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Africa Singapore Business Forum 2018 | Ethiopia

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Africa Singapore Business Forum, 28 - 29 August
Country Panel Presentation - Ethiopia

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Africa Singapore Business Forum 2018 | Ethiopia

  1. 1. Ethiopia Emerging Manufacturing Hub and Preferred Investment Destination in Africa 2018
  2. 2. Why Ethiopia? Clear vision and strategy Rapid and sustainable economic growth Trainable labour at competitive rates Favorable infrastructure and market access Areas of investment opportunity 1 2 4 3 5
  3. 3. Why Ethiopia? 1 Clear vision and strategy
  4. 4. Vision 2025: Making Ethiopia the leading manufacturing hub in Africa  Middle income  Average annual GDP growth of more than 10%  Manufacturing growth for structural economic transformation  Annual growth rate 25%  Increase by 4 times to 20% of GDP  Creating 2 million manufacturing jobs (200,000/year)  Targeted investment Promotion: Key sectors, high-quality
  5. 5. Priority Sectors: Focus on Manufacturing Industries Leather & leather products Agro- processing Industrial parks Pharmaceuticals Construction materials Metal engineering … Apparel & textile Chemicals Light Manufacturing Industries Basic Import Substitutions
  6. 6. Why Ethiopia? 2 Rapid and sustainable economic growth
  7. 7. Fastest growing economy
  8. 8. Source: UNCTAD, World Investment Report 2018 Remarkable FDI performance – 2nd largest FDI recipient in Africa according to UNCTAD
  9. 9. Pioneer Indonesian Investors located in Ethiopia (in textile and apparel, food processing, chemical manufacturing etc)
  10. 10. High-level Commitment for Investment Promotion and facilitation
  11. 11. Why Ethiopia? 3 Trainable labour available at competitive rates
  12. 12. Demographic advantage• 100+ million population;  World Rank #13  Africa Rank #2 • Median age is under 20 - large & young;  Wages very competitive in the world;  Growing educated labor force - 50+ Universities; 1,300+ TVETs • Gov-supported industrial skills trainings 12
  13. 13. Why Ethiopia? 4 Competitive infrastructure and market access
  14. 14. Ethiopia is building mega infrastructure projects which will capitalize its geographic and market access advantages and boost investment New electric railway connecting industrial parks to Djibouti port - 4-12 hour travel time Africa’s aviation hub: daily flights by Ethiopian Airlines to various parts of Africa, Asia and Europe, 1. Accessible export market with proximity to European Union, U.S., Middle East, and Asia and leading aviation industry 2. Duty-free Quota-free access to USA and EU; preferential market access to several countries 3. ACFTA with access to 1.2 billion population Market access advantages Several road projects such as Addis-Adama express way Building Infrastructure as Path to Middle Income
  15. 15. Railway networks connecting important corridors of the country – set to ease trade logistics Coupled with recent reforms on trade logistics: 1.Access to Assab port – adds proximity and variety/options for access to sea 2.Privatization of ESLSE (among other SoEs – amined at enhancing quality service provision through private sector participation)
  16. 16. Ethiopian Airlines  Africa’s world-class and Star Alliance member,  Fliesto 110+ international passenger and 40+ dedicated cargo destinations;  Operates the largest cargo network and terminal in Africa
  17. 17. Substantial investment in electricity generation Clean and new energy sources (3 US cents/kwh)
  18. 18. Industrial Parks Development More than 10 Industrial Parks being developed through out the country
  19. 19. Industrial parks anchor principles Specialized parks Export Oriented Vertical Integration Sustainab ility Skills Developme nt 19
  20. 20. Hawassa Industrial Park
  21. 21. Bole Lemi I Industrial Park 21
  22. 22. Kombolcha Industrial Park 22
  23. 23. Mekelle Industrial Park 23
  24. 24. Adama Industrial Park 24
  25. 25. Dire Dawa Industrial Park 25
  26. 26. Kilinto Industrial Park 26
  27. 27. Other industrial parks under development Name Details 1 Debre Birhan Industrial Park Location: Debre Birhan Cluster: Agro-processing 2 Jimma Industrial Park Location: Jimma Cluster: leather and leather products 3 Adama II Industrial Park Location: Adama Cluster: Textile and apparel 4 Bole Lemi II Industrial Park Location: Addis Ababa Cluster: Textile and apparel Expected to be finalized by April/June 2018 A number of investors including Soufflet, Shints Suda group etc are in the pipline to enter in to the park 27
  28. 28. Private industrial parks operational and under development Name Details Investors in the park 1 Eastern Industrial Park (Phase I and II) Location: Dukem, 400 ha (total size), 267 (Phase I operational) Cluster: Mixed Over 70 investors in various manufacturing sectors 2 George Shoe Industrial Park Location: Mojo. Size: 100ha Cluster: leather and leather products George Shoe 3 CCCC - Arerti Industrial Park Location; Arerti: 100 ha (Phase I). Cluster: building materials and furniture Under development 4 Huajian Industrial Park Location: Lebu: 184 ha. Cluster: Leather and leather products and others Huajian 5 CCECC – Dire Dawa Industrial Park Location: Dire Dawa – 1000 ha Cluster: Mixed Under development 28
  29. 29. Why Ethiopia? 5 Areas of investment opportunity
  30. 30.  Large land size and conducive climatic conditions for cotton and fibres production  > 3.2 million hectares of land is dedicated for cotton production (<3% utilized so far)  Easy access to industrial land with promotional lease rate  Abundant and trainable workforce: labor costs 20% of China, lower than other East African countries  Globally competitive energy costs (estimated at USD 0.03/kWh); reliable green energy supply in industrial parks  Rich in supply of water  Potential areas of operation include:  Integrated textile mills  Spinning  Weaving and/or knitting  Dyeing and printing  Garment factory (knitted/woven) 1. Textile and Apparel – Opportunity for cost competitive and vertically integrated manufacturing
