Ethiopia

ethiopia 2011
investing in
The conference is supported by
Development Bank of ethiopia
ethiopian shipping Lines
ForeworD
Foreword
DepuTy prime minisTer anD minisTer of foreign affairs of The feDeral DemocraTic republic of eThiopia. his excellency hailemariam Desalegn.
t is both a great pleasure and an honour for me to convey my full support and endorsement of the Ethiopian Investment, Trade and Tourism Promotion Forum, organised in partnership between the Embassy of the Federal Democratic Republic of Ethiopia in London, Africa Matters Ltd, Developing Markets Associates and WAFA Marketing and Promotion Plc. This Forum, I believe, comes at a very opportune time; as Ethiopia has, just a few months back, embarked upon the implementation of a historic new fiveyear plan, a plan that the people of Ethiopia are absolutely committed to. This undertaking which we have named the Growth and Transformation Plan, (GTP), takes into account two alternative growth scenarios. The base case scenario assumes that the previous five years average annual GDP growth rate will be maintained. The high-case scenario assumes GDP and the agriculture value added achieved in 2009/10 will double by the end of the GTP period, in 2014/15. In doubling-up the economy, we are poised to maximise the productivity of our agricultural sector, thus achieving food self-sufficiency by 2015 and a fertile ground for the industry to lead the economy. Mega infrastructure projects such as roads, railways and clean and renewable energy sources are being undertaken a prerequisite for integrated and robust sustainable economic growth that would ultimately usher Ethiopia into the middle income category by 20202023. In this protracted endeavour, trade and investment, including in tourism, are expected to play a decisive role.
As a nation, we strive to attract as much investment, trade and tourism as possible, in order to boost the effort to create job opportunities and to better the livelihoods of our citizens. This drive fits very well with our aims of building a democratic society where citizens will have a say in their countrys future, thus allowing them to unleash their full potential in the implementation of multifaceted social and development programmes pivotal to Ethiopias Renaissance. Certainly, an Ethiopia that has a dynamic economy would undoubtedly contribute its fair share to regional integration, which in turn will go a long way towards the maintenance of peace and stability in our sub-region. As I previously indicated, this Forum could not have been organised at a better time. And the fact that it is being held in the United Kingdom, a country with which Ethiopia enjoys excellent relations in all areas, and a key development partner for Ethiopia, makes it all the more appropriate. I would like to congratulate all those who have tirelessly laboured to make this endeavour a success and express my sincere belief that this Forum will offer ample opportunities to all stakeholders to learn more about our long history, our efforts to better the lives of our people and to contribute their share in the Renaissance of Ethiopia. I wish you all a productive and successful Forum.
Deputy Prime Minister and Minister of Foreign Affairs, HE Hailemariam Desalegn
2011 | investing in ethiopia
introDuction
Introduction
baroness lynDa chalKer of Wallasey, chairman, africa maTTers lTD
am delighted to welcome you to the UK-Ethiopia Forum, which has attracted a wide cross section of delegates from all corners of the United Kingdom. Ethiopia and Britain share warm and close relations; this Forum will cement this cooperation further by giving the delegates a unique opportunity to interface with senior Ethiopian government ministers and officials from the public and private sector. The Forum will listen to federal government ministers, industry leaders and private sector management about, Ethiopias current policies and opportunities for investment. We much welcome the presence of a high-powered Ethiopian delegation led by the Deputy Prime Minister and Foreign Minister, Hailemariam Desalegn. It is testimony that the government is determined to showcase to the investment world the opportunities in the country and the governments assurances that Ethiopia is open for business. In May next year, Ethiopia will host the 22nd World Economic Forum on Africa, which is further evidence of the important place that Ethiopia is now achieving as one of Africas success stories. The event today is another good platform for the government to demonstrate its readiness to enter into a partnership with the private sector. Ethiopias stability in a troubled Horn of Africa marks its position as an important investment destination. It continues to be an important centre for Africas political and economic institutions, notably the African Union and the Economic Commission for Africa. Its significant role on the continent was further evidenced,
when in May in this year, Addis Ababa played host to the Second Africa-India Forum Summit. The investment report highlights the current trends in Ethiopias business environment, its history and its rich cultural heritage. The chapters give an independent view of what Ethiopia has to offer and pinpoints important leads for delegates to raise and discuss with the members of the delegation during and after the Forum. The government approved Growth and Transformation Plan 2010/11 2014/15 (GTP) addresses the current infrastructure constraints and most importantly encourages links between domestic and foreign businesses with a view to building the capacity of local firms and the domestic private sector in general. Foreign Indirect Investment (FDI) is already assisting the manufacturing and agriculture sectors. Ethiopia like the rest of the world was hit by the changes in world economic conditions, thus impacting negatively on the FDI figures for 2009 and 2010. UNCTADs Report on the Implementation of the Investment Policy Review of Ethiopia makes important recommendations to the government on how to attract investment into the country. This Forum is therefore a timely response by the government to promote investment in the country. I wish you a informative Forum. fruitful and an
Baroness Lynda Chalker of Wallasey, Chairman, Africa Matters Ltd
investing in ethiopia | 2011
contents
Contents
04 14 20 22 26 28
economic overview agricuLture energy & mining inFrastructure tourism nyota aDvertoriaL
Publisher: Chris Gerrard Contributors: Alex Green-Wilkes, Frazer Lang, James Martin, Tom Minney, Matthew Rugamba and Moin Siddiqi Art Director: Steven Jones Conference Team: Deanne Lintorn, Jennie Wengrovius, Rebecca Isaacs Conference Directors: Leon Isaacs, Atam Sandhu Correspondence Developing Markets Associates Ltd (DMA), 150 Tooley Street, London, SE1 2TU email: info@developingmarkets.com | web: www.developingmarkets.com | www.moneymove.org | www.sendmoneypacific.org DMA acknowledge the assistance of all the individuals and organisations who have contributed to this publication. The views expressed herein are the opinions of the authors, and do not necessarily represent the Embassy of Ethiopia, the Government of Ethiopia, DMA or AML. All rights reserved. No part of this publication may be reproduced or transmitted in any form without the written permission of the publisher. Published by Developing Markets Associates Ltd (DMA). Printed by Woodrow Press. Picture credits: WAFA
Developing Markets Associates Ltd
economic overview
Putting Ethiopia in the fast development lane

by moin siDDiQi, economisT
thiopia, one of the worlds oldest civilisations, is currently advancing an Agriculture Led Industrialization Strategy to promote investment-led growth and sustainable development. Yet, despite the countrys rich history (dating back to the Aksumite Kingdom, more than one century before Christ) and its vast untapped natural resources, the international investment community has only recently started to appreciate the long term investment opportunities on offer in agriculture & agro-processing, minerals, tourism and infrastructure building. Ethiopia qualifies as a durable African success story, thanks to sound
macroeconomic fundamentals and a government that prioritises broad-based development. Since the mid-2000s, it has ranked among the five fastest growing economies in the world. This impressive expansion primarily the result of good planning is expected to continue over coming years, thus providing healthy returns to prospective investors. The government is taking concrete measures to shift the economy towards an even higher growth trajectory by further integrating all federated states into the development process through sound social and economic policies, as well as encouraging mega investments in the coming years.
Nominal GDP grew six-fold over the period 2000-2010 and is projected by the International Monetary Fund (IMF) to reach 474.1bn Ethiopian Birr in the fiscal year 2010/11, representing a compound annual growth rate of 55.6%, fuelled mainly by government and private sector investments. Real GDP growth has averaged 11% per annum in the past seven years (way exceeding regional trends). Significantly, Ethiopia long reliant on agriculture has achieved greater diversification, reflected in the growth of industry and services. Concurrently, economic activity is more broadbased thereby benefiting all sectors of the economy. In 2010, services led by
economic overview
Sound economic planning to create broad based sustainable growth has guided Ethiopia over the years
banking, insurance, retail/wholesale trade, real estate, hotels, transportation and communications surpassed agriculture as the major contributor to national output at 46% of GDP, compared with 41% for the agriculture sector. The contribution of local industry to GDP is 11%; the main sub-sectors are textiles, leather, food/ beverages, chemicals, cement, mining, steel/metals. ensuring broad-based, accelerated, and sustainable economic development; balancing population growth and economic development; creating an environment conducive to unshackling womens capacity; strengthening infrastructure, sustainable human resource development; halting the adverse impact of vulnerability and disaster on development; and creating job opportunities. The plan also emphasised greater commercialisation of agriculture and enhancing private sector development, industry, urban development and a scaling-up of efforts to achieve the Millennium Development Goals (MDGs). A comprehensive and planned development direction has also helped manage the countrys resources effectively by directing them where they are most needed and this has helped mobilise
external resources in the form of FDI and development cooperation to fill the financing gap in the growth plan. Hence, the first five-year Development Plan achieved most of its targets in transport, energy, telecoms, drinking water and poverty reduction and succeeded in expanding public services and achieving most of the MDGs targets. (see Table 3) The impact of the global downturn on Ethiopia was milder than on most developing nations. Exports, remittances and foreign direct investment (FDI), after falling modestly during 2008-09, have recovered and have exceeded their precrisis levels. The current account deficit (excluding official transfers) stood at US$3.1bn, showing a decline of 2.8% compared to the level of the previous fiscal year. With the rise in export earnings and relative slowdown of imports, foreign exchange reserves have risen, from barely four weeks of import-cover in October 2008 (US$764mn) to over two and a half months of imports at the end of 2010 (US$2.4bn), according to the World Bank.
sounD economic governance

