Ethiopia Is a Land-Locked Country Located in East Africa, and Is Bordered by Eritrea, Djibouti, Somalia, Kenya and Sudan

General

Ethiopia is a land-locked country located in East Africa, and is bordered by Eritrea, Djibouti, Somalia, Kenya and Sudan. With an estimated population of more than 91,000,000, Ethiopia is Africa’s second most populous country. Although Ethiopia’s official language is Amharic, there are avariety of officially recognized regional languages which are spoken among Ethiopia’s ethnically diverse population. Unique among African countries, the ancient Ethiopian monarchy maintained its freedom from colonial rule with the exception of a short-lived Italian occupation from 1936-41. In 1974, a military junta, the Derg, deposed Emperor Haile SELASSIE (who had ruled since 1930) and established a socialist state. Torn by bloody coups, uprisings, wide-scale drought, and massive refugee problems, the regime was finally toppled in 1991 by a coalition of rebel forces, the Ethiopian People's Revolutionary Democratic Front (EPRDF). A constitution was adopted in 1994, and Ethiopia's first multiparty elections were held in 1995. A border war with Eritrea late in the 1990s ended with a peace treaty in December 2000. In November 2007, the Eritrea- Ethiopia Border Commission(EEBC) issued specific coordinates as virtually demarcating the border and pronounced its work finished. Alleging that the EEBC acted beyond its mandate in issuing the coordinates, Ethiopia has not accepted them and has not withdrawn troops from previously contested areas pronounced by the EEBC as belonging to Eritrea.

Climate Temperate on plateau, hot in lowlands Weather in Addis Ababa (altitude 2,450 meters) Hottest months, AprilMay,10-30°C; Coldest month, December, 5-23°C; Driest month, December, 5 mm average rainfall; wettest month, August, 300 mm average rainfall

Measures Metric system; also 1 gasha = 40 ha, 1 kend = 0.5 metres, 1 frasoulla = 17 kg

Currency The birr (previously the Ethiopian dollar) = 100 cents; the single legal exchange rate is determined by a weekly auction.

Time 3 hours ahead of GMT

Public holidays January 7th (Christmas), January 19th (Epiphany), March 2nd (Battle of Adowa), May 28th (Downfall of the Derg),September 11th (New Year), Good Friday, Easter, Eid el Fitr, Eid el Ahda, Maulid; the Ethiopian calendar has 13 months

Demographics - Population :- 91,195,675 (July 2012 est.) - Age Structure :- o 0-14 years: 44.6% (male 20,342,615/female 20,319,812) o 15-24 years: 19.8% (male 8,976,586/female 9,087,897) o 25-54 years: 28.9% (male 13,144,601/female 13,248,588) o 55-64 years: 3.9% (male 1,719,791/female 1,802,075)

o 65 years and over: 2.8% (male 1,155,374/female 1,398,336) (2012

est.)

- Median Age :- Total: 16.8 years Male: 16.5 years Female: 17.1 years (2012 EST.)

- Population Growth Rate : 2.9% (2012 EST.)

- Birth Rate : 38.5 births/1,000 population (2012 est.) - Death Rate : 9.3 deaths/1,000 population (July 2012 est.) - Net Migration Rate : -0.01 migrant(s)/1,000 population - Urbanization : o Urban population: 17% of total population (2010) o Rate of urbanization: 3.8% annual rate of change (2010-15 est.)

- Major Cities and Population : in 000’S o Addis Ababa (capital): 3,480 o Bahir Dar: 218 o Dese: 219 o Dire Dawa: 356 o Gonder: 253 o Jima: 208

o Mekelle: 220 o Nazret: 300

- Ethnic Groups : (2007 Census) o Oromo 34.5% o Amara 26.9% o Somalie 6.2% o Tigraway 6.1% o Sidama 4% o Gurage 2.5% o Welaita 2.3% o Hadiya 1.7% o Affar 1.7% o Gamo 1.5% o Gedeo 1.3% o other 11.3%

- Religions :- (2007 Census) o Orthodox 43.5% o Muslim 33.9% o Protestant 18.6% o traditional 2.6% o Catholic 0.7% o other 0.7%

- Languages :- o Oromigna (official regional) 33.8% o Amarigna (Amharic) (official) 29.3% o Somaligna 6.2% o Tigrigna (official regional) 5.9% o Sidamigna 4% o Wolayitigna 2.2% o Guaragigna 2% o Affarigna 1.7% o Hadiyigna 1.7% o Gamogna 1.5%

o other 11.7%, English (official) (major foreign language taught in schools), Arabic (official)

