1.
Political Stability - The political situation in Ethiopia has been unstable for many years,
creating a high level of uncertainty for investors and businesses. However, recent efforts by the
government to reform institutional practices and build greater transparency have helped to
improve this somewhat. A stable political environment is essential for business growth and
investment, as it provides a reliable framework for decision-making and planning.
2. Security - The security situation in Ethiopia has been volatile, with frequent outbreaks of
violence and civil unrest. This instability can be a significant risk for businesses operating in
affected areas, as it poses a threat to personal safety and property. Furthermore, businesses may
incur additional costs for security contingencies and measures to mitigate risks.
3. Infrastructure - Ethiopia has invested significantly in infrastructure development over the last
decade, including roads, railways, airports, and ports. This development enhances the country's
transport networks and trade routes, supporting businesses by reducing transportation times and
costs.
4. Regional instability - Ethiopia's geographical location makes it vulnerable to regional
instability, which can spill over into the domestic economy. For example, conflicts in
neighboring countries like South Sudan, Somalia and Eritrea adversely impact Ethiopia’s
economy. It results from security risks and difficulties in cross-border trade and investment,
hurting business activity in specific regions.
5. Access to Finance - Ethiopia’s banking sector still faces some limitations that hamper lending
such as liquidity problems, shortage of forex and outdated technology in banking. This can
severely handicap entrepreneurs and small businesses and hamper overall economic growth by
stalling investment projects.
6. Corruption - Corrupt practices limit the quality of service delivery and impede business
prospects. In Ethiopia, one of the challenges is informality in providing services and informal
networks, where corruption can take place. This may lead to unethical behavior, bribery and
nepotism, resulting in inefficiency and a negative impact on businesses that operate with
integrity.
7. Human Development - Education, health and social amenities are fundamental to developing a
skilled, healthy and productive workforce. These factors have increased in recent years,
supporting economic progress and social development, but further investment is necessary to
sustain the improvement. Companies can benefit from improved labor productivity when
employees are properly trained and equipped with proper tools and resources.
8. Ethnic tension - In recent years, ethnic tensions have erupted in many areas of Ethiopia,
resulting in violence and displacement. Since ethnicity-based conflict involves resource
redistribution, rivalries over business opportunities can be aggravated, hurting entrepreneurs and
adversely affecting investments.
9. Energy Supply - A reliable supply of electricity is essential to support industrial and
commercial growth, with inadequate energy supply negatively affecting business operations.
Ethiopia has made significant advances in expanding access to electricity, but maintenance of
infrastructure and adequate capacity provisions hamper the sector's stability.
10. Transparency and accountability - Government action plans and transparency help to enforce
rules and regulations, which can minimize uncertainty significantly, increasing investor
confidence. Ethiopia has committed to enhancing transparency and accountability, i.e.,
publication of accounts for state-owned companies and the allocation of tenders publicly, among
other measures.
In conclusion, these indicators have varying impacts on business operations, including some
negative effects specific to regional and local areas. Nonetheless, recent government-led
initiatives are working towards addressing these challenges to create a more attractive
environment for investment and economic growth.
Checklist for identifying major business indicators in Ethiopia:
1. What is the current state of the economy and how does it impact business in Ethiopia?
2. What are the primary industries in Ethiopia and how are they performing?
3. What is the level of foreign investment in Ethiopia?
4. How does the government's policies and regulations impact business in Ethiopia?
5. What is the level of infrastructure development and how does this impact businesses?
6. What is the level of corruption and bureaucratic inefficiency?
7. What is the level of education and skilled labor force in Ethiopia?
8. What is the state of the country’s financial sector?
Major Business Indicators in Ethiopia:
1. GDP: The Gross Domestic Product growth rate is a key indicator of overall economic health,
and Ethiopia has experienced significant growth in recent years. According to the International
Monetary Fund (IMF), the Ethiopian economy is expected to continue growing at a rate of
around 6-7% annually.
2. Primary Industries: Agriculture is Ethiopia's largest industry, generating over 80% of the
country's exports. Manufacturing and services comprise a smaller portion of the economy.
