Ethiopia

Ethiopia is the oldest independent country in Africa. This is the cradle of humanity and the birthplace of coffee. The country's fertile lands are home to historical treasures, and Ethiopia's culture and traditions have existed for more than 3,000 years. This is where you can feel the true spirit of Africa.

General information

Official name of the state — Federal Democratic Republic of Ethiopia (FDRE). The state occupies an area of 1,104 300 km² (27th in the world). The population is approximately 124,850 547 people (as of 2023).

Ethnic composition of the population of Ethiopia: more than 100 nationalities and ethnic groups. The largest: Oromo — 16.6 million people, Amhara — 15.5 million, Tigrayans — 3.25 million, Gurage — about 3 million, Sidamo, Wolayte, Somalia and Tigre — each more than 1 million, Afars — about 600 thousand, Cushitic ethnic groups (Kembatta, Kaffa, Yem, etc.) and Nilo-Saharan ethnic groups (Nuer, Anuak, Kunama, Berta, etc.).

Official language — Amharic (Amharik). Amharic is the working language of the federal government. Somali, Arabic and English are widely spoken, as are 70 languages and dialects of the Afroasiatic and Nilo-Saharan family groups. All languages of Ethiopia enjoy equal state recognition.

Religion in the country is represented by several denominations. Christianity (Ethiopian Orthodoxy, Pentecostals, Catholicism) has the largest number of followers, accounting for 62.8% of the number of believers, followed by Islam with 34.6%, folk beliefs — 2.6%.

The official currency of the country is the Ethiopian birr.

Adis Ababa — the capital and largest city of the Federal Democratic Republic of Ethiopia. It has the status of a separate region of the country. The headquarters of the African Union is located in Addis Ababa. The city has a variety of economic activities. Recently, the number of high-rise buildings and expensive hotels has been growing. Construction of shopping centers and entertainment clubs is underway. The city is increasingly called the “Resort Capital of Africa.”

Dire Dawa — city in eastern Ethiopia. One of two cities in the country (along with Addis Ababa) equated to the regional level. Dire Dawa is a major transport hub: the Addis Ababa railway — Djibouti", international airport, road to the city of Harar. Industrial center: food and textile industries, production of building materials (cement, brick). The city has enterprises for servicing railway transport, as well as handicraft production of metal products and traditional crafts. In 2007, a company producing concrete sleepers was founded next to the cement plant. Dire Dawa is home to several hotels and one of the largest bazaars in Africa. Tourism takes place.

Bahir Dar — city in northwestern Ethiopia. Located on the coast of Lake Tana, at the source of the Abbay River (Blue Nile). The city has food and textile industries. Handicraft production is also developed. Bahir Dar is an important tourism center — local and foreign. The shore of Lake Tana within the city limits has been transformed into a recreation area. Observation platforms and cafes are being built. At the same time, natural vegetation is preserved as much as possible.

As of 2021, Ethiopia is administratively divided into 11 regions (states), organized along ethnic lines, and two federal cities (Addis Ababa and Dire Dawa).

History, geography, culture, mentality

The territory of Ethiopia has been inhabited since the Stone Age. In the 7th-5th centuries BC. e. immigrants from South Arabia began to settle here. In the IV-I centuries BC. e. migration to the region began from the territory of modern Yemen. The settlers brought with them terrace farming, iron tools, their culture, writing and government. In the I-X centuries AD. e. here existed the Aksumite kingdom with its capital in the city of Aksum. In the 4th century, Christianity established itself in the kingdom.

In the first half of the 11th century, Aksum collapsed, and several Christian principalities arose in its place. Around the same time, Islam came to the region.

In 1270, power was seized by representatives of the Solomon dynasty, who had to fight with the surrounding Islamic sultanates. At the end of the 15th century, the first contacts were established with European sailors, mainly Portuguese. In 1543, with the support of the Portuguese, the Ethiopians defeated the Adal Sultanate. However, later relations with the Europeans deteriorated due to the latter’s attempts to gain a foothold in Ethiopia and the missionary activities of the Jesuits. In 1633, the Jesuits were expelled from the country, and Ethiopia was closed to Europeans.

