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Fast-growing Ethiopia seeks greater investment from UAE

Minister says opportunities abound in agriculture and property

Abdul Rahman Saif Al Ghurair, Chairman of the Dubai Chamber of Commerce and Industry
Image Credit: Supplied
Abdul Rahman Saif Al Ghurair, Chairman of the Dubai Chamber of Commerce and Industry, called upon Dubai companies to invest in Ethiopia, especially in its fast-growing agricultural, infrastructure, trade and livestock sectors.
Gulf News

Ethiopia, Africa's fastest growing economy, boasting 11 per cent growth, is looking for greater investments from the UAE, a top Ethiopian government official said yesterday.

The UAE's investments in Ethiopia, just $800 million (Dh2.9 billion) in the last seven years, are modest because of a ‘lack of information' about the opportunities available, Tadesse Haile, Ethiopian Minister of Industry, told Gulf News.

Investment opportunities abound in agriculture, mining, infrastructure, manufacturing, tourism in Ethiopia's underserved economy, experts agreed during a seminar briefing UAE-based companies on investment opportunities in Ethiopia yesterday.

Despite the geographical proximity between the UAE and Ethiopia, it is India and China that are leading investments in Ethiopia, Haile said.

In terms of trade, Germany is Ethiopia's top trading partner. "UAE-Ethiopia trade is far behind expectations...There is much to go in this area," he commented.

Ethiopia is Dubai's 71st trading partner with non-oil trade reaching Dh1 billion in 2010, said Abdul Rahman Saif Al Ghurair, chairman of the Dubai Chamber of Commerce and Industry (DCCI) that organised the event.

Asked how the threat of Somali sea piracy, which lurks just beyond Ethiopia's borders with Somalia and its proximity to the piracy-infested Gulf of Aden, could affect trade and investment opportunities, Haile said: "The problem of piracy is not only the problem of Ethiopia. It is a global problem and the responsibility of all nations to address. Ethiopia has an important role in solving the problem. The fundamental approach is to support the establishment of a strong, democratic government in Somalia. Piracy will remain a global problem if there's no democratic Somali government."

Investment potential

Ethiopia offers massive opportunities for investors: A large market with a population of more than 80 million, more than 1.14 million square kilometres or the equivalent of France and Spain combined, cheap labour, political stability and access to markets in the EU and US are just a few reasons to invest in Ethiopia, experts said.

Ethiopia, an underserved economy, has undergone a major overhaul in the past 10 years.

It is the fifth biggest economy in Africa — after South Africa, Nigeria, Angola and Sudan — climbing up from 10th in 2003, according to Zemedeneh Negatu, Managaing Partner of Ernst and Young Ethiopia, in a presentation called ‘Investing in Ethiopia: Why now?'

By 2023, Ethiopia's GDP per purchasing power will hit an approximate $500 billion and it is set to become the third largest economy in sub-Saharan Africa, according to an Ernst and Young forecast.

Fastest growing

By 2015, Ethiopia is expected to become the third fasting growing economy in the world, said Negatu.

The government has reshaped the investment environment to attract foreign currency.

Ethiopia ranks higher in doing business than three of the four BRIC (Brazil, Russia, India, China) economies except China. Ethiopia is ranked 107th out of 183 countries in the Doing Business 2010 report by the World Bank while China ranks 89th.

Regionally, Ethiopia ranks ninth in the top 10 countries to do business within Africa, according to the same report.

Ethiopia is expected to exceed 11 per cent growth this year, surpassing top players India and China, and has sustained double digit growth in the past few years.

If recent trends continue, Ethiopia's goal of joining the ranks of the middle income emerging market economies is achievable in less than two decades, said Negatu.

While China is known for its cheap labour, Ethiopia undercuts even those rates. A worker in the manufacturing industry in China earns $420 a month but his Ethiopian counterpart gets just $80, he added. The major investment sector in Ethiopia is agriculture and agro-processing. The country has reserved 3.6 million hectares for foreign investors, said Negatu.

There are 74 million hectares suitable for agriculture and 15 million hectares of cultivated land. The land is suitable for the production of food crops (wheat, maize, beans, lentils, chick peas and more), oil crops (sesame seed, rapeseed, cotton seed), coffee and tea, cotton, feed stocks for bio diesel (palm oil, castor oil) and for ethanol (sugarcane, sugar beet, potatoes and corn).

Agriculture contributes 45 per cent of the GDP, employs 85 per cent of the population and rakes in 90 per cent of the foreign currency earnings, said Haile.

Ethiopia also has the largest livestock population in Africa with 42 million cattle, according to the Ethiopian Investment Agency.

There are opportunities in manufacturing textiles, leather products, construction and property development.

Tourism is also growing at 10 to 15 per cent a year, said Ato Zafu, president of the Ethiopian Chamber of Commerce and sectoral associations. Ethiopia's biggest exports are coffee, oilseeds, pulses, spices, chat, livestock and meat products, although flower and gold are emerging products too, said Zafu.

With a $4.7 billion hydropower project, Ethiopia hopes to be a net exporter of energy to neighbouring countries in future, said Haile.

Foreign investment

About 16 per cent of foreign direct investment (FDI) into Ethiopia is from licensed investment projects, he added.

With a restructured legal and insitutional framework, Ethiopia has tried to attract investors through various incentives: no tax levies on exports, investors are exempt from customs duties and other taxes on imported or locally purchased raw materials used in exports, and exporters can retain and deposit in a bank up to 20 per cent of their foreign exchange earnings from exports to reinvest in business.

However, sectors exclusively for Ethiopian investors include banking, indurance and micro-credit services. This is only a temporary situation, said Haile.

Security issues

UAE-based food company IFFCO Group will be investing in palm oil plantations and cattle processing facility in Ethiopia — a country that could be one answer to UAE's food security issues, said a senior company official.

The company has signed a Memorandum of Association and has started recruiting staff there, said Anurag Sen, Head of Africa for IFFCO, a subsidiary of Allana.

However, political risk remains an issue for investors to consider as Ethiopia shares borders with Eritrea, Somalia and Sudan, he added.

Halcrow Group, a global construction and infrastructure consultancy, is also considering Ethiopia as a prime market for projects in water treatment plants, roads, rail and airports, said Tim Gamon, Development Director in the UAE.

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