Investment and Partnership Opportunities (10 Oct 2008)

Investment and Partnership Opportunities in Ethiopia
Privatization & Public Enterprises Supervising Authority PPESA

1. INVESTMENT

Ethiopia has adopted a free market economic policy in 1992, and in line with this has promoted private investment. With the introduction of market economy, Ethiopia has implemented a number of reforms including the privatization of state owned enterprises, liberalization of foreign trade, deregulation of domestic prices, and devaluation of the exchange rate. The Birr has been fairly stable undergoing a gradual devaluation from 6.8 Birr per U.S. Dollar. Ethiopia's exchange rate has remained fairly stable due to the government's appropriate monetary policies and considerable foreign exchange reserves.

With its enormous resources, the country has untapped investment opportunities, huge market access and low cost of doing business. The country has excellent climate, fertile soil and huge domestic raw material base. Its location is strategic that makes it close to the lucrative markets of the Middle East, Asia and Europe.

Ethiopia's current road density is 30% per thousand kilometers with a plan to further the road density by 41% between 2002 and 2007. This in effect brings about significant quality improvement in import-export routes and other all-weather roads on major national routes. The air transport and the shipping line are also providing efficient services. Air transport cost for general cargo export is about USD 4.26/kg and USD 5.26/kg to Europe and USD 8.35/kg to North America, whereas, for general cargo import the fare is USD 5.25/kg from Europe and USD 16.73/kg from North America.

The pre capita power production is 28 KWh and the government is planning to increase hydropower capacity of the country. The current tariff on electric power ranges between 0.41-0.57. Hydropower generation of electricity has also recently been opened up to private foreign investors. The state-owned telecommunication service envisages increasing the number of telephone lines over 760,000 with the aim of raising the lines to 12 lines per 1,000 persons.

The political situation of the country is stabilized. In Ethiopia, the labor force is estimated at 40 million, and labor remains readily available and inexpensive. The cost of labor is very low in Ethiopia with a wage of USD 1 a day for unskilled labor and average monthly salary of USD 90 for a fresh graduate. Ethiopia has enacted a liberal investment law and the Ethiopian Investment Commission has been established, which is making every effort in creating an enabling environment for investment. The conducive economic environment encouraged foreign direct investment. The data indicate that for the period between 1992 and 2005 a total of 13,125 investors with an aggregate capital of 151.5 billion Birr have been licensed; out of which 1,358 are foreigners with an aggregate capital of 38.9 billion Birr.

The country has currently reformed its investment code by broadening the sector coverage for foreign participation. Accordingly, the newly included sectors are telecommunication, power and air services. Thus, almost all sectors are open for foreign investors.

Nowadays, investors are no more expected to go to various government offices to get their applications approved. The Ethiopian Investment Commission (EIC) is now serving as one stop-shop facilitator, issuing investment permit, work permit, residence permit and allocation of land for investment.

1.1 Investment Protection & Guarantee

The Government encourages foreign investors to invest in a broad range of industries which allows foreigners to hold up to 100% equity ownership. According to the investment Proclamation, investors are legally protected against the expropriation and nationalization of assets. In addition to this, Ethiopia has ratified the convention establishing the Multilateral Investment Guarantee Agency (MIGA) of the World Bank Group. It has also signed bilateral investment promotion agreements with a number of OECD (Organization for Economic Cooperation and Development) countries.

The investment proclamation allows all foreign investors, whether they receive incentives or not, to freely remit profits and dividends, principal and interest on foreign loans, and fees related to technology transfer. Foreign investors may also remit proceeds from the sale or liquidation of assets, from the transfer of shares or of partial ownership of an enterprise, and funds required for debt service or other international payments. The right of expatriate employees to remit their salaries is granted in accordance with the foreign exchange regulations of the National Bank of Ethiopia.

1.2 Investment Laws

Both foreign and domestic private entities have the right to establish, acquire, own, and dispose of most forms of business enterprises.