In the middle of the 16th century, the north of the country came under the control of the Omani Empire. Subsequently, part of the state was captured by the Sennar Sultanate. Emperor Tewodros II (1818—1868) managed to unify the state and carried out a number of government, tax and military reforms. However, this policy displeased the nobility, which provoked the Anglo-Ethiopian War.

Yohannis IV continued the policy of centralizing power and carried out the forced Christianization of people of other faiths. With the help of the British, he inflicted several defeats on the Egyptian troops and subjugated the mountainous regions. His successor Menelik II strengthened cooperation with Italy and transferred a number of northern territories to it. In 1890, Italy united all its colonies in Africa on the shores of the Red Sea into one colony — Eritrea. The Italian expansion did not stop there; it captured a number of cities in Ethiopia. This was the cause of the first Italo-Ethiopian war. In 1896, Italian troops were defeated at the Battle of Adua. That same year, Italy recognized the independence of Ethiopia.

Ethiopia did not participate in the First World War. In 1930, Emperor Haile Selassie came to power. In 1931, he promulgated the country's first constitution. It did not limit the power of the emperor, but introduced a unified state administration, proclaimed the abolition of slavery, and was aimed at developing the social sphere.

In October 1935, Italian troops invaded Ethiopia. The country was included in the newly formed Italian colony of Italian East Africa. In April 1941, British troops, together with local guerrillas, liberated Addis Ababa. By the end of that year, the entire territory of Ethiopia was liberated. In 1949, Haile Selassie's power was restored throughout the country. In 1954, the last British armed forces left the country.

In 1952, by decision of the UN General Assembly, Eritrea was annexed to Ethiopia on a federal basis. Eritrea's federal status was abolished by the authorities in 1962.

The country is faced with acute internal problems: corruption, mass protests, the preservation of feudal relations, ethnic conflicts. In 1974, popular protests were supported by the army. A Coordination Committee of the Armed Forces and Police was created, headed by Major Mengistu Haile Mariam. Haile Selassie was deposed and died soon after. The new government allocated land to millions of peasants. At the end of the 1980s, radical reforms of government, its bureaucratization, and ideologization of public life led to an increase in population discontent. In 1990, the government tried to save the situation by declaring market and democratic reforms. But these measures were not successful and in 1991 power passed to a 4-party coalition led by Meles Zenawi.

An administrative-territorial reform was carried out, during which the country was divided into 9 states, created mainly on an ethnic basis. In 1993, a referendum was held in Eritrea, following which it separated from Ethiopia. Successful economic reforms were carried out, collective and state farms were liquidated, land was transferred to peasants for long-term lease, oil and gas exploration began.

The country is located in eastern Africa. It borders Eritrea in the north, Djibouti in the northeast, Somalia and the unrecognized state of Somaliland in the east, Kenya in the south, Sudan in the northwest and South Sudan in the southwest.

Ethiopia — the highest mountainous country on the African continent. A significant part of its territory is occupied by the Ethiopian Highlands, stretching from north to south of Ethiopia. The highest part of the highlands — northern. The highest points of the country are located here — Ras Dashen (4620 m) and Talo (4413 m). In the east, the highlands abruptly end into the Afar depression — one of the lowest points in Africa.

Most of the rivers in western Ethiopia belong to the Nile basin. The largest among them — Abbay, or Blue Nile. The largest lake in Ethiopia is also located here — Tana.

Ethiopia — a country with an ancient culture with a thousand-year history of Christian civilization. Ethiopians are very religious and scrupulous about observing religious norms. For example, when entering a church, you must take off your shoes. Pork meat is not sold even in Christian butcher shops, which are closed during Lent.

It is customary to eat national food with the right hand without using cutlery. According to tradition, the host, as a sign of special respect for the guest, can place food in his mouth with his hand.

Confrontation with various external forces has preserved the culture of Ethiopia almost unchanged for thousands of years and has surrounded its history with a touch of mysticism.

The Italian Africanist historian Conti-Rossini calls Ethiopia a “museum of peoples” — ethnic diversity is represented by approximately 80 groups with different traditions and languages.

Ethiopian literature (and writing is a sign of civilization) dates back about two thousand years. Until the 8th century, literature, mostly sacred texts, was written in the Ge'ez language. Now this language is used only in worship, like Old Church Slavonic. The creation of the first works in the Amharic language dates back to the 19th century.