3. Foreign Investment: Ethiopia has been gradually opening up its markets to foreign investors,
leading to an increase in foreign direct investment (FDI). According to the World Bank, FDI
inflows to Ethiopia increased from $135 million in 2004 to over $4 billion in 2019.
4. Government Policy and Regulations: The Ethiopian government has implemented various
reforms to improve the business climate, including streamlining the regulatory environment,
privatizing state-owned enterprises, and establishing special economic zones to attract foreign
investors.
5. Infrastructure: The Ethiopian government has invested heavily in improving infrastructure,
including roads, railways, airports, and electricity generation. However, further development is
needed to enhance connectivity and reduce transportation costs.
6. Corruption: Corruption continues to be a challenge in Ethiopia. The country ranks 101 out of
180 countries on Transparency International's Corruption Perceptions Index.
7. Skilled Labor Force: Ethiopia has made significant progress in expanding access to education,
but there is still a shortage of skilled labor in some sectors.
8. Financial Sector: Ethiopia's financial sector is underdeveloped, with low levels of use of
formal financial services by businesses and individuals alike.
Factors that affect business in Ethiopia:
Positive factors:
- Proactive government policies
- Rapid economic growth
- Large market potential
- Emerging opportunities in manufacturing and services
- Increasing foreign investment
Negative factors:
- Corruption and bureaucratic inefficiency
- Limited skilled labor and infrastructure
- Regulatory and policy restrictions
- Political instability
- Underdeveloped financial sector
Sources:
- International Monetary Fund: https://www.imf.org/en/Countries/ETH
- World Bank: https://data.worldbank.org/country/ethiopia
- Transparency International: https://www.transparency.org/en/cpi/2020/index/nzl
Here's a checklist that serves as questions to identify major business indicators and key factors
affecting businesses in Ethiopian regions or cities:
1. What is the size of the market and potential customer base in the region or city?
2. What are the key industries and sectors driving economic growth and development in the
region or city?
3. What is the level of competition among existing businesses in the region or city?
4. What are the challenges in terms of infrastructure, logistics, and access to resources or capital?
5. What is the regulatory and legal framework governing business operations in the region or
city?
6. What is the level of corruption, bureaucracy, and red tape when doing business in the region or
city?
7. What are the demographics and socio-economic indicators of the population in the region or
city?
8. What is the level of education and skills of the workforce in the region or city?
9. What is the political stability and security situation in the region or city, and how does it affect
business operations?
10. What is the level of technology adoption and innovation in the region or city?
Here are sources that could be useful for answering these questions:
- Ethiopia Country Commercial Guide (https://2016.export.gov/ethiopia/ccg2016/index.asp): A
report by the US Department of Commerce that provides an overview of the Ethiopian market
and business environment.
- Doing Business in Ethiopia (https://www.export.gov/article?id=Ethiopia-doing-business-in-
ethiopia): A guide by the US Commercial Service that outlines the key aspects of doing business
in Ethiopia, including regulations, investment opportunities, and challenges.
- Ethiopia Economic Outlook
(https://www.worldbank.org/en/country/ethiopia/publication/economic-outlook-october-2019):
A report by the World Bank that analyzes the economic prospects and challenges facing
Ethiopia, including the business climate.
- African Economic Outlook 2020: Ethiopia (https://www.afdb.org/en/documents/african-
economic-outlook-2020-ethiopia-45495): A report by the African Development Bank that
assesses the economic situation and business climate in Ethiopia, with a focus on the key sectors
and policies.
Sure, here is a checklist of questions to be answered for identifying major business indicators and
factors affecting businesses in the mentioned regions and cities:
1. What is the current state of economic growth in each region/city?
2. What are the major industries/sectors contributing to the economy of each region/city?
3. What is the level of infrastructure development (transportation, communication, energy, etc.)
in each region/city?
4. What are the policies and regulations regarding businesses and investments in each
region/city?
