Ethiopia - Economic analysis of government's policies, investment climate and political risk.






ETHIOPIA: Economic Policy Analysis

This site presents an analysis of the Ethiopian government's economic policies compared to a revised list of 34 economic policies as prepared by student Serkalem Tekletsadik with the McKeever Institute of Economic Policy Analysis (MIEPA)in December 2013. To read the analysis scroll through this site. To learn more about the background policies, click here  Introduction and Policy Recommendations

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Serkalem Tekletsadik, an Ethiopian citizen who currently [December 2013] lives in San Francisco, has completed a study of the home country government's economic policies as compared to the MIEPA list of policies as outlined above. The study on Ethiopia is shown below. The ratings herein are based on the following rating scale:


5.0 Perfect Facilitation of Wealth Creation
4.0 Midway between Perfect and Neutral
3.0 Neutral Effect on Wealth Creation
2.0 Midway between Neutral and Obstructionist
1.0 Perfectly Obstructionist to Wealth Creation
[Rating scale copyright Mike P. McKeever, 2013. Used herein with permission]

To read a disclaimer about the analysis in this file, scroll to the bottom of the file.

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Comparison of Ethiopia's economic policies to MIEPA criteria as prepared by native student of Ethiopia, Serkalem Tekletsadik, studying in the US in December 2013.



        1               1.0           3.0             15.0        20%

        2               1.0           3.0             15.0        20

        3               1.0           3.0             15.0        20

        4               2.0           6.0             15.0        40

        5               1.0           3.0             15.0        20

        6               1.0           3.0             15.0        20

        7               2.0           6.0             15.0        40

        8               2.0           6.0             15.0        40

        9               2.0           6.0             15.0        40

        10              2.0           6.0             15.0        40

        11              2.0           6.0             15.0        40

        12              5.0          10.0             10.0       100

        13              2.0           4.0             10.0        40

        14              5.0          10.0             10.0       100

        15              1.0           2.0             10.0        20

        16              2.0           4.0             10.0        40

        17              4.0           8.0             10.0        80

        18              1.0           2.0             10.0        20

        19              1.0           2.0             10.0        20

        20              1.0           2.0             10.0        20

        21              4.0           8.0             10.0        80

        22              1.0           2.0             10.0        20

        23              1.0           2.0             10.0        20

        24              2.0           4.0             10.0        40

        25              3.0           6.0             10.0        60

        26              4.0           8.0             10.0        80

        27              4.0           8.0             10.0        80

        28              1.0           2.0             10.0        20

        29              3.0           3.0              5.0        60 

        30              4.0           4.0              5.0        80

        31              5.0           5.0              5.0       100

        32              1.0           1.0              5.0        20

        33              3.0           3.0              5.0        60

        34              4.0           4.0              5.0        80

   TOTAL              79.0          155.0            365.0        43.0%
                      =====        ======            =====        =====

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1) Freedom from internal control: 1.0

Ethiopia’s heavy government involvement and the lengthy processes required to transfer property rights and establish business, strongly discourage opening up a business. Citizens are fairly free to move about at their own discretion, but businesses and wealth creating activity unless underground, are at mercy of permits and property rights that are inconsistently attainable. Ethiopia ranks 163/185 economies on the ease of starting a business, dealing with construction permits there requires 9 procedures, takes 128 days and costs 275.6% of income per capita. Ethiopia stands 94/185 economies on the ease of getting electricity. It is difficult for businesses to move about easily; the time required to start up again, with all permits in place is very discouraging.

2) Freedom of Speech: 1.0

Ethiopia’s extreme censorship and limits on what is safe to say and print, greatly obstruct the free flow of ideas and points of inspiration for potential entrepreneurs. The lack of free speech strongly discourages opening up a business in the country. In the democracy index Ethiopia ranks 123/165. There is a lack of access to internet and that severely impedes the flow of ideas. Many people that speak out in opposition to the government are jailed, especially through new anti-terrorism laws that are misused.

