Ethiopia, the second most populous country in Africa, offers many business opportunities for American firms

Business America, August, 1997

Ethiopia, the second most populous nation on the African continent, is endowed with natural resources and offers a wide variety of trade and investment opportunities for U.S. companies. Formerly a socialist country, Ethiopia is undergoing a transition to a free-market economy. Since 1992, the new government has undertaken economic reforms under the auspices of the International Monetary Fund and the World Bank. In an effort to transform a centrally-planned economy into a market-oriented economic system, Ethiopia has removed price controls and many regulations and restrictions which had been stifling market forces and private sector initiatives.

Macroeconomic stability has been maintained through a determined tightening of fiscal and monetary policies. GDP growth was more than 7 percent in 1996 and is expected to exceed 7 percent again in 1997. Inflation was less than I percent in 1996.

The Federal Democratic Republic of Ethiopia has adopted a five-year development plan in which the nation's development efforts focus on agriculturally-led industrial development. Part of this plan includes improving the investment regime, the outline of which was incorporated into the revised 1996 Investment Proclamation. The revised policy is expected to result in the opening of additional sectors of the economy for investment and a lowered initial foreign investment requirement, which will likely decrease from $500,000 to $250,000.

As part of its economic development program, the Ethiopian government has engaged in a privatization program over the past two years, during which about 150 state-owned stores, hotels, restaurants, and factories have been sold through public tendering. The government is committed to continuing the privatization process and to attracting domestic and foreign investment. Foreign investment, however, is prohibited in large-scale power production, telecommunications, financial services, and many small-scale personal services.

Although the government dominates the banking and insurance sectors, three private banks and seven private insurance companies have opened in the past two years.

Business opportunities for American firms abound. U.S. exports to Ethiopia totaled $147.9 million in 1996. Leading export items were machinery parts, wheat, fertilizers, and airplanes. U.S. imports from Ethiopia were $34.6 million in 1996, led by coffee, tantalum and vanadium ores, and animal skins.

There are currently more than 35 American firms with representation in Ethiopia. Within the last six months, 128 American firms have registered protection for their trademarks in Ethiopia. Several of these firms have subsidiaries in Addis Ababa, including IBM, Boeing, National Cash Register, Mack Truck, General Motors, Pratt and Whitney, Pioneer Seed, and Sterling Products.

Investment and sales opportunities include aircraft equipment and machinery, agricultural chemicals and fertilizers, mineral exploration and extraction, computers and other office equipment, telecommunications equipment, consultancy services, and vehicles and spare parts. Many commercial opportunities are in the form of major projects. Recently, an American sugar company won an $83 million contract to construct a sugar refinery. Current projects where U.S. companies are bidding include the Addis Ababa International Airport, the Bole International Airport Expansion, and the Lega Dembi Gold Mine.

To obtain further trade information on Ethiopia, please contact the Office of Africa by telephone at (202) 4824227, or fax at (202) 482-5198.