Overall Background
Economic Overview
Business Travel
Trade and Investment Rules and Regulation References
1. OVERALL BACKGROUND
1.1 Geography and Climate

Ethiopia is located in the Eastern part of Africa known as the “Horn of Africa”. It enjoys a unique location at the crossroads between Africa, the Middle East and Asia. It extends 30 to 150 north of the equator and 330 to 480 east of the Greenwich Meridian. It covers an area of approximately 1.14 million square kilometers. Arable and irrigated land shares are 513,000 square kilometers (45%) and 34,200 square kilometers (3%) respectively.

The topography ranges from 148 meters below sea level (Dallol Depression) and highest point 4,260 meter above sea level (Mt. Ras Dashen). Due to the moderating influence of high altitude, much of the country enjoys a temperate and pleasant climate; the lowlands typically have sub-tropical and tropical climates. Temperature and rainfall ranges from 200C to 300C and from 200mm to 2000mm respectively. In most of the highlands, rainfall occurs in two distinct seasons: The "small rains" during February and March, and the "big rains" from June to September.

Ethiopia has high water resource potential. There is huge run-off ground water. Moreover there are numerous big rivers which can be utilized for irrigation & hydroelectric power generation. The most famous Ethiopian river is Blue Nile which flow a distance of 1,450kms from its sources to join the White Nile at Khartoum. There are 8 more big rivers suitable for electric power generation and large scale irrigation.

1.2 Demographic Situation

The population of Ethiopia is around 84.8 million (2012/13). The density of population is 74.4 per square kilometer (2012/13). The age structure of the population has remained predominately young with 44% under the age of 15 years and over (53%) of the population in the age group of 15 and 65 years. The population in the age group of over 65 years accounts for only 4% of the total. Ethiopia’s comparative advantage is primarily in its abundant low – cost, disciplined and trainable labor force.

Amharic is the official working language of the federal government, while Oromiffa and Tigrigna are widely spoken. English is taught in schools and is the main business language. The Ethiopian Orthodox Church is the largest religious group (45%), followed by Sunni Muslims (35%) and those with traditional beliefs (11%). An additional 9% are listed as ‘others’. Catholicism and Ethiopian evangelism (Mekane Yesus) are also other religions in Ethiopia.

1.3 The Government and Political System

The constitution that established the Federal Democratic Republic of Ethiopia (FDRE) in 1995 provides a multi-party political system. The FDRE has parliamentarian form of government which comprises House of Peoples’ Representatives and House of Peoples’ Federation. The structure of the Federal Government consists of nine autonomous Regional States and two chartered City Administrations (Addis Ababa and Dire-Dawa). Power of the government is assumed by the political party or coalition of political parties that constitutes a majority in the House of the Peoples’ Representatives. Executive power is vested in the Prime Minister. Ethiopia is considered as one of the most stable countries in Africa.

1.4 Currency

The "Birr" is the unit of currency in Ethiopia. The nominal exchange rate against USD, Pound Sterling and Euro at the end of November 2014 was Birr 20.08, Birr 31.9 and Birr 25.02, respectively. The exchange rate of the Birr continued to be determined in the daily inter-bank market with the National Bank of Ethiopia (NBE) intervening in the market as necessary. Foreign currency can be exchanged at the airport on arrival, at the public and private banks, or licensed hotels.

1.5 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 short 13th month of "Pagume." The calendar is seven years behind the Western or Gregorian calendar, the Ethiopian New Year commences on September 11th, and on the 12th (every leap year).

1.6 Local Time and 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. and 1:30 p.m. to 5:30 p.m from Monday through Thursday. Working hours on Friday are 8:30 a.m. to 11:30 a.m. and 1:30 p.m. to 5:30 p.m. Private and some public businesses are often open on Saturday.


2. ECONOMIC OVERVIEW
2.1 Growth Domestic Product (GDP)

The Ethiopian Government has formulated the five year Growth and Transformation Plan (GTP) to carry forward the important strategic directions in maintaining a fast growing economy in all sectors. Ethiopia is among the fastest growing economies in the world and has maintained an average GDP growth rate of 11 percent in the last ten years which is double the Sub-Saharan Africa (SSA) average growth rate of 5.6 percent. In 2013/14 the registered economic growth was 10.3 percent which is obviously based on the contribution of wide range of economic activities. The contribution of these activities by major industrial classification shows that Agriculture 2.3 percent, Industry 2.7 percent and service 5.3 percent.

2.2 Major Sector Contribution to GDP

Agriculture continues to be the backbone of the Ethiopian economy Contributing 42.9 percent to GDP, and accounting for about 80 percent of employment and 70 percent of export earnings in 2012/13. The share of the services sector has also been increasing in the past decade and reached 45 percent in 2013, Industry remains low in terms of its share to the GDP at around 12 percent.

2.3 Trade in Ethiopia

Ethiopian Commodity Exchange (ECX) is a market place where buyers and sellers come together to trade. It assures all agricultural commodity market players the security they need in the market through providing a matching offers and bids for commodity transaction.

Ethiopian export trade is highly dominated by agricultural products. The GDP share of export is 11.7 percent in 2013/14. During the previous year 2012/13 total export earnings amounted US$ 3.1 billion, coffee is having the major share of export earnings (24%) , gold (19%), oil seeds (14%), chat (9%), pulses (8%) cut flower (6%) and live animals (5%). Switzerland, Germany, Netherlands, Somalia, China, Sudan and Saudi Arabia are the top 7 export destination countries.