Sound economic planning to create broad based sustainable growth has guided Ethiopia over the years. The second phase of the development strategy of the country the Plan for Accelerated and Sustained Development to End Poverty (PASDEP) 2006-10 was based on eight pillars of growth to achieve its goals i.e. comprehensive capacity building,
economic overview
The authorities have implemented corrective measures in the past two years by implementing appropriate fiscal and monetary policies such as tightening fiscal policy by reducing the governments domestic borrowing, managing money supply, and depreciating the local currency in order to boost export competitiveness, as well as applying price caps on selected basic goods and importing cereals to address the problems of soaring food inflation. The budget has been managed prudently, with stronger revenue collection efforts and higher donor inflows. The IMF noted: Those countries that had improved their policies most during the precrisis period were able to mount the strongest counter-cyclical responses, thus successfully limiting the decline in output. Thus, Ethiopia in 2009 still registered a robust 10% GDP growth the highest among low-income countries (LICs) in Africa and Asia.
notably textiles/apparel, leather products, agriculture & agro-processing, tourism and mining/quarrying. Ethiopia has about 80m hectares of arable land, of which onefifth is under cultivation. Whilst irrigation potential is estimated at 4m hectares of land, only 5-6% of this fertile area is presently utilised. Ethiopia is endowed with one of the largest and most diverse genetic resources in the world, with 18 major and 49 sub agro-ecological zones spread across a landscape of 1.14m square kilometres. Private investors are encouraged to focus on high value-added export sectors ranging from food products, industrial raw materials to biofuels. Main cash crops are Arabica coffee, tea, sugar cane, oil seeds, cotton, spices, sub-tropical fruits, vegetables and flowers. Ethiopia has the largest livestock resources in Africa and the worlds tenth largest, as well as vast fishery and apiculture resources. The strategic location of the country as an inland gate-way to Africa, its proximity to Europe and to the Middle East provides investors ample opportunity and a comparative advantage to access these potential markets.
To make the agricultural sector more appealing to foreign investors and supplement the dominant small scale agriculture, there has been a notable move to facilitate the development of large scale and mechanised farming by providing suitable land and encouraging modern technologies, encouraging irrigated agriculture and improving the skill of the labour force through technical and vocational training. In order to increase the productivity of the countrys numerous small holder farmers, the government has been undertaking agricultural extension schemes to train farmers in using modern technologies and scaling-up best practices drawn from high-performing farmers. As a result, productivity has risen by 11%/ year on average from 2005 to 2010. Another programme launched in 2009/10 (funded by the World Bank) is the Rural Capacity Building Project, which has the objectives of modernising agricultural, technical and vocational training colleges and building capacity in agricultural extension systems. There are 25 colleges that provide farming training under the Ministry of Agriculture and Rural Development.
growth inDustries
The country enjoys comparative advantages in labour-intensive sectors,
economic overview
Ethiopias mining sector is undergoing a huge transformation as opportunities for investment have opened up. Geological surveys indicate that Ethiopia is endowed with a variety of mineral resources. Metallic minerals include gold, which is the most developed with a huge potential of exploration. A proven reserve of natural gas, in the amount of 12.6 trillion cubic feet, has been found which is ready for commercial exploration, whilst deposits of platinum (and other PGE), tantalite, iron, copper, lead, zinc, nickel and other base metals exist. Petroleum and gemstones have also been identified. Industrial and construction minerals such as quartz, feldspar, mica, kyanite, kaolin, talc, chromites, graphite, magnesite, industrial olivine, marble and granite, potash, rock to the Ministry of Mines making it the second largest recipient of foreign investment after agriculture. Seven years ago, the West didnt know about our mineral resources, said Head of Mineral Operations at the Ministry. Ethiopia possesses huge renewable energy sources, such as hydropower, wind, solar and geothermal with a total potential capacity of 60,000 megawatts (MW) that could (if fully tapped) make it an important regional electricity exporter. Its hydropower resources are second only to Congo (DRC) and the Nile, the worlds longest river, derives about 85% of its waters from the Blue Nile, which originates from Ethiopia. The country is served by eight river basins. designated hotels and lodges, which also enjoy incentives. The tourism sector will also benefit from mega development projects underway in the country, including the construction and upgrading of airports, roads, rail and communications networks, as well as public utilities. The Ministry for Culture and Tourism has set a target of placing Ethiopia among the top ten tourist destinations in Africa by the year 2020. This goal now looks achievable.
a new FDi Frontier

This Horn of Africa nation projects enormous trade and investment potential. Foreign direct investment (FDI) inflows have steadily risen in the past decade targeting manufacturing, agriculture, and mining activities. There are no restrictions on foreign equity ownership in the aforementioned sectors. With paramount importance given to the development of the infrastructure sector, there is wide scope for participation of foreign investors in areas such a hydropower, railway and road development and expansion. Ethiopias investment code is relatively transparent, attractive and competitive against peer African countries. It provides ample opportunity for investors with a variety of packages of incentives and guarantees. Investors are entitled to 100% customs import duty exemption on all imports of investment capital goods and construction materials necessary for the establishment of new enterprises or for the expansion and upgrading of existing ones; including spare parts worth up to 15% of the imported investment capital goods. Products and services developed in Ethiopia are exempt from export tax. An income tax holiday of between two and seven years (variable depending on area of investment, location and volume of export) is available to income derived from new manufacturing and agro-industrial investment, agricultural investment and information and communication technology (ICT) development. Businesses that have suffered losses during this holiday can carry them forward for half the exemption period, once that exemption has expired. Investors are also entitled to remit their capital in foreign currency in the form of profits, dividends, payments for technology transfer, salary of expatriates and payments of loans from foreign banks.
there is wide scope for participation of foreign investors in areas such a hydropower, railway and road development and expansion
salt, soda ash, sulphur, silica sand, diatomite and bentonite have been identified and some are under production. Such mineral wealth, in combination with a skilled and highly motivated workforce guarantees a thriving and profitable mining sector. The Mining Proclamation recognises the significant role of private investment in capital formation, technology acquisition and marketing of minerals. As a result of a conducive fiscal and legislative environment, the country is now enjoying the participation of both foreign and local investors in exploration and mining. To date the Ministry of Mines and Energy has granted 119 exploration licenses of which 86 are foreign and 33 on joint venture basis and 52 mining licenses of which 24 are foreign and 17 are on joint venture and 11 locally owned. The total number of licenses issued has reached 171 granted to 86 companies. Intensive exploration programmes are also being conducted for oil and gas, precious stones such as diamonds and sapphires and other gemstones in different parts of the country. The government intends to license 50 (E&D) projects every year and more than double exports from the mining sector which is totally open to foreign investors to US$1bn in five years. Investment has jumped from merely US$100mn in 2003 to US$1.3bn by 2010, according The current potential capacity of cleaner energy is hydropower (45,000 MW); wind (10,000 MW); and geothermal (5,000 MW). Foreign and local private investors can participate in power generation for sale to the national grid. The Ministry of Water Resources & Energy said: As the country has the potential to export energy to the region and beyond, investing in the energy sector of Ethiopia creates a new investment opportunity with high returns. The combination of its natural beauty and its ancient history and cultures (dating back to biblical times) make the country an ideal tourist destination where visitors enjoy a wide variety of attractions such as historical sites; notably Axum, the rock-hewn churches of Lalibela one of the eight wonders of the world as designated by UNESCO, Harar the fourth holiest place in Islam; as well as the Afro-Alpine highlands (peak height 4,300 metres); moors/mountains, deep gorges, the largest cave in Africa (Sof Omar); and tropical forests, combined with giant waterfalls and a spring-like climate throughout the year. Africas oldest nation offers historical, cultural, archaeological and anthropological sites and boasts huge potential for the globally growing trend towards eco-tourism. Such attractions create ample opportunity for investors to participate in the tourism industry such as star
economic overview
Other improvements have included the easing of regulations on investment from the Diaspora and reducing minimum capital thresholds for Greenfield projects from US$500,000 to US$100,000 and joint ventures from US$300,000 to US$60,000. Moreover, investors exporting three-quarters of outputs are exempted from minimum capital requirements. Foreign manufacturers benefit from Ethiopias preferential access to the EU and US markets under the Everything But Arms (EBA) initiative and the USs African Growth and Opportunity Act (AGOA), as well as other duty free schemes from other European and emerging market countries. The country has a stable economic and political environment and it offers a cost-productive (trainable) workforce and abundant natural resources. The UNCTAD and the International Chamber of Commerce identified a safe and secure working and living environment as a key asset for investors. Ethiopia is endowed with a vast land area both convenient for industry, mining juniors Altus Strategies Ltd and Stratex International; and global hotel chains (Hilton, Sheraton, Emerald, Intercontinental, and Accord), among others. food security at household and national level of which 100% coverage of primary education enrolment has been achieved. A healthy workforce is key to raising productivity and competing successfully in global markets. Large-scale investments in transportation and energy infrastructure will help underpin future industrialisation drives. The plan entails the addition of massive railway construction of 2,400km. It also envisages the construction of 88,179km of new federal and regional roads, which will bring the total coverage to 136,972km by 2015. Being a landlocked country, Ethiopia would benefit enormously from a more efficient transport system to increase linkages between the regions, thereby enhancing domestic market integration, strengthening the export market and cutting the costs of transport. To this end it has introduced dry port facilities and up-graded its renowned airline services to include air cargo systems. In the energy sector, 8,000MW of new capacity is envisaged by tapping the hydropower supply. The construction of dams and hydropower plants is underway across Ethiopia which is also destined for export to neighbouring countries and thereby contributing to regional economic cooperation and integration. The GTP foresees the creation of more industrial zones, which should foster sustainable industrial development and promote manufactured exports. The government has allocated land and provided incentives for developing necessary infrastructures. There are a number of industrial zones currently under construction. Among these, the China Africa Development Fund is building a development with plans for housing 80 Chinese textile, leather and metal companies whilst a Turkish group, Akgn Construction and Machinery is also constructing an industrial zone. The objectives of the 2011/15 development plan could be achievable given increased mobilisation of domestic savings and donor and private financial support. The government has identified a funding gap of Birr 140bn (US$8.3bn). Ethiopia is well placed for tapping global capital markets in coming years, reflecting improving country risk. The government has also put in place mechanisms for raising finance through encouraging national savings and issuing bonds.
the piLLars oF a stronger economy

The new five-year Growth and Transformation Plan (GTP), which succeeds the previous five year plan, PASDEP, seeks to expand physical infrastructure and achieve the Millennium Development Goals (MDGs), as well as laying the foundations of a middleincome developing economy. The plan covering the period (2011-15) and costing one trillion Birr (US$59.3bn) offers ample scope for Public-Private Partnerships and/or Private Finance Initiatives in mega developments from road/rail networks to energy, large scale farms including irrigated agriculture, plus water & sanitation, and housing. It also aims to enhance productivity in the primary sector and national competitiveness, whilst improving the
The GTP, by the end of its plan period, envisages the industrial sector leading the way forward
service and large scale agriculture. Cost of land is quite reasonable and it is provided on a long lease basis of up to 99 years. Ethiopia a member of the World Bank Multilateral Investment Guarantee Agency (MIGA) has also concluded bilateral investment promotion and protection accords with 28 jurisdictions including Britain. Presently, the EthiopiaUK avoidance of double taxation treaty is due to be signed in the UK on 9th June, 2011. The government is improving the mechanisms to tackling current obstacles to inward FDI by investing in power generation and transportation networks. Major foreign companies operating in Ethiopia include AYKA (Turkey), the largest textile investor in sub-Saharan Africa; Karuturi Global Ltd (Indian food processor); Pittards Tannery (UK) in the leather sector; German footwear manufacturer Ara AG; SouthWest Energy (UK);Thani Ashanti (the South African AngloGold Ashanti jointventure Co); Nyota Minerals (UK/ Australia); Beijing Donia Resources Co; UK-based capacity of state institutions, nurturing the growth of the private sector and ensuring greater transparency. The GTP, by the end of its plan period, envisages the industrial sector leading the way forward, with a projected real annual growth of a minimum 11.2% and a high scenario of 14.9%, including the doubling of current GDP and exports to US$10bn by end FY 2015. Promoting micro, small and medium-sized enterprises (MSMEs) the engine of job creation and poverty reduction is a major government priority. To facilitate the growth of MSMEs, attention should focus on improving the business climate, particularly further cutting red tape and increasing access to credit. Boosting total access to electricity coverage and safe water supply from 41% and 68.5%, respectively, to 100% and 98.5% are also targeted. Equally crucial is expanding and improving health and education services in order to meet MDGs and ensuring
economic overview
Future poLicy chaLLenges

