wafa - booklet_final(1)final[1]

INVESTING INETHIOPIA

2011

BACKGROUND

ECONOMIC OVERVIEW

AGRICULTURE

INFRASTRUCTURE DEVELOPMENT

MINING AND ENERGY

TOURISM IN ETHIOPIA

ETHIOPIAN PRIVATE BUSINESS

06

07

15

19

23

27

32


2011

Contents


2011

4 INVESTING IN ETHIOPIA 2011

Ethiopia is not only Africa’s oldest independent country but also one of the oldest nation in the world. Its history can be traced back to the Aksumite Kingdom of the first few centuries before

Christ.

The country lies in the Horn of Africa, bordered to the north and northeast by Eritrea, to the east and by southeast Djibouti and Somalia, to the south by Kenya, and to the west and south west by Sudan and now by South Sudan.

Ethiopia has a high central plateau that varies from 1,290 to 3,000 meters and; the highest mountain reaches 4,533 meters. The Great Rift Valley splits the plateau diagonally, with a number of rivers crossing the plateau (notably the Blue Nile, with its source at Lake Tana.) Between the valley of the Upper Nile and Ethiopia’s border with Eritrea is a region of elevated plateau from which rise the various table lands and mountains that constitute the Ethiopian Highlands. East of the highlands towards the Red Sea is a strip of lowland semi-desert, the Ethiopian xeric grasslands and shrub lands.

The climate varies greatly, with the climate being cold on the plateau and hot in the lowlands. The country lies within the tropics, but its nearness to the equator is counterbalanced by the elevation of the land.

For much of the 20th century, Ethiopia was ruled on a highly centralized state. The Ethiopian People’s Revolutionary Democratic Front (EPRDF), the current ruling party has governed Ethiopia since 1991. The EPRDF has led ambitious reform efforts to initiate a transition to a more democratic system of governance and decentralize authority. These have devolved powers and mandates first to regional states, and then to Woredas or district authorities, and Kebeles or village administrations. The formal Ethiopian state structure has now been transformed from a highly centralized system to a federal and increasingly decentralized one

Background

Background

Economic Overview

5INVESTING IN ETHIOPIA 2011

Economic Overview

Economic Overview

In spite of Ethiopia’s rich history and vast untapped natural resources,foreign investors have only recently started to appreciate the investment opportunities in various sectors.Ethiopia’s Agricultural Led Industrialization Strategy has promoted growth in investment and sustainable development. The country has successfully implemented its previous five year plan, known as Plan for Accelerated and Sustained Development to End Poverty (PASDEP), which run from 2005/06 to 2009/10. It is currently implementing the 3rd five-year Growth and Transformation Plan (GTP) (2010/11-2014/15) to sustain the important gains registered in the previous poverty reduction plans and strategies. Ethiopia has achieved strong economic growth over the past eight years. Real GDP growth has been at double digits level, an average of 11% per annum. Since 2003/04, the country has consistently outperformed most countries in Africa. The growth performance is well in excess of the population growth rate and a 7% rate required for attaining the Millennium Development Goal (MDG) to reduce poverty by half by 2015.

Moreover, nominal GDP grew six-fold over the last decade. The International Monetary Fund (IMF) predicts that it will reach 474.1 billion Birr in 2010/2011 fiscal year. This represents a compound annual growth rate of 55.6%, fuelled mainly by government and private sector investments.

The government is taking concrete measures to gear-up the economy to even higher trajectory through the formulation of the GTP that encourages further investments in the upcoming years.

The agriculture sector has continued to be the major drive of the economy. Conversely, the growth contributions of the non-agricultural sectors such as the service and industry sectors have also been significant. For example, the Industry sector is projected to increase to an average of 15.6% share of GDP while the agriculture sector will be an average of 38.8% by the end of 2015. (See Table 1)

The sub-sectors in which much of the industrial investments are expected include textile and apparel, leather and leather goods, sugar, cement, metal and engineering, pharmaceuticals, agro-processing and chemicals. Growth in agriculture and industry is expected to initiate more investment opportunities in the service sectors as well.


2011


I Poverty Reduction and GrowthThe government of Ethiopia attaches great importance to fostering rapid economic growth with investment equities. Indeed, the economic growth registered during the past decade has been a key factor in alleviating poverty.

The country’s medium term development plans such as PASDEP of 2005/06-2009/10 and its successor the GTP are of paramount importance to reducing poverty and achieving sustainable economic growth.

The PASDEP was based on eight pillars of growth:

1 Build comprehensive implementation capacity

2 Ensure broad-based, accelerated and sustainable economic development ,

3 Balance population growth with economic development

4 Create a conducive environment to realise women’s potentials and capacity

5 Strengthen infrastructure

6 Sustainable human resource development

7 Minimize vulnerability to risks of natural disaster and drought and

8 Create employment opportunities.

The PASDEP has also particular emphasis on greater commercialization of agriculture and enhancing private sector development, industry, urban development and scaling-up efforts to achieve the MDGs.

The adoption of a robust economic growth and poverty reduction strategy, which focused on infrastructure development, commercialization of agriculture, improvements to basic services and private sector development have helped mobilize Foreign Direct Investment (FDI) to the country. The FDI flow to the country has been steadily growing over the past ten years. It’s share was about 15.7 percent out of the total investment projects licensed from 1992 to 2010.

The PASDEP has achieved most of its targets in improving infrastructure, energy, provision of clean water, poverty reduction. It has also succeeded in expanding public services and achieving most of the MDGs targets.

II Highlights of the Growth Sectors and Investment Opportunities Ethiopia has numerous comparative advantages in terms of human capital and land resources, which are imperative for faster and equitable growth. Investments in agricultural, mining, renewable and nonrenewable energy resources, textile, leather products and tourism sectors are very rewarding.

Investing in Agriculture:Ethiopia has about 80 million hectares of arable land and one-fifth is under cultivation. Furthermore, irrigation potential is estimated at 4 million hectares, only 5 to 6 percent is presently utilized. The


Economic Overview

Table 1: Projected Trends in the Structure of GDP by Industrial Origin (% share)Sector 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 AverageAgriculture & Allied activities 41.6 40.6 39.7 38.7 37.8 36.9 38.8

Industry 12.9 13.2 14.0 15.3 16.9 18.8 15.6

Services 45.6 46.2 46.3 46.0 45.3 44.3 45.6Source: Ministry of Finance and Economic Development of Ethipoia

country is endowed with one of the largest and most diverse genetic resources in the world with altitudes ranging from 148 meters below sea level and 4610 meters above sea level. Ethiopia enjoys 18 major and 49 sub agro-ecological zones, each with unique agricultural and biological potentials.

The government has made it abundantly clear that it will support the intensified production of marketable farm products for domestic and foreign markets through small farm holders and private agricultural investors. Fundamentals of the strategy include a shift to production of high value crops with a special focus on potential high productivity areas, intensified commercialization, and support for development of large-scale commercial agriculture. The country’s main cash crops include Arabica coffee, tea, sugar cane, oil seeds, cotton, spices, sub-tropical fruits, vegetables and flowers. Currently, 11.55 million hectares of land is ready for investors. The Ministry of Agriculture has been given the responsibility to allocate land for commercial farming, provide technical support to private investors and facilitate other public services.

Investing in Livestock:Ethiopia has the largest livestock in Africa and stands tenth in the world. There are several investment opportunities in livestock, fishery and apiculture areas.

Investing in Minerals:Geological studies have revealed that Ethiopia has a wide variety of mineral resources such as substantial deposit of gold, tantalum, platinum, nickel, potash, and soda ash. There are also construction and industrial minerals such as marble, granite, limestone, clay, gypsum, dolomite, gemstone, iron ore, coal, copper, silica, diatomite, feldspar, magnesium, chloride, magnesium oxide, etc… Significant oil and natural gas exploration and developments endeavours are underway in major sedimentary basins in different parts of the country. A proven reserve of natural gas, to the tune of 12.6 trillion cubic feet has been found and efforts are underway for exploitation.

These mineral resources combined with skilled and highly motivated workforce guarantees prosperous and lucrative investment in the mining sector. The Mining Proclamation recognizes the significant role of private investment in capital formation, technology acquisition and marketing of minerals. As a result of conducive environment, the country is now enjoying the participation of both foreign and local investors in mining and exploration. According to the Ministry of Mines, the investment in the sector has jumped from a mere 100 million USD in 2003 to 1.3 billion USD by 2010, making it the second largest recipient of foreign investment after agriculture. The government intends to license 50 projects every year and more than double exports from the mining sector, which is open to foreign investors.

