#1Ethiopia Investment Policies and Incentives and opportunities EIC ETHIOPIAN INVESTMENT COMMISSION የኢትዮጵያ ኢንቨስትመንት ኮሚሽን#2Contents 1 Overview of economic, geographic, social, and political outlook 2 Enabling business environment; policies and incentives 3 Investment opportunities in industrial parks 4 Investment opportunities in specific sectors 5 Some examples of high profile investment in Ethiopia Ethiopian Investment Comission 2#3Overview of economic, geographic, demographic, and political outlook#4Ethiopia's vision of becoming a middle income country by 2025 is built around economic, social, and environmental pillars • Ethiopia envisions to become a middle income country And Leading manufacturing hub in Africa by 2025. The target is broader than a quantitative target; includes aggressive poverty reduction and advances in health, education, and the environment The three key pillars to achieving the target are economic, social, and environmental developments: Economic development Social development Environmental development Focusing Manufacturing on Light Focusing on Education & mainly health Textile Leather Garment & Agro processing Sustainable use of natural resources and boosting resilience to adverse impacts of climate change Ethiopian Investment Comission 4#5Ethiopia's geographic and demographic realities present excellent opportunities for investment and trade Ethiopia Land size Population Altitude Location ■1,140,331 sq. km (twice the size of the United Kingdom) ■45 Percent suitable for agriculture Have abundant arable and irrigable land ■100 million+ Ethiopia is the 2nd populous county in Africa 4600 a.s.l. 120 m b.s.l. - 3-15º N Latitude ⚫33-48ºE Longitude It is well positioned for global exports and is 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 exports Ethiopia Ethiopian Investment Commission 5#6Ethiopia has registered (average) 11% GDP growth over the last 12 years 00 Real GDP growth rate (%) 11.8 11.2 11.4 10.6 10 •Ethiopia has registered a rapid and sustained double digit economic growth (11% per annum) during the last 12 years -The Economist 10.3 9.8 9.6 8.7 •Inclusive growth with rapid reduction of poverty 2007 2008 2009 2010 2011 2012 2013 2014 2015 •FDI about to reach 2+ billion USD •One of the top exporters of Coffee, Oil seeds, Gold and Horticulture products "#7A bit shy of 60% of Ethiopia's population is in the working age group Availability of labour Abundant, trainable & industrious labor force Labor cost in Ethiopia is relatively inexpensive even compared to regional average: О 。 Daily laborer ... less than $5/day О Salaries of fresh university graduate.... $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. Source: PRB, Ethiopia Population Data, 2017 3% Age 65+ Age 15-64 55% Age 0-14 42% 7#8Ethiopia's location and its membership in regional and bilateral trade agreements make it a desirable investment destination Free trade advantages: • • United States: AGOA (extended for 10 more years) European Union: Everything but Arms Sub-Saharan Africa: A founding member of the Common Market for Eastern and Southern Africa (COMESA) Location advantage: 3.5 billion people live within 8 hours of flight from Addis Ababa Source: EIC analysis 00 8#9Enabling environment; investment policies and incentives#10The 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 。 USD 200,000 for a wholly foreign owned single investment project, USD 150,000 jointly with a domestic investor 。 USD 100,000 for technical consultancy if wholly owned or USD 50,000 jointly with a domestic investor Source: EIC analysis 10#11Regulatory 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.) 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 countries. Source: EIC analysis 11#12...coupled with a highly competitive fiscal incentives scheme Duty free import of capital goods Tax holidays for priority sectors Provision of land with competitive lease prices (>$1/m²) Fiscal incentives Investment credit support Income tax holidays (1- 9 years) Duty exemption of raw materials used as inputs for export 12#13TAX RATE & INCENTIVES Common applicable Commercial Tax Rates Type of tax Tax rate Corporate income ICT 30% tax Sectors in which foreign investment is permitted¹ Manufacturing Agriculture Generation, transmission & supply of electrical energy Government incentives Customs duty Income tax exemptions exemptions Customs duties 0-35% Export trade Hotel and tourism VAT 15% Mining × Construction contracting Excise tax 0-100% Import trade Education and training × × Withholding tax 3% Health service Personal income 35% Architectural & engineering works Real estate tax