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6

By Mesfin Zegeye

Addis Chamber Organizes Consultation on Doing

Business with GovernmentConsultations on current issues of concern to the business community, and for trade and investment are organized with a view to identify gaps, deliberate on and recommend solutions, and for stakeholders to take their respective share of the task, said Addis Ababa Chamber of Commerce and Sectoral Asso-ciations Deputy Secretary-General, Ato Yayehyrad Abate while opening the consultation the Chamber organized at Elili Hotel on January 29, 2014.

Addis Ababa Chamber of Commerce and Sectoral Associations organized the 18th edition of Addis Chamber International Trade Fair under the motto “Trade and Industry for Sustainable Development” at Addis Ababa Exhibition Centre from February 20 to 26, 2014. The closing ceremony took place in a symposium at Hilton Addis on 25 February.

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Legal frame Said Stifling for Joint Ventures: Seminar

18th Addis Chamber International Trade Fair

Takes Place

The Ethiopian Development Research Institute (EDRI) and Addis Ababa Chamber of Commerce and Sectoral Associations (AACCSA) held the first of a regular sem-inar series under the theme, “Joint Ventures, Prospects and Challenges in Ethiopia” at Hilton Addis Ababa on February 14, 2014.

Addis Ababa Chamber of Commerce and Sectoral Associations (AACCSA) in accordance with the requests of its members to seek time extension from Ethiopian Revenues and Customs Authority (ERCA) for producing the document from document authen-tication and certification office showing their shares have been used for capital growth, raised the issue with the Authority on the need for holding a discussion.

Joint Ventures, Prospects and Challenges in Ethiopia

3

Addis Ababa Chamber of Com-merce and Sectoral Associa-tions Ethiopian Development Research Institute organized seminar on “Joint Ventures, Prospects and Challenges in Ethiopia” in which three in-dividuals had presentations

on various aspects of joint venture legal framework and implementation realities. The event took place at Hilton Addis on February 14, 2014.

Problem with clarity in legal framework is an area mentioned in the presentation. There is commercial code written well but it lacks clarity in articles, as well interpre-

tation. Getting access to comprehensive directives is also another problem area. Investors are used to risks but do not like surprises, the presenter said. They want clear information, to understand laws, ease in doing business, as well as efficient service delivery.

According to one of the presenters infor-mation reliability, its institutionalization considerations, and its readily availability are challenges being faced.

Another presenter said the investment agency, it does not have data on its activi-ties, and there is no transparency.

(Cont’d on page 4)

(Cont’d on page 7)

5

ASA is Set to Showcase Small Scale Sustainable Fish

Farm

5

February 2014 ADDIS BUSINESS PAGE 2

EDITORIAL

ADDIS BUSINESS

Addis Ababa Chamber of Commerce & Sectoral Associations External Relations and Media Department

Monthly NewspaperFebruary 2014 Volume XII No 6

011-5518055 ፣ 011-5519713, 0115-155221

Fax፡ 011-5511479 2458

Editor-in-Chief - Mesfin Zegeye Designer - Tenaye KebedePhotographer - Anduamlak Tamiremariam

Reporters - Roman Tegegne Editorial Board Ato Yayehyirad Abate - Chair Ato Yohannes Weldegebriel - Member Ato Mengistu Dargie - “ Ato Mesfin Zegeye - “ Ato Tekeste Girma - “ Ato Kassahun Mamo - “

Which domestic firms benefit from FDIJoint Venture, an

important business ownership arrangement to

enhance business and investment in Ethiopia!

Joint venture is one form of business ownership arrangement that pro-vides great significance for developing countries like Ethiopia where in-vestment capital, appropriate technology and knowhow to undertake bigger projects is scarcely available in the hands of individual businesses.

Joint venture has proved to be an important instrument for many busi-nesses in developing courtiers to undertake business and investment ven-tures between citizens and also in collaborations with foreign investors that yielded mutual benefits for all parties.

Many businesses have their own comparative advantages that could only be converted into real competitive advantages when they bring their re-spective competences together in pursuance of common business objec-tives. This is what provides a strong rationale for joint venture business arrangements in today’s highly competitive business environment.

Such arrangements made between local and foreign companies also pro-vide the opportunity to access new markets on top of pulling resources such as investment capital, knowhow and technology. The foreign investor is benefiting from market knowledge of the native partner while the local partner is accessing foreign markets through well-established network of the foreign partner in overseas markets.

The Addis Ababa Chamber of Commerce and Sectoral Associations (AACC-SA) hasbeen employing various instruments to promote joint venture as a business model between local and foreign investors. One of these instru-ments is the business to business meetings it organizes to link Ethiopian business people with their foreign counterparts. The business to business meetings have brought together its members and foreign companies that arrived from courtiers during the past two and half years. A growing num-ber of the foreign business delegates that have taken part in the B2B fo-rums were interested in the manufacturing sector. Considerable propor-tion of these delegates has shown interest to work with their Ethiopian counterparts in joint venture arrangement.

In a similar manner, the international Trade Fairs organized by the cham-ber have been instrumental in bringing together foreign and Ethiopian business persons to discuss opportunities for collaborations to work to-gether in joint venture arrangements.

At the chamber, we also feel that there are issues we all need to dwell with in order to promote the establishment of joint ventures and enhance ef-fectiveness of already initiated ventures. The Ethiopian Commercial Code may require revisit to rearticulate the articles related with Joint Venture to include provisions that encourage businesses to consider it as viable form of company formation and enhance confidence of foreign companies to consider working in Ethiopia in collaboration with their local private sector counterparts and with the public sector as well.

AACCSA is studying the challenges and prospects surrounding joint ven-ture business in Ethiopia in collaboration with reputed research institu-tions such Ethiopian Development Research Institute in pursuance of dis-charging its responsibilities.

The most promising element of such undertakings is the fact that the out-puts of the researches and discussions do not end up in library shelves. It rather feeds into the agenda of policy makers for improving the country’s economic and business regimes.

AACCSA is also currently working to establish the Center for Research and Policy Analysis to play its role in augmenting government’s endeavors for improved business and investment climate in the country.

The efforts being exerted by AACCSA and other partnering research insti-tutions are appreciative. However, similar effort and attention should be given by the policy makers and other relevant institutions if we have to create a meaningful and conducive environment for joint venture business arrangement in Ethiopia.

Yesuf Ademnur,

I. General OverviewThe major issues covered in this paper are results of a survey conducted by UNIDO (working paper 2012) and the writer has also included supplementary information from Ethiopian Investment Agency (EIA) and UNCTAD.

In this paper attempt is made to show the main characteristics that can make domestic firms in Sub Saharan Africa net winners or losers from the presence of FDI and the channels through which the multinational enterprises have an im-pact on the local firms: products’ market, input availability and costs, access to fi-nance, export opportunities.

The African continent has attracted a modest share of FDI inflows over the last decades. In 2009 the global share of FDI stock in Africa was about 2% with a net flow of FDI to the continent amount-ing to approximately 46 billion USD. According to World Investment Report, 2013, the inflow of FDI has increased to 50 billion USD in 2012. Less than a decade ago the five main FDI receiving

countries (Nigeria, Mozambique, South Africa, Democratic republic of Congo, Ghana) accounted for 90% of the total inflow. In 2011 this percentage has de-creased to about 50% with rising share of FDI aimed at non-extractive sectors such as manufacturing and services (UNCTAD 2012)

Two recent papers produced by Mor-rissey, Amendolagine, Boil, Coniglo, Prota and Seric in 2012 emphasize the limited impact of FDI in Africa in terms of creation of linkages and spillovers to domestic economy. The limited effects are generally attributed to :• A limited absorptive capacity of do-

mestic firms• A concentration of FDI inflows in the

resource sector rather than in manu-facturing and services

• The presence of corruption and politi-cal instability which limits the inflow of market and efficiency seeking FDI

• Relatively recent time of entry as well as the mode of entry (Greenfield in-vestments generate fewer backward linkages)

• Sectorial composition and motivation of foreign investors (market oriented companies are more likely to source inputs from local suppliers)

• The importance of the origin of FDI in terms of potential to boost local linkages (The research reveals the re-duced tendency of Chinese investors which constitute the bulk of recent in-vestment in several African countries to generate local linkages.

