INTERNATIONAL INVESTMENT FORUM ADDIS ABABA ETHIOPIA OCTOBER 5/2016 - - PowerPoint PPT Presentation

INTERNATIONAL INVESTMENT FORUM ADDIS ABABA ETHIOPIA

OCTOBER 5/2016

GTP II

• To achieve middle income status (in 10 years)
• To become manufacturing hub of Africa
• Growth Rate: GDP 11% same achived in GTP Imanufacturing 20%

was achived in the 1st GTP 25% is targeted

• Pillars:

– Development of manufacturing sector – Transformation of agricultural sector – Develop export sector – Shared growth (Gini coefficient 0.3, poverty reduction 22% Life

expectancy 64 years, Primary education net enrolment reached 94%)

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GTP II

• Goals: Manufacturing Sector

– 1 million jobs in 5 yrs and 2 million in 1o yrs – 2 fold growth – share of GDP 10% in 5 yrs and 4 fold in 10yrs – 2 fold growth – share of export 20% in 5 yrs and 40% in 10yrs

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GTP II …contn….

• Key Strategies

1.Targeting manufacturing Investment (FDI and domestic) 2.Development of industrial parks

• 3. Quality infrastructure, skills and competitiveness
• 10 Key industries in 3 categories:
• 1. Light manufacturing (textile, leather, agro-industry,

electronics )

• 2. Basic & import substitution (steel, equipment, chemical and

pharmaceutical)

• 3. Strategic (energy, ICT and bio-technology)

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Priority Sectors:

• Develop 12 public IPs in 5 years (Hawassa has two phases),

1. Hawassa phase 1 & 2 (2 IPs)= phase 1 inaugurated 13 July/16 2. Mekelle = construction has begun 3. Kombolcha= construction has begun 4. Adama= a contractor has been selected 5. Dire Dawa = soon contractor will be selected 6. Bole Lemi II = contractor selection is taking place 7. Kilinto = is in Akaki, its status is same as Bole Lemi II 8. Jima= feasibility & other studies have been conducted 9. Debre Birhan= feasibility study will commence soon

• 10. Bahir Dar= feasibility & other studies will soon be conducted
• 11. Aysha= soon all the studies will be commenced
• 12. Hunan Prov. (Adama), China

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• Enable the development of private industrial parks
• 1. Expansion of Eastern (Dukem) China
• 2. George Shoe (Mojo), Taiwan – China
• 3. Huajian (A.A), China
• 4. Arerti (Minjar), China
• 5. CCECC (Dire Dawa), China
• 6. Yangone Corp. (Adama), South Korea

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Industrial Parks that are under construction :

• Mekelle Industrial Park
• Kombolcha Industrial Park
• Debrebirhan
• Arerti
• Dire Dawa Industrial Park
• Adama Industrial Park

11% avg. growth for the last 12 years Shared growth, Development is happening (Poverty reduced, life expectancy improved etc)

Fastest growing economy

Bigger than France and Spain combined

Untapped natural Resource:

Ethiopia Land size: 1,140,331 sq. km (435,186 sq. miles) World Rank #27 Africa Rank #8

• 74 million hectares of arable

land

• Underground water
• Livestock
• Mineral Resources

Ethiopia’s economy by the numbers #1 Coffee exporter in Africa (5th in the world) #1 Livestock in Africa (top 10 in the world) #1 Hydro electric power dam in Africa (on the Nile River) #1 Wheat producer in Sub Sahara Africa (S. Africa is 2nd) #2 Flower exporter in Africa (only 10 years since the industry was established)

Demographic advantage Availability of labor force

• Ethiopia’s

population is large & young;

• Median age is under 20;
• Wages very competitive in

the world;

• Ethiopia

is now and will still be the 2nd most populous country in Africa by 2070;

World Rank

#13

Africa Rank

#2

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Building Infrastructure as Path to Middle Income I

Infrastructure

• Ethiopia is rapidly investing in modernizing infrastructure for population and industry
• Mega infrastructural projects have increased the accessibility of:
• Electric power
• Roads
• Communication services
• The aviation industry is under a rapid growth with new airport projects and expansion
• f the existing ones

Electric Power Infrastructure Development opportunities

– Hydro : More than 45,000 MW – Wind: More than 10,000 MW – Geothermal: More than 5,000 MW – Supply chain

• pportunities

– Engineering & tech. consultancies

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Infrastructure: Investment in Modern Transportation Systems

