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, 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

The Dutch are coming! and The Dutch are here! With these one-liners the Netherlands Embassy has summarized the increasing Dutch involvement in Ethiopia during the last years via the Trade and Business Newsletter, regularly published by the Netherlands Embassy in Addis.

and at present

more than fifteen Dutch companies - sometimes as a Dutch-Ethiopian joint-venture – are active (or will be soon active) in the field of flori- or horticulture. And every week the Netherlands Embassy receives requests for information from potential Dutch investors.

Let’s go back in time, for a closer look at the beginning of this Dutch interest in Ethiopia. After a successful visit of a group of fifty Dutch business representatives to Ethiopia in May 2003, trade and business moved fast 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. Especially in the field of flowers and vegetables. The Ethiopian climate, the altitude, the availability of land, cheap labour and the accessibility 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 available several programmes for supporting trade and business with the least developed countries, including with Ethiopia.

For example through the Matchmaking facility, that can put Ethiopian companies on the lookout 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 or read the latest Trade and Business Newsletter of the Netherlands Embassy in Addis), which will hopefully give you the chance to submit your proposal.

As to the Program for Cooperation with Emerging Markets (PSOM), the second Invitation to Tender, which was open to 49 countries around the world, from June 17th, 2008, to  August 19th, 2008 and the PSOM Plus Invitation to Tender, which was open from  June 25th, 2008, to August 19th, 2008, both of which were funded by the Ministry for Development Cooperation (OS), have been withdrawn with immediate effect. Further information regarding the future of the programme will be published on the EVD website (www.evd.nl/psom).

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 is definitely improving. 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.