5. What are the demographics and consumer trends in each region/city?
6. What are the labor market conditions (availability and cost of labor) in each region/city?
7. What are the levels of education and skill among the population in each region/city?
8. What is the level of access to financing and credit for businesses in each region/city?
9. What are the major challenges faced by businesses in each region/city?
10. What are the opportunities for business growth and expansion in each region/city?
Sources for information:
1. The World Bank - https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG
2. Ethiopian Chamber of Commerce and Sectoral Associations -
https://ethiopiachamber.com/sectors/
3. Ethiopian Roads Authority - http://www.era.gov.et/index.php/road-standards
4. Ethiopia Investment Commission - https://www.investethiopia.gov.et/policies-strategies/
5. Central Statistical Agency of Ethiopia - https://www.csa.gov.et/
6. International Labor Organization -
https://www.ilo.org/global/about-the-ilo/newsroom/news/WCMS642038/lang--en/index.htm
7. United Nations Development Programme -
https://www.et.undp.org/content/ethiopia/en/home/library/economicdevelopment/ethiopian-
skills-development-initiative--research-and-data-reposit.html
8. National Bank of Ethiopia - https://www.nbe.gov.et/
9. Ethiopian Chamber of Commerce and Sectoral Associations -
https://ethiopiachamber.com/challenges-current-status-of-ethiopian-business-environment/
10. Ethiopian Investment Commission - https://www.investethiopia.gov.et/investment-
opportunities/
Ethiopia has been experiencing a significant transformation over the last years, and changes in
external and internal conditions have given rise to various challenges related to peacebuilding. A
range of social, economic, and political indicators could affect peace in Ethiopia. Identifying
those indicators could enable policymakers to come up with appropriate intervention measures.
1. Political Stability
Political stability is a critical indicator for peace in Ethiopia. It comprises two components i.e.,
government effectiveness and political governance. Studies show that Ethiopia faces challenges
on these fronts due to issues caused by ethnic federalism and the governance structure
established by the current administration (Adekunle et al., 2020). The recent escalations in
conflict within the country could place businesses at risk, negatively impacting investment.
2. Rule of Law
The rule of law plays a crucial role in ensuring peaceful coexistence among different ethnic
groups in Ethiopia. Ethiopian businessmen rely on predictable norms and rules in the country for
smooth operations. Failure to observe the rule of law can hinder the ability to conduct business
as usual (Barnes & Ahmed, 2020).
3. Regional Disparities
Regional disparities could trigger regional conflicts, often stemming from religious or cultural
differences. Regional conflicts negatively impact investment and economic activity in the
affected regions (Collins, 2019).
4. Ethnic Conflict
Ethnic conflict refers to tensions arising from differences in ethnic beliefs, values, and practices.
Ethnic violence in Ethiopia typically results from poverty and wealth disparities between groups.
In areas where ethnic conflicts occur, businesses face operational challenges due to the unsafe
and unstable conditions (Gwede, 2020).
5. Infrastructure
Infrastructure deficits hinder the growth of the economy, resulting in lower investment
initiatives. Therefore, an improvement in infrastructural facilities such as energy, transportation,
and telecommunication could drive investment growth (Eshetu & Martin, 2021).
6. Corruption
In Ethiopia, corruption thrives within the public administration system, hindering investment
initiatives. It affects business operations while also scaring off foreign investors (Teshome,
2019).
7. Education
Education has a positive impact on sustainable peace (Janta & Hossain, 2020). Education can
help bridge the wealth disparity gap and promote a peaceful environment with higher standards
of living. Expanding access to education opportunities in Ethiopia could improve the wellbeing
of citizens in the country, which could lead to peace and stability.
8. Environmental degradation
Ethiopia’s diverse ecosystems are deteriorating from human-caused harm, such as deforestation
or intensive farming practices. These environmental challenges can trigger conflict over a lack of
resources like water or food, increasing economic challenges (WaboNéKéké, Agbahey & Bétika,
2021).
References:
- Adekunle, B., Hassen, S. M., & Ayoub, A. (2020). The current state of peace and conflict in
Ethiopia. African Agenda, 23(4), 41–50.
- Barnes, C., & Ahmed, F. Z. (2020). Federalism, ethnic politics, and democracy in Ethiopia: A
historical overview. Africa Journal of Management, 6(2), 296–304.
- Collins, J. (2019). Addressing regional disparities in Ethiopia. Center for Strategic and
International Studies. Retrieved from https://www.csis.org/blogs/africa-up-close/addressing-
regional-
disparities-ethiopia
- Eshetu, D., & Martin, J. P. (2021). Domestic factors affecting foreign direct investment in
Ethiopia. African Development Review, 33(1), 142-155.
