Ethiopia Trade and Foreign Investment

By | July 23, 2022


  • Business Relationships
  • Foreign direct investment
  • FTAs ​​and Treaties
  • Development Cooperation
  • Prospective fields of study (MOP)

Business relations

Trade relations with the EU

Ethiopia’s trade balance with EU countries has been negative for a long time. Ethiopian exports are dominated by food and live animals, raw materials and consumer goods. A frequent problem of Ethiopian exports is the quality that does not meet EU standards, so it is exported through third countries, where the goods are modified so that they can enter the EU market. The EU mainly exports machinery and means of transport, chemicals and foodstuffs to Ethiopia. During 2021, there was a slight increase in Ethiopian exports to the EU and a decrease in EU exports to Ethiopia by approximately 26%, bringing the mutual trade balance to a historically low level of EUR 645 million.

  • Allcountrylist: Overview of major industries in Ethiopia, including mining, construction, transportation, tourism, and foreign trade.
2017 2018 2019 2020 2021
Exports from the EU (million EUR) 2,109.40 1,736.20 1,971.60 1,588.30 1,261.20
Imports into the EU (million EUR) 523.8 491.5 522.3 550.2 616.2
Balance with the EU (million EUR) -1,585.7 -1,244.7 -1,449.3 -1,038.1 -645

Source: European Commission

Trade relations with the Czech Republic

Exports from the Czech Republic to Ethiopia in 2020 continued the increasing trend of recent years despite the Covid-19 pandemic. The main items of Czech exports are medical furniture and devices, components, etc. related to the overhaul of L-39 aircraft. Ethiopian imports to the Czech Republic are dominated by legumes, coffee, flowers and clothing. In 2021, exports from the Czech Republic fell by approximately half compared to the previous year due to the ongoing consequences of the pandemic and the political and security situation in Ethiopia.

2017 2018 2019 2020 2021
Exports from the Czech Republic (million CZK) 397,830 327,487 366,733 435,202 242,804
Import to the Czech Republic (million CZK) 173,688 212,954 157,269 189,318 111,870
Balance with the Czech Republic (million CZK) -224,142 -114,534 -209,464 -245,884 -130,934

Source: CZSO

Trade relations with countries outside the EU

In 2021, Ethiopia significantly strengthened its exports to countries outside the European Union, which is also related to the weakening of political relations with the EU and the search for new partners who do not view the political, security and humanitarian situation in the country so critically. Imports to non-EU countries returned to pre-pandemic levels in 2021 after a slight weakening in 2020.

2017 2018 2019 2020 2021
Exports from countries outside the EU (million EUR) 412.6 515.5 314.1 1,119.0 2,286.7
Imports to countries outside the EU (million EUR) 12,875.3 12,427.3 11,766.4 10,520.3 12,756.4
Balance with non-EU countries (million EUR) -12,462.8 -11,911.9 -11,452.4 -9,401.3 -10,469.7

Source: EIU, Eurostat

Foreign direct investment

Foreign direct investment in Ethiopia reached its provisional peak in 2016 when it reached USD 4.14 billion, has been on a downward trend since then and reached USD billion in 2020, according to the latest available World Bank data. In recent years, foreign investments have been directed mainly to newly emerging industrial parks. The most foreign direct investment in Ethiopia comes from China, Turkey, India, Saudi Arabia, the Netherlands and the United Kingdom. Almost 60% of the funds go to industry. From a legal point of view, investments are regulated through Investment Proclamation 1180/2020 and Investment Regulation 474/2020. These documents contain a list of sectors that are reserved for domestic investors. The main body responsible for attracting foreign investors and working with them is the EIC, Ethiopian Investment Commission. Risks for potential investors are the political-security situation, different application of rules at the federal level and at the level of individual regions, frequent turnover of officials and difficult repatriation of profits from the country.

FTAs and treaties

Treaties with the EU

The contractual pillar of Ethiopian-EU relations is the Joint Declaration on Strategic Relations, signed by the President of the European Commission Jean-Claude Juncker and the then Ethiopian Prime Minister Hailemariam Desalegn. The declaration envisages an annual dialogue at the ministerial level in six different sectors: good governance and human rights, regional peace and security, the fight against terrorism and radicalization, migration, socio-economic development, investment and trade, and last but not least, climate change and environmental cooperation. For exports from Ethiopia, the EU applies the “everything but arms” program, which allows more than 7,000 Ethiopian products to enter the EU market without customs burden.

Contracts with the Czech Republic

During the visit of the Deputy Prime Minister and Minister for Regional Development Jiří Čunk to Ethiopia in 2007, the Agreement on the Avoidance of Double Taxation and the Prevention of Tax Evasion with Income Taxes was signed.

On February 16, 2018, after all internal conditions had been met on both sides, the bilateral Czech-Ethiopian Air Transport Agreement, signed on April 5, 2014, entered into force.

