Doing Business in Ethiopia

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Doing Business in Ethiopia

• Economic / Commercial Section
• Embassy of the United States of America
• Addis Ababa, Ethiopia
• February 2009
• Fassil Yilma
• Commercial Specialist

2
Outline of Presentation

• Market overview
• Market Challenges
• Market Opportunities
• Market Entry Strategies
• Conclusion

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1. Market Overview

• Area 1.1 million sq. km (472,000 sq. m.) about
  the size of Texas, Oklahoma, and New Mexico
  combined

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Market ..contd

• After 1993 Ethiopia became landlocked
• Population 77 million
• Rural population is 84 while 14 reside in
  urban areas
• The political environment is fairly stable
  despite border disputes with Eritrea and the
  volatile situation in the Ethiopia Somali region
• Elections take place every 5 years- the next one
  is coming up in 2010
• Controversial and very restrictive laws passed
  in the past one year (on media, CSOs and
  banking)
• Ethiopia is an agrarian economy
• Ag sector contributes 46 to GDP
• Over 80 of the labor force is engaged
• Over 60 of export earnings is generated.

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Market ..contd

• Real GDP for 2007/08 is 22.9 billion. Real GDP
  growth was double digits in the past few years,
  although official growth figures of 11.5 in
  recent years are inflated
• Unlike historical records, inflation has risen
  dramatically in recent years ( headline inflation
  is about 40)
• Significant and widening trade deficit in recent
  years has resulted in a foreign exchange crisis
  
• Value of exports 1.5 billion in 2007/08,
• Value of imports 6.8 billion in 2007/08,
• Forex reserves are currently estimated to cover
  only four weeks of imports
• Major exports coffee, oil seeds, leather and
  leather products, Khat, cut flower, gold, fruits
  and vegetables, and live animals
• In 2007/08 ,coffee generated 525 million (35),
  oil seeds 219 million (15), pulses 144 million
  (9.8), cut flower 111 million ( 7.6) , khat
  108 million (7.4 ) and gold 78 million (5.3)

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Market ..contd

• In 2007/08 Ethiopia imported
• capital goods worth of 1.8 billion, petroleum
  products 1.6 billion, consumer
  non-durables 1.1 billion, consumer durables 459
  million, fertilizer 300 million, cereals 207
  million, medical and pharmaceuticals 211 million
• U.S. exports to Ethiopia
• 262 million (2007/08 estimate), 4 of Ethiopias
  total imports
• Ethiopian exports to the U.S.
• 140 million (2007/08 estimate)
• Ranked 116th out of 181 countries worldwide and
  11th in Sub-Saharan Africa for ease of doing
  business .
• The WB s 2009 Doing Business Report
• WTO accession process commenced in 2003.
  Negotiations are still underway.

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2. Market Challenges

• Government remains heavily involved in most
  economic sectors.
• Services and trade sectors - difficult for
  foreign investor to enter.
• GOE controls the utilities, telecoms, and other
  major services.
• Financial sector is blocked for foreign
  ownership .
• Land is owned by the government and can be
  leased on a long term basis of up to 99 years.
• Foreign exchange is an acute problem.
• Lack of access to finance is a great hindrance to
  both foreign and local businesses.

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Market Challenges... (contd)

• Inadequate telecom services
• Customs clearance process
• Slow and time consuming,
• Imported goods being charged at attributed values
  instead of invoice values.
• Labor force - largely semi-skilled
• Judicial system
• - remains poorly staffed,
• inexperienced, particularly with respect to
  commercial disputes.

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Market Challenges- contd

• All imports must be channeled through Ethiopian
  nationals registered as official import or
  distribution agents with the ministry
• In 2008, Ethiopia ranked 126th out of 180
  countries in Transparency Internationals
  Corruption Perception Index
• Corruption (bribery) is slowly increasing, while
  conflict of interest corruption (cronyism)
  remains pervasive
• Ethiopia still is not signatory to many
  international WIPO Regulations Domestic IPR
  laws are enacted but with limited enforcement
  capacity

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3. Market Opportunities

• Ethiopia is well endowed with abundant
  agricultural resources, and vast diversity of
  ecological zones
• Considerable opportunities - cultivation and
  export of cut flowers, dried fruits, and
  processed vegetable products
• Ethiopia is interested in exploiting its forestry
  and fishing resources
• Developmental projects on construction of roads
  and low cost houses, hydro-electric power,
  telecom and tourism offer key opportunities
• Other leading export s to Ethiopia include
  construction machinery, vehicles and spare
  parts, medical equipment, fertilizer and
  pharmaceuticals
• Priority Sectors set by the GoE include leather ,
  textiles, cement , and agro-processing

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4. Market Entry Strategies

• Majority of procurement is undertaken by GoE,
  political dynamics do influence decisions.
• U.S. firms are strongly advised to appoint
  local agents to represent their products and
  services in Ethiopia.

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5. Closing Remarks

• Despite the numerous and stiff market challenges
  in the Ethiopian market, there are still
  opportunities for U.S. companies.
• We are ready to assist you !!!
• THANK YOU.