ETHIOPIAA NEW INVESTMENT FRONTIER IN AFRICA

No.

Table of Content

Page

1.

Introduction

4

2.

The Ethiopian Economy

7

3.

Governance in Ethiopia

104.

Investment Opportunities

11

5.

Major Investment Areas

20

6.

Areas of Investment Reserved for Domestic

37

Investor
7.

Investment Policy and Administration

39

8.

Major Investment Incentives

41

9.

Areas of Investment not Eligible for Exemption

46

from payment of Customs Duty
10.

Areas

of

Government

Investment
or

Joint

reserved

fortheInvestment

with

the

47

Government
11.

Requirements to Obtain Investment Permits

48

12.

Useful Contact Address in Ethiopia51

1. Introduction
Ethiopia is strategically located in

Ethiopia is a country enjoying great

Northeast

approximately

geographical features ranging frombetween latitude 430N and 150 N andhighest peak at Ras Dashen (4,550

longitude 330 N and 480E. The territory

meters above sea level), to the Afarof Ethiopia covers about 1,133,700

Depression (125 meters below sea level).

(1.14millions)kilometers.

There are broadly three climatic zones;

Ethiopia shares border with five Eastthe ‘kola’ or hot lowlands (below

African countries - a long borderline inapproximately 1,500 meters), ‘weyna

the West and Northwest with the

Dega’

Sudan, in the North with Eritrea andannual temperatures range from 10-160c

in the South with Kenya, in the Eastin the ‘Dega’,16-290c in the ‘Weyna

and Southeast with Somalia and in the

Dega’ and 29-330c in the‘Kolla’. In

East with Djibouti.

general, the highlands receive more rain

Africa,square(1,500-2,400

meters)mean

than the lowlands.

Ras Dashen – the highest peak in Ethiopia

4Map of Ethiopia

The capital city of Ethiopia, Addis

1958 and later 1963, chosen to be theAbaba is located at 900030 latitude andseat of the organization of African

380420E longitude, situated roughly inUnity, now officially transformed into

the center of the country. Addis Ababa

African Union (AU). This was madeis recognized as the diplomatic capitalpossible due to Ethiopia’s position as aof Africa. It was made the headquarter

symbol of independence and freedom inofthe African continent and its efforts

UnitedNations

Economic

Commission for the Africa (ECA) in5

over the years to bring about unity

only 3.2% of the whole population areamong Africans.

aged 60 years and above. Therefore, theyouth account for a large percentage of
the Ethiopian population.

The Headequarters of the African
Union in Addis Ababa

According to Population and Housing
Census conducted by the Central

The

Headquarter

of

the

UnitedNations Economic Commission for
Africa (UNECA)

Statistical Authority (CSA) of Ethiopia

The population comprises more than 80

in 2007, the total population ofnationalities

Ethiopia was 76.9 million which makes

languages and several dialects. Amharicit the Second largest population inis the official language of the Federal

Africa next to Nigeria. Of the total

Democratic Republic of Ethiopia.

number of population, 49.5% andEnglish is the medium of instruction in

50.5% are female and male respectively.

secondary

In Ethiopia 45.0% of the population isuniversities and is widely used inunder the age of 15 years, 51.9%

business, particularly in banking andbetween the ages of 15 and 59 years andinsurance.

speaking

schools,about

colleges

83

and

6

Panoramic View of the Capital City Addis Ababa (which means New Flower)

2. The Ethiopian Economy
The mainstay of the Ethiopian economy

country’s foreign exchange earnings,

is the agricultural sector, which

while oilseeds accounted for 24% inaccounts for about 43% of the GDP.

2008/2009. Other Ethiopian export

An estimated 85% of the population

items include, among others, leather andgains its livelihood directly or indirectly

leather products, meat (Canned andfromfrozen), flowers, fruits and vegetables,

agricultural

production.

The

agricultural sector is also the main
source of Ethiopia’s export commodities.
Coffee is Ethiopia’s major export
commodity accounting for 26% of thepulses and gold.
The share of the agricultural sector in
the overall Ethiopian economy has

7shown decline over the last couple ofothers. On the other hand, the "service"

years. While the share of the Industrial

sector consists of trade, transport andsector remains more or less stablecommunications, banking, insurance

accounting on average for 13.4% of theand real state, health, domestic andtotal GDP in the last six years, theother personal services.

share of the service sectorhassignificantly increased accounting for45.1% of the GDP in 2008/2009.

The Ethiopian government has adopted
an Agricultural Development Led
Industrialization (ADLI) policy and

Sectoral Distribution of GDP

strategy which aims to extricate theEthiopian people from poverty andensure rapid economic growth anddevelopment in the country.

Thegovernment’s vision is for Ethiopia toachieve the Millennium Development
Goals (MDGs) in 2015 and join theranks of middle income countries in thenext two decades. In this respect,enormous progress has been achieved in

Source: MOFED

Some of the industries in Ethiopia arefoodprocessing

andbeverages,

automotive industries which include
production of components and parts,
textileandtextileproducts

andgarments, leather and leather products,
fertilizers (mini-Plant) and chemicals,
drugs and pharmaceuticals among

terms

of

reducing

povertyandimproving the people’s livelihood. In thelast six consecutive years, the Ethiopian
economy has registered on average
11.5% growth which indicates that thecountry is indeed

on the rightdevelopment trajectory. During thesame period, the agriculture, Industry

8and service sectors grew on average by

10.8%, 10.1% and 13%, respectively.

