VZCZCXRO1403
RR RUEHROV
DE RUEHDS #0105/01 0141345
ZNR UUUUU ZZH
R 141345Z JAN 08
FM AMEMBASSY ADDIS ABABA
TO RUEHC/SECSTATE WASHDC 9142
INFO RUCNIAD/IGAD COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 08 ADDIS ABABA 000105 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT EB/IFD/OIA JNHATCHER AND AMKAMBARA 
DEPARTMENT PLEASE PASS TO USTR BILL JACKSON 
 
E.O. 12958: N/A 
TAGS: EINV EFIN ETRD ECON KTDB USTR OPIC ET
 
SUBJECT: ETHIOPIA: 2008 INVESTMENT CLIMATE STATEMENT 
 
REF: STATE 158802 
¶1. As requested in Reftel, post is pleased to submit the 2008 
Investment Climate Statement for Ethiopia. 
Begin Text: 
¶2. Openness to Foreign Investment 
2006/2007 HIGHLIGHTS 
 
-- In a bid to curb increasing food prices the Government of 
Ethiopia (GoE) levied a 10 percent surtax on selected imports as of 
April 2007 and used the proceeds to distribute subsidized wheat to 
urban areas. 
 
-- The UN Investment Guide to Ethiopia indicated that, according to 
the private sector, routine bureaucratic corruption is virtually 
non-existent in Ethiopia.  However, Transparency International 
recorded a decline in Ethiopia's ranking from 114th out of 145 
countries rated in 2004 to 130th out of 160 countries rated in 2006 
and 138th out of 180 countries rated in 2007 in its Corruption 
Perception Index, where a higher number indicates a higher level of 
corruption. 
 
-- Ethiopia has double taxation treaties with 15 countries, but not 
with the United States. 
 
-- The nation's central bank, the National Bank of Ethiopia (NBE), 
has ordered that all bank processes concerning items being exported 
to China shall be undertaken and overseen by the state-run 
Commercial Bank of Ethiopia (CBE) effective November 14, 2006. 
 
-- NBE revised the monetary and banking proclamations and the 
banking business proclamation 1994.  These draft laws are 
distributed to commercial and banks and other stakeholders for 
comments.  The laws are expected to be approved by Parliament during 
¶2008. 
 
-- The World Bank's 2008 Doing Business Report ranks Ethiopia as 9th 
in Sub-Saharan Africa.  Factors considered include starting a 
business, registration, and credit facilities, while macroeconomic 
conditions and level of infrastructure development are not 
considered. 
 
-- A National Foreign Investment Promotion Advisory Council has been 
established with to the aim of conducting focused foreign investment 
promotion on textiles and garments, leather and leather products, 
fruits and vegetables and agro-processing areas.  Its major tasks 
are to collect, organize and make available basic data regarding 
land allocation, utilities connection, investment opportunities, 
market and other relevant information. The next step is to track 
potential foreign investors and convince them to invest in Ethiopia 
in the priority areas. 
 
-- The GoE has publicly stated that the private sector will be an 
engine of development and that private capital should play an 
important role in the economy. The GoE has eliminated most of the 
discriminatory tax, credit and foreign trade treatment of the 
private sector, simplified administrative procedures, and 
established a clear and consistent set of rules regulating business 
activities. 
 
--Ethiopia continues in the WTO accession process.  The Memorandum 
of Foreign Trade Regime (MFTR) was submitted to the WTO Secretariat 
in December 2006. Ethiopia is currently preparing responses to the 
questions posed by member states, and the responses are expected to 
be delivered in January 2008. 
 
-- Though bureaucratic hurdles continue to affect implementation of 
projects, the Ethiopian Investment Agency (EIA), the main contact 
point for foreign investors, has improved its services and is now 
providing a highly expedited "one-stop shop" service that 
significantly cuts the time and cost of acquiring investment and 
business licenses. 
 
¶3. OVERVIEW: 
 
In June 1996, the Ethiopian Government issued a revised Investment 
Code which provided incentives for development-related investments, 
reduced capital entry requirements for joint ventures and technical 
consultancy services, created incentives in the education and health 
sectors, permitted the duty-free entry of capital goods (except 
computers and vehicles), opened the real estate sector to expatriate 
investors, extended the losses carried forward provision, cut the 
capital gains tax from 40 to 10 percent, and gave priority to 
investors in obtaining land for lease. 
 
