 years, duty exemption on all investment goods imported from abroad, loss carry forward for business enterprises that suffer losses during the tax holiday period, foreign exchange retention and remittance of profits, dividend and other gains, duty draw back schemes for exporters, and voucher system and bonded manufacturing ware house scheme for exporters,
The government has recently made readily available plots of land and is continuing to do so with all infrastructure facilities in major cities and towns of the country inorder to speed up the allocation of land at a reasonable lease rates with special priority for investors wishing to invest in export oriented project; particularly in priority areas. A swift and efficient service delivery system to satisfy the needs of prospective investors, “one-stop-shop” is adopted.
The constitution and the investment proclamation adequately protect and guarantee private property against nationalization and expropriation. In order to minimize non-economic commercial risks and to build confidence in the minds of foreign investors, Ethiopia has signed multilateral and bilateral investment guarantee, protection and promotion agreement with MIGA, OPIC and with many FDI sources countries.