Sector of the

2003/

2004/

2005/

2006/

2007/

2008/

Economy

2004

2005

2006

2007

2008

2009

AverageReal Growth Rates

Real GDP Growth

11.7

12.6

11.5

11.8

11.2

9.9

11.5

Agriculture

16.9

13.5

10.9

9.4

7.5

6.4

10.8

Industry

11.6

9.4

10.2

9.5

10.0

9.9

10.1

Services

6.3

12.8

13.3

15.3

16.0

14.0

13.0

Percentage Shares
Agriculture

47.0

47.4

47.1

46.1

44.6

43.2

45.9

Industry

14.0

13.6

13.4

13.2

13.0

13.0

13.4

Services

39.7

39.7

40.4

41.7

43.5

45.1

41.7

18.0

22.9

23.6

30.6

44.5

35.2

29.1

GDP at Current
Market Prices(Growth Rate)

Source: MOFED

global economy has started signs of
As can be seen from the above table,

recovery, the Ethiopian economy is

Ethiopia’s total GDP has doubled

expected to register robust growth thiscompared to 2003/2004 as a result ofyear. In its statement issued on the 24th

the country’s fast economic growth inof March 2010, the International

the last six years. Although the global

Monetary Fund (IMF) reaffirmed that

economic crisis had negatively impacted“good progress was made in the first

upon

the

Ethiopianeconomyhalf of 2009/2010 in macroeconomic

particularly

affectingexport,stabilization” and that “the economic

remittances and capital flows, theoutlook remains generally favorable

country has managed to register 9.9%with continued strong growth expected”.

economic growth in 2008/2009. As the

According to the Economist magazine,

9Ethiopia is also forecast to be one of theworld in 2010.

five fastest growing economies in the

3. Governance in Ethiopia
The Federal Democratic Republic ofand the House of Federation. The

Ethiopia was established in 1995 as aFederal Government is composed of theresult of the adoption of a new

Legislative, the Executive and theconstitution which introduced a Federal

Judiciary. The House of People’s

System in the country composed of theRepresentatives is the highest authority

Federal Government, Nine Nationalof the federal government.

Regional States and two chartered cities.

Members of the Ethiopian Parliament
exercising their vote
Ethiopian Prime Minister H.E. Mr.

Since the EPRDF assumed power inMeles

1991, Ethiopia has enjoyed peace and

ZenawiaddressingtheParliament

Ethiopia

stability over the last two decades. This
has

also

institutedahas also ushered in a new era ofparliamentary form of government withdemocratic dispensation. In this regard,a bicameral parliament comprising of

the country has conducted three

the House of People’s Representatives

national and regional elections in a10

successful manner. At this juncture, thenational and regional elections in May

country is preparing to hold the fourth

2010.

4. Investment Opportunities
Ethiopia is endowed with immense

cereals. Moreover, the country has thenatural resources. Geographical studies

largest number of heads of cattle inhave proven that the country has not

Africa. All these resources no doubt

only a significant amount of rare andoffer huge potential for investment inprecious minerals but also possesses vast

the country.

deposits of construction minerals.

Block of gray limestone in Harar
Tantalite belt in southern Ethiopia

It has been a while since Ethiopia has

Due to its enormous water resources,

opened its door for business. The

Ethiopia is referred to as the “Water

downfall of the Derg regime has ushered

Tower of Africa”. The existence of vast

in a new era in terms of the country’s

and potentially irrigable land coupledeconomic development. Ethiopia haswith wide-ranging agro-climatic zones

adopted market oriented economic

and rich fertile soil also makes thepolicy in order to bolster its economic

country suitable to grow all types of11growth. Particularly, efforts have beenof economic activities. They can have up

made to create a conducive climate forto 100% equity ownership of new

investment with a view to stimulating

investments or invest jointly with

rapid economic growth and development

domestic entrepreneurs. Ethiopia hasin the country. In this respect, a liberal

ratified the convention establishing theinvestment code has been enacted toMultilateralpromote both domestic and foreign

Agency (MIGA) and investors areinvestment, which provides a number oflegally protected against expropriation

incentives including tax holidays, duty

andexemption and free remittance of funds

Ethiopia

as well as retention of foreign exchange

investment promotion and protection

earnings. Accordingly, foreign investors

agreement with a number of countries.

Investment

nationalization.
hassignedGuarantee

Moreover,bilateral

are allowed to invest in a broad range

Blue Nile Falls

12Television Assembly Plant

Corrugated Iron Sheet manufacturing
plant

The availability of cheap and easily
trainable labor force in the country
gives investors comparative advantage
in labor intensive industries such as
textile, garment, leather and leather
products. The country’s geographicalproximity to the Middle East andEuropean markets provides ample
opportunities for its exports. Ethiopia isa member of COMESA, a regional
economic grouping of Eastern andSouthern African countries with a total
population of around 430 million, alsooffers substantial market opportunities.

Moreover, the country is benefitingfrom new market access opportunities
given to Least Developed Countries by
the United States (Africa Growth
Opportunity Act (AGOA)) and theEuropean Union (Everything but Arms
(EBA)), among others. With about 56
destinations in different parts of theworld,

EthiopianAirlines

offersexcellent passenger and cargo airtransport services. 90% of Ethiopia’s
import and export is handled by marinetransport and Ethiopian shipping lines
provides efficient import- export andcoastal carrier services.

13

19 African countries which are Member of the Common Market for Eastern andSouthern Africa (COMESA)

Note: COMESA has a total population of 430 million with overall GDP of US $472
billion (at 2008 prices). Exports to and imports from COMESA member states enjoy
preferential tariff rates (with 10% reduction on import duties)

14

Ethiopian Airlines

New road constructed recently

Cognizant of the need to put adequateTheinfrastructure to bring about rapid

implementing

economic growth and development, themeasures in order to improve thegovernment has been undertaking aefficiency and effectiveness of thenumber of infrastructure development

bureaucracy. In line with this reformprojects thereby creating an enablingmeasures, the Ethiopian Investment

environment for investment in the

Agency provides services under one-stopcountry.

shop arrangement and investors can getgovernment
a

has

also

been

seriesofreforminvestment permits in a matter of few
hours.
As a result of all these measures, many
foreign investors are entering thecountry and the flow of both domestic
and foreign investment has shown
dramatic increase in recent years.
Ethiopian Shipping Lines, SC.

