30 JAPAN SPOTLIGHT • September / October 2010
Special
Articles 1
Since the turn of the 21st century, Africa has achieved robust economic
growth, unlike in the period of economic stagnation that affected
much of the continent in the 1980s and early 1990s. Although the
global economic crisis has had a negative impact on the economies of
Africa, the continent has proved resilient and it is expected to grow by
4.5% in 2010 and 5.2% in 2011, slowly returning to its pre-crisis
growth pattern, according to the “African Economic Outlook 2010”
report jointly published by the African Development Bank (AfDB),
OECD and UN Economic Commission for Africa (UNECA).
It has therefore become increasingly apparent that Africa will be the
next growth pole offering substantial business opportunities. This has
also been clearly indicated by a McKinsey Global Institute report,
which came out in June 2010 highlighting the progress and potential
of African economies. It is because of this fact that the continent is
attracting widespread attention from many parts of the world.
Rapid, Sustainable Economic Growth
Ethiopia is one of the fastest growing non-oil economies in Africa.
The country has registered on average 11.5% economic growth for
the last six consecutive years. Although the global economic crisis
has had an effect on its economy in terms of exports, flow of remittances,
food and oil price hikes and so on, the country was able to
withstand the crisis and maintain strong growth of 9.9% in
2008/2009. The Economist in its world economic forecast for 2010
has listed Ethiopia as the fifth fastest growing economy in the world.
Since the downfall of the Derg dictatorial regime, Ethiopia’s leadership
under the Ethiopian People’s Revolutionary Democratic Front
(EPRDF) has widely recognized that good governance and democracy
are a sine qua non for sustainable development. Thus the driving force
behind the above-mentioned fast economic growth is a democratic
developmental government seriously committed to defeating poverty
by ensuring rapid, sustainable economic growth and development.
The fourth national and regional elections, which were successfully
conducted on May 23, 2010, in a peaceful, free, fair and credible
manner, clearly attest to that and would undoubtedly give an added
impetus to the vision set by the government for the country to march
towards its ambitious journey of achieving the UN Millennium
Development Goals (MDGs) by 2015 and joining the ranks of middleincome
countries by 2020.
Moreover, the Ethiopian government, cognizant of the importance
of the role infrastructure plays in spurring the development and
expansion of the activities of other crucial sectors in an integrated
manner, has undertaken massive investment in building infrastructure
to speed up the country’s socioeconomic development. It has
also exerted enormous efforts to expand access to social services
such as education and health as well as other services with a view to
improving the people’s livelihood.
All these measures have resulted in a significant transformation in
the development of the country in the last two decades. Ethiopia’s
economy has significantly expanded and its GDP at current market
prices reached $35.2 billion in 2008/09. In purchasing power parity
(PPP) terms, its GDP has reached $70 billion, according to Ernst and
Young, thus becoming the fifth largest economy in sub-Saharan
Africa after South Africa, Nigeria, Angola and Sudan.
It is imperative to also note that Ethiopia is one of the 20 developing
countries in the world that are making absolute progress towards
meeting the MDGs as has been revealed in a progress report recently
published by the Overseas Development Institute (ODI) of Britain.
Ethiopia is an attractive venue for business. The country is
endowed with immense natural resources, which undoubtedly offer
huge potential for investment in different sectors including agriculture,
manufacturing, mining and energy, tourism and other services.
By ABDIRASHID Dulane
Photo: Ethiopian Embassy of Tokyo
Ethiopia’s real GDP growth
Source: Ethiopian Ministry of Finance & Economic Development
Hidase (Renaissance) Bridge on the Nile River: “a living monument and a symbol
of Ethio-Japanese friendship” as called by Prime Minister Meles Zenawi during its
inauguration in 2008.
Agricultural Potential
Agriculture is the sector contributing most to the livelihood of the
predominant majority of Ethiopia’s people. In this connection, the
Ethiopian government has put a lot of emphasis in transforming
smallholder agricultural production through the provision of appropriate
technologies, which has shown remarkable progress in recent
years. In addition, to supplement the efforts of smallholder farmers in
the lowlands where vast arable land and plentiful water resources are
available, the government has been encouraging private investors to
participate in large-scale development and commercialization of agriculture
by using their capital and technology. Coffee, cereals, oil
crops such as sesame, horticultural crops, rice and other food commodities,
crops for biofuel production, and cotton production for use
in the textile and garment industries, among others, are enticing
investment areas for production and value addition (agro-processing)
in the sector. Ethiopia, being home to one of the largest livestock populations
in the world, also enjoys a comparative advantage in the sector,
especially in large-scale animal breeding and meat and meat processing.