Land for investment purposes is obtained on lease and with prices set by periodic auctions. Land leasehold regulations vary in form and practice from region to region. Nonetheless, they all are best in attracting investments. Land could be obtained by paying nominal or fair charges. In some priority investment areas, land could be availed even free of charges. There are also industrial zones with adequate infrastructure facilities.

Ethiopia works hard to combat corruption through a combination of social pressure, cultural norms, and legal restrictions. Although corruption exists, it is not a significant hindrance to investment or trade in Ethiopia.

1.3 Labor Law

Ethiopia enjoys labor peace. The right to form labor associations and to engage in collective bargaining is granted by law. Workers who provide critical services like health care are not permitted to strike. The labour law has been revised to provide for strong work culture, discipline and efficiency while safeguarding basic labour rights.

1.4 Investment Incentives

Investors are eligible for investment incentives. Special incentive sectors and sub-sectors include agricultural development and agro-processing, agricultural production, manufacturing of equipment and machinery, spare parts, components and supplies, vehicle bodies, other products and assembly plants, and publishing of printed goods; large-scale road and building construction and other related works. Rural transportation facilities; and the purchase of spraying machinery, trucks fitted with refrigeration facilities, or other equipment for support services are also eligible for special incentive facilities.

An investor in one of these specified areas who meets the conditions for a qualifying investment certificate, and who produces evidence showing the exact amount of the capital invested within 30 days of commencement of operation, may qualify for incentives.

Incentives include: -

Exemption from payment of income tax for the period between 2 to 7 years depending on the area of investment, volume of exporting and the location of investment;
100% exemption from payment of import custom duties on all investment goods;

Duty-free imports of spare parts up to 15% of the value of capital goods imported;

Capital goods imported without the payment of import duties and other import taxes may be transferred to another investor enjoying similar privileges;

Exemption from custom duties or other import taxes are granted on raw materials that are required in the production of export goods. Taxes and duties paid on raw materials are drawn back at the time of export of finished products. The duty drawback scheme applies to all taxed at the time of import, as well as those paid on local purchases.

Exemption from any export taxes and other taxes levied on exports for Ethiopian products and services destined for export;

Carrying forward of losses during a tax exemption period for half of the tax holiday period after the expiry of the tax holiday;

Export products from Ethiopia to the European Union are entitled to duty reductions or exemptions and are free from all quota restrictions under the Lome Convention. Trade preferences include duty-free entry of all industrial products and a wide range of agricultural products including fruits, vegetables, pulses and oil seeds. Under the Generalized system of Preference (GSP), a wide range of Ethiopia's manufactured products are entitled to preferential duty treatment in the USA, Canada, Switzerland, Norway, Sweden, Finland, Austria and Japan, as well as most European Union countries. Furthermore, no quantitative restrictions are applicable to Ethiopian exports on any of the 3,000-plus items currently eligible for Act (AGOA) & Everything But Arms (EBA) are the respective US and Europe export market opportunities open for exports from Ethiopia. The country has also access to 23 African countries through COMESA.

2. PARTNERSHIP

Foreign firms are welcome to invest in privatization efforts of the Ethiopian government.Since Ethiopia has launched the new market-oriented Economic Policy in 1992, it has embarked upon the privatization of state-owned enterprises as an integral part of the broader macro-economic reform.

Domestic and Foreign investors are encouraged to participate in the privatization process. In order to accomplish the privatization process, the former Ethiopian Privatization Agency is fused with the Public Enterprises Supervising Authority and has been re-established as Privation and Public Enterprises Supervising Authority (PPESA) since August 2004. Under PPESA there are well over 110 public enterprises for partnership and privatization in almost all sectors of the economy.

PPESA is also working towards attracting foreign private partners for joint venture, management contract and lease arrangements with public enterprises. This is in addition to sale option for public enterprises.

