INTERNATIONAL INVESTMENT FORUM ADDIS ABABA ETHIOPIA OCTOBER 5/2016
GTP II • To achieve middle income status (in 10 years) • To become manufacturing hub of Africa • Growth Rate: GDP 11% same achived in GTP Imanufacturing 20% was achived in the 1 st GTP 25% is targeted • Pillars: – Development of manufacturing sector – Transformation of agricultural sector – Develop export sector – Shared growth ( Gini coefficient 0.3, poverty reduction 22% Life expectancy 64 years, Primary education net enrolment reached 94%) 2
GTP II • Goals: Manufacturing Sector – 1 million jobs in 5 yrs and 2 million in 1o yrs – 2 fold growth – share of GDP 10% in 5 yrs and 4 fold in 10yrs – 2 fold growth – share of export 20% in 5 yrs and 40% in 10yrs 3
• Key Strategies GTP II …contn…. 1.Targeting manufacturing Investment (FDI and domestic) 2.Development of industrial parks 3. Quality infrastructure, skills and competitiveness • 10 Key industries in 3 categories: 1. Light manufacturing (textile, leather, agro-industry, electronics ) 2. Basic & import substitution (steel, equipment, chemical and pharmaceutical) 3. Strategic (energy, ICT and bio-technology) 4
Priority Sectors:
• Develop 12 public IPs in 5 years (Hawassa has two phases), 1. Hawassa phase 1 & 2 (2 IPs)= phase 1 inaugurated 13 July/16 2. Mekelle = construction has begun 3. Kombolcha= construction has begun 4. Adama= a contractor has been selected 5. Dire Dawa = soon contractor will be selected 6. Bole Lemi II = contractor selection is taking place 7. Kilinto = is in Akaki, its status is same as Bole Lemi II 8. Jima= feasibility & other studies have been conducted 9. Debre Birhan= feasibility study will commence soon 10. Bahir Dar= feasibility & other studies will soon be conducted 11. Aysha= soon all the studies will be commenced 6 12. Hunan Prov. (Adama ), China
• Enable the development of private industrial parks 1. Expansion of Eastern (Dukem) China 2. George Shoe (Mojo ), Taiwan – China 3. Huajian (A.A), China 4. Arerti (Minjar), China 5. CCECC (Dire Dawa), China 6. Yangone Corp. (Adama), South Korea 7
Industrial Parks that are under construction : • Mekelle Industrial Park • Kombolcha Industrial Park • Debrebirhan • Arerti • Dire Dawa Industrial Park • Adama Industrial Park
Fastest growing economy � 11% avg. growth for the last 12 years � Shared growth, � Development is happening (Poverty reduced, life expectancy improved etc)
Untapped natural Resource: Ethiopia Land size: 1,140,331 sq. km (435,186 sq. miles) World Rank #27 � Bigger than France and Spain combined Africa Rank #8 � 74 million hectares of arable land � Underground water � Livestock � Mineral Resources
Ethiopia’s economy by the numbers #1 Coffee exporter in Africa (5 th in the world) #1 Livestock in Africa (top 10 in the world) #1 Hydro electric power dam in Africa (on the Nile River) #1 Wheat producer in Sub Sahara Africa (S. Africa is 2nd) #2 Flower exporter in Africa (only 10 years since the industry was established)
Availability of labor force Demographic advantage Ethiopia’s population is • large & young; Median age is under 20; • Wages very competitive in • the world; Ethiopia is now and will • still be the 2nd most populous country in Africa by 2070; � World Rank #13 � Africa Rank #2 12
Building Infrastructure as Path to Middle Income I
Infrastructure • Ethiopia is rapidly investing in modernizing infrastructure for population and industry • Mega infrastructural projects have increased the accessibility of: • Electric power • Roads • Communication services • The aviation industry is under a rapid growth with new airport projects and expansion of the existing ones
Electric Power Infrastructure Development opportunities – Hydro : More than 45,000 MW – Wind: More than 10,000 MW – Geothermal: More than 5,000 MW – Supply chain opportunities – Engineering & tech. consultancies 15
Infrastructure: Investment in Modern Transportation Systems Aviation Hub By 2017 By 2020 Electric Driven Railway
Path to Middle Income Market Access #1 Airline in Sub-Sahara Africa
Market Access Ethiopia’s geographic location and its active membership in regional and bilateral trade agreements makes it a desirable investment destination Local: construction boom, income is increasing Export: 3.5 billion people live within 8 hours of flight from Addis Ababa; • Free trade advantages: United States: AGOA (extended for 10 more years) • • European Union: Everything but Arms • Sub-Saharan Africa: A founding member of the Common Market for Eastern and Southern Africa (COMESA)