The key macro-financial goals for the medium-term are keeping inflation in single digits, to maintain a competitive exchange rate, continuing to build forex reserves, and to implement a monetary policy that halts demonetisations where the economy is heavily cash dependent whilst promoting financial deepening (i.e. the development of sophisticated and efficient payments, savings, credit, and financial tools), as well as preserving fiscal sustainability. The government has implemented a series of financial capacity building programmes which include, inter alia, strengthening the regulatory mechanisms that ensure financial stability. This is also helping to create a conducive environment for the growing numbers of private banks. More importantly, the risk of debt distress is low because of projected double-digit export growth and sustained high remittance (averaging
89% of GDP) levels. Low/manageable foreign debt, forecast this year at 24% of GDP provides scope for tapping capital markets (including possible bond issuances). External borrowing on commercial terms are mostly directed at productive capital projects that generate a higher rate of return. Creating a larger tax base through enhanced domestic resource mobilisations and higher gross capital formation (averaging 35-40% of GDP/ year), combined with solid gains in total factor productivity can improve the economys resilience to exogenous shocks and sustain real per capita GDP growth of 8% per annum a prerequisite for meeting core Millennium Development Goals (MDGs). The government encourages, as indicated in the GTP, to improve the overall competitiveness of the economy, through sustained export growth and implementation of import substitution policy. The plan also aims to enhance
agriculture and industrial productivity, undertake massive infrastructure projects such as roads, hydropower development and railways that help fuel the growth of other economic sectors, improve the business and investment climate, and implement sound fiscal and monetary policy to stabilise the financial markets. On current growth patterns and continued good governance, Ethiopia has a realistic chance of joining the ranks of middle-income countries by 2025. Ethiopia, with its huge potential middle-class, as well as untapped arable land and natural resources, will appear more and more on the radar of strategic investors over the next decade. As Donald Kaberuka, President of the African Development Bank puts it: Africa is ready to optimise its potential. Opportunities abound and the time is ripe. Ethiopia is expected to play a major role in the regions economic renaissance creating openings in many sectors for foreign investors targeting both domestic and wider East African markets.
economic overview
taBLe 1: KEY ECONOMIC AND FINANCIAL INDICATORS

proj. Domestic economy nominal gross Domestic product (gDp) at market prices (Billions of Birr) Real GDP growth(1) (%) Consumer price inflation(2) (%) Gross domestic investment (%) of GDP of which: Private investment Gross domestic saving (%) of GDP government Finances (%) of gDp Total government revenue External grants Total expenditure and net lending of which: Capital spending Budget balance (%) of GDP, incl. grants Gross domestic government debt (%) of GDP 2009/10 399.1 10.4 2.8 22.0 7.0 5.4 17.3 3.2 18.6 10.2 -1.3 13.3 2010/11 474.1 10.5 9.0 24.2 7.6 3.5 17.3 4.0 19.8 10.8 -2.5 12.7 proj. 2011/12 550.2 11.2 7.3 26.4 9.4 5.0 17.8 4.2 20.0 11.0 -2.2 12.2 proj. 2012/13 633.4 11.2 6.0 27.4 11.0 9.0 18.0 4.2 19.9 10.7 -1.9 11.7 proj. 2013/14 726.6 11.2 6.0 29.0 13.0 11.2 17.8 3.8 19.5 10.3 -1.7 11.2 proj. 2014/15 833.8 11.2 6.0 32.0 15.5 15.0 18.0 3.8 19.7 10.6 -1.7 10.7
The Ethiopian fiscal year ends July 7; (1)Annual percent change; (2)period average. Sources: the ethiopian authorities and imF projections.
Area (sq km): 1.14mn. Capital: addis ababa. population (2009): 83.8mn. gDp (2010): us$35bn. The currency Birr per US dollar: 16.8 (May 2011).
taBLe 2: BALANCE OF PAYMENTS, 2010-2015

(IN US$MN, UNLESS OTHERWISE INDICATED) 2009/10 2,003 8,269 73 -6,266 29.0 456 1,194 -4.0 2,709 1,905 956 317 2,017 2.1 16.8 3.6 proj. 2010/11 2,335 9,630 650 -7,295 -1.1 571 -2,411 -8.0 2,766 1,642 1,049 412 2,291 2.3 25.0 5.7 proj. 2011/12 2,742 10,873 1,050 -8,131 -0.5 884 -2,627 -8.3 2,891 1,890 1,130 367 2,659 2.5 27.5 7.1 proj. 2012/13 3,271 11,383 560 -8,112 2.9 1,243 -1,963 -5.6 2,996 2,105 1,267 453 3,112 2.6 28.7 7.7 proj. 2013/14 3,805 12,532 560 -8,727 0.5 1,588 -1,970 -5.2 3,187 2,215 1,405 490 3,602 2.7 29.2 8.3 proj. 2014/15 4,429 13,810 560 -9,381 0.5 1,937 -1,966 -4.7 3,357 2,372 1,453 492 4,094 2.8 29.4 9.0
Exports of goods (f.o.b)(1) Imports of goods (f.o.b) of which: aircraft Trade Balance Terms-of-trade (%)(2) Net balance on services Current account balance As (%) of GDP Private transfers (net) Official transfers (net) FDI inflows (net) Overall balance of payments Gross international reserves Import-coverage(3) External debt (%) of GDP External debt-service to export ratio (%)
(1) (2)
Main exports: Coffee, Livestock, Pulses & Oil seeds, horticulture, floriculture, textile/garment, gold. annual (%) change in terms-of-trade (the ratio of export to import prices). (3)gross forex reserves in months of imports of goods and services. ~ Net flows of foreign direct investment, after repatriation of interest and profits. FDI 2009 inward stock: US$3,790mn, up from us$941mn in 2000. Sources: ethiopian authorities, imF and unctaD database.
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economic overview
taBLe 3: SOCIO-ECONOMIC DEvELOPMENT INDICATORS

Base yr 2005 national health Total poverty headcount (%) of population Number of health centres Number of hospitals Access to healthcare (%) of population Maternal mortality rate (per 100,000) education sector Primary school net enrolment rate (%) Number of primary schools Secondary school enrolment ratio (%) Number of secondary schools University students (undergraduates) Number of universities (Public) Basic infrastructure Total road network (km) Roads in good conditions (%) Power generating capacity (MW) Electricity service coverage (%) Total access to safe water (%) Number of fixed line subscribers (mn) Number of mobile subscribers (mn)
Source: ethiopia authorities.
end-2010 29.2 1,787 111 89.0 590 88.0 25,217 38.1 1,202 185,788 22 48,800 81.0 2,000 41.0 68.5 0.74 4.0
proj. 2015 22.2 100.0 267 100.0 75.0 467,445 64,500 86.7 10,000 100.0 98.5 8.5 61.4
39.0 644 79 30.0 871 69.0 16,513 N/A 706 78,232 13 36,400 64.0 714 16.0 36.0 0.62 0.56
taBLe 4: OFFICIAL AID TO ETHIOPIA

Net Official Development Assistance (US$mn) Bilateral share (gross ODA) percent of total Net ODA (%) of Gross National Income Net Private flows (US$mn) 2007 2,578 49.0 13.4 -53 2008 3,328 56.0 12.8 -138 2009 3,825 48.0 13.4 240
Top Ten donors of gross ODA (2008/09), US$mn The International Development Association (795); the US (769); the European Union institutions (325); Britain (298); and the african Development Fund (222). Sources: oecD, world Bank.
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economic overview
taBLe 5: ETHIOPIAS BUSINESS DATA

ethiopia starting a Business Procedures (number) Duration (days) Cost (% of GNI per capita) Paid in min. capital (% of per capita) Dealing with construction permits Procedures (number) Duration (days) Cost (% of income per capita) Registering Property Procedures (number) Duration (days) Cost (% of property value) Paying Taxes Payments (number per year) Time (hours per year) Profit tax (%) Labour tax and contributions (%) Other taxes (%) Total tax rate (% profit) trading across Borders Documents for exports (number) Time for exports (days) Cost to export (US$ per container) Documents for import (number) Time for import (days) Cost to import (US$ per container) enforcing contracts Procedures (number) Duration (days) Cost to enforce; in (%) of claim protecting investors Extent of disclosure index(1) Extent of director liability index(1) Ease of shareholder suits index(1) Strength of investor protection index(1) getting credit Strength of legal rights index(1) Depth of credit information index(2) Public registry coverage (% adults) Private bureau coverage (% adults) closing a Business Time (years) Cost (%) of estate Recovery rate, cents on dollar sub-saharan africa, avg 8.9 45.2 95.4 145.7 17.6 239.5 1,773.3 6.5 67.9 9.6 37.3 315.1 23.1 13.5 31.5 68.0 7.7 32.3 1,961.5 8.7 38.2 2,491.8 39.1 639.0 50.0 4.8 3.4 5.0 4.4 4.6 1.7 2.7 4.9 3.4 20.7 23.2 oecD avg 5.6 13.8 5.3 15.3 15.8 166.3 62.1 4.8 32.7 4.4 14.2 199.3 16.8 23.3 3.0 43.0 4.4 10.9 1,058.7 4.9 11.4 1,106.3 31.2 517.5 19.2 6.0 5.2 6.8 6.0 6.9 4.7 8.0 61.0 1.7 9.1 69.1
5.0 9.0 14.1 367.7 12.0 128.0 419.6 10.0 41.0 2.1 19.0 198.0 26.8 0.0 4.3 31.1 8.0 44.0 1,890.0 8.0 45.0 2,993.0 37.0 620.0 15.2 4.0 4.0 5.0 4.3 4.0 2.0 0.1 0.0 3.0 15.0 31.3
ethiopia ranks (104) out of 183 economies on the ease of doing business. (1)(0-10) - Most 10; Least 0-1. (2)(0-6) - scope and accessibility of credit information distributed by public credit registries and private credit bureaus; Most 6; Least 0-1. Source: world Bank Doing Business 2011 report.
12
economic overview
chart 1: ETHIOPIAS GROWTH ExCEEDS REGIONAL AvERAGE (IN PERCENT)
15 12.6 12
11.5
11.8 11.2 10.0
9 7.3 6 6.3 6.4 5.7
8.0
4.9 2.8
0
et su hio pia ar
2005
s b-
ah
an
ri af
ca et su
hio
pia ar
2006
s b-
ah
an
ri af
ca et su
hio
pia ar
2007
s b-
ah
an
ri af
ca et su
hio
pia ar
2008
s b-
ah
an
ri af
ca et su
hio
pia ar
2009
s b-
ah
an
ri af
ca et su
hio
pia ar a
2010
f na
ric
s b-
ah
Source: imF, african Department database, april 2011.
chart 2: STEADY INCREASE IN FDI INFLOWS TO ETHIOPIA (US$MN)