According to statistics from the15

The Addis Ababa-Goha Tsion–Dejen Road Rehabilitation Project which includes the “Renaissance Bridge” over the Abay
Gorge constructed with Japanese grant assistance16National Bank of Ethiopia, 4918

It can be understood from theforeign investment projects with aaforementioned facts that there are

cumulative investment capital worth

ample opportunities for investment as

200,545.34 million Birr (the nationalwellcurrency) have been approved by theenvironment in Ethiopia which has

Ethiopian Investment Agency frommade1992/93 up to 2007/2008. (One US

investment

as
the

an

enabling

country
destination

investment

thepremiuminAfrica.

dollar is equivalent to 13.4 Ethiopian
birr at the current exchange rate).

Sources of Foreign Investment in Ethiopia

Others3%

From July 1992 up to December 2007

North
Americ20%

Africa
12%

Asia
22%

Middle East
17%
Europe26%

North Americ
Middle East
EuropeAsia
AfricaOthers17

Capital Outlay of Approved Investment Projects by source

Source: National Bank of Ethiopia

Major Reasons to invest in Ethiopia
 Politicalandmacro-economic

Stability

 Very nearly free of crime, and high Strategically located at the crossroads between Africa, Asia and the
Middle East; Untapped Zero tolerance to corruption;level of security of person andproperty;
 Amplenaturalresources,

excellent climate and fertile soil;

opportunities

inprivatization program; Alluring incentive packages such as Abundant, inexpensive, competitive

customs duty exemptions, Export

and easily trainable labor force;

incentives, income tax holidays, loss Almost no bureaucratic maze;carry forward, etc.
18

One of the executive model cars rolled out by Holland
Car Plc, a car assembling company established in
Ethiopia recently. The Car is named after one of the

The first electric car, Solaris Elettra, assembled in
Ethiopia by Freestyle PLc.

longest rivers in Ethiopia – Abay.

19

5. Major Investment Areas
I. Agriculture
Ethiopiahaswide-ranging(sesame, ginger seed, flax, rape, linseed,groundnut, castor beans and Soya
agro-

climatic zones which makes it suitableto grow all kinds of crops. The mainfood crops grown in Ethiopia are cereals(“Teff”, barley, maize, wheat, sorghum,
millet, etc), pulses (horse beans, peanuts,
peas, chick peas, rough peas, fenugreek,beans). The main cash and industrial
crops are coffee, tea, cotton, oilseeds,
flower, pulses, fruits and vegetables,
sisal, tobacco, sugar cane, spices, etc.
While 66% of the total area of land in
Ethiopia is suitable for agriculture, only
15% of the total arable land has so far
been utilized for the production of crops.

soybeans, vetch and lentils) and oilseeds

Large scale commercial farm by Karuturi Global Ltd.

20

In Ethiopia land is a public property.
Thus, it is neither sold nor exchanged
for any other property. However, bothrural and urban land is available andcan be obtained for investment on leasebasis, rental or freely depending on thetype of investment.
With regard to urban land, the periodof lease shall range from 50-90 years
depending on the level of urban
development as well as the sector ortype of development activity for which
the land is leased. Likewise, rental
value and the lease period of rural land
are fixed by land use regulation of eachregion.

flavored, with a winy, spicy, creamy,
flora and mocha taste. Because of its
unique quality, it is largely used forcountries. Ethiopian coffee, thus offers
a wide choice to the world coffee

Coffee is Ethiopia’s gift to the world.
Country

Ethiopian coffee is aromatic and sweet

blending coffees produced in other

Coffee and Tea
The

Coffee Farmer picking coffee cherryisAfrica’s

roasters.

leading

In 2007/2008 Ethiopia has supplied

producer of Coffee Arabica. While

170, 888 tons of coffee to the

Ethiopia has vast land suitable forinternational market earning US $525

coffee cultivation, currently only 560

million. During the same period of time,

thousand hectares of the land iscoffee accounted for 35.8% of the total

estimated to have been covered by trees.

foreign currency earned from the21

country’s export. There are ample
investment opportunities for large-scalecommercial coffee production as well as
coffeeroasting

particularly

anddestinedpacking,fortheinternational market.

CottonEthiopia is believed to be one of theorigins of cotton and cotton production
is deep-rooted in the history of thecountry’s

agriculture.

Annualproduction of cotton is estimated to be
110,000 tons; overall average yield is
1.22 ton per hectare.

Women working on tea farm

Similarly,

Ethiopia’s

agro-climaticcondition gives the country comparativeadvantage in the production of tea.
Therefore, there is a huge potential forinvestment in large scale commercial
production of tea as well as investment
in modern tea blending and packaging
industries.

Cotton spinning plant in Adama

Cotton is grown in a warmer climate
and the soil typical for cotton
production is heavy, dark and cracking
soil. The potential cotton growing areasofEthiopia

fulfillthewarm

temperature and soil requirement forcotton production. Africa, Asia and22

Europe are major markets for Ethiopian

pepper, onion, asparagus, water melon,

cotton.

sweet melon, carrots, green beans andcut flowers.

Oilseeds
Rapeseed,linseed,groundnut,

sunflower, niger seed and cotton seedserve as raw materials for the domestic
edible oil industry. Some oilseeds such as
sesame and peanuts are important
export crops. The volume of oilseeds
exported by Ethiopia in 2007/2008 was
160,955 tons.