Amendments to Ethiopia's Investment Proclamation (Law) were issued 
in September 1998 and July 2002, further liberalizing the investment 
regime and removing most of the remaining restrictions. In the 
 
ADDIS ABAB 00000105  002 OF 008 
 
 
latest amendment, areas solely reserved for government investment 
were reduced to the transmission and supply of electricity through 
the Integrated National Grid System, postal services with the 
exception of courier services, and passenger air service using 
aircraft with more than 20 seats. Manufacturing of weapons and 
ammunitions and telecommunications services can only be undertaken 
as joint ventures with the government. 
 
Ethiopia's revised investment code prohibits foreign firm 
participation in domestic banking, insurance and micro-credit 
services. Other areas of investment reserved for Ethiopian nationals 
include broadcasting, financial services, air transport services 
using aircraft with a seating capacity of less than 20 passengers, 
travel agency services, and forwarding and shipping agency services. 
Professional service providers must be licensed by the Government to 
operate in Ethiopia. Also a foreign investor intending to buy an 
existing enterprise to operate it or buy shares in an existing 
enterprise needs to obtain prior approval from the Investment 
Agency. 
 
In addition to those mentioned above, the amendment reserves the 
following areas of investments for domestic investors: 
retail trade and brokerage; wholesale trade (excluding supply of 
petroleum and its by-products as well as wholesale by foreign 
investors of their locally-produced products); import trade 
(excluding LPG, bitumen and upon approval from the Council of 
Ministers, material inputs for export products); export trade of raw 
coffee, chat, oilseeds, pulses, hides and skins bought from the 
market and live sheep, goats and cattle not raised or fattened by 
the investor; construction companies excluding those designated as 
grade 1; tanning of hides and skins up to crust level; hotels 
(excluding star-designated hotels), motels, pensions, tea rooms, 
coffee shops, bars, night clubs and restaurants excluding 
international and specialized restaurants; trade auxiliary and 
ticket selling services; car-hire, taxi-cabs transport services; 
commercial road transport and inland water transport services; 
bakery products and pastries for the domestic market; grinding 
mills; barber shops, beauty 
salons, and provision of smith, workshop and tailoring services 
except by garment factories; building maintenance and repair and 
maintenance of vehicles; saw milling and timber making; custom 
clearance services; museums, theaters and cinema hall operations; 
and printing industries. 
 
Another important change made in the 2002 amendment has been the 
reduction in the minimum capital requirement of foreign investors 
from $500,000 to $100,000 per project for wholly foreign owned 
investments and from $300,000 to $60,000 for joint investments with 
domestic investors. The minimum capital required of foreign 
investors in the areas of engineering, architectural, accounting and 
auditing services; 
business and management consultancy services; and publishing is 
reduced from $100,000 to $50,000 for wholly foreign owned 
investment; and to $25,000 for joint ventures undertaken with 
domestic partners. A foreign investor reinvesting profits or 
dividends, or exporting at least 75 percent of the output will not 
be required to meet minimum capital requirements. The 27 percent 
equity requirement of local partners in joint ventures is also 
repealed. 
 
Most, but not all of the tenders issued by the Privatization and 
Public Enterprises Supervising Agency (PPESA) under Ethiopia's 
privatization program are open to foreign participation. In some 
instances the Government promotes joint ventures with Ethiopian 
private companies rather than outright sales. Some sectors are 
closed to foreign investment. 
 
Foreign firms participate through consultancy services preparatory 
to privatization, or through tendering on advertised privatization 
opportunities. Of the 360 public 
enterprises and branches pegged for privatization, 294 have been 
offered between 1994 and December 2007.   254 properties 
approximately worth in excess of $460 million have been sold; 18 
returned to their original owners, while 10 retail shops and 1 state 
farm have been closed. These enterprises are mostly small 
enterprises in trade and other service sectors.  24 enterprises were 
privatized from October 2006 through December 2007. 
 
While PPESA would not provide the value of privatized companies, 
research indicates that companies owned by or affiliated with 
prominent Ethio-Saudi businessman Sheik Mohammed Al-Amoudi were 
awarded enterprises worth over $400 million, over half of all 
privatizations by value. 
 