Investing in Energy ResourcesThe potential of Ethiopia’s renewable and nonrenewable energy resources is enormous. There is a huge potential for geothermal energy generation with the estimated possibility of generating up to 7000 MW. Moreover, nine of the country’s major rivers are suitable for hydroelectric power generation with the capacity of generating up to 45,000 MW. Ethiopia can potentially generate estimated total energy of 62,000 MW from hydropower, wind, solar and geothermal energy sources. This could, if fully tapped, make the country an important regional electricity net exporter.

Investing In Tourism: Ethiopia’s unique historical and cultural heritage, magnificent scenery, spring like climate throughout the year, rich flora and fauna, important archaeological sites and hospitable people create ample opportunities for investors to enter the tourism industry.

Tourists can enjoy cultural and educational attractions, photo and huting safaris, bird watching, adventure sport activities to include river rafting, desert trekking, and mountain climbing. There are several untapped opportunities in the tourism industry specifically the health tourism, where investors can take advantage of the cool climate and numerous hot springs. Investors could also enjoy incentives in participating in the sector, for instance, in building star-designated hotels and lodges.

The Ministry of Culture and Tourism has set a target to place Ethiopia among the top ten tourist destinations in Africa by 2020. The government has committed itself in making Ethiopia attractive through construction of airports, roads, rail and communication networks, as well as public utilities.

III Vision for Sustainable GrowthThe key objective of the Government of Ethiopia is to eradicate poverty through broad-based, accelerated and sustained economic growth. By sustaining the current economic growth over the next four years period, the government aims to achieve the MDG targets by 2015, and its longer term vision of making the country amongst middle income nations by 2020-2023. To this end, a new five year plan, the GTP of 2010/11-2014/15 has been formulated to maintain a faster economic growth, and achieve the country’s vision to become a middle income country. The plan envisages that the industrial sector would grow faster, about an average of 20% a year. Projected real annual GDP growth is at minimum 11.2% and a high scenario of 14.9%. This includes the doubling of current GDP and raising exports to $10 billion by the end of the plan period. The plan also offers ample scope for private investments, public-private partnerships and Private Finance Initiatives in mega development projects ranging from road and rail networks to energy, and large scale farms to include irrigation.


2011


Accordingly, the government planned to expand large scale irrigated agriculture from the current 127, 242 hectares to 785, 582 hectares and small scale irrigated agriculture to 1.85 million hectares by the end of the GTP period. These would be important steps to improve Ethiopia’s economy and alleviate poverty.

The government faces challenges as the demand for energy and electricity increases as a result of the growing economy. In order to address these challenges, the government aims to increase hydropower generation from the current 2060 MW to 10, 000 MW by the end up of the GTP period. The implementation of the plan relies on domestic and international financing and capacity, a strategy that presumes greater role and synergy between public enterprises, the private sector and the public at large to mobilize and provide resources and be involved in the construction process. The construction of dams and hydropower plants is also intended to export energy to neighbouring countries and thereby contribute to regional economic cooperation and integration.

The government also plans to focus on strengthening micro and small-scale manufacturing enterprises, which are fundamental for the establishment and expansion of medium and large scale industries, key players in the economy.

Large scale investments in transportation and energy infrastructures will help underpin future industrialization drives. In the GTP period, the expansion of road and railway construction will connect rural Kebeles, the lowest administrative organ of the country to main road networks. The plan involves the addition of massive railway construction of two, 400km, the construction of 88, 179 km of new federal and regional roads to make Ethiopia benefit enormously from a more integrated and efficient transportation system and increase linkages between the capital city and other regions. This will enhance the export market and cut transportation cost significantly.

IV Investment Regime and Market AccessRecognizing the role of the private sector in the economy, the Ethiopian Government has created a competitive and investment friendly environment through simplifying and easing administrative procedures, providing attractive incentives to investors and privatizing. With paramount importance given to the development of the infrastructure sector, some areas of investment that were previously government operated, such as air cargo, railway and hydroelectric power generation have been made open to foreign investors. Moreover, foreign investors are entitled to invest jointly in telecommunication services as strategic partners to the government.

Ethiopia’s investment policy is relatively transparent, attractive and competitive compared to other African countries. It provides ample opportunities for investors with various packages of incentives and guarantees. For example, investors are entitled to 100% customs import duty exemption on all imports of investment capital goods and construction materials necessary for the establishment of new enterprises, as well as expansion and upgrading of existing ones. This includes spare parts worth up to 15% of the imported goods. Additionally, products and services developed in Ethiopia are exempt from export tax. Investors are also provided with an income tax holiday of two and seven years (depending on the nature of the investment, location and volume of export) from new manufacturing and agriculture and agro-industrial investments, information and communication technology development.

Businesses that suffered losses during this ‘holiday’ can carry them forward for half the exemption period, once that exemption has expired. Investors are also entitled to remit their capital in foreign currency in the form of profit, dividends, and payments of loans received from foreign banks.

In the past, one of the problems faced by foreign investors was related to the minimum capital requirement. The capital required for the entry of the wholly foreign- owned single project was $500,000 while for the entry of a joint investment with a domestic partner was $300,000. This minimum capital requirement has now been improved to $100,000 for a wholly foreign-owned project and $60,000 for a joint investment with domestic partner. On the other hand, the minimum capital required of a wholly foreign-owned investor in consultancy services or publishing is $50,000. This capital amount can be lowered to $25,000 if invested in partnership with domestic investor(s). Foreign investors who are re-investing their profit or dividends, or exporting at least 75% of their outputs are not required to allocate a minimum capital for additional investment projects.

Ethiopia is a member of the World Bank affiliated Multilateral Investment Guarantee Agency (MIGA,) which issues guarantees against non-commercial risks to companies that invest in signatory countries. Ethiopia has also concluded bilateral investment promotion and protection agreements with 28 countries.

The Constitution of the Federal Democratic Republic of Ethiopia protects private property. The investment and proclamation also provides investment guarantees against measures of expropriation and nationalization that may only occur for public interest and in compliance with the requirement of the law. Where such expropriations are made, the government provides adequate compensation to the prevailing market value of property and such payment is granted in advance.

Ethiopia projects enormous trade and investment opportunities as a strategic location in eastern Africa with easy access to the big markets of the Middle East and Asia as well as being a member of the Common Market for Eastern and Southern Africa that comprises 23 African countries. Ethiopia also qualifies for preferential access to European Union as well as US markets under the Everything-But-Arms (EBA) initiative and under the USA’s African Growth and Opportunity Act (AGOA.) As a result, most Ethiopian products can enter into these markets quota and duty free. Furthermore, a broad range of manufactured goods from Ethiopia are entitled to preferential access under the Generalized System of Preference (GSP) of the USA. There are no quota restrictions on imports from Ethiopia that fall under 4800 products, currently eligible under the GSP

Economic Overview


Economic Overview

proj. proj. proj. proj. proj.

Domestic economy 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15Nominal Gross Domestic Product (gdp)at market prices (Billions of Birr) 399.1 474.1 550.2 633.4 726.6 833.8Real GDP growth(1) (%)Consumer price inflation(2) (%) 2.8 9.0 7.3 6.0 6.0 6.0Gross domestic investment (%) of GDPof which: Private investment 7.0 7.6 9.4 11.0 13.0 15.5Gross domestic saving (%) of GDP 5.4 3.5 5.0 9.0 11.2 15.0

Government Finances (%) of GDPTotal government revenue 17.3 17.3 17.8 18.0 17.8 18.0External grants 3.2 4.0 4.2 4.2 3.8 3.8Total expenditure and net lending 18.6 19.8 20.0 19.9 19.5 19.7of which: Capital spending 10.2 10.8 11.0 10.7 10.3 10.6Budget balance (%) of GDP, incl. grants -1.3 -2.5 -2.2 -1.9 -1.7 -1.7Gross domestic government debt (%) of GDP 13.3 12.7 12.2 11.7 11.2 10.7

Table 2: KEY ECONOMIC AND FINANCIAL INDICATORS

The Ethiopian fiscal year ends July 7; (1)Annual percent change; (2)period average.Sources: the ethiopian authorities and IMF projections.

Area (sq km): 1.14mn. Capital: addis ababa. population (2009): 83.8mn. gDp (2010): US$35bn. The currency – Birr per US dollar: 16.8 (May 2011).