More over a report published by UNIDO in 2012 suggests that FDI inflows in Sub Saharan Africa have produced an overall increase in sectrorial productivity despite displacing some of the competing domes-tic firms evidenced by a reported reduc-tion of employment and wages.

Looking at the overall impact of FDI inflows in SSA, the effect appears to be heterogeneous across countries. Below is table showing the percentage of firms experiencing positive, negative, or no ef-fect due to the presence of foreign firms in their home markets.

Country Positive Negative No effect Number of observations

Burkina Faso 41.1 26.0 32.9 73

Burundi 35.5 27.3 37.2 121

Cameroon 37.6 27.8 34.6 133

Cape Verde 33.1 31.6 35.3 272

Ethiopia 27.4 20.2 52.4 431

Ghana 27.7 31.2 40.4 235

Kenya 25.9 19.3 54.7 316

Lesotho 7.8 39.2 52.9 102

Madagascar 50.0 20.6 29.4 102

Malawi 44.0 25.3 30.7 75

Mali 25.6 25.1 49.2 195

Mozambique 82.5 6.3 11.1 189

Niger 24.6 29.2 46.2 65Nigeria 37.7 23.0 39.3 387

Rwanda 27.8 24.1 48.1 108

Senegal 42.8 23.0 34.2 152

Tanzania 32.4 24.7 42.8 299

Uganda 25.8 27.3 46.9 403

Zambia 47.3 33.5 19.2 203Sub Saharan Africa 34.4 24.9 40.7 3861Source: UNIDO Africa Survey 2010

The net effect of inward FDI on domestic firms by country of origin in Sub Saharan Africa

(Cont’d on page 8 )

ANALYSIS

PAGE 3 ADDIS BUSINESS February 2014

Addis Chamber Organizes Consultation on Doing Business with Government

By Mesfin Zegeye

Consultations on current issues of con-cern to the business community, and for trade and investment are organized with a view to identify gaps, deliberate on and recommend solutions, and for stakehold-ers to take their respective share of the task, said Addis Ababa Chamber of Com-merce and Sectoral Associations Deputy Secretary-General, Ato Yayehyrad Abate while opening the consultation the Cham-ber organized at Elili Hotel on January 29, 2014.

Advisor to State Minister of Trade, Ato Assefa Mulugeta, had a presentation on “Doing Business in Collaboration with Government Agencies” and touched on various issues by way of forwarding ideas to get the discussion started.

The government’s primary focus is on adding value to products, he said and went on to add, processing agricultural products, textile and garment, leather and leather products, floriculture, sugar and related areas, pharmaceutical, and metal are examples of the areas of government emphasizes.

Regarding incentives the presenter men-tioned, export guarantee, tax free on im-ports to be used for production of exports, tax free on capital imports, tax holiday for priority sectors, and opportunities relating to market.

Transparency, accountability, legali-ty, predictability, and sustainability of economy and finance are mentioned as principles for public-private partnership. Of the things that should be avoided in-clude corruption, illegal business practic-es, contraband, defaulting on contracts, evading tax, problems with bureaucracy, and products quality problems.

Following the presentation members of the business community had comments and some questions. One participant said, in other countries when business people had problems standing on their feet the government rushes in and lends them a hand, and they go into business without fearing failing because they know the government is ready to help. In Ethiopia there are businesses that disappeared for lack of support when they needed it. The country loses a lot when an investor fails. What has been done to avoid things from falling apart in this regard?

Countries like Kenya and Uganda did so much compared to us because they got a lot of support by way of facilitating the situation for them, another participant

said. On the other hand, an idea of a dif-ferent angle has also been forwarded a different participant.

There are many opportunities made avail-able by the government which the busi-ness community has not exploited. When this happens investors tend to see the gap in the other side and the problems caused by it. All activities should be based on information and knowledge. Not all situ-ations that create problems to us are due the problems in them, the participant said. This platform helps to explore these and other kinds of unexplored areas too, he added.

Regarding the industry sector it was said that investors are not going into it. Con-sequently the government is forced to fill the gap. Should not this trend be changed? If there were a stock market it would have made possible the selling of shares and to use for investment the financial resources available.

One participant forwarded a question regarding why agriculture is considered

a priority sector by the government as indicated in the presentation. In respond-ing to this the presenter said, the govern-ment considers agriculture a priority area because of the current reality of ample land, human resource, and so on that is available in agriculture sector. By putting these resources to use it would be possi-ble to make agriculture feed industry and speed up the transformation process. It is expected that 30% of the produce from agriculture would be lost due to failure to deploy modern harvesting tools. This sort of gap is mentioned as another factor the presenter used to strengthen his position of making agriculture a priority sector.

The safety of Ethiopian products is anoth-er area to look into, said another member of the business community. We all re-member the problem the nation got into due to a minor chemical problem in the sack with Japan and the country’s dis-lodging from the market. Similarly con-trol and checking system should be put in place on foreign products coming into the country.

Problem with capacity was another con-cern area raised in the course of the dis-cussion. Employees of various govern-ment bodies including Ministry of Trade have capacity problem. Incidents occur in which the services required by customers have been found to be beyond staff ca-pacity to provide and handle. Sometimes measures taken by government agencies are reversed soon afterwards. Some ser-vices could be out sourced to private ser-vice providers by signing Memorandum of Understanding with them.

Chamber President Ato Elias Geneti in a remark he made regarding the way the business community forwards questions to the government, it is important that there should be cooperation with various associations of the business community. Rather than taking up issues individual-ly and run the risk of less chance of pro-ducing the desired outcome, it would be better to present them in an organized and united manner. Channeling such issues through the Chamber would be wise un-der the circumstances.

An issue of utmost significance is the need to show to the government that the private sector is its partner and give it assurances that it is so, he said. Efforts must be made for the government to consider the busi-ness community its partner rather than a body always set to exploit every opening for its own benefits. It is important that a situation be created in which there is no need to use the force of the law for taxes to be paid and people abide by the system. It is also necessary to realize that the de-velopment witnessed in the country came through the efforts of all.

On the other hand, it has been seen that forums organized fail to deal with prob-lems for which they are there. Strength-ening partnership would help address this gap. Rather than focusing on individual cases that does not show the general re-ality, it is important to come forward with researched problems and issues, the pre-senter underlined.

AACCSA Validates a Study on the Institutionalization of Business InformationBy Shumet Geberemedhin

Addis Ababa Chamber of Commerce and Sectoral Associations (AACCSA) held a validation workshop on the Institutional-ization and Dissemination of Business In-formation and Investment Opportunities on 30th January, 2014 at Harmony Hotel.The study that has been conducted by Kilimanjaro Consulting brought togeth-er AACCSA members and the business community at large, delegates from gov-ernment ministries including the Ministry of Industry, the Ministry of Trade and Investment Agency, as well AACCSA board members and staff.

The objective of the workshop was to val-idate the second final draft of the study on “Institutionalization and Dissemina-tion of Business Information and Invest-ment Opportunities” with the presence of stakeholders get feedback and reach con-sensus on the way forward.

On his opening remark, Ato Getachew Regassa, Secretary General of AACCSA, underlined the importance of information in trade and business, and pointed out the efforts that are undergoing by the cham-ber to improve the gathering, processing and dissemination of information. Ato Getachew emphasized the importance of developing the services provided by AACCSA and the transformation of the system within the chamber in in-formation utilization and management. Kilimanjaro Consulting presented the outcome of the study to participants by describing the methods of data collec-tion and analysis it has applied to explore how AACCSA may position itself in gathering, processing, disseminating, as well as institutionalizing, relevant busi-ness and investment related information to the internal operation, to its members and to the business community at large.

