Overview of Ethiopian Investment Opportunities and Policies MARCH - PowerPoint PPT Presentation

Overview of Ethiopian Investment Opportunities and Policies MARCH 2014

Ethiopia has great potential for investments for several reasons � Among the top performing economies with an average GDP growth Rapid economic of 11% per annum since 2004 1 1 growth � Rapid growth expected to continue � Stable political environment Favorable � Government actively promoting private sector investment with 2 political attractive incentive packages environment � Large population of ~85 million, among which 40% is under age 15 2 Low cost and � One of the lowest minimum wages in Africa 3 abundant labor � Good standards of spoken and written English � Large domestic market as the second most populous country in Sub- Large domestic Saharan Africa and international 4 � Located in the crossroads between Africa, the Middle East and Asia markets � Preferred access to many international markets � Projected national investments of $73 billion to upgrade hard and Massive soft infrastructure 3 5 investments in � Access to low cost electricity due to investments in hydroelectric infrastructure power, etc. Source: 1 Ministry of Finance and Economic Development 2 World Bank Ethiopian Investment Agency 2 3 Growth and Transformation Plan 2010/11-2014/15

1 Ethiopia is one of the fastest growing economies in the world and its rapid growth is expected to continue GDP Growth Rates by country, 2005-2010 1 (Constant 2000 USD) CAGR 11% 11% 8% 7% 4% 4% 3% South Russia Brazil Nigeria India Ethiopia China Africa The Economist has ranked Ethiopia as the 3 rd fastest growing economy in the world for the next four years 1 All data based on the World Bank except Ethiopia growth figures which is based on the Ministry of Finance and Economic Development Source: The World Bank; The Economist; The Ministry of Finance and Economic Development Ethiopian Investment Agency 3

1 Ethiopia is setting the pace for Africa Average annual growth in percent 12 10 8 6 4 2 0 China India Ethiopia Nigeria Kenya South Africa 2006-10 2011-15 Ethiopian Investment Agency 4 Source: Doing business in Ethiopia – Precise consult international (2013).

1 Ethiopia ’ s trade is global Imports Exports China China 8.4% 15.9% Germany 7.8% Saudi Arabia Somalia 6.6% 8.0% Others Others Netherlands 50.0% India 50.0% 5.5% 5.6% Saudi Arabia USA 4.7% 4.0% Sudan UAE 4.5% Japan 3.6% Switzerland 3.6% Italy 4.0% USA Germany Italy UAE Malaysia Turkey 3.3% 3.0% 1.6% 2.0% 2.4% 2.7% 2.9% Ethiopian Investment Agency 5 Source: Doing business in Ethiopia – Precise consult international (2013).

2 Ethiopia is politically stable and the government is actively encouraging private sector investment � Stable political environmen t fostering a peaceful and secure working environment � Strong political and security integration with countries in the region that fosters mutual economic ties and benefits; host of the African Union � Robust policy framework in the “ Growth and Transformation Plan ” which also focuses on private sector investment promoting growth including … – Attractive tax holidays and duty free packages for investors – Investments in infrastructure – Strong commitment to agriculture and rural development through allocation of more than 10% of total government budget � Committed to promoting good governance and tackling corruption ; party to multiple international agreements Ethiopian Investment Agency 6

3 Ethiopia ’ s population is large and young with relatively low wages Ethiopian population breakdown Monthly minimum wage in select African countries 1, 2 by age group, 2011 Million, percent PPP USD 84.7 Age 65+ 100% 3% Age 15-64 56% Age 0-14 41% � Daily laborer: less than $3/day 1 Latest year available 2 Ethiopia ’ s minimum wage only applies to public sector jobs � Salaries of fresh university graduates: $110 - $200/month Source: World Bank, ILO “ Global Wage Report 2010/11 Africa Brief ” Ethiopian Investment Agency 7

