Why Ethiopia is attracting investors

Huijian Factory in the outskirts of Addis Ababa
Huijian Factory in the outskirts of Addis Ababa

Ethiopia is becoming an investment destination in the sub-region for the fast paced economic progress it has been experiencing, for the lucrative business opportunities it provides, and for its attractive investment incentives. The country is located in the north-eastern part of Africa, commonly known as the Horn of Africa, at the cross-roads between Africa, the Middle East and Asia. The country has a stable political and economic environment. Thanks to its large population, Ethiopia is potentially one of the largest domestic markets in Africa. By virtue of its membership of the Common Market for Eastern and Southern Africa (COMESA), embracing 19 countries with a population of over 400 million, Ethiopia also enjoys preferential market access to these countries. Ethiopia qualifies for preferential access to European Union market under the EU’s Everything-But-Arms (EBA) initiative and to USA markets under the African Growth and Opportunities Act (AGOA). Accordingly, most Ethiopian products can enter into these markets quota and duty free. Furthermore, a broad range of manufactured goods from Ethiopia are entitled to preferential access under the Generalized System of Preference (GSP) of the USA. No quota restrictions are placed on Ethiopian exports falling under 4800 products currently eligible under the GSP.

The Ethiopian economy is based on agriculture, which contributes about 42.9% of the gross domestic product (GDP), about 90 % of foreign currency earnings and 85 % of employment. However, the industrial sector’s share is growing from year to year. The country is among the top growing economies in Sub-Saharan Africa: for the last ten years, real GDP grew by an average of about 11 percent per year. Ethiopia is endowed with abundant natural resources. Altitude in Ethiopia ranges from 125 meters below sea level in the Danakhil depressions of the Afar region to 4,620 meters above sea level in the Amhara region. Thus the country has 18 major and 49 sub agro- ecological zones, each with its own agricultural and biological potential. Overall, 74.3 million hectars of land are suitable for agriculture (45% of the total area), of which only about 18 million hectares are currently utilized. The climate is suitable for growing over 146 types of crops. Ethiopia possesses one of the largest and most diverse genetic resources in the world. Besides, it has the soils and the climate suitable for the production of a variety of food crops.

The labour law of Ethiopia, prepared in conformity with international labour norms and standards, provides adequate provisions for the conclusion and termination of employment contracts with safeguards that do not infringe the rights of investors. Labour cost in Ethiopia is relatively low compared to the African average. The number of skilled workers and technicians is increasing steadily as a result of an increase in the number of universities, colleges, and vocational and technical training schools in the country. The Ethiopian Government has made commendable efforts, through legislative and procedural reforms, to improve the investment climate of the country and thereby attract more foreign direct investment. In line with market-oriented economic policy, the investment regime has been liberalized through a series of Government legislations. Since 1992, the investment code has been revised three times to ensure the participation of more foreign investments in various sectors of the economy.

In a nutshell, these are the top 10 reasons to invest in Ethiopia:

• Political and social stability
• Macro-economic stability and growing economy; • Adequate guarantees and protections
• Transparent laws and streamlined procedures
• Ample investment opportunities
• Abundant and trainable labour force
• Wide domestic, regional and international market opportunity
• Competitive investment incentive packages
• Welcoming attitude of the people to FDI
• Pleasant climate and fertile soils

Report prepared by the Embassy of Ethiopia in Brussels