Base yr2005

End-2010

proj.2015

National HealthTotal poverty headcount (%) of population 39.0 29.2 22.2Number of health centres 644 1,787 –Number of hospitals 79 111 –Access to healthcare (%) of population 30.0 89.0 100.0Maternal mortality rate (per 100,000) 871 590 267

Education Sector

Primary school net enrolment rate (%) 69.0 88.0 100.0Number of primary schools 16,513 25,217 –Secondary school enrolment ratio (%) N/A 38.1 75.0Number of secondary schools 706 1,202 –University students (undergraduates) 78,232 185,788 467,445Number of universities (Public) 13 22 –

Basic Infrastructure

Total road network (km) 36,400 48,800 64,500Roads in good conditions (%) 64.0 81.0 86.7Power generating capacity (MW) 714 2,000 10,000Electricity service coverage (%) 16.0 41.0 100.0Total access to safe water (%) 36.0 68.5 98.5Number of fixed line subscribers (mn) 0.62 0.74 8.5Number of mobile subscribers (mn) 0.56 4.0 61.4

Source: ETHIOPIA AUTHORITIES.

Table 3: SOCIO-ECONOMIC DEvELOPMENT INDICATORS


2011


0

3

6

9

12

15

ETHIOPIA’S GROWTH EXCEEDS REGIONAL AVERAGE (IN PERCENT)

Source: IMF, African Department Database, april 2011.

12.6

6.3

11.5 11.8

6.47.3

11.2

5.7

10.0

2.8

8.0

4.9

Sub-s

ahara

n Afric

a

Ethiopia

Sub-s

ahara

n Afric

a

Ethiopia

Sub-s

ahara

n Afric

a

Ethiopia

Sub-s

ahara

n Afric

a

Ethiopia

Sub-s

ahara

n Afric

a

Ethiopia

Sub-s

ahara

n Afric

a

Ethiopia

2005 2006 2007 2008 2009 2010

CHART 1

1500

250

500

750

1000

1250

0

STEADY INCREASE IN FDI INFLOWS TO ETHIOPIA (US$MN)

Source: Ethiopian Authorities And Imf Projections.

880956

1,0491,130

1,267

1,4051,453

2008/09 2009/10 2010/11 2011/12 2013/142012/13 2014/15

MAIN DESTINATION OF EXPORTS (PERCENT OF TOTAL 2010)

7.6%53.5%

15.3%

10.4%

China

Germany

Belgium

Saudi Arabia

Usa

others * Including - Sudan, Djibouti, Turkey,

6.5%

6.7%

Source: IMF, Direction of trade statistics.

Italy, Netherlands

MAIN SOURCES OF IMPORTS (PERCENT OF TOTAL 2010)

5.0%61.8%

18.2%

9.0%

China

Saudi Arabia

Usa

India

Turkey

others * Including - France, Italy, Canada,

2.4%3.6%

Source: IMF, Direction of trade statistics.

Russia, Germany

Economic Overview


Ethiopia Sub-SaharanAfrica, Avg

OECDAvg

Starting A BusinessProcedures (number) 5.0 8.9 5.6Duration (days) 9.0 45.2 13.8Cost (% of GNI per capita) 14.1 95.4 5.3Paid in min. capital (% of per capita) 367.7 145.7 15.3

Dealing With Construction PermitsProcedures (number) 12.0 17.6 15.8Duration (days) 128.0 239.5 166.3Cost (% of income per capita) 419.6 1,773.3 62.1

Registering PropertyProcedures (number) 10.0 6.5 4.8Duration (days) 41.0 67.9 32.7Cost (% of property value) 2.1 9.6 4.4

Paying TaxesPayments (number per year) 19.0 37.3 14.2Time (hours per year) 198.0 315.1 199.3Profit tax (%) 26.8 23.1 16.8Labour tax and contributions (%) 0.0 13.5 23.3Other taxes (%) 4.3 31.5 3.0Total tax rate (% profit) 31.1 68.0 43.0

Trading Across BordersDocuments for exports (number) 8.0 7.7 4.4Time for exports (days) 44.0 32.3 10.9Cost to export (US$ per container) 1,890.0 1,961.5 1,058.7Documents for import (number) 8.0 8.7 4.9Time for import (days) 45.0 38.2 11.4Cost to import (US$ per container) 2,993.0 2,491.8 1,106.3

Enforcing ContractsProcedures (number) 37.0 39.1 31.2Duration (days) 620.0 639.0 517.5Cost to enforce; in (%) of claim 15.2 50.0 19.2

Protecting InvestorsExtent of disclosure index(1) 4.0 4.8 6.0Extent of director liability index(1) 4.0 3.4 5.2Ease of shareholder suits index(1) 5.0 5.0 6.8Strength of investor protection index(1) 4.3 4.4 6.0

Getting CreditStrength of legal rights index(1) 4.0 4.6 6.9Depth of credit information index(2) 2.0 1.7 4.7Public registry coverage (% adults) 0.1 2.7 8.0Private bureau coverage (% adults) 0.0 4.9 61.0

Closing A BusinessTime (years) 3.0 3.4 1.7Cost (%) of estate 15.0 20.7 9.1Recovery rate, cents on dollar 31.3 23.2 69.1

Table 5: ETHIOPIA’S BUSINESS DATA

Ethiopia ranks (104) out of 183 economies on the ease of doing business. (1)(0-10) - Most 10; Least 0-1. (2)(0-6) - scope and accessibility of credit information distributed by public credit registries and private credit bureaus; Most 6; Least 0-1.

Source: World Bank Doing Business 2011 Report.


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I OverviewEthiopia possesses a landmass of more than 1.1 million kilometers with a wide range of agro-ecologies, biodiversity and vast water resources suitable for agriculture. Agriculture is the most important economic sector of the country, contributing 45% of the GDP, 85% of foreign earnings and 83% of employment. . There are a number of crops being cultivated throughout the country. The livestock population in the country is also the highest in Africa.

The Ethiopian government launched the Agricultural Development-Led Industrialization (ADLI,) which enhanced the formulation of various sector-specific policies, strategies and programs. The agricultural sector policies, strategies and programs were formulated and executed during the implementation of the previous two five-year PASDEP and Sustainable Development and Poverty Reduction Program (SDPRP.)

The Agricultural and Rural Development plan under the GTP will address the lessons learnt from previous years’ development plan and scale up process. Generally, the agricultural and rural development policies and strategies are prepared with an objective of building a market economy in order to benefit its people, eliminate dependence on food aid, and assure rapid economic growth. This is with the assumption that agricultural development accelerates trade and industrial development through supplying raw materials, creating opportunities for capital accumulation and enhancing domestic market.

The agricultural sector’s fundamental strategies focused on specialization, diversification and commercialization of agricultural products and services to realize accelerated agricultural development and agro-industries. This will contribute to poverty reduction, achievement of the MDGs, and the overall economic growth.

II Agricultural Resources

LandEthiopia has a total land area of 112 million hectares, out of which about 74.3 million hectares, i.e. 66.6% is arable. In fiscal year of 2009/2010, the total cultivated area was about 13 million hectares. There are currently 13.2 small household farmers that produce different agricultural products. The country has potential irrigable land of about 3.7 million hectares but only a million hectares use medium- and large-scale irrigation.

Agriculture


Agriculture

Ethiopia has identified 32 agro-ecological zones with potentials and constraints related to agricultural production (MoARD 2006.) These agro-ecologies are suitable for wide ranges of crops, livestock and microbes. There are around 146 types of different crops, which are currently growing in Ethiopia (UNCTAD.)

The main cash crops are coffee, cotton, tobacco, sugar cane, tea, spices and horticultural crops. The major food crops are cereals, pulses and oil seeds. Pulses mainly comprised of peanuts, beans, peas, chickpeas, lentils, rough peas, fenugreek, Soya beans, haricot beans and several other varieties of oil seeds. There are also very high genetic diversity in four of the world’s widely grown food crops (wheat, barley, sorghum and peas.) Teff, an endemic seed is among the main food crops grown in the country. The major oil crops grown in Ethiopia include sesame, niger seed, groundnuts, rape and linseed. Sunflower and castor beans also have potential.

There are also other horticultural product that range from cut flowers to fruits and vegetables such as citrus, banana, mango , papaya, avocado, guava, grapes, cabbages, cauliflower, okra, egg plant, tomato, celery, cucumbers, peepers, onion, asparagus, water melon, carrots and green beans.

Water

Ethiopia has huge water resources that can be used for agricultural and non-agricultural development with modest investment. There are 11 year-round big rivers and 10 lakes that can potentially be used for irrigation. However, only one million hectares are cultivated using irrigation in 2009/2010.