Horticulture

Women workers preparing strawberry

The existence of a variety of altitudes

Major fruits and vegetables destined forand different agro-climatic conditions,

export are mainly grown in statelong growing season and the abundance

plantations. Recently some privateof water resources for irrigation incompanies have started to be engaged in

Ethiopia allows fruits and vegetables tothe production and export of fruits andgrow well. The major horticulturalvegetables. The main destinations for

products grown in Ethiopia are citrus,

export are Europe and the Middle East.

banana, mango, papaya, avocado,

Ethiopia’s

guava, grapes, pineapple passion fruit,

vegetables in 2007/2008 was worth US

apple, potato, cabbage cauliflower, okra,$12 million.

destined for export

exportoffruitsandegg plant, tomato, celery, cucumber,

23

Floriculture
Ethiopia is an ideal location for thecultivation of both highland andlowland world class cut-flowers. The
optimum

altitudeforcut-flower

production is between 1500 to 2300
meters above sea level, while the best
ranges of temperature are from 20 to 30
degree centigrade. Large areas of thecountry satisfy such the requirements ofaltitude and temperature.

Ethiopian Cut-flower displayed at theannual IFEX Flower Expo in Japan

A wide variety of flower types
including roses, carnations, gypsophila,
etc are grown in Ethiopia, althoughroses take the lion’s share in the export
trade. The Ethiopian flower industry is
relatively new but it has become thefastest growing industries in Ethiopia
as a result of the surge of both foreignand domestic investment in the sector inrecent years.
Some of the major destinations for theexport of Ethiopian cut-flower are the
Woman worker harvesting flower

Netherlands, Germany, UK, Italy,
France, Sweden, Russia, USA, Japan,

24

Australia and the Middle Easterncountries. In 2007/2008 Ethiopia
exported 1015 million stems worth US$111 million.

Livestock
Ethiopia has the largest livestock
resource in Africa and it is also ranked
among the top ten countries in the

Fishery
Ethiopia’s extensive inland rivers, lakes,
reservoirs and other small water bodies
contain substantial reserves of fish andother aquatic resources. The potential
annual freshwater fish production isestimated at about 45,000-50,000 tones,of which only 15% is currently exploited.

world in terms of its cattle population.
Therefore, there are vast opportunities
for investment in modern commercial
livestock breeding, processing of meat,milk and egg and animal feed processing.

A Fisherman fishing in Lake Chamo
believed to be rich in fish diversity

There are 10 major lakes in Ethiopia 7of which lie in the Ethiopia Rift Valley.
So far over 100 indigenous species offish have been identified. However, theModern slaughtering facility

fish diversity is not believed to have25

been studied exhaustively and more
species could be found in the future.

Apiculture
Ethiopia is the largest honey producing

Forestry

country in Africa and the fourth largest

Out of the total land area of Ethiopia,
51% is suitable for pasture, 14.8% toannual and perennial crop production,
3.6% to forestry, 8.1% to bush. 3.8% isuncultivated and the remaining 18.7%
is unutilized so far.

beeswax producing country in the world.
Its favorable agro-climatic condition,
diverse botanical base of multifarious
plants flowering over different seasonscoupled with large population of honeybee colonies and other environmental
factors

havecreatedoptimum

Therefore, there are potential areas forconditions for the production of honeyinvestment in the forestry industry

and beeswax.

which include, among others, theproduction and marketing of gum andincense, large scale plantation of timber,establishment of forest based industries
such as pulp and paper and chipboard
as well as the establishment of rubber
plantation. Investors are also welcome
to engage in the integrated commercial
productionofstructural

timber,pulpwood, matchwood and even fuelwood.
Local Honey Extractor

26

There are around 10 million bee colonies
and over 800 honey source plants in the
country. The annual honey and beeswax
production is estimated at 24,700 tons
and 3200 tons, respectively. Comparedto the apiculture resource potential
existing in Ethiopia, the quantity ofhoney and beeswax exported to theCanned meat and diary products

world market is negligible. Therefore,

flakes and edible oil from maize andthere is a huge opportunity forprocessing of spices, among others.

investment in this area.

Agro-processing

II. Manufacturing
Food and Beverage

Ethiopia has a vast landmass conducive
for growing various forms of crops
which could serve as an input for agroprocessing. There are vast opportunities
for agro-processing including processingof fruits, processing and preserving ofmeat products, integrated production
and processing and preserving of fish
and fish products, processing andSparkling water

preserving of fruits and vegetables,
integrated production and processing ofThis includes the manufacture of sugar,

dairy products, processing of edible oil

brewery, soft drinks, processing andfrom oil seeds, processing of starch, cornbottling of mineral water, etc.

27

Leather Industry
The fact that Ethiopia has a large
number of livestock populations gives
the country a resource base for its
thriving leather industry. Ethiopian
highland sheep skins (Bati and Selallie
types) are well known worldwide for
theirdistinctcharacteristics:

fine

quality, thickness, flexibility, strengthandcompact

Ethiopiangoat

texture.

Similarly,

skins

known

internationally as Bati Genuine andBati Type have a distinct feature of
thickness, high flexibility and clean
inner surface.

Ethiopian finished leather

The Leather products industry in
Ethiopia includes the manufacture ofshoes, shoe uppers, leather garments,
bags and stitched upholstery. The
footwear industry is composed of large
mechanized industries and SMEs.

More than 20 tanneries in operation in
Ethiopia are believed to have thecapacity to process 352, 000 pieces ofhides and 32 million pieces of skins andthe majority of them produce semiprocessed and finished leather mainlyfor export.
Ethiopia

Tannery

producingsemi-finished and finished leather for both
domestic and international market

28

The leather garment industry is mainly
supplying its products for the domestic
market. Made in Ethiopia bags andother accessories are being promoted
under a special brand named calledTAYTU which is getting recognition in
the international fashion industry.

TextileThe textile sector has been accorded toppriority by the Ethiopian government
based on its potential for employment
generation, prospect for export andstrengthening the agro-industry linkage
and broader based development.