There are no discriminatory or excessively onerous visa, residence, 
or work permit requirements regarding foreign investors. Foreign 
investors do not face unfavorable tax treatment, denial of licenses, 
 
ADDIS ABAB 00000105  003 OF 008 
 
 
discriminatory import or export policies, or inequitable tariff and 
non-tariff barriers. However, some Ethio-American investors who 
acquired privatized properties have experienced difficulties 
obtaining title deeds to the properties because of difficulties 
created by local level authorities. Some had problems acquiring land 
for investment purposes. Although federal officials have at 
times intervened to resolve these problems, a lasting solution 
requires policy level changes. 
 
¶4. Conversion and Transfer Policies 
-- Ethiopia's Investment Proclamation (Law) allows all foreign 
investors, whether or not they receive incentives, to remit freely 
profits and dividends, principal and interest on foreign loans, and 
fees related to technology transfer.  Foreign investors may also 
remit proceeds from the sale or liquidation of assets, from the 
transfer of shares or of partial ownership of an enterprise, and 
funds required for debt service or other international payments. The 
right of expatriate employees to remit their salaries is granted in 
accordance with the foreign exchange regulations of the 
National Bank of Ethiopia (NBE). U.S. businesses represented in 
Ethiopia do not encounter difficulties in the repatriation of 
dividends. 
 
-- The NBE retains a monopoly on all foreign currency transactions. 
The NBE supervises all payments or remittances made abroad. The 
local currency (Birr) is not 
freely convertible. Ethiopia issued several proclamations (laws) in 
September 1998 that somewhat liberalized the country's foreign 
exchange market. NBE issued a directive in 2004 that allows 
non-resident Ethiopians and non-resident foreign nationals of 
Ethiopian origin to establish and operate foreign currency accounts. 
The minimum deposit is U.S. $100 and since 2006 the maximum amount 
is $50,000. The directive also allows them to open a minimum of 
$5,000 in a fixed foreign currency account.  The Bank issued two 
other directives in 2006 regarding Flower Export and Foreign 
Exchange Repatriations and Provision for International Remittance 
Services.  In general, firms complain that they are facing 
difficulty in obtaining needed foreign exchange at competitive 
rates. 
 
-- In contrast to recent years, the Birr has undergone a sharp 
depreciation, from Birr 8.65 per dollar in January 2005 to Birr 9.2 
per dollar in December 2007. Over this period, the differential 
between the inter-bank determined rate and the parallel (or "black 
market") exchange rate has been steadily increasing.  The rate in 
the parallel market began to diverge beginning in 2005 due to 
speculation owing to 
loss of investor confidence and excess demand for foreign exchange. 
Currently, the official exchange rate is Birr 9.2 per dollar while 
Birr 9.55 in the parallel market. 
 
 
¶5. Expropriation and Compensation 
-- Per Ethiopia's 1996 Investment Proclamation (Law) and subsequent 
amendments, no assets of a domestic investor or a foreign investor, 
enterprise or expansion may be nationalized wholly or partly, except 
when required by public interest and 
in compliance with the laws and payment of adequate compensation. 
Such assets may not be seized, impounded, or disposed of except 
under a court order. 
 
-- No confirmed acts of expropriation have occurred under either 
the 
Transitional Government of Ethiopia (1991-95) or the Federal 
Democratic Republic of Ethiopia, which assumed power in mid-1995. 
Nevertheless, a few cases of U.S. citizens whose business properties 
were expropriated by the Marxist Derg 
government in power between 1974 and 1991 remain unresolved. 
 
-- There is no right of private ownership of land. All land is owned 
by the state and can be leased for up to 99 years. A few textiles 
factories privatized in recent years were repossessed by the 
government because the new owners failed to pay debts owed to the 
government and other commercial banks. 
 
¶6. Dispute Settlement 
-- According to the Investment Proclamation (Law), disputes arising 
out of foreign investment that involve a foreign investor or the 
state may be settled by means agreeable to both parties. A dispute 
that cannot be settled amicably may be submitted to a competent 
Ethiopian court or to international arbitration within the framework 
of any bilateral or multilateral agreement to which the Government 
and the investor's state of origin are contracting parties. 
 
-- Ethiopia's judicial system remains underdeveloped, poorly staffed 
and inexperienced, although efforts are underway to strengthen its 
capacity. While property and contractual rights are recognized and 
 
ADDIS ABAB 00000105  004 OF 008 
 
 
there are written commercial and 
bankruptcy laws, many judges lack understanding of commercial 
matters. There is no guarantee that the decision of an international 
arbitration body will be fully accepted and implemented by Ethiopian 
authorities. The Embassy routinely 
advises investors to specify that disputes will be settled by 
arbitration either in Ethiopia (the Chamber of Commerce now runs an 
arbitration center) or abroad due to the lack of experience of 
domestic courts. 
 