Attractive Investment Policies and Incentives Investment Policies
Investment Incentives Repatriation of investment and Repatriation: of profits, dividends, principal and interest payments on Incentives external loans out of Ethiopia in convertible currency profits The right to employ expatriate experts and management staff; there is also Hiring Expats an exemption of 2 years corporate income tax for exporting companies of expat employees Customs duty exemption on capital goods, construction materials and partially on spare parts (as much as 15% of the total value of capital goods) Industrial Parks spare parts of capital goods are allowed Income tax exemption 2-8 years for many sectors, Up to 10 years Inside Industrial Parks in textile and garment for export; It is 10-15 years for Developers of Industrial Parks;
Ethiopian Investment Board and Commission • Ethiopian Investment Board (EIB) is the highest investment policy making body on Investment and Industry Park in the country • EIB is chaired by The Prime Minister • EIC is responsible for promoting, supporting & regulating investment projects • EIC has introduced One Stop Shop services (OSS) and After Care Services
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Extension of the Addis – Modjo – Djibouti railway to Hawassa 24
Building the Infrastructure…contn… 3.4 . One-stop-shop government services • IPDC : Management of the park • EIC: Capital Goods clearance, Investment OSS & aftercare USD 200,000 is a minimum requirement Customs • – All cargo will directly transit from HIP to Djibouti and vise versa – HIP is a Free Zone: considered as outside the customs territory Banks and other governemnt institutions • Utility providers • • Immigration 25
Designing Investment Incentives The Role of Ethiopian Investment Board (EIB) • Proactive engagement by EIB – In addition to various incentives provided under the Investment Proclamation, Regulations and various directives, the Board has been proactive in supporting investors – EIC played key role in studying, evaluating and submitting proposals and Board Agenda 26
Incentives … continued… • Incentives: under revised Investment Laws and EIB decision – Manufacturers are exempted from income tax 8 - 10 years, 10 years has been promised for HIP & will continue for others, – Exemptions from duties & other taxes: machinery, equipment, construction materials (before & after completion), spare parts, raw materials, trucks (only for HIP), canteen facilities, office furniture and equipment, all except personal consumables, 2 SUVs and 3 hybrid vehicles, input importation using investment license and exemptions for same commissioning & training limited amount - Special visa scheme 3-5 yrs multiple visas, for now we have began with 2 years multiple visa issuance, 27
• Outcome – Our promotion strategy was able to attract major global players to enter HIP – HIP is now fully occupied with foreign and local manufacturers producing for export market 28
Expectations when it matures: Up to $1 Billion export earning Up to 60,000 local employment in two shifts Figures that are more than the total country wide, • sector based employment, production and export levels 29
Challenges - Weak manufacturing sector - Weak exports, - Transformation of agriculture: (weak domestic value chain to supply manufacturing industry) - Weak logistics - Foreign currency challenge due to low export earning 30
Lessons Learned from HIP • Sectroal approach is important for Investment promotion, • Relationship building with FDI is the best Investment Promotion strategy considering Hawssa IP in consultation with buyers, • Performance related incentive package is the right tool for domestic investors/ SMEs, • Investment incentives, even when they are one of the most generous, will not be effective unless they are well designed, targeted and communicated. 31
Main reasons for investing in Ethiopia 1. Remarkable economic growth 2. Huge infrastructural and skills development 3. State of the art industrial parks ‘ready-to-plug.’ 4. Stable economic and political environment 5. Access to international markets 6. Availability of abundant and wage competitive labor force 7. Availability of natural resources for productions 8. Transparent investment policies 9. Attractive investment incentives
Thank you 33
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