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Ethiopia: Business and Economy

THE ECONOMY - (top)

The Ethiopian economy is dominated by agriculture that accounts for about 50 per cent of total Gross Domestic Product (GDP) and 85 percent of export and total employment. The country's export is highly dependent on a single crop, coffee, generating nearly 53 per cent of the foreign exchange earnings in 2000. agriculture is supplemented by manufacturing, mining, trade, tourism, construction and services that have a combined share of about 50 per cent of GDP.
The industrial sector, which contributed about 12 per cent of GDP, supplies important consumer goods both to the domestic and international markets. The main manufacturing products are textiles, food stuffs, tobacco, beverages, cement, leather and leather products, wood, metallic and non-metallic products. The main manufacturing export products include leather and leather products and frozen meat.

Even though the mining sector currently contributes less than one per cent to GDP, there are proven reserves of industrial minerals and precious metals such as gold, platinum, tantalum, iron ore, marble, potash and natural gas which can economically be exploited. On the other hand, the service sector makes up about 38 per cent of GDP and its significant contribution stems from the relatively large investment expended on the sector, notably on health related and social services, tourism and travel-related services, construction and related engineering services and financial services.

ECONOMIC LIBERALISATION - (top)

The new Market Oriented Policy of 1992 led to a number of policy measure and reforms, which have changed the structure of the economy and encouraged immense economic development and growth. The reforms included inter-alia: the liberalisation of trade policy, privatisation of public sector enterprises, financial sector reforms, and deregulation of prices and exchange rate controls. Since 1992, Ethiopia has cautiously devalued its currency (the Birr) and toward a market determined exchange rate system through the use of periodic foreign exchange auction. In line with market oriented economic policy, the investment regime has also been liberalised through a series of Government proclamations.

AGRICULTURE - (top)

Ethiopia is an agricultural based economy. It generates over one-half of the country's GDP, over 80 per cent of export earnings and employs 80 per cent of the labour force. Agricultural production is predominantly in the hands of small farmers working individuals, small holding mainly for household consumption. The Government has made agriculture its primary priority, and to this end developed and implemented strategy of Agricultural Development Led-Industrialisation (ADLI).
The Agricultural Development Led-Industrialisation embraces the export-led development's strategy as an engine of growth, incorporates a parallel and co-ordinated development of agriculture and industry. The strategy has two layers, an outer layer, an export led growth and an inner core Agricultural development led-industrialisation. The export contribution will come through the supply of commodities for direct export and through industrial value added. The inner core will come in two ways. First, by establishing a deliberate reliance of industry on domestic agriculture as inputs to agri-business of various types. Second, it is intended to improve smallholder productivity thus reducing employment pressures and acting as an increased source of demand for local industrial goods.

Endowed with wide-ranging agro-ecological zones and diversified resources, Ethiopia produces all types of cereals, fibre crops, oil seeds, coffee, tea, fruits and vegetables. Considerable opportunities exist for new private investment in the production and processing of the agricultural crops and resources.

FOREIGN TRADE - (top)

The foreign trade sector plays an important role in generating employment and income as well as being a source of foreign exchange earning.

EXPORT TRADE - (top)

A great part of the total export earning is accounted for by the agricultural sector in the form of raw or semi-processed commodities. The export sector is based mainly on agricultural products such as coffee, hides and skins, oil seeds and pulses.

COFFEE - (top)

Being the origin of coffee Arabica, Ethiopia has immense potential to offer the world market a wide variety of flavours of organically produced, washed and sun-dried coffee. Flavours range from the fruity flavour of Ghimbi to the winery flavour of Limu to the cheesy flavour of Illubabor to the mocha flavours of Yirga cheffe and Harar. Today coffee consumers worldwide are appreciating the value of organic coffee's natural aroma and flavour. More than 90 percent of the coffee harvested in Ethiopia is organically grown. The inherently superior quality of Ethiopian highland Arabica coffee is unmatched, particularly in flavour and aroma. Ethiopia also produces several types of coffee, the water soluble extracts of which can be used for hot beverages, iced drinks, ice creams and in the confectionary industry.

LEATHER AND LEATHER PRODUCTS - (top)

Ethiopia offers a wide range of processed and semi-processed hides and skins to the world market. Some of the products, such as Ethiopian highland sheepskin (which has gained an international reputation for making gloves), are known for their quality and natural characteristics. Ethiopian hide and skin exports include pickled sheep skin, wet blue sheep skin, crust sheep skin, wet blue goat skin, crust goat skin, crust cow hides, finished garment leather, finished glove leather, lining/upper leather, suede leather, full grain leather, embossed leather and patent leather. The export of finished leather and leather products (such as leather garments, footwear, gloves, bags and other leather articles) is also highly promising.