PPESA is looking for domestic/foreign public/private partners for most of the public enterprises it is supervising. In this regard, textile and garment, leather & leather products, food processing, construction and agro-industries are given priority for partnership. Those who are capable, experienced and committed investors are seriously looked for partnership. It is believed that working with the existing enterprises would reduce investment requirement and risks to new partners. There is also huge profit potential to be earned by proper utilization of time and resources. Of course, there is a challenge to be overcome.

Ethiopian Tannery

Privatization of public enterprises through competitive bidding and transparent negotiated sales are options available. Due considerations are given to expedite the process of privatization with ensuring transparency, fairness and public accountability. The sale option could be full or partial sale of shares as the case may be (see the annexed list of public enterprises for partnership and/or complete sale out options for shopping).

Cotton Plant

For Management Contract (MC), Joint Venture (JV), Lease or Export Partnerships, what you have to do is just apply expressing your mode of participation, interest and the enterprise that you want to partner with. Afterwards, you would be required to produce business plan for the chosen options & chosen enterprise. We always demand that you be dependable, committed, realistic and capable to initiate and effect partnership and privatization.

3. LIST of State-Owned Enterprises to be Privatized

No.	Name of Enterprise	Location
	FOOF INDUSTRY
1	Addis Modjo Edible Oil S.C	Addis / Modjo
2	Kality Food S.C	Addis Ababa
3	Dire Dawa Food Complex S.C	Dire Dawa
4	Fafa Food S.C	Addis Ababa
5	Hamaressa Edible Oil S.C	Harar
6	Ethiopia Spice Extraction	Addis Ababa
7	Yerer Flour S.C	Nazareth
8	Bahir Dar Edible Oil S.C	Bahir Dar
9	Tigray Flour S.C	Quiha
10	Ada Flour & Pasta Factory	Debre Zeit
11	Awassa Flour S.C	Awassa
12	Addis Candy Factory	Addis Ababa
	BEVERAGE INDUSTRY
13	Bedele Brewery S.C	Bedele
14	Harar Brewery S.C	Harar
15	Meta Abo Brewery S.C	Sebeta
16	National Alcohol Liquors S.C	Addis Ababa
17	Addis Ababa Bottle & Glass S.C	Addis Ababa
18	Babile Mineral Water Factory	Harar
	GARMENT INDUSTRY
19	Addis Garment S.C	Addis Ababa
20	Akaki Garment S.C	Akaki
21	Gulele Garment S.C	Addis Ababa
	LEATHER & SHOE INDUSTRY
22	Ambessa Shoe S.C	Addis Ababa
23	Addis Ababa Tannery S.C	Addis Ababa
24	Modjo Tannery S.C	Modjo
25	Kombolcha Tannery S.C	Kombolcha
26	Tikur Abay Shoes S.C	Addis Ababa
27	Rubber & Canvas Shoes	Addis Ababa
	ENGINEERING INDUSTRY
28	Akaki Spare part S.C	Akaki
	COFFEE
29	Coffee Plantation & Dev't Enterprise *	Jimma
	PUBLIC TRANSPORT
30	Abay Technical Serv. Enterprise *	Addis Ababa
31	Walia Public Transport Enterprise *	Addis Ababa
	FREIGHT TRANSPORT