-- Ethiopia is not a member of the International Center for the 
Settlement of Investment Disputes. 
 
¶7. Performance Requirements and Incentives 
-- The 2003 amendment to the Investment proclamation gives 
investment incentives for investors in specific areas. 
 
-- Investors engaged in manufacturing, agro-industrial activities or 
the production of certain agricultural products and who export at 
least 50 percent of their products or 
supply at least 75 percent of their product to an exporter as 
production input are exempt from income tax for five years. An 
investor who exports less than 50 percent of his product or supplies 
his product only to the domestic market is income 
tax exempt for two years. Under special circumstances, the Board and 
the Council of Ministers could extend the tax exemption. 
 
-- The government has also set up a special loan fund of $174 
million through the Development Bank of Ethiopia and made available 
land at low lease rates for priority export areas such as 
floriculture, leather goods, textiles and garments, agro-processing 
and related products. An investor can borrow up to 70 percent of the 
cost of the project from this special fund without collateral upon 
presenting a viable business plan and a 30% personal equity. 
 
-- An investor who invests in the relatively under-developed regions 
of Gambella, Benshangul and Gumuz, South Omo, Afar and Somali will 
be eligible for an additional one-year income tax exemption. 
However, an investor who exports hides and skins after processing 
only up to crust level will not be entitled to the income tax 
incentive. 
 
-- Investors who expand or upgrade existing enterprises and export 
at least 50 percent of their output or increase production by 25 
percent are eligible for income tax exemption for two years. 
 
-- Investors are allowed to import duty-free capital goods and 
construction materials necessary for the establishment of a new 
enterprise or for the expansion of an existing enterprise. Also 
spare parts worth 15 percent of the value of the capital good can be 
imported duty free. This privilege may be denied if the capital good 
and construction materials are locally produced and have competitive 
prices, quality and 
quantity. 
 
 
¶8. Right to Private Ownership and Establishment 
-- Both foreign and domestic private entities have the right to 
establish, acquire, own and dispose of most forms of business 
enterprises. 
 
-- State-owned enterprises have considerable de facto advantages 
over private firms, particularly in the realm of Ethiopia's 
regulatory and bureaucratic environment, including ease of access to 
credit and speedier customs clearance. 
Local businessmen as well as foreign investors complain of the lack 
of a level playing field when it comes to state-owned and 
party-owned businesses, also known as "endowment companies."  While 
there is no report of credit advancement to them, there are 
indications that they receive incentives such as foreign exchange 
allocation, preferences in government tenders, and marketing 
assistance. 
¶9. Protection of Property Rights 
-- Secured interests in property are protected and enforced, 
although all land ownership remains in the hands of the state. 
 
-- One pending issue is the return of properties seized, "lawfully" 
or "unlawfully" during the Mengistu Haile-Mariam, or Derg, regime 
(1974-91). The Government's position is that property seized 
"lawfully," that is, by court order or government proclamation 
published in the official gazette, remains the property of the 
state. The state may choose to sell such property if deemed 
appropriate. In most cases, property seized by oral order or other 
informal means is gradually being returned to lawful owners or their 
heirs through a lengthy judicial appeals process. Claimants are 
required to pay for any additions (buildings, generators, etc.) or 
improvements made by the Government. 
 
ADDIS ABAB 00000105  005 OF 008 
 
 
 
-- Land for investment purpose is leased, with prices set by 
periodic auctions for urban land with established market floors. 
Land leasehold regulations, however, vary in form and practice by 
region. The June 1996 Investment Proclamation and 
subsequent amendments charge the Investment Authority with locating 
and facilitating the leasing of property by licensed investors. 
 
-- Loan terms are generally quite short and very few mortgages are 
made. There is no system of recording security interests. 
 
-- Also see section on Intellectual Property Rights. 
 
¶10. Transparency of Regulatory System 
Ethiopia's regulatory system is generally considered fair, though 
there are instances in which burdensome regulatory or licensing 
requirements have prevented the local sale of U.S. exports, 
particularly personal hygiene and health care products. Investment, 
business and other licenses for foreign investors can now be 
obtained from the Ethiopian Investment Agency in a matter of hours. 
¶11. Efficient Capital Markets and Portfolio Investment 
-- Ethiopia does not have a securities market, although a private 
sector initiative to establish a mechanism for buying and selling 
company shares is under discussion. 
 