LivestockEthiopia is known for its livestock population. The country stands first in Africa and 10th in the world in terms of livestock population. According to Central Statically Authority report of 2011, the country has 53.4 million cattle, 49.3 million poultry, 25.5 million sheep, 22.78 million goats and 1.1 million camels. There are also about 5.1 million beehives populations, over 800 honey source plants and current annual production of honey and bee-wax estimated at 43.7 thousand tones and 3.6 thousand tons respectively. Ethiopia is indeed one of the leading apiculture producers on the continent.

Additionally, the river basins and Rift Valley lakes are rich in fish population with sustainable yield in estimated amount over 30,000 tons per year. In spite of the large livestock population, it’s overall contribution to food security and income remains minimal. Hence, there are numerous investment opportunities in fishing industry along the river banks and lake areas; and incentives are available to attain the GTP’s targets.

III Agricultural Policies, Strategies and ProgramsThe Ethiopian government has designed and implemented agricultural and rural development policies and strategies with particular emphasis on rural-centered improvements. The basic concept is that development in agriculture can accelerate progress in trade and industry through supplying raw materials, creating opportunities for capital accumulation, and enhancing domestic market. The development of other sectors cannot be sustainable without agricultural development, which will create market, capital and employment opportunities.

The basic directions of agricultural development strategy utilizing the GTP are:

1 Increasing the capacity and extensive use of labor;

2 Utilizing and managing land, water and other resources efficiently;

3 Using agro-ecology based development approach;

4 Linking specialization with diversification;

5 Integrating agricultural and rural development ;

6 Strengthening the agricultural marketing system;

7 Implementing scale up of best practices effectively reviewing lessons learnt, experience gained and successes achieved in the previous plan period; 8 Encouraging the private sector;

9 Enhancing the benefits of the working people;

10 Advocating use of agricultural technical and vocational training;

The participation of private investors has been minimal in areas where extensive agriculture could be practiced due to the poor infrastructure. However, the government has been devoting funds to improve infrastructures in rural areas, which resulted in increasing private investment. The increase in demand for raw agricultural inputs has also encouraged private investment.

In the next five year plan, more efforts will be made to improve and increase private investment in lowland areas, where lands for large scale commercial farming are readily available. Also private investment will be steered towards high value horticulture products that can be cultivated on limited land. This will create employment opportunities and increase supply of products for export.

IV Building Human Capital Elements of the GTP include capacity building of the various actors and stakeholders in agricultural and rural development. The strategies in capacity building include: improving the capacity of professionals, maintenance of farmers’ health, promotion, multiplication and utilization of agricultural technologies. The agricultural Technical and Vocational Education Training (TVET) initiative has trained over 52,000 development agents and over 9,265 farmer training centers have been completed. Through the development agents’ assistance and training program, a growing number of farmers have shifted to small-scale modern farming practices. The GTP envisages increasing the number of beneficiaries of extension services from the current 5.4 million to 14.6 million beneficiaries.

V Creating Market-led Agricultural DevelopmentThe government is committed to transforming the economy through market driven agricultural sector with a strong linkage to industry. Hence, emphasis is given to agricultural commodities that can be marketed using post-harvest technologies, reducing the length of the marketing chain, promoting standards, expanding the production of exportable crops, and promoting out-grower schemes as well as other forms of contract farming.

Commercial agriculture is also considered an important strategy to transform small-scale farmers linking them to private sector, trading centers, rural-urban facilitators. This strategy supports the intensification of marketable farm products for domestic and export markets to accelerate market-based agricultural development.


2011


The government has been establishing an effective, transparent and accountable land administration system and agencies to ensure proper leasing process land usage. Other necessary arrangements will also be made to increase private investors’ participation through identifying areas that are not inhabited but are suitable for agriculture. The government has also planned to complement the transformation of the agricultural sector, specifically the rapid agricultural diversification and commercialization with an effective marketing system. In this regard, modern agricultural marketing systems, such as the marketing practiced through the Ethiopian Commodity Exchange (ECX) will be strengthened.

VI Investment Opportunities in AgricultureEthiopia has enormous investment opportunities, especially in the agricultural sector. Investment in the agriculture sector is attractive and profitable ranging from food products and industrial raw materials to bio-fuel. The government provides a number of incentives and guarantees for investors. Below are investment opportunities for different agricultural products.

A Food and Beverage Crops

MaizeMaize is one of the most important and highly used crops in Ethiopia and around the world. It grows in the mid highland areas of the country. There are several tracts of land in all regions suitable for maize farming. Maize is mainly produced in SNNPR and Oromia regions, where there are about 1.77 million hectares under cultivation. There are numerous opportunities to invest on maize production.

Wheat and Barley FarmingWheat and barley are mostly grown in the highlands and mid highland areas of the country mainly in Oromia (Bale and Arsi zones) and some parts of the Amhara (north Gondar and corth Shewa) regions. Wheat and barley are the main cereal crops with about 1,095,436 and 1,398,215 hectares under cultivation, respectively. The potential for the private sector in agro-processing and out growers’ scheme of development is significant. It offers excellent opportunities for production of wheat under

irrigation in the Afar, Gambella, SNNPR and Somali Regions.

Oil seeds and pulsesA variety of oil seeds such as sesame, rapeseed, linseed, groundnut, sunflower, Niger seed, cotton seed, etc… grow in Ethiopia. The demand for sesame has been increasing in the global market, making sesame an important export commodity. Rapeseed, linseed, groundnut, sunflower, Niger seed and cotton seed also serve as raw materials for the domestic edible oil industry. Cultivation of pulses like beans, peas, chickpeas, lentils, soybeans, etc... is also common in Ethiopia. It is carried out in both the highland and lowland areas of the country mainly by peasant farmers. Currently, a large quantity of pulses is being exported to the international market with room for additional investment.

Rice FarmingThere are several parts of Ethiopia suitable for rice cultivation. The predominant potential areas are:-

West central highlands of the Amhara Region (Fogera, Gonder Zuria, Dembia, Takusa and Achefer)

North West lowland areas of Amhara and Benshangul Regions (Jawi, Pawi, Metema and Dangur)

Gameblla Regional State (Abobo and Etang Woredas)

South and South West Lowlands of SNNPR (Beralee, Weyito, Omorate, Gura Ferda and Menit);

Somali Region (Gode) South Western Highlands of Oromia Region (Illuababora,

East and West Wellega and Jimma Zones).

Investors can have profitable business growing rice in these regions.

Spices

The most common spices that grow in Ethiopia are ginger, hot pepper, fenugreek, turmeric, cummins, cardamoms, corianders and black pepper. Currently, spice production has averaged 244,000 tons a year, covering an area under farming of nearly 122,700 hectares. The potential areas for the cultivation of spice are Amhara and Oromiya, SNNPR and Gambella Regions. The potential area for cultivating spices in the lowlands is estimated to be 200,000 hectares and is available to investors.

CoffeeEthiopia produces some of the best coffee in the world and is one of Africa’s leading producers of Arabica coffee generating most of its export earnings. Currently, coffee grows on over 600,000 hectares mainly in the South and South Western Highlands. More than 60% of Ethiopian coffee is produced as forest or semi-forest coffee. The four main coffee growing regions in Ethiopia are: Harrar, Ghimbi, Sidama or Yirgacheffe, and Jimma or Keffa. Ethiopia has more genetic diversity among its coffee varieties than any other county. There are nine different varieties of coffee cultivated in the four major growing areas. Investment opportunities in coffee range from large-scale commercial coffee production, coffee roasting and grinding to packing for the international market


Agriculture

TeaEthiopian tea is amongst the best quality tea in the world. The current tea production is only approximately 7000 tons of black tea per annum. The total landmass covered by tea plantation is 2700 hectares and the country only produces black tea though it has the potential to grow other tea types. Investment potential exists in large-scale commercial tea production and modern tea blending and packing industries.

B Horticultural Crops

Fruits, Vegetables and FlowersThe climate, various soil types and access to water make Ethiopia favorable to grow fruits, vegetables and flowers. The most exportable fruits include citrus, banana, mango, papaya, avocado, guava, grapes, pineapple, passion fruit, apples and strawberries; and vegetables consist of potatoes, cabbage, cauliflower, okra, egg plant, tomato, celery, cucumber etc. Ethiopia is currently utilizing close to 0.45 million hectares to produce horticultural crops.

