Trade and investment

Background

A vibrant private sector is essential for economic growth and poverty reduction in Ethiopia. This is reflected in Ethiopia’s overall strategy for poverty reduction, the PASDEP (Plan for Accelerated and Sustained Development to End Poverty, 2006 – 2010) and the “White Paper” on Private Sector (Industrial Development Strategy, GoE, August 2003). These papers contain the recognition of the importance of the Private Sector as an engine of growth and indicate specific areas of intervention in which private sector and private resources could better support economic development and the achievement of the Millennium Development Goals.

The Government of Ethiopia, in consultation with the World Bank and other donors, is implementing structural reforms that should support growth and poverty reduction. In these reform areas, a number of specific measures are aimed at promoting private sector development under the PASDEP. In particular, steps are being taken to reduce the burden of business licensing requirements, reforming the investment code to make it more investment friendly, improving access to land through reform of land leasing, and strengthening the private-public consultation process. But in general private sector development and the investment climate is still in the process of growing. Coming years, key reforms for private sector development, such as financial sector reform, land reform, better functioning markets, and increased openness to international and regional trade should be further implemented.

In the opinion of the Royal Netherlands Embassy in Addis a vibrant private sector is essential for economic growth and poverty reduction in Ethiopia. The overall objective of the Dutch support in the field of Private Sector Development (PSD) is therefore two-fold: i) to find ways to stimulate the pace of private sector development in Ethiopia, and ii) to facilitate the role of the private sector in the achievement of broader development objectives and poverty reduction.

Trade and Investment

At present more than sixty Dutch companies - sometimes as Dutch-Ethiopian joint-ventures – are active (or will be soon active) in Ethiopia. And every week the Netherlands Embassy receives requests for information from potential Dutch investors.

From 2003, after a successful visit of a group of fifty Dutch business representatives, trade and business has moved steadily forward for the Dutch in Ethiopia. Mainly in the field of flori- and horticulture, but also in other sectors where new markets are expanding rapidly.

For what reason are the Dutch coming to Ethiopia? In short, the Ethiopian ‘emerging market’ provides good opportunities for Dutch businesses, including Dutch-Ethiopian joint ventures, to expand their investments and trade relations. Particularly in the field of flowers and vegetables. The Ethiopian climate, the altitude, the availability of land, cheap labour and the facilities for foreign investors to the country are positive elements for Dutch entrepreneurs to start in Ethiopia. And on the other hand, trade and investments stimulate growth of the Ethiopian economy, generate employment, and enable the local population to improve its standard of living.

To promote these goals the Dutch government has made available several programmes for supporting trade and business with the least developed countries, including with Ethiopia.

For example through the Matchmaking Facility (MMF), that can put Ethiopian companies looking for reliable business partners abroad in contact with Dutch businesses to stimulate joint investments. Proposals can be submitted to this Embassy (MMF Intake Form to download elsewhere on this website). Please find out the deadline and the requirements for the next MMF-round(www.evd.nl/mmf), which will hopefully give you the chance to submit your proposal.

In December 2008, the Private Sector Investment programme (PSI) was launched. PSI is the successor of the former PSOM programme. PSI subsidies are available for Dutch and foreign companies entering into long-term cooperation with Ethiopian partners. Submitted projects are judged, among others, by the standard of local innovation. One of the beneficial side effects of PSI is that it introduces a country like Ethiopia to new knowledge. Furthermore, both parties must be financially sound. In addition, the scale of the planned expenditure must ensure further investments in the future. PSI has two granting procedures per year. The closing date for the first PSI Tender 2009 is on 2 February 2009.

Read more about PSI at  www.evd.nl/psi where you can also find the relevant application form. Or call PSI on +31 (0) 70 7788513, or contact the Dutch Embassy at Addis Ababa on +251 011 3711100

In the meantime, a publication issued in October 2008 by the Ethiopian Investment Agency (EIA) with support of the Netherlands Ministry of Agriculture, Nature and Food Quality and the Embassy will give you a guide on how and where to address investment issues in Ethiopia. This document takes you through the routine processes to follow as a potential investor, be it in the agricultural sector or other sectors of your preference. The hard copy of this publication entitled “Investing in the agricultural sector of Ethiopia – A guide for new investors” is available on request from the Embassy.

However, as stated before, Ethiopia is a developing country and the private sector development and the investment climate is still in the process of growing. The World Bank publication “Doing Business” shows that the climate for foreign investors in Ethiopia has definitely been improving over time. The way the Government deals with foreign and larger companies is seen as satisfactory by most investors.

But a lot remains to be done and coming years, key reforms for private sector development should be further implemented. Foreign investments call for liberalisation of the banking, telecom and other sectors, for a better infrastructure, like roads and efficient airport facilities, and of course for competitive freight prices and the availability of enough cargo space to export all the products from Ethiopia.

For entrepreneurs, considering starting business in Ethiopia and willing to face the challenge of investing in a developing economy, the country offers very interesting opportunities.