LIVE ANIMALS AND MEAT - (top)

With the largest livestock population in Africa, Ethiopia has an ample supply base for the export of live animals and meat. Livestock husbandry is mostly carried out under natural grazing, making the meat and meat products obtained from the animals very tasty and nutritionally healthy for human consumption. Ethiopia's main exports of live animals and meat products include steers and yearlings; lowland sheep and goats; fresh and chilled lamb and mutton carcass; fresh and chilled goat carcass; fresh and chilled veal carcass and beef four quarter; fresh and chilled boneless veal and beef; frozen lamb, mutton and goat carcass and veal and beef special cuts.

TEXTILE FABRICS AND GARMENTS - (top)

The textile industry is the largest manufacturing industry in the country. There are more than fourteen major state-owned and private textile and garment factories. The industry employs about 30,000 workers and represents 36% of the entire manufacturing industry. The main textile products manufactured in the country a cotton and nylon fabrics, acrylic yarn, woollen and waste cotton blankets and sewing thread. The domestic potential of cotton production as basic raw material is far more than the demand of the currently installed spinning capacity and the availability of cheap labour is one of the major parameters for considering this industrial sector as one of the strategic industries for export development.

OILSEEDS AND PULSES - (top)

Ethiopian oilseeds and pulses are known for their flavour and nutritional value as they are mostly produced organically, for instance, the Ethiopian white sesame seed is used as a reference for grading in international markets. Ethiopia's major oilseed and pulse exports include sesame seeds, nigger seeds, linseeds, sunflower seeds, groundnuts, rapeseeds, castor oil seeds, pumpkin seeds, haricot beans, pea-beans, horse beans and chick peas. Saudi Arabia, Yemen, Israel, EU countries, and some Asian and neighbouring Africa countries constitute the major markets of Ethiopia's oilseeds and pulse exports.

FRUITS, VEGETABLES AND FLOWERS - (top)

With a favourable climate, abundant labour, land and water resources, most regions of the country are suitable for the production of a wide range of tropical and sub-tropical fruits, vegetables and flowers. The major vegetable export products include potatoes, green beans, okra, melon, white and red onions, shallots, cabbage, leeks, beetroot, carrots, green chillies, tomatoes and lettuce. The main exportable fruits include oranges, mandarin grapefruit, mangos, guavas, lemons and limes, while cut flower exports include statice, alliums, roses and carnations.

TEA - (top)

The quality of tea mainly depends on climatic conditions, the type of soil upon which the plant grows and the method of processing. In Ethiopia, tea is mostly grown in the highland dense forest regions where the land is fertile and thus the use of fertiliser is very minimal. Moreover, the availability of abundant and cheap labour in the country has made the use of manual weeding, instead of chemical seeding, possible. Because of this mostly organic cultivation, Ethiopia tea is increasingly sought for its aroma and natural flavours. This is confirmed by the "International God Star" award for quality, recently given by B.D.I. in Madrid, Spain to one of the major Ethiopian tea exporters: Tea Production and Marketing Enterprise.

NATURAL GUM - (top)

Ethiopia is endowed with distinct climatic conditions that enable it to grow diverse plant species, which are for industrial and pharmaceutical purposes. Acacia, commiphora and boswellia are examples of one group of plant species that grows in the arid and semi-arid areas yielding gum. The increasing consumption of convenience foods has enhanced the growth of gum production and use over the past several years. As in most other sectors of the additive industry, increasing health consciousness has tended to fuel the demand for thickeners of natural origin. The major gum products produced mainly for export are gum lobanum derived from boswellia, gum myrrh and oppoponex derived from commiphora and gum Arabic derived from acacia species. Apart from their pharmaceutical applications, these products have a wide-range of industrial uses in such areas as beverages, candies, chewing gum, confectionaries, dairy products, gelatines, nut products, puddings and canned vegetables. Typical applications for gum products include: adhesive thickeners; thickeners, stabilisers, flavour, fixatives and emulsifying agents in food products; clarification in beverages; release agents for rubber products and formulations in cosmetics.

MINERAL PRODUCTS - (top)

According to studies, there are diverse mineral deposits in various parts of the country than can meet export standards. Mineral currently being exported include gold, platinum, marble, granite and tantalum. Export of these mineral is on a very limited scale relative to their immense export potential. Other metallic and non-metallic substances that have also been identified in the country include copper, lead, zinc, silver, gypsum, limestone, quartz and pyrite. Most Ethiopian mineral products are exportable to markets in East and Southern Africa and in Asia and Oceania. Due to freight costs, Ethiopian exports have an advantage in these regions of the world over established exports from Europe and North America. Ethiopia has also recently entered into the export of high quality dimensional stones (i.e., different types of unprocessed blocks, as well as processed marble, granite and limestone suitable for both internal and external uses.