The main educational and cultural centers for centuries were monasteries, like monasteries in Europe. Crafts and arts flourished here, utensils, icons and ancient manuscripts were preserved.

Power

Ethiopia — federal Republic. Head of State — President, elected for a 6-year term with the right of re-term by the House of People's Representatives.

The head of government is appointed from the party that wins the parliamentary elections.

Legislature — bicameral parliament: the House of the Federation (108 members elected by the state assemblies for a 5-year term), which resolves constitutional and federal-regional issues, and the House of People's Representatives (547 members elected by the population for a 5-year term).

Economy

The Ethiopian government has launched a new 10-year vision plan that runs from 2020 to 2030. The plan aims to support significant economic growth. Domestic economic reform envisages increasing the private sector's contribution to the overall economy by opening up large state-owned enterprises (Ethiopian Airlines, Ethio Telecom, Ethiopian Electric Power Corporation and Ethiopian Shipping and Logistics Services Enterprises) to private and foreign investment.

Ethiopia's economy is predominantly based on agriculture. However, the government is working to diversify into light industries such as agro-processing, leather and leather goods, textiles and textile products, as well as import substitution sectors (chemicals, iron, steel and pharmaceuticals).

Ethiopia is a member of a number of bilateral, multilateral and international free trade and preferential duty free trade agreements.

The African market, with a total population of over 750 million people, represents an important area of potential for investors in Ethiopia. Ethiopia is a member of COMESA and has preferential access to the regional market of 400 million people. The country also has duty-free and quota-free access to the US and EU markets through AGOA and EBA respectively. In addition, duty-free and quota-free access to Japan, Canada, China, Turkey, Australia and New Zealand covers almost all exports from Ethiopia. Preferential access to the Indian market.

The African Continental Free Trade Agreement (AfCFTA) was launched, covering all fifty-four African countries with a population of over one billion people and a combined gross domestic product (GDP) of over US$3.4 trillion.

In the field of foreign trade, the government is taking measures to increase export volumes and diversify it. Sales of mining products abroad are increasing: gold, tantalum, marble. More than 40% of exports go to European countries, less than a third to the Middle and Far East, about a quarter — to Africa. Oil and petroleum products, mechanical engineering products, metal and rolled metal products, mineral fertilizers, food, medicines, etc. are imported. The main trading partners — China, Sudan, Saudi Arabia, UAE, India, USA, Italy, Germany, Turkey, Djibouti, Belgium, Malaysia, Japan.

The share of manufacturing in the country is about 6% of GDP, and it employs about 0.5% of the population. However, Ethiopia has enormous investment potential in this sector, especially in the light industry and import substitution sectors. In addition, the sector is seen by the government as an engine for accelerated and sustainable economic growth.

• Ethiopia's strengths include industrial parks that are "plug and play" ready.
• Attractive investment incentives.
• 100-plus million people and growing by 2.9% annually; GDP 80 billion US dollars.
• Preferential access to US markets through AGOA and the US Generalized System of Preferences (GSP).
• Preferential access to European markets as part of the Everything But Arms initiative (EBA).
• Close proximity to the Middle East and South Asia.
• Cheap electricity.

Textiles and clothing

This is a priority sector that has grown over 50% over the past six years, mainly due to expansion driven by foreign direct investment. The country's comparative advantage in this sector is supported by investor-friendly policies, sector-specific industrial parks, attractive investment incentives, quotas and duty-free access to a number of markets such as the US and Europe, and affordable labor.

This sector has been able to attract many world famous brands and companies such as H&M, PVH, Kanoria, DBL from Bangladesh, Ayka Addis (Ethiopian subsidiary of Turkish textile giant Ayka Textiles) and others.

The government is also looking to increase domestic cotton production to supply the sector with yarn. He has identified 3 million hectares of land suitable for cotton production and there will be opportunities for  cotton production, spinning and weaving.

Leather and leather goods

Ethiopia has the largest cattle population in Africa and the tenth largest in the world.

Ethiopian leather products are exported to the UK, Italy, USA, Canada, China, Japan, the Far East and the Middle East.

There is also strong domestic demand and opportunities for import substitution. Ethiopia continues to import large quantities of shoes, leather and artificial leather goods from around the world, spending millions in hard currency.