3) Effective, Fair Police: 1.0

The police are not perceived as fair by nationals and international community, this strongly discourages opening up a business. The Ethiopian Police, operate with instructions from the central government. The UN and other advocacy groups including Human Rights Watch, have criticized Meles’s government for cracking down on civil liberties and introducing anti-terrorism laws in 2009 that have been used to jail opposition politicians, reporters, and aid workers. On July 13, 2012, an Ethiopian court jailed writer Eskinder Nega for 18 years and sentenced opposition activist Andualem Arage to life in prison “for plotting against the government”. In 2011, two Swedish journalists were sentenced to 11 years by an Ethiopian court for supporting terrorism after being captured with a banned rebel group. The police disrupt public peaceful demonstrations, with violent means, and have been known for arresting people under false accusations. Most homeowners and business owners employ their own means of protection from crime. Many upper middle class and upper class homes have high gates and guard dogs. Many businesses also have paid night guards.

4) Private Property: 2.0

Ethiopia’s laws protecting private property, so that titles are nationally recognized, moderately discourage opening a business. The process to dispute claims can be very lengthy and the government does not have a good record of respecting Ethiopia’s privately owned properties. The current government The Ethiopian Peoples Revolutionary Democratic Front, came into power following a regime that confiscated privately owned property, especially land, when the EPRDF came into power they did not return the land to the rightful owners. Ethiopia’s intellectual and private property protection rights rank 78/122. Globally, Ethiopia stands at 112/185 economies on the ease of registering property.

5) Commercial Banks: 1.0

Ethiopia’s commercial banks do not have a large supply of deposits, and do not have the means to lend to potential entrepreneurs or those looking to expand their business. The commercial banking system is not able to actively finance business operations or opportunities; this strongly discourages opening up a business in Ethiopia. In depositors with commercial banks, Ethiopia’s ranking is 17.85, Ukraine has the highest score (3335.09) and the lowest scoring country is Central African Republic (2.55). In the domestic credit provided by the banking sector as a percentage of GDP, Ethiopia ranks 37.15, the highest scoring country is Japan (341.69) and the lowest scoring is Libya (-65.93). In the number of Ethiopian residents that are public and private households that obtained loans from commercial banks, Ethiopia’s ranking is 1.87, the highest scoring country is Singapore (1073.16) the lowest scoring country is the Central African Republic (0.58).

International Monetary Fund, Financial Access Survey

6) Communication Systems: 1.0

Ethiopia’s communication systems are inconsistent. The majority of Ethiopians do not gain from the country’s current state of communications systems, this negatively affects the facilitation of the introduction of new ideas and business opportunities and strongly discourages opening up a business. Telephone service and internet access are under a monopoly by the Ethiopian Telecommunications Corporation (ETC). In mobile users per 100 people, Ethiopia ranks at 122/122 and in internet users it ranks at 122/122. Telephone lines are unreliable even in the capital and internet access is not available to most people. There are also limits on free speech, making newspapers, tv, and magazines ineffective in the introduction or spread of new ideas and business opportunities. According to the ETC, the average rural inhabitant of Ethiopia has to walk 30 kilometers to the nearest phone.

7) Transportation 2.0

Ethiopia’s still-developing transportation networks, and infrastructure leave key market and population centers inaccessible, this moderately discourages opening up a business. The quality of domestic transport ranks 93/122. The border regions of Ethiopia and the highlands do not have adequate, safe roads for passenger and freight transportations. The tribes along the borders are not integrated with the majority of the country. Because there are few means of transportation for goods, many opt to trade with neighboring tribes, that are often technically from a different country, such as Somalia or Djibuti (taking money out of Ethiopia). The government has put in a surge of government spending towards building roads and highways. While at the moment many roads within the capital are in various states of completion, once the roads are completed Ethiopia’s transportation score will be significantly improved.