32	Addis Mechanical Enterprise *	Addis Ababa
33	Bekelcha Transport Enterprise *	Nazareth
34	Shebele Transport Enterprise *	Addis Ababa
35	Woyre Transport Enterprise *	Addis Ababa
	CONTRACTORS
36	Awash Construction Enterprise	Addis Ababa
37	Batu Construction Enterprise	Addis Ababa
38	Blue Nile Construction Enterprise	Addis Ababa
39	Water Works Construction Enterprise	Addis Ababa
	CONSTRUCTIONS DESIGN
40	Building Design Enterprise	Addis Ababa
41	Transport Construction Design Ent..	Addis Ababa
	HORTICULTURE
42	Horticulture Development Ent.	Addis Ababa
43	Upper Awash Agro. Industry	Merti-Jeju
44	Etfruit	Addis Ababa
	PHARMACEUTIAL
45	PHARMID	Addis Ababa
46	EPHARM	Addis Ababa
	BASIC METAL ENGINEERING INDUSTY
47	Ethio-Iron & Steel	Akaki
48	Kality Metal	Kaliti
49	Kotebe Metal	Addis Ababa
50	Kolfe Household	Addis Ababa
51	Nazareth Tractor	Nazareth
	HOTEL & TOURISM
52	Ethiopian Tourist Trade Enterprise	Addis Ababa
53	National Tour Operators (NTO)	Addis Ababa
54	Ras Hotels	Addis Ababa
55	Ethiopian Hotels	Addis Ababa
	SHARE COMPANIES
56	Pulp & paper Factory S.C	Wonji
57	Crown Cork S.C	Akaki
58	Ethio-Japan Textile S.C	Modjo
59	AMCE (Truck Assembly) S.C	Addis Ababa
	AGRI SERVICES
60	Coffee Technology Development	Addis Ababa
61	Fish Product & Marketing Enterprise *	Addis Ababa
62	Natural Gum Marketing Enterprise *	Addis Ababa
63	Agricultural Equipment & Technical	Addis Ababa
	CONSTRUCTION
64	Addis Block S.C	Addis Ababa
65	Water Wells Drilling Enterprise	Addis Ababa
66	Building Materials Supply Enterprise	Addis Ababa
67	Bole Bulbula Construction Material	Addis Ababa
68	Housing Construction Enterprise	Addis Ababa
69	Ethio-Marble	Addis Ababa
70	Prefabricated Building Production	Addis Ababa
71	Tabor Ceramics S.C	Awassa
72	ECAFCO	Addis Ababa
73	Ethiopian hard & Soft Board Fact	Addis Ababa
74	Sawmill & Joineries	Addis Ababa
	MINING
75	Abijata Soda Ash S.C	Abijata
76	Ethiopian Mineral Dev't Enterprise	Addis Ababa
	TEXTILE
77	Debre Berhan Blanket	Debre Berhan
78	Adei Ababa Yarn Factory	Addis Ababa
79	Ethio-Fiber Factory	Akaki
80	Meher Fiber Factory	Akaki
81	BahirDar Textile S.C	BahirDar
82	Dire Dawa Textile Factory	Dire Dawa
83	Edget Yarn & Sewing Thread	Addis Ababa
	AGRICULTURE
84	Dairy Development Enterprise	Addis Ababa
85	Middle Awash Agricultural	Awash
86	Bale Agricultural Dev't Enterprise	Robe
87	Abobo Agricultural Dev't Enterprise	Abobo
88	Arsi Agricultural Dev't Enterprise	Arsi
89	Awassa Agricultural Dev't Enterprise	Awassa
90	North Omo Agricultural Devt'	Arba Minch
91	Tendaho Agricultural Devt'	Assaita
	PRINTING
92	Yekatit Paper Convert	Addis Ababa
93	Artistic Printing	Addis Ababa
94	Bole Printing	Addis Ababa
95	Commercial Printing	Addis Ababa
	CEMICAL
96	Nefas Silk Paint Factory	Addis Ababa
97	Ethiopian Plastic S.C	Addis Ababa
98	Addis Ababa Foam & Plastic Factory	Addis Ababa
	TRADE
99	M'S Whole Sale & Import Trade	Addis Ababa

