Ethiopia Investment Policies and Incentives and opportunities

1 Ethiopia Investment Policies and Incentives and opportunitiesContents2 Ethiopian Investment Comission1 Overview of economic, geographic, social, and political outlook2 Enabling business environment; Policies and incentives3 Investment opportunities in industrial parks4 Investment opportunities in specific sectors 5 Some examples of high profile Investment in Ethiopia Ethiopia s vision of becoming a middle income country by 2025 is built around economic, social, and environmental pillars3 Ethiopian Investment Comission1 Overview of economic, geographic, social, and political outlook2 Enabling business environment; Policies and incentives3 Investment opportunities ; non-park and industrial park opportunities Overview of economic, geographic, social, and political outlook Overview of economic, geographic, demographic, and political outlook Ethiopia s vision of becoming a middle income country by 2025 is built around economic, social, and environmental pillars4 Ethiopian Investment Comission Ethiopiaenvisionstobecomeamiddleincomeco untryAndLeadingmanufacturinghubinAfricab y2025.

2 Thetargetisbroaderthana quantitativetarget; includesaggressivepovertyreductionandadv ancesinhealth,education,andtheenvironmen t Thethreekeypillarstoachievingthetargetar eeconomic,social,andenvironmentaldevelop ments:Economic development Social developmentEnvironmental development FocusingonLightManufacturingmainlyTextil eLeatherGarment&AgroprocessingFocusing on Education & health Sustainableuseofnaturalresourcesandboost ingresiliencetoadverseimpactsofclimatech angeEthiopia s geographic and demographic realities present excellent opportunities for Investment and tradeEthiopia Land size 1,140,331 sq. km (twice the size of the United Kingdom) 45 Percent suitable for agriculture Have abundant arable and irrigable landPopulation 100 million+ Ethiopia is the 2ndpopulous county in AfricaAltitude 4600 - 120 m 3 -15 N Latitude 33-48 E Longitude It is well positioned for global exports andis situated at the cross-roads of Africa and the Middle East Easy access to Asia through the port of Djibouti and close proximity to Europe also enable Ethiopian exports5 Ethiopian Investment CommissionEthiopia has registered (average) 11% GDP growth over the last 12 years Ethiopia has registered a rapid and sustained double digit economic growth (11 % per annum)

3 During the last 12 years -The Economist Inclusive growth with rapid reduction of poverty FDI about to reach 2+ billion USD One of the top exporters of Coffee, Oil seeds, Gold and horticulture products A bit shy of 60% of Ethiopia s population is in the working age groupAvailability of labour Abundant, trainable & industrious labor force Labor cost in Ethiopia is relatively inexpensive even compared to regional average:oDaily laborer .. less than $5/day oSalaries of fresh university $110 $250/month English is the medium of instruction in secondary & higher education; English is also used as a working language in both government. & private institutions together with Amharic, the Federal working language. Age 0-14 Age 15-64 Age 65+42%55%3%7 Source: PRB, Ethiopia PopulationData, 2017 Ethiopia s location and its membership in regional and bilateral trade agreements make it a desirable Investment destinationFreetradeadvantages: UnitedStates:AGOA(extendedfor10moreyears ) EuropeanUnion: EverythingbutArms Sub-SaharanAfrica:AfoundingmemberoftheCo mmonMarketforEasternandSouthernAfrica(CO MESA) billionpeoplelivewithin8 hoursofflightfromAddisAbabaLocation advantage:8 Source: EICanalysisEthiopia s vision of becoming a middle income country by 2025 is built around economic, social, and environmental pillars9 Ethiopian Investment Comission1 Overview of economic, geographic, social, and political outlook2 Enabling business environment; Policies and incentives3 Investment opportunities ; non-park and industrial park opportunities Overview of economic, geographic, social, and political outlook Enabling environment.

