INVASTIMANTII

1. Introduction

Oromiya, ranking first in terms of physical area and population, has vast domestic raw material base for various industries and abundant and inexpensive labor force which is vital for any investment. Among others, the country’s stable political climate, the liberalized free market economy the country is pursuing, and the conducive microeconomic and investment policies established contributed to the current investment influx to the country in general and Oromiya in particular. The existing huge market potential in and surrounding the country also adds up to the reasons for this investment friendliness.

2. Investment Performance of Oromiya 2002 &2003

As a result of the favorable investment atmosphere created in the region the investment activity in Oromiya has shown significant increase each year. So far, a total of 14,380 investment projects registering a capital outlay of Birr 249 billion are licensed. Of these projects 2,258 projects registering a capital outlay of Birr 117.2 billion are owned by foreigners and 12,122 projects registering a capital outlay of Birr 131.8 billion are owned by domestic investers .Many of these projects have started production and service delivery. When these projects go fully operational 684,643 permanent and 1,268,920 casual job opportunities will be created. Only last year, 2009/10, (2002 E.C.), 1790 projects with the capital of 19.1 billion birr are licensed to work in the region. These projects create 62,299 permanent and 129,498 seasonal job opportunity once they start functioning in full potential.

Licensed projects with capitals

3. Oromiya’s Investment performance in the last five years 2005/06 ⇒ (1998/99 E.C) - 2009/10 (2002/2003 E.C.)

In the past five years (i.e. From 2005/06 (1998/99E.C) - 2009/10 (end of 2002 E.C.)) 10,270 projects with the capital of 196.1 billion birr are licensed to work in Oromiya region which enabled employment of about 1,170,930 individuals. Of the investment projects 1,604 are foreign led and the remaining 8,666 are local. When compared in terms of capital the local investment has shown significant increase with a registered capital of about 101 billion birr unlike the previous years. At the end of 2009/10 the foreign led investment has registered only about 95 billion birr. This may be attributed to the financial crisis that hit the world.  The investment activity in the past five years, when compared to the investment activity in 2003/2004 (1996/97 E.C.), has significantly increased both in number and in the capital amount registered.

Comparison o f local and foreign licensed investment  in 2005/06 (1998/99E.C) - 2009/10 (2002/2003 E.C.)

4.  MAJOR AREAS OF INVESTMENT IN OROMIYA

4.I Agriculture

Endowed with fertile soil, wide ranging agro-ecological zones and diversified resources, Oromiya is suitable for crop production, livestock farming, forest and fishery development. Its vast potentially irrigable land and huge surface and ground water potential, makes Oromiya an ideal place for agriculture. The region grows all types of cereals, fiber crops, oil seeds, coffee, tea, fruits and vegetables. Moreover, its ecology is suitable to grow quality indigenous and exotic spices in small or large commercial scales. The region is also considered as one of the best quality flower producing African countries although the culture of producing and exporting it is still at its infant stage. However, farming in the region is still conducted by small holder farming type which accounts for about 98% of the total production from the sector and needs to be supplemented by high tech large scale farming.

Considerable opportunities exist for new private investment in the production and processing of agricultural crops and resources. The following areas in particular have been identified to offer plenty of opportunities to private investors.

A. Food Crops

The food crops grown in the region include cereals and pulses such as teff, wheat, maize, sorghum, millet, beans, chick peas, field peas, lentils, soya beans, etc. Great opportunities, therefore, exist for commercial production and processing of these food crops. Some pulses can also be produced or processed for the export market.

♦ Industrial and commercial crops

Industrial and commercial crops in the region are Cotton, Malt barley, Sugar cane, Sisal, Tobacco, Highland grapes, Flowers, spices (ginger, cinnamon) and different oil seeds (Sunflower, Sesame, Linseed, Ground nuts, sunflower). Some oilseeds, including sesame, are export crops. Cotton also provides significant opportunities for export. A portion of the existing textile industry’s demand of lint cotton is met from domestic production, the remaining being met through imports. In addition to its being a raw material for sugar production, sugar cane is currently used for extraction of ethanol.