Floriculture is a leading industry in the non-traditional export sector. The rose industry has successfully developed over the past ten years. Ethiopia is currently the second largest cut flower exporting country in Africa. The flower industry is becoming a leading sub-sector with a total of 1200 hectares cultivated by 80 domestic flower growers and others from countries such as the Netherlands, India, and Israel.

C Cotton, Textile and GarmentHuge potential exists for large scale cotton farming under irrigation in the Awash Valley. Other potential areas of cultivation include South Omo, Gambella, the Tekezze Valley, the Dabus Valley and the Wabeshebelle water shade area. Currently, there are about 322,000 hectares of land suitable for commercial production of cotton.

The textile industry is the largest manufacturing industry in the country. There are several state-owned and private textile and garment factories.. The main textile products manufactured are cotton and nylon fabrics, acrylic yarn, wool and waste cotton blankets and sewing thread. This industry creates several employment opportunities to residents. The availability of inexpensive labor and the main raw material, cotton, along with low energy costs are the major factors for considering investing in

textile industry to improve exports. In addition to the existence of abundant resources to develop the sub-sector, there are a number of incentives that investors can enjoy by engaging in the production of textile and garments products and in the export sector.

D Leather ProductsEthiopia exports processed and semi-processed hides and skins to the world market. Some of the products such as Ethiopian highland sheepskin (which has gained an international reputation for making gloves) are known for their quality and natural characteristics. Ethiopian hide and skin exports include pickled sheep skin, wet blue sheep skin, crust sheep skin, wet blue goat skin, crust goat skin, crust cow hides, finished garment leather, finished glove leather, lining/upper leather, suede leather, full grain leather, embossed leather and patent leather.

The manufacturing and exporting potential of finished leather and leather products such as leather garments, footwear, gloves, bags and other leather articles is also highly promising.

In addition to the incentives included in the general investment framework, the government has implemented a program that offers investors up to 70% of equity through loans provided by the Development Bank of Ethiopia. Investors in the leather sector are eligible for this incentive


2011



Infrastructure Development

Infrastructure DevelopmentInfrastructure contributed six tenths of a The Ethiopian Government has made significant investment on infrastructure over the last decade. It has developed Ethiopia Airlines, a leading regional carrier, upgraded its network of trunk roads, and expanded access to water and sanitation rapidly. According to World Bank report of 2011, infrastructure contributed 0.6 percentage point to Ethiopia’s annual per capita GDP growth over the last decade. Although Ethiopia’s infrastructure indicators, compared relatively with low income country peers, they remain well below levels found in Africa’s middle income countries. There are several challenges especially in the power and transport sectors. Ethiopia needs to double its current power capacity to 8,700 megawatts of generating plant over the next decade to improve infrastructure endowment to region’s middle-income countries. This will increase the infrastructure contribution growth by additional 3 percentage points. The transportation sector also faces challenges of

low levels of rural accessibility and inadequate road maintenance. Ethiopia launched an ambitious investment program to upgrade its trunk network and establish a modern funding mechanism for road maintenance in order to improve ground transportation.

The Ethiopian Government has dedicated 70% of its total budget to improve health, infrastructure and educational services. Government invested massive capital to improve infrastructure during the past decade. The investment program focuses mainly on rehabilitation, upgrading, widening of the trunk network and construction of new roads. The country has spent 3.6 billion USD on roads over the last decade. These efforts have improved the quality of Ethiopia’s trunk network level and resulted in 81 percent of paved network and 60 percent of the unpaved network in the country is in good or fair conditions.

The government of Ethiopia has imperative task of building infrastructure for fast growing population of around 80 million. The key objective of the government as enunciated in the GTP is to gain sustained, robust and pro-poor economic growth in order to achieve the MDGs as well as develop every corner of the country by 2020-2023.

Sectoral Overview RoadsTransportation plays a vital role in facilitating economic development. In particular, it is the road transportion that provides the means for movement of people, utilization of land and natural resources, improved agricultural production and market, access to social services, and opportunities for sustainable growth. The Federal Democratic Republic of Ethiopia has placed increased emphasis on


2011


improving access and quality of roads both in Addis Ababa, the capital city, and rural areas recognizing the importance of the road transportation to support social and economic growth as a catalyst to reduce poverty. The ring road in Addis Ababa was completed over the last decade and roads throughout the country are in the process of being constructed.

The Government has formulated the Road Sector Development Program (RSDP) in 1997 to address constraints in the road sector, mainly restricted road network coverage and low standards. The first 5-year phase of the RSDP was officially launched in September 1997 and ended in June 2002. The second phase, RSDP II, stretched over the period 2002 – 2007 and ended in June 2007. The third phase, which is RSDP III, commenced in July 2007 for a period of 3 years. The program has received very significant financial support from donors and focuses on creating adequate capacity and facilitating the economic recovery process through the restoration of the essential road network to an acceptable condition. Specifically the program has captured rehabilitation and upgrading of main roads; construction of new roads; and the execution of regular maintenance on the network. Additionally, 40 new federal roads were opened and more than 11,000 kilometers of roads were added to the network under the PASDEP, which run from mid 2005 to mid-2010. The road network totaled 48, 800km by mid-2010, excluding the Woreda (district) roads, the proportion of roads assessed as ‘in good condition’ was up from 64% (2004/05) to 81% (2009/10).

The current RSDP IV, as one of the pillars of the GTP, which aims to extend the existing road networks both at the federal and regional levels from the present 49,000 km to about 64,500 km in five years. This plan, however, seems very ambitious, and it will require concerted efforts by the Ethiopian Government and its development partners.

Railways

Ethiopia has a proud history of imperial rail transport built in the early 1900s. Like so many rail systems, the Ethiopia-Djibouti railway was neglected. However, a major plan to restore 100 years old imperial railway and build national network is under way. Under the GTP, railways are set for a new prominence as the mode is cost effective and time efficient means of transportation and key for rapid economic growth.

Rail is high on the agenda and work has begun on the five-year engineering and design project. The Ethiopian Railway Corporation (ERC) supervised a feasibility study using satellite mapping technology for three rail corridors stretching 2,395 km. This includes remaking the Addis Ababa- Djibouti rail to the international boarder as well as rail lines heading north and south-west. Eighteen companies are contracted for studies including socio economic and environmental studies. The government estimates that over 5,000 engineers and 25,000 technical and vocational school graduates will be needed for the construction.

Table 6:GTP Target for the Roads Sub-sector by Budget YearDescription of Targets 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15

1. Federal and regional total road length(km) 48,800 51,636 54,818 58,211 61,771 64,5222. Length of woredas all-weather road(km) 0 9568 24299 40044 55790 715223. Kebeles connected to all-weather roads(%0 39 48 63 78 93 1004. Average time taken to reach nearest all-weather road(hrs)

3.7 3.0 2.3 1.9 1.6 1.4

5. Area further than 5km from all-weather roads(%)

64.1 57.3 48.7 40.9 34.3 29.0

6. Area further than 2km from all-weather roads (%)

83.7 80.0 75.0 70.0 65.2 61.0

7. Road density (km/1000km2) 44.5 55.6 71.9 89.3 106.9 123.78.Road density (km/1,000 population) 0.64 0.78 0.98 1.18 1.37 1.549. Roads in acceptable (Fair+Good) condition (%)

81 81.3 83.0 84.6 85.9 86.7

10. Number of projects operated/carryout by domestic contractors (%)

58 61 64 67 70 73

11. Average vehicle km of travel (mln km) 9.6 10.1 10.6 11.1 11.7 12.3

Source: GTP 2010/2011


The government plans to launch construction of 5000KM new railways to link the capital to various regions of the country and eventually to neighboring countries. According to ERC director, Getachew Betru, the project will be tackled in two phases. In order to achieve the targets set for the rail way sub sector, the government aims to develop local capacities in the railway network development processes. This strategy will include specifically help local metal manufacturing and electro-mechanical companies to produce materials for railway network development. Conducive policy and regulatory environment will also be created for the participation of private sector in the sub sector.

Air TransportEthiopian Airlines is a leading airline in Africa serving 61 international and 17 local destinations. Its safety records are one of the best in the world. Linked to the ascendancy of the national airline, Addis Ababa Bole International Airport has become one of the three main international gateways for Sub-Saharan Africa. Ethiopian Airlines is growing rapidly. The total number of passengers climbed from 1.6 million (2004/05) to 3.1 million (2009/10) and cargo from 1.4bn tons/kilo meters to 2.8bn/km. For the present plan period (from 2010/11) to 2014/15), the target is to boost the number of passengers on domestic flights from 428,000 to 1.5 million and on international flights from 2.7 million to 6.6 million. Cargo from all international airports is to rise from 119,000 tons to 311,000 tones. The airline is seeking $1.45 billion in financing to invest on 39 aircraft on order, including 10 Boeing 787 Dreamliners, 10 Boeing B737s and 12 Airbus A350s.