The value of imports marginally increased to US$11.5 billion in 2012/13 from US$11.1 billion the previous year, posting an annual increase of 3.7 percent. The major import goods are capital goods (30%), consumer durable 29% and non- durable 23%, fuel 20% and semi – finished and inputs are 19%. Concerning Ethiopia’s imports by countries of origin in 2012/13, about 72.6 percent of the total merchandise import was from Asia while 19.3 percent from Europe, 5.3 percent from America and 2.7 percent from Africa.

The three top suppliers of Asian countries, namely China, Saudi Arabia and India accounted for 31.3 percent, 14.3 percent and 12.7 percent of the total imports of the continent, respectively. Petroleum products were the major imports from Saudi Arabia which alone accounted for 73.3 percent of the total petroleum import of the nation in 2012/13.

The share of European countries from total import was just 19.3 percent, where 79.2 percent went to four countries; namely, Italy 23.41 percent followed by Turkey 19 percent, Germany 9.6 percent and France 8.9 percent. USA and Brazil alone accounted for over 87.03 percent of the country’s imports from America.

The share of African countries trade to Ethiopia is 2.7 percent of the total imports of the country. The bulk of imports bill was paid for items imported from South Africa (39.7 percent) and Egypt (33.1 percent), which jointly accounted for 72.8 percent of the total import from Africa.

2.4 Investment in Ethiopia

Ethiopia remains an untapped and unexploited market for investors. Turkey, China, India, Sudan, Saudi Arabia, Netherlands, USA, Germany Britain and Canada are the top 10 sources of FDI during 2009- 2014.

Due to the investment – friendly environment created in the country, the inflow of Foreign Direct Investment (FDI) has been increasing over the last twenty one years. The rate of investment has reached 40.3 percent of GDP in the year 2013/14. The total number of investment projects from 2009-2014 were 3921 which created 413,105 permanent and 687,345 temporary employments

2.5 Areas for Investment

The areas, with most promising potential for investment in the country today are agriculture, agro-processing, textile and garment, leather and leather products, sugar, cement, chemical and pharmaceutical industry, tourism, mining and hydropower. The ongoing privatization program also offers enormous investment opportunities to private investors, particularly in the agricultural, manufacturing, hotel and tourism sectors.

2.6 Markets

With a population of around 84 million and increasing purchasing power, Ethiopia is one of the largest domestic markets in Africa. In addition to this, Ethiopia enjoys access to regional markets through membership of Common Market for Eastern and Southern Africa (COMESA) and there is the zero tariff preferential trade agreement with Sudan.

There are global initiatives which offer market access privilege for Ethiopian products as well. Such as, the American Growth and Opportunity Act (AGOA), Everything But Arms (EBA) by European Union, and Generalized System Preference (GSP) are prominent in these respect. The countries which bestow duty free quota free market access are China, India, South Korea, Turkey and Eurasian Economic community (Russia, Belarus and Kazakhstan) etc. on the specified export commodities, so it is good site for domestic and foreign investor to actively participate in export trade.

2.7 Taxation

The Ethiopian tax law provides for direct and indirect taxes. The direct taxes are divided into five categories: personal income tax, rental tax, withholding tax, business profit tax and other taxes. The main types of indirect taxes applicable are 15 percent Value Added Tax (VAT), customs duty maximum rate of 35 percent, excise and turn over taxes. Other direct taxes include corporate tax, dividend income tax, and royalties and stamp duties. Export tax is levied only on raw and semi-processed hides and skins, such as wet-blue cow hide, pickled sheep skins with wet-blue sheep and wet blue goat skins at a flat rate of 150%.

The country fiscal policy has focused on enhancing the capacity of tax revenue to meet the country’s expenditure needs and maintaining a budget deficit of less than 3 percent of GDP. During 2012/13, tax revenue increased by 24.8 percent of GDP to reach 12.5 percent. Improved domestic revenue collection enabled the government to finance 81 percent of its expenditure from domestic sources.


3. BUSINESS TRAVEL
3.1 Health Requirements

Prior to entry, all travelers should be in possession of valid health certificate for yellow fever. Vaccination against Cholera is also required for any person who has visited a Cholera infected area within 6 days prior to arrive in Ethiopia. Other recommended vaccinations includes: tetanus, hepatitis A, hepatitis B, typhoid, meningitis, poliomyelitis, and rabies.

3.2 Entry Visa

Foreign citizens need an entry visa to enter the country, with the exception of nationals of Djibouti and Kenya. Visas may be obtained promptly from Ethiopian diplomatic missions throughout the world. However, the nationals of the 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.

3.3 Residence and Work Permits

The Immigration and Refugee Affairs Office will issue a residence permit to a foreign investor upon submission of an Investment Permit issued in his name by the Ethiopian Investment Commission (EIC). A foreign investor, who is a shareholder of a company or Branch Company and an expatriate staff who have a work permit are also entitled to a residence permit. Foreign investors obtain work permits for expatriate employees directly from the Ethiopian Investment Commission.


4. Trade and Investment Rules and Regulation References
  1. Ethiopia Investment Commission, (www.investethiopia.gov.et)
  2. Ministry of Trade,(www.mot.gov.et),
  3. Ministry of Industry, (www.moin.gov.et),
  4. Ministry of Finance and Economic Development, (www.mofed.gov.et),
  5. Ministry of Foreign Affairs, (www.mofa.gov.et),
  6. Ethiopian Revenues and Customs Authority, (www.erca.gov.et)