Ethiopian leather shoe destined for

Textile manufacturing plant

export

The Ethiopian leather industry has
shown tremendous progress in supplying
its products to the international market.
In 2007/2008 Ethiopia has exported
US$100 million worth of leather andleather products.

The availability of a large pool of cheap
labor force along with the highest input
and the highest market demand makes
the sector attractive for investment.
There are a limited number of public
andprivatelarge-scale

garment

factories that produce for export to theAmerican and European markets.
29The revenue generated from the Textile
sector has registered 27.4% growth on
average over the last five years owing to
the maximum attention given by
Ethiopian government to the sector.

OthersThe

first

Ethiopia

ever

glass

establishedfactorybyainforeigncompany

It is worthy to mention that in recent
years the cement industry has attracted
a lot of attention as a result of theconstruction boom in Ethiopia andthere is a surge in the demand for
cement.
Cement manufacturing plant

Other manufacturing sectors withpossibility for investment include glassand ceramics, chemical and chemical
products, paper and paper products,
building materials and metallurgy.

Metal manufacturing plant30

III. Mining

construction minerals such as kaolin,
diatomite, feldspar, quartz, silica sand,potash, phosphate, soda ash, slat, rocksalt, limestone, marble and granite aswell as energy minerals including coal,oil shale, natural gas and hot spring
have also been identified in various
parts of the country.

A large exposure of Dolomite Marble
in Kenticha, Sidamo area of Ethiopia

Ethiopia offer excellent opportunities
formineraldevelopment.

prospecting
There

is

and

favorable

geological environment hosting a wide
variety of mineral resources. Ethiopia’s
green stone belts offer one of the finest
areas for gold mineralization anywherein the world.

Marble

from

Awash

area,

Central

Ethiopia

With regard to fossil energy resources,
there are significant opportunities for
extracting oil and natural gas in the

In addition to gold Ethiopia is blessed

four major sedimentary basins namely

with large deposits of precious andOgaden, Gambella, Blue Nile and themetallic minerals such as tantalum, ironSouthern Rift Valley.

ore and platinum. Industrial and31

Ethiopia has enormous potential forhydropower and geothermal energy
generation. Among its major rivers, nine
are suitable for hydropower generation
with a total capacity of more than 30
thousand MW.

Rock

Salt

from

the

Denakil

Depression, northern Ethiopia

Iv. Service
Hydropower
Prime

Minister

Meles

Zenawi

Inaugurating Gilgel Gibe II Hydro
Electric Power Dam together with
Foreign Minister Fratini of Italy

The private sector is encouraged toparticipate in electricity generation fromany source. The transmission and supplyof electrical energy through Integrated
National Grid System is exclusively
Gilgel Gibe I Hydro Electric Power

reserved for the government.

But

Dam

private sectors both foreign and32

domestictransmission

are
and

allowedoff-grid

distribution

Currently, there are 21 governmentof

universities and many other affiliatedelectricity. Moreover, private investors

colleges and university colleges in the

can generate electricity in bulk andcountry.

reach an agreement of power purchaseinstitutions have significantly increased

with the Ethiopian Electric Powerover the last couple of years offering

Corporation (EEPCo) for transmission

training programs both in diploma andand distribution.

undergraduate degree levels.

Education

Both public and private higher learning

Education has shown the highest

business,

growth rate in the service sector bysignificantly increasing primary school
enrollment ratio to 95% in 2007/2008.

Privatehigherlearning

institutions produce skilled personnel ineconomics,

management,

accounting, engineering, law, medicine
and

other

scienceandtechnical

disciplines. The participation of bothforeign and domestic investors in the
education sector is encouraged.

HealthEthiopia has a number of medical
facilities. Major medical services are
performed by medical personnel trained
both nationally and internationally.
Most medical facilities are publicly
Addis Ababa University which is theoldest University in Ethiopia

owned and managed. But the number ofprivate clinics and hospitals has grown33

over time. There is still high demand for

raw coffee beans, oilseeds, pulses etc)

medical facilities to meet the needs ofthrough market promotion, quality

the Ethiopian public. Therefore, thegovernment

offersapackageofincentives to encourage the private
sector to actively participate in thehealth sector.

OthersReal

EstateDevelopment

by

the

Private Sector

improvement by value addition andpackaging; construction comprising offirst grade contracting and rental of
construction materials as well as realestate development; air cargo service;
Condominium houses being built by
the government

Other attractive opportunities forinvestment in the service sector include
exporting Ethiopia’s various products(except traditional export products likeparticipation in telephone network injoint venture with the government.

V. Tourism
Ethiopia has a lot to offer tointernational tourists. It has unique34

historical and cultural heritages (8another

UNESCO Registered Cultural Heritage

cultural attraction.

importanthistoricalandsites), magnificent scenery, a surprisingclimate, rich flora and fauna, importantarcheological sites and hospitable people.

Kuriftu Lodge

Sheraton Addis – a luxury collection

The oldest human fossils known as

hotel

Lucy and Selam are some of the

The northern Tourist circuit known as
the historic route comprises the mostimportant tourist sites in Ethiopia
which include the ancient city of Axum,
the medieval city of Lalibela, AlNegashi Mosque in wukro, the medieval
city of Gondar and the island
monastries of Lake Tana. The Walledcity of Harar located in the eastern partof Ethiopia with its numerous mosquesarcheological discoveries which madeEthiopia the cradle of all mankind. The
high plateaus, long mountain ranges,
lofty peaks, deep gorges, the largest cavein Africa (Sof Omar), one of the lowest
depression on earth (Dallol), the great
rift valley, savannah land, tropicalforest, deserts and lakes, spectacularwater falls and volcanic hot springs are
awe-inspiring.

and shrines of venerable age is also35

All these tourist attractions offer great

specialized restaurants, lodges in tourist

potential for cultural and educationaland holiday hubs.

tourism, photo safaris, hunting safaris,
bird watching, river rafting, desert
trekking, mountain camping and eco-

Privatization
Programtourism.