♦ Beverage crops

In Ethiopia coffee remains the single most important cash crop as it is the major foreign exchange earner. The country is still Africa’s leading producer of Coffee Arabica. Oromiya being the birth place and the largest producer of coffee Arabica in the country and having broad genetic diversity amongst its coffee varieties is the number one pick for coffee plantation.

Similarly, the tea produced in Oromiya is of an excellent quality that tea is another potential for production, processing and export. The favorable agro-climatic conditions in the region offer excellent opportunities for production and processing of tea for both export and domestic consumption.

B. Horticulture

Due to the suitable agro-climatic conditions a broad range of fruits and vegetables, including citrus, banana, mango, papaya, avocado, guava, grapes, apple, strawberry, cabbages cauliflower, okra, egg plant, tomato, celery, cucumbers, pepper, onion, garlic, asparagus, water melon, carrots, green beans, beetroot, sweet potatoes and cut flowers can be grown in Oromiya. Cut flower and vegetable production are fast growing export business. The horticulture sub-sector in general holds great potential for private investment.

C. Livestock

Ethiopia possesses a large livestock resource that includes 35 million cattle, 11.4 million sheep and 9.6 million goats; 52% of these total livestock population is found in Oromiya. Therefore, investment opportunities are potentially attractive for modern commercial livestock breeding, production and processing of meat, milk and eggs.

Investment opportunities of significant potential are also available in ostrich farming.

D. Fishery

The regions annual fish production potential is estimated at 17,500 tons, Rivers such as Dabus, Dhidhessa, Guder, Mugar, jemma, Genale, Wabe Shebelle, Fafem, Awash, Segen and lakes like Abijata, Ziway, Haromaya, Wonchi, Shala and Abaya are sites for fishery development in Oromiya. Tilapia, catfish, barbus and cyprinoids are some of the species that can attract the attention of investors for modern fishery development. , opportunities exist for fresh water fish production and processing either using the above fresh water bodies or using artificial ponds.

E. Apiculture (Bee keeping)

Bee keeping; although traditional, designates the promising potential of the region. Illuababora, jimma, Arsi, Wollega and bale Zones are among the top ranking honey producing areas of the region. Oromiya has plenty of room for investors intending to invest in the sector to produce and export honey and beeswax of best quality.

F. Forest development

Ethiopia’s remaining meager forest resource is mainly found in Oromiya, 37 out of 53 forest Priority Areas of the country is found in the Region. The Region’s estimated high forest cover is about 7.1 percent, while plantation, woodland, shrub land, grassland and Afro-Alpine coverage accounts for 0.2, 27.3, 21.6, 12.0 and 0.5% respectively. Forest resource is rapidly depleting due to population pressure and expansion of agricultural land. As to investment opportunities in this sector, studies indicate that 21,503 hectares of land is readily available for forestry development. In Illuababora alone there is 4,651 hectares of land suitable for commercial rubber plantation.

G. Bio Diesel or Agro fuel extraction

The region has vast area of land suitable for Castor, jatropha and Pongomia Pennata plantation which are used for the extraction of various oils and other byproducts. About 1,318,396 hectares of land have currently been identified for such agricultural investment in different zones and districts of the region.

4.2  Industry

Oromiya has ample opportunity to set up industries of all sizes. Currently, though industrial expansion is in its early stage, there are all sizes of manufacturing plants in Oromiya. The industries in the region are mainly engaged in the manufacturing of food products and beverages, tobacco products, textiles, wearing apparel, tanning and processing of leather, footwear, luggage and handbags, wood and wooden products, rubber and plastic products, chemicals and chemical products, other non-metallic mineral products, basic iron and steel, metal products, assembling of motor vehicles, and tractors.

Major manufacturing opportunities offering attractive potential benefits to prospective investors exist in the food and beverage, leather, textile and garment, electronics, building materials and metallic and non-metallic mineral industries. The investment opportunities in the region include:

A. Agro-industries

Food and Beverages:

Processing and preserving of meat products; integrated production and processing of dairy products; manufacturing of sugar, brewery, winery, soft drinks, processing and bottling of mineral water, etc.

