TRADE

Trades in Ethiopia

Ethiopia has adopted a free market economic policy in 1992, and in line with this has promoted private investment. With the introduction of market economy, Ethiopia has implemented a number of reforms including the privatization of state owned enterprises, liberalization of foreign trade, deregulation of domestic prices, and devaluation of the exchange rate. The Birr has been fairly stable undergoing a gradual devaluation from 6.8 Birr per U.S. Dollar. Ethiopia’s exchange rate has remained fairly stable due to the government’s appropriate monetary policies and considerable foreign exchange reserves.

With its enormous resources, the country has untapped investment opportunities, huge market access and low cost of doing business. The country has excellent climate, fertile soil and huge domestic raw material base. Its location is strategic that makes it close to the lucrative markets of the Middle East, Asia and Europe.

Ethiopia’s current road density is 30% per thousand kilometers with a plan to further the road density by 41% between 2002 and 2007. This in effect brings about significant quality improvement in import-export routes and other all-weather roads on major national routes. The air transport and the shipping line are also providing efficient services. Air transport cost for general cargo export is about USD 4.26/kg and USD 5.26/kg to Europe and USD 8.35/kg to North America, whereas, for general cargo import the fare is USD 5.25/kg from Europe and USD 16.73/kg from North America.

The pre capita power production is 28 KWh and the government is planning to increase hydropower capacity of the country. The current tariff on electric power ranges between 0.41-0.57. Hydropower generation of electricity has also recently been opened up to private foreign investors. The state-owned telecommunication service envisages increasing the number of telephone lines over 760,000 with the aim of raising the lines to 12 lines per 1,000 persons.

The political situation of the country is stabilized. In Ethiopia, the labor force is estimated at 40 million, and labor remains readily available and inexpensive. The cost of labor is very low in Ethiopia with a wage of USD 1 a day for unskilled labor and average monthly salary of USD 90 for a fresh graduate. Ethiopia has enacted a liberal investment law and the Ethiopian Investment Commission has been established, which is making every effort in creating an enabling environment for investment. The conducive economic environment encouraged foreign direct investment. The data indicate that for the period between 1992 and 2005 a total of 13,125 investors with an aggregate capital of 151.5 billion Birr have been licensed; out of which 1,358 are foreigners with an aggregate capital of 38.9 billion Birr.

The country has currently reformed its investment code by broadening the sector coverage for foreign participation. Accordingly, the newly included sectors are telecommunication, power and air services. Thus, almost all sectors are open for foreign investors.

Nowadays, investors are no more expected to go to various government offices to get their applications approved. The Ethiopian Investment Commission (EIC) is now serving as one stop-shop facilitator, issuing investment permit, work permit, residence permit and allocation of land for investment.