As part of its macro-economic reform,
the Ethiopian government has launcheda program for privatization of stateowned enterprises. Pursuant to thelaunch of these programs, a number ofenterprises have been transferred to theprivate sector. There are still many state
owned enterprises ready to be soldwholly or on joint venture basis withprivate investors.
Most of these enterprises fall under
manufacturing, construction,agriculture
Intercontinental

Hotelrecentlyinaugurated in Addis Ababa

Great

opportunities

forand agro-industry, hotels, transport,
trade and mining sectors. Among these

privateenterprises,

garment

andleather

investment in the tourism sector include

manufacturing factories are given thethe construction and operation of star-prioritybythegovernment.

designated hotel, international and36

6. Areas of Investment Reservedfor Domestic Investor
I.

The following Areas areand skins bought from theexclusively reserved formarket and live sheep, goatsdomestic investors:

andcattlenotraisedorfattened by the investor;
1. retail trade and brokerage;
5. Construction
2. wholesale trade (excluding
supply of petroleum and its

companies

excluding those designated as
grade 1.

by-products as well as wholesale by foreign investors of
their

products

locally

6. Tanning of hides and skins up
to crust level;

produced);
7. Hotels other than those star
3. Import trade (excluding LPG,

designated, motels, pensions,bitumen and upon arrival thetea rooms, coffee, shops, bars,

arrival of the Council ofnight clubs and restaurants

ministers, materials used as

excluding international andinputs for export products);

specialized restaurants;

4. Export trade of raw coffee,

8. Travel agency, trade auxiliarychat, oilseeds, pulses, hides

and ticket selling services;

37

16.
9. Car-hire and taxi-cab hire

Customs

clearanceservices;

services;
17.
10.

Commercial road transport

Museums,theaters

andcinema hall operations;and inland water transport
services;
11.

Bakerypastries

products
for

the

and

domestic

market;18.

Printing industries.

II.

Notwithstanding

provisions of Paragraph
One of this section, thefollowing

12.

grinding mill;

areas

Barbersalons,shops,

andbeautyprovisions

exceptgarment

factories;

Ethiopiannationals
1. Banking , insurance andmicro-credit

Building maintenance andandsavingservices;
2. Travel

14.

for

of

smith workshops and tailoring
servicesofinvestment are exclusively
reserved

13.

the

and

shipping

agency services;

repair and maintenance of

3. broadcasting services; andvehicles;

4. Air transport services using

15.

Saw milling and timbermaking products;

aircraftwithaseating

capacity

of

up

to

20

passengers.

38

7. Investment policy andadministration
Wholly Foreign Owned andMinimum capital Requirements

Joint Investment

for investment in partnershipwith domestic investors• A foreign investor can undertake
investment as a sole proprietor or• USD 60,000 in cash and/or injointly with domestic investors, orkind per each project; USD

with the government.

25,000 in cash and /or in kind if
the investment is made in the

Minimum capital Requirements

areas of engineering, architecture,foraccounting and audit services,

whollyowned

foreign

project

investment
• USD

or

businessmanagement consultancy services

100,000forasingleinvestment project in cash and/or
in kind;or publishing.
• No capital requirement for aninvestor who exports at least 75%• USD 50,000 in cash and/or inkind per project in areas ofengineering,architecture,accounting and audit services,
project

studiesstudiesorbusinessof his output; reinvests his profits
or dividend.

Investment

guarantees

andprotections

management consultancy services
or publishing.

• Ethiopia is a member of theMultilateral

Investment
39

Guarantee

Agency(MIGA)

which issues guarantees against
non-commercial

risks

to

enterprises

investinthatat the prevailing exchange rateon the date of remittance: Profitsandsignatory countries; International

accruing

Centerinvestment;for

Investment

settlement

from

an

between Payments

relatedtoStates and Nationals of Other

technology

transferorStates

Disputesofdividends(ICSID);

andIntellectual

World
Property

Organization (WIPO).

promotion

andprotection agreements with many
Africa, Asian, and European
countries. In additions, Ethiopia
hassigned Proceeds from sales or
liquidation• Ethiopia has concluded bilateral
investment

management agreements;

agreementon

avoidance of double taxation

anenterprise; Proceeds from the sale ortransfer of shares or ofpartial ownership of anenterprise to a domestic
investor;
 Expatriates employed in
an enterprise may remit,with several countries.

in

Repatriation of Capital andconvertible

currency,

foreignsalaries

andother payments accruing

Profits• The

offrom their employment;
following

capitalrepatriation and remittances are Repaymentofforeignloans.

granted to foreign investors to
be made in convertible currency

40

8. Major Investment
Incentives
theBusiness enterprises that incur

payment of import customs

losses during the tax holiday

duties and other taxes levied on

period can carry forward suchimports is granted to an investor

losses for half of the income tax

to import all investment capital

exemption period following thegoods, such as plant machinery

expiry of the exemption period.

100%

and

exemptionequipment,

fromconstruction

materials, as well as spare parts
worth up to 15% of the value ofthe imported investment capital

EXPORTINCENTIVESCHEMESgoods;
Exemption from the sales andDuty drawback scheme;

exciseVoucher scheme;

taxes

for

all

exportBondedcommodities;
Investors

engagedinnewmanufacturing

warehouse scheme;

manufacturing, agro-processing
activities and the production ofagricultural

productsareTaxation

exempted from paying income

The principal taxes currently intax for the period ranging fromplace are profit tax, value added

2-7 years depending on the typetax (VAT), excise tax, customsof the investment, volume of

duty tax, and income tax fromexport, and the region in which

employment.

the investment is undertaken;
41Othertaxes

includedividend

producedlocally

and

cost,

income tax, royalties and stamp

insurance and freight values

duties.