- Gwede, N. (2020). Long-standing conflicts in Ethiopia threaten to escalate. RT. Retrieved from
https://www.rt.com/op-ed/496320-long-standing-conflicts-in-ethiopia/
- Janta, H., & Hossain, S. (2020). Education and Perspectives on Sustainable Peace: A Study
from Ethiopia. Analyse & Kritik, 42(1), 135–151.
- Teshome, F. (2019). Corruption in Ethiopia: Causes, consequences, and the role of foreign
donors. Journal of Contemporary African Studies, 37(3), 309–323.
- WaboNéKéké, P., Agbahey, J., & Bétika, D. A. (2021). Impacts of Environmental Degradation
on Conflicts in Ethiopian Danakil Depression. International Journal of Business and
Management Review, 9(1), 20-29.
Ethiopia is one of the fastest-growing economies in Africa, and it has a potential market for
businesses. Over the years, Ethiopia has made significant strides to boost its business
environment by implementing policy reforms that lead to further economic growth. There are
several major business indicators in Ethiopia that have an impact, positively or negatively, on
businesses. Here are some of them:
Gross Domestic Product (GDP):
GDP is a basic measure of an economy's size and performance. According to the International
Monetary Fund (IMF), Ethiopia's GDP was around $103.6 billion in 2020. In 2019, the country's
real GDP was up by 9%.
The source of information- International Monetary Fund
Inflation Rate:
Inflation refers to an increase in the overall cost of living due to the rising prices of goods and
services. High inflation can harm businesses as they struggle to maintain their profitability.
Ethiopia's inflation rate was around 20.5% in July 2021. While the government has intervened to
try and control it, inflation remains a concern.
the source of information- National Bank of Ethiopia
Ease of Doing Business (EODB) Ranking:
The World Bank’s Doing Business Report ranks economies on the EODB. The EODB index
assesses factors such as starting a business, getting permits, accessing credit, and paying taxes.
Ethiopia ranked 159 out of 190 countries in the 2020 report, which is not particularly
encouraging for businesses.
the source of information - The World Bank
Political Stability:
Ethiopia has been experiencing socio-political unrest for some time now, leading to protest and
violence, particularly in the Oromia and Amhara regions. Instability in these regions may
negatively impact international investments and thereby hinder the growth of businesses.
the source of information - ethiomedia.com
Infrastructure:
Ethiopia still lacks an adequate transport system, which is a major hindrance to businesses. The
existing infrastructures, such as roads, railways, and airports, remain insufficient and in most
cases, of low quality. Poor infrastructure increases the cost of doing business and reduces
competitiveness.
the source of information - Trading Economics
Electricity:
The unreliable power supply in Ethiopia is also another factor that negatively affects businesses.
Despite efforts by the government to improve the supply of electricity, constant power outages
are a common problem in Ethiopia. Businesses may incur additional expenses by having to
operate using alternative power sources.
the source of information - The World Bank
In conclusion, Ethiopia’s business environment has both positive and negative factors that affect
businesses. While the country shows potential for immense growth opportunities, certain critical
factors such as inflation rate ease of doing business ranking, political stability, infrastructure, and
electricity need to be addressed to help guarantee future success for businesses in Ethiopia.
According to the World Bank's Doing Business 2020 report, Ethiopia ranked 159 out of 190
countries in terms of ease of doing business. The report cited various factors that can affect
businesses positively or negatively. Below are some of the major business indicators and factors
identified by the report, including specific regions in Ethiopia:
1. Starting a business: Starting a business in Ethiopia requires several procedures, including
registering at the Ethiopian Investment Commission, obtaining a business license, registering for
taxes, and registering with the Public Enterprises Supervisory Authority if the company will
engage in certain industries. The process can take up to 45 days and involves substantial costs.
2. Dealing with construction permits: Obtaining construction permits can be a complex and
lengthy process in Ethiopia, involving up to 13 procedures and taking an average of 95 days.
Additionally, the cost of obtaining permits can be high, accounting for up to 15% of the total
construction cost.