* Restricted for local investors

5.LIST of Enterprises in search of Strategic Partners

No.	Preferred Modality	Sector	Name of Enterprise
1	JV-Equity	Textile	Akaki Garment S.C.
2	JV-Equity	Textile	Akaki Textile S.C.
3	JV-Equity	Textile	Kombolcha Textile S.C.
4	JV-Equity	Textile	Bahar Dar Textile S.C.
5	JV-Equity	Leather	Blue Nile Shoe S.C.
6	JV-Equity	Construction	Tabor Ceramics S.C.
7	JV-Equity	Food	Kaliti Food S.C.
8	JV-Equity	Food	Dire Dawa Food Complex S.C.
9	JV-Equity	Cement	Dire Dawa Cement Factory
10	JV-Equity	Agriculture	Upper Awash Agro-Industy Enterprise
11	JV-Equity	Beverage	Assela Malt Factory
12	JV-Equity	Agriculture	Dairy Dev't Enterprise
13	JV-Equity	Textile	DebreBrhan Blanket Factory
14	JV-Equity	Chemical	Addis Ababa Bottle & Glass S.C
15	JV-Equity	Food	Addis Modjo Edible Oil Complex S.C.
16	JV-Equity	Food	Fafa Food S.C.
17	JV-Equity	Mining & Mineral	Ethiopian Mineral Dev't S.C.
18	JV-Equity	Chemical	Awash Aluminum sulfate & sulfuric Acid Co
19	JV-Equity	Chemical	Adami Tulu Pesticide Processing S.C. *
20	JV-Equity	Agriculture	National Veterinary Institute
21	JV-Equity	Others	Industrial Project Service
22	JV-Equity	Agriculture	Horticulture Dev't Enterprise
23	JV-Equity	Textile	Ethiopian Fiber Products
24	JV-Equity	Textile	Meher Fiber Products Factory
25	JV-Equity	Construction	Ethiopian Marble Industry
26	JV-Equity	Food	Ethiopian Spice Extraction Factory
27	JV-Equity	Pharmacy & Health	Ethiopian Pharmaceutical Manufacturing Co
28	JV-Equity	Beverage	Babile Mineral Water Factory
29	JV-Equity	Agriculture	Coffee Plantation & Dev't Enterprise
30	JV-Equity	Chemical	Caustic Soda S.C.
31	JV-Equity	Textile	Adei Ababa Yarn S.C.
32	JV-Equity	Textile	Addis Garment S.C.
33	JV-Equity	Textile	Dire Dawa Textile Factory
34	JV-Equity	Textile	Arba Minch Textile S.C.
35	JV-Equity	Leather	Anbesa Shoe S.C.
36	JV-Equity	Leather	Ethiopia Rubber & Canvas Shoes Factory
37	JV-Equity	Textile	Gullele Garment S.C.
38	JV-Equity	Textile	Nazareth Garment S.C.
39	JV-Equity	Leather	Modjo Tannery S.C.
40	JV-Equity	Leather	Addis Ababa Tannery S.C.
41	JV-Equity	Leather	Kombolcha Tannery S.C.
42	JV-Equity	Textile	Edget Yarn Factory
43	Lease	Transport	Shebelle Transport S.C.
44	Lease	Transport	Walia Liter-City Bus Service Enterprise
45	Lease	Transport	Woyra Transport S.C.
46	Lease	Transport	Bekelcha Transport S.C.
47	Lease	Wood	ECAFCO S.C.
48	Lease	Wood	ETHARSO Factory
49	Lease	Wood	Ethiopia Ply Wood Factory
50	Lease	Food	Kokeb Flour & Pasta Factory
51	Lease	Food	Misrak Flour & Bread Factory
52	Lease	Food	Bahir Dar Edible Oil S.C.
53	Lease	Food	Yerer Flour S.C.
54	Lease	Food	Tigray Flour & Edible Oil Sh. Co.
55	Lease	Food	Adama Edible oil Factory
56	Lease	Food	Ada Flour & Pasta Factory
57	Lease	Food	Nazareth Edible Oil Factory
58	Lease	Wood	Sawmills & Joineries Enterprise
59	MC	Agriculture	Coffee Technology Dev't & Engineering Enter
60	MC	Construction	Awash Construction S.C.
61	MC	Construction	Batu Construction S.C.