Political Considerations

Government •Country name :-

- Conventional long form: Federal Democratic Republic of Ethiopia - Conventional short form: Ethiopia - Local long form: Ityop'iya Federalawi Demokrasiyawi Ripeblik - Local short form: Ityop'iya - Former: Abyssinia, Italian East Africa - Abbreviation: FDRE

•Government type :- Federal Republic

•Capital :- Addis Ababa

- Geographic coordinates: 9 02 N, 38 42 E

•Administrative divisions :- 9 ethnically based states (kililoch, singular - kilil) and 2 self- governing administrations* (astedaderoch, singular - astedader); Adis Abeba* (Addis Ababa), Afar, Amara (Amhara), Binshangul Gumuz, Dire Dawa*, Gambela Hizboch (Gambela Peoples), Hareri Hizb (Harari People), Oromiya (Oromia), Sumale (Somali), Tigray, Ye Debub Biheroch Bihereseboch na Hizboch (Southern Nations, Nationalities, and Peoples

•Independence :- Oldest independent country in Africa and one of the oldest in the world - at least 2,000 years (may be traced to the Aksumite Kingdom, which coalesced in the first century B.C.)

•Constitution :- ratified 8 December 1994, effective 22 August 1995

•Legal system :- Civil Law System

•International law organization participation :- has not submitted an ICJ jurisdiction declaration; non-party state to the ICC

•Suffrage :- 18 years of age; universal

•Executive branch:

- Chief of state : President GIRMA Woldegiorgis (since 8 October 2001) - Head of government : Prime Minister HAILEMARIAM Desalegn (since 21 September 2012); note - prior to his approval as prime minister, HAILEMARIAM had been acting prime minister due to the death of former Prime Minister MELES cabinet: - Council of Ministers :- Ministers selected by the prime minister and approved by the House of People's Representatives elections: - President elected by both chambers of Parliament for a six-year term (eligible for a second term); election last held on 9 October 2007 (next to be held in October 2013) - Prime minister designated by the party in power following legislative elections election results: GIRMA Woldegiorgis elected president; percent of vote by the House of People's Representatives - 79%

•Legislative branch :- Bicameral Parliament consists of the House of Federation (or upper chamber responsible for interpreting the constitution and federal-regional issues) (108 seats; members chosen by state assemblies to serve five-year terms) and the House of People's Representatives (or lower chamber responsible for passing legislation) (547 seats; members directly elected by popular vote from single-member districts to serve five-year terms) elections: last held on 23 May 2010 (next to be held in 2015) election results: percent of vote - NA; seats by party - EPRDF 499, SPDP 24, BGPDP 9, ANDP 8, GPUDM 3, HNL 1, FORUM 1, APDO 1, independent 1

•Judicial branch :- Federal Supreme Court (the president and vice president of the Federal Supreme Court are recommended by the prime minister and appointed by the House of People's Representatives; for other federal judges, the prime minister submits to the House of People's Representatives for appointment candidates selected by the Federal Judicial Administrative Council)

•Political parties and leaders : Afar National Democratic Party or ANDP [Mohammed KEDIR]; All Ethiopian Unity Organization or AEUO [Hailu SHAWEL]; Arena Tigray [GEBRU Asrat]; Argoba People's Democratic Organization or APDO [Abdulkader MOHAMMED]; Benishangul Gumuz People's Democratic Party or BGPDP [Mulualem BESSE]; Coalition for Unity and Democratic Party or CUDP [AYELE Chamiso]; Ethiopian Democratic Party or EDP [MUSHE Semu]; Ethiopian Federal Democratic Forum or FORUM (a UDJ-led 6-party alliance established for the 2010 parliamentary elections) [Dr. Moga FRISSA]; Ethiopian People's Revolutionary Democratic Front or EPRDF (including the 6

following organizations: Amhara National Democratic Movement or ANDM; Oromo People's Democratic Organization or OPDO; Southern Ethiopian People's Democratic Movement or SEPDM; and Tigray People's Liberation Front or TPLF); Gambella Peoples Unity Democratic Movement or GPUDM; Gurage Peoples Democratic Front [GIRMA Bogale]; Harari National League or HNL [YASIN Husein]; Oromo Federalist Democratic Movement or OFDM; Oromo People's Congress or OPC [IMERERA Gudina]; Somali Democratic Alliance Forces or SODAF [BUH Hussien]; Somali People's Democratic Party or SPDP [Abdulfetah Sheck ABDULAHI]; South Ethiopian People's Democratic Union or SEPDU [TILAHUN Endeshaw]; United Ethiopian Democratic Forces or UEDF [BEYENE Petros]; Unity for Democracy and Justice or UDJ [Dr. NEGASSO Gidada]