Textile:Spinning, weaving and finishing of textile fabrics and production of garments.

Tannery, Leather Goods and Articles:

When it comes to leather and leather products manufacturing, there is a possibility to get engaged into integrated tanning or in processing finished leather products into luggage, handbags, saddlery and harness items, foot-ware, garment and tanning and leather goods.

Bio-diesel extraction industry

With the expansion of bio-diesel crops plantation in different Oromiya zones, bio-diesel extraction

industries are emerging. Yet, the field is new and there is much more to be done in this sector.

B. Manufacturing Industries

Glass and ceramics:

Manufacturing glass and ceramic containers into tableware, sanitary ware, and sheet glass.

Chemicals and Chemical Products:

Manufacturing of basic chemicals based on local raw materials, including PVC granules from ethyl alcohol, formal-dehyde from methanol, manufacturing of caustic soda and chlorine-based chemicals, carbon black; activated carbon; precipitated calcium carbonate and ball-point ink

Drugs and Pharmaceuticals:

There is ample opportunity for manufacturing of pharmaceutical, medicinal, chemical and botanical products in the form of tablets, capsules, syrups and injectables.

Paper and Paper Products:

There is ample opportunity for production of paper and paper products from indigenous raw materials to meet the huge demand of such products.

Building Materials:

As a result of the current construction boom in the country, the need for construction materials has become immense. Thus, one can take part in the production of cement, lime, gypsum, marble, granite, limestone, ceramics, roofing tiles, corrugated sheets, tubes, pipes and fittings whose raw materials is abundantly available in Oromiya.

Electrical and Electronic products:

Though there is a big demand for electrical and electronic products in the country, such industries rarely exist in the region or the country as a whole. Thus, most of office, accounting and computing machinery; electric motors, generators, transformers, capacitors, resistors, switch gears, electrical fittings and integrated circuit boards; radio, television, VCRs, printers, floppy disc drives, communication and other equipment and apparatuses are imported. Hence, there is a possibility to invest in this area for both domestic and export market.

Metallurgy:

Manufacturing of basic iron and steel, operation of blast furnaces, steel converters, rolling and finishing mills, recycling of metal waste and scrap. Manufacturing of basic precious and non-ferrous metal; mechanical working, heat treatment, plating of ferrous and non-ferrous metals.

Structural Products:

Manufacturing of structural metal products, reservoirs and steam generators.

Machinery and Equipment:

Assembly and manufacturing of agricultural machinery and equipment, industrial, transport and mining machinery and parts, construction machinery, machine tools and accessories, miscellaneous light engineering products, components and parts.

4.3  Real Estate Development

In addition to government’s effort to tackle shortage of residential houses, the private sector’s contribution to the real estate industry has been significant. So far, a number of real estate developers are running several projects in the region. These projects range from building a tourist city to construction of mixed use buildings and residential villas and apartments. Yet, there is ample opportunity for local and foreign investors to take part in this sector. In addition to construction, comprising first grade contracting and rental of construction machinery is a related business one can think of in the area.

4.4 Services

Opportunities exist for private investment in the following services:

·         ♦ Social services, such as health, education, entertainment and sports facilities are short of in the region and are in big demand;

• ♦Exporting the country’s various products by way of undertaking market  promotion, quality improvement or packaging;
• Other projects in this sector are to be identified by potential investors.

4.5. Hotel and Tourism

Oromiya has a lot to offer to tourists. Given its historical and cultural heritages, attractive scenery, variety of endemic and common wild life and bird species, whole year round pleasant climate, rich fauna and flora, important archeological site (Melka kunture),and friendly and hospitable people, Oromiya’s potential puts it among one of the major tourist destinations in Africa. Yet, due to underdeveloped infrastructure on the tourist destinations and lack of promotion, the tourism industry hasn’t born the desired fruit in all aspects.