--The government of Ethiopia is in a move to launching a commodity 
exchange to help alleviate food shortages and encourage the 
commercialization of agriculture.  The Ethiopia Commodity Exchange 
(ECEX) is expected to be opened in Spring 2008.  Given the myriad 
weaknesses of Ethiopia's agriculture sector and the government's 
insistence on maintaining a tight grip on ECEX, market participants 
who profit from price opacity will have other incentives to keep 
trading off the exchange. 
 
-- While credit is available to investors on market terms, the 100 
percent collateral requirement limits the ability of some investors 
to take advantage of business opportunities. Export oriented 
investors can borrow from the special fund at 
the Development Bank of Ethiopia without collateral for up to 70 
percent of the project cost. 
 
-- Foreign banks are not permitted to provide financial services in 
Ethiopia. Currently eleven banks; three state-owned and eight 
privately owned, are licensed to operate in the country. Four more 
private banks are under formation but not yet given license.  Some 
of the banks used to have extremely high non-performing loan (NPLs) 
portfolios. Due to their risk-averse behavior and NBE's stringent 
supervision, currently the NPLs ratio is declining and is below 20 
percent. The state-owned Commercial Bank of Ethiopia has 
approximately two-thirds of the assets of the banking sector, but is 
reported to have NPLs in excess of 70 percent. 
 
-- The Ethiopian Government partially controls interest rates. NBE 
determines the floor bank deposit rate.  Because there are no real 
securities markets, the Government cannot affect interest rates 
through market actions and retains the 
right to set interest rates. Loan interest rates are allowed to 
float. The minimum deposit interest rate is now 4 percent; adjusted 
upwards from 3 percent in July 2007.  Real interest rates remained 
negative over the past three years mainly driven by the increase in 
the inflation rate.  The Government offers a limited number of 28 
days, 3-month and 6-month Treasury bills, but prohibits the interest 
rate from exceeding the savings deposit rate. In September 1998, 
Ethiopia reduced the minimum denomination of Treasury bills to about 
$600 (5,000 Birr) in view of accommodating the private sector and 
individuals in the market. The yield on these T-bills is very low, 
0.638 percent for 28 days, 1.091 percent for 91 days and 1.028 
percent for 182-days bill in the first quarter of 2007/08. 
 
-- There are no laws or regulations authorizing private firms to 
adopt articles of incorporation/association that limit or prohibit 
foreign investment, participation or control. There are no private 
sector or Government efforts to restrict foreign participation in 
industry standards setting consortia or organizations. There are no 
known instances of private firms attempting to restrict foreign 
investment, 
participation, or control of domestic enterprises. 
 
-- There are no "cross-shareholding" or "stable shareholder" 
arrangements used by private firms to restrict foreign investment 
through mergers or acquisitions. 
 
¶12. Political Violence 
Ethiopia is relatively stable and secure for investors. Sporadic 
ethnic and religious violence in Oromia, Southern and Somali regions 
in recent years has not seriously affected foreign or domestic 
investors, although an insurgent attack on Chinese workers at an oil 
 
ADDIS ABAB 00000105  006 OF 008 
 
 
exploration site in Somali region in April 2007 has prompted China 
to suspend exploration operations there. 
 
There was political unrest, violent protests and numerous arrests 
following the distputed May 2005 elections.  While the unrest had 
largely subsided by 2007, local level elections in April 2008 hold 
the potential of re-sparking political unrest. 
 
 
¶13. Corruption 
 
-- The UN Investment Guide to Ethiopia published in 2004 points out 
that, according to the private sector, routine bureaucratic 
corruption is virtually non-existent in 
Ethiopia.  The guide adds that bureaucratic delays and difficulties 
certainly exist, but they are not devices by which officials strive 
to line their pockets. 
 
-- Ethiopia's Transparency International corruption rating has 
declined.  Ethiopia ranked 114th out of 146 countries rated in 2004 
(a higher number indicates a higher level of corruption), 137th out 
of 159 countries rated in 2005, 130th out of 
160 countries rated in 2006 and 138th out of 180 countries rated in 
2007 suggesting a worsening corruption trend. There are suspicions 
that the frequent cancellation of telecommunications, power and 
other infrastructure tenders may be a result of corruption. In 
addition, state- and party- owned businesses are widely perceived to 
receive preferential access to land leases and credit. 
 