8) Education: 2.0

Ethiopia’s education system moderately discourages opening up a business. The World Economic Forum ranks Ethiopia 115/122 in overall education. My main critique of the Ethiopian education system is that it does not prepare students to be “tech-savvy”. In my opinion this is a critical factor for an Ethiopian student to be considered competitive or even comparable to students from industrialized countries. Very elite private schools, and wealthier families can provide their children with technology skills, but a majority of Ethiopia’s children do not have access to computers or internet. Internet access in Ethiopia ranks 108/122. In industrialized countries there is better access to new technology, assignments requiring the use and understanding of the internet are part of primary and secondary school programs, not just university programs like they are in Ethiopia. There is also a significant gender gap in education which is shown through the country’s 114/122 score. Primary education attainment (% population age 25+) ranks 69/122 and Secondary education attainment (% population age 25+) ranks 83/122.

Personal Experiences

9) Social Mobility: 2.0

Ethiopia has come a long way in encouraging or even allowing for social mobility, however it still has a long way to go in certain areas. The current state of opportunities for social mobility moderately discourages opening up a business. The World Economic Forum ranks Ethiopia 92/122 in social mobility. It receives low scores in its ability to attract 95/122 and retain talent 96/122. The country’s ranking in terms of pay in relation to productivity is also low and ranks 106/122. Ethiopia does make a university education available to all well scoring students (raw national university exam scores), regardless of a parents income. This gives many students from a variety of backgrounds a chance to go to university. However after graduation the best jobs may be through connections and not through abilities.

The World Economic Forum -

Personal Experiences

10) Freedom from outside control: 2.0

In my opinion Ethiopian citizens are not free from the control of citizens and agencies of other countries, this moderately discourages opening up a business in the country. Ethiopia borrows funds, and receives assistance from a variety of countries, including the United States, and from various NGOs. The country is also currently working on the process to join the WTO. Aid and WTO membership are conditional. In 2006 Ethiopia was a U.S. ally in the fight against terrorism in the Horn of Africa. In return the U.S. government provided 6.23 billion USDs in food aid and military training funds. Currently the Ethiopian government is still “fighting terrorism” in the country with the help of the support of the United States government. It is impossible to say that outsiders like the United States do not have a significant say, or control over what citizens can or are able to do.

The ABCs of the Global Economy: World Bank, IMF, and the WTO

Dollars and Sense Magazine Issue#228, March-April 2000 by the Dollars and Sense Collective

11) Protection of Domestic Enterprises: 2.0

The Ethiopian government believes in protecting its domestic companies from competition through protectionist measures. However their policies have not been successful, and this moderately discourages opening up a business. Ethiopia’s average tariff was 17.3 percent in 2010 and 10 percent for COMESA member countries. High tariffs were applied to certain imports to protect local industries like the textile and leather industries. Ethiopia has a Current Account deficit of 613.90 million USD (third-quarter of 2012) and a trade deficit of 2366.20 million USD as of the fourth quarter of 2012. Ethiopia’s constant trade deficits are due to its small amount of exportable goods. The main exports are gold, coffee, live animals, and oilseeds. Ethiopia’s main imports are from China (18% of total imports, 8% of exports). The Chinese government and the Ethiopian government have been partnering for certain projects, mainly building infrastructure. This makes me cautious, about whether the Ethiopian government will continue to put high tariffs on imported products, especially from China. Ethiopia is also working on becoming a member of the World Trade Organization; that will most likely put an end to Ethiopia’s non-free trade protectionist measures and heavy government involvement in exports and imports.

12) Foreign Currency Transactions: 5.0

The constant use of Ethiopian currency by virtually all businesses in Ethiopia strongly encourages opening up a business. Ethiopian business owners expect everyone, including tourists to pay in Birrs. The first thing to do as a tourist is to have your foreign currency exchanged into Birrs. All official payments, including those made by tourist must be paid in Birr. The visa fee at Bole International Airport is able to be paid in USD but that is because it would be difficult for visitors to have already had exchanged their currency. It is very rare to see even small businesses, or quickly put-together outdoor marketplaces barter or accept anything outside of the Birr. The rise in Ethiopian consumer culture has made dealing exclusively in Birr important and very common.