development Publishing Wholesale trade × ✓ ×#14Investors will also benefit from easily accessible and efficient one-stop-shop services at EIC and industrial parks Around 28 licensing and registration services in relatively short timeframe ● Approval of incentives for agro - processing and other investment venture Complaint handling by executing officials • The Ethiopian Investment Board overseeing our (EIC's) activities, entertains issues beyond our juridical capacity . One Stop Shop services in all industrial parks Source: EIC analysis 14#15Investment opportunities in industrial park investments#16Industrial Parks Development Corporation and private developers are developing IPs throughout the country • Industrial Parks Development Corporation of Ethiopia (IPDC) is mandated to develop and operate a wide ranges of industrial parks IPDC serves as Industrial Park land bank, develops Industrial Parks and hands over to private Industrial Park developers (leases or sub-leases land, sells or rents shades) IPDC will develop 100,000 ha of land between 2016 and 2025 -i.e. 10,000 Ha annually- for a total factory floor area of 10 million m² (1 million m² annually) 16#17Several industrial Parks are being developed through out the country Existing and future IP location ERITREA Red Sea YEMEN World-class parks, ready for 'plug and play' Specialized on priority sector Sustainable (eco-parks) • Strategically located along the new railway corridors Gonder Mekelle IP Bahir dar IP Gulf of Aden By 2017 SUDAN Specialisation Bahir Dar Dese Kombolcha IP Hawassa II Apparel & Textile Bole Lemi and Mekelle Kilintol IP Diren Apparel & Textile Addis Abab Dire Dawa IP SOMALIA Adama Nazret Jimma IP Adama IP Werder Dire Dawa Hawassa IP Chew Gestro R Kombolcha Kilinto UGANDA Bole Lemi II KENYA Apparel & Textile Machinery & Equipment Apparel & Textile Apparel & Textile Pharmaceuticals Apparel and Textile 2000- Occ#18Industrial Park Projects Fully subscribed Parks Name of No. Parks Site & Location From Addis Ababa Land size in hectare Clusters 1 Bole Lemi I Addis Ababa 156 Apparel 2 Hawassa 300 South 275 Km Textile & Apparel Source: IPDC 18#19Industrial Park Projects Kombolcha and Mekele Fully subscribed Parks and Dire Dawa and Adam will inaugurate recently No. Name of Parks Site & Location From Addis Ababa Land size in hectare Clusters 1 Dire Dawa East 473 Km 1500 Textile & Apparel, Food Processing, assembly 2 Kombolcha North-East 380 Km 700 Textile & Apparel, Food Processing 3 Mekelle North 760 Km 1000 Textile & Apparel, Food Processing, Assembly 4 Adama South East 74 Km 2000 Textile & Apparel, Food Processing 19#20Industrial Park Projects Parks under construction and finalized early 2018 No. Name of Parks Site & Location From Addis Ababa Land size in hectare Clusters 1 Bole Lemi || Addis Ababa 186 Textile & Apparel 2 Kilinto Addis Ababa 337 Food Processing, Pharmaceuticals, House appliance, electronics and electrical 3 Bahir Dar North-West 578 Km 1000 Textile & Apparel, Food Processing 4 Jimma South-West 346 Km 500 Textile & Apparel, Food Processing Source: IPDC 20#21Investment opportunities in specific sectors#22priority sectors have been identified Light Manufacturing Industries Leather Agro- processing Industrial parks Textile & garment Chemicals Basic & Import Substitutions Metal engineering Construction materials Pharmaceuticals#23GoE has prioritized labor intensive light manufacturing industries to generate employment and export . Source: EIC analysis Promoted Investment Projects: o Industry Park Development o Agro-processing o Textile & Textile Garment ○ Leather & Leather Garment ○ Pharmaceuticals o Construction materials, o IT and Electronics o Energy 23#24Investment opportunities in textile and apparels . • • More then 9 Industrial Parks being promoted or are in the construction stages are dedicated for textile and apparels Big names such as PVH and H&M are already are producing their textile and apparel products in Ethiopia Potential to develop a competitive cotton or textiles industry due to favorable climatic and soil conditions • Ethiopian textile firms export to Europe & US • Strong export performance: the Ethiopian garment and apparel industry has grown an average of 51% over the last 6 years: • US imports 40% of Ethiopian textile and garment exports • UK imports 10% of Ethiopia's textile and garment exports countries import 50% other European Source: EIC analysis 24#25Investment opportunities in pharmaceuticals • . • . The Government of Ethiopia considers pharmaceutical manufacturing a priority for its economic strategy Increased attention to the country's disease burden, rising