-- The Federal Ethics and Anti-Corruption Commission was established 
in 2001. Since its establishment, the Commission has arrested many 
officials, including managers of the Privatization Agency, the 
state-owned Commercial Bank of Ethiopia, and private businessmen and 
charged them with corruption. There were some arrests in 2007 such 
as officials from the Ethiopian Telecommunications Corporation, 
Addis Ababa City Land Administration, Ministry of Mines and the 
National Bank of Ethiopia. 
 
-- Money laundering controls do not apply to non-banking financial 
institutions or intermediaries and there have been no significant 
arrests for money laundering or terrorist financing in 2007.  There 
is no distinct 2007 recording of terrorist-related financing arrests 
or convictions. 
 
 
-- It is a criminal offense to give or receive bribes, and bribes 
are not tax deductible. The Embassy has no knowledge of foreign 
investors ever being charged with corruption. The Ministry of 
Justice and the Anti-Corruption Commission are 
the Government entities with the primary responsibility to combat 
corruption. 
 
¶14. Bilateral Investment Agreements 
-- To date, Ethiopia has bilateral investment agreements and 
treaties with China, Denmark, Italy, Kuwait, Malaysia, Netherlands, 
Russia, Sudan, Switzerland, Tunisia, Turkey Yemen, and recently with 
Djibouti. The Investment Agency has expressed interest in discussing 
a bilateral investment treaty with the United States. A Treaty of 
Amity and Economic Relations, which entered into force on October 8, 
1953, governs economic and consular relations between the U.S. and 
Ethiopia. Ethiopia also has double taxation treaties with Italy, 
Kuwait, Romania, Russia, Tunisia, Yemen, Israel and South Africa. 
There is no double taxation treaty between the U.S. and Ethiopia. 
¶15. OPIC and Other Investment Insurance Programs 
 
-- The Overseas Private Investment Corporation (OPIC) offers risk 
insurance and loans to US investors in Ethiopia. In October 2000, 
the Ethiopian Investment Authority and OPIC signed an Investment 
Incentive Agreement and the agreement was ratified by the Ethiopian 
Parliament on April 8, 2003. OPIC provided political risk insurance 
in 1995 for a US$ 48 million project by a US firm to construct a 
sugar refinery. It also provided risk insurance to a US firm 
involved in a road design project. OPIC also provided loan and risk 
insurance in 2003 for MedPharm project, a medical laboratory 
established by a US company led by a US citizen of Ethiopian origin. 
The project is now operational. Ethiopia is a member of the 
Multilateral Investment Guarantee Agency (MIGA). 
 
¶16. Labor 
 
-- Ethiopia's labor force is estimated at 35 million, of which 85 
percent are employed in subsistence agriculture, mostly as farmers. 
The Government and armed forces are the most important sectors of 
employment outside agriculture and provide work for almost 3 million 
people. The number of permanent and temporary workers employed in 
public sector manufacturing increased from 78,000 in 1978 to over 
300,000 
 
ADDIS ABAB 00000105  007 OF 008 
 
 
in 1999 and currently remains at about the same level. Approximately 
40 percent of the urban workforce is unemployed. The high urban 
underemployment is partially 
offset by an informal economy. According to a May 2006 ILO survey, 
the informal sector constitutes 70-80% of the workforce.  The 
economy is growing but does not generate enough jobs for the 600,000 
new entrants per year. 
 
-- Labor remains readily available and inexpensive in Ethiopia. 
Skilled manpower, however, is scarce in many fields. 
 
-- Only about 300,000 workers are members of labor unions. Civil 
sector employees are not allowed to form unions. Most ILO Core Labor 
Standards have been enacted into law; the Ethiopian Parliament 
ratified ILO Convention 182 on the Worst 
Forms of Child Labor in May 2003. 
 
-- Child labor is widespread in Ethiopia. While not a pressing issue 
in the formal economy, child labor is common in rural agrarian areas 
and the informal economy in urban areas. Employers are statutorily 
prohibited from hiring youngsters under the age of 14. There are 
strict labor laws defining what sectors may hire "young workers," 
defined as workers aged 14 to 18, but these are not always 
enforced. 
 
