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Ethiopia Population: 97.0 million (growth rate of 2.5 %) GNI per capita: USD 550 Official languages: Amharic Areal: 1,104,300 km2 Capital: Addis Ababa Economic overview The Ethiopian economy has experienced strong and broad-based growth over the past decade, averaging 10.8% per year in the past decade (compared to the regional average of 5.0%). The strong growth is projected to continue, making Ethiopia one of Africa’s top performing economies. According to the International Monetary Fund (IMF), the economic outlook remains favourable, reflecting the country’s significant potential, generally sound macroeconomic policies, and the government’s efforts to improve infrastructure and attract foreign direct investment. Inflation remained in a single digit range during 2014/15 but has increased over the last year, mainly due to a significant rise in food prices due to the El-Niño effected drought in the country. Ethiopia is the second-most populous country in Africa. The population is approaching 100 million and the workforce is more than 45 million people. 44 % of the population is under 15 years and over half (52%) between 15 and 65 years. The Ethiopian economy is largely based on the agriculture sector. However, aided by a construction boom the services sector is a now central driver in the economic growth. Rapid growth in the agriculture sector has contributed significantly toward poverty reduction in the country. Recent agricultural growth is largely explained by high government spending on extension services, roads, education as well as favourable price incentives. Massive public infrastructure investments, including in airports, roads, and hydro-dams have been a key structural driver of growth. A promising business destination § Ethiopia enjoys a relative high level of stability in the volatile Horn of Africa. However, popular protests related to i.a. land rights have occasionally – and most recently in late 2015/early 2016 created some turmoil. Though guaranteed in the Constitution, freedom of speech and assembly are under pressure in Ethiopia. § The government has been able to prioritise capital spending over consumption, and Ethiopia spends more of its annual budget on infrastructure than any other country in Africa (planned road network: 136,000 km by 2015-2016, planned rail network 5,000 km. Ethiopian Airlines serves more than international destinations). § The government encourages Foreign Direct Investment (FDI). FDI incentives include tax breaks up to 8-10 years, duty free import/export of capital goods, cheap land with leases up to 60-80 years at zero charge, and access to a vast young, affordable and deployable workforce. Electricity rates (app. 3 USD cents/kwh) are exceptionally low by international standards. § The EU is Ethiopia’s most important trade partner. 300 EU companies are currently active. § Ethiopia is developing a number of sustainable eco-industrial parks ready for “plug-andplay”, and investors from Turkey, China, Europe and the US are showing interest. The specialised parks cater for dedicated sectors such as textile & garment, footwear & leather, pharmaceuticals, petro-chemical and chemical products, agro-processing etc. The industrial parts are located along key economic corridors and connected to ports and railways. Challenges of doing business On the World Bank’s Doing Business Index for 2016 Ethiopia ranks as 146 out of 189. This demonstrates some of the challenges of doing business in Ethiopia: § § § § § § § Scarcity in foreign currency which can cause delays in payments; Lack of capacity in the administration and a heavy bureaucracy; Inconsistencies in tax assessments; Power outages; Limited private sector access to bank financing and credit; Corruption is in general at a high level (103 out of 167), but compared to other neighbouring countries levels are relatively low and control of corruption is strong; All financial transactions in Ethiopia are conducted in the local currency, ETB. The exchange rate is determined by the daily inter-bank foreign exchange market in which the National Bank of Ethiopia intervenes.