Ethiopian Country Profile

I. COUNTRY BACKGROUND

Official Name: Federal Democratic Republic of Ethiopia

Area: 1.14 million square kilometers

Capital City: Addis Ababa

Population: Appx. 100 million (2017)

Population density: Appx. 95.5 per square kilometer (2017)

Language: Amharic is the working language of the federal government. English is taught in schools and is the main business language.

Calendar: Ethiopia uses the Julian calendar which divides the year into 12 months of 30 days each, and the remaining five or six days in a leap year constituting the 13th month of “Pagume.” The calendar is seven years behind the Western or Gregorian calendar, the Ethiopian New Year commences on September 11th, and 12th (every leap year).

Currency: Birr; The Birr is divided into 100 cents.

Climate: Temperate in the highlands, ranging from 20°C to 30°C (68°F to 86°F) and hot in the lowlands, often reaching 45°C). Rainfall ranges from 200 mm to 2000 mm.

Altitude: From 120m bellow see level to 4600m

Administrative: There are nine regional states division and two city administration.

Political System: Federal state with multi-party system.

Working hours: Ethiopia is in the GMT+3 hours’ time zone. The government office hours are 8:30 a.m. to 12:30 a.m. av gnd 1:30 p.m. to 5:30 p.m. from Monday through Thursday; and 8:30 am to 11:30 and 1:30 pm to 5:30 pm on Friday.


II. MACROECONOMIC HIGHLIGHTS

ECONOMIC GROWTH

In 2017/18 Ethiopia’s GDP (at current price) increased to $84 Billion and per capita GDP to $ 883 compared to last year’s $81 Billion and $876 respectively. The shares of the major sectors, agriculture, industry and services out of the total GDP were about 34.9%, 26.0% and 39.1%, respectively.

The Real GDP growth in 2017/2018 was 7.7% (3.3% contributed by service, 3.1% by industry and 1.3% by agriculture).


Investment

In 2016/17, 467 projects became operational. These projects had investment capital Birr 8.9 billion.

424 (90.6 percent) of the total investment projects were domestic with a capital of Birr 3.3 billion (37 percent); and 43 projects were foreign having Birr 602 million capital signifying that foreign investment projects were more capital intensive than domestic ones in terms of average capital per project.

Manufacturing sector constituted 31.8% of the total investment projects and 21.2% of investment capital.


EXCHANGE RATE

One US$ was exchanged for Birr 27.24 in April 2018.

There was 15% devaluation of the Birr in October 2017.

Interest rate

Domestic saving in 2017/18 increased to 24.3% of GDP as compared to 22.4% in 2016/17.

Minimum statuary saving deposit rate is raised to 7% from 5% effective October 10 2017.

Average nominal saving rate was 8% in December 2017.


Areas of opportunities for investment are manufacturing (textile and apparel, agro-processing, leather and leather related products, pharmaceuticals, light machineries manufacturing), basic and import substitution (steel, equipment, chemical and pharmaceuticals), strategic sectors (energy, ICT, and technology) as well as agriculture & service sectors.


III. MARKET ACCESS


Ethiopia is a founding member country of Africa’s largest regional trade union “The Common Market for Eastern and Southern Africa” (COMESA).

The United States’ AGOA and the EU’s EBA unilaterally grant Ethiopian products that conform to the origin criterion exemption from customs duty and quota restriction to access to the U. S. and EU markets

The country has also Preferential Trade Agreement with the Republic of Sudan.

Furthermore, broad ranges of manufactured goods from Ethiopia are entitled to preferential treatment under the Generalized System of Preference (GSP) in all developed countries. China, India & South Korea granted duty free quota free market access to Ethiopia’s products as well.


IV. BUSINESS ESTABLISHMENT


Foreign investors can establish businesses in Ethiopia as Joint Venture with the government or private businesses or alone with 100% own equity. Both foreign and domestic private entities have the right to establish, acquire, own and dispose of most forms of business enterprises. There is no right of private ownership of land. However, all land is owned by the state and can be leased for up to 99 years. The Ethiopian Investment Commission (EIC) should be one of the first stops for an investor wishing to apply for licenses and receive information on any pertinent incentives.


V. ENTRY VISA


With the exception of nationals of Kenya, foreign citizens need an entry visa to enter the country. Ethiopian diplomatic missions throughout the world issue visas promptly. However, the nationals of Argentina, Australia, Austria, Belgium, Brazil, Canada, China, Denmark, France, Germany, Greece, Ireland, Israel, Italy, Japan, Republic of Korea, Kuwait, Luxembourg, Mexico, Netherlands, New Zealand Norway, Poland, Portugal, Russian Federation, South Africa, Spain, Sweden, Switzerland, Taiwan, United Kingdom, and U.S.A are eligible to obtain visas at Bole International Airport upon arrival ($20, paid in U.S. dollars). Visas are not required for transit passengers. This stands for 72 hours, but may be extended for seven days. Business visas are issued for a month.


VI. TAXATION


The Ethiopian tax law stipulates provisions for direct and indirect taxes. The direct taxes are personal income tax, rental tax, withholding tax, business profit tax and other taxes such as dividend income tax, royalties and stamp duties. The main types of indirect taxes are Value Added Tax (VAT), customs duty taxes, excise and turn over taxes. Export tax is levied only on raw and semi-processed hides and skins at a flat rate of 150%.

Main Taxes in Ethiopia:

 Type of TaxesRate
1Corporate Income Tax30%
2Turn Over Tax 2% and 10%
3Excise Tax 10% up to 100%
4Customs Duties 0% up to 35%
5Income Tax from Employment0% up to 35%
6Withholding Tax 2%
7Value Added Tax (VAT) 15%
8Export Tax Nil (with exception of hides and skins-150%)
9Royalty Tax 5%
10Dividend Tax 10%


Addis Ababa Chamber of Commerce and Sectoral Associations

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