  31. 31. 2. Leather - Ethiopia has one of the largest livestock population in the world Rawhides and Skin According to FAOUN, Ethiopia ranks 9th in the global Raw hide and Skin with the kill rate of: •Cattle – 7% •Sheep – 33% •Goat – 33% Thus, every year Ethiopia produce: •66,500 tones of salted hide •20 million pcs of skins Livestock Ethiopia ranks 7th in the global livestock population; & according to CSA livestock survey in 2016/2017, •Cattle – 59,486,667 •Sheep – 30,697,942 •Goat – 30,200,226 Finished leather • There are more than 33 tanneries • Locally owned – 17 • Foreign owned tanneries – 15 • Total annual finished leather production reaching between: 120- 135 million sq.ft • Sheep and Goat – 80 million sq. ft. • Cattle: 40 million sq. ft. • Export: 60 million sq.ft ($69,552,960 dollar) Footwear • There are 16 local and 3 FDI footwear factories • Total production: 7.81 pair pairs • Export: 3.31 mil pairs ($38,567,000) Gloves • There are more than 30 factories with 19 exporting • Total production: 1.3 mil pieces • Export: $2,555,000 dollar Goods and Garment • Three foreign owned factories • Total production: 1.5 mil pairs1.26 mil pairs • Export: 1.26 pairs ($5,004.56) Source: Central Statistical Agency (2016) FAO (2016) LIDI (2016)
  32. 32. Ethiopia is: -Africa’s leading producer and exporter of coffee Arabica and ranks 5th in the world -2nd largest flower exporting country in Africa -Regional lead in livestock resource and among top 10 in the world -Continental lead in honey and beeswax production. Priority areas for investment: Horticulture (flowers, fruits, vegetables and herbs), plantation of cotton, palm tree, rubber tree, coffee, tea, sugarcane, oilseeds, livestock, apiculture, and high-value crops such as barley for malting. 32 3. Agribusiness - Ethiopia has one of the largest livestock population in the world
  33. 33. - Ethiopia is the first African country to develop a national strategy for pharmaceutical manufacturing (2015-2025) - GoE encourages clusters - state of the art Industrial Park specialized in pharmaceutical manufacturing (kilinto) - Growing pharma market both in Ethiopia (at 15% per year) and throughout Africa - Opportunity to serve the African market by locating in Ethiopia (creating regional export hub) - New and generous incentives package – covering corporate income tax exemption, personal income tax exemption, customs duty exemption, price preference etc 33 4. Pharmaceuticals - Huge potential to substitute import and also export
  34. 34. The proposed corporate income tax incentives are bolder than the current exemption scheme and incentivize export in a way that is well-suited for the pharma sector Active Pharmaceutical Ingredient (API) production inside of industrial parks In Addis/surroundi ng areas Outside of Addis/surrounding areas Base 8 years 10 years 30% export (in terms of value, successively for 3 years)* + 2 years + 2 years 60% export (in terms of value, successively for 3 years)* + 2 years + 2 years TOTAL Up to 12 years Up to 14 years Formulation/final medicine production inside of industrial parks In Addis/surroundi ng areas Outside of Addis/surroundin g areas Base 6 years 8 years 30% export (in terms of value, successively for 3 years)* + 2 years + 2 years 60% export (in terms of value, successively for 3 years)* + 2 years + 2 years TOTAL Up to 10 years Up to 12 years Pharmaceutical packaging production inside of industrial parks In Addis/surrounding areas Outside of Addis/surrounding areas Base 3 years 4 years 30% export (in terms of value, successively for 3 years)* + 2 years + 2 years 60% export (in terms of value, successively for 3 years)* + 2 years + 2 years TOTAL Up to 7 years Up to 8 years Wide-ranging incentives for pharma manufacturers located in IPs – Business income tax exemption
  35. 35. Wide-ranging incentives for pharma manufacturers located in IPs – other incentives • Pharmaceutical inputs • Capital goods/machinery • Construction materials • Spare parts • Vehicles necessary for the investment Personal income tax exemption Loss carry forward 100% Customs duty and other tax exemption on import of • 5-10 years for expatriate experts • Long-term employment visa and work permit • For up to 5 years 100% Export duty exemption on • Export of all pharmaceutical products Procurement • 25% price preference provided to firms manufacturing in Ethiopia • Long term procurement framework on local sale of exported pharmaceutical products Finance and forex • Increased export earning retention: 30% can be retained indefinitely, and 70% can be used in 28 days • Higher external loan threshold: 60:40 debt:equity ratio
  36. 36. Ethiopia: Country ProfileGeneral incentive packages and investment facilitation support – for investment in priority sectors  Corporate income tax exemption - up to 10 years income tax exemption  Import duty exemption - on import of capital goods, construction materials, spare parts, motor vehicles, raw materials for export commodities & personal effects for residents in industrial parks.  Export duty exemption – on all products  Loss carry forward – a right to carry forward loss incurred within the period of income tax exemption for half of the income tax exemption period after expiry  Free repatriation of funds  Guarantee against expropriation Investment Incentives and protection  One-stop shop and aftercare services under the EIC  Customs facilitation through bonded warehouse and voucher schemes  Expedited visa procedure Investment Facilitation
  37. 37. Thank You!

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