•International organization participation :- ACP, AfDB, AU, COMESA, FAO, G-24, G-77, IAEA, IBRD, ICAO, ICRM, IDA, IFAD, IFC, IFRCS, IGAD, ILO, IMF, IMO, Interpol, IOC, IOM, IPU, ISO, ITSO, ITU, ITUC (NGOs), MIGA, NAM, OPCW, PCA, UN, UNAMID, UNCTAD, UNESCO, UNHCR, UNIDO, UNISFA, UNMIL, UNOCI, UNWTO, UPU, WCO, WFTU (NGOs), WHO, WIPO, WMO, WTO (observer)

Political stability The death of the prime minister, Meles Zenawi, in August 2012 has taken Ethiopia into largely uncharted territory. Mr Meles was only the country's second leader since 1977, and had been the overwhelmingly dominant political figure since the Tigrayan People's Liberation Front (TPLF) ended the 14-year dictatorship of Mengistu Haile Mariam in 1991. In line with the constitution, the former deputy prime minister and foreign minister, Hailemariam Desalegn, has been appointed prime minister, and his unanimous—if belated—endorsement by the 180 member council of the ruling Ethiopian People's Revolutionary Democratic Front (EPRDF) suggests that the party wishes him to remain in the post at least until the next elections, due in 2015. However, the longer-term prospects for EPRDF unity are more uncertain, as these will depend on whether Mr Hailemariam—who is no political heavyweight—is able to stamp his authority on the coalition. The risk of ethnic and religious tensions has increased following the death of Mr Meles, who played a pivotal role in holding together the EPRDF's multi-ethnic framework. However, Mr Hailemariam will seek to sustain this, and is already making clear efforts to rebalance the EPRDF—traditionally dominated by the TPLF. Following his November 2012 cabinet reshuffle, leading members of all parties in the coalition now hold at least a deputy prime ministerial role: Muktar Kedir is a leading member of the Oromo People's Democratic Organisation, Debretsion Gebremichael is also deputy chairman of the TPLF and Demeke Mekonnon is the leader of the Amhara National Democratic Movement. Mr Hailemariam himself comes from the Southern Nations, Nationalities and People's Region, the most populous of the country's nine ethnic

divisions, and led the Southern Ethiopia People's Democratic Movement, considered the leastinfluential member of the EPRDF alliance during the tenure of Mr Meles. This would appear to mark a clear change from the centralising tendencies seen under Mr Meles, although it is not yet clear whether Mr Hailemariam actively wants such a change or lacks sufficient support within the party to replicate his predecessor's dominant position. There is certainly an ongoing expectation that the new prime minister will be a less overwhelmingly influential figure than Mr Meles. This could potentially lead to a weakening of government structures (and a slowing of the decision-making process) and a concomitant increase in the influence of the security apparatus. This is not to say that the EPRDF's dominance of local politics will falter in the short to medium term. The opposition remains underfunded and prone to internal divisions, and the regime will continue to protect its hegemony using restrictive legislation and periodic crackdowns by the security services. Indeed, such crackdowns may increase should the military become more influential and believe that support for the ruling group is waning.

Economic Situation •Economy – overview:-

Ethiopia's economy is based on agriculture, which accounts for 46% of GDP and 85% of total employment. Coffee has been a major export crop. The agricultural sector suffers from poor cultivation practices and frequent drought, but recent joint efforts by the Government of Ethiopia and donors have strengthened Ethiopia's agricultural resilience, contributing to a reduction in the number of Ethiopians threatened with starvation. The banking, insurance, and micro-credit industries are restricted to domestic investors, but Ethiopia has attracted significant foreign investment in textiles, leather, commercial agriculture and manufacturing. Under Ethiopia's constitution, the state owns all land and provides long-term leases to the tenants; land use certificates are now being issued in some areas so that tenants have more recognizable rights to continued occupancy and hence make more concerted efforts to improve their leaseholds. While GDP growth has remained high, per capita income is among the lowest in the world. Ethiopia's economy continues on its state-led Growth and Transformation Plan under its new leadership after Prime Minister Meles's death. The five-year economic plan has achieved high single-digit growth rates through government-led infrastructure expansion and commercial agriculture development. Ethiopia in 2013 plans to continue construction of its Grand Renassiance Dam on the Nile-the controversial multi-billion dollar effort to develop electricity for domestic consumption and export.