Under the GTP,the major focus for air transportation services is to further strengthen the competitiveness of air transport and expand passenger and air transport services through creating new international and domestic destinations. Domestic air transportation service delivery is intended to be expanded to supports the development of tourism activities in the country. Air Transport is one of the best ways for tourists to travel around Ethiopia, allowing them flying over spectacular landscapes and easy access to key attractions.

Moreover, a cargo terminal has been built at Bole International Airport to store perishable agricultural products as part of a national drive to boost flower and horticulture exports. As part of the GTP, new or expanded airports are being constructed in seven locations. Airports in Mekele and Bahirdar are already open and operating with international standards while the runway construction in Jijiga, Humera and Assosa are completed. Airports in Jimma, Jinka, Kombolcha and Semera are at different stage of construction. Additionally, standardized cargo terminals and cooling systems at different airports will be built to facilitate import and export trade of horticulture, meat and perishable commodities.

Power Generation and TransmissionEthiopia has a huge potential to generate more than 45,000 MW of electricity from hydropower in addition to 7,000 and 10,000 MW from geothermal and wind respectively. Furthermore, Ethiopia could tap its streams and rivers for agriculture in order to mitigate the impact of recurrent drought, and ensure food security. Water and energy remain the two significant resources for Ethiopia’s economic growth and social development. Further, water and the bio-physical environment are in symbiosis, always dynamically linked. The country recognizes that it cannot develop its water and energy resources at the cost of the bio-physical environment that sustains them.

Water and Energy: Cornerstones and drivers of Ethiopia’s growth and developmentIt is indeed ironic that Ethiopia, literally sitting atop mountain of water and potential energy, is severely handicapped by the lack of these very commodities to advance its agenda of economic development and social progress. Ethiopia does not suffer from the physical scarcity of water as such, but rather from its inability to make this water accessible and available to meet the demand for clean drinking water, and energy. Ethiopia has not been able to tap its potential because it does not have considerable water resources infrastructure – a reality the country is committed to change.

Despite the significant improvements in the energy supply sector over the last two decades, the national access to electricity is 47 % and the per capita energy supply is 100kwh/year, which is less than 20% of the internationally accepted minimum for a reasonable quality of life. The demand for energy and electricity due to the growing economy of the country is escalating. Meeting these demands is a challenge that the Ethiopian Government cannot ignore. For the GTP period, the country intends to increase hydropower generation from the current 2060 MW to 10,000 MW. The implementation of the plan relies mainly on domestic financing and capacity, a strategy that assumes greater role for domestic factors such as the public enterprises, the private sector and the public at large, in terms of mobilizing resources, supply and construction.

In the Ethiopian context, hydropower generation provides a gateway to rural electrification in which without it the country cannot contemplate achieving the MDG. . The government has been working hard to improve access to electricity. The number of towns and rural villages with access to electricity climbed from 648 (2004/05) to 5,136 (2009/10). The expansion of the hydropower project is not only expected to spur domestic growth but will also contribute positively to regional integration as Ethiopia is poised to sell electricity to neighboring countries. Under the GTP, the government envisages increasing the electricity service coverage of the country from 41% to 75%. Ethiopia has started building a major hydro project along the Nile River to generate power and increase electricity. According to the Ethiopian Electric Power Corporation, the hydro project would generate 5000 MW upon completion in five to 10 years.

TelecomsThe Ethiopian Government has made a priority to bring telecommunications and information technology to as many users as possible. During the PASDEP period, the mobile telecommunication network capacity was increased from 0.5 million users in 2005/06 to 25 million in 2009/10. Also, the number of telecommunication customers increased from 0.56 million users in 2004/05 to 6.5 million users in 2009/10. In the Universal Access Program, a CDMA wireless internet network which covers 90% of the country has successfully been installed and the system enabled voice and data service available to every kebele, the lowest administration body in the country. The number of fixed line and mobile phone users increased from 0.62 million and 0.02 million in 2004/05 to 1 million and 0.187 million respectively in 2009/10. The percentage of the rural population with access to a telephone service increased from 13% in 2004/05 to 62.14 % in 2009/10.

However, the International Telecommunication Union figures show there is still much to be done for Ethiopia to catch up with African leaders in terms of subscriptions per 100 inhabitants. Ethiopia is

Infrastructure development


2011


implementing major changes in the sector to improve quality and accessibility. One major change is the installation of 10,000km of high capacity fiber-optic cable networks, bringing capabilities such as video conferencing to rural courts and colleges. The fiber optic will be linked to through neighboring countries to international marine cables stretching up to the East African coast. Global capacity to link Ethiopia to the world’s networks is to be increased from 3.255 gigabits per second to 20.

Under the GTP, in addition to ensuring the information and telecommunication infrastructure already in place, is effectively utilized, the plan aim to provide superior qualities of information and communication services. The focus will be on upgrading the existing ICT network to accommodate the latest information technologies and improve network quality and expand services. The targets to be achieved by the telecommunication sector are

presented in the following table.

Water and SanitationThe management of water resources is closely related to the development of hydropower. Clean drinking water is a key development target with massive impact on health and economic development. Progress on water supply has been particularly encouraging in the country. The share of the population with access to clean water has increased dramatically since 1994/95 and given current trends, Ethiopia seems to be on track to reach the MDGs target of halving the population without access to clean water by 2015. Access to safe drinking water increased from 19 % in 1990 to 68.5% in 2009/10. It is particularly encouraging to note that the proportion in rural areas with access to clean water has significantly increased from 35% in 2004/05 to 65.8% in 2009/10, compared to increases from 80% to 91.5% in urban areas for the same period, bringing the overall cover to 68.5%. The GTP plan includes action to boost this to 98.5%, so that everyone in cities and towns would have access to potable water with in 5km and 98% of rural people would have similar access.

Ethiopia’s power sector investment plans call for a major development of new hydro capacity, along with the opportunity to develop multipurpose storage that serves the needs of the power sector, provides for other uses such as irrigation, and is managed in such a way as to attenuate extreme hydrological events, such as droughts and floods.

Ethiopia also recognizes that doubling the country’s current irrigated area is economically viable. Irrigation development measures were taken during PASDEP to put in place small, medium and large scale irrigation schemes. At the start of 2004/05 it was planned to carry out irrigation scheme pre feasibility studies covering 177,988 has, detailed studies for 464, 051 ha and initiation of irrigation works over 430, 061 ha of land. The achievement by the end of the PASDEP period was 178, 000 ha, 462.114 ha and 65,243 ha of land for small, medium and large scale irrigation schemes, respectively.

The country has determined to improve these achievements in the coming five years. Ethiopia has planned to expand large scale irrigated agriculture to 785, 582 hectares and small scale irrigated agriculture to 1.85 million hectares by the end of the current GTP period. This is believed to be a fundamental step to improve the Ethiopian economy and alleviate poverty

Table 7: GTP targets for the telecommunication Sector

Description of Targets 2009/10 2014/15

Number of fixed line telephone subscribers

1 3.05

Fixed line telephone density 1.36 3.4

Number of mobile telephone subscribers

6.52 40

Mobile telephone coverage (%) 8.7 45

Number of internet service subscribers

0.187 3.69

Rural telecom access with in 5km radius of services (%)

62.14 100

Wireless telecom service coverage (%)

< 50 90

Global link capacity (Gb/s) 3.255 20



Mining and Energyin Ethiopia

Mining and Energy in EthiopiaI Mining

Ethiopia can be divided into three major geological terrains: Proterozoic crystalline basement, most prospective for gold, underlies about 19% of the country hosting nearly all of the known gold occurrences. Late Palaeozoic, Mesozoic and Tertiary continental and marine sediments occur mostly in the east and occupy about 25% of the land area of Ethiopia, with the remaining 56% underlies by Cenozoic volcanic and sedimentary rocks, including those of the East African Rift Valley, which transects the country in a north-easterly direction. This gives a wide variety of mineralising environments.