(C.I.F) in respect of goods

Corporate income tax

imported. Depending on thetype of goods locally produced

The corporate income tax (taxor imported the rate of tax

on profit) is 30%.

ranges from 10% to 100%.

Turnover tax (TOT)

Value added tax

A 2% tax is payable for goods

Value added tax is charged onsoldrenderedthose businesses whose total

locally. The services renderedvalue exceeds 500,000 Birr per

include contractors, grain mills,

year and tax is levied at the rate

tractors and combine-harvesters.

of 15% of the value of every

A 10% tax is levied on othertaxableservices. Base of computation ofregistered person, and every

the turnover tax is the grossimport goods, other than an

receipts in respect of goods

exempt import or an import of

supplied or services rendered.

services.

andservices

Excise tax

transaction

byaCustoms duties

Excise tax is charged on selected

Customs duties are payable on

and locally produced goods orimports by all persons andimported goods. Base of theentities which have no duty

computation is the cost ofprivileges. The rate of customs

production in respect of goods

duty ranges from 0% to 35%.

42

Income Tax from Employment

Withholding tax
Withholding tax is payable onMonthly

Income tax

import of goods and is set at 3%

employment

payable (%)

of the same cost, insurance andincome (Birr)

freight. In case of organizations,

Up to 150

Exempt thresholdhaving151-650

10

private651-1400

15

non-profit institutions, and non-

1401-2350

20

governmentalorganizations

2351-3550

25(NGOs), the amount withheld is3551-5000

30

2% of the gross amount ofAbove 5000

35

legal

government

personality,

agencies,

payment.

Incometax

from

Employment

Income tax applicable
to foreign Employees
A

Every person deriving income
from employment is liable to
pay tax on that income at therange specified hereunder. The
marginal tax range from 10% to35%.

foreigner,

who

lives

in

Ethiopia for more than 183 daysin a period of 12 months,
whether

continuouslyorintermittently, is regarded as
being resident for the entire tax
period and taxed in accordancewith the provisions of Income
tax proclamation No. 286/2002.

43

Taxable Business Income otherthan that of Juridical Persons

 Approves

andissuesinvestment permits to foreign
investors;
 Provides trade registration

Taxable Business

Income Tax

Income (per year)

payable (%)

Up to 1,800

Exempt threshold

1,801-7,800

10

7,801-16,800

15

16,801-28,200

20

Association and Articles of

28,201-42,600

25

Association;

42,601-60,000

30

Above 60,000

35

services to foreign investors;
 Issues operating licenses forapproved

foreigninvestments;
 Notarizes Memorandum of Gradesconstruction

contractors;
 Approves

One-Stop-Shop Service

andtechnology

registers
transfer

agreements;
 Registers

export-oriented

The Ethiopian Investment Agency

non-equity

is the government organ responsible

enterprise collaborations;for promoting, coordinating and Provides advisory and after

facilitating foreign investment incare services to investors;

the country. It is a one-stop-shop

 Approves

based

foreign

expatriate

posts

for all investors in Ethiopia andand issues work permits torenders the following services:foreign employees; and Facilities the acquisition of Provides
servicesthenecessary

requiredland and utilities by investors.

byinvestors;

44

Ethiopian Investment Agency
Client Chart
NO
1.

2.

3.

TYPE OF SERVICE

DELIVERY COST/FEE
TIME(BIRR)

Issuance of Investment Permit•

New Investment

4 hours

600•

Expansion of Investment

4 hours

300

Renewal of Investment Permit•

New Investment

1 hour200•

Expansion of Investment

1 hour100

1 hour100

Substitution of Lost or Damaged Investment
Permit4.

Issuance of Trade Registration Certificate•

Principal Registration

4 hours80•

Summary Registration

4 hours105.

Issuance of Business License

4 hours806.

Issuance of Work Permit

1 hour600

7.

Notarization of Memorandum of Association and4 hours400

Articles of Association
8.

Investment Permit Amendment/ change

3 hours100

9.

Construction Contractor grading

2 hours-

10.

Investment Permit Revocation

2 hours-

11.

Registration of Technology Transfer Agreement

2 hours200

12.

Issuance of domestic status certificate to a

1 hour100

foreign national permanently residing in Ethiopia
taken for domestic investor

45

9. Areas of investment noteligible for exemption frompayment of customs duty

1. Hotels, other than those star
designated,motels, tearooms,

11. Theater

andcinemahall

operations;coffee shops, bars, night clubs

12. customs clearance services;and restaurants, which do not

13. laundry services;

have international standards;

14. travel agency, trade auxiliary

2. wholesale, retail and import

and ticket-selling services;
15. Lottery and games of a similar

trade;

nature.

3. maintenance services;
4. commercial road transport andhire services;

When it finds it appropriate, the5. postal and courier services;

Investment

6. real estate development;

directives providing for additional

7. Businessareas of investment, which may notandmanagement

consultancy service;
and

may

issue

be eligible for exemption from the

8. advertisement services;
9. cinematography

Board

payment of customs duty.
similaractivities;
10. radio

andtelevision

broadcasting services;46

10. Areas of investment reserved forthe government or joint
investment with the government
The following investment areas

Investors shall be allowed toare exclusively reserved for theinvest in the following areas only

government;

in

joint

venturewiththegovernment;
1. Transmission and supplyofelectricalthroughtheenergyintegrated

national grid system;
2. Postal

services

exceptionofwit

1. Manufacturing of weapons
and ammunitions;
2. Telecommunication

theservices.

courier

services;

Tekeze hydroelectric power Dam

Ethiopian
Corporation

Telecommunication
Satellite47

11. Requirements to obtain
investment permits
A properly filled application formbusinessshouldbe

Ethiopian
togetherorganization,insubmitted

totheaddition to the above said

Investment

Agencydocuments, photocopies of thefollowing

pages of valid passport of each

with

the

shareholder and photocopies of

documents:

certificates evidencing the status
 Where the application is signedof the domestic investors, if any;

by an agent, a photocopy of his Where the investment is to bemade by a branch of a foreign

power of Attorney; Where the investment is to bebusinessorganizationinmade by an individual person, a