Personal Observations

13) Border Control: 2.0

The Ethiopian government has inconsistent levels of control over the goods entering and leaving the country. This leaves businesses and wealth creation in Ethiopia open to disruption from outside trends. The lack of border control moderately discourages opening up a business. Ethiopia has two major ports and terminals, the government has control over the majority of goods exported and imported through the ports and terminals. However the government is not able to effectively control what goods are illegally exported and imported through it’s 5328 kilometers of shared borders. A large majority of the traded goods, especially along the northern and eastern borders of Ethiopia are unofficial. The government has little control over the border area and I do not see that changing within the next few years. The tribes along the borders are not integrated with the majority of the country. Almost all of the tribes are pastoral nomads, barter trading with neighboring tribes, regardless of a neighboring tribe’s “country”, allows them to meet their needs more efficiently. The government’s trade policies also encourage smuggling because they put an extremely high, on average, 17.3 percent tariff on imports.

14) Currency: 5.0

The Ethiopian Birr is widely used and accepted. Recent growth in consumer culture have lead to the Birr being more valued by both consumers and businesses. Old barter systems are no longer effective or accepted. The Birr is the second-most-used currency in Africa, it has 88 million users, and the top conversion of Birr is to US Dollars, this shows its popularity and high level of value amongst expatriates.

Personal Experiences

15) Cultural, Language homogeneity: 1.0

Ethiopia receives a low score, in terms of this policy, because of its extreme ethnic diversity. Deep rooted ethnic tensions usually get in the way of the countries development; in the past these conflicts have become violent. Recently the Oromo ethnic group is seeking an independent state and workers from other ethnic groups in Oromia have been experiencing discrimination. Ethiopia’s main tribal groups are the Oromo 34.5percent, Amara 26.9 percent, Somalie 6.2 percent, Tigraway 6.1percent, Sidama 4 percent, Gurage 2.5 percent, Welaita 2.3 percent, Hadiya 1.7 percent, Affar 1.7 percent, Gamo 1.5 percent, Gedeo 1.3 percent, and other 11.3 percent (2007 Census). The main religions are Orthodox 43.5%, Muslim 33.9%, Protestant 18.6%, traditional 2.6%, Catholic 0.7%, and other 0.7% (2007 Census). The main languages are Oromigna (official regional) 33.8%, Amarigna (Amharic) (official) 29.3%, Somaligna 6.2%, Tigrigna (official regional) 5.9%, Sidamigna 4%, Wolayitigna 2.2%, Guaragigna 2%, Affarigna 1.7%, Hadiyigna 1.7%, Gamogna 1.5%, other 11.7%, English (official, major foreign language taught in schools), and Arabic (official) (1994 census).

16) Political Effectiveness: 2.0

The Ethiopian is not uniformly politically effective throughout all regions of Ethiopia; this moderately discourages opening up a business. In terms of disaster relief the capital receives the most resources, the border regions and southern provinces are not effectively addressed. The current ruling party, The Ethiopian People’s Revolutionary Democratic Front, was dominated by ethnic Tigrays. The political process was more effective in the Tigray province where more attention and resources were concentrated. Recently the Ethiopian Prime Minister Hailemariam Desalegn appointed Muktar Kedir, an ethnic Oromo, which gives better distribution on political interest and government efforts throughout both rural and urban areas.