By 2017 By 2020

Aviation Hub Electric Driven Railway

Path to Middle Income Market Access #1 Airline in Sub-Sahara Africa

Market Access

Ethiopia’s geographic location and its active membership in regional and bilateral trade agreements makes it a desirable investment destination Local: construction boom, income is increasing Export: 3.5 billion people live within 8 hours of flight from Addis Ababa;

• Free trade advantages:
• United States: AGOA (extended for 10 more years)
• European Union: Everything but Arms
• Sub-Saharan Africa: A founding member of the Common Market for Eastern

and Southern Africa (COMESA)

Attractive Investment Policies and Incentives Investment Policies

Investment Incentives

Repatriation of investment and profits

Repatriation: of profits, dividends, principal and interest payments on external loans out of Ethiopia in convertible currency

Hiring Expats

The right to employ expatriate experts and management staff; there is also an exemption of 2 years corporate income tax for exporting companies of expat employees

Customs duty exemption

• n capital goods, construction materials and partially on spare parts (as

much as 15% of the total value of capital goods) Industrial Parks spare parts of capital goods are allowed

Income tax exemption

2-8 years for many sectors, Up to 10 years Inside Industrial Parks in textile and garment for export; It is 10-15 years for Developers of Industrial Parks;

Incentives

Ethiopian Investment Board and Commission

• Ethiopian

Investment Board (EIB) is the highest investment policy making body on Investment and Industry Park in the country

• EIB is chaired by The Prime Minister
• EIC is responsible for promoting, supporting & regulating

investment projects

• EIC has introduced One Stop Shop services (OSS) and

After Care Services

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Extension of the Addis – Modjo – Djibouti railway to Hawassa

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Building the Infrastructure…contn…

3.4 . One-stop-shop government services

• IPDC : Management of the park
• EIC: Capital Goods clearance, Investment OSS &

aftercare USD 200,000 is a minimum requirement

• Customs

– All cargo will directly transit from HIP to Djibouti and vise versa – HIP is a Free Zone: considered as outside the customs territory

• Banks and other governemnt institutions
• Utility providers
• Immigration

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Designing Investment Incentives

The Role of Ethiopian Investment Board (EIB)

• Proactive engagement by EIB

– In addition to various incentives provided under the Investment Proclamation, Regulations and various directives, the Board has been proactive in supporting investors – EIC played key role in studying, evaluating and submitting proposals and Board Agenda

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Incentives … continued…

• Incentives: under revised Investment Laws and EIB decision

– Manufacturers are exempted from income tax 8 - 10 years, 10 years has been promised for HIP & will continue for others, – Exemptions from duties & other taxes: machinery, equipment, construction materials (before & after completion), spare parts, raw materials, trucks (only for HIP), canteen facilities, office furniture and equipment, all except personal consumables, 2 SUVs and 3 hybrid vehicles, input importation using investment license and exemptions for same commissioning & training limited amount

• Special visa scheme 3-5 yrs multiple visas, for now we have began

with 2 years multiple visa issuance,

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• Outcome

– Our promotion strategy was able to attract major global players to enter HIP – HIP is now fully

• ccupied

with foreign and local manufacturers producing for export market

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Expectations when it matures: Up to $1 Billion export earning Up to 60,000 local employment in two shifts

• Figures that are more than the total country wide,

sector based employment, production and export levels

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Challenges

• Weak manufacturing sector
• Weak exports,
• Transformation of agriculture: (weak domestic value

chain to supply manufacturing industry)

• Weak logistics
• Foreign currency challenge due to low export earning

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Lessons Learned from HIP

• Sectroal approach is important for Investment promotion,
• Relationship

building with FDI is the best Investment Promotion strategy considering Hawssa IP in consultation with buyers,

• Performance related incentive package is the right tool for

domestic investors/ SMEs,

• Investment incentives, even when they are one of the most

generous, will not be effective unless they are well designed, targeted and communicated.

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Main reasons for investing in Ethiopia

• 1. Remarkable economic growth
• 2. Huge infrastructural and skills development
• 3. State of the art industrial parks ‘ready-to-plug.’
• 4. Stable economic and political environment
• 5. Access to international markets
• 6. Availability of abundant and wage competitive labor force
• 7. Availability of natural resources for productions
• 8. Transparent investment policies
• 9. Attractive investment incentives

Thank you

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