Ethiopia

Population

Population Projections (millions)

Source: United Nations Population Division, Department of Economic and Social Affairs.

Population Residing in Urban Areas (%)

Source: United Nations Population Division, Department of Economic and Social Affairs.

Youth Literacy Rates (2017, %)

Source: United Nations Educational, Scientific and Cultural Organization, UNESCO Institute of Statistics.

Economy Overview

GDP

Source: World Bank, World Development Indicators 2019.

Value Added by Sector (% of GDP)

Source: AFDB Socio Economic Database.

Trade Profile

Import Partners (Imported Value, thousands, USD)

Source: International Trade Center COMTRADE Statistics.

Export Partners (Exported Value, thousands, USD)

Source: International Trade Center COMTRADE Statistics.

Ethiopia’s Top import Products (USD ‘000)

Source: COMSTAT database

Ethiopia’s Top Export Products (USD ‘000)

Source: COMSTAT database

Investment Profile

FDI Inflows (millions of USD)

Source: United Nations Conference on Trade and Development, World Investment Report 2021

FDI Inward Stock (millions of USD)

Source: United Nations Conference on Trade and Development, World Investment Report 2021

FDI Inflows Main Source Countries (in terms of number of projects)

China, United States, India, UAE, UK, Turkey, Germany, South Africa, Egypt, and Kenya.

Source: Financial Times, fDi Markets, 2018

FDI Inflows Main Sectors (in terms of number of projects)

Textiles, Financial Services, Food and Tobacco, Chemicals, Communications, Business Services, Automotive OEM, Pharmaceuticals, Pharmaceuticals, and Building and Construction Materials.

Source: Financial Times, fDi Markets, 2018

FDI Inflows Main Companies (in terms of number of projects)

Chongqing Lifan Industry, Libya Oil Ethiopia, Transsion Holdings (Tecno Telecom), CHT/BEZEMA Group, Black Rhino, Hela Clothing, Petronas, ZTE, Dow Chemical, and Wilmar International.

Source: Financial Times, fDi Markets, 2018

Doing Business

Overall Doing Business Ranking

Source: World Bank, Doing Business, 2020

Starting a Business

*GNI per capita used: USD 790
Source: World Bank, Doing Business, 2020

Labour

Unemployment (2018, % of Total Labour Force, Modeled ILO Estimate)

Source: World Bank, World Development Indicators 2019.

Labour Force (2017, % of Ages 15+, Modeled ILO Estimate)

Source: World Bank, World Development Indicators 2019.

Paying Taxes

Paying Taxes

Source: World Bank, Doing Business, 2020

Trading Across Borders

Assumptions

• It is assumed that shipment travels from a warehouse in the largest business city of the exporting economy to a warehouse in the largest business city of the importing economy.
• It is assumed that each economy imports a standardized shipment of 15 metric tons of containerized auto parts (HS 8708) from its natural import partner—the economy from which it imports the largest value (price times quantity) of auto parts. It is assumed that each economy exports the product of its comparative advantage (defined by the largest export value) to its natural export partner—the economy that is the largest purchaser of this product.
• A shipment is a unit of trade. Export shipments do not necessarily need to be containerized, while import shipments of auto parts are assumed to be containerized.
• Shipping cost based on weight is assumed to be greater than shipping cost based on volume.
• If government fees are determined by the value of the shipment, the value is assumed to be $50,000.
• The mode of transport is the one most widely used for the chosen export or import product and the trading partner, as is the seaport, airport or land border crossing.
• Time is measured in hours, and 1 day is 24 hours.
• Costs do not include tariffs.