17) Institutional Stability: 4.0

Ethiopia has stable institutions; the current ruling party The Ethiopian Revolutionary Democratic Front has been in power for over two decades, although it is seen by many as oppressive, it is predictable and people opposing the ruling party are immediately stopped. The state owns and controls many industries, they also appoint the heads of many institutions such as ministers of education. In 2012 the Prime Minister of Ethiopia, for the past two decades, Meles Zenawi passed away, his Deputy Prime Minister Hailemariam Desalegn is currently serving as Prime Minister. Because many core institutions are controlled by the ruling party and anyone opposing is swiftly jailed or otherwise quieted, there will be stability for many years. The recent growth of the economy, average growth of 11 percent since 2004, has kept many people passive about the same party being in power over two decades; this leads me to believe that there will be no massive revolution that could disrupt the EPRDF.

18) Honest Government: 1.0

The lack of an honest, predictable government in Ethiopia strongly discourages opening up a business. The ruling party in Ethiopia ranks at 113 out of 176 countries, this makes it part of the most perceived-as-corrupt countries of the world. The current ruling party The Ethiopian People’s Revolutionary Democratic Front (EPRDF) has been in power for more than two decades; following a violent overthrow of the previous government. The previous military Regime, Derg that EPRDF overthrew had seized and nationalized many privately owned properties; after overthrowing them the EPRDF still kept those properties for the state instead of returning them to their rightful owners. The recent 2010 elections for 547 parliamentary seats showed an unnaturally high number of votes favoring the EPRDF, all but two seats were won by EPRDF and allies. Anyone speaking out against the ruling party or its leaders is immediately stopped. The United Nations and the Human Rights Watch are two of many international organizations that have criticized the ruling party’s use of “anti-terrorism” laws to jail people opposing the government. Recent cases include the 2012, 18 year prison sentence given to opposition activist Andualem Arage, and the 11 year sentences given to Swedish journalists, for “supporting terrorism”, after they were caught with a banned rebel group (named a banned rebel group because they are in opposition to EPRDF).

19) Common Laws: 1.0

The justice system of Ethiopia strongly discourages opening up a business due to deep rooted biases, lack of well trained legislative staff and lack of access to updated systems. The deep rooted biases favor kin of those in power. People that are wealthy and of the “right” social sectors are close to invincible, the rest of the population is subject to class and other biases, sometimes in the population and almost always in the justice system. Wealthy entrepreneurs of certain backgrounds are vulnerable to having property seized for unclear reasons. The justice system is also not growing at the same rate as the population. In my opinion the lengthy delays between arrests and verdicts is one the biggest problems with the justice system. Within the past few years there have been efforts to improve the justice system; such as retraining judges and their support staffs, increasing information storing capacities, increasing access to the internet, and updating communications systems. The deep rooted biases and lack of transparency are also being addressed through public information booths, bias awareness workshops for those in the justice system, and audio recordings of all court proceedings. However, in my opinion, it is going to take at least a few years for all the efforts to have significant results.,,contentMDK:22355015~menuPK:3266877~pagePK:51236175~piPK:437394~theSitePK:73154,00.html Personal Experiences

20) Central Bank: 1.0

The Central Bank of Ethiopia caters more to the governments ideals instead of enacting policies that would grow the economy in the long term; this strongly discourage opening up a business in Ethiopia. Ethiopia’s Central Bank, the National Bank of Ethiopia (NBE) fails to be independent from the political party in power. The bank’s actions and policies are motivated by agenda of the Ethiopian People’s Revolutionary Democratic Front. “Its [NBE] margin of error on the side of the economy remains larger than its margin on the side of politics.” (All Africa)

21) Domestic Budget Management: 4.0

Ethiopia’s domestic budget management moderately encourages opening up a business. As of March 2012 the national budget was fairly balanced with a slight surplus of 0.2 percent. Within the last few years the government has been collecting more revenues, as a result of increased taxes. Ethiopia’s tax revenues 2008-2011 as a percentage of GDP have been increasing 7.9, 6.6,8.2,9.3. The overall trend is positive and indicates a more balanced budget in the next few years.