Currently, however, promising results are observed with governments due emphasis for the development and effective utilization of these resources. Tourist influx is getting better and so is the income from the sector. Yet, there is serious shortage of facilities and infrastructures and the sector is in huge demand of both domestic and foreign investment. Private investors can take part in promotional activities, construction of facilities, service provision, tour operation and tour guide.

4.6. Mining and Energy

Oromiya National Regional State, which occupies the largest physical area of the country, has huge mineral potential that can make great contribution to the national economy. Oromiya offers excellent opportunities for mineral prospecting and development. The metallic minerals are found associated with industrial minerals/rocks (like dolomite, quartz, feldspar, kaolin, mica, graphite, talic) and precious stones (like sapphire, emerald, aquamarine, peridote and tourmaline) in southern parts of Oromiya, namely: Bulbul-Melka Arba, Kanticha, and Moyale-Malka Hageremariam-Surupa Belts. These places are also known as the four metallic belts, and they are abundant with metallic minerals such as gold, tantalum, iron ore, nickel, and chromium. Minerals such as gold, platinum, iron, copper, zinc, and cobalt are available in Meti-Najjo Belt (towards the western part of the region). Iron ore is found in Bale Zone, too.

The Region has also large energy resource potential, which includes: Hydropower, Solar, Wind, Geothermal and Biogas energy. Accordingly, potential investors are invited to invest in this sector. Please refer to section 6.5 for details on mining and energy.

More information on this sector is provided on Chapter 6 of this material

5. Investment Administration

Investment administration in the region is carried out at various levels. The administrative council of Oromiya National Regional State is the higher body that decides on policy issues, regulations, directives and core investment matters. The Investment Board of Oromiya also decides on land allotment and conducts follow up on the implementation of all issues relevant to investment activities. The Oromiya investment commission, the focal institution for the coordination and promotion of investment activities, is accountable to deliver investment license and facilitate land provision and other supporting services like incentives acquisition and advisory service, identifying and providing information on investment opportunities, and conducting research on policy and service delivery improvement issues. The zonal, city, and district investment committees are other relevant organs in the investment administration particularly with regard to land provision and project follow up.

The following are the major provisions of the investment administration.

5.1 Investment License Provision

• Foreign investors receive investment license from the Federal Investment Agency.
• In previous years licence has been given for domestic  investors before receiving the land how ever now adays since the license has been used for another purpose the commission decided to give the licence after the investor got the land
• After the investor signed the agreement the following criterias should be fulfilled to get the license

ü  A photocopy of one’s identification card together with two passport size photos,

ü  When the application is made by an agent, the photocopy of power of attorney,

ü  When the application is made by business organization, photocopy of its article of association and memorandum of association together with the photocopy of the identification card and two passport size photographs of the manager.

ü  If the investor want to work rentally he will get the licence after he signed the agreement legally with the responsible person

5.2 Land provision

• Land ownership is exclusively vested on the state and the people of the region and shall not be subject to sale or other means of exchange,
• Private investors and any organization, however, have the right to use land on lease or rental bases through legal process,
• Investors have the right to transfer land to third party and entitled to compensation when the land is requested for public interest,
• The lease and rental price of investment land in Oromiya is different for urban and rural lands.

5.3 Urban Land:

• Urban Land in the Region can be acquired on a  lease hold or rental basis,
• Urban land in towns (Adama, Bishoftu, Burayu, Dukam, Sululta, Gelan, Legetafo, jimma, Mojo, Sebeta & Shashemene) and sub-urban area of Addis Ababa (within the radius of 10 km) on lease basis. In all other towns land is acquired on rental basis,Lease period varies from 30 - 99 years depending on the type of service,
•  Both lease and rental price rates vary depending on the class of towns, grade of sites, land size and type of investment.

5.4 Rural land:

• Rural land can be held on rental basis from 20 – 45 years based on the ♦ type and location of the project,
• The rental rate of rural land for agricultural purpose has been set based ♦ on the development level of the zones and distances from main all weather roads,
• Accordingly, the minimum and maximum annual charges for one hectare ♦ of rural land in the region is birr 70.40 and birr 135.00 respectively,
• The minimum rural land rent for Tourism purposes is birr 2.00 per square ♦ meter per annum,
• Any farmer can also rent out up to 50% of his/her holding to another ♦ farmer for a period of 3 years or to private investor for about 15 years where the price will largely depend on the agreement of both parties, (but not less than the floor rate set by the government)
• In addition, the lease price will be paid within 30 – 40 years (up on the ♦ advance payment of 10% of the total lease charge), while the rent price is paid annually for the whole contract period.