Negotiations on the bilateral Agreement on the Promotion and Protection of Investments (DPOI) between the Ministry of Finance of the Czech Republic and the Ethiopian Investment Commission, which is responsible for investment agreements on the Ethiopian side, have made no significant progress. The last (2nd) round of bilateral negotiations took place in Prague in 2015. A framework text was agreed upon and the parties agreed that negotiations on unresolved/open points will continue to take place through correspondence. These open points are: most-favoured-nation clause, national treatment and ISDS. Department 65 of the Ministry of Finance of the Czech Republic consulted the framework text with the European Commission (EC) and this consultation resulted in points that the EC requests to be included in the DPOI. They are: the right to regulation, transparency of proceedings, a clause on the future possibility of using the investment tribunal. The new requirements were interpreted to the Ethiopian side through correspondence.

Developmental cooperation

Ethiopia is one of the largest recipients of official development aid in the world, which according to the Development Assistance Group Ethiopia accounts for up to one third of the state budget (30-50% of aid is humanitarian and food aid). The largest donors are traditionally the EU and the USA. In recent years, however, more and more aid has come from China (in its specific, economic form), India, Japan, South Korea and Turkey. Most of these countries focus their development aid on subsequent economic continuity and deepening of economic ties.

Since 2010, Ethiopia has been a priority country of the ZRS of the Czech Republic with a cooperation program, and based on the decision of the government of the Czech Republic from June 2016, it will be until 2023. In 2018, 83 million CZK was allocated to projects in Ethiopia. The funds are directed to projects in two priority areas: 1. rural development, 2. sustainable management of natural resources. Czech funds are also directed to trilateral projects and humanitarian aid. The priority region in which the majority of the activities of the ZRS CR is concentrated is the Region of Southern Nations, Nationalities and People (SNNPR). The framework for bilateral development cooperation between the Czech Republic and Ethiopia for the years 2018–2023 is provided by the Memorandum signed in Addis Ababa on 16 February 2018 between the Ministry of Foreign Affairs of the Czech Republic and the Ministry of Finance of Ethiopia. The cooperation program is based on the second Ethiopian Growth and Transformation Plan, and the bilateral development program is fully based on Ethiopian development priorities. In addition to traditional bilateral and trilateral projects, Aid for Trade and B2B projects are implemented in Ethiopia. In addition, so-called small local projects are implemented in Ethiopia as part of Czech development cooperation, and Czech government scholarships are regularly provided. Humanitarian aid is also provided to Ethiopia.

Prospective fields of study (MOP)

Mining, mining and oil industry

The mining sector is a key part of the new ten-year development plan. The priority is the extraction of materials that can be further used in construction and agriculture. The Ministry of Mining and Petroleum focuses on the efficient use of minerals, the search for export opportunities and the support of domestic demand. Opportunities exist for the supply of machines or processing technologies. Discounted packages for tax and for the import of machinery are prepared for foreign companies. Revenue from mineral exports in the 2020/2021 financial year reached USD 680 million.

Defense industry

Ethiopia is a long-term buyer of equipment of Czech origin. The conflict in the north of the country only highlighted the need to modernize military equipment and purchase new technologies. Defense spending increased by 33% year-on-year in the state budget for the financial year 2021/2022. Opportunities for Czech entities exist mainly in military aviation, upgrading of previously delivered equipment, spare parts, delivery of trainers, training and air traffic systems.

Healthcare and pharmaceutical industry

The global pandemic has highlighted the under-equipment and unpreparedness of the Ethiopian healthcare system. In hospitals, there are not enough oxygen generators, standard equipped ICUs or laboratory equipment. Czech companies can benefit from bad experiences with the supply of low-quality goods and a preference for higher quality for more complex equipment. The government is preparing programs for the reconstruction of damaged medical facilities in the conflict-affected northern regions. In 2020, 353 hospitals, 3,735 health centers and 17,550 health posts (health posts) were operating in Ethiopia.

Agricultural and food industry

Ethiopia’s problem in agriculture is primarily the low efficiency and diversification of agricultural production, which is also very susceptible to the vagaries of the weather and other natural influences. Ethiopia would like to introduce mechanization, chemicalization and other modern agricultural practices. Related processing industries are also developing. The average growth of the agricultural sector in the next decade is estimated at 6.2% per year.

Energy industry

Ethiopia is strengthening its role as a regional energy hub. In addition to the giant hydroelectric plants at the GERD Dam, with a planned generation capacity of GW, Ethiopia plans to build smaller hydroelectric plants, but the potential also exists for smaller solar plants that could serve more remote communities. As part of the national electrification program, there is potential for the supply of transmission network components, generators or transformers. The energy potential of the country, estimated at 60 GW, is now used at less than 10%, over 94% of energy is produced by hydropower.

Transport industry and infrastructure

The Ministry of Transport of Ethiopia is preparing a number of projects to expand the transport infrastructure. Above all, the importance of domestic airlines is growing, which will lead to the need to build 6 new regional airports and upgrade the existing ones, including technological equipment. On the other hand, the public transport network is also being strengthened, both in larger cities and between regions, opportunities exist not only in the supply of means of transport, but also in transport management technologies. The government’s goal is to build a modern, safe and reliable transport network by 2030 that will be accessible to all residents and will contribute to the prosperity of the country.

Ethiopia Trade