Following the presentation, profound discussion was made on the methodology, major findings and conclu-sion of the study, as well as the implementation plan and strategy that are suggested by study.

The workshop was conclud-ed by reaching an agreement that the consultation firm will continue to work closely with AACCSA in finalizing the study using the ideas raised during the workshop and get to the bottom of implementa-tion in institutionalization of information.

February 2014 ADDIS BUSINESS PAGE 4

Indian Business Delegation Confers at Addis ChamberIndia is focusing on Africa as a business partner and Ethiopia occupies an important part in it, head of the delegation from Federation of India Export Organi-zation said. The Indian business delegation discussed with Addis Chamber of Commerce and Sectoral As-sociations and some Ethiopian business people on business partnership possibilities and what is being made available by both sides at a ceremony held at the Chamber’s Board Room on February 10, 2014.

Nine Indian business missions have been received last year only and this is the highest number of mis-sions compared to missions from other countries, Secretary-General of the Chamber, Ato Getachew Regassa said.

Trade relations between the two nations have been growing with the balance of trade being in favour of India, the Secretary-General indicated. Last year Ethiopian imported goods from India worth USD 4.3 billion and exported USD160 million equivalent products.

Secretary-General of the Chamber underlined that not only trade but investors should also be encour-aged to come to Ethiopia and the Chamber works towards that end.

Head of Federation of Indian Export Organization heading the Indian delegation said, since recent times India has been focusing on Africa and Africa is the highest importing partner to India. Federation of Indian Export Organization is the apex of Indian businesses and medium and small enterprises are an important of it and they make up a significant part of the business operations in the country, he said.

Head of the Delegation indicated that they are send-ing invitations for a business event planned at Gu-jarat in the near future and Gujarat is growing at an amazing speed, he added. There will be 150 dele-gates coming mainly from Africa. He underlined that they would like to cooperate with Ethiopian business people and expect some 50 to 60 delegates from them

for the event. But they want them to be carefully se-lected as they want serious business people, he un-derlined.Of the side of Ethiopian business people present at the discussion was an Indian businessman who had been operation for the last seven years in Ethiopia.

He said, “I found Ethiopia the most peaceful place and peace is very important. There will be no disrup-tions.” He did not see a single strike in Ethiopia, and

there is maximum working hour, he said. There is good manpower, 32 new universities giving technical courses, engineering and on other areas. The Indian government also has education facilities in Ethiopia, he added.

He had a warning to add. One should not be tempt-ed to think that they come to Africa and make fast money. It does not work that way, he said. Patience and hard work is necessary. And went on to add that

not everything is smooth and there are bureaucratic problems too.

Members of the Indian business delegation hinted at the need to address some gaps in the investment en-vironment in Ethiopia too. Foreign currency issue, problem with unloading machinery heavy items, the holding up of import items in Djibouti, lack of speed in provision of some services as time could be crucial.

By Mesfin Zegeye

Botswana Business Delegation Lures Investors into the Lank-Linked Nation

The Addis Ababa Chamber of Commerce and Sec-toral Associations jointly with the Embassy of Bo-tswana organized a business event in which business opportunities in both nations were presented and dis-cussion took place. The Botswana presenter elaborat-ed on the various investment potential and opportu-nities in the country and said the office of which he is an executive director would facilitate the process for potential investors coming to his country. The event took place at Hilton Addis on February 18, 2014.

The Botswana Ambassador in a speech she deliv-ered on the occasion said, the Botswana Embassy is working hard to strengthen relations between the two countries. The General Cooperation Agreement signed in 2012 between the two is a platform for co-operation at government level and the agreement was accompanied by the establishment of a Joint Techni-cal Committee.

Botswana recognizes the importance of the private sector investment as engine of economic growth, the Ambassador said and went on to add more. To this end the government has established organiza-tions that facilitate investment promotion and devel-opment of viable businesses such as the Botswana Investment and Trade Centre (BITC) and Botswana Development Cooperation (BDC). In addition, there are sector hubs such as the transport hub, innovation hub, health hub, diamond hub, agriculture hub and education hub.

The delegation from Botswana accompanying the Ambassador comprises of BITC and agriculture hub experts and they are the ones carrying the task of selling opportunities in Botswana for the day, the Ambassador announced.

Secretary-General of Addis Chamber of Commerce and Sectoral Associations, Ato Getachew Regassa, speaking on the event said trade between Botswana and Ethiopia is very low despite the immense oppor-tunities. Businesses in Botswana and Ethiopia are

struggling to navigate the competitive global arena and one way to do this is identifying their respective comparative advantages and devising strategies to convert them into competitive advantages. Ethiopia has identified comparative advantages and areas as priority sectors for investors.

The Chamber on its part has been working to en-hance business and investment ties with foreign companies by organizing business networking events in the form of business to business meetings, and business missions to various countries. In the last two years the Chamber has organized 53 busi-

ness to business meetings with companies from 25 countries, of which the Netherlands, Italy, the USA, the United Kingdom, Sweden and Kenya are some. “I am very glad to see Botswana companies to enter the list of our visitors of the past two years,” the Sec-retary-General said. (Cont’d on page 7)

By Mesfin Zegeye

PAGE 5 ADDIS BUSINESS February 2014

ASA is Set to Showcase Small Scale Sustainable Fish Farm

Joint Ventures, Prospects and Challenges in Ethiopia

The Ethiopian Development Research Institute (EDRI) and Addis Ababa Chamber of Commerce and Sectoral Associations (AACCSA) held the first of a regular seminar series under the theme, “Joint Ventures, Prospects and Challenges in Ethiopia” at Hilton Addis Ababa on February 14, 2014. Executive Director of EDRI and long serving Chief Econom-ic Advisor to Ethiopian Prime Minister, Mr Newai Gebre-ab opened the seminar by highlighting the partnership between EDRI and AACCSA to support the private sector development in Ethiopia. Mr Afe-work Yohannes, board members of AACCSA, on his opening remark indicated that the aim of this seminar is to improve the understanding of joint venture and Ethiopia’s experiences in joint venture investment.Three presenters representing their respective cir-cles have presented their findings along the select-ed theme in the seminar. Mrs Berhane Demissie, Managing Director for Schulze Global Invest-ments in Ethiopia, displayed the opportunities and challenges of joint ventures related to the market conditions, the legal and institutional frameworks, as well as infrastructure and services sector that distress joint ventures in the country. In Ethiopia, lack of clarity in tax law, commercial code, and enforcement of arbitral rulings created rooms for varying interpretation and confusion on investors and potential investors that are attracted to joint ventures. However, according to Berhane joint ventures are becoming more attractive to local companies, and to strategic and financial investors.

Mr Mehrteab Leul, Principal of Mehrteab Leul & Associates Law Office, on his part presented the le-gal aspects and regulatory framework of joint ven-tures in Ethiopia. On his presentation, joint ventures

are pointed out as a potential area of investment for foreign investors. Nevertheless, some of the limita-tions, such as restriction on using global brand name as it is, and the longer time that takes to register for establishing new joint ventures are indicated as a series draw backs in development of joint venture businesses.

The third and final presentation was delivered by Mr Yohannes Woldegebriel, Director of Arbitration Institute in AACCSA, under the title “Ethiopia’s Experiences and Practices in Promoting Joint Ven-tures, the Challenges and the Way forward”. His-torical background and the existing array of joint ventures in Ethiopia were assessed during the pre-sentation.

Profound discussion followed the presenta-tions, and critical questions were raised in the area of investment proclamation and regula-tion, commercial registration proclamation, and commercial code, as well as other legal, institutional and policy aspect, that shape joint venture business in Ethiopia. Including the board members of AACCSA, Sec-retary General and Deputy Secretary Generals of AACCSA and ECCSA, delegates and ministry ad-visors from government departments including the Ministry of Industry and Justice, private company owners and representatives, as well as academicians, took part in the seminar. The seminar was praised by participants as the most productive event, and this can be attributed to the collaboration and interaction between EDRI and AACCSA. EDRI and AACCSA have entered an agreement to arrange other series of seminars in different topics and to work together in different areas.

