Attention: leather exporters or importers! please read about this company.

The Company has a production capacity of 500 hides and 5000 skins daily. It is well equipped with modern tanning machines and highly experienced labor force.

For Export:

• Pickled sheep skins
• Wet blue sheep skins
• Wet blue goat skins
• Wet blue side hides
• Crusts of hides and skins

For more information please contact us at info@madeinethiopia. net

HOW TO SET UP BUSINESS ORGANIZATIONS IN ETHIOPIA

One-Stop-Shop

The EIA is a truly one-stop-shop for all foreign investment matters in Ethiopia. The EIA provides necessary information required by investors; receives investment applications; approves and issues investment permits to foreign investors; provides registration services to newly incorporated business organizations; approves expatriate posts in an approved investment and issues work permits to foreign employees; issues trade and operating license to approved foreign investment; facilitates the acquisition of land by foreign investors in accordance with the relevant laws of the federal and regional governments; etc.

As a result of the appropriate measures taken by the Federal Government to organize EIA as a one-stop-shop for investors, cumbersome bureaucratic procedures faced by investors have been eliminated.

Companies incorporating in Ethiopia may operate through a subsidiary (i.e. incorporated under the Laws of Ethiopia) or through a branch (i.e. incorporated under the laws of a foreign country).

Ethiopian company law recognizes the commercial company in various forms. The most important types of business organizations are:-

a) sole proprietorships;

b) branch offices of companies registered outside Ethiopia;

c) share companies;

d) private limited companies (PLC);

e) partnerships; and

f) co-operatives.

The most widely used forms of companies are limited liability companies or PLC's which are formed in conformity with the requirements of the Commercial Code of Ethiopia of 1960.

Company Registration

All foreign investors are required to register their enterprise in accordance with the Commercial Code of Ethiopia. The initial steps in forming a company are to register the name of the proposed company with the Ethiopian Investment Authority. Prospective investors are required to submit a draft memorandum and articles of association. After the above documents are examined by the Authority, the founders are required to appear in person or by proxy before the notary public at the high court and finalize the signing of the statutes of the company. Following the signing of the above documents, the Authority will announce the formation of the company through the official Gazette in less than 5 days. The Ethiopian Investment authority will subsequently issue a certificate of incorporation evidencing the registration of the company.

Opening of a Branch Office of an Overseas Company

An overseas company wishing to invest through a branch office is required to submit the following documents to the Ethiopian Investment Authority.

a certified and notarized copy of the statutes or memorandum of association of the company;

a resolution passed by the owners of the mother company authorizing the establishment of a branch office in Ethiopia. The authorized capital of the branch, the

names of the share holders, the chief executives, and the branch manager vested with the authority to become the legal representative in Ethiopia should be indicated in the resolution;

a certified and notarized 3 (three) specimen signature of the legal representative.

An embarkation fee of USD 10 per person is payable when leaving Ethiopia. The embarkation fee can be payed either at the Exit Airport or any Ticket Agent Office.

ALLOCATION OF LAND FOR INVESTMENT

In Ethiopia, land is public property. Both rural and urban lands are made available to investors on a lease-hold basis. Lease-holders have a right of use over urban land for periods ranging from 50 to 99 years. With respect to rural land, the rental value and the lease period are fixed by land use regulations of each Federal State. Lease right over land can be transferred together with on-built facilities.

Each Regional Government delivers, based on the Federal law and its own laws, the required land to an investor within 60 days after receiving an application for allocation of land for an approved investment.

The Ethiopian Investment Authority, in cooperation with the concerned Regional Government entities, facilitates and follow up the allocation of land for approved foreign investments.

Areas of Investment Reserved for Domestic Investors

Banking and insurance business (exclusively reserved for Ethiopian nationals);

Production and supply of electrical energy with installed capacity of up to 25 mega watts (exclusively reserved for Ethiopian nationals);

Air transport services using aircraft with a seating capacity of up to 20 passengers or with a cargo capacity of up to 2,700 kg. (exclusively reserved for Ethiopian nationals).

