Ethiopia
But the pace of reform to attract more FDI has slowed since the 2002-2004 initiatives to improve business registration, tax administration and competition policy and, as a result, Ethiopia’s Doing Business rank declined from 101st in 2004 to 116th in 2008, 6 before recovering to 107th out of 183 countries in 2009 (see World Bank 2009c: World Bank’s Doing Business Report 2010). Ethiopia recorded its highest ranking (43rd) for paying taxes and its lowest (159th) for trading across borders. It is ranked tenth in Africa behind a number of Southern African countries – Mauritius, South Africa, Botswana, Namibia and Zambia – as well as two of its close neighbours and regional competitors, Rwanda and Kenya. Although progress has been achieved in improving the investment climate, many challenges remain, especially access to land and credit, and the state of the infrastructure. In the last decade the government has made significant efforts to create a favourable environment for investors and to open up the investment regime. Both the Ethiopian Investment Commission (EIC) – an autonomous government body – as well as the Ethiopian Privatization Agency (EPA) are active actors in promoting the country as a location for FDI. The same investment laws and systems of incentives apply to domestic and foreign investors. Numerous sectors are, however, reserved for domestic private and state investment, thus presenting a highly restrictive FDI regulatory framework, even compared to many developing countries in the region (UNCTAD, 2007). Incentives for both domestic and foreign investors engaged either in new enterprises or in expanding existing firms include tax exemptions and tax holidays, privileges in repatriation of capital and profits, and guarantees against expropriation. For agribusiness projects land is made readily available at a very low lease cost. Since the early 1990s the creation of a more business-friendly investment climate has attracted increased FDI. The stock of inward FDI is estimated to have increased from $124 million in 1990 to $941 million ten years later and to $3.7 billion in 2008 (UNCTAD 2009). Thirteen sub-Saharan economies have larger inward stocks of FDI, of which six are oil exporters. In terms of sectors, manufacturing attracted most FDI, but the share of agriculture, hunting and forestry was in 2008/09 at 22% (Table 3.10). Table 3.10: Distribution of FDI Projects by Sector in Ethiopia, 1999/00 – 2008/09 Sector
99/00
01/02
02/03
03/04
04/05
05/06
06/07
375
226
22
46
72
58
5.6
17
41
26
22
2
2
2
1
7
0.7
10
26
29
14
1.4
6
5
15
70
138
169
239
Construction
5
1
2
1
13
20
34
2
2
1
5
16
2
Health & social work
1
n/a
n/a
3
5
9
2008/09 (%)
5
Fishing
07/08
No.
Agriculture, hunting & forestry Education
6
00/01
It isthe 111th country in 2008 after recalculation of rankings to reflect changes to methodology and the addition of two new countries (World Bank, Doing Business 2010, 2009c).
97
ETHIOPIA
The investment climate in Ethiopia benefits from considerable resources of land, reasonably priced labour, a continuously improving infrastructure, good investment opportunities, a large potential domestic market demand, and the country’s location in close proximity to highly attractive markets of the Middle East and Europe. A 2006/07 Investment Climate Assessment Study by the World Bank concluded that there have been substantial improvements in the business environment compared to 2001/02 (World Bank 2009b).
3