•GDP (purchasing power parity)

- $103.1 billion (2012 est.) - $96.39 billion (2011 est.) - $89.67 billion (2010 est.)

•GDP (official exchange rate): $41.89 billion (2012 est.)

•GDP - real growth rate:- - 7% (2012 est.) - 7.5% (2011 est.) - 8% (2010 est.)

•GDP - per capita (PPP) - $1,200 (2012 est.) - $1,100 (2011 est.) - $1,100 (2010 est.)

•GDP - composition by sector - agriculture: 46.6% - industry: 14.6% - services: 38.8% (2012 est.)

•Labor force :- 37.9 million (2007)

•Labor force - by occupation - agriculture: 85% - industry: 5% - Services: 10% (2009 est.)

•Population below poverty line : 29.2% (FY09/10 est.)

•Household income or consumption by percentage share: - lowest 10%: 4.1% - highest 10%: 25.6% (2005)

•Investment (gross fixed) 22.7% of GDP (2012 est.)

•Budget - revenues: $6.079 billion - expenditures: $7.219 billion (2012 est.)

•Taxes and other revenues : 14.5% of GDP (2012 est.)

•Budget surplus (+) or deficit (-): -2.7% of GDP (2012 est.)

•Public debt - 44.4% of GDP (2012 est.) - 44.7% of GDP (2011 est.)

•Inflation rate (consumer prices) - 21.7% (2012 est.) - 33% (2011 est.)

•Commercial bank prime lending rate - 14.5% (31 December 2012 est.) - 16% (31 December 2011 est.)

•Stock of narrow money (M1) - $7.851 billion (31 December 2012 est.) - $6.7 billion (31 December 2011 est.)

•Stock of broad money - $13.35 billion (31 December 2012 est.) - $11.51 billion (31 December 2011 est.)

•Agriculture – products:- cereals, pulses, coffee, oilseed, cotton, sugarcane, potatoes, khat, cut flowers; hides, cattle, sheep, goats; fish

•Industries :- food processing, beverages, textiles, leather, chemicals, metals processing, cement

•Industrial production growth rate : 9.5% (2010 est.)

•Current Account Balance - -$2.95 billion (2012 est.) - -$1.965 billion (2011 est.)

•Exports - $3.163 billion (2012 est.) - $2.957 billion (2011 est.)

•Exports – commodities : coffee, khat, gold, leather products, live animals, oilseeds

•Exports – partners: Germany 14.2%, China 12.2%, Belgium 7.8%, Saudi Arabia 6.8%, US 6.3%, Italy 5.1%

•Imports :- - $10.6 billion (2012 est.) - $9.694 billion (2011 est.)

•Imports – commodities : food and live animals, petroleum and petroleum products, chemicals, machinery, motor vehicles, cereals, textiles

•Imports – partners: - Saudi Arabia 10%, China 9.9%, US 7.6%, India 4.6% (2011)

•Reserves of foreign exchange and gold:- - $3.024 billion (31 December 2012 est.) - $2.671 billion (31 December 2011 est.)

•External debt :- - $9.956 billion (31 December 2012 est.) - $8.292 billion (31 December 2011 est.)

•Exchange rates :- - birr (ETB) per US dollar - - 18.65 (2013 est.) - 17.8 (2012 est.) - 16.899 (2011 est.) - 14.41 (2010 est.) - 11.78 (2009) - 9.57 (2008)

•Fiscal year :- 8 July - 7 July

Natural Wealth : - small reserves of gold, platinum, copper, potash, natural gas, hydropower

Big Projects 1. The Grand Ethiopian Renaissance Dam, formerly known as the Millennium Dam and sometimes referred to as Hidase Dam, is an under construction gravity dam on the Blue Nile River about 40 km (25 mi) east of Sudan in the Benishangul-Gumuz Region of Ethiopia.[1] At 6,000 MW, the dam will be the largest hydroelectric power plant in Africa when completed, as well as the 13th or 14th largest in the world sharing the spot with Krasnoyarskaya.[2] The reservoir at 63 billion cubic meters will be one of the continent's largest.