Radio and television broadcasting services;

Retail trade and brokerage;

Wholesale trade (excluding the sale by foreign investors of their products produced locally)

Import trade;

Export trade of raw coffee, oilseeds, pulses, hides and skins and live sheep, goats and cattle not raised or fattened on own farm;

Construction companies excluding grade 1 contractors;

Tanning hides and skins up to crust level;

Hotels other than star designated, motels, pensions, tearooms, coffee shops, bars, night clubs and restaurants excluding international and specialized restaurants;

Tour operation, travel agency, commission agency and ticket offices;

Car hire and taxi-cab transport;

Commercial road transport and inland water transport services;

Bakery products and pastries exclusively for the domestic market;

Grinding mills for grains;

Barber shops, beauty saloons, goldsmith shops and tailoring excluding garment factories;

Building maintenance services, repair and maintenance of vehicles;

Saw milling, slicing, pealing and chopping of logs, and manufacture of wood products exclusively for the domestic market;

Customs clearance service;

Museums, theaters and cinema halls operations;

Printing industry.

Economic Performance	92/93	93/94	94/95	95/96	96/97
GDP growth rate	12	1.7	5.4	10.6	5.6
Exports growth rate		25.7	62.2	-9.0	46.3
Inflation rate	10	1.2	13.4	0.9	-6.4
Public Savings (% of GDP)	-0.9	-2.3	2.6	4.5	5.6
Government borrowing (% of GDP)	3.2	1.9	0.3	-1.3	0
Net foreign reserves (in months of imports)	3.3	4.8	6.5	8.0	4.7

Financial reforms

Currently, in addition to widening the scope for foreign investment, notably in telecommunications and power generation, economic reforms are focused on the full liberalisation of the current account and the deregulation of interest rates in conjunction with the creation of a securities market. In keeping with the objective of progressively liberalising the foreign trade regime for goods and services, payments on invisible trade are expected to be deregulated fully by the end of the 1990s. This will enable Ethiopia to attain current account convertibility. At the same time, maximum tariffs on imports will be reduced, with the average rate lowered to under 20 per cent.

It has been possible to maintain interest rates positive in real terms of most of the period since the beginning of economic reform in 1992, avoiding financial repression. However, the deregulation of interest rates is at an initial stage.

To summarise, the transition from a command to a market economy has been made. There remain, of course, several scores of enterprises in the hands of the state. Yet it should be stressed that this is due to the complex process of privatisation itself, rather than the authorities' lack of commitment. The government has already successfully faced numerous challenges; eliminating price controls, removing subsidies, commercialising telecommunications and electricity, and achieving current account convertibility. In all these the policy reform achievements have been remarkable. Ethiopia has made a successful transition to the market economy. This has been achieved with minimal price distortions and successive decreasesin external tariffs providing a sustainable basis for future growth and investment.

Economic Performance; Growth with Stability

Sound economic management coupled with targeted interventions have enabled Ethiopia to attain growth with stability whilst in the midst of a complex political and economic transformation. This has helped the national regain confidence in its economic growth, after years of stagnation and mismanagement under the previous military regime. Continued growth and stability for a decade ahead will lock the country into a virtuous circle of economic progress.

In the immediate aftermath of the political and economic upheavals of the late 1980s, the economy declined sharply. GDP fell by 15 per cent in the two years to 1991. However, following the overthrow of the military regime in mid-1991, the economy turned around quickly and GDP had recovered fully to its level of 1989/90 by mid-1994. In the following three years to 1997, GDP grew at an annual average rate of 7.2 per cent.

Ethiopia remains predomintnatly a rural-based economy and this recovery and growth was agriculture-led. Exports of agricultural products and leather increased significantly in volume terms. Coffee, the major export item, which normally accounts for about 60 per cent of exports, had recovered in volume by some 50 per cent by mid-1997. Production of food crops, particulaly cereals, also rose sharply in 1995/96 and 1996/97. Indeed, following good harvests in 1996/97 Ethiopia attained self-sufficiency at a national level for the first time in nearly two decades.