4 Investment Policies and Incentives The Ethiopian government has put attractive admission and regulatory incentive schemes in place for foreign investors Ethiopia s admission policy has been modified more than four times in the last 22 years in favor of investors Foreign investors can invest on their own or in partnership with domestic investors in areas open for FDI. No restrictions on equity ownership in joint Investment Required to have Investment permit from the EIC or relevant government organs as appropriate. Required to allocate/transfer minimum capital oUSD 200,000 for a wholly foreign owned single Investment project, USD 150,000 jointly with a domestic investoroUSD 100,000 for technical consultancy if wholly owned or USD 50,000 jointly with a domestic investor10 Source: EICanalysisRegulatory schemes have been put in place to protect and guarantee foreign investors .. Guarantee against expropriation or nationalization (The Constitution & Investment Law provide guarantee for investors.)

5 Ethiopia is signatory of Multilateral Investment Guarantee Agency & has concluded Bilateral Investment Promotion & Protection Treaties with 30 countries. Privilege to full repatriation of profits, dividends, principal and interest payments on external loan, etc. out of Ethiopia in convertible currency. The right to employ expatriate managers and experts. Double taxation avoidance treaties with 18 : with a highly competitive fiscal Incentives schemeFiscal incentivesInvestment credit supportTax holidays for priority sectorsIncome tax holidays ( 1 9 years)Duty free import of capital goodsDuty exemption of raw materials used as inputs for export Provision of land with competitive lease prices (>$1/m2)12 Type of taxTax ratePersonal income tax35%VAT15%Customs duties0-35%Excise tax0-100%Withholding tax3% Corporate income tax30%Common applicable Commercial Tax Rates Government incentivesCustoms duty exemptionsIncome tax exemptionsSectors in which foreign Investment is permitted1 Generation, transmission & supply of electrical energyICTA gricultureManufacturingWholesale trade PublishingReal estate developmentArchitectural & engineering worksHealth serviceEducation and trainingImport tradeConstruction contractingHotel and tourismMiningExport tradeTAX RATE & INCENTIVESI nvestors will also benefit from easily accessible and efficient one stop- shop services at EIC and industrial parks Around28licensingandregistrationservices inrelativelyshorttimeframe Approvalofincentivesforagro- processingandotherinvestmentventure Complainthandlingbyexecutingofficials TheEthiopianInvestmentBoardoverseeingour (EIC s)

6 Activities,entertainsissuesbeyondourjuri dicalcapacity OneStopShopservicesinallindustrialparks1 4 Source: EICanalysisEthiopia s vision of becoming a middle income country by 2025 is built around economic, social, and environmental pillars15 Ethiopian Investment Comission1 Overview of economic, geographic, social, and political outlook2 Enabling business environment; Policies and incentives3 Investment opportunities ; non-park and industrial park opportunities Overview of economic, geographic, social, and political outlook Investment opportunities in industrial park investments Industrial Parks Development Corporation and private developers are developing IPs throughout the country IndustrialParksDevelopmentCorporationofE thiopia(IPDC)ismandatedtodevelopandopera teawiderangesofindustrialparks IPDC servesasIndustrialParklandbank,developsI ndustrialParksandhandsovertoprivateIndus trialParkdevelopers(leasesorsub-leasesla nd,sellsorrentsshades) IPDC willdevelop100, ,000 Haannually- fora totalfactoryfloorareaof10millionm2(1 millionm2annually)

7 16 Several industrial Parks are being developed through out the countryBy2017 SpecialisationHawassaIIApparel & TextileMekelleApparel & TextileAdamaApparel & TextileMachinery& EquipmentDire DawaApparel & TextileKombolchaApparel & TextileKilintoPharmaceuticalsBole LemiIIAppareland Textile World-class parks, ready for plug and play Specialized on priority sector Sustainable (eco-parks) Strategically located along the new railway corridorsIndustrial Park Projects of ParksSite & Location From Addis AbabaLand size in hectareClusters1 Bole LemiIAddis Ababa156 Apparel2 HawassaSouth 275 Km 300 Textile & ApparelFully subscribed ParksSource: IPDCI ndustrial Park Projects of ParksSite & Location From Addis AbabaLand size in hectareClusters1 Dire DawaEast 473 Km1500 Textile & Apparel, Food Processing, assembly2 KombolchaNorth-East 380 Km700 Textile & Apparel, Food Processing3 MekelleNorth 760 Km1000 Textile & Apparel, Food Processing, Assembly4 AdamaSouth East 74 Km2000 Textile & Apparel, Food ProcessingKombolchaand MekeleFully subscribed Parks and Dire Dawaand Adam will inaugurate recentlyIndustrial Park Projects of ParksSite & Location From Addis AbabaLand size in hectareClusters1 Bole LemiIIAddis Ababa186 Textile & Apparel2 KilintoAddisAbaba337 Food Processing, Pharmaceuticals, House appliance, electronics and electrical3 BahirDarNorth-West 578 Km1000 Textile & Apparel, Food Processing4 JimmaSouth-West 346 Km500 Textile & Apparel, Food ProcessingParks under construction and finalized early 2018 Source.