2. The Yayu Fertilizer Factory project : is one of the largest construction projects in Ethiopia. The winner of the construction contract is a local Ethiopian company. The project with a total area of more than 54 hectare or 540,000 meter square it is easy to imagine how grandiose this factory will be. 3. Railway Projects :- Three railway projects totaling over 5 billion USD are underway. Those projects have been awarded to two state owned Chinese firms (CREC and CCCC) and a Turkish firm ( Yapi Merkezi). This is big share of the 2395 KM goal of new railway under the current Growth and Transformation Plan ending in 2015. 4. Road Project: - There are many road project underway in Ethiopia with an ambitious GTP concentraded on road building makes the list of big projects a long list

A country to Invest In

Top ten reasons to do business in Ethiopia

1. Political and social stability; 2. Macro-economic stability and growing economy; 3. Adequate guarantees and protections; 4. Transparent laws and streamlined procedures; 5. Ample investment opportunities; 6. Abundant and trainable labour force; 7. Wide domestic, regional and international market opportunity; 8. Competitive investment incentive packages ; 9. Welcoming attitude of the people to FDI; and 10. Pleasant climate and fertile soils.

- Market Size: At present, the size of Ethiopia’s economy is only approximately US$30bn and there is a strong scope for growth from such a low base. We believe that once the global economy begins to pick up, private investment could flourish and flow into several sectors of the Ethiopian economy, aiding economic diversification away from the agriculture-based economy. At present, agriculture comprises about half of total GDP, with industry making up about 15% of GDP, and services contributing about 40%. Encouragingly, the government is pro-business, recognizing the potential for foreign investment to provide jobs and aid the alleviation of poverty.

- Expectations potential quick growth in Medium and long term: The economy of Ethiopia will expand quickly, owing largely to the strong performance of the dominant agricultural sector. Agriculture and agro-industry will benefit from the movement of subsistence farmers into the commercial economy, helped by the expansion of road, power and market networks, as well as a rebound from drought in 2011. Industry will benefit from improved power supply; a series of planned renewable energy sources should increase capacity to more than 3,000 mw during the forecast period (although the government's stated aim of boosting output to 10,000 mw by 2015 looks to be overambitious). However, the government's state-led development model will hinder private-sector growth, while external demand will

remain muted because of the continuing economic problems in Europe—a key export market (annual growth in Western Europe is expected to average just 1.1% in 2013-17). Thus the official target of annual GDP growth in excess of 11% a year over the 2010-15 period will not be attainable. We therefore expect growth to average a still robust 7.5% in 2012/13, and remain between 6.9% and 7.3% for the rest of the forecast period as foreign investment rises, electricity supply increases and export demand picks up in line with faster global growth.

- Skilled and Affordable Labor:

General Employment Situation In rural areas, unemployment rates are low. However, instead of unemployment, low productivity and agricultural underemployment can be found. Especially the youth, in particular young women, are affected.

Wages · Public employment: The minimum wage in government institutions is ETB 320 (USD 18.19) a month. · Private employment: Wages and salaries in the private sector, however, are negotiable. Wages for unskilled labour range from ETB 40 to ETB 70 (USD 2.27 to USD 3.97) a day and skilled laborers, such as carpenters, range from ETB 130 to ETB 150 (USD 7.39 to USD 8.52) a day. · Graduates: The salaries of fresh graduates at government offices range between ETB 1000 (56.85 USD) to ETB 1500 (85.27 USD) per month while at private organizations they range between ETB 1500 (equiv. USD85.27) and ETB 2000 (equiv. USD113.7).

- Free Trade Treaties :

Both import and export tariffs are ad valorem and there are no other preferential tariffs except for imports from COMESA member countries (including government imports). There are no areas designated as foreign trade zone and/or free ports in Ethiopia. All exports are duty free.

Macro-Economic Scenario - Tax Responsibility:

- Corporate tax:

The main rate is 30%. For unincorporated or individual businesses the business income tax ranges from 10-35%.

- Individual tax:

Individual tax ranges progressively from 10-40%. Expatriates are subject to personal income tax on income on income derived from local sources. Investors engaged in manufacturing, agricultural processing activities or the production of certain agricultural products and who export at least 50% of their products or supply at least 75% or their products to an exporter as a production input are excluded from income tax for five years. Similarly, an investor who exports less than 50% of the product or supplies their products solely to the domestic market is except from income tax for two years.