The oldest (Precambrian) rocks host most of the economic metallic mineral deposits that include primary and secondary enriched (placer) gold, platinum, platinum group elements (PGE), nickel, tantalum, base metals (like copper, lead and Zinc), industrial minerals (like phosphate, iron ore, kaolin, etc), gemstones (like ruby, emerald, sapphire, garnet, etc) and also decorative and dimension stones such as marble, granite and other colored stones.

The sedimentary (Mesozoic) rocks also host, other than the natural fuel minerals (oil, gas, oil shale, coal, etc.), some other metallic ores like malachite, manganese, gypsiferous minerals as well as enormous construction and cement raw materials resources. The volcanic and sedimentary rocks of the recent age (Cenozoic) host most world class industrial minerals such as potash, rock salt, bentonite, soda


2011


bentonite, soda ash, diatomite, opalized stones and numerous types of construction and cement raw materials.

Recognizing the country’s huge mineral resource endowment and contribution to the economic growth the government of Ethiopia is actively encouraging further exploration and expansion. Hence, investment in the mining sector has surged from less than $100 million in 2003 to $1.75 billion in 2010.

The international mining industry has paid relatively little attention to the gold potential of Ethiopia in spite of placer gold mining history dating back at least 2500 years. It is estimated that very large tonnages of gold have been produced from deposits of this type. The Geological Survey of Ethiopia (GSE) has discovered that about 50% of Ethiopia’s 1.2 million km2, including the major greenstone belts is believed to offer one of the finest areas for gold mining.

Gold is considered to be the mineral with the most potential for mining investment and the government estimates that production could raise to 40 tons a year, providing significant income opportunity.

Gold mines are found in three regions: Southern Greenstone Belt (including the Adola, Ageremariam and Moyale areas,) Western Greenstone Belt (including the Akobo area,) and the Northern (or Tigray) Greenstone Belt. More than sixty shear-zone hosted gold

occurrences have been identified in the main greenstone belts. In recent years the Geological Survey of Ethiopia has carried out regional and detailed surveys in several prospective sectors of the greenstone belts. The diverse geology of Ethiopia has potential for the occurrence of gold in a variety of deposit types in addition to mesothermal quartz-veins including epithermal gold in rift and other volcanic settings, porphyry copper-gold, Ophiolite-associated, intrusion-related gold, iron-oxide copper gold (IOCG), gold-bearing massive sulphides, and finally placers.

Among the gold mines in Ethiopia, Legedembi primary gold mine, which has been transferred from public to private ownership, is the largest gold mine, while there are about eight mines in the Oromia, Gambella, Somali, Tigray, Amhara, Benishangul, and Southern Nations, Nationalities and People’s Region. According to the Ministry of Mines, tantalum, soda ash, potash, nickel and platinum minerals have the most potential for development. Soda ash is being mined at Lake Abiyata in the rift valley about 200 kilometers south of the capital. The reserve at Lake Abiyata and the surrounding lakes exceeds 460 million tons of sodium carbonate at salt concentration ranging from 1.1 to 1.9%. The plant is producing about 5,000 tons soda ash per year at semi industrial scale. The consumers of the soda ash are local caustic soda factory, soap and detergent manufacturers.

Table 8: GTP Targets for the Mining Sector

Description of Targets 2009/10 2014/15

1. Increase coverage (of the country) of geological related mapping studies as follows a) Geological mapping coverage at a scale of 1250,00 (%) 51 100b) Gravity studies coverage at 1500,000 scale (%) 80 100c) Geochemistry & mineral potential map preparation & anomalous

areas coverage at a scale of 1100,000 (%) 2.7 4

d) Air born geophysics data coverage (%) 30 95e) Geo- hazard studies coverage, at a scale of 1250,000 (%) 9.6 27.1F) Hydro-geological mapping coverage at a scale of 1250,000 (%) 42.0 83.7f) Derailed hydro-geological studies (Km2) 3,400 30,400

2. Increase evaluated and delineated areas of potential industrial minerals exploration, at a scale of 150,000 (%)

48 77

3. Conduct metallic minerals exploration, evaluate potential at a scale of 12000-15000, and raise delineated potential areas (%)

40 63

4. Detail coal/oil shale exploration and potential evaluation in central Ethiopia, and increase delineated potential areas (%)

12 20

5. Conduct petroleum exploration, at a scale of 150,000 in the west Ogaden Basin, and increase coverage (Km2)

120,000 165,000

6. Increase Pre-deep well drilling geothermal detail study coverage, at a scale of 120,000 (%)

6.2 68

7. Complete the shallow depth 3MW geothermal energy exploration in Tendaho (%)

95 100

8. Complete a deep well geothermal exploration, of a site in Tendaho capable of producing 20MW (%)

100%

9. continue exploration of 40 MW geothermal energy source for power Supply in Aluto Langano (0%)

12.5 100

10. Increase country-wide core drilling (m) 7,000 16,00011.Increase water well drilling (m) 600 7,50012. Increase geothermal drilling (m) 10,000 20,000



Mining and Energyin Ethiopia

Kaolin, quartz and feldspar are also being mined from the Adola belt in southern Ethiopia by government enterprises. The consumers of the products are the Awash-Melkasa Aluminum Sulphate and Sulfuric Acid Factory and the Tabor Ceramics Factory. Silica sand is also being mined and utilized by local industries. The cement factories of the country are using high quality limestone, clay, gypsum and pumice as raw materials for cement production. There is also large input of construction minerals such as sand, gravel, scoria, crushed stones, aggregates, pumice, scoria, etc to the construction industry (including buildings, roads, dams, bridges etc.) Other mineral products including platinum from laterite, industrial minerals, gemstones (opal, peridot and other precious stones) and decorative and construction materials are also produced by licensed foreign and local mining companies in the southern, western, central and northern regions of the country.

II Renewed Interest Historically a number of companies carried out systematic exploration of gold deposits in Ethiopia. These included Ashanti, Canyon Resources, Emerging Africa Gold, Golden Star, JCI, Rift Resources and Tan Range. In the past two years or so the situation has changed dramatically with early and advanced explorations under way by international and local companies. These include Aberdeen International Inc, a Canadian company targeting gold and associated metals in western and northern greenstone belts; Ezana Mining Development PLC in joint venture with the Chinese company Donia Beijing is conducting base metals resource estimation as well as exploration in the northern greenstone belt. Stratex International PLC and Nyota PLC are exploring gold and base metals also in the northern greenstone belt. MIDROC Gold Private Limited has started deep bore hole drilling in the western Ethiopia greenstone belt in addition to operating the Legadembi mine that produces c 130,000 oz annually. Exploration for base metals and industrial minerals continues including Canadian Allana Resources on the potash project in the Danakil depression. Saink Potash plc of Indian is also exploring in the area.

The Ministry of Mines is responsible for the processing of licence application, regulation of mineral operations and the promotion of investment opportunities in the mining sector. To date the Ministry has granted 119 exploration licences of which 86 are foreign and 33 on joint venture basis. The Ministry has also granted 52 mining licences of which 24 are foreign and 17 are on joint venture and 11 locally owned.

Factors of investment attraction and development The stimulus for this extensive exploration work is the revised legislation. In August 2010 the government enacted new mining and mining income tax laws entitled, ‘A Proclamation to Promote Sustainable Development of Mineral Resources’ to make the mineral sector more favourable for foreign investment.The previously issued proclamations to attract private investment, the Mining Proclamation 52/1993, Mining regulation 182/1994 and Income Tax proclamations 53/1993 were consecutively amended so as to make the country remain competitive. The new proclamation provides:

1 Non exclusive reconnaissance rights ( for a maximum period of 18 months);

2 Initial three-year exclusive exploration licenses, with two renewals of one year each; and

3 Mining license for 10 or 20 years of small-scale and large- scale operations, respectively, with unlimited renewal periods (of 5 or 10 years each).

The new proclamation also makes provisions for the adequate health and safety of employees, environmental protection, and for environmental and social impact assessments (depending on the type and nature of the project.) The proclamation also guarantees the license’s right to sell the minerals, provides exemption from customs duties and from taxes on the equipment, machinery and vehicle necessary for the mineral operations.

The government also guarantees the opening and operation of foreign currency account in Ethiopia, and the retention of portion of foreign currency earning and remittance of profits, dividends, principal and interest on foreign loans etc out of Ethiopia. The government allows losses to be carried forward for ten years, and dispute settlements through negotiation and international arbitration. In return, the government requires the payment of relatively low royalties, ranging from 3% for construction materials to 8 % for precious stones and minerals.