6 .To acquire land for investment,

Investors can submit their application with the following documents to regional Investment Commission or zonal Investment committees.

• Identification card/passport
• Power of attorney in case the request is submitted by an agent,
• Article of association and memorandum of association, in case the request is made by a business organizatio
• Letter of promise to pay 10% of the total land rent/lease price in ♦ advance,
• Bank statement describing the circulation of money at least for a year ♦ and the availability of 30% of the allotted capital in the same bank,
• Land use plan and action plan.♦

6.1 Investment Incentives

• 100 % exemption from payment of import duties and other taxes levied on all capital goods and spare parts worth up to 15% of their values,
• An investor who exports 50% of his/her product or supplies 75% of his/her product as production input to an exporter is eligible from 2 – 7 years income tax exemption,

6.1.1 Additional incentives granted by Oromiya National Regional Government

• An investor who plants coffee, tea, Sugar cane, or any other perennial crops on area of more than 100 hectares shall not pay a land rent for four years,
• An investor who produces cereals, pulses and oil seeds under rain fed on a land left fallow or virgin for a period of more than 5 years, will be exempted from rent payment from 1 to 2 years,
• An investor who produces cereals, pulse and oil seeds under rain fed on a land previously developed but left fallow for at least 5 years will be exempted from rent payment for 1 to 2 years,
• An investor who plants fruits, vegetables and produces food crops or oil seeds under irrigation schemes will be exempted from land rent payment for 2 to 4 years,
• Any investor who produces flowers, herbs and spices will be exempted from land rent payment for 3 years,
• An investor who produces improved seeds will be exempted from land • rent payment for three years,
• Any Investor who is granted to use rural land may mortgage or pledge his • holding and properties on the land as collateral to get loan from a bank or from other source of finance,

7.  Comparative Advantages of Investing In Oromiya

A. Infrastructural facilities:

As Oromiya is located at the very heart of the country, it has comparatively well developed infrastructural facilities; including easy access to the dependable Ethiopian Airlines that provides service in Africa and the rest of the world, Ethio-Djibouti railway, 1st grade asphalt road to all parts of the region and telecommunication services as well as adequate power supply.

B. Human Labor:

The Oromiya region has about 27,158,471 people (36.7%) of the total population of the country. The working age group constitutes about 49.99% of the population in Oromiya. The work force in the region is well disciplined and easily trainable and has great desire to work in an enterprise. In addition, the government has launched extensive training programs on vocational and technical skills development so as to provide the growing industry with trained human resource.

C. Market access

Oromiya has better access both to domestic and foreign markets. It shares boundaries almost with all regional states in the country except one, and with two neighboring African countries which provides the region with large market potential. In addition, the region enjoys the countries proximity to the markets of the Middle East and Europe and the alternative access to the Common Market for Eastern and Southern Africa (COMESA), which comprises of 20 countries with estimated number of 350 million people. The “Every Thing But Arms, (ETAB)” and the “African Growth and Opportunity Act, (AGOA)” create export opportunities for the country as a whole to enter the markets of Europe and United States of America respectively.

D. Investment Protection

The constitution of the Federal Democratic Republic of Ethiopia from which all the investment laws are emanated, gives guarantee and protection to private property ownership. The investment laws at regional and national levels also ensure this fact. Various trade and investment agreements are concluded between Ethiopia and other countries, and organizations to enable investors to get more guarantee and protection at international level.

 E. The Attitude of welcome

The Oromo are very embracing and warm people. It is in their culture to welcome and host others which applies to all circumstances including investment and investors. The economic interaction resulting from the actual investment activities, access to modern technology and job opportunity enabled by investment created better socialization and promoted domestic investment in the region.