Chamber Organizes Service Marketing Training for Staff

Addis Ababa Chamber of Commerce and Sectoral Associations contracted Glimpse Experiential Learn-ing, a consultancy and training firm, to provide Ser-vice Marketing training to more than 20 Chamber staff members for two and half days at Adama Town from February 7 – 9, 2014.

Three trainers of the firm took part as facilitators of the training. The trainers started the presentation by talking about the art of greatness. They challenged the participants by saying that they are all great and push them to believe that they should really believe so. What they think of themselves and their attitudes in general plays a great part in shaping the reality they live in, they said.

Forgiveness was another important area on which the trainers invited a lot of ideas and discussion. The art of letting go unleashes the freedom within and has benefits for work environment, health and relation-ships. Forgiving is advisable primarily because it benefits the forgiver a lot and enables the individual to make maximum use of the potential within.

On the other hand, failure to forgive has a stifling effect on oneself. It prevents one from making use of his/her capacity and achieve success. By forgiving others for their transgressions one benefits in person-al life and global networking as well, they added.

Other reasons listed include the fact that there is lesson people learn from it; the need to consider the offensive incident by standing in the other per-

son’s shoes; because in the past the forgiver might have done similar wrong to another and now has the chance to settle those past accounts; it is a mirror showing what the forgiver is; the other person did wrong because he/she is weak; and sooner or later both of them will pass away and it could be a burden to carry it that long.

The other focus area by the facilitators of the training was that there are disturbing factors preventing peo-ple from smoothly going about their daily work rou-tine and achieving targets set. Despite the existence of a system and guides to take them to the finish line, “noise” in various forms exerts a disturbing impact. Hence there is a need to realize this and overcome the disturbing factors and focus on the target and the path.

People need to see their environment differently and positively, and also the people working around them as well as themselves. And they need to remember that curves in their routine cannot be passed just like other stages of their activities, the facilitators advised.

There are noises, curves, turning points etc and all of them require different ways and tools of handling. Not one tool for all.

The staff expressed satisfaction and the fact that it is different from other trainings. They promised that they would use the insights they got from the training in their daily work routine relations.

Africa Sustainable Aquaculture (ASA) is one of the Dutch companies in Ethiopia exploring investment opportunities. ASA has been engaged in activities for sometime now with a view to invest in aquacul-ture sector. Addis Ababa Chamber newspaper, Addis Business, had a talk with Alwin Quispel MSc, ASA Manager Operations, recently.

Addis Business: What business area have you in mind in coming to Ethiopia? What kind of busi-ness plan do you have in your hand? What are you bringing in to Ethiopia?

ShareBusiness initiated the project Africa Sustain-able Aquaculture (ASA)in March 2012. ASA focus-es on strengthening and increasing the tilapia pro-duction in Ethiopia for the local market through the use of sustainable aquaculture techniques, thereby explicitly contributing to food security, employment and capacity building. ASA was born from the idea that encouraging local entrepreneurs in developing countries contributes to social and economic prog-ress.

In May 2013, ASA conducted a feasibility study in southern Ethiopia. This resulted in a number of key findings. First, the supply of fish does not meet the demand. Secondly, the lakes are affected by overfish-ing and the water volume is decreasing. Thirdly, the income of fishermen is far below the global average. Fourth, the government promotes alternatives to tra-ditional fishing and sees fish as a source of essential protein that can contribute substantially to dealing with food security issues.

Through the development of sustainable aquaculture (fish ponds in the country), we want to do something about these problems. Fish as a source of human food has a long history in Ethiopia. People consume large amounts of fish during fasting, and in major cities and towns, especially in Ziway, Arba Minch and Ad-dis Ababa. These local characteristics and the rising demand for fish make Ethiopia suitable for large-scale fish production.

Our strategy is as follows: ASA aims at demonstrat-ing adding value to this profitable and sustainable business case, whereby socio-economic value is cre-ated and the natural habitat is preserved. This means that the tilapia is produced in ponds on the land with-out the addition of harmful hormones, that our em-ployees are well trained and waste is minimized. In this way, we guarantee sustainably produced tilapia and we ensure that Ethiopians have improved access to a protein-rich, low-cost and quality fish.

Addis Business: What have you done to get your business started and get “your hands” in action on the ground

We are currently performing an investment study re-sulting in a business plan. The business plan focuses on the setting up of a ‘model fish farm’ near the cap-ital Addis Ababa. The model assembly is intended to

show the effectiveness of a small-scale sustainable production system on the land for the production of 100 tons of high quality of tilapia. In other words, the proof of a viable business model. Then we want to scale-up our business to various places in the country, like Arba Minch, Bahir Dar and Awassa, and within a few years to grow to a production of

1000 tonnes per annum. In this way, a potentially prosperous sector may flourish within a decade. For the model farm, we focus on the Rift Valley Lakes area between Mojo and Bulbulla and the area around Adama.

Addis Business: What do you think of the business potential and environment in Ethiopia? Is this the way you heard of it and expectation before you came here?

In my opinion, Ethiopia has a lot of business poten-tial, but this has not fully been optimized yet. As the country opens up for

foreign direct investments, it has the opportunity to become one of the leading African players in agricul-ture-related fields. However, even though the busi-ness environment is getting better, it can still be im-proved a lot. For example, foreign investors struggle with the repatriation of their profits in hard currency, or with the process of business license renewal.

Addis Business: What kind of support did/do you need? What have you got so far?

Until now, Agri Business Support Facility has been very helpful in supporting us with any legal, organi-zational and financial questions we have. The most important step we now have to take is is to find the right location for the model farm close to Addis Aba-ba. We are hoping the national and regional govern-ments will be able to assist us to find the right loca-tion for this and to ease the process of acquiring land.

Addis Business: What challenges have you faced in your line of work in Ethiopia? What did you do about it? What challenges do you expect in the time ahead?

Since we have just started with our activities, we have not face big challenges yet. One challenge that we’ve encountered is regarding getting the informa-tion we need for example on water quality, tempera-ture, etc. I am assisted by a local intern, provided by ABSF. He is very helpful and knows where to find the right information. The major challenge I foresee in the near future is that acquiring land might take a long time, which will delay our activities. Another risk is to import fingerlings, which are live animals.

The process has to go quickly, since these small fish can only remain in quarantine for a brief period of time. Therefore, the longer the delay at customs, the less chance of survival and the more costly the import will get. We have to make clear agreements with the customs authority on this matter and need full cooperation from them. Luckily, since we have to chance to do a feasibility study first, we will be able to address and minimize major risks, before we start investing in the model fish farm.

“we guarantee sustainable, improved access to protein-rich, low cost, quality fish,” Alwin Quispel MSc, ASA Manager Operations

By Mesfin Zegeye

By Mesfin Zegeye

By Mesfin Zegeye

Febraury 2013 ADDIS BUSINESS PAGE 6

By Mesfin Zegeye

18th Addis Chamber International Trade Fair Takes Place

Month Given to Produce Evidence to Avoid

Dividend TaxBy Mesfin Zegeye

Addis Ababa Chamber of Commerce and Sectoral Associations organized the 18th edition of Addis Chamber Internation-al Trade Fair under the motto “Trade and Industry for Sustainable Development” at Addis Ababa Exhibition Centre from Feb-ruary 20 to 26, 2014. The closing ceremony took place in a symposium at Hilton Addis on 25 February.

The motto for the 18th Addis Chamber In-ternational Trade Fair calls for integration between trade and industry so as to bring about sustainable development, President of the Chamber, Ato Elias Genetie, said in a speech he delivered at the opening ceremo-ny of the event. The fair is accompanied by concurrent events with a view to providing additional information regarding standards and trends, possible applications and solu-tions to problems, he said.