The government’s prioritization of the aforementioned gives
an added advantage to investors who venture in these sectors.
Manufacturing
The industrial sector in Ethiopia is still in its infancy, but it is a sector
whose growth is assured by the vast resource base available in the
country. With one of the largest livestock concentrations in the world,
Ethiopia is fast becoming an attractive hub for the leather and leatherproduct
industries. Finished leather products such as shoes, garments
and bags are manufactured by factories while tanneries process finished
and semi-processed leather for the domestic and export markets.
Ethiopia’s Bati and Sellalie types of famed sheepskin are highly sought
products in the international market for their high quality. Vast land
suitable for cotton production and the large trainable and cheap labor
force make the garment and textile industries a priority area of investment.
Steel/metals, cement, food/beverages and chemicals/chemical
products, among others, are important industries for investment.
Mining & Energy Resources
Ethiopia is rich in mining and energy resources. In mining, geological
studies indicate proven deposits of industrial and precious minerals
such as tantalum, platinum, gold, quartz, silica sand and iron
ore among others and construction materials, including limestone,
granite and marble. Among the above, for instance, gold production
has been progressing well over the years with a proven reserve estimated
at more than 500 tons. Oil and gas exploration has been going
on for sometime and natural gas from the fields of Calub in eastern
Ethiopia, which have a large proven reserve of natural gas, will hit
the market by 2015, according to the Ministry of Mines and Energy
of Ethiopia. Enormous opportunities greatly abound for foreign companies
to engage in oil, gas and mineral exploration and production
activities either individually or in joint ventures.
According to Ethiopian Electric Power Corporation (EEPCo), the
country has enormous potential for hydroelectric, geothermal, wind
and solar power and has the capacity to generate more than 45,000
MW, 5,000 MW and 10,000 MW of renewable energy from these
sources, respectively. With the current installed capacity of 2,000
MW, the country’s judicious investment in the various power sources
mentioned above will enable it to meet its growing domestic requirement
besides satisfying the surging demand of its neighboring countries
for power by quintupling the current capacity to 10,000 MW in
the next five to 10 years. In this regard, numerous power projects
worth billions of dollars are being implemented. Ethiopia has already
signed bilateral agreements with Djibouti, Kenya and Sudan to supply
electricity to this effect and transmission lines between these countries
and Ethiopia are progressing well. Ethiopia’s investment policy
allows independent power producers to invest in the sector and sell
bulk generation to EEPCo. With the country’s rich energy resource
potential from diverse sources, it is an area worth investing in.
Tourism
With its historic civilization, eight UNESCO-recognized World
Heritage sites, robust archeological locations and awe-inspiring natural
beauty with wide varieties of flora and fauna as well as rich and
diverse culture, Ethiopia is uniquely placed as an important travel
destination in Africa. In addition, its distinct honor and privilege in
JAPAN SPOTLIGHT • September / October 2010 31
Photo: Ethiopian Embassy of Tokyo
Large-scale commercial farm
Photos: Ethiopian Embassy of Tokyo
Corrugated iron sheet-manufacturing plant Ethiopian processed leather goods
Photos: Ethiopian Embassy of Tokyo
Gold mining at Lega Dembi, Ethiopia Tekeze hydroelectric dam, inaugurated
in 2009, is one of Ethiopia’s several
hydropower projects completed recently.
serving as the headquarters of the African Union and UNECA, among
others, make it an attractive location to establish world-class hotels,
restaurants and resorts. In this relation, there are many possibilities
for foreign investors to engage in this service sector.