1500 1,405 1250 1,049 1000 880 956 1,130 1,267 1,453
750
500
250
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
Source: ethiopian authorities and imF projections.
chart 3: MAIN DESTINATION OF ExPORTS (PERCENT OF TOTAL 2010)

china
15.3%
chart 4: MAIN SOURCES OF IMPORTS (PERCENT OF TOTAL 2010)

china
18.2%
Germany Belgium
10.4%
saudi arabia usa india

9.0%
saudi arabia usa others * including - sudan, Djibouti, Turkey, Italy, Netherlands
Turkey others * including - France, Italy, Canada, Russia, Germany
53.5%
7.6% 6.7% 6.5%
61.8%
5.0% 3.6% 2.4%
Source: imF, Direction of trade statistics.
Source: imF, Direction of trade statistics.
13
agricuLture
is estimated to be around 4.3m ha. The mid-highland and highlands account for 45% (50.2m ha) of the total land and the rest is lowland. The country is endowed with abundant agricultural resources and altitudes of up to 4,620 metres above sea level and 148 metres below provide diverse agroecological zones that are conducive for a variety of crops. The country has 18 major agro-ecological zones and 62 subzones, its soils and climate are ideal for a variety of crops. Around 146 types of crops are currently grown. (UNCTAD). The main cash crops grown are coffee, cotton, tobacco, sugar cane, tea, spices and horticultural crops. The major food crops are cereals, pulses and oil seeds. The main cereal groups include teff, barley, wheat, maize and sorghum; pulses comprise mainly peanuts, beans, peas, chickpeas, lentils, rough peas, fenugreek, soyabeans, haricot beans and several varieties of oil seeds. The major oil crops include sesame, niger seed, groundnut, rape and linseed. Sunflower and castor beans also have potential.
Agriculture and Agro-Industries

by maTTheW rugamba
The broad range of horticulture products range from a growing export industry of cut flowers to fruits and vegetables such as citrus, banana, mango, papaya, avocado, guava, grapes, cabbages, cauliflower, okra, egg plant, tomato, celery, cucumbers, pepper, onion, asparagus, water melon, carrots and green beans. Ethiopia stands first in Africa and tenth in the world in terms of its livestock resources (43 million heads of cattle, 31 million heads of sheep, 27 million heads of goats, 32 million poultry, 2.3 million camels and 7 million equines). With about 10 million bee colonies, over 800 honey source plants and current annual production of honey and bee-wax estimated at 43.7 thousand tonnes and 3.6 thousand tonnes respectively. Indeed Ethiopia is one of the leading apiculture producers on the continent. These vast resources are suitable for promoting agro-processing industries such as leather, textiles, sugar production, food processing, including dairy farming and canning of various types of fish and honey processing. Currently, substantial growth is registered both in the number and quality of production of leather, textiles and the sugar industries.
griculture is the mainstay of the Ethiopian economy. It employs 80% of the population and contributes about 41% of GDP and 86% of exports. The government has put in place an Agriculture Development Led Industrialization (ADLI) strategy that has been instrumental in making use of its vast agriculture potential and paves the way for the expansion and growth of the agro-processing sub-sector. This has, amongst other things, resulted in the current double-digit growth of the economy as registered in the past consecutive seven years. The countrys five-year Growth and Transformation Plan (2010- 2015) continues to take the agriculture sector as one of its leading growth pillars. Agriculture will continue to be the engine of growth. Modernisation and productivity of agriculture is expected
to meet the target of ascertaining food self-sufficiency and growth of foreign currency earnings. Main crop production is expected to double from the current 18 million tonnes to about 40 million tonnes. Textiles, leather and apparel, food processing and sugar production are expected to substantially grow in quantity and quality.
agricuLture resource potentiaL

Ethiopias population now stands at close to 80 million of which 85% is based in rural areas. The total area of the country is about 111.5 million hectares (ha), out of which about 80m ha is suitable for annual and perennial crop production and only 15m ha is cultivated. The irrigation potential of the country
14
agricuLture
poLicy initiatives
The governments new GTP 2010-2015, contains key policies and strategies to sustain broad-based, rapid and equitable economic growth. Its success will depend on a vibrant agriculture sector and the countrys industrialisation. Investment in the agriculture sector is currently more attractive and profitable in diverse subsectors ranging from food products, industrial raw materials to biofuels (GTP). Farmers and private investors are being encouraged to produce high value added and high demand products. The improvement of the infrastructure, evident in roads, energy and irrigation schemes, in areas where land is easily available for commercial agriculture, is being pursued with a view to attracting investors. ADLI places emphasis on the need for smallholder farmers/pastoralists to efficiently use modern agricultural technologies and increase production and productivity. With the increasing commercialisation of the sector, there are growing demands for inputs of agricultural products by manufacturing industries and for the
Farmers and private investors are being encouraged to produce high value added and high demand products
provision of all-round support services such as the maintenance of tractors, harvesters, grain silos and cold storage, and services such as transport and marketing. The Agricultural and Rural Development plan under the GTP will in the next five years scale up the lessons learnt and the achievements of the Plan for Accelerated and Sustained Development to End Poverty (PASDEP) which was Ethiopias guiding strategic framework for the fiveyear period of 2005-2010. The government implemented an agricultural extension programme to train farmers on the use of modern tools and technologies. This has led to an increase in agricultural productivity of 11 percent a year on average between 2005
1
investment opportunities
The Ministry of Agriculture and Rural Developments policy framework underscores the role that the private sector can play in agricultural development outcomes, as evidenced by the successes registered in the floriculture sub-sector. Infrastructure bottlenecks have indeed hampered the commercialisation of agriculture, and in response to this the government has improved and expanded the infrastructure in areas that are viable for large scale commercial farming. As a result of these improvements, there has been increased interest in agricultural investment in areas that had hitherto lacked basic infrastructure. Ethiopia has huge investment potential for agricultural development. Investment in the agriculture sector is attractive and profitable in the various sub-sectors ranging from food products, industrial raw materials to bio-fuel. The countrys investment code provides a number of
and 2010. The Rural Capacity Building Project was launched in 2009/10 with funding from the World Bank aimed at modernising the agricultural extension programme and strengthening the agricultural research system. The agricultural Technical and vocational Education Training (TvET) initiative has trained over 52,000 development agents. Over 9,265 Farmer Training Centres have been completed and are in service. Through the development agents assistance and training programme a growing number of farmers have shifted to small-scale modern farming practices. The GTP envisages increasing the number of beneficiaries of extension services from the current 5.4 million to 14.6 million beneficiaries (GTP, UNCTAD)1.
Growth and Transformation Plan 2010-2015. Ethiopia Investment Guide 2010, Ethiopia Investment Agency; an Investment Guide to Ethiopia, UNCTAD, 2004 and Report on the Implementation of the Investment Policy Review Ethiopia, UNCTAD, 2011.
15
agricuLture
Ethio-Agri-Ceft, a leading tea plantation and processing company, produces tea products for both domestic and foreign market. Kanan Devan Hills Plantations Company (KDHP) that owns and runs Tata Tea estates has signed an agreement with the East Africa Agri-Business Private Limited company of Ethiopia to manage their 500 hectares tea estate. Under the agreement, KDHP will transfer the latest tea planting, growing, harvesting and manufacturing technology for black tea. KDHP will also assist in planting tea on 5,000 ha. Opportunities for investment range from large-scale commercial tea production to modern tea blending and packing industries.
maize (corn)
Maize is grown in the mid highland areas, although all regions provide suitable conditions for maize farming. Huge tracts of land are available for farming in SNNPR and Oromia regions. 1.77 million ha are currently under cultivation.
wheat anD BarLey

incentives and guarantees for investors engaged in the sector. The potential to grow all types of tea is huge, although currently only black tea is produced.The current capacity of black tea production is 7,000 tonnes per annum, with a consumption rate in the country of 5,000 tonnes. Tea is grown in the highland dense forest regions of the country. Ethiopia offers the ideal climatic conditions and soil type for the growing of good quality tea. Wheat and Barley are grown by smallholder farmers in the highlands and mid highland areas, in Oromia (Bale and Arsi Zones) and parts of Amhara (North Gondar and North Shewa) regions. The areas under cultivation for wheat and barley are 1,095,436 and 1,398,215 hectares respectively. Agro-processing opportunities and out growers development schemes are significant. There are also opportunities
coFFee
Coffee is Ethiopias dominant export crop, which is cultivated on over 600,000 ha. The country produces some of the best coffee in the world and is one of Africas leading producers of Arabica coffee. Coffee is largely grown in the south and south western highlands of the country. More than 60% of Ethiopian coffee is produced as forest or semi-forest coffee. The four main coffee growing regions in Ethiopia are: Harrar, Ghimbi, Sidama/ Yirgacheffe, and Jimma/Keffa. Ethiopia has more genetic diversity among its coffee varieties than any other country in Africa. Investment opportunities in coffee range from large-scale commercial coffee production, coffee roasting and grinding to packing for the international market.
Figure 1: STRUCTURAL COMPOSITION OF ECONOMY

50
40 percentage share of gDp agriculture Industry service
30
20
10
tea
Ethiopian Tea is renowned as being amongst the best quality in the world. Tea plantations cover an area of 2,700 ha.
0
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
Source: africa Development Bank.
16
agricuLture
for the production of wheat under irrigation in the Afar, Gambella, SNNPR and Somali regions. National Forest Priority Areas (NFPA). Thirteen NFPAs are managed under integrated forest management systems, with about 80,000 ha of industrial forest having been established for limited sustainable exploitation. The undertaking of a sound forest development programme, with the participation of private investors, has become imperative to reversing previous deforestation activities. Potential activities for private investors in commercial forestry include the production and marketing of gum and incense, large-scale plantations for timber, the establishment of integrated forest-based industries such as pulp and paper and chipboard, and the establishment of rubber plantations. Investors are welcome to invest in integrated commercial production of structural timber, pulpwood, matchwood, chipboard and even fuel wood. both the highland and lowland areas. Pulse processing factories exist.
oiL seeDs
Ethiopia has favourable agro-ecological conditions for growing a variety of oil seeds, which are produced for both internal consumption and export. The edible oil industry uses these seeds as raw materials.The seeds include: rapeseed, linseed, groundnut, sunflower, niger seed and cotton seed. Peanuts and sesame are mainly exported. The demand for sesame has been increasing in the global market, making sesame an increasingly important export commodity in Ethiopia. In 2008/09, Ethiopia exported 287,000 tonnes of sesame valued at US$356.1mn, accounting for 24.6% of total export earnings.
ruBBer anD paLm trees

The production of rubber and palm oil offers investment opportunities for investors. Palm trees grow in a wide range of tropical soils. They grow well in tropical and sub-tropical hot and humid conditions.
other agricuLturaL proDucts