8 IPDCE thiopia s vision of becoming a middle income country by 2025 is built around economic, social, and environmental pillars21 Ethiopian Investment Comission1 Overview of economic, geographic, social, and political outlook2 Enabling business environment; Policies and incentives3 Investment opportunities ; non-park and industrial park opportunities Overview of economic, geographic, social, and political outlook Investment opportunities in specific sectors priority sectors have been identifiedGoEhas prioritized labor intensive light manufacturing industries to generate employment and export23 Source: EICanalysis Promoted Investment Projects: oIndustry Park DevelopmentoAgro-processingoTextile & Textile GarmentoLeather & Leather GarmentoPharmaceuticalsoConstruction materials, oIT and ElectronicsoEnergyInvestment opportunities in textile and apparels24 Source: EICanalysis Morethen9 IndustrialParksbeingpromotedorareintheco nstructionstagesarededicatedfortextilean dapparels BignamessuchasPVHandH&Marealreadyareprod ucingtheirtextileandapparelproductsinEth iopia Potentialtodevelopa competitivecottonortextilesindustrydueto favorableclimaticandsoilconditions EthiopiantextilefirmsexporttoEurope&US Strongexportperformance.

9 TheEthiopiangarmentandapparelindustryhas grownanaverageof51%overthelast6 years: USimports40%ofEthiopiantextileandgarment exports UKimports10%ofEthiopia s textileandgarmentexports- otherEuropeancountriesimport50%Investmen t opportunities in pharmaceuticals25 Source: EICanalysis TheGovernmentofEthiopiaconsiderspharmace uticalmanufacturinga priorityforitseconomicstrategy Increasedattentiontothecountr y sdiseaseburden,risinghealthcarecoverage, andprogressivepopulationandeconomicgrowt hmakeEthiopiaanattractivemarketforpharma ceuticals TheEthiopianpharmaceuticalmarketis expectedtogrowat15%peryeartoreachnearly$ 1 billionby2020 Inaddition,Africarepresentsa frontierpharmaceuticalmarketvaluedat>$25 Bandwherehighgrowthis stillachievable COMESA representsa largeexportmarket withanaddressablemarketsizeof$ whileIGADandEACarealsoconsiderablemarket size KilintoIndustrialParkwillspecializeinpha rmaceuticalmanufacturingandwillbeopenedi nearly2018 Widerangingincentivesforpharmamanufactur erslocatedinIPs generousincometaxexemptionThere are wide ranging Investment opportunities in agro-processing (1/2)Agro - processingProcessing of.

10 Meat & meat products Fish & fish products Fruits and vegetables Milk and milk processing Processing of coffeeProduction of: Crude and refined edible oil Spaghetti, noodles and macaroni Animal feeds Sugar & sugar products26 Source: EICanalysisThere are wide ranging Investment opportunities in agro-processing (2/2) Agro - processingProcessing of: Oil seeds, cereals seeds, pulses excluding flour Baby food HoneyProduction of: Alcoholic beverage Soft drinks Wine Mineral and other bottled water 27 Source: EICanalysisMore opportunities exist in agricultural farming and plantationAgricultural farmingCotton plantation :Rubber Tree plantation :Livestock:Breeding, Fattening, Veterinary Services horticulture : Citrus, banana, mango, papaya, avocado, guava, grapes, pineapple, apples, potatoes, cabbages, eggplant, tomato, celery, cucumber, onion, asparagus, water melon, sweet melon, carrots, green beans, strawberries, herbs. Floriculture: Highland and lowland world class flowers and rosesRoot & Tuber Crops: sugarcane, potatoes, sweet potato corn, etc.