Ethiopia, photocopies of its

photocopy of the pages of a

Memorandum of Association

valid

his

and Articles of Association or aidentity and his recent two

similar document of the parent

passport size photographs;

company;

passport

showing Where the investment is to be Where it is a joint investment by

made by a business organization

domestic and foreign investors,

incorporated

photocopies of Memorandum ofinEthiopia,

photocopies of its Memorandum

Associationandof Association and Articles of

Association,

pages

Association;

passport, certificates evidencing

 Where the investment is to bemade by an newly establishedthestatusof

Articles

the

of

of

valid

domestic

investors and photocopies of48

identity cards, as the case may An application form signed by
the agent of the company;

be; andhas Where the application form isconcluded a technology transfer

signed by an agent (other thanagreement

hisauthorized in the Memorandum

investment, he is required to

and Articles of Association) a

submit the same for registration

photocopy of his power ofand approval.

attorney; Wherean

investor
relatedto Memorandum of Association

Requirements

forPrincipal Registration

and Articles of Association fornotarization and issuance of acertificate; A photocopy of the pages ofRegistration

of

Sole

Proprietorshipeach individual shareholder’svalid passport, or identity cardor photocopy of a certificate
evidencing a domestic investor

 An application form signed by
the investor or agent;

status; A Bank statement showing that

 Where the application is madeone quarter of a company’s

by an agent, photocopy of his

capital is deposited in the Banks

power of Attorney; andaccount (for share companies

 Threerecentpassport

size

photographs.

only);
 Minutes and related documentsof the meetings of the persons

Company Registrationcommitted to buy shares (forshare companies only);

Companies are required to submit:49 A report of contributions madein kind, if any, prepared andauthenticated by a professional

the business organization (i.e.,
registration certificate) Minutes

oftheparentor institution designated by thecompany’s authorized body for

Ministry of Trade and Industry

the establishment of a branch(for share companies only).

companyinauthenticatedEthiopiabyaandPublicRegistration of a Branch

Notary, or a letter written by the

Officeowner in case of a one-manofanOverseas

Company

company;
 Aphotocopy

of

power

of

attorney of the representative ofAn overseas company wishing to

the company and copy of the pages

invest through a branch office isof his passport or identity card;

required to submit the following A copy of the Memorandum of

documents

totheEthiopianof the parent company.

Investment Agency:
 An application form filled by an
agent

of

the

Association or similar documents

businessorganization;
 A photocopy of a document that

Foreign companies wishing to open
liaisonofficesmust

submittheirapplication to the Ministry of Tradeand Industry.

justifies judicial personality of50

USEFUL CONTACT ADDRESSESIN ETHIOPIA Ministry of Trade and Industry

 National Bank of Ethiopia

P. O. Box. 704

P.O.Box:5558

Tel. 251-11-5528579/5154035

Tel: 251-11 551 7438

Fax. 251-11-5514288

Fax: 251-11 551 4588

Email: moti@telecom.net.et

Email nbe.edpc@ethionet.et
Homepage: http://www.nbe.gov.et Ministry of Agriculture and Rural
Development

 Ethiopian Investment Agency

P. O. Box. 62347

P. O. Box. 2313

Tel. 251-01-518040

Tel. 251-11-5539474

Fax. 251-01-528298

Fax. 251-11-5514396

Email. minagri3@ethionet.et

Email: ethiopianinvest@ethionet.et

Homepage: http://www.morad.gov.et

Homepage:
http://www.ethiomarket.com/eic/

 Ministry of Mines and Energy
P. O. Box. 486

 Ministry of Culture and Tourism

Tel. 251-11-6461208/6463166

P. O. Box. 1907

Fax. 251-11- 6463364/ 6463426

Tel. 251-11-5517020

Email: mmeia@ethionet.et

Fax. 251-11-551-28-89

Homepage: http://www.mome.gov.et

Email: info@tourismethiopia.org
Homepage:
http://www.tourismethiopia.org

51 Ethiopian Revenue and Customs

 Ethiopian

electricPower

Authority

Corporation

P. O. Box. 2559

P. O. Box. 1233

Tel. 251-11-4667466/4667326

Tel. 251-11-1559567/1560254

Fax. 251-11-4662628/4668244

Fax. 251-11-5560028

Email: min.of.rev@ethionet.et

Email: eelpa@ethionet.et

Homepage: http://www.erca.gov.et

Homepage: http://www.eepco.gov.et

 Ethiopian Chamber of Commerce Privatization

andPublicand Sectoral Association

Enterprises Supervising Agency

P. O. Box. 517

P. O. Box. 11835

Tel. 251-11-5518240

Tel. 251-11-5530343/5510014

Fax. 251-11-5517699

Fax. 251-11-5513955

Email: ethiochamb@ethionet.et

Email: epa.etw@telecom.net.et

Homepage:

Homepage: http://www.ppesa.gov.et

http://www.ethiopianchamber.com

 Ethiopian AddisAbaba

Commerce

ChamberandofSectoral

Civil

Aviation

Authority
P. O. Box. 978

Association

Tel. 251-11-6610277

P. O. Box. 2458

Fax. 251-11-6612533

Tel. 251-11-5500934/5518055

Email: civilaviation@telecom.net.et

Fax. 251-11-5511479
Email: aachamber1@telecom.net .et
Homepage:
http://www.addischamber.com

 Ethiopian

Telecommunication

Corporation
P. O. Box. 1047
Tel. 251-11-5510500
Fax. 251-11-5515777
Email: etcweb@ethionet.et
Homepage: http://www.ethionet.et52