The production of sugar, jatropha and castor beans presents a growing opportunity for investment for both the domestic and export markets. The potential for large-scale plantations exist for the growing of jatropha and castor bean. Table 1 shows the potential areas for large-scale cultivation of the crops in the whole country.
horticuLture
Fruits and Vegetables Most fruits and vegetables grow favourably in Ethiopia, given its diverse agro-climatic zones, long growing season and water for irrigation. Close to 0.45m ha are planted with horticultural crops. The major tropical and sub-tropical fruits grown include: mango, banana, papaya, avocado, citrus, grapes, and pineapple. Pear and plum, which are temperate fruits, are now also grown. Floriculture Floriculture is a leading industry in the non-traditional export sector. The rose industry has successfully developed over the period of 1998 to 2009. Ethiopia is currently the second largest cutflower exporting country in Africa, after Kenya. The flower industry is becoming a leading sub-sector in the country. A total of 1,200 ha are cultivated by 80 flower growers from countries such as the Netherlands, India, Israel and also by domestic investors. The sector generates over US$170mn in foreign currency annually, employing over 50,000 people (Ethiopian Horticulture Producers and Exporters Association 2010).
spices
Spice production has averaged 244,000 tonnes a year, covering an area under farming of nearly 122,700 ha. The main spices grown include ginger, hot pepper, fenugreek, turmeric, coriander, cumin, cardamom and black pepper. The potential area for cultivation in the lowlands is 200,000 ha. Spices are in high demand in the international market, which makes the area attractive for investors targeting production for export.
Livestock Farming, Fishery anD apicuLture

Livestock Farming Huge investment opportunities exist for the rearing and breeding of livestock. There is ample potential for dairy farming targeting the growing demand of the local and export markets. Investment in cattle rearing is also an area of opportunity as there is a big demand for live animals from neighbouring countries and the Middle East. Fishery Fresh water fishery development and production is a growing sub-sector that offers viable investment opportunities. Most freshwater lakes that are sources of fish are located near urban areas. The construction of aquaculture to produce fresh water fish is a good investment opportunity to meet both domestic and international market demands. The potential annual freshwater fish production is estimated at about 45,000 tonnes, of which only 20% is exploited at present. Apiculture Ethiopia is the largest honey-producing country in Africa and the fourth largest beeswax-producing country in the world. There are around 10 million bee colonies and over 800 honey source
cotton
Huge potential exists for large-scale cotton farming under irrigation in the Awash valley. Other potential areas of cultivation include, South Omo (Omorate), North-west, Gambella, the Tekezze valley, the Dabus valley and the Eabeshebelle watershed area. Cotton is an important raw material for the large number of textile and garment factories in the country. Currently there are 322,000 ha of land suitable for commercial production of cotton.
Forestry anD reLateD activities

An estimated 3.5m ha of natural forest presently remains in 58 designated
puLses
Pulses grown include beans, peas, chickpeas, lentils and soyabeans. These are grown by small-holder farmers in
17
agricuLture
plants in the country. Annual honey and beeswax production are estimated at 24,700 tonnes and 3,200 tonnes respectively. More than 90% of the honey produced is used in the country for domestic consumption. Studies show that, under modern management, the traditional yield of five kgs of honey in one harvesting season can be improved to 1520kgs. This area of agricultural activity is currently underdeveloped and has the potential for commercial exploitation, including exports, especially to Middle East markets. of Ethiopia. Investors in the leather sector are eligible for this incentive. Ethiopian tanneries have traditionally exported leather at various stages of processing (from pickled to crust) to international markets. The main markets include China, India, Italy, Japan, the Netherlands, the United Kingdom and the United States. There are currently 15 privately owned and four stateowned tanneries. The potential for the can enjoy by engaging in the production of textile and garments products and in the export sector.
FooD processing
The existence of rich agro-ecological zones that allow the production of almost any type of crop, the large cattle population, fisheries and the vast resources in terms of apiculture makes food processing an ideal industry.
Leather inDustry
The countrys leather industry has witnessed tremendous growth since 2005, which is mostly due to large-scale private investment. The government encourages the local processing of raw hides and is less supportive of exportation of unprocessed hides. In pursuing its policy of value addition, a 150% tax on raw hides was imposed in November 2008. In 2009 the tax was extended to include sheep pickle and wet-blue for both hides and skins, aimed at encouraging further value addition. A Leather Products Technology Institute (LLPTI) was established in 2004 to build technical capabilities in the sector and enhance the competitiveness of the leather and leather product industries. In addition to the incentives that are included in the general investment framework, the government has implemented a programme that offers investors up to 70% of equity through loans provided by the Development Bank
Ethiopia is effectively on the path of diversification of export products

development of the leather sector is huge and plans are underway to process the hides and skins to finished leather products such as shoe uppers, shoes, jackets and bags. The growth of cities and the urban population has created a big demand for processed food products domestically. Beyond this, the Middle East and Europe provide huge markets for canned food, fruits and vegetable as well as dairy products. The demand for Ethiopias processed agriculture produce is growing and processed products such as coffee, tea and honey are entering the Middle East and European markets.
textiLes
The textile sub-sector, with a history of more than 70 years, is one of the oldest industries in Ethiopia. All essential ingredients for a competitive textile industry are available: raw materials, low wages and low energy costs. This gives the country a comparative advantage over countries and regions elsewhere in the world. Ethiopias textile and clothing industry is undergoing massive development which is helped by the presence of an affordable, skilled and highly motivated workforce. In addition to the existence of abundant resources to develop the sub-sector, there are a number of incentives that investors
exports
Exports in 2008/09 amounted to US$1.45bn, which was lower than that in 2007/08 by 1.2%, owing to lower export earnings from coffee, pulses, leather products and fruits and vegetables. Lower volume (by 21.5%) and international prices of coffee accounted for a decline in export receipts by 23%. Table 2 shows the decline of exports
taBLe 1: POTENTIAL AREAS FOR FARMING

no. 1 2 3 4 5 6 7 8 9 10 Type of Farming Rice Maize Horticulture Coffee Tea Cotton Oil Crops Pulses Rubber Palm Oil total area (ha) 280,000 1,400,000 763,300 426,000 150,000 3,000,810 1,601,323 1,601,323 3,274,469 200,000 11, 545, 902 region SNNP, Oromiya, Amhara, Benshangui, Gumuz, and Somali SNNP, Oromiya, Amhara, Benshangui, Gumuz, Gambella and Somali SNNP, Oromiya, Amhara and Dire Dawa SNNP, Oromiya, Amhara and Gambella SNNP, Oromiya, Amhara and Gambella Tigray, SNNP, Oromiya, Amhara, Benshangul, Gumuz, Gambella, Afar and Somali Tigray, SNNP, Oromiya, Amhara, Benshangul, Gumuz, Gambella, Afar and Somali Tigray, SNNP, Oromiya, Amhara, Benshangul, Gumuz SNNP and Gambella SNNP, Oromiya and Gambella
Source: Ministry of Agriculture and Rural Development
18
exacerbated by the global economic downturn and the reduced international demand for commodities. Export oriented trade is one of the strategies followed by the government to spur growth. As the agriculture sector contributes 86% to the nations export earnings, the realisation of the strategy hinges to a large extent on the productivity of agriculture. Ethiopia is effectively on the path of diversification of export products. Agriculture products account for the majority of the countrys top export items; they include coffee, oil seeds, pulses, leather and leather products, textiles, khat, live animals, meat products, fruits and vegetable and cut flowers are destined for export to various parts of the world. Ethiopias proximity to the Middle East and Europe means that perishable goods such as fruits, vegetables and meat are easily transported to these destinations. Coffee exports account for approximately 30% of the countrys foreign exchange. As per 2010 estimates, coffee production engages around 25% of the working population. Oilseeds are the countrys next largest exchange source. Sesame has the lions share in the oilseeds category. Livestock is another major export subsector for Ethiopia. A major portion of livestock production is exported to neighboring countries. The export of cut flowers is also growing while processed products such as leather and textiles also form an important part of export activity. The export sector had registered a record 25% growth per annum for about five consecutive years before the global financial meltdown. It suffered a short-
lived downturn and picked up in the year 2010 registering growth of 38%. The GTP targets exports reaching about US$10bn in the coming five years from 2.5bn in 2010. Ethiopia is a member of a regional trade grouping the Common Market for Eastern & Southern Africa (COMESA) a region inhabited by more than 420 million people. Ethiopia also enjoys Duty Free and Quota Free (DFQF) privileges
extended by, among others, the USA Africa Growth and Opportunity Act (AGOA), the EU Everything But Arms (EBA) and by other European countries and by BRIC markets such as China and India. The market access privileges allow investors engaged in the agriculture and agro-processing export sector to reap the benefits of preferential markets, giving them the chance to acquire a competitive edge for their products compared to those outside the scheme.
taBLe 2: vOLUME OF ExPORTS (IN MILLION OF KG)

particulars Coffee Oil seeds Pulses Meat & Meat Products Fruit & vegetables Live Animals Chat Flowers Leather and Leather Products 2006/07 a 176.4 235.0 158.8 5.8 40.9 43.7 22.7 14.4 15.8 2007/08 B 170.7 152.1 233.0 6.5 39.9 40.0 22.4 22.4 14.9 2008/09 c 134.0 287.0 138.0 7.5 38.5 36.7 25.4 29.2 7.3 percentage change c/B c/a -21.5 -24.1 88.7 22.1 -40.8 -13.1 15.3 27.8 -3.6 -6.0 -8.1 -15.9 13.4 12.1 30.2 102.0 -51.1 -53.8
Source: Ethiopian Revenue and Customs Authority.
19
energy & mining