Secretary-General of the Chamber, Ato Getachew Regassa, in a speech he deliv-ered on the occasion said, Addis Chamber International Trade Fair is the leading and most attended trade and investment promo-tional event in the country. The trade fairs have had far reaching impact on the coun-try’s business by introducing thousands of foreign companies to Ethiopian markets as suppliers of goods and services.

The 17th edition of Addis Chamber Inter-national Trade Fair attracted a total of 313 companies, of which 213 were foreign firms from 25 countries. The number of ex-hibitors this year shows a decline. This is due to the limited size of the space for the exhibition. As many of the early applicants this year booked larger exposition stands, applications of late arrivals have been turned down, the Secretary-General said.

Trade State Minister, H.E. Ato Ali Siraj, in his opening remark said, the government of Ethiopia is committed to enhancing the competitive positions of business com-panies by improving the business climate and eliminating policy and regulatory bottlenecks that adds to the cost of doing business. To this end, the government has institutionalized Public Private Consulta-tive Forums to engage the private sector with constructive consultation to address challenges facing business and investment in the country.In a press conference given by the Sec-retary-General, and Trade and Invest-ment Promotion Directorate Director, Ato Gashaw Abate a few days before the open-

ing of the trade fair, the latter said, so far there are three categories of trade fair or-ganized by the Chamber. They are general trade fair, of which the recent 18th edition is one; agriculture and food fair, to take place for the 7th time in the coming June; and tourism and travel, of which next April will be 3rd edition.

Talking about unique features of the 18th trade fair, the Director said, one such fea-ture is the fact that the foreign participants came well organized for the fair. They have brought their own materials for their dis-plays, they have new technologies, their management and procedures also show skills. The integration of their staging of their exhibition and organization is impres-sive.

One area of focus for the Chamber is the issue of visitors of the fair. The number of visitors is showing growth from time to time; but the number is not still good enough. This could be due to the fact that the event is not one in which items are bought and sold. It is an event for importers and exporters to network, for business peo-ple to exchange information and explore business possibilities.

On the participation of companies, foreign investors paying attention to the oppor-tunities and particularly the fast growing economy of Africa, natural resources and other opportunities come to the fair in large number. And their participation is also of high level qualitatively too, the Di-rector said.

Stating what he thinks is behind the low level of participation on the part of local business people, it is fatigue he said. There are more than 200 bazaars in one year. On the other hand, there is problem with awareness. The event is not about selling items and there are no shops involved in it. It is about selling ideas of business and net-working among potential partners. On top of that expenses are incurred for participa-tion in the fair, he added.

Secretary-General of the Chamber said, starting from the upcoming edition, pro-fessionally organized business to business meetings will be organized side by side with other activities of the fair. The Cham-ber endeavors to serve its esteemed cus-tomers to their best satisfaction by intro-ducing innovative ideas based on feedback collected from participants.

Ministry of Trade State Minister on the occasion said, Ethiopia is currently in the process of acceding to the international trading system, the World Trade Organi-zation and it is on the verge of completing accession into the COMESA Free Trade Area. For those sectors that Ethiopia de-veloped competitive industries, the ac-cession to the Free Trade Area will start from 2014 while four additional years will be given to less competitive sectors to prepare themselves for competition. The year 2018 and beyond will show Ethiopia’s full accession to the regional economic Free Trade Area.

Addis Ababa Chamber of Commerce and Sectoral (AACCSSA) Associations in ac-cordance with the requests of its members to seek time extension from Ethiopian Rev-enues and Customs Authority (ERCA) for producing the document from document authentication and certification office show-ing their shares have been used for capital growth, raised the issue with the Authority on the need for holding a discussion. ERCA in turn agreed and in a discussion it orga-nized at its premises on February 26, 2014, decided to extend the time by one month.

The positive way ERCA listens to concerns of AACCSA and the business community and its readiness to organize discussions is admirable, Secretary-General of AACCS-SA, Ato Getachew Regassa, and members of the business community in attendance on the day said.

ERCA Director-General, Ato Beker Shale, on his part said, failure to abide by the law is not simple matter. For the government this is a development issue. January 30 (Eth. Cal) is set as the deadline at high govern-ment official level and the decision is made for national interest considerations. This decision is reached in a discussion in which experts of the Ministry of Finance and Eco-nomic Development as well as the Minister participated. From this on things should be go smoothly and hence dragging heels by members of the business community is un-acceptable behavior.

Those who claim they have used their shares for capitalization purpose but they were made to pay dividend tax by mistake should consider this a dead issue and take it as cut-off point to start from a clean slate, the Di-rector-General underlined. Abiding by the law is an obligation of all citizens, he added.

The Authority and the business commu-nity stand for the same goal and all know too well paying taxes is an obligation, there is no confusion in this regard, one of the participants said and went on to mention the area he says are problematic. There are problems of clarity when it comes to the is-sue of dividend tax. Perhaps this is due to the fact that the law is not yet internalized and that he believes that the intention of the

government is to create awareness so as to create capacity to abide by obligations.Employees in document authentication of-fice working in this area are very few and take 25/30 minutes to go over the minutes submitted to them, another shared what he said he saw. This obviously has adverse im-pact in completing the process on time, he added. Another said, the office has no branches and this creates problems in efficiency of the service delivery. The same problem exists in the Ministry of Trade and also the service by the Authority at its Mexico Square office. All of these drag the process a lot, he said.

In responding to these, Director-General of Beker Shale ERCA said, the business community should bring up their problems in other government bodies to the officials in those offices in the same way as they are doing with ERCA. They should do every-thing that is necessary for them to be able to fulfill their obligation, he underlined and went on to add, instead of doing that making a request for the extension of the time is not reasonable.

ERCA cannot keep on entertaining such re-quests indefinitely. This has to stop at some point and now is the time. This kind of ques-tion and answer cannot be allowed to be a routine for the Authority. Some members of the business community entertain the idea that the government may decide to reverse or ignore its policy and hence are on ‘wait and see’. The Authority has the duty to en-force the law, Ato Beker reiterated.

Secretary-General said, the Chamber is re-questing the extension of time for those who have started the process but could not make the deadline.

After these and other ideas went back and forth, and other officials of ERCA shared their comments, the Director-General an-nounced his verdict. Out of the ERCA’s respect for the Chamber, and because the Authority believes that the Chamber listens to the heartbeats of the business community, the 30-day time extension has been granted, he said. And it would be naïve this would happen again in the time ahead. From now on ERCA enters the law enforcement phase, he warned.

Addis Ababa Chamber of Commerce and Sectoral Associations (AACCSA) orga-nized a symposium on Competitiveness of Selected Industries: The Case of Metal and Metal Products as part of its 18th Ad-dis Chamber International Trade Fair. The theme attracted a lot of attention of a large number of business community members of AACCSA including many foreigners with investments in Ethiopia. The event took place at Hilton Addis on February 25, 2014.

The two presenters, from the National Bank of Ethiopia, defined terminologies and concepts basic to the theme, touched on various policy frameworks in existence in the country and then moved on to their presentation of considerations and gaps in the sector in detail.

Custom regulation on metal and metal products makes the industry unprotected or exposed for fierce competition. Regard-ing institutional readiness to enhance the competitiveness of industry, at macro level in a 2005 R&D survey, government GDP ratio expenditure is 0.2 percent while R&D personnel per 10,000 labor force is found to be too low to enhance competitiveness, it was indicated in the presentation.

Instead of protecting the metal industry, as one can expect given its infancy, the small upper bound tariff exposed the industry to stiff competition, and high lower bound tariff on raw material stifled further the competitiveness of the industry.

At industry level, not only budget for re-search and development activities is not being made available, the area faces cap-ital shortage problem.