Inflation

Meanwhile, inflation during these five years was tightly controlled. Despite the massive devaluation of the Birr in October 1992, and the subsequent liberalisation of domestic prices and markets, the annual rate of inflation declined from 15.5 per cent in October 1992 to –1 per cent in October 1993. As the table shows, except in 1994/95, when the rate rose to 13.4 per cent, inflation has remained insignificant.

Developments on the fiscal side were also positive. Public savings, which were initially negative, rose both in absolute and relative terms, reaching about 5.6 per cent of GDP in 1996/97. Concomitantly, government domestic borrowing declined to virtually nil. Since 1994/95 the budget has been balanced, with no domestic borrowing, and a significant reduction of domestic debt. To be sure, the zero budget deficit is supported by counterpart funds generated from foreign assistance, although these are declining.

Balance of Payments

Regarding the balance-of-payments, the inceased flow of external loans from multi-lateral institutions has meant higher levels of current account imbalance in proporation to GDP. This is to be expected in a developing country emerging from years of civil strife. More significantly, the coverage of imports goods and services from export earnings has increased appreciably, from less than one-third to a half by 1996/97. An ample volume of net foreign reserves has been maintained throughout.

Foreign Exchange

Foreign exchange rate policy is designed to allow the nominal exchange rate to reflect changes in prices and to let the exchange rate act as a nominal anchor for prices. The rate increased from 5 birr per US dollar in October 1992 to 6.9 birr at the end of 1997. During this period, the parallel market rate remained fairly stable at an average of 7.4 birr per dollar. Generally, the foreign exchange rate differential between the auction and parallel market tended to narrow as the auction rate increased. Since the end of 1997 the differences in exchange rates in the two markets have become inconsequential and the unification of rates appears virtually complete.

Efficiency and Resource Allocation

While macroeconomic stability has encouraged savings and investment, deregulation of prices and markets have helped improve efficiency and resource allocation. Among the first areas in which improvement has been observed is in the squeezing out of rent-seeking activities, which were rife under the command economy. Removal of explicit and implitic entry barriers and enhanced competition in trade, services and in the manufacturing sector have substantially narrowed the scope for rent seeking. This has in turn given an impetus to investment.

It is hoped that new investment opportunities in rural Ethiopia, particularly those pursued by foreign investors, will complement the process of agricultural improvement. Such investment is crucial to enhancing the longer-term strategy of agricultural development led industrialisation (ADLI). To make the process self-sustaining, new markets are being encouraged to fill missing gaps and improve rural infrastructure. For example, rural credit institutions are being established to provide loans to farmers. The essence of the approach is both to implement a rural development programme and to help create markets to enable economic agents to undertake economic activities themselves.

Export Promotion

Another important area for intervention is export promotion. The government has established several joint-councils comprising both public and private exporters and senior government officials. These are chaired by the Prime Minister and discuss ways and means of promoting selected export commodities. Such councils provide a forum for exporters to raise administrative, regulatory and economic issues, which are in need of resolution. They also allow the government to obtain vital feedback, enabling it to modify economic management and devise new policies of benefit to exporters and potential investors in the export sector. The government is prepared to create similar forums to facilitate dialogue between the private sector and itself on a broader range of economic issues. In general the authorities have both the commitment and capacity to support the private sector in bringing about economic progress in the country.

Infrastructure

In terms of quality and quantity Ethiopia's education, roads, electricity and telecommunication services are amongst the lowest in sub-Saharan Africa. This presents the government and potential foreign investors with both a challenge and an opportunity. The government is committed to preventing poor infrastructure and human resources from becoming an obstacle to growth. It is creating new opportunities for investment throughout the country via medium-term sectoral programmes launched with the support of the World Bank, European Union and bilateral donors. These programmes reflect the high priority that the government attaches to the development of infrastructure, physical as well as human.