22) Government Debt: 1.0

Ethiopia has huge unsustainable internal and external debts strongly discourage opening up a business. It is unsettling to invest in a country that can not manage its finances, and has it’s economic potential stifled by the need to pay debts. As of 2012 Ethiopia’s internal debt was 45.5 percent of GDP, it’s external debt was 10 percent of it’s GDP.

23) Economic Statistics: 1.0

The lack of data on Ethiopia's large population strongly discourages opening up a business. As a potential business owner it is necessary to have a true and clear picture of potential consumers and workers. Macroeconomic data is more available than is more narrowly focused data on individuals. A study sponsored by The Hewlett Foundation and conducted by the Population Reference Bureau found that relevant census topics such as migration patterns, unemployment, and place of birth are not properly surveyed or documented. When Ethiopia’s third National Census was finally conducted in 2007 (three years late) the results were not released until 18 months later. Data that has been collected by national institutions, as well as those collected by international institutions (NGOs, universities) are difficult to access. Due to the lack of advanced information technology, demographic data that would be public and posted online in many advanced countries requires written requests to national census offices. The requests often take months to be processed. There is also a lack of positive perception of the data that is collected and reported; many do not believe the data published is accurate and unbiased, regardless of whether it was by a national or international organization.

24) Protection of Public Health and Safety: 2.0

Ethiopia’s low public health statistics moderately discourage opening up a business. The combined efforts of the Ethiopian government and private organizations have significantly improved public health factors, especially in the countryside of Ethiopia. However, in my opinion, they are not effective enough to manage the challenges of a dramatically growing population; especially in the capital which is important for business. The Infant Mortality Rate in Ethiopia is 58.28 which is significantly higher than an industrialized country like the United States, which has an IMR of 5.9. A total of 67 percent of all deaths of children aged under 5 years occur before a child’s first birthday. 34.6 percent of children are born underweight. There is also a high rate of TB in Ethiopia 527/100, 000 people, are affected. In urban areas there is an HIV rate of 7.7 percent. These are all worrying statistics.

25) High Wage Policies: 3.0

Ethiopia does not have any minimum wage policies and does not actively encourage high wages. The lack of high wage policies have no effect on the decision to open a business within the country. Even with that a significant portion of the population (in the capital/larger cities) can afford to buy consumer goods. There are many migrant workers that send money back home to their families and friends that allow for them to purchase consumer goods, beyond what they could afford without remittance. There is also a growing consumer culture, many people value high tech/ luxury goods and will purchase as much as they can, which is encouraging for a potential business owner.

Personal Experiences

26) Environmental Protection: 4.0

Ethiopia is currently not a heavily industrialized country, it is still relatively clean, has many natural resources, and moderately encourages opening up a business. Ethiopia has a beautiful natural environment and internationally recognized levels of species and climate diversity. Most of the country’s environment is well preserved. However the capital, which is becoming increasingly populated, is not as pristine. There are some signs of increasing pollution and smog in Addis Ababa. Ethiopia has drafted plans, such as the Environmental Policy for the Federal Democratic Republic of Ethiopia, to protect the country’s environment. The plans are ineffective because there are no enforcement organizations or penalties for businesses that do not follow.

African Health Observatory, World Health Organization

27) Strong Army: 4.0

Ethiopia’s strong army moderately encourages opening up a business. It is of the strongest armies of Africa and is internationally ranked as #28 by the Power Index (2012). The army has 182,500 active personnel and a defence budget of $286 million USD. Currently there are no revolutions or civil wars; the economy is growing and many people are satisfied with the country’s direction. There are stirrings of terrorism and some provinces wanting to become their own independent countries, however it is still too early to see if that will have an impact on the general state of the country.