According to the Ethiopian Investment Agency (EIA), the country’s
investment code provides a multitude of attractive incentives for foreign
investors, including tax holidays, duty exemption for capital
goods and construction material for establishing new businesses
and expanding existing enterprises, and free remittance of funds as
well as retention of foreign exchange earnings. Foreign investors are
allowed to invest in a broad range of economic activities either in the
form of 100% equity ownership or teaming up in joint ventures with
domestic partners. The government has also been exerting huge
efforts to improve the business environment in the country. In this
regard, a number of reform measures have been implemented, with
the EIA providing services under a one-stop-shop arrangement and
investors getting their investment permit in a matter of few hours.
The surge of both domestic and foreign investment in the country
clearly indicates the existence of a favorable business environment.
According to data from the National Bank of Ethiopia obtained from the
EIA, a total 29,796 domestic investment projects worth 257,535 million
birr (the Ethiopian currency) and a
total 4,918 foreign investment
projects worth 200,545 million
birr were approved by the EIA during
the 1992/93-2007/08 period.
Investors in Ethiopia enjoy a
variety of opportunities regarding
market access for their products.
Being a member of the Common
Market for Eastern and Southern
Africa (COMESA), a regional economic
grouping with a total population
of around 430 million and
exports to and imports from its
member states receiving preferential
tariff rates, Ethiopia is no doubt
a prime investment destination in
Africa. In addition, the country enjoys geographical proximity to the
Middle Eastern, Asian and European markets, providing ample opportunities
for exports. It also benefits from market access opportunities
given through the African Growth and Opportunity Act (AGOA) by the
United States, the Everything But Arms (EBA) initiative by the European
Union and a generalized system of preferences (GSP) offered by many
other countries, including Japan, as well as the aforementioned abundant
natural resources and favorable investment environment.
Therefore, it is high time for Japanese businesspeople and entrepreneurs,
especially small and medium enterprises and large trading
houses interested in the above-mentioned sectors, to benefit from the
attractive investment climate and incentives by investing in Ethiopia.
The Ethiopian Embassy in Tokyo will be more than happy to respond
to any queries by prospective Japanese investors. It is also ready and
willing to provide further information to them in their areas of interest.
In conclusion, I would like to express my sincere thanks to the
chairman and CEO of the Japan Economic Foundation (JEF), Mr.
Noboru Hatakeyama, and the editor-in-chief of Japan SPOTLIGHT,
Mr. Naoyuki Haraoka, for giving me the opportunity to introduce
Ethiopia and highlight the investment potential in the country to the
readers of this esteemed magazine.*
32 JAPAN SPOTLIGHT • September / October 2010
Special
Articles 1
Abdirashid Dulane is Ethiopian ambassador to Japan, also accredited to the
Republic of Korea, the Philippines and Indonesia.
Capital outlay of
approved investment projects by source
Source: Ethiopian Investment Agency
Photos: Ethiopian Embassy of Tokyo
Tis Issat, the source of the Blue
Nile
Lalibela, 12th-century rockhewn
church
Harar, the fourth most holiest
site of Islam
Mt. Arteale, a breath-taking
active volcano
Sof Omar Caves, one of the
largest cave systems in the world
Axum, the center of 2,000-
year-old ancient civilization
Gondar, home to 17th-century
Castle of Fasilades
Lucy, one of our early ancestors making
Ethiopia a cradle of humankind
* It is important to note that the executive director of the Ethiopian International
Institute for Peace and Development (EIIPD), Hon. Ato Sebhat Nega, made a productive
visit on May 23-28, 2010, at the invitation of Mr. Noboru Hatakeyama, JEF chairman
and CEO.
During his visit, Hon. Ato Sebhat held discussions with Mr. Hatakeyama on the possibilities
of future cooperation between EIIPD and JEF and they agreed to work together
on joint research programs and training projects and, to this effect, a memorandum of
understanding (MOU) was signed by the two principals on May 26, 2010. The signing
of the MOU has been indeed a successful outcome of the visit and laid the basis for the
two institutions to cooperate in areas of their mutual interest.
The implementation of the MOU is crucial for further opening up of opportunities not
only for close exchanges and cooperation between the two think tanks, but also for
enhancing the overall relationship between the two sisterly countries. The posting of
today’s article introducing my country’s investment potentials in Japan SPOTLIGHT, a
bimonthly publication of JEF, serves as a notable example in this noble undertaking.
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