The Foreign Investment Regime

The favourable climate for foreign investment created by the overall economic conditions of the country is further augmented by specific incentives and administrative procedures to encourage investment. In common with other developing countries, the most important incentives consist of tax breaks. These include:

exemption from profit tax for a minimum period of three years, and up to five years depending on the type and location of investment, with provision for additional exemption of one to two years for investment in existing enterprises;

the carrying forward of losses suffered during the tax exemption period for three to five years after expiry of tax holidays;

duty free imports of spare parts up to 15 per cent of the value of capital goods imported for investment purposes.

Foreign investors currently face a wide array of investment opportunities in Ethiopia. The country possesses comparative advantages in terms both of its natural resources and its proximity to Middle Eastern and European markets. It also has a population of 57 million and htus potentially a large domestic market. There are huge tracts of land suitable for irrigation; and Africa's largest herds of livestock. Ethiopia's large labour force is both disciplined and trainable. There are considerable opportunities for mining resources such as gold, potash, copper, tantalum, marble and natural gas; as well as a variety of tourist attractions: historical sites, scenic beauty and wildlife.

The government is committed to opening up larger areas of the economy to foreign investment with telecommunications and electricity sectors expected to be opened in the near future. Foreign investors are viewed as partners in the economic development of the country. They are welcome to invest on their own as well as in joint ventures with domestic enterprises.

Security of investment as regards property ownership and disposal of income is guaranteed. The security of private property is upheld by the constitution of the Federal Democratic Republic of Ethiopia. The Investment code of 1996 also provides investment guarantees and ensures the protection of private property. Ethiopia is also a member of the Multilateral Investment Guarantee Agency (MIGA), the World Bank affiliate which issues guarantees against non-commercial risks that may be faced by enterprises in member countries.

In addition, Ethiopia has recently signed and ratified bilateral investment promotion and protecttion agreements with Italy and Kuwait. Similar bilateral agreements with a range of other OCED and Arab states are currently awaiting ratification. Discussions are also underway with several other countries to conclude agreements on investment protection and avoidance of double taxation.

In practice, the ability to convert income earned from foreign investment into foreign currency for purposes of the repayment of loans, remittance of profits and, when necessary, sales of assets is of greater relevance for many companies. Ethiopia's Investment Code provides foreign investors the right to transfer capital abroad. The fact that the government attaches high priority to macroeconomic stability, which it has shown to be capable of attaining, provides further assurance that these entitlements foreign investors can be realised.

To facilitate both foreign and domestic investment, a separate institution, the Ethiopian Investment Authority (EIA), has been formed at the federal government level. In addition, individual Investment bureaus at the regional administration level have been created. The foreign investor need only apply for an investment certificate at the EIA. The EIA operates as a one-stop agency. Upon acquisition of a certificate and registration of the business, the foreign investor may approach the Investment Bureau of the region in which the investment is proposed. The Investment Bureau will facilitate access to land and utilities. In this way, by circumventing the normal procedures for licensing, leasing lf land, and obtaining utility services, the foreign investor is able to shorten the start-up period and thus the costs of their business.

To take some recent examples, a French brewer group obtained permits and secured land for a brewery at Kombolcha (Amhara Regional State) in under one momth. Construction of the plant is currently underway. An Ethio-Saudi joint venture registered and obtained 5000 hectares of land for irrigated agriculture in Gidabo (Oromiya Regional State) within a few weeks. It took a similarly short time for an Italian firm to register and get all the urban and rural land that it required in order to establish a ginnery and a cotton plantation in the north of the country (Amhara Regional State). What these examples indicate is the determination and capability of the government to respond expeditiously to foreign investors who choose to do business in Ethiopia.

Naturally, there is much more to be accomplished. Yet progress in establishing a favourable climate for foreign investment is well under way. Elements already in place include a growing economy, sound economic and investment policies, macroeconomic stability, infrastructure improvements, and a reliable institutional framework. The authorities are committeed to continuously improving the country's investment climate so that Ethiopia is consistently able to offer sound business opportunities in a stable economic environment.

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