Table 9: GTP Targets for Mineral and Petroleum Investment Expansion Description of Targets 2009/10 2014/151. Increase the volume of mineral investment (min ETB) 12.7 202. Increase revenue from royalties and other licensing (min ETB) 69 1503. Increase annual revenue from mining tax (min. ETB) 230 2504. Increase foreign currency earnings from minerals (min USD) 108 277.35. Increase the production of gold (Kgs) 3,907 8,7006. Increase the production of tantalum (tons) 202 3007. Increase exports of marble (m3) 99.34 1408. Increase investment in the petroleum sector (min USD) 238 538.79. Increase total number licenses issued to petroleum exploitation sector 22 2910. Increase number of international extractive industry transparency

initiatives member companies 10 310



2011


EnergyThere are also significant opportunities for extracting fossil energy resources-notably oil and natural gas – in the six major sedimentary basins; the Ogaden, the Gambella, the Blue Nile, Metema, Mekele, and the Southern Rift Valley. There are currently plans to exploit the natural gas reserves in the south-eastern part of Ethiopia, estimated at 4 trillion cubic feet. As a sign of this ambition, the Ministry of Mines recently signed a petroleum development agreement and four exploration and production sharing agreements with a Chinese oil and gas company, PetroTrans Company.

Exploration for gas and oil is under way in different parts of Ethiopia. The eight companies currently undertaking exploration work in separate basins in Ethiopia are, Pexaco Exploration (East Africa), South West Energy, Africa Oil Corp., Clavalley Petroleium Ltd., Falcon Petroleum Ltd., Afar Exploration Company, Epsilon Energy Ltd., and Tullow Oil, and applications from other companies are currently being considered and are in the process of evaluation.

There is vast potential for investing in Ethiopia’s hydropower and geothermal energy resources. Ethiopia has the potential to generate about 62, 000MW of clean energy out of which 45, 000 MW comes from hydropower, 10, 000 MW from wind energy and about 7,000MW from geothermal resources respectively. The private sector can participate in electricity generation from any source and without any capacity limit. The transmission and supply of electrical energy through the integrated National Grid System, however, is exclusively reserved for the state electricity provider, the Ethiopian Electric Power Corporation.

Ethiopia is often referred to as the ‘water tower’ of Africa because of the major nine river basins that run from the high tableland. It also has the greatest water reserves in Africa. However, the country has not been able to tap its potential because it does not have significant water resources infrastructure. Ethiopia’s actual irrigation utilization versus its potential is very unfavorable as compared with the other Basin States. Ethiopia has a potential of 2.2 million hectares irrigable land within its portion of the Nile Basin, of which only about 24,000 hectares used. By contrast, Egypt and Sudan developed 1.9 and 3.1 million hectares respectively.

In order to utilize this resources, the government by the end of the current GTP period, have planned to expand large scale irrigated agriculture from the current 127,242 (nationwide) to 785, 582 hectares and small scale irrigated agriculture to 1.85 million hectares. Also to meet the ever increasing demand for energy and electricity due to the country’s growing economy, the government, for the GTP period, intended to increase the hydropower generation from the current 2060 MW to 10,000 MW. Ethiopia, among others, offers an ample opportunity for investors in the area of electricity generation or sizable irrigated commercial farm

Table 10: GTP Targets for the Energy Sub-SectorDescription of Targets 2009/10 2014/151. Hydroelectric power generating capacity (MW) 2,000 10,0002. Total length of distribution lines (km) 126,038 258,0003. Total length of rehabilitated distribution lines (km) 450 8,1304. Reduce power wastage (%) 11.5 5.65. Number of consumers with access to electricity 2,000,000 4,000,0006. Coverage of electricity service (%) 41 757. Total underground power distribution system (km) 97 150



Tourism in Ethiopia

Ethiopia is truly a land of beauty with very unique cultural, historical, archeological, and natural attractions. Ethiopia is one of the oldest nations in the world with a history dated back over 3000 years, and home of the earliest known human kind – “LUCY,” a 3.2 million-year old archeological site. The country is located in a landscape that extends from one of the lowest spots on earth, the Danakil Depression, to Ras Dashen, the highest mountain, standing at 4500 meters, the fourth highest peak in Africa. Ethiopia is also endowed with unique combinations of natural and cultural heritages, impressive scenery, as well as rich flora and fauna. Although situated close to the equator, the country largely has a climate tempered by altitude, which means that most of its regions enjoy an idyllic spring-like climate throughout the year.

Historical and Cultural AttractionsAs the oldest nation in the world, Ethiopia’s history extends to the pre-historic period and it is the home of the famous tourist attractions. Among these, the eight world heritage sites, namely, the Aksum Obelisk, the Castles of Gondar, the Simien Mountain National park, the Rock-hewn Churches of Lalibela, the Stealea of Tiya, Hadar (where Lucy was found), the Lower Omo Valley Paleoanthropological site and the walled city of Harar registered by UNESCO as world heritage testifies Ethiopia’s might of ancient times and the endowments of the country with significant tourist attraction sites.

As the country has a vast land mass of 1.4 million square kilometers, it has a widely diverse nations and nationalities who speak more than 80 different languages. Its diversity is its beauty and great strength.

Historically Ethiopia is known as a home of different religions living in harmony and tolerance. The oldest mosque (Al-Nejashi) and the oldest churches in Africa can both be found in one nation, Ethiopia.

Natural AttractionsEthiopia’s many national parks enable the visitor to enjoy the country’s scenery and its wildlife, conserved in natural habitats, and offer opportunities for travel adventure unparalleled in Africa. Ethiopia is a bird watchers dream. More than 800 species of birds are found in Ethiopia of which 23 are endemic. There are more than 100 mammal species, of which seven of the big mammals are unique to Ethiopia. The mountains, the lakes, the rivers of the country have many fascinating features. There are 25 mountains in north-western and south-eastern portions by the Great Rift Valley that divides Ethiopia in to two, which are over 400 meters high above sea level and 6 of them are over 3000 meters. The fourth highest peak of Africa’s mountain- Ras Dashen (4500 Meters) –is also located in Ethiopia.

Ethiopia is also known as the water tower of Africa. Lake Tana, the source of the Blue Nile lies in the north-western portion of the Ethiopian highlands contributing 85 per cent of the Nile water.

Along with the Blue Nile, the rivers of Awash, Genale, the Wabe Shebele, Omo, Tekeze, and Baro are among the few and most useful rivers for the country’s socio-economic development. The most known natural lakes are also found in the main Rift valley region of Ethiopia. Lake Langano, Abyata, Shalla, Abaya, Chamo, Awassa, and others are among the potential ones for the development of tourism.

Tourism in Ethiopia


2011


Investment Opportunities in TourismEthiopia is the political capital of Africa, the seat of the head quarters of the African Union, the Economic Commission for Africa, and more than 105 embassies and numerous international organizations. Furthermore, Ethiopia has a national airline, Ethiopian Airline, of longstanding experience, which has extensively linked the country to 62 destinations of African countries and major international transport networks. These give the country ample opportunity to advance the conference tourism.

As more travelers have become aware of Ethiopia’s natural beauty, fascinating history and religious diversity, tourism has played an increasing role in the economy and has risen from 200, 000 visitors in 2005 to around a million in 2010. Despite the numerous historical, cultural, and natural attractions and the multifaceted beauty of the country, Ethiopia’s share of the tourist flow to the eastern African Region of nineteen countries, for instance, is at the very low stage.

In order to make the country more beneficial from its diverse tourism potential, the government came up with the tourism policy that has the vision to see Ethiopia as the top ten tourist destinations in Africa by 2020.

The strategic direction for the culture and tourism development program under the next five year Growth and Transformation Plan (GTP) are to enhance the role tourism and culture play in the socio-economic and political development initiatives. The GTP envisages expanding the tourism industry products and services in quantity and quality to enable them to compete globally. Cultural and tourist attractions will be used to build an attractive image of the country. The cultural, natural, and historical heritages and values of the country would be developed so that they play a significant role in social and economic development as well as in the democratization process of the country.

Hence, the growth of the tourism industry requires the involvement of multiple parties. The country’s tourism development will be realized with guidance from the government, the private sector proactively playing a vital role, and communities at tourist destinations and civic societies directly participating and benefiting.

The private sector will be encouraged to engage in the building and expansion of tourist facilities of appropriate standards at each tourist destination, taking into consideration tourist demand for accommodation, food, entertainment services, etc. The establishment of facilities for rest and recreation by investors at certain distances along the network of high ways currently undergoing expansion in the country shall also get incentives and be highly encouraged


2011