Pharmaceutics

Ethiopia's annual pharmaceutical market is valued at approximately US$500 million and is growing at 25% per year. More than 85% of the country's need for pharmaceutical products is met by imported drugs. In 2015, Ethiopia became the first country in Africa to develop a pharmaceutical strategy, which is one of the government's key priority sectors.

The government has allocated space in industrial parks for pharmaceutical production near Addis Ababa and introduced a procurement policy that provides for upfront payment of 30% of sales and 25% price protection against competition with foreign suppliers. There is also a complete exemption  from paying customs duties and other taxes levied on imports such as raw materials, capital goods and construction materials.

The government is committed to adding value to the country's agriculture-centric economy through the development of the agro-processing sector.

For this purpose, agro-industrial parks are being developed, equipped with specialized infrastructure consisting of refrigerated warehouses, quarantine facilities, quality control laboratories, quality certification centers, raw material warehouses and central processing centers.

There is high demand for consumer goods in the form of processed foods, and this may provide an opportunity for import substitution.

Agriculture

Ethiopia's economy is dominated by subsistence agriculture. This sector employs more than 80% of the population and accounts for about 46% percent of GDP. Ethiopia has generally good agronomic conditions for growing a wide range of food, industrial, commercial, beverage and oilseed crops. Opportunities exist in the following areas.

• Grains: wheat, barley, corn, rice and teff.
• Pulses: soybeans, beans, chickpeas, beans and lentils.

Pulses occupy about 13% of cultivated land and account for about 10% of added value in agriculture.

They are a significant contributor to Ethiopia's export earnings after coffee and sesame.

Gardening and floriculture

The cut flower business in Ethiopia is the second largest on the continent after Kenya.

The climate is favorable. South of Addis Ababa, rising approximately 2,800 feet above sea level, it is ideal for floriculture. The country has 12 river basins, 18 natural lakes and a potential irrigated area of 3.7 million hectares.

The country has regular and direct air connections with markets in Europe, Africa and the Middle East.

Oil seeds

Oilseeds are the second most important export commodity after coffee. It is currently grown on approximately 860,000 hectares of land by about 4 million smallholder farmers, who produce about 86% of the annual harvest.

The main crops are sesame seeds, niger seeds and flaxseed. 33% of oilseeds produced are sesame and 13% are flaxseed. Ethiopia is the third largest exporter of sesame after India and Sudan.

All seeds consist of two parts: oil, which is extracted by pressing the seeds, and cake, which is used as animal feed.

Most of Ethiopia's oilseeds are sold raw and unprocessed. About 850 small and micro enterprises make up 95% of the production base. Capacity utilization is seriously limited, and equipment is usually old and dilapidated.

Tourism

Despite Ethiopia's many attractions, both natural and man-made, and 10 UNESCO World Heritage Sites, the sector contributes only 4.1% of the country's GDP and 3.6% of total employment. Work is underway to develop infrastructure in order to increase the investment attractiveness of the industry.

Key benefits for tourism include:

• Moderate climate.
• Unique historical and religious sites.
• Excellent ecology, rich fauna and flora with many endemic species.
• National airline operating flights to more than 100 international destinations.

Business climate

Ethiopia and Russia

With the assistance of the USSR, a number of industrial facilities were built in Ethiopia and geological exploration work was carried out. More than 20 thousand Ethiopian citizens received education in our country, 5 thousand specialists received professional training.

Trade and economic relations are regulated by the Agreement on Economic, Scientific and Technical Cooperation and the Trade Agreement of November 26, 1999

There is a representative office of the Rostec State Corporation in Ethiopia, as well as Russian companies for the exploration of hydrocarbon deposits. The Ethiopian government is interested in the participation of Russian companies in the modernization of the state district power station, which was built by the Soviet Union. April 15, 2019 in Sochi, on the sidelines of the XI International Forum "ATOMEXPO-2019" a roadmap was signed to establish cooperation in the implementation of projects for the construction of a nuclear power plant and the Center for Nuclear Science and Technology in Ethiopia. In 2019, at the 7th meeting of the IPC, special emphasis was placed in addition to energy (including nuclear) on the field of science, technology and personnel training.

