Last year really was a momentous one for Ethiopia. We’ve launched satellites into the depths of space, started our digital economy with Alibaba (which will change our economic future), and stretched an oil pipeline worth of a billion annual income with our neighbour Djibouti.
Happy new year to all the world, as Ethiopians had their own new year calendar begin on September and a budget year spanning June to May of G.C.
Here I have listed the top ten new and unique uplifting moments of Ethiopia in 2019.
1. PM Abiy Nobel Peace Prize worth of a socio-economic capital
Peace is an investment; the peace of today not only allows for huge production and job gaps filling of today, but also creates FDI wheels and a culture of prosperity for tomorrow. The October announced and December received prize, with a wealth of lecture notes, is changing the image of Ethiopia in a positive way.
2. Top FDIs in East Africa
A report released by Ernst & Young entitled the “EY Attractiveness Survey 2019”, released in September, showed that Ethiopia attracted foreign investments worth Sh726.6 billion last year, compared to Kenya’s inflows, which stood at Sh207.6 billion in the same period.
The Ethiopian Investment Commission announced that the country’s Foreign Direct Investment (FDI) jumped up by 35 percent on average over the last six months, compared to the same period of the last year.
3. Alibaba eWTP launch
The establishment of an eWTP hub in Ethiopia is primarily aimed at enabling Ethiopia to provide smart logistics and services, conduct cross-border trades, targeting small and medium-sized enterprises (SMEs) by helping them penetrate international markets.
The new platform will facilitate the flow of goods across boundaries, e-commerce, retail and wholesale trade, in addition to helping Ethiopian youth acquire training in digital skills, enabling Ethiopia to provide smart logistics and services, conduct cross-border trades with a focus on small and medium-sized enterprises.
4. Oil pipeline
Ethiopia parliament has approved a US$4B worth natural gas pipeline agreement that was signed between the Government of Ethiopia and Djibouti on December 2019. A deal that grants Ethiopia full ownership and entitlement over the natural gas in the pipeline. Back in February, it was disclosed that Ethiopia expects over US$1B in annual income by selling gas to the global market. It is disclosed that 65 kilometers of the pipeline will be built within Djiboutian territory.
5. Economic reform with the World Bank and the IMF financial support
On early September, the Ethiopian government launched a three-year economic reform program (Homegrown Economic Reform), at a briefing held for Donors, Partners, Ambassadors & Investors at UNECA hall, in Addis Ababa, in the presence of PM Dr. Abiy.
What are the main pillars of the reform? Here I have listed them into 5. My point, most importantly, is on (e)-corporate affairs, buying and selling of stocks and bonds among investors. No. 4 facilitates ongoing liberalisation to move on public enterprises and later opening of financial sectors.
- Opening the finance sector to Ethiopian-born foreign citizens, making it the first time this happens since free economy was endorsed in the early 1990s.
- All banks, including the two public banks (CBE & DBE), would be seen equally by the NBE as per the international banking experience.
- The monetary policy will be improved. It will change the T-bill and lift the NBE bill that makes private banks buy a 27% bond on every loan approval of theirs.
- The secondary bond market will also be introduced, regarding access to finance. The market ensures valuation, liquidity and return of an investment for investors.
- The IMF recommendation that the government expand access to finance for the private sector, rather than consuming under public projects, will be implemented.
This plan is implemented as follows:
- Ethiopia lifted a limitation on Ethiopia-born foreign nationals from engaging in the financial sector.
- Ethiopian law, in earlier times, didn’t allow dual-nationality, and the financial sector has long been reserved for Ethiopian nationals only. Such opening up is expected to reach five million Ethiopians who have taken other nationalities.
- The government has taken steps in handing off a decade-long government unlimited project expenditure and huge mandatory bill collection from private banks to finance its projects. NBE, this week, lifted a bill purchase directive on private banks which were operational since 2011 and offered, for auction, one-year treasury bills for the first time in 2011.
6. Ethiopia to adopt and enforce the New York Convention
The Council of Ministers ordinary meeting on 24 December 2019 has referred the draft New York Convention (Convention on the Recognition and Enforcement of Foreign Arbitral Awards) adoptive proclamation to the parliament, with opinion statement of approval annex documents, in a detailed clarification as to the pros and cons of its promulgation as a law.