Star, JCI, Rift Resources and Tan Range have explored some areas of the known gold deposits. Revenue from gold exports is expected to increase as the price of gold is growing in the international market. In light of this, foreign and local investment is expected to grow. This mineral potential, coupled with the attractive and conducive investment environment, definitely magnifies the possibility of discovering economic deposits at a high rate of success. Sinknesh Ejigu, Minister for Mines The Ministry of Mines is responsible for the processing of license application, regulation of mineral operations and the promotion of investment opportunities in the mining sector. To date the Ministry of Mines has granted 119 exploration licences of which 86 are foreign and 33 on joint venture basis. They have also granted 52 mining licences of which 24 are foreign and 17 are on joint venture and 11 locally owned. The total number of licences issued has reached 171 granted to 86 companies. These are mainly for gold and base metals, platinum, industrial and construction minerals such as potash, diatomite and high quality ceramic raw materials. Intensive exploration programmes are also being conducted for precious stones and gemstones such as diamonds and sapphires as well as oil and gas. Currently the Mineral Operations Department of the Ministry of Mines is inviting international mining companies to participate in exploration and mining development ventures across the country. All interested investors can contact the department in order to get further information on the mineral potential and prospective candidate projects for development. Investors can obtain diverse geo-information from the Geological Survey of Ethiopia (GSE) which is accountable to the Ministry of Mines. Since its inception in the late 1960s, the GSE has been engaged in exploring the country for various minerals. In addition to reconnaissance and detail surveys for minerals, the GSE has also been studying the geological, hydrogeological and engineering geological conditions of the country. The Ministry of Mines welcomes all interested investors to come to Ethiopia and be partners in the development of their prospective mineral resources.
Mining and Energy in Ethiopia

by alex green-WilKes
atural resource development is playing a key role in the growth of the Ethiopian economy. To maintain annual GDP growth of over 10%, the government is actively encouraging further exploration and expansion of the countrys mineral and energy resources. Investment in the mining sector has surged from less than US$100mn in 2003 to US$1.3bn in 2010. Mining has become the second-largest industry for inward investment after agriculture. This is partly due to the fact that the current Ethiopian government has embarked on a programme of economic reform, including privatisation of state enterprises and rationalisation of government regulation. Ethiopias new economic policy encourages full participation of private investment particularly in the mining and energy sectors. These industries have already benefited enormously from such programmes and have begun to attract much-needed foreign investment.
mineral resources. There is a rich variety of industrial and construction minerals such as kaolin, diatomite, feldspar, quartz, silica sand, potash, phosphate, soda ash, salt, rock salt, limestone, marble and granite. Gold, tantalum, potash, platinum, marble and gemstone are among the minerals identified for future development. In fact, Ethiopias green stone belts offer one of the finest areas for gold mineralisation anywhere in the world. Gold is the most significant mineral export, with more than 500 metric tonnes of gold deposits having already been identified by exploration. Gold is considered to be the mineral with the most potential for mining investment and the government estimates that production could rise to 40 tonnes a year given sufficient income. Legedembi primary gold mine, which has been transferred from public to private ownership, is the largest gold mine, while there are about eight mines in the Oromia, Gambella, Somali, Tigray, Amhara, Benishangul and Southern Peoples region. In the past 20-30 years, companies including Ashanti, Canyon Resources, Emerging Africa Gold, Golden
mining
Ethiopia enjoys a favourable geological environment hosting a wide variety of
20
energy & mining
CURRENT ExPLORATIONS IN ETHIOPIA

In the past few years, local and international companies have undertaken early and advanced explorations. Some of these include: miDroc gold mine: exploration and development of new industrial-scale megashear zone-hosted and skarn-type gold and associated metals deposit in the metekel greenstone area. Nyota Minerals focused on exploration and development of the syanite-hosted primary gold project at Tulu Kapi and other primary gold occurrences exploration in wollega, western ethiopia. in this area other companies are also engaged in exploration of precious and base-metal minerals. sheba exploration plc a British registered company operating mainly in the northern greenstone belts of ethiopia. ascom mining plc has undergone gold and base-metals exploration in the western greenstone belt. South West Energy for Africa has recently started for oil and gas exploration. stratex international is exploring for epithermal gold deposits in the north-eastern rift and has found bonanza-type gold-bearing alteration zones. aberdeen international inc is exploring for primary gold in the western greenstone belt and also gold and base metals in the northern greenstone belt. Local company Ezana Mining Development plc, in joint venture with chinas Donia Beijing, is conducting base-metals resource estimation in western Tigray as well as further exploration of gold and base metals in a number of target areas within the northern greenstone belt. other junior international and local companies are carrying out aggressive exploration works. miDroc owns and operates the Legadembi gold mine, producing about 4t/y of gold dor at present. It is also actively involved in exploration projects near the known Legadembi mine and developing the underground lode-type gold deposits at sakaro in the southern greenstone belt, about 500km south of addis ababa. ethiopian minerals Development share co. is also producing tantalum-niobium concentrates in the kenticha greenstone belt and exporting 210t/y, representing over 9% of global tantalum-niobium ore supply. Some local and Chinese companies are also exploring near the known tantalum-niobium deposit. As for industrial minerals, especially potash and related evaporite minerals, canadas allana resources, g and B central african resources Ltd and indias saink potash are focused on the exploration and development of a previously explored Dallol potash property in the Danakil Depression of the afar national regional state, in the north-east.the Denakil depression is the worlds lowest point: 120m below sea level. Bhp Billiton has also been investigating the possibility of potash and related minerals in the same Denakil depression. Legislation the stimulus for this exploration and development work is the result of mining legislation that had been initially promulgated in 1993, and the overall positive investment climate in ethiopia. The government has enacted a very competitive legal and fiscal regime that attracted international mining companies. Following this, the government has been making progressive amendments to the Mining Laws in order to make the industry more competitive. In July 2010, the Ethiopian government enacted a revised mining law, a proclamation to promote sustainable Development of mineral resources, to make the minerals sector more favourable for foreign direct investment, and to be transparent and equitable in using the mineral resources of the country. The law recognizes the significant role of private investment in capital formation, technology acquisition and marketing of minerals. This is a very positive step forward from the earlier government policy of complete monopoly of the mining sector. the requirements for licensing and the time frame for awarding a licence right are now relatively simple and quick, provided the applicant fulfils the minimum requirements as stipulated in the mining legislation. this is similar to best practices in other well-known mining industry countries.
Source: gebe egziabher mekonen, head of the mineral Licensing and administration Department, Ministry of Mines, Ethiopia
energy
There are also significant opportunities for extracting fossil energy resources notably oil and natural gas in the six major sedimentary basins; the Ogaden, the Gambela, the Blue Nile, Metema, Mekele and the Southern Rift valley. There are currently plans to exploit natural gas reserves in the south-eastern part of Ethiopia, estimated at 4 trillion cubic feet. Exploration for gas and oil is underway in different parts of Ethiopia. The eight companies currently undertaking exploration work in separate basins in Ethiopia are , Pexco Southwest Energy, Africa Oil Corp. Clavalley Petroleum Ltd. Falcon Petroleum Ltd. Afar Exploration Company, Epsilon Energy
Ltd. and Tullow Oil, and applications from other companies are currently being considered and are in the process of evaluation. There is vast potential for investing in Ethiopias hydropower and geothermal energy resources. The country currently derives around 90% of its electricity needs from hydropower, meaning electricity generation, as with agriculture, is dependent on abundant rainfall. Ethiopia has the potential to generate more than 45,000MW and 5,000MW of electricity from hydropower and geothermal resources respectively. The private sector can participate in electricity generation from any source and without any capacity limit. The transmission and supply of electrical
energy through the integrated National Grid System, however, is exclusively reserved for the state electricity provider, the Ethiopian Electric Power Corporation. Ethiopia is often referred to as the water tower of Eastern Africa because of the major eight river basins that run from the high tableland. It also has the greatest water reserves in Africa, but few irrigation systems in place to use it. Just 1% is used for power production and 1.5% for irrigation. With such natural assets at its disposal, Ethiopia, among others, offers an ample opportunity for investors in the area of electricity generation or sizable irrigated commercial farm. Source: Mining Journal. www.mining-journal.com
21
inFrastructure
Infrastructure in Ethiopia
by Tom minney
he roads appear to defy gravity as they snake up the slopes of Ethiopias ferocious mountain ranges that for millennia kept the outside world at bay. This vast and abrupt terrain, with centuries-old monasteries clinging to some of the giddying heights, offers some of the worlds most beautiful and aweinspiring landscapes. But the mountain guardians have not stopped infrastructure builders from crisscrossing the country with roads, fiber-optic telecoms and power-lines, reaching remote areas that used to be only accessible for trader caravans and opening them for development and opportunities for investment.
The Ethiopian Government is aiming for 11% annual economic growth, spread across the giant country, and full attainment of the global Millennium Development Goals (MDGs) by 2015. The furious pace of building infrastructure countrywide shows they are serious. Two thousand years of imperial rule brought some developments to Ethiopia earlier than to much of Africa. Emperor Menelik II was intrigued by technological advances such as photography and medicine and introduced electricity, the telephone, telegraph, motor car and modern plumbing at the start of the 20th century. In 1894 studies began for the Imperial Railway Company to build the
Addis Ababa-Djibouti railway line under royal charter. But imperial rule was based on feudalism which, as was the case in Imperial Britain, did not result in enough effort being devoted to infrastructure that benefited the poor. The current government has a huge task in terms of building the infrastructure for a developmental state with a fastgrowing population that recently passed 82 million. The national vision is to bring development to every corner of the country and for Ethiopia to be a middleincome country by 2020-2023. The pace of building infrastructure to achieve this picked up under the just ended Plan for Accelerated and Sustained Development
22
inFrastructure
to End Poverty (PASDEP), which ran from mid-2005 to mid-2010. The following sectoral overview of infrastructure development is largely based on PASDEPs successor, the Growth and Transformation Plan (GTP) running from July 2010 to July 2015 (Ethiopian fiscal years). 4.9bn), the European Union (EU) (Birr 4.5bn) and the African Development Bank (AfDB) (Birr 3.8bn), as well as bilateral donors led by China (Birr 3.1bn), followed by Kuwait (Birr 790mn) and others ($1~Birr18). As the rails are laid, local small and medium metal manufacturing and engineering industries could spring up to produce sleepers, locomotives and rail spare parts and inputs for building railway infrastructure. Civil engineering and construction companies and metal and electro-mechanical industries may benefit. The rail network could eventually grow to 5,000km of lines radiating from Addis Ababa and linking to neighboring countries. The system will be constructed in two phases, the first phase involving building five lines. The government is also investigating a mass transit system for Addis Ababa to ease congestion. The target is 36.5km of light railway along two corridors crossing the city from east to west and north to south, with up to 50 companies designing and building the network and more than 20 companies manufacturing spare parts and providing metal engineering and electro-mechanical services. New roads to the city centre from the south and east suburbs of Addis Ababa centre were built with wide central reservations, enough to accommodate rail. China has pledged US$490mn to finance 85% of the cost of this and a Memorandum of Understanding has been signed with China Railways Group Ltd to build the rail. (insert GTP figure for budget instead) In addition to the rail, 500 buses are being assembled and will start operating in September 2011.
raiLways
The historic stations in the Legahar (La Gare) area of Addis Ababa and in the town of Dire Dawa testify to the proud history of rail transport. In 2011 railways are set for new prominence as an important green transport alternative that can bring economic development to key agricultural, mining and other areas and offer a great opportunity for
roaDs
Perhaps the biggest changes can be experienced on the roads, as journeys that used to take days are transformed into rides of a few hours on new asphalt highways. In the PASDEP period, 40 new federal roads were opened and more
The national vision is to bring development to every corner of the country

