Ethiopia’s Investment Prospects: A Sectoral Overview*

Ethiopia is in the midst of a sustained growth surge that is becoming increasingly broadbased, building on major improvements in educational attainment, improved health outcomes, and infrastructure capacity in terms of access to power, transportation and telecommunications. The Government’s Growth and Transformation Plan sets ambitious targets for further improvements in these areas, together with significant reforms aiming to improve trade logistics, by rolling-out the authorized economic operator program across export-oriented industry parks and improving the main export corridor to Djibouti. This industrialization push coincides with global trends that provide Ethiopia an opportunity to integrate its economy into the modern “Made in the World” production system, including by attracting labor-intensive production, which is leaving China and other East Asian economies due to their rising wage rates. This paper considers Ethiopia’s prospects to succeed in this endeavor. It reviews overall economic management and performance indicators and provides a horizontal overview of the investment framework. It then summarizes the investment prospects in several major sectors of the economy, in light of Ethiopia’s emerging capacities and global developments: agriculture, mining, oil & gas, economic infrastructure, manufacturing, and selected services, including health and tourism. Keywords: Ethiopia, investment, growth and transformation pla

Financing Ethiopia’s Development: Confronting the Gap between Ambition and Means

Ethiopia set out – and in large measure achieved – a very ambitious program of economic and social development under its Growth and Transformation Plan (GTP-I).The scale of public sector involvement was very large: for the five-year Plan period, it called for budgetary government spending and public enterprise off-budget spending of 41% of GDP, more than half of which was to come from budgetary resources. As Ethiopia prepares for the second version of its GTP (GTP-II), it must confront a fiscal numbers problem: Ethiopia’s tax share of GDP under GTP-I reached only the 12%-13%level, and revenue flows from official international assistance are shrinking. This paper dissects the financing challenge that Ethiopia must meet to achieve its goal of becoming a middle income country. It concludes that only export-led manufacturing in a context of a major expansion of the number of active formal enterprises coupled with best practice performance in all other areas related to revenue generation will square the circle of Ethiopia’s development financing challenge.Keywords: Ethiopia, Development Financing, Resource Mobilization, Tax, Private Sector Developmen