Cooperation in the field of trade is actively developing. In 2021, Russia's trade turnover with Ethiopia amounted to $225.24 million, an increase of 359.18% compared to 2020 (exports 194.7 million, imports 30.54 million). In the structure of Russian exports to Ethiopia  — food products and agricultural raw materials, metals and products made from them, chemical products, machinery, equipment and vehicles, wood and pulp and paper products. Imports from Ethiopia consist of agricultural products.

The Joint Russian-Ethiopian Biological Expedition is working productively. Russian experts are taking part in applied research on the use of innovative methods to increase agricultural productivity in Ethiopia. The issue of creating a Joint Russian-Ethiopian Biological Center on its basis has been practically resolved. 

In 2019, at the “Russia” summit  — Africa" Negotiations took place between Prime Minister of Ethiopia Abiy Ahmed and Russian President V.V. Putin. As a result of the negotiations, dozens of important agreements were signed.

In July 2022, the visit of the Minister of Foreign Affairs of the Russian Federation S.V. Lavrov to Ethiopia. The minister held meetings with the President of Ethiopia Sahle-Work Zewde and the Foreign Minister of Ethiopia, Deputy Prime Minister Demeke Makonan. Issues of technical cooperation between the two countries, agricultural development, and mining were discussed

The potential for development of Russian-Ethiopian relations is very high and covers a large number of areas.

According to the Chairman of the State Duma, Russian companies are interested in cooperation with Ethiopian partners. “We have prospects for long-term cooperation in mining, energy, transport, construction, agriculture,” — noted Vyacheslav Volodin at a meeting with the Speaker of the Federation Council of the Federal Democratic Republic of Ethiopia Ageneha Teshager in May 2023

Also in July 2023, negotiations between Vladimir Putin and the Prime Minister of the Federal Democratic Republic of Ethiopia Abiy Ahmed took place.

On August 24, 2023, South African President Cyril Ramaphosa announced that a number of countries, including Ethiopia, have been invited to join BRICS as full members.

Investment climate

Ethiopia has become a preferred destination for foreign direct investment and a new manufacturing hub in Africa thanks to:

• Sustainable socio-economic management and high-level political commitment to promote and protect investment under the leadership of the Ethiopian Investment Board, chaired by the Prime Minister.
• Favorable macroeconomic environment: annual GDP has averaged 11% over the past 14 years.
• The population exceeds 100 million people, the labor force is 54 million people.
• Globally competitive labor costs.
• Duty-free and quota-free access to Australia, Canada, China, EU, USA, Japan, Turkey through GSP, AGOA and EBA, as well as COMESA membership.

Broad incentive packages for priority sectors and export-oriented investments.

Industrial parks are central to the government's strategy to attract foreign direct investment.

A number of laws regulate parks and their constituents (i.e. developers, businesses and operators) to ensure that the goals of industrial parks set by the government are met and maintained. Parks in Ethiopia are created either by the government or by private developers. Private developers wishing to develop their own parks must submit a detailed project proposal along with other mandatory documents to the Investment Commission of Ethiopia.

Industrial parks are usually located along economic corridors connected to ports by roads and railways. Their facilities are ready to accept tenants and are equipped with all the necessary infrastructure.

The criteria for establishing industrial parks in Ethiopia include the following:

• Specialization:  increasing economies of scale and efficiency through specialization in priority sectors such as apparel and textiles, leather and leather goods, pharmaceuticals and agro-processing.
• Export orientation:  Government provision of incentives and support measures to industrial parks aimed at increasing export performance and competitiveness.
• Skills Development and Competitiveness:Creating and developing a pool of trained industrial labor and an enabling environment to attract and retain skills, leading to enterprise competitiveness.
• Vertical integration:  strengthening backward and forward links in the economy.
• Sustainability:  Maintaining high environmental standards through clean technologies, zero-discharge systems and other socially sustainable facilities such as staff housing.

Key facilities in Ethiopian industrial parks:

• Comprehensive services, including registration and issuance of permits, licenses, registration certificates, contracts, tax identification numbers, customs clearance and banking services.
• Dedicated electrical substations.
• Waste processing facilities.
• Commercial buildings.
• Housing facilities.
• Sanatoriums.
• Fire brigade.
• Security services.