than 11,000 kilometers of roads were added to the network. A traveler driving winding roads through green western hills weaves past Japanese, Korean, Chinese or Ethiopian road-building teams repairing and upgrading the old highways or building new. The road network totaled 48,800km by mid-2010, without counting the woreda (district) roads. The proportion of roads assessed as in good condition was up from 64% (2004/5) to 81% (2009/10). In the new plan, the Ethiopian Roads Authority is already busy with the challenge of building another 82,500km of roads across Ethiopia with a total budget of Birr 124bn (US$7.2bn). This includes 71,500km of all-weather roads connecting all the countrys rural kebeles (18,000 neighbor-hood administrations) to the main road network, which is to increase to 64,500km. Only 29% of the country is to be further than 5km from an all-weather road (presently 64%). Road density is to nearly triple from 44.5km/1000km2 to 123.7km/1000km2 and from 0.64km/1,000 people to 1.54km/1,000 people. Reorganisation of the roads sector includes building capacities of the Regional Roads Authorities and the Woreda (district) Roads Bureaux. Funding is to come from the Treasury (Birr 88bn), the Ethiopian Road Fund Office (Birr 11bn) and a range of multilateral donors such as the World Banks International Development Association Fund (Birr the integration of domestic markets and services within the country and beyond. The first company to build the DjiboutiAddis Ababa railway line went bankrupt in 1906 and Dire Dawa sprang up where the line finished in the desert. In 1908 the Compagnie de Chemin de Fer FrancoEthiopien de Jibuti Addis Abeba started working on the single-track 781km line, which climbed from desert up formidable mountains and reached Addis Ababa by 1917. It is built using narrow and 1,000 mm gauge (60% of the worlds railways use a standard gauge of 1,435 mm) and is not much used, partly due to repair works. Now it is likely to be completely replaced by a new modern line to allow trains to travel faster. Rail is high on the agenda and work has begun on a five-year engineering and design project. The Ethiopian Railway Corporation supervised a feasibility study using satellite mapping technology for three rail corridors stretching 2,395km, estimated at a cost of US$2mnUS$3mn per kilometre. This includes remaking the Addis Ababa-Djibouti rail to the international border as well as rail lines heading north and south-west. Eighteen companies are contracted for studies including socioeconomic and environmental studies. The government estimates that over 5,000 engineers and 25,000 technical and vocational school graduates will be needed for the construction.
ports
Old Ethiopian bank notes from 1966 depict the port of Massawa. Eritreas 1993 peaceful independence followed by a 1998-2000 war with Ethiopia have cut that link to the sea and brought the focus onto Djibouti. This had been a key trading route for 3,500 years and an independent nation since 1977. Djiboutis port is managed by global giant DP World (Dubai Ports), aiming to list on the London Stock Exchange from 1 June 2011. Ethiopia is building what it describes as a multi-modal maritime and sea transportation service delivery system, including a cargo terminal built on 164,000m2 of land made available by the Government of Djibouti. The overall target is to diversify so that Djibouti handles 60% of imports and exports, Berbera port in Somaliland 30% and Port Sudan another 10%.
23
inFrastructure
The ports are to be linked into an efficient inland cargo-handling, transport and storage system. Dry Ports Service Enterprise (DPSE) has built a Birr 30mn inland dry port at Modjo in Oromia, a major transport crossroads south-east of Addis, and a Birr 28mn dry port on 108 hectares at Semera in the northeastern Afar region. Modjo was already busy in 2009 and had cut transit times for those who used it, while Semera was inaugurated in March 2010. The DPSE has launched a Birr 220mn second expansion project which will include warehouses, container packaging equipment, cranes, parking lots, telecommunications lines and offices for Ethiopian Shipping Lines, Commercial Bank of Ethiopia and Ethiopian Maritime Services Enterprise. This is part of a Birr 1.2bn plan and studies are being done for further dry ports in Moyale, Woyito, Hawassa (Awassa), Dire Dawa, Jimma and Mekele. GTP targets include cutting transit time for import and export goods from 30 days to 20 days by 2015 and boosting capacity at Modjo and Semera dry ports to handle 100% of general cargo, excluding unpacked and liquid cargo, supplemented by 35 new loading stations all over the country. Other aims include cutting costs of transit logistics and processing of imports and exports. is to rise from 119,000 tons to 311,000 tons. The airline is seeking US$1.45bn in financing for 39 aircraft on order, including 10 delayed Boeing 787 Dreamliners, 10 Boeing B737s and 12 Airbus A350s. Citi is leading some of the financing well as home solar systems for 10,081 rural families and solar electricity to 238 rural health stations and schools. The expansion of the hydropower project is not only expected to spur domestic
New or expanded airports are being built in seven locations

syndicates while a range of African and international banks are also participating. The GTP focuses on the built infrastructure. A cargo terminal for storing perishable agricultural products has already been built at Bole International Airport as part of a national drive to boost flower and horticulture exports. New or expanded airports are being built in seven locations: in Jijiga, Humera and Assosa runway construction is finished; Jima, Jinka, Kombolcha and Semera runways are at different stages of construction and pre-construction; while Mekele and Bahir Dar airports already operate to international standards. growth but will also contribute positively to regional integration as Ethiopia is poised to sell electricity to neighboring countries. The pace only picks up under GTP, with electricity service coverage to increase from 41% to 75% of the country. The length of distribution lines is to double to 258,000km (2014/5) and 8,130km of power lines are to be rehabilitated. Quality is to be improved as transmission line power losses are to be cut from 11.5% to 5.6%. The number of customers is to double again to 4 million and local contractors and manufacturers are starting to produce components, while technical and vocational school graduates and other stakeholders all hope to benefit.
power transmission
Power shortages that have hampered economic growth in recent years should be history as giant new hydroelectric power stations come on-stream. Moving the power around the country and for sales to neighboring countries requires massive investment in power transmission lines and other infrastructure. In the PASDEP years the Ethiopia Electric Power Corporation (EEPCO) stretched transmission lines from 8,380km (2004/5) to 12,147km (2009/10) while power substation lines mushroomed from 25,000km to 126,038km. The current generating capacity of 2000MW is expected to be enhanced by an additional 8000MW by 2015. This includes the historic dam to be constructed along the river Nile by mobilising domestic resources. Bringing electricity to rural areas is a key development priority and the number of towns and rural villages with access to electrical power climbed from 648 (2004/5) to 5,136 (2009/10). The number of registered electricity customers rose from 952,000 to 1.9 million, while 3 million improved energysaving biomass ovens were distributed as
teLecoms
Knowledge is power, and bringing telecommunications and information technology to as many users as possible has been a priority for governmentowned monopoly Ethio Telecom, formerly the Ethiopian Telecommunications Corporation. In December 2010 France Telecom signed a two-year management contract to improve efficiencies and accounting and introduce new services. International Telecommunications Union figures show there is still much to be done for Ethiopia to catch up with African leaders in terms of subscriptions per 100 inhabitants. Mobile telecommunications network capacity was increased from 500,000 users (2005/6) to 25 million and is forecast to grow again. The number of fixed-line customers rose from 620,000 (2004/5) to million (2009/10) and is set to rise to 8 million (2014/15), while the number of mobile customers is expected to rise to 6.1 million in 2014/15 from 4 in 2010. By 2009/10 some 62% of rural people had access to a phone within a 5km radius, up from 13% (2004/5), but there is
air transport
One of the best ways for a tourist to travel around Ethiopia is by air, flying over dramatic landscapes and covering in hours what could take days by road, landing at small airports near many key attractions and towns. Ethiopian Airlines a leading airline in Africa is the main provider of domestic and international flights with a fleet of seven aircraft. It has been growing quickly, especially in its international traffic, and serves 61 international and 17 local destinations. The total number of passengers climbed from 1.6 million (2004/5) to 3.1 million (2009/10) and cargo from 1.4bn ton/ kilometers to 2.8bn ton/km. For the present plan period (from 2010/11 to 2014/15), the target is to boost the number of passengers on domestic flights from 428,000 to 1.5 million and on international flights from 2.7 million to 6.6 million. Cargo from all four international airports
24
inFrastructure
still some way to go to achieve the target of 100% access by 2014/15. The number of internet subscribers is expected to reach to 7.1 million compared to the current 200,000. One major change is the installation of 10,000km of high capacity fibre-optic cable networks, bringing capabilities such as video conferencing to rural courts and colleges. A National Network Operation Centre has been set up for central administration of the network and this controls service quality and manages service failure information. The fibreoptic will be linked though neighbouring countries to international marine cables stretching up the East African coast. Global capacity to link Ethiopia to the worlds networks is to be increased from 3.255 gigabits per second to 20. The Universal Telecommunications Access Programme includes digitising all telephone services, expanding internet potable water within 5km and 98% of rural people would have similar access. PASDEP progress included digging 793 very deep rural wells, 3,353 medium-deep wells and 8,762 hand-dug wells, as well as enhancing 8,195 springs, creating 478 water harvesting ponds and 3,294 rain water collection systems, and setting up watershed and river basin administration systems and extending the coverage of surface and ground water studies. Irrigation feasibility and design work is being done to cover 1,208,400 ha (up from 462,000 ha), including 6,570 ha of irrigation rehabilitation and 785,600 ha of irrigation construction. There is potential to irrigate 4m-5m ha of land. Other priorities are watershed management and effective works to retain water and moisture, such as terracing hillsides. Decades of work have already girded some hillsides with lines of small stone bunds to stop runoff and trees are in Addis Ababa, and 101,022 houses in sugar development projects. In 19 cities the local administrations have been busy with improvements such as markets and small enterprise facilities, drainage and sewer lines, water supply, building cobblestone roads and developing parks. The government has helped private businesses and other enterprises to import a huge range of construction machinery and supported the supply of cement, including importing some and encouraging local factories. China is building an industrial zone in Dukem, close to the southern flanks of Addis Ababa, which is costed at US$5bn and hopes to attract more Chinese investment in textiles, garments, leather and chemicals. In May 2010 the US$9mn Zhongshun Cement Manufacturing Plant was inaugurated as the first project to produce cement for the rest of the zone. India and Turkey also have industrial zones and Egypts El-Sewedy Cables has submitted an application. When the Ethiopian Parliament passed a record Birr 77.2bn (US$4.5bn) budget in July 2010, Prime Minister Meles Zenawi told MPs the country had budgeted 70% of the total on poverty reduction and infrastructure development programmes a bigger slice than any other country in Africa. He said: The Government is working hard to electrify rural towns and a large amount of our development spending will go on roads. He recently singled out China as a major partner, but there is room for much more participation, particularly if backed with finance. Infrastructure is opening some of Africas most beautiful and challenging terrain, giant agricultural lands and vast mineral, water and other resources for business and for fighting poverty through economic development.
Clean drinking water is a key development target with massive impact on health and economic progress
access, boosting the number of internet users from 187,000 to 3.7 million, and installing wireless networks (CDMA) to cover 90% of the country and offering voice and data services in every kebele. The GTP also prioritises security and preventing transmissions of illicit content. Support and encouragement is available for companies seeking to make ICT components locally. growing on slopes and in gullies that had been barren from centuries of overfarming.The target is to rehabilitate 1m ha of damaged and degraded land.
construction anD urBan DeveLopment

