2023-03-09The year 2022 proved to be the most challenging year in nearly a decade for Chinese companies investing in Ethiopia. The stark reality and the uncertain future have engulfed many investors' confidence in this East African nation. Domestically, the situation has been characterized by instability, forex shortages, inflation, financial constraints, economic downturn, and burdensome taxes. Foreign investment enterprises either closed down or distanced themselves, leaving those who stayed in a state of cautious observation, awaiting a turnaround. Despite continuous official reports on various investment opportunities in Ethiopia, the government's efforts to introduce a series of reform measures and the continuous replacement of high-ranking officials across various departments, the number of Chinese investors in the country has seen a decline. Some faced production halts due to a lack of foreign exchange, others reduced output due to changes in plans for exporting to the United States, and many experienced diminished profit margins due to unwarranted taxation. The darkest circumstance is that numerous enterprises not only ceased operations for various reasons but also encountered undue obstacles from tax authorities, finding themselves unable to argue, reluctant to bribe, and incapable of halting operations. In 2022, all Chinese investors were eagerly anticipating and hoping that Ethiopia in 2023 would be a year of positive momentum and normalization.
新年伊始，埃塞俄比亚以隆重的仪式迎来了中国新任外交部长秦刚。这次部长级访问不仅是中方精心设计的特殊友好安排，也契合了埃塞俄比亚对中国的期望并奠定了中埃关系的新起点。埃塞俄比亚人认为清晨到达的人可以帮助他们应对当天的挑战。而2023年第一批从中国到来的贵宾也将帮助埃塞俄比亚度过难关，吸引更多的中国投资来到该国实现双赢。埃塞俄比亚人在西方投资方面得到了用于教育和健康的人类发展基金，而中国则在基础建设、制造业、人力资本、和人力资源方面进行了大量的投资。位于伦敦的经济学人智库（EIU）是一家以客观与中立闻名，提供全球商业经济预测分析与咨询服务的机构。 EIU预测，2023年中国对非投资的性质和结构将发生重大的变化。中国私营部门在非洲的投资将在未来十年中发挥核心作用，目标是信息和通信技术 (ICT) 、基础设施和服务、农业、消费，电子、轻工业和金融等行业。EIU还预测，中国将增加对非洲农业的投资，粮食安全问题和中国巨大的粮食需求可能会推动中国大量投资流入非洲的农业生产部门。
also aligned with Ethiopia's expectations of China, laying the foundation for a new phase in China-Ethiopia relations. Ethiopians believe that individuals arriving early in the morning can help them confront the challenges of the day. In the same vein, the first batch of distinguished guests arriving from China in 2023 is expected to assist Ethiopia in overcoming its difficulties, attracting more Chinese investments for mutual benefits. Ethiopians have received support in education and health from the Human Development Fund in the Western investment, while China has invested significantly in infrastructure, manufacturing, human capital, and human resources. The Economist Intelligence Unit (EIU), based in London, known for its objectivity and neutrality, and providing global business and economic forecasting analysis and consulting services, predicts significant changes in the nature and structure of China's investments in Africa in 2023. The Chinese private sector is expected to play a core role in African investments in the coming decade, targeting industries such as Information and Communication Technology (ICT), infrastructure and services, agriculture, consumer electronics, light industry, and finance. The EIU also forecasts increased Chinese investment in African agriculture, and food security concerns and China's substantial demand for food may lead to significant investments flowing into Africa's agricultural production sector.
In 2023, Ethiopia is undergoing a transition from chaos to stability. While China, based on the principle of non-interference in the internal affairs of other countries, did not directly participate in the peace negotiations between the Ethiopian government and the Tigray People's Liberation Front in November last year, China undoubtedly stands to be the biggest beneficiary of peace in the country. Chinese companies' investments and projects in the Tigray will resume with the country's restoration of peace, and Chinese investors across the nation will have their investments securely protected.
Ethiopia remains a preferred destination for investment by labor-intensive Chinese companies. With the aging of the Chinese workforce and rising wages, the allure of this industry in Ethiopia is expected to grow. Moreover, Ethiopia stands out among African nations with the highest number of industrial parks, fostering closer collaboration between China and the country. This collaboration will drive the supply and demand dynamics within the industrial chain. China's private sector is poised to play a more significant role in elevating the value of products and services across various sectors in Africa, with some goods manufactured in Ethiopia finding possible export opportunities in China.
The Ethiopian Ministry of Foreign Affairs has embarked on an extensive campaign to promote the investment opportunities in the country. On January 14th, the Ministry of Foreign Affairs, in collaboration with the Ethiopian Chamber of Commerce and industry associations, organized a forum. They unanimously acknowledged that Ethiopia has emerged from a challenging period and is now in a favorable state to attract investors. They also expressed their commitment to providing accurate business information to attract investors to Ethiopia. The Minister of State for Foreign Affairs stated, "We need to promote our country in a better way, and our ambassadors need to focus on targeted promotion to facilitate trade, investment, and foreign direct investment."
Despite the influx of positive publicity, some objective facts are interwoven in the news. Recently, the Reporter confirmed that Hong Kong-based Hop Lun, after compensating, dismissed over 700 workers from the Bahir Dar Industrial Park, posing a significant setback for the Ethiopian government, and in addition to that, several factories have left the Hawassa Industrial Park last year due to Ethiopia's delisting from AGOA. Fortunately, Israel's Anbasa Elite Tactical Textile Industry swiftly filled the void in Bahir Dar Industrial Park, claiming a future investment exceeding USD3 million and creating over 1,000 job opportunities. Chinese Foreign Minister’s choosing Ethiopia as the first destination for a visit in 2023 will undoubtedly inject new momentum into China-Ethiopia relations, and domestic propaganda reports about Ethiopia will also stimulate more Chinese investors to pay attention to investment opportunities in Ethiopia. Especially amid the intensifying competition in China's manufacturing sector, the comprehensive opening after the pandemic lockdown is poised to draw more long-awaited investors into Africa and, specifically, Ethiopia. However, beneath the optimism, Chinese enterprises investing in Ethiopia will encounter numerous challenging obstacles. This is particularly true as the country's government grapples with a fiscal deficit and forex shortages, prompting a focus on exploring tax revenues from foreign enterprises, especially from the numerous Chinese enterprises. Over the past two years, an increasing number of Chinese companies have voiced complaints about severe disruptions from local customs and tax authorities hindering business development. While the primary issue stems from government departments, it cannot be denied that certain companies themselves exhibit poor internal management, lacking the flexibility to comprehend the rationality and legality of various tax laws. It is noteworthy that the senior officials at the Ethiopian Tax Bureau treat companies that assert their rights fairly. At the end of last year, Huajian Light Industry City received a special commendation from the President of Ethiopia for steadfastly resisting bribery during tax audits, serving as an exemplary model for other large private enterprises. Perhaps, this is something Chinese enterprises could consider and learn from. Certainly, attracting investment relies not solely on officials' enthusiastic promotion. If the government lacks sufficiently favorable policies and provides no room for the survival of enterprises, it is likely that even those who enter will, like Hong Kong-based Hop Lun, depart without recouping their investments.
The year 2023 is poised to be a promotional year for Ethiopia in encouraging investments. However, this does not imply that every project is suitable for implementation in the country. It is essential to recognize that specific projects still present investment opportunities. For investors, exercising caution and conducting thorough consultation before making investment decisions is more crucial than ever. We welcome investors seeking consultation to reach out to us for access to objective and genuine information regarding investment feasibility.
