Doing Business in Ethiopia Economic / Commercial Section Embassy of the United States of America Addis Ababa, Ethiopia February 2009 Fassil Yilma Commercial Specialist Outline of Presentation 1. Market overview 2. Market Challenges 3. Market Opportunities 4. Market Entry Strategies 5. Conclusion 1. Market Overview Area: 1.1 million sq. km (472,000 sq. m.); about the size of Texas, Oklahoma, and New Mexico combined; Market ..cont’d After 1993 Ethiopia became landlocked; Population: 77 million; Rural population is 84 % while 14 % reside in urban areas; The political environment is fairly stable despite border disputes with Eritrea and the volatile situation in the Ethiopia Somali region; Elections take place every 5 years- the next one is coming up in 2010 Controversial and very restrictive laws passed in the past one year (on media, CSO’s and banking) ; Ethiopia is an agrarian economy ; – Ag sector contributes 46% to GDP; – Over 80% of the labor force is engaged – Over 60% of export earnings is generated. Market ..cont’d Real GDP for 2007/08 is $22.9 billion. Real GDP growth was double digits in the past few years, although official growth figures of 11.5% in recent years are inflated; Unlike historical records, inflation has risen dramatically in recent years ( headline inflation is about 40%); Significant and widening trade deficit in recent years has resulted in a foreign exchange crisis: – Value of exports $1.5 billion in 2007/08, – Value of imports $6.8 billion in 2007/08, – Forex reserves are currently estimated to cover only four weeks of imports; Major exports : coffee, oil seeds, leather and leather products, Khat, cut flower, gold, fruits and vegetables, and live animals; In 2007/08 ,coffee generated $525 million (35%), oil seeds $219 million (15%), pulses $144 million (9.8%), cut flower $111 million ( 7.6%) , khat $108 million (7.4% ) and gold $78 million (5.3%); Market ..cont’d In 2007/08 Ethiopia imported : – capital goods worth of $1.8 billion, petroleum products $1.6 billion, consumer non-durables 1.1 billion, consumer durables $459 million, fertilizer $300 million, cereals $207 million, medical and pharmaceuticals $211 million U.S. exports to Ethiopia : – $262 million (2007/08 estimate), 4% of Ethiopia’s total imports Ethiopian exports to the U.S.: – $140 million (2007/08 estimate); Ranked 116th out of 181 countries worldwide and 11th in Sub-Saharan Africa for ease of doing business . – The WB ‘s 2009 Doing Business Report ; WTO accession process commenced in 2003. Negotiations are still underway. 2. Market Challenges Government remains heavily involved in most economic sectors. Services and trade sectors - difficult for foreign investor to enter. GOE controls the utilities, telecoms, and other major services. Financial sector is blocked for foreign ownership . Land is owned by the government and can be leased on a long term basis of up to 99 years. Foreign exchange is an acute problem. Lack of access to finance is a great hindrance to both foreign and local businesses. Market Challenges... (cont’d) Inadequate telecom services; Customs clearance process: Slow and time consuming, Imported goods being charged at attributed values instead of invoice values. Labor force - largely semi-skilled; Judicial system : - remains poorly staffed, - inexperienced, particularly with respect to commercial disputes. Market Challenges- cont’d All imports must be channeled through Ethiopian nationals registered as official import or distribution agents with the ministry; In 2008, Ethiopia ranked 126th out of 180 countries in Transparency International’s Corruption Perception Index; Corruption (bribery) is slowly increasing, while conflict of interest corruption (cronyism) remains pervasive; Ethiopia still is not signatory to many international WIPO Regulations ; Domestic IPR laws are enacted but with limited enforcement capacity; 3. Market Opportunities Ethiopia is well endowed with abundant agricultural resources, and vast diversity of ecological zones; Considerable opportunities - cultivation and export of cut flowers, dried fruits, and processed vegetable products; Ethiopia is interested in exploiting its forestry and fishing resources; Developmental projects on construction of roads and low cost houses, hydro-electric power, telecom and tourism offer key opportunities; Other leading export s to Ethiopia include construction machinery, vehicles and spare parts, medical equipment, fertilizer and pharmaceuticals; Priority Sectors set by the GoE include leather , textiles, cement , and agro-processing; 4. Market Entry Strategies Majority of procurement is undertaken by GoE, political dynamics do influence decisions. U.S. firms are strongly advised to appoint local agents to represent their products and services in Ethiopia. 5. Closing Remarks Despite the numerous and stiff market challenges in the Ethiopian market, there are still opportunities for U.S. companies. We are ready to assist you !!! THANK YOU.
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