What might attract investors to set up businesses in Ethiopia?
- Political and Social stability. ...
- Growing Economy. ...
- Excellent Climate and Fertile Soils. ...
- Strong Guarantees and Protections. ...
- Abundant and Affordable Labor. ...
- Regional Hub with Access to a Wide Market. ...
- Improved Economic Infrastructure. ...
- Competitive Incentive Packages.
Ethiopia is expected to become an industrial-based economy. Ethiopia has maintained strong investor interest as one of the top investor destinations in Africa, becoming the second largest FDI recipient in Africa. The recent launch of the African Continental Free Trade Area (AfCFTA) is expected to fuel investments.
The areas, with most promising potential for investment in the country, are agriculture, agro-processing, textile and garment, leather and leather products, sugar, cement, chemical and pharmaceutical industry, tourism, mining , hydropower and digitalisation.
Here are a few measures to attract FDI and what to prepare:
Documentation of how your business could work under a foreign country's government regulations. A list of any potential setbacks and how your business plans to rectify them. Potential profits an investor could gain by forming a partnership.
Political stability, lower wages rate, lower production cost, easy communication, good exchange rate, host country‟s policy about foreign investment etc are the influential factors to attract the foreign investor.
Ethiopia has been attracting high amount of Foreign Direct Investment (FDI) in recent years. According to the recent World Bank Report, Ethiopia tops East Africa in attracting FDI, with almost half of the inflows to the East African region.
The most promising commercial opportunities in Ethiopia are in agriculture and agro-processing, infrastructure, energy, aviation, healthcare and tourism.
- Stocks.
- ETFS.
- Bonds, Fixed Income and Money Market Accounts.
- Real Estate.
- Commodities and Gold.
- Mutual Funds.
- Peer-to-Peer Lending.
- Startups and IPOs.
The largest volume of foreign direct investment (FDI) in Ethiopia comes from China, followed by Saudi Arabia and Turkey.
The study investigated challenges such as lack of start-up capital, limited access to land, weak marketing infrastructure, long bureaucratic procedures, limited access to credit, and corruption that were determining factors for domestic private investment in the city.
What steps have been taken to attract foreign investment?
- Establishing Special Economic Zones (SEZs)
- Making labour laws flexible.
- Curbing trade barriers.
- Granting compulsory licensing.
Labour costs, infrastructure quality, company taxes, innovation, economic growth… all these are factors that are used by governments to attract foreign investment. In 2016, the top 10 countries receiving FDI were the following, according to the UNCTAD (the United Nations Conference on Trade and Development):
Foreign direct investment in India is done via two routes- the automatic route and the government route. Under this route, foreign direct investment up to 100% is allowed in all sectors and activities except the following. The services/activities listed below require prior approval of the government.
Political stability, lower wages rate, lower production cost, easy communication, good exchange rate, host country"s policy about foreign investment etc are the influential factors to attract the foreign investor.
Economic growth (changes in demand) Confidence/expectations. Technological developments (productivity of capital)
Employment and economic boost:
FDI creates new jobs and more opportunities as investors build new companies in foreign countries. This can lead to an increase in income and mor purchasing power to locals, which in turn leads to an overall boost in targetted economies.
INVESTMENT OBJECTIVES
The investment objective of the Federal Democratic Republic of Ethiopia is to improve the living standard of the peoples of Ethiopia by realizing a rapid, inclusive and sustainable economic and social development.
Accordingly and as market structure is the term used to describe the way in which industry competitors interact, the analysis of market structures in Ethiopia include: perfectly competitive, monopolistic competition & monopoly.
The country intends to be a middle-income economy by 2025. Ethiopia's major industries include agriculture, construction, manufacturing, resources and energy, tourism, and food processing.
The exchange rate in Ethiopia is stable, and working and living environments are safe and secure. There are numerous, excellent reasons to invest in Ethiopia.
How much money do you need to invest in Ethiopia?
Any foreign investor, to be given the permission to invest in Ethiopia, is obliged to allocate a minimum capital of USD 200,000 for a single project. If the foreigner is investing together with a domestic investor, the minimum capital requirement will reduce by 50k and becomes USD 150,000.
In Conclusion
Ethiopia presents a lucrative and profitable market for investors across the world. The country is one of the few in the world to have enjoyed a long period of economic growth before the outbreak of COVID-19 early in 2020.
To obtain investment permit, applicant has to approach the Ethiopian Investment Commission (EIC) contact link. The applicant has to get application form from the respective authority, or download the application form from the given link application form. Complete the application form with necessary details.
An investment is the purchase of an asset with an expectation to receive return or some other income on that asset in future. The process of investment involves careful study and analysis of the various classes of assets and the risk-return ratio attached to it.
With about 115 million people (2020), Ethiopia is the second most populous nation in Africa after Nigeria, and still the fastest growing economy in the region, with 6.3 percent growth in FY2020/21. However, it is also one of the poorest, with a per capita gross national income of $890.
According to the studies reviewed, the main determinants of investment are found to include market size, resource availability, degree of openness and liberalization, human capital, macroeconomic stability, political stability, policy variables, investment climate, lag effects, incentive packages, risks involved, ...
Their research investigations revealed that the key determinants that significantly affected the economic growth of Ethiopia, as per their order of significance, include physical capital, exogenous factors (foreign aid, external debt and foreign direct investment), demographics, trade, human capital, fiscal policy, ...
In theory, foreign bank entry could significantly reduce the cost of credit by bringing capital, technical skills, and product innovation to host countries, which increases competition and leads to improvements in the efficiency of the banking sector, ultimately benefitting customers of the banking system, including ...
What actions might a government take to attract foreign companies to do business in its country? Offer tax incentives, low - cost land and materials, reduced trade barriers and low cost loans.
(i) Special Economic Zones have been set up to have world-class facilities such as cheap electricity, roads, transport, storage, etc. (ii) The companies set up their units in SEZs which are exempted to pay tax for initial period of five years. (iii) Labour laws are made flexible.
What are the tools used by governments to promote foreign investments?
Governments encourage FDI through financial incentives; well-established infrastructure; desirable administrative processes and regulatory environment; educational investment; and political, economic, and legal stability.
In the recent years the Indian Government has taken special steps to attract foreign companies to invest in India: i The government has set up industrial zones called special Economic Zones SEZs. SEZs provide world class facilities – electricity water roads transport storage recreational and educational facilities.
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ECONOMIC FACTORS:
- High economic growth. ...
- Limited legal restrictions on foreign investments. ...
- TAX incentives. ...
- Stable currency of the host country.
The exchange rate in Ethiopia is stable, and working and living environments are safe and secure. There are numerous, excellent reasons to invest in Ethiopia.
The largest volume of foreign direct investment (FDI) in Ethiopia comes from China, followed by Saudi Arabia and Turkey. Political instability associated with various ethnic conflicts—most notably the conflict in the Tigray region—could negatively impact the investment climate and lower future FDI inflow.
The study investigated challenges such as lack of start-up capital, limited access to land, weak marketing infrastructure, long bureaucratic procedures, limited access to credit, and corruption that were determining factors for domestic private investment in the city.
INVESTMENT OBJECTIVES
The investment objective of the Federal Democratic Republic of Ethiopia is to improve the living standard of the peoples of Ethiopia by realizing a rapid, inclusive and sustainable economic and social development.