On the issue of energy for the sector, there is a lot of hope in the future. In the meantime, however, a major constraint is the frequent power fluctuation and lack of electricity in potential iron ore area. The former forces companies for extra cost and erode their competitiveness.

Given this situation, it may not be much of a surprise that the performance of the met-al and metal industry has been poor. Av-erage annual value of production of metal industries during 2008-2012 at industry level was USD 974 million.

The presenters have also given a summa-ry of what they said are major challenges facing the industry. Innovation and prod-uct diversification problems for high value added commodities; lack of infrastructure to mine domestic ore; shortage of finance for working capital or new investment; lack of capacity to compete with foreign businesses especially from India and Chi-na; custom duty on imported raw materials eroded domestic competitiveness of the industry; little investment on research and development; weak linkage between high-er education and research institution; weak linkage between private firms and mega public investments; and power/electricity shortage and fluctuation problem.

Then the presenters before moving on to their conclusion, touched on what they call are competitive disadvantages. Lack of finance hinders the industry from adopt-ing the latest technology and becoming competitive; the limitation in capacity of support institutions; and the weak focus on regional market.

In conclusion the presenters said, among other things, some government policies

do not address the issue of the sector ap-propriately; institutional capacity is weak; limitation in infrastructure development is a constraint for the industry; and perfor-mance of the industry in production and export is poor.

After the presentation, discussion took place in which questions and comments by the participants, who happened to fill the room to its maximum capacity, followed.

Ato Yohannes W/Gabriel, AACCSA Arbi-tration Institute Director, said organizing a discussion on this theme is a great step as the Chamber has been criticized for ignor-ing the sector and focusing on service.

He said he expected the presentation to have more things to say about the theme but it did not. The government keeps 27% of private bank reserve for its own policy objective. The Director said that he does not believe the manufacturing sector ben-efits much from this scheme. On the other hand, supply of finance is low and why is that?, he asked. There are several policy constraints, he said.

Another participant asked how open the sector is for private sector. He asked if there would not be a crowding out. For Ethiopian investors financing from banks is limited, another commented.

While yet another asked, currently, it is said the Ethiopian metal industry is not competitive. How will the sector manage when it enters COMESA and there will no duty? These and other issues do not seem to have easy answers, at least on the level of that day’s discussion.

Addis Chamber Organizes Symposium on Metal Industry Competitiveness

By Mesfin Zegeye

PAGE 7 ADDIS BUSINESS February 2014

BUSINESS AND LAWChallenges and opportunities to

invest in the manufacturing Sector(By Yohannes Woldegebriel)

The manufacturing Sector has been given particular and unprecedented attentions, prominence and impor-tance in the long term vision of the Government Ethiopia. Accordingly the National vision formulated for the Fed-eral Democratic Republic of Ethiopia (FDRE), deservingly expects “the in-dustrial sector that plays a leading role in the economy.”

In order to achieve the various objec-tives charted out under the Growth and Transformation Plan (GTP), “creating favorable conditions for the industry to play key role in the economy” is one of the pillar strategies adopted and to which the Real GDP projection is set for five years at 20.0% base cases. It is evident that the inadequate attention previously given to the industrial sector appears to have justified a paradigm shift. The fact that the sector has obtained the attention of major government policy framework is by itself, a positive step forward that would signal firm commitment to allevi-ate the ordeals of private investors that are likely to endure so much sufferings and losses due to lack of adequate policy clarity, attention, support and immense bureaucratic neglects.

The policy declaration of the FDRE government must be welcomed and all investors will definitely look forward to see concrete and sustainable legislative and administrative measures toward supporting “value adding private sector” that have already made and will make courageous initiatives to invest in the sector despite the prevailing unfriendly and less encouraging environment and attention provided by various govern-ment bodies.

Private and public companies that pre-viously resolved to invest and engage in the industrial sector long before the promised support indicated in the pillars strategies of the GTP were conceived and adopted passed through tough and difficult times. Many businesses that were set up with huge capital obtained from revenues generated in the import and retail businesses, bank loan or pub-lic funding have endured unspeakable sufferings and good numbers of them have perished prematurely for lack of safeguard and protections. Although these businesses decided to invest in the manufacturing sector in response to the rising local market demand for various kinds of products, they did so in the absence of policy and appropriate legislative backing. Accordingly their effort was aborted due to high costs of production, flood of cheap and substan-dard imported foreign products, lack of investment incentives, lack of tariff pro-tection and many other highly needed government supports etc….

The overall development of a country cannot be conceived exclusively with wholesale import of finished machiner-ies, equipments and goods. For several decades, most local companies have been engaged in the import and distribu-tion of finished goods. But the nation de-velopment endeavor cannot be sustain-ably realized by importing the finished products from abroad. Therefore it was quite justified that the government felt in its national vision the need to shift to-ward the manufacturing sector.

Now that it has been increasingly un-derstood that country’s economic growth has become hard to imagine without added value, it looks proper that following a painstaking studies, need analysis, priorities, potential and

available demands, supports and incen-tives and carefully scrutiny of the direc-tion of government policies, businesses would have to make a prudent decision to engage in the manufacturing sector.

The impressive policy direction envi-sioned by the FDRE government in its GTP on the manufacturing sector how-ever could not by itself guarantee hus-tle free investment or thwart unfolding problems. According to information ob-tained from investors that have already invested in and joined the sector, busi-ness have suffered immensely due to underdeveloped infrastructure in the in-vestment site, basic utility facilities such as water, telephone, Electric power, poor duty and tax administration, lack of bank loan and other financial supports, the prevalence of distorted market, rising overhead costs and many other essential supports needed for such kinds of new establishments. It was therefore natural that the suffering started to generate sub-stantial and unbearable costs during the very initial period of the investment.

Much was expected when the FDRE Government adopted its GTP in 2010, in line with dream and demand of gen-uine local investors that have either al-ready invested or planning to invest in the subsectors. Since its adoption, many investors have been very optimistic that the various legal, administrative and bureaucratic bottlenecks that they were facing or likely to face will be tackled in the short run. Nearly four years have passed since the GTP with all its good promises still unmet and the ordeals of businesses exacerbated from time to time.

The following are some of the common problems prevailing among existing and new investors and possible solutions. Rules and regulations on loan interest rate, type and duration of loan, and loan approval process, compulsory purchase of treasury bills are geared toward seri-ous and prudent considerations to con-trol the activities of banks for proper, non-discriminatory banking services, to boost customers’ confidence to encour-age and contribute the development ac-tivities of the government while earning reasonable profits. Indeed all public and private commercial banks should in-volve and encourage public and private investment to support and share the de-velopment endeavor of the country. This is very acceptable.

Local investors in the manufacturing sector that have mobilized their re-sources to achieve the efforts of gov-ernments’ policy priority areas have already demonstrated their commitment and practically proved implementation of government policies. Accordingly special exemption, preference and in-centives should be accorded in banking related services to put in to effect the policy declaration of the government enshrined in the GTP carefully and on case by case examination, taking in to account the importance and level of in-vestment and the potential financial re-quirement of each investment.

The investment law has been issued in line with the GTP. However there are still old practices that have not been amended with the spirit of the GTP. The proclamation and other lower laws needs to be revised or their application would have to be tuned in such a way as to give full effect and force to the policies outlined under the GTP in respect of the manufacturing sector. Accordingly the

proclamation should be either amended to allow existing manufacturing industry to enjoy the same privilege of duty free import of machineries or equipment’s for a new level or phase of productions. Waiver must be granted to the sector to produce an investment plan every now and then for expansion if the aim is to improve or boost the production capac-ity or even transform existing industry. Finally the manufacturing sector must be separately considered in granting or denying investment incentives and it must not be considered together with other sectors.

Priority and other favourable attention given to the manufacturing sector have not been accompanied with similar en-couragements and supports on taxes and duties. Accordingly duty and taxes payable for such goods, products and components are still treated by the same tariff and tax laws already in place when the government did not adopt the policy.