-- Ethiopia has ratified all eight core ILO conventions.  Ethiopia's 
Labor Proclamation (42/93) prohibits children below the age of 14 
from working.  The same proclamation limits conditions of work for 
children between the ages of 15 and 18. Children in the 15-18 year 
old age bracket are allowed to work so long as it is not hazardous 
to their health or developmental progress. Prohibited activities 
include transporting goods by air, land, or sea; working with 
electric power generation plants; and performing underground work. 
Article 176 of Ethiopia's Criminal Code identifies minors as age 15 
or younger, identifies age 18 as the age of legal majority, and 
notes that those between age 15 to 18 belong to an "intermediary age 
group." 
 
-- The Ethiopian Penal Code outlaws work specified as hazardous by 
the International Labor Organization (ILO) convention, but the labor 
law of Ethiopia does not define or specify the worst forms of child 
labor.  The GOE ratified Convention 182 on May 8, 2003.  As the 
Ethiopian constitution states that all international conventions and 
covenants ratified by Ethiopia are an integral part of the law of 
the land, the list of occupations listed by the ILO Convention also 
apply in Ethiopia. 
 
-- Ethiopia generally enjoys labor peace. There was no formal labor 
strike in 2006/07. The Government re-certified the Confederation of 
Ethiopian Trade Unions (CETU) in April 1997. Since its 
re-certification, CETU (with a constituent membership of 182,000) 
has focused on fundamental workers' concerns, such as job security; 
pay increases, severance pay, and health and retirement benefits. 
The right to form labor associations and to engage in collective 
bargaining is granted in the constitution. The new labor law that 
went into effect in February 2004 is generally considered 
pro-employer by labor unions.  ---- Workers who perform essential 
services are not permitted to strike. Organizing workplaces is 
difficult because the courts are slow.  According to the Ministry of 
Labor and Social Affairs (MOLSA) and ILO staff, the 2003 labor laws 
are considered to be a positive step, however implementation remains 
weak. While there is supposed to be an industrial court in each of 
the nine regions, they exist only in Addis and three regions. 
 
-- Tri-partism emerged in May 1998 when the Government licensed the 
Ethiopian Employers' Association (EEA). The EEA is dedicated to 
maintaining labor peace and works in harmony with the ILO, CETU and 
the Ministry of Labor and Social Affairs. Its leadership supports 
the adoption of all ILO Core Labor Standards. In general, 
entrepreneurs believe that cooperating with labor is in their 
self-interest. 
 
¶17. Foreign-Trade Zones/Free Ports 
 
-- There are no areas designated as foreign trade zones and/or free 
ports in Ethiopia. Because of the 1998-2000 Ethio-Eritrean war, 
Ethiopian exports and imports through the Eritrean port of Assab are 
now prohibited. As a result, Ethiopia is conducting almost all of 
its trade through the port of Djibouti with some trade via the 
Somaliland port of Berbera. Despite Ethiopia's efforts to clamp down 
on small-scale trade of contraband, unregulated exports of coffee, 
live animals, khat (a mildly narcotic amphetamine-like leaf), fruit 
and vegetables, and imports of cigarettes, alcohol,textiles, 
electronics and other consumer goods continues. The Government of 
Ethiopia provides support to exporters of textiles, leather and 
horticultural products, including plots of land at low lease prices 
and a line of 
 
ADDIS ABAB 00000105  008 OF 008 
 
 
credit of $174 million (1.5 billion Birr) to finance exports. 
 
 
¶18. Foreign Direct Investment Statistics 
-- Foreign direct investment in Ethiopia has gradually increased in 
the last few years. It increased from $40 million in 2002 to $70 
million in 2004. Floriculture, horticulture in general, and leather 
are the sectors that have lately attracted FDI.  Cumulated US 
capital inflow in the form of FDI to Ethiopia in the past 15 years 
has surpassed an estimated amount of $4.0 billion. Current U.S. 
direct investment in Ethiopia is estimated at about $60 million. 
 
-- U.S. companies with the  significant presence and participation 
in Ethiopia's economy include Boeing, Cargill, Sheraton Hotels, 
Lucent Technologies, Cisco, Coca-Cola, Pepsi-Cola, Schaffer & 
Associates, Pioneer Hi-Bred Seeds, DHL International, Federal 
Express, United Parcel Service, Caterpillar, Mack Trucks, General 
Motors, Rank/Xerox Corporation, John Deere, Navistar and Hughes 
Network. 
 
 
End Text 
 
YAMAMOTO