Ethiopia's Economic Climate

Introduction

With a population of 61 million, growing at a rate of 6% per year, Ethiopia is the second most populous country in sub-Saharan Africa (after Nigeria). Located in the north eastern part of Africa bordering Eritrea to the north, Djibouti to the north east, Somalia to the south east, Kenya to the south and Sudan to the west, Ethiopia is the gateway to one of Africa's most rapidly growing markets.
Its climate is mainly temperate because of the high plateau terrain, with an average annual temperature of 55 degrees F, abundant rainfall in some years and low humidity. The lower country and valley gorges are very hot and subject to recurrent drought.

Host of the Organization of African Unity (OAU) and the United Nations Economic Commission for Africa (UNECA), Ethiopia has become Africa's s premiere hub for diplomacy and a dynamic center for commerce, investment and tourism. As one of the oldest nations in the world Ethiopia and its people have an ancient culture and deep-rooted values. Ethiopia has one of the lowest crime rates in Africa.

Although the gross national product (GNP) per capita of $1,101 per head is low, it is growing, and Ethiopia ranks as the fifth-largest US export market in sub-Saharan Africa, after South Africa, Nigeria, Angola and Ghana. In 1997, the total GNP at current market prices was about $6.5 billion. The country has huge potential as a major base for exporters to the global market, with its proximity to a large number of African countries, the Middle East and Europe specially noting a significant increase in its trade activities in recent years.

Ethiopia, as is the case with Africa generally has secured only modest levels of foreign direct investment (FDI) compared to developing countries elsewhere in the world. The recent policy reforms and the introduction of a liberal investment code have opened the way for Ethiopia to attract substantially more foreign investment in the future.
The current Ethiopian economic policy places Agricultural-Development-Led-Industrialization (ADLI) as its strategy in order to build a strong bridge between the present agricultural economic base and industry. This is seen as the future engine of the country's economic development.

The economic policy has deregulated the price of goods and services, opened the market for the private sector allowing free competition, eliminated export duties, made land available through lease and provided access to foreign exchange for importation through auction.

Ethiopia recognizes that foreign investment is paramount for its development. Fortunately it has immense resources and a lot more to offer the foreign investor: large market base; easily trainable and ample labor force; supportive and enabling macro-economic policy environment with investor friendly bureaucracy and crucial incentives.

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