The surge of construction is also transforming cities, including the capital Addis Ababa where flyovers and highways sweep between the frames and cranes of tower blocks stretching skywards. The PASDEP years saw Government build 213,000 houses in various regions and city administrations of which 72,000 were finished and handed to beneficiaries by July 2010. The housing development programme helped establish 4,306 small construction enterprises and create 176,000 permanent and temporary jobs. The provision of housing and basic services is expected to reach 700,000 and the reduction of slum areas and a number of over populated areas from the current 40% to 20%. New plans under the GTP include building and transferring another 150,000 houses
water
Clean drinking water is a key development target with massive impact on health and economic progress. The global Millennium Development Goal is to cut in half the proportion of people without sustainable access to safe drinking water by 2015. Ethiopias Ministry of Water Resources, supported by the Treasury and donors such as the European Union, has boosted access to potable water from 35% to 65.8% in rural areas and from 80% to 91.5% in urban areas, bringing the overall cover to 68.5%. The GTP plan includes action to boost this to 98.5%, so that everyone in cities and towns would have access to
WEBSITES
Ethiopia Electric Power Corporation www.eepco.gov.et Ethiopian Roads Authority www.era.gov.et Ethio Telecom www.ethionet.et
25
tourism
Tourism in Ethiopia
a LanD oF wonDers
Ethiopia is a country with a unique culture and heritage that is both fascinating and rare. She has extraordinarily rich flora and fauna, and globally recognised archaeological sites (home of the earliest known human kind: Lucy or Australopithecus Afarensis, a 3.2 millionyear old was discovered at Hadar in the Afar region of Ethiopia). With one of the oldest cultures on earth, the country has been home to the fabled Queen of Sheba, the Ark of the Covenant, spectacular landscapes, stunning wildlife with over 800 species of birds, and a cuisine which is renowned worldwide. The country is located in a landscape that extends from one of the lowest spots on earth, the Danakil Depression, to mountain ranges with Ras Dashen, the highest mountain, standing at 4,550 metres, the fourth highest peak in Africa. Although situated close to the equator, the country largely has a climate tempered by altitude, which means that most of its regions enjoy an idyllic springlike climate throughout the year. As the oldest nation in the world, Ethiopias history extends to the pre-historic period and it is the home to world famous tourist attractions. Among these are eight world heritage sites; namely, the Aksum Obelisks, the Castles of Gondar, the Simien Mountain National Park, the Rockhewn Churches of Lalibela, the Stelae of Tiya, Hadar (where Lucy was found), the Lower Omo valley Paleoanthropological site and the walled city of Harar. The country has a vast land mass of 1.4 million square kilometres, roughly twice the size of France, and has a widely diverse population who speak more than 80 different languages. Its diversity is its beauty and its great strength. Historically, Ethiopia is home to different religions living in harmony and tolerance. The oldest mosque (AlNejashi) and the oldest churches in Africa can both be found in the country. Ethiopia is a bird-watchers dream. More than 800 species of birds are found in Ethiopia of which 23 are endemic. There are more than 100 mammal species, seven of which are unique to the country. The mountains, lakes and rivers of the country offer some of the most dramatic scenery in the Horn of Africa. There are 25 mountains in the north-western and south-eastern portions by the Great Rift valley that divides Ethiopia in two. With its abundant lakes and rivers, Ethiopia is known as the Water Tower of Africa. Mighty Lake Tana, the source of the Blue Nile, lies in the north-western region of the Ethiopian highlands and contributes 85% of the rivers water. Along with the Blue Nile, Awash, Genale, the Wabe Shebele, Omo, Tekeze, and Baro account for some of the countrys most significant rivers and
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creative anD tourism

are of huge importance both in terms of regional industry and socio-economic development and as attractions for the adventurous tourist. The best known natural lakes are found in the main Rift valley region of Ethiopia. With their natural beauty, Lakes Langano, Abyata, Shalla, Abaya, Chamo, Awassa amongst others have great potential as tourist destinations.
a growing Destination
Ethiopia has a national airline, Ethiopian Airlines, of longstanding experience, which extensively links the country to 62 destinations in Africa and to major international transport networks. Thus presenting the country with ample opportunity to advance, for example, conference tourism. As more travellers have become aware of Ethiopias natural beauty, fascinating history and religious diversity, tourism has played an increasing role in the economy and has risen impressively from 200,000 visitors in 2005 to around a million in 2010. Despite the numerous historical, cultural, and natural attractions and the multifaceted beauty of the country, Ethiopias share of the tourist flow to the eastern African Region of nineteen countries is still at a relatively early stage of development and thus represents an enormous opportunity. In order to ensure that the country fully capitalises and benefits from its diverse tourism potential, the government has developed a tourism policy that envisions Ethiopia within the top ten tourist destinations in Africa by 2020.
an investment Drive
The government is now beginning to address the huge potential of its tourism industry in earnest and is opening it up for promotion and investment drives. Essential to the anticipated growth levels in coming years is the development of the sectors infrastructure and in this endeavour the government is encouraging investment from the private sector and support from donors. Already there is clear evidence of a supply side response to the demand for tourist services. The most pressing need is for better quality hotel and lodge accommodation, especially away from the capital Addis Ababa. Currently in the historic sites of Lalibeza,
Axum and Arba Minch, there are 956 hotel rooms in 31 hotels, but construction of 23 new hotels is underway which will double the capacity and makes up a large percentage of the 5,000 rooms currently nationally under construction.This is a clear sign that measures are being taken to, in the longer term, bring Ethiopia to the top table of tourist destinations. Clear evidence of the need for the hotel and infrastructure projects is the fact that despite the incredible natural and historic attractions beyond the capital, Addis still accounts for 86% of national tourism revenue with US$146mn tourist spend within Addis and a relatively low US$42mn outside, according to the latest figures. Conference and business tourism to the capital accounts for 83% of international arrivals (excluding family visits), three quarters of bed nights and over two thirds of tourist spending, which is indicative of the fact that there are huge opportunities for growth and development outside of the capital where the countrys sunny climate and stunning scenery provide potential for luxury resorts and lodges away from Addis. Further to this the existing high-end market enjoys a very buoyant demand, with an average of 85% occupancy further underlining the need and value of expansion at this level. The government is placing an emphasis on developing a leisure and travel industry which, while still relatively uncompetitive in global or indeed continental terms, has been growing at around 10% per annum since 1995. This leisure market
is predominantly made up of mature travelers, eco tourists and birdwatchers, and whilst this market currently represents only around one tenth of visitors to the country, they stay an average of 14.8 days which makes their tourist spend of vital importance to the economy. The direct contribution of Travel and Tourism to GDP is expected to be 4.6% or ETB20.63mn in 2011. This primarily reflects the economic activity generated by industries such as hotels, travel agents, airlines and other passenger transportation services, but it also includes restaurants and other leisure industries directly supported by tourists. The strategic direction for the culture and tourism development programme under the next five year Growth and Transformation Plan (GTP) is to enhance the role tourism and culture play in the socio-economic and political development initiatives. The GTP envisages expanding tourism industry products and services in quantity and quality to enable them to compete globally. There are few countries in the world that have protected their ancient monuments and ways of life so well and with this in mind, the tourism potential for the wouldbe investor in all areas of development remain vast. From small-scale eco development projects and lodges to hotel expansion both in Addis and around the country, the time to invest is now.
27
Ticker:
AIM : NYO ASX : NYO

Market Cap:
Listed on AIM Market of LSE Well established in Ethiopia Developing Tulu Kapi Gold Project in the West of the Country Application submitted for large-scale mining licence Mine plan calls for approximately USD 200m to be invested in mine infrastructure and development over a three year period Project construction expected to employ more than 1000 Ethiopians A further USD 50m is budgeted to increase the resource and mines longevity Approved budget of USD 3.5m for regional exploration in 2011
GBP 100 million*

Mid Share Price 52 week high/low:
0.31 0.09
Shares on Issue:
529 million*
Directors Holdings:
5.6%
*01 March 2011
Drilling at Tulu Kapi
Visible gold on core sample
The conference is supported by
Development Bank of ethiopia
ethiopian shipping Lines

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ethiopia 2011

The conference is supported by

Development Bank of ethiopia

ethiopian shipping Lines

Deputy Prime Minister and Minister of Foreign Affairs, HE Hailemariam Desalegn

2011 | investing in ethiopia

Baroness Lynda Chalker of Wallasey, Chairman, Africa Matters Ltd

investing in ethiopia | 2011

Developing Markets Associates Ltd

2011 | investing in ethiopia

Putting Ethiopia in the fast development lane

investing in ethiopia | 2011

sounD economic governance

2011 | investing in ethiopia

investing in ethiopia | 2011

a new FDi Frontier

2011 | investing in ethiopia

the piLLars oF a stronger economy

investing in ethiopia | 2011

Future poLicy chaLLenges

2011 | investing in ethiopia

taBLe 1: KEY ECONOMIC AND FINANCIAL INDICATORS

taBLe 2: BALANCE OF PAYMENTS, 2010-2015

investing in ethiopia | 2011

taBLe 3: SOCIO-ECONOMIC DEvELOPMENT INDICATORS

taBLe 4: OFFICIAL AID TO ETHIOPIA

2011 | investing in ethiopia

taBLe 5: ETHIOPIAS BUSINESS DATA

investing in ethiopia | 2011

11.8 11.2 10.0

9 7.3 6 6.3 6.4 5.7

Source: imF, african Department database, april 2011.

chart 2: STEADY INCREASE IN FDI INFLOWS TO ETHIOPIA (US$MN)

Source: ethiopian authorities and imF projections.

chart 3: MAIN DESTINATION OF ExPORTS (PERCENT OF TOTAL 2010)

chart 4: MAIN SOURCES OF IMPORTS (PERCENT OF TOTAL 2010)

saudi arabia usa india

Turkey others * including - France, Italy, Canada, Russia, Germany

7.6% 6.7% 6.5%

5.0% 3.6% 2.4%

Source: imF, Direction of trade statistics.

Source: imF, Direction of trade statistics.

2011 | investing in ethiopia

Agriculture and Agro-Industries

agricuLture resource potentiaL

investing in ethiopia | 2011

2011 | investing in ethiopia

wheat anD BarLey

Figure 1: STRUCTURAL COMPOSITION OF ECONOMY

40 percentage share of gDp agriculture Industry service

Source: africa Development Bank.

investing in ethiopia | 2011

ruBBer anD paLm trees

other agricuLturaL proDucts

Livestock Farming, Fishery anD apicuLture

Forestry anD reLateD activities

2011 | investing in ethiopia

Ethiopia is effectively on the path of diversification of export products

taBLe 1: POTENTIAL AREAS FOR FARMING

Source: Ministry of Agriculture and Rural Development

investing in ethiopia | 2011

taBLe 2: vOLUME OF ExPORTS (IN MILLION OF KG)

Source: Ethiopian Revenue and Customs Authority.

2011 | investing in ethiopia