62	MC	Construction	Water Well Drilling Enterprise
63	Lease	Agriculture	Abobo Agricultural Dev't Enterprise
64	MC	Agriculture	Agricultural Equipment & Technical Service
65	Lease	Agriculture	Agricultural Mechanization Service Enterprise
66	JV-Equity	Agriculture	Arsi Agricultural Dev't Enterprise
67	JV-Equity	Agriculture	Awassa Agricultural Dev't Enterprise
68	JV-Equity	Agriculture	Bale Agricultural Dev't Enterprise
69	JV-Equity	Agriculture	Coffee Processing & Warehouse Enterprise
70	JV-Equity	Agriculture	Ethiopian Fruit & Vegetable
71	JV-Equity	Agriculture	Fish Production & Marketing Enterprise
72	JV-Equity	Agriculture	Kaliti Animal Feed Enterprise
73	JV-Equity	Agriculture	Middle Awash Agricultural Dev't Enterprise
74	JV-Equity	Agriculture	Natural Gum Production Marketing Enterprise
75	JV-Equity	Agriculture	Semen-Omo Agricultural Dev't Enterprise
76	JV-Equity	Agriculture	Tendaho Agriculural Dev't S.C.
77	JV-Equity	Beverage	Ambo Mineral Water Factory
78	JV-Equity	Beverage	Bedele Brewery S.C.
79	JV-Equity	Beverage	Harar Brewery S.C.
80	JV-Equity	Beverage	National Alcohol & Liquor Factory
81	JV-Equity	Chemical	Addis Ababa Foam & Plastic Factory
82	JV-Equity	Chemical	Alkyd Resin S.C.
83	Lease	Chemical	Chora Gas & Chemical Factory
84	Lease	Chemical	Nazareth Soap Factory
85	Lease	Chemical	Nefas Silk Paint Factory
86	JV-Equity	Construction	Addis Block Production S.C.
87	JV-Equity	Construction	Blue Nile Construction S.C.
88	JV-Equity	Construction	Building Materials & Supplies Enterprise
89	JV-Equity	Construction	Prefabricated Building Parts Construction
90	JV-Equity	Construction	Residential Houses Construction Enterprise
91	JV-Equity	Food	Hamressa Edible Oil S.C.
92	JV-Equity	Hotel & Tourism	National Tour Operation Enterprise
93	JV-Equity	Hotel & Tourism	SPA Service Enterprise
94	JV-Equity	Mining & Mineral	Abijata Soda Ash S.C.
95	JV-Equity	Mining & Mineral	Bole Bulbula Construction Stone Production SC
96	JV-Equity	Mining & Mineral	Adola Gold Dev't
97	MC	Pharmaceutical	Pharmaceutical and Medical Supply S.C.
98	Lease	Printing	Artistic Printing Enterprise
99	Lease	Printing	Bole Printing Enterprise
100	Lease	Printing	Commercial Printing Enterprise
101	JV-Equity	Printing	Educational Materials Production & Distr.
102	JV-Equity	Printing	Ethiopian Pulp & Paper Factory S.C.
103	Lease	Printing	Gonder Printing Enterprises
104	JV-Equity	Printing	Yekatit paper Converts Enterprise
105	Lease	Sugar	Addis Ketema Candy Factory
106	MC	Trade	Procurement Service Enterprise
107	MC	Trade	Merchandise Wholesale & Import Trade
108	Lease	Transport	Comet Transport S.C.
109	JV-Equity	Hotel & Tourism	Ethiopian Tourist Trading Enterprise
110	MC	Hotel & Tourism	Ethiopia Hotel
111	MC	Hotel & Tourism	Ras Hotel
112	JV-Equity	Sugar	Wonji/Shoa Sugar-Baker Yeast Project
113	JV-Equity	Chemical	Abjiata Soda Ash S.C.
114	JV-Equity	Textile	Ethio-Japan Synthetic Textile S.C.

* Enterprises under partnership process.