As a result, the manufacturing sector is still taxed with the tariff and duty regime MOFED has decided several decades ago. There is therefore a top urgency for the government to introduce tariff preferences for the manufacturing sector before the sector degenerate and doom The manufacturing sector should be particularly treated differently from all other sectors by Customs laws, taxes and tariffs in order to introduce real and concrete changes. The manufacturing sector has been accorded special atten-tion by the GTP and as a result, for this sector to grow there must be, custom formalities, duties, tax and tariff pro-tections from foreign industries that are producing similar products abroad and imported to the country. Several young industries have already perished over the past years without obtaining reasonable protections by the government that has been erroneously arguing that protection is inconsistent with free market policy. The procurement policies adapted to public bodies that constitute the biggest procurer of goods and services does not sufficiently support the manufacturing sectors and needs to be relaxed without compromising quality and standards. Goods that are produced locally should be given preference margin in compari-son with similar products imported from abroad. To the extent locally produced goods and services substantially meet the demands of local customers, public bodies must be encouraged to buy lo-cally and local suppliers should be in-centivized to provide their products to supply to local customers.

Existing requirements and directives that are imposing very complicated and unrealistic criteria in order to secure the Issuance of license and certificate of competence should be re evaluated and granted with special dispensation, waiver in circumstances where the cri-teria prevent the sector from engaging in actual works. The manufacturing sector should not be overburdened with all sorts of trivial hurdles after making huge investment to produce goods and services.

The government should at all times pro-vide necessary administrative, judicial and legal support in order to alleviate and remove all problems investors in the sectors face. It should in particular cre-ate a platform to coordinate all relevant and concerned offices that could provide to solutions to each and every problem the sector faces by involving appropriate officials of each public body.

Then followed presentation on Botswa-na and Ethiopia investment opportu-nities, discussion on them, and a busi-ness-to-business session in the afternoon of the day. The first presentation was on the business and investment opportunities in Botswana and the presenter was BITC executive director.

Speaking on the type of investment found and sought in Botswana, the present-er said potential investors in Botswana should think of business undertakings that are economically, socially and environ-mentally sustainable in value, strategic to Botswana economy and diversification, export centred [manufacturing and ser-vice], technology and skill transfer, that can create employment, ready to exploit natural resources, and productive inves-tors, not traders.

The presenter focused on three areas of investment for profiling. They were dia-mond, coal, and agriculture.

Talking about diamond, he said investors can get involved in any phase of the di-amond value chain of their interest like exploration, mining, cutting, polishing, and retail, to mention some. Other areas of involvement that exist around diamond are air transport, insurance, financing, certification laboratory and trade.

The second area of sale chosen by the presenter was coal. There is abundant coal reserve probably the largest in the world with 212 billion tones of unexploit-ed coal. Currently, only one miner is pro-ducing around 3 million tons per annum. The demand for coal energy has increased significantly.

Coming to agriculture, the third invest-ment area for the presentation, Botswana is not self-sufficient in food, he under-lined. Poultry is the only sector of which local production met the demand. Many are around 50% many doing below that figure, maize laboring at 10% while milk is standing at 6%. All that gap is waiting for investors to fill in, the presenter seems to be saying. Thus, production of crops, ostrich farming, hides and skin, and pro-cessing are mentioned as some potential investment areas in that regard.

Grey water cycling [for irrigation], agri-culture insurance, and contract farming are also mentioned.

Other opportunities included manufactur-ing [with only15 % corporate tax], educa-tion, transport and logistics [as centre of SADC cheaper and nearer for transporta-tion], and health.

Botswana being at the centre of SADC re-gion promises huge opportunities and he went to touch on why that is. SADC has a population of 270 million, a GDP of USD 740 billion, strong projected economic growth, small economies with relatively underdeveloped financial system, as well as the opportunity to serve as financial in-termediary centre for the region’s Interna-tional Financial Services Center.

The presenter, who managed to glue the attention of the participants to his presen-tation, appeared himself could not resist the temptation of elaborating on Botswa-na business opportunities forever. The presentation, combined with the charisma of the presenter, was too good to allow even a few moments of boredom among the potential investors attending the event. The Botswana Delegation seems to have thought a lot about how to present it and not just what to present. Africa never suffered much with shortage of things to sell. Presentation and selling what it has, however is quite another matter.

Following BITC presenter, Ethiopian investment agency official described the progresses the current government has made in achieving admirable economic growth and the investment environment being made available.

Question and answer and discussion ses-sion followed the two presentations in-volving participants attending the event. Both presenters as well as members of Botswana Business Delegation and Ethi-opian government officials in attendance on the day reacted to ideas and question raised.

The afternoon of the day was slated for a business to business discussion in which companies link up with members of the Botswana Business Delegation on specif-ic areas of their interest to gauge the real situation on the ground for them to get down to practical business.

AACCSA is committed to serve its mem-bers by focusing on the priority sectors, the Secretary-General said and went on to cite some instances of action, it has spe-cialized business development services to companies in agri-business area through its Agri-Business Support Facility, and it also provides System Management Cer-tifications assistance to companies. At the moment, the Chamber is establishing a window of services to its members in the manufacturing sector under the newly initiated Manufacturing Support Facility.

Botswana Business... (Cont’d from page 4)

Legal frame ... (Cont’d from page 1)

As a consequence of this in the present situation and because they said do not have the necessary information from the agency they are not able to provide advise appropriately to their customers.

Getting services is not easy. There was a case in which signing a simple lease agreement took a whole day and that is not a good indication, the presenter said. He said they were asked to have five doc-uments but these requirements are no-where in the law. He said that they are not even sure that if the international compa-ny comes up with the list the government would not be making more demands.

There are no people assigned to talk to and no clearly indicated department to contact for this.

It was reiterated in the course of the day’s discussion that the law was adopted from France but only one component of five possibilities was taken and the one tak-en has no legal personality of its own. Currently the investment environment requires legal frame far more than the one existing can accommodate, it was said.

February 2014 ADDIS BUSINESS PAGE 8

Trade and investment between Ethiopia and Sweden have shown to have great potential.

A number of both well-established as well as younger Swedish companies are represented in Ethiopia, including Volvo, Scania, Ericsson, Tylö (steam and sauna bath equipment), Solna Offset, Electrolux, Dynapac, Atlas Copco, ABB, SKF, AstraZeneca, Scan-coin, Pallmax as well as, recently, the fashion brand and retailer H&M. Swedish products and investments have been recognised for their high quality standards and comparative advantages in providing environmentally friendly, sustainable, long term, efficient as well as cost-efficient solutions that can mutually benefit Ethiopia and Sweden. Trade between Sweden and Ethiopia has significantly increased on both sides over the last couple of years and there is potential for further expansion..

The Ethio-Swedish Diaspora, together with the Swedish and Ethiopian business communities have significantly contributed in promoting the two countries’ trade and investment.

The Embassy is engaged in assisting local and Swedish companies in facilitating their business and in promoting trade and investments which are essential for Ethiopia to reach its ambitious Growth and Transformation Plan in the near future. We welcome enquiries and contacts from the Ethiopian business community.

All Ethiopian and foreign citizens as well as interested companies that are engaged in Ethiopia, are encouraged to contact the Embassy if you have any business-related enquiries. Companies that are interested to establish business contacts are encour-aged to register their company on the website www.chambertrade.com free of charge. You can also find Swedish companies on the website www.kompass.com. Companies seeking consultancy help can contact Business Sweden in Nairobi on +254 733 525250For more information, you can visit our website www.swedenabroad/addisabeba or www.business-sweden.se or contact us on +251-11-5180000, fax +251-11-5180030 or e-mail address ambassaden.addis-abeba@gov.se Follow the Embassy’s activities in our facebook page www.facebook.com/embassyofswedenaddis and twitter www.twitter.com/SweinEthiopia

Trade and investment promotion between Sweden and Ethiopia

What can we observe from the statistical table?1. The number of domestic firms who benefit from

FDI is larger than those negative effects (34.4 percent against 24.9 percent)

2. In Lesotho, Ghana, Niger and Uganda the nega-tive effect is higher than the positive effect

3. Most of the FDI inflows in Lesotho (only 7.8 percent positive effect) are concentrated in the textile and apparel sector and are mainly related to the preferential agreement under the Africa Growth and Opportunity Act (AGOA) which in-duced a large number of investments from Tai-wan and main land China. These investors had a weak local link in the country.