healthcare coverage, and progressive population and economic growth make Ethiopia an attractive market for pharmaceuticals The Ethiopian pharmaceutical market is expected to grow at 15% per year to reach nearly $1 billion by 2020 In addition, Africa represents a frontier pharmaceutical market valued at >$25B and where high growth is still achievable COMESA represents a large export market - with an addressable market size of $6.2B - while IGAD and EAC are also considerable market size - Kilinto Industrial Park will specialize in pharmaceutical manufacturing and will be opened in early 2018 Wide ranging incentives for pharma manufacturers located in IPS - generous income tax exemption Source: EIC analysis 25#26There are wide ranging investment opportunities in agro- processing (1/2) Agro-processing Processing of: Meat & meat products Fish & fish products Fruits and vegetables Milk and milk processing Processing of coffee Production of: Crude and refined edible oil Spaghetti, noodles and macaroni Animal feeds Sugar & sugar products Source: EIC analysis 26#27There are wide ranging investment opportunities in agro- processing (2/2) Agro - processing Processing of: Oil seeds, cereals seeds, pulses excluding flour Baby food Honey Production of: Alcoholic beverage Soft drinks Wine Mineral and other bottled water Source: EIC analysis 27#28More opportunities exist in agricultural farming and plantation Agricultural farming Cotton 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 roses Root & Tuber Crops: sugarcane, potatoes, sweet potato corn, etc. Beverage Crops: Coffee and tea Source: EIC analysis Maranque Plants (Arst Mesti 4-2005 28#29Ethiopia is capitalizing its electric power potential to enhance investment opportunities Electricity tariff is one of the lowest electricity in the world Current rate: 3 cents/kwh Energy potential Hydro More than 45,000 MW - Largest hydro power dam in Africa is under construction with 6,000 MW capacity Wind: More than 10,000 MW Geothermal: More than 5,000 MW Supply chain opportunities. Engineering & technical consultancies 29#30Railway networks will connect important corridors of the country • New electric railway connecting industrial parks to Djibouti port - 4-12 hour travel time Planned Railway Networks Axum Shire Tigray Metema GendaWuha Mekele Azezo Aykel Wereta Weldly Bahir Dar Amhara Finote Selam Kurmuk Benishangul Gumuz Asosa Alar Dichoto Elidar Semera Kombolcha Dewele Nejo Nekemte Ejaji Ambo Addis Ababa Dire Dawa Haran Mieso Awash Sebeta Bedele Medjo Adama Iteya Seka Gambella Ziway Asola Robe Jimma indeto Gasera Tepl Shashemene Ginir Somali Soddo Hawasa Oromia Boma pc Car Sy Dima B 25 Southern Region Arba Minch Konso Weyto Yabelo Mega Moyale --- By 2017 By 2020#31A flagship industrial park, Hawassa Eco-Industrial Park I has been constructed in 2016 Overview - 1.4 million m² land 400,000m² factory buildings ■ Specialized in Apparel and Textile Eco-industrial park (ZLD) dad Advantages One Stop Shop services Abundant labor with competitive wage Proximity to Airport, railway Anchor and leading firms Attractive incentives Phase 1 was inaugurated on July 13th, 2016 20#32Attractive incentives are provided for investors in Industrial Parks Manufacturers Exempted from income tax up to 8 - 10 years Exempted from duties and other taxes on imports of machinery, equipment, construction materials, spare parts, raw materials and vehicles No taxes on exports One-stop-shop government services Land lease term: 60-80 years at zero charge for factories and residential quarters Developers Exempted from income tax up to 15 years (outside Addis Ababa) Land lease term: 60-80 years at nominal rate with sub- lease rights Provision of necessary infrastructure, including dedicated power substations Exempted from duties and other taxes on imports of machinery, equipment, construction materials and vehicles#33Some examples of high profile investment in Ethiopia#34Presence of multinationals-witness of fast industrialization Arvind CHARGEURS FASHION TECHNOLOGIES AYKA ADDIS droid allana POTASH ★HeinekenⓇ® Raymond jm 无锡金茂 PVH 34#35Indochine INTERNATIONAL Unilever 德欣贸易 EVER EK The Ultimate Innovator® BEST CORPORATION (P) LIMITED TM RG Reykjavík Geothermal hela H&M TESCO Every little helps AIKMA QUALITY 35#36DIAGEO 回非 STAL TAL Apparel BUSANA APPAREL GROUP Tiger Brands NewAge SOUTHWEST ENERGY EPIC G ROUP World-das mancing ingen sokitions CAL VALLEY PETROLEUM INC. 36#37We Welcome you to invest in the fast growing Ethiopia For further reference our website is: www.investethiopia.gov.et Thank You! EIC ETHIOPIAN INVESTMENT COMMISSION የኢትዮጵያ ኢንቨስትመንት ኮሚሽ ን