3. Getting electricity: The process of getting access to electricity in Ethiopia can be challenging
due to unreliable power supply, inadequate infrastructure, and high tariffs. According to the
Doing Business report, it takes an average of 76 days to obtain an electricity connection and can
cost up to 165.3% of the income per capita.
4. Registering property: Registering property in Ethiopia can take up to 71 days and require up to
6 procedures. The cost of transferring property is relatively high, accounting for 5.5% of the
property value.
5. Trading across borders: Trading across borders in Ethiopia can be complicated due to
bureaucratic procedures and lack of modern infrastructure. The average time and cost required
for exporting and importing goods are higher than the Sub-Saharan African average.
6. Enforcing contracts: Enforcing contracts in Ethiopia can be a protracted process, requiring up
to 51 procedures and taking an average of 1,035 days. The process can also be costly, with legal
fees and court costs accounting for up to 33.8% of the claim value.
7. Resolving insolvency: The insolvency framework in Ethiopia is largely underdeveloped, and
the process can be complex, time-consuming, and expensive. Recovering debt is difficult, and
bankruptcy proceedings can take up to 3 years to conclude.
In summary, the World Bank's Doing Business 2020 report highlights several factors that can
impact businesses in Ethiopia positively or negatively. While the Ethiopian government has
taken measures to improve the business environment, there are still significant challenges that
need to be addressed to attract more foreign investment and encourage entrepreneurship.
Reference: World Bank. (2020). Doing Business 2020: Comparing Business Regulation in 190
Economies. Retrieved from https://openknowledge.worldbank.org/handle/10986/32436
1. The Reduction of Political Tension: Political instability or tension is a significant deterrent to
business confidence, which decreases investment and increases the risk of doing business.
Reduction in political tension would increase the nation's stability and encourage investment.
2. The Decrease in Violence and Conflicts: Ethiopia has experienced several internal conflicts
ranging from inter-ethnic violence, border disputes, terrorism and banditry, which leads to a
decrease in tourism and investment in the affected regions. Decreasing violence and conflicts
would improve economic activities in such regions.
3. Law and Order: Ensuring adequate law enforcement in the regions of Ethiopia would provide
a foundation for business expansion and investment, hence societal order must be maintained,
and the risk of crime reduced for the business sector to invest more in the local economy.
4. Stability in Key Regional Economies; Efforts to promote peace and stability in economically
vibrant regional states like Oromia, Amhara and Tigray is more likely to lead to higher levels of
sustainable long-term investment for both external and local actors who can benefit from the
relative prosperity of these regions
5. Improved Infrastructure: The establishment of stable governments and dependable institutions
would lead to more investment in infrastructure like transportation networks, power production,
water delivery systems, and communication facilities. These will attract investments and new
business opportunities.
Reference:
The United States Institute of Peace, United States Agency for International Development
(USAID).
How Peace Indicators Affect Businesses in Ethiopia:
1. Peaceful local environments would increase the nation's stability and encourage investment
among external and even domestic investors, leading to business expansion in a particular
geolocation.
2. The decrease in violence and conflicts especially in tourist-rich areas would lead to high
visitor rates encouraging new businesses to set up shop in the area, leading to job creation and
overall economic growth.
3. Increase in stability in specific regional economies like Oromia, Amhara and Tigray would
lead to more and better trade deals with other nations and allow for more business-friendly
policies to be enacted streamlining the investment process leading to more opportunities for
investment in their regions.
4. Improved infrastructure and better transportation networks will lead to a boost in business
efficiency by reducing transportation costs, time spent on commutes, and prompt access to goods
and services.
Checklist: Questions to Answer
1. How has political instability affected businesses in Ethiopia?
2. What role does an unstable security environment play in the development of the Ethiopian
economy?
3. What areas of Ethiopia are most prone to conflicts, and how do these conflicts affect local
businesses?
4. What measures can be enacted to stabilize economic hotspots such as Oromia, Amhara, and
Tigray?
5. What is the current state of infrastructure in Ethiopia, and how would improvements lead to
better economic growth?
6. How can international partners contribute to decreasing conflicts in Ethiopia, hence improving
the business environment?
7. What is the government doing to create an enabling environment that encourages business
expansion and investment in Ethiopia?
Reference:
The World Bank (2021). "World De
Development Indicators." The United Nations Department of Economic Affairs.