Source: World Bank, Doing Business, 2020

Investment Regime

Legal Framework

Investment Code – The Investment proclamation No. 769/2012

• The House of People’s Representatives of the Federal Democratic Republic of Ethiopia, recently approved a new Investment Proclamation (No. 1180/2020), which replaces Investment Proclamation (No. 769/2012) as the main legislative framework governing investments. The proclamation published in the official Negarit Gazetta on 26th year No. 28 Addis Ababa 2nd day of April, 2020. The new Proclamation is supplemented by a new investment regulation (No. 474/2020). The proclamation will take effect as of the date of its publication in the official Nagarit Gazetta. The new Proclamation will be supplemented by a new investment regulation to be enacted by the Council of Ministers. The “New Regulation” is currently in the draft stage.
• The new law is a major shift in how the Ethiopian government regulates Foreign Direct Investment (FDI), as it moves from a positive listing to a negative listing of investment areas allowed for investment. This means except for sectors that are fully or partially restricted for FDI – all other sectors will be open for foreign investment. Details of sectors reserved for (a) joint investment with government (b) domestic investors, and (c) joint investment with domestic investors provided in the “New Regulation”.
• The New Investment Proclamation, same as the previous ones:
  • Provides strong guarantees against expropriation, except when the public interest requires it.
  • Allows foreign investors to choose to submit an investment dispute to a competent body with judicial power or arbitration.
• In addition, foreign investors can exploit protection clauses inserted in bilateral investment agreements concluded with over 22 countries.
• Ethiopia is member of a World Bank Affiliate – Multilateral Investment Guarantee Agency (MIGA) – that provides insurance against political risks, and the World Intellectual Property Organization (WIPO).

Source:United Nations Conference on Trade and Development, iGuide Ethiopia.

Investment Incentives

As part of the new investment regulation, the Ethiopian government is expected to install a new incentives regime. This process notwithstanding, the following sets of incentives are currently in place.

Fiscal Incentives

• Income Tax Exemptions: Exemptions vary according to areas of investment, sector, and type of investment (e.g, IP developers versus enterprises).
  • Exemption from income tax of 10 – 15 years for Industrial Park Developers, depending on park location (10 years if in Addis Ababa and Special Zones of Oromia surrounding Addis Ababa, and 15 years in other areas)
  • Exemption from corporate income tax of up to 10 years
    
    • Up to 6 years exemption depending on sector of engagement and location of investment.
    • Additional 2 – 4 years exemption for industrial park enterprises with at least 80% export or input supply to exporters.
    • Additional 2 years exemption for 60% exporters or input suppliers to exporters within or outside of industrial exporters. 
    • Additional 30% deduction for 3 consecutive years, if investing in underdeveloped regions.
    • Up to 14 years corporate income tax exemption for pharmaceutical manufacturers located in IPs, depending on the type of manufacturing (varying based on export levels).
      
      • Up to 14 years for active pharmaceutical ingredients
      • Up to 12 years for formulation and final medicine
      • Up to 8 years for packaging materials
    • Up to 9 years corporate income tax exemption for investments in agro-procesing
      • • Additional 2 years exemption if 60% of product is directly exported or supplied to an exporter
        • Additional 30% deduction for 3 consecutive years, if investing in underdeveloped regions
• Custom tax exemptions: On import of capital goods, construction materials, spare parts with a value of up to 15% of the total value of capital goods (100% of total value for industrial park enterprises that are exporting fully), motor vehicles required for investment operation, raw materials needed for the production of export commodities, and personal effects for residents in industrial parks. Investors buying the aforementioned items from the local market can seek refund of the duty paid.
• Loss carry forward: A right to carry forward loss incurred within the period of income tax exemption for half of the income tax exemption period after expiry, maximum being 5 years.
• Export duty exemptions: On all products

Non-Fiscal Incentives:

• Customs facilitation through bonded export factory and similar other schemes
• Guarantee against expropriation
• Guarantee for repatriation of funds
• Relaxed industrial park land regime (60 – 80 years charge-free lease for IP Developers)
• Discounted lease rate for IP Enterprises

Other Incentives:

• One-stop shop investment facilitation and aftercare services under the EIC (both at the head office and industrial park branches)
• Expedited procedure for securing visa, work permit and certificate of residency
• Market linkage facilitation services

Source: Ethiopian Investment Commission (EIC).