After reaching the parliament within a day, the draft is referred to the concerned ADHOC committee of the house for adding a further specific professional consideration and wider public consultation.
The main advantages referred in the annex include:
- Increased foreign direct investment due to higher investors’ trust;
- Investors and the country could easily get an international loan with lower interest rate, joining those countries with lower contract performance risk.
The main disadvantages listed in the annex include:
- Sovereignty of the state (direct enforcement of award);
- The issue of justiciability (avoiding appeal and cassation);
- The capacity of arbitral enforcement (domestic court procedural pitfalls).
7. Mastercard foundation with 30 million job offers and IFC huge support
Ethiopia has officially joined the Mastercard foundation effort to create 30 million needed jobs across seven African nations, 10 million of which in Ethiopia by the year 2030. The initiative is geared towards supporting local entrepreneurs, small and medium-sized businesses as a hub for its job creation plan. Reeta Roy, the President and CEO of the Mastercard Foundation, has kicked the initiative with a financial asset valued at over US$30B. The Foundation estimates to have helped 33.8 million people within the continent.
Mastercard believes the government can invest and create the environment for private entrepreneurs to create good, sustainable and needed jobs. The new effort would be geared towards agriculture and, more specifically, to expand and strengthen its agri-food system. The job creation plan would work towards benefitting 70 percent of women and girls.
IFC also has an advisory portfolio that exceeds over 42 million USD and focuses on particular sectors for creating job opportunities: in sectors like manufacturing, agri-businesses, infrastructure, energy, water, transport and telecoms. The third large part of intervention is supporting local financial institutions, such as banks and insurance companies, leasing companies by providing funding, resources for the development of the economy, particularly for the development of SMEs.
8. EIC’s first quarter report: US$47.5M performing industrial parks
Ethiopian Investment Commission’s (EIC) first quarter performance report to the standing committee confirmed that the industrial parks earned US$47.5M from foreign direct trade (export).
This amount covers 71% of the commission’s first quarter projection and around an 88% increase from last year’s same period first quarter performance. Three industrial parks cover 85% of the quarter earning. Hawassa Industrial Park – 21.3 million; Bole Iemi Industrial Park – 13.5 million; East Industrial Park – 5.9 million.
9. The new civil societies proclamation 1113/2019
After ten years of civil societies and charities’ stiff control and limitations on their activities, source of fund and use of the fund, a new law is promulgated after the coming into power of new Prime Minister Dr. Abiy. One of the legislative priorities set to be civil societies and the new law is one part of the reform. The new law repealed proc. 621/2009 and made the following changes:
- It has repealed classification of charities and civil societies into foreign and Ethiopian, calling them “civil societies” instead;
- It has repealed the limitations and excluded activities of foreign charities and made all civil societies to engage in activities as they wish;
- It has repealed the limitation on administrative cost percentile of 30% and 70%, leaving that to their discretion;
- It has repealed the stiff criminal and administrative measures stipulated against the violation of administrative provisions;
- It has guaranteed the judicial review right and the right to be heard (see art. 57 (6) and 79);
- It has established a civil societies fund and a council of civil societies.
10. Establishment of an Islamic bank within a month, with a huge capital, far exceeding minimum capital
Ethiopian Banking Law 592/2008 recognises and authorises interest free banking as a banking business, while leaving room for the Central Bank to issue a directive. The Central Bank ratified directive SBB/51/11, which limits interest free banking service within a bank’s window. Hence, Zamzam Bank under establishment is dissolved and collected capital is returned in 2012.
After 6 years, the Central Bank set aside the above directive and founders of four banks took a licence to collect capital to establish an Islamic bank, enabling them to collect far legal minimum exceeding capital, including the earlier Zamzam Bank.
Zamzam Bank-collecting 70% capital will start operation in October 2019 with 1 billion birr capital. Zahd Bank, Hijra Bank & Gada Bank are collecting capital and are expected to start operation in January, March and April 2020, consequetively, each with a billion birr capital.
Based on current data, interest free banking is now offered, within a window, in 11 banks out of 18, and comprises a 40 billion birr deposit and a 6 billion birr investment.