28) Foreign Trade Impact: 1.0

The foreign trade impact of Ethiopia strongly discourages opening a business. Trade in Ethiopia as a percentage of GDP is 7.9 (imports+exports= $3422.80 million USD out of the $43.13 billion USD GDP). Currently Ethiopia is not taking advantage of its large domestic markets, labor resources or of the huge international market. Ethiopia is not a member of the World Trade Organization, and is not fully participating in the Common Market for Eastern and Southern Africa (COMESA) (10% tariff). Some reasons for the low trade impact include Ethiopia’s high taxes on imported goods, the average tariff in 2010 was 17.3%. It is also difficult for Ethiopian businesses to import because of the lengthy import permits needed and it is difficult for businesses to export because of some export bans.

29) Management of Foreign Currency Budget: 3.0

Ethiopia has an imbalanced foreign currency budget, this has no effect on the decision to open up a business in the country. There are more imports into the country than there are exports. The fact that Ethiopia is importing a lot more than it is exporting is at first discouraging, existing businesses are not successfully selling their goods and services to other countries. The high imports mean that Ethiopian consumers are purchasing foreign products, which are heavily taxed, for government revenues. As a business owner, the high imports would encourage me to open up a business in Ethiopia. High imports are encouraged by consumption, and there will be a large domestic market for my goods, which will be competitive because there will be no import tax on them. Ethiopia’s exports measured for September 30th 2012 were $698.10 million (USD), imports measured $2724.70 million (USD). Ethiopia relies heavily on imports of goods and services, from other countries. There is a negative balance of trade equaling -$2026.60 million (USD), which is 4.69% of that years GDP of $43.13 billion (USD). According to Trading Economics, “countries recording a current account deficit have strong imports, a low saving rates and high personal consumption rates as a percentage of disposable incomes”.

30. Layers of collective action: 4.0

Ethiopia has many layers of collective action, but the top most leaders are not appointed through trusted democratic processes. Because most officials are local leaders it is moderately encouraging to opening up a business. The strong tribal tradition of Ethiopia means that most local officials are not dependent on the central government and have strong personal ties to their community’s development. In 2010 Ethiopia decentralized property/land managing tasks to sub cities, which is a great sign since the workers in those positions are locals. Based on personal experiences, there is a collective want by Ethiopian citizens to improve the economy and global standing of Ethiopia.

Personal Experiences

31. Pro-business climate 5.0

A majority of Ethiopians view entrepreneurs as industrious, motivated, inspirational individuals. The positive perception strongly encourages an entrepreneur to open up a business in Ethiopia. The increase of foreign investments into Ethiopia, along with the increasing number of former residents returning to Ethiopia, mostly from industrialized nations, to start a business, is indicative of the pro-business climate of Ethiopia.

Personal Experiences

32. Government Enterprises: 1.0

There are many government owned businesses and industries that are heavily subsidised, this strongly discourages opening up a business. Profitable industries are controlled by the government and do not encourage entrepreneurship or allow competition from private business owners. As of 2011 subsidies and other transfers as a percentage of government expenses was 63.76, that is the highest value within the past two decades. The high subsidies are funded sometimes by high taxes; a legal business pays 33.3 % of profits towards taxes.

33. International Security Agreements: 3.0

Ethiopia’s international security agreements or treaties with neighboring countries have no effect on the decision to open up a business. Security agreements between Ethiopia and it’s neighboring countries would be ineffective; especially considering the instability of the neighboring countries, such as Eritrea and Kenya. I personally believe that the safety of a business owner and their assets within the country are more indicative of whether or not an entrepreneur would want to start a business in Ethiopia. From my personal experience there are low-level thefts; but none that cannot be countered by a guard and a guard dog.

Personal Experiences

34. Protection of domestic enterprises from government mandated costs: 4.0

The Ethiopian government’s protection of domestic enterprises from government mandated costs, moderately encourages opening up a business. In Ethiopia there are no costs on domestic enterprises that are not uniformly imposed by other countries. The lack of government imposed worker safety regulations and minimum wage, is advantageous for the business owner. It is not expensive to operate in Ethiopia, but getting construction permits for a business is a lengthy process. It is also difficult to get reliable electricity; many business have to install expensive back-up systems, which are an added cost.


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