Significant investment potential in renewable energy, including hydropower, wind and geothermal energy. Once completed, the Grand Ethiopian Renaissance Dam, the largest hydroelectric power station in Africa, is expected to produce 6,000 MW of electricity.

Investors wishing to establish a new business must first apply for an investment permit from the Ethiopian Investment Commission (EIC).

Investors wishing to buy an existing business or shares require approval from the Investment Commission of Ethiopia.

To be approved for investment permit, the project must meet the following capital requirements:

• 200,000 US dollars for one investment project of a foreign investor.
• USD 150,000 if the investment is made jointly with a domestic investor.
• USD 100,000 if the investment is for architectural or engineering work or related technical consulting services, technical testing and analysis, or publishing work and is owned exclusively by the foreign investor. If the investment is made jointly with a domestic investor in these specific sectors, the required amount is US$50,000.
• There are no capital requirements for reinvesting profits or dividends.

For your first visit to Ethiopia, a business visa can be obtained from a foreign diplomatic mission. Once the investment permit is received, the Department of Immigration and Citizenship issues a residence permit. Foreign investors who are shareholders have the right to obtain a residence permit. Multiple-entry five-year visas are available for investors in industrial parks.

Forms of opening companies in Ethiopia:

• Sole proprietorship
• Private Limited Company (PLC)
• Branch of a transnational company

Depending on the type of business form, investors need to take the following steps to register their company after contacting the Investment Commission of Ethiopia (Investment Information and Promotion Department) for information on procedures and rights.

Investment incentives

Investors can take advantage of the following investment incentives:

• Income tax exemption periodAn investor is entitled to an income tax exemption period of an average of 2 to 6 years, while enterprises and industrial park developers are entitled to an average income tax exemption period from 8 to 10 years and 15 years, respectively.
• Loss Carry Forward If an investor suffers a loss during an income tax exemption period, he is permitted to carry forward the loss for half of the income tax exemption period after the expiration of that period.
• Exemption from export duty.With the exception of hides and skins, all export products are exempt from export duty.
• Exemption from customs duties. Inputs, construction materials, spare parts, vehicles, raw materials for export and personal belongings (only for Industrial Park enterprises) can be imported without customs duty.
• Retention of Foreign Exchange Exporters are allowed to retain and deposit in a bank account up to 30% of their foreign exchange earnings indefinitely. They can also use the remaining 70% of the balance within 28 days without changes.
• Lack of export price controls.The National Bank of Ethiopia does not impose export price controls.
• Export Credit Guarantee Scheme.  Exporters can take advantage of the Export Credit Guarantee Scheme, which is currently in place to ensure that the exporter receives payment for goods sent overseas in the event of customer default, reducing risk to the exporter's business and allowing them to retain competitive price
• Simplified and expedited procedures. Enterprises entering the parks undergo expedited procedures regarding licensing, permits, registration certificates, tax identification number, customs clearance, etc.

Business and investment support structures

Ethiopia is currently actively developing its economy and taking steps to attract foreign investment. As part of this process, the country has created several business and investment support structures that can benefit local and foreign investors. Here are some of them:

• Ethiopian Investment Commission (EIC) This is a government agency that attracts and supports foreign direct investment in Ethiopia. They provide advice and assistance to investors on issues related to registration, licensing, land issues, etc.
• Ethiopian Chamber of Commerce and Sectoral Associations (ECCSA). This is an organization that brings together various industry associations and chambers of commerce. It provides information on business conditions in the country, and also provides support to entrepreneurs and investors.
• Ethiopia Commodity Exchange (ECX). It is an electronic platform designed to facilitate trade in agricultural products. It promotes fair prices for products and ensures transparency in trade.
• Ethiopian Privatization and Public Enterprises Supervising Agency (PPESA). This is the agency responsible for the privatization of state-owned enterprises and monitoring the activities of state-owned companies. It helps attract private capital and manage public assets.
• Ethiopian Revenues and Customs Authority (ERCA). This department is responsible for tax collection and customs control. It plays an important role in ensuring the financial stability of the country and provides information on tax obligations for businesses.

These are just some of the key support structures for business and investment in Ethiopia. They contribute to the development of the business environment in the country and create conditions for attracting investment and stimulating economic growth.