4. We can observe that there is a large difference across the countries. These differences are like-ly to be driven by both domestic firms’ char-acteristics and the different macroeconomic environments with in which both domestic and foreign firms operate.

In the next section we shall observe characteristics of domestic firms who classify themselves as either winners or losers from FDI inflows.

II. Who benefited from FDIIn the survey two sets of covariates were employed to see the impact of FDI on domestic firms. The first set of covariates relates to domestic firms’ character-istics such as size, age, market orientation, owner-ship structure, sector and productivity levels and the degree of interaction between foreign and domestic firms.

The second set of covariates includes characteristics of the home country, which might affect both the type of inward FDI and in turn its effects on the host coun-try economy and the ability of local economic agents to benefit from foreign Multi National Enterprises presence in the country.

The survey used Probit Model, which is a type of regression where the dependent variable can only

take two values, for example married or not married. Based on the analysis the results obtained with regard to the first set of characteristics mentioned above are :

• Newly established and large domestic firms have higher probability of experiencing positive ef-fects from FDI interaction.

• Family businesses are more likely to be net losers from FDI although the magnitude of the effect is not large (about 6.3%)

• When domestic firms directly compete with for-eign firms the likelihood of positive effect from FDI is lower.

• Domestic firms with upstream market orientation, that is, firms engaged in the supply of intermedi-ate products, are more likely to experience gains from FDI as compared to domestic firms which serve the final consumer.

• Backward linkages, that is, the purchase of inter-mediate inputs from foreign firms operating in the country, are associated with net positive gains from FDI only in the case of long term supply relationship.

• More productive domestic firms are more likely to be winners from FDI inflows. In particular do-mestic firms with export status have higher likeli-hood of experiencing positive effects from FDI.

. With regard to the second set of characteristics (home/host country and local economic agents) the results obtained quite interesting. Although a better business environment is associated with a higher likelihood of gains from FDI, other variables mea-suring the quality of institutions seem to play in a different direction. The survey reveals that:

The more inefficient is the judicial and legal system (proxied by the number of years needed to solve in-solvency and an index of the strength of legal rights) and more widespread is the corruption the more like-

ly is that domestic firms benefit from FDI. Two pos-sible interpretations of this effect co-exist. On the one side, in a macroeconomic context where contracts are weakly enforceable interactions with foreign firms might be seen as more reliable and in turn more prof-itable for domestic firms. On the other side, in weak institutional environment the benefits from domestic firms might be due to more extractive behavior of do-mestic firms at the expense of foreign ones due to a lower level of punishment.

According to the Annual Investment report on FDI, April 2013, published by the Ethiopian Investment Agency a total of 6,166 foreign investment projects with a total capital of Birr 546 billion have been issued an investment license. Out of these projects 3,873 (63%), 1,515 (24%) and 778 (13%) projects

are in the pre-implementation, operation and imple-mentation stages respectively

So far there is no a study conducted to assess the benefit domestic firms got from the inflow of FDI in the country. I suggest that the Ethiopian Investment Agency or any concerned body should conduct simi-lar surveys and know the actual situation in the coun-try. Such studies are useful to take policy actions with regard to FDI and device ways on how to interlink domestic and foreign firms for a common benefit.

Finally I would like to indicate how the domestic firms react to the presence of foreign affiliates in their countries. The following table shows the percentage of the number of firms that apply various strategies to react to the presence of foreign firms in their coun-tries.

Type of strategy All firms (%) Winners (%) Losers (%)Production of similar products

29.5 37.9 31.2

Adopt similar production technology

15.5 17.7 19.6

Adopt similar marketing strategies and methods

28.1 35.7 30.9

Recruit key employees from foreign firms

6.4 9.2 6.7

Produce different products to avoid competition

22.8 25.2 27.5

Produce complementary products

21.2 25.3 21.9

No strategic reaction 38.8 24.7 33.9

Observations 3723 1260 899

How do domestic firms react to the presence of foreign firms in their countries?

Which domestic firms....(Cont’d from page 2)

Source: UNIDO Africa Survey 2010

PAGE 9 ADDIS BUSINESS February 2014

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Foreign Companies Seeking Importer TRADE FAIR

Chamber’s Memory

Kenya’s Minister of Commerce Visits Addis Ababa Chamber of Commerce

Partnership Opportunity

H.E. Dr. J.G. Kiano, Minister of Commerce and Indus-try and a member of the Kenya’s Economic Delegation which recently came to Addis Ababa, paid a visit to the Addis Ababa Chamber of Commerce during the delegation’s two-day stay in the capital. He was ac-companied by Mr. L. M. Kabetu Director of Trade, Kenya Government, and Mr. A.E. Osanya Nyyneque, Economic Advisor, Ministry of External Affairs, Ken-ya Government, who also were members of the dele-gation.

Addressing the members of the Addis Ababa Chamber of Commerce H.E. De. J.G. Kiano said that the purpose of the meeting was to discuss with the businessmen in Ethiopia the possibilities of increasing the trade be-tween the two countries.

He said that both the governments of Kenya and Ethi-opia were very much concerned about the communica-tion between their countries. Goods could be imported by sea and air only to Ethiopia from Kenya. The road is ready up to Moyale on the Ethiopian border with Ken-ya. It is expected that Kenya should construct the road from there southwards to Nairobi. H.E. the Ministr further said that he would convey this idea to the Pres-ident, Mr. Jomo Kenyatta, and joint ventures between the two countries in such fields could be expected.

Ato Bekele Beshah, the President of the chamber of Commerce’ who presided over the meeting called upon the members to ask questions on topics of their interest.

Answering a question on foreign capital investment in Kenya, the Minister said that a clear cut statement is put in the constitution which provides sufficient com-pensation on investment. In addition, the Foreign In-vestment Protection Act was passed by the Parliament of Kenya. Foreign investors, according to this, should apply for approved States Certificate. Once this certif-icate is obtained the investor gets the guarantee for the repatriation of his assets. Thirdly some foreign inves-tors desire to go for joint ventures. The Kenya Govern-ment has formed the Development Finance Company which goes into joint investment with private investors.

Answering another question on the export of malt to Ethiopia for the production of beer, the Minister said that even though Kenya produces barley, she is not an exporter of malt as there are two beer manufacturing companies in the Country.

Answering a question on banking, Dr. Kiano said: “Kenya has no experience in banking and the existing banks are man-aged by foreigners. We do not have any bank; this is a field in which special attention should be directed.”

The Minister suggested a visit to Kenya by representatives of the Addis Ababa Chamber of Commerce and said that he

has succeeded in forming a Kenya National Chamber of Commerce absorbing into it all the previous racial Chambers of Commerce in the country.

Answering a question whether any preferential treat-ment is given to Britain since Kenya is a member of the Commonwealth, the Minister said that no such special position is created although Kenya receives privileges. The same import tariff is applied to British manufac-tured goods also. Imports to Kenya are not based on special treatment. He also said that they have banned trade relations with South Africa and Portugal. “There

is an unfavorable trade balance between Japan and Kenya” he added. “Both Tansania and Uganda have banned’ the trade with Japan; if Japan imports more goods from Kenya, then the trade between Kenya and Japan would continue. Otherwise, we shall also ban trade with Japan”, he concluded.

At the end of the meeting, the Delegates visited Chamber’s Permanent Exhibition.

Source Trade Jornal 1965

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