Investment Outlook The 2017 investment outlook of Ethiopia is part and parcel of the second phase of the Growth and Transformation Plan ( GTP II ), which aims to make Ethiopia a lower-middle income country by 2025. Ethiopia plans on achieving these development goals through an environmentally-friendly, green economy. Development through the sectors of agriculture, manufacturing and construction are the main focus of the GTP II. In addition, the Ethiopian Investment Commission ( EIC ), states that the specific strategic investment sectors are leather production, textile and garment, horticulture and industry zone development. The International Monetary Fund ( IMF ) has projected Ethiopia’s real GDP growth to be around 7.5 % for the fiscal year 2016-2017. Furthermore, the World Bank, has projected that Ethiopia’s economy will grow by 8.9% for the fiscal year 2017 in its yearly update. Ethiopia is one of Africa’s fast- growing economies with an overall economic estimated growth of 6.5%. This past year however, has seen a relative slowdown due to the impact of the “El Niño”-related drought, a drastically weaker global environment and the fall in value of the U.S dollar. Agriculture accounts for 36.2% of GDP in 2016, while industry accounts for 17% and services 46.8%. 1 The EIC announced that the country’s Foreign Direct Investment ( FDI ) has increased by 35 percent on average over the last six months as compared to the same period last year. Foreign investors have increasingly been settling in industrial parks over the last six months. Recently, one of the Chinese textile companies situated in the Hawassa Industrial Park has begun exporting its products. The Hawassa Industrial Park plays host to the largest textiles and apparel park in Africa and one of the largest in the world and is home to 52 factories. This is a manifestation of efforts to develop industrial parks as part of a wider industrialization push. 2 In October, a State of Emergency was declared due to political unrest. Nonetheless, the EIC has reported that six- month FDI performance stands at USD 1.2 billion.
Forms of Corporate Structure Among companies registered in Ethiopia, private limited companies are the most prominent and account for approximately 96%, whereas share companies account for 4% of the registered companies. All business structures other than a joint venture must annually renew their business licences after filing their tax returns and obtaining tax clearance from the tax authority. 1. Partnerships a. Ordinary Partnership – unlimited liability. These are not generally used to structure businesses. b. General Partnership – unlimited liability. Partners have the right to partake in the management of the partnership. c. Joint Venture – no legal personality and rarely used in Ethiopia. Foreign investment does not normally take this form because of the requirement of registration. d. Limited Partnership - limited liability. These are rare and less frequent in practice than general partnerships. With the exception of joint venture companies, partnerships are required to register on the commercial register and obtain a business licence prior to commencing their business activities. As part of the registration and licensing process, they will be required to register as taxpayers and receive a tax identification number. 2. Companies limited by shares a. Share Company – formed by a minimum of five members and liability of shareholders is limited. Shares are freely transferable and capital can be structured into paid and subscribed portions. A share company is required to have a formal management structure with detailed in the Commercial Code. b. Private Limited Company ( PLC ) - formed by between two and fifty members with capital that is fully paid at the point of formation. Shares are not freely transferable and the PLC cannot engage in banking and insurance activities. Unlike share companies, PLCs may be operated by a manager responsible to the shareholders, rather than having to adopt a formal management structure, such as a board.
1 www.cia.gov 2 http://www.investethiopia.gov.et
26
Made with FlippingBook Online newsletter