4 Ethiopia also benefits from access to large domestic, regional, and international markets Great potential for Great potential for Preferred access to international markets Preferred access to international markets domestic market domestic market � � � Ethiopia is geographically COMESA Trading Block and Regional Map Ethiopia ’ s Ethiopia ’ s population of 90 population of 90 well-positioned to serve mn is the second mn is the second several export markets largest in Sub- largest in Sub- � Membership in Common 84.7 Saharan Africa Saharan Africa Market for Eastern and 0.9 � � 67.7 ~40% of the ~40% of the Southern Africa (COMESA) Djibouti population is population is enhances access to 19 10.3 under age 15 and under age 15 and member countries and 34.5 Ethiopia their population of more � � ~70% is under 30 ~70% is under 30 South 41.6 Sudan than 450 million suggesting great suggesting great 10.9 � Ethiopia also enjoys Duty potential for potential for Uganda continued continued Free and Quota Free Kenya Rwanda growth of the growth of the (DFQF) privilege extended Congo, Democratic Republic 46.2 domestic domestic by international markets 8.5 purchasing purchasing of USA, European Union, Tanzania potential in potential in China and India Burundi addition to labor addition to labor force force 10.0 Population COMESA Other Trade 2011 (Millions) Members Countries Source: World Bank, “ Doing Business ” , 2012; Monitor Analysis Ethiopian Investment Agency 8

4 Investment is also taking place from many countries Sources of foreign investment Others Africa 3% 11% North America 19% Asia 22% Middle East 21% Europe 24% Ethiopian Investment Agency 9 Source: Doing business in Ethiopia – Precise consult international (2013).

Ethiopia Trade: #1 coffee exporter in Africa, Live stock (10), Hydro Power, wheat, Airlines, 2 nd Flower Exporter 4 Investment is taking place in many sectors: Breakdown of total approved investment projects by sector – 2011/12 Others 7.5% Construction 10.3% Manufacturing 36.9% 15.5% 22.1% Hotel and Share in restaurants 14.5% number of 10.9% Share in projects investment 20.7% capital 9.5% Real estate, 17.8% renting and business Agriculture, activities 12.0% hunting and forestry 22.4% Ethiopian Investment Agency 10 Source: Doing business in Ethiopia – Precise consult international (2013).

Massive investments in infrastructure The Growth and Transformation Plan represents an ambitious set of national investments that will significantly upgrade both hard and soft infrastructure Key highlights of Growth and Transformation Plan Key highlights of Growth and Transformation Plan Massive investments are planned Massive investments are planned Growth and Transformation Plan – � � Building 71,000 km of new roads, including all-weather Building 71,000 km of new roads, including all-weather Projected Spending roads to virtually all kebele administrations and an roads to virtually all kebele administrations and an USD Billions expressway linking Addis Ababa to Adama (a key route to expressway linking Addis Ababa to Adama (a key route to facilitate export and import trade) facilitate export and import trade) 16 16 15 15 � � Constructing 2,395 km of new railways linking Addis Constructing 2,395 km of new railways linking Addis Ababa with Djibouti, linking selected domestic cities, and Ababa with Djibouti, linking selected domestic cities, and 11 within Addis Ababa itself within Addis Ababa itself � � Laying 132,000 km of new electricity distribution lines Laying 132,000 km of new electricity distribution lines and expanding electricity coverage to 75% of the country and expanding electricity coverage to 75% of the country � � Expanding the water supply infrastructure to cover 99% Expanding the water supply infrastructure to cover 99% of the population and the drilling of some 3,000 water of the population and the drilling of some 3,000 water wells per year, Power, tlecom, etc wells per year, Power, tlecom, etc 2010/11 2011/12 2012/13 2013/14 2014/15 Total of $73 billion planned over 5 years Source: Growth and Transformation Plan 2010/11-2014/15 Ethiopian Investment Agency 11

3.Overview of Ethiopia ’ s investment Policies and Incentives The policy for Ethiopian investment has been modified in the last 20 years for more than 4 times. The Investment Policy - Admission The Investment Policy - Admission � Foreign investors can invest alone or in partnership with � Foreign investors can invest alone or in partnership with domestic investors in areas open for FDI domestic investors in areas open for FDI � No restrictions on equity ownership in joint venture (JV) � No restrictions on equity ownership in joint venture (JV) investment investment � Required to have investment permit from EIA � Required to have investment permit from EIA � Required to allocate minimum capital � Required to allocate minimum capital � USD 200,000 for a single investment project � USD 200,000 for a single investment project � USD 150,000 for joint with a domestic investor � USD 150,000 for joint with a domestic investor � USD 100,000 for technical consultancy if wholly � USD 100,000 for technical consultancy if wholly owned or owned or � USD 50,000 jointly with a domestic investor � USD 50,000 jointly with a domestic investor Ethiopian Investment Agency 12