Ethiopia has become one of the investment destinations in Africa. The government has been exerting efforts to enhance a conducive environment for further expansion of trade and investment in the country. A number of big textile-manufacturing companies are also expected to join the Ethiopian investment ecosystem.
So far, there are companies from countries, including China, India, Belgium, Spain, France, Hong Kong, Sri Lanka and Indonesia. According to data from the Ethiopian Investment Commission, the foreign direct investment in Ethiopia in the 2015-16 fiscal years was 2.2 billion Dollars.
The investment potential in Ethiopia enabled the country to attract a lot of investors that the country claimed an average GDP growth of 10 to 11 percent over the last seven years.
The increasing number of investors from different countries worldwide is due to the conducive factors at home. Some of the top reasons for this influx of investors include political and social stability, growing economy, excellent climate and fertile soil, strong guarantees and protections, abundant and affordable labor, regional hub with access to a wide market, improved economic infrastructure and competitive incentive packages.
One of the crucial factors for the rise of investment in Ethiopia is the construction of infrastructure in the country. The Ethiopian government has been allocating huge amount of budget for the development of infrastructure to encourage the flourishing of private investments in the country. The road infrastructure under construction throughout the country is considered to remarkably increase foreign trade and investment.
The infrastructure also enables the nation to diversify its port options for additional trade outlets. Some of the road infrastructure likes the Addis Ababa-Nekemt-Asos – Kurmuk enables the country to utilize Port Sudan. Another road infrastructure, which directly connects Addis Ababa to Mombassa availing port connectivity to the Ethiopia.
These and other road networks that have been built on the expense of 12.2 billion Birr in the country play considerable roles in facilitating foreign trade, cementing regional integration and attracting foreign investment not only to Ethiopia but also to neighboring countries.
The State investment in infrastructure has helped to intensify Foreign Direct Investment. It also contributed a lot in accelerating Ethiopia's target to become Africa's leading manufacturing hub in the near future. The government is hugely investing in infrastructure in a bid to boost nation's foreign trade.
State investments on railway lines, road networks, maritime, dry ports, airline cargo, and industrial parks among others, are significantly heighten private sector investment in consistence with the magnitude of investment the government is undertaking.
The importance of state investment in fostering the private sector’s involvement in the construction sector is considerably highlighted. State investments are also colossal to encourage the private sector to take part in a variety of manufacturing industries thereby transforming the nation's foreign trade.
The general overhaul of infrastructures through state investment accelerates swift trade exchange on top of availing less expensive means of business transaction that put Ethiopia in a competitive advantage in the global business arena.
Abundant of competitive labor, repatriation of investment and profit, temporary income tax exemptions for investments in selected sectors, duty-free imports of capital goods, an excellent national airline, fast growing infrastructures, competitive energy costs and the untapped consumer markets are key elements for attracting Foreign Direct Investment in Ethiopia.
The importance of state investment in fostering the involvement of private sector in the construction sector is considerably highlighted.
The key priority areas for investment in Ethiopia are agro-processing industry, textile and apparel industries, sugar and related industries, chemical industry, pharmaceutical industry and metal and engineering industries. The establishment of industrial parks that focus on the production of textiles, leather, garments, pharmaceuticals, agro-processing and equipment manufacturing plays considerable role in supporting the endeavor.
Several opportunities that were created for investors became the stimulants for international investors spend their money, skills and knowledge in the country. The installation of railway, road infrastructure, telecommunication service, electricity, power, industrial park development projects and others are some of the factors that speed up investment.
The government is providing incentives that encourage investors. And these incentives are attracting investors from every corner of the world. Our recent experience has witnessed that the investment sector is one of the most important engines for the country's economic development. It is crystal clear that the role of the investment sector to further boost the economic growth of the country is beyond measure. The sector has a multifaceted benefit to the growing economy of the nation.
In a country like Ethiopia, the investment sector can be considered as insurance. In this regard, using the already registered achievements as input, the government is expected to further encourage investors.
International Monetary Fund described Ethiopia’s economy as Africa’s fastest-growing economy. It argued that the present government has managed to boost the economy in double digits for the last consecutive years that helped to pull millions of people out of poverty. Besides, the country has remained an oasis of peace and stability in the volatile Horn of Africa, which led it to a significant leap forward in terms of flow of foreign direct investment to the country. The annual inflow has risen from 200 million USD in 2005 to 2.2 billion USD in 2015.
The World Bank also emphasized that, the Foreign Direct Investment (FDI) contributes 3.6 percent to the country’s Gross Domestic product (GDP), almost close to China’s 3.9 percent FDI share to its GDP. Besides, both the source and the sectors of investment have diversified. As a result, a large number of investors have been coming not only from emerging countries like China, India, and Turkey but also from developing economies including USA and Europe.
The number of investors has been increasing from time to time in Ethiopia. The government leased more than 2.5 million hectares of land to about 50 foreign investors since 2009.
FDI has also a significant role in transferring modern management practices that local companies have been starting adopting accounting and audit transparency and other modern management practices by emulating those foreign companies.
Ethiopia is also a signatory of the main international investment related institutions and this makes it a favored hub for foreign investment. There is also a significant amount of the tax incentive. Investors are 100 percent exempted from all imports of investment capital goods like plant machinery, construction materials, including spare parts worth up to 15 percent of the imported capital goods; plus exemption from import of raw materials needed for the production of export goods.
Ethiopia has a strong market and is situated at a strategic position with excellent market access to different corners of the world. It is located at the juncture between Africa, the Middle East and Asia, within easy reach to the ports in the Horn. The good rainfall, fertile soils and favorable temperature have made Ethiopia a favored destination for investors. Unexploited mineral deposits like gold, tantalum, platinum, nickel, potash, soda ash and so many others have become the new options in a country hardly known for such resources.
The labor law of the country regulates worker-employer relations in line with international conventions. Ethiopia is the second largest labor force in Africa with 43 million workers. The country has been hugely investing to interconnect itself with neighboring countries that there is no access to high level asphalted roads.
To sum up, the country has created a favorable condition, particularly developed its infrastructure that paves ways for investment and many investors to invest their wealth in various sectors and become profitable. That is why a number of foreign investors have been flocking to the country and enjoying successful experiences.