IMPORT TRADE - (top)

Ethiopia's import commodities fall under five major categories, namely: food items, textiles, machinery and transport equipment, manufactured articles, and petroleum products.

INVESTMENT - (top)

In line with market-oriented economic policy, the investment regime has also been liberalised through a series of Government proclamations. Since 1992, the investment code has been revised twice to ensure a wider coverage of the sectors and activities that foreign investors are allowed to participate in. the latest revision has broadened the sectoral coverage to include telecommunications and power sectors. The Ethiopian Investment Authority (EIA), which is an autonomous Government body, serves as a one-stop-shop for issuing investment licenses and investment facilitations.

ETHIOPIAN AIRLINES (EA) - (top)

As Ethiopia's most visibly successful commercial company, EA is playing a leading role in Africa's emerging air-transport sector. It is building an internationally successful businesses in training aircrew and maintenance mechanics, in flight simulator training and in assembling light aircraft for use in domestic flights and agriculture.

ADDIS ABABA CHAMBER OF COMMERCE (AACC) - (top)

There is one National Chamber of Commerce and eleven city Chambers in Ethiopia. The AACC is the largest, oldest and most influential of the city chambers, with 20 professional staff and 45 support staff serving over 7,000 active members. The Chamber undertakes functions covering business and market information; trade affairs and overseas trade mission; business advisory services, especially to start-up businesses; business skills training; publication of business directories and advisory leaflets; and the operation of a small library, Internet service and website. It also undertakes specific studies on the obstacles to doing business in Ethiopia and proposes new policies and/or adjustments to existing policies; promotes entrepreneurship, sectoral trade associations and the culture of democracy and free market system; and serves as a bridge between the Government and the business community in Addis Ababa. The Chamber disseminates information on business developments within Addis and the economy as a whole through its two bimonthly newspapers namely, "Nigdina Limat" (Trade and Development), in Amharic language, and "Addis Business" in English.

INVESTMENT POLICY - (top)

The New Market Oriented Economic Policy in 1992 embraces wide reforms which includes foreign private investments. Consequently, the private sector is encouraged to invest in most areas of the economy. Areas that were exclusively restricted to the government such as defence, industries, hydropower generation, telecommunications services are now open for private as well as foreign investors.

HOW TO DO BUSINESS IN ETHIOPIA - (top)

Foreign participation in investment can be carried out in either of the following forms:
Through wholly foreign owned enterprises or subsidiaries;
Through establishment of branches;
Through locally incorporated enterprises.
Such as:
sole proprietorships;
share companies;
private limited companies PLC;
partnerships and
co-operatives.

COMPANY REGISTRATION (top)

All foreign investors are required to register their enterprise in accordance with the Commercial Code of Ethiopia. They are supposed to register the proposed company with the Ethiopian Investment Authority. Prospective investors are required to submit a draft memorandum and articles of association. After the Authority examines these documents, the founders are required to appear in person or by proxy before the notary public at the high court and finalise the signing of statutes of the company. Following the signing of the documents, the Authority will announce the formation of the company through the official Gazette in less than 5 days. The Ethiopian Investment Authority will subsequently issue a certificate of incorporation evidencing the registration of the company.

OPENING OF BRANCH OFFICE (top)

An overseas company wishing to invest through a branch office is required to submit the following documents to the Ethiopian Investment Authority:

Certificate of incorporation in the country of establishment;
A certified and notarised copy of the statutes or memorandum of association of the company;
A resolution passed by the owners of the Mother Company authorising the establishment of a branch office in Ethiopia.
The authorised capital of the branch; the activity to be undertaken, and the branch manager vested with the authority to become the legal representative in Ethiopia, should be indicated in the resolution;
A certified and notarised three specimen signatures of the legal representative;
The Ethiopian Investment Authority shall upon receipt of the above documents, authorises the publication through a gazette of extracts from the statutes of the company announcing the establishment of the branch in Ethiopia. Once the publication is made, the Authority will subsequently issue a certificate of registration evidencing the formation of a branch of an overseas company;
Foreign companies wishing to open liaison offices must submit their application to the Ministry of Trade and Industry.

 
             
 
 
         
© 2007 Permanent Mission of Ethiopia, Geneva. All Rights Reserved.
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Last updated 23-01-07 11:30 CEF DST
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