- Indirect tax:

VAT is charged at 15% for all goods and services. VAT is only payable by companies with annual turnover of more than US%58,000. There are 10 excise tax brackets, applied equally to domestically produced and imported goods, ranging from 10% for textile and electronic products to as high as 200% for alcoholic beverages.

- Tariff Rate:

Ethiopia’s average tariff rate of 17% is just above the average for Sub-Saharan Africa and the government is under pressure from the WTO and the IMF to commit to a number of tariff reductions. The overall Ethiopian tariff structure is not regarded as a significant trade barrier to access the market, though the government will continue to use trade instruments to achieve industrial policy objectives. Ethiopia is a member of the Common Market for Eastern and Southern Africa (COMESA), a regional economic grouping of Eastern and Southern African countries. In 2003, Ethiopia formally applied for membership to the WTO, and its application is currently under consideration. In 2003 the government adopted a six-band tariff structure (down from 23) based on the harmonized system. The top two bands of 30% and 35% apply to about half of all imports and provide higher rates protection to the manufacturing sector. It has also reduced custom duties on a wide range of imports. Ethiopia’s government is under

pressure to boost tax administration and review tax policy. The tax regime remains fairly straightforward, though the personal income tax rates are high. A new VAT replaced the former sales tax system as of January 2003.

- Local Exchange: The Birr will continue to be managed closely by the central bank, which maintains a policy of gradual depreciation punctuated by sharper downward adjustments. We expect the government to continue using the exchange rate as the policy tool, devaluating the currency to maintain export competitiveness. in the face of double-digit inflation. The pattern of gradual depreciation and intermittent larger adjustments is likely to continue, with the currency forecast to weaken from an average of Birr16.90;US$1 in 2011 to Birr17.83:US in 2012 and Birr24.15:US$1 by 2016.

- Inflation: We estimate that inflation slowed to 23.3% in 2012, from 33.2% in 2011. A further slowdown to an average of 14.2% is expected in 2013, as international food and fuel prices are set to moderate, while a solid primary harvest should help to exert downward pressure on domestic prices. Against that, however, fiscal deficits, weak monetary policy—particularly if the NBE resumes direct financing of the government—and a depreciating exchange rate will keep inflationary pressures high, and the rate is expected to remain in double digits throughout the forecast period, rising to 15.5% in 2017 as international oil and gas prices rise.

- Investment: The Ethiopian government is seeking private sector investors to help modernize the agriculture sector in the country and help it produce more efficiently, particularly with large-scale commercial farming and agro-industrial activities. The government is preserving 3.4mn hectares of land for investors who are interested in modern farming. Investment into other sectors is also critical for Ethiopia’s long-term growth, and authorities have identified energy (only 4% of the population is currently supplied with electricity), manufacturing and tourism as industries with high potential. Investment is picking up. In H210, a total of 900 projects were registered with the EIA, for a total of about ETB34bn (US$2.0bn) in investment. The EIA reported that 72% of these projects were registered by foreigners. Beside agriculture, manufacturing was also a target sector, according to the report.

Business opportunities for the client:

Ethiopian authorities are trying to address the nation’s deep infrastructure deficit, with large- scale rail and road projects announced to improve transport links across the vast expanses of the country. The government is also embarking on an extremely ambitious plan to address the chronic power shortage which hampers business operations, particularly in the manufacturing industry. Ethiopia already has seven hydroelectric dams, and with multiple projects currently under construction and other still in the planning stage, authorities believe that energy capacity will increase fivefold in the next five years, to 10,000MW. This should easily meet and exceed Ethiopia’s domestic demand for power for many years to come.

1. Construction. a. Railway projects : Railroad transport is a cost effective and time efficient means of carrying bulk inputs and produce. The construction of railway network has become important in order to keep up with the rapid economic growth in the country. To support this strategic direction, the capacity of domestic small and medium metal manufacturing and engineering industries to produce sleepers, locomotives and rail spare parts and inputs for the the railway network infrastructure construction, will be promoted. Taking into account the long-term economic advantages of railway transport, the plan is to expand the network so as to connect the country with neighboring countries and different ports. b. Roads Projects: The Ethiopian government has recognized the importance of road transport in development of the national economic and social activities and hence attaches a high priority to improving the road infrastructure. The objectives are to expand the road network so as to improve access to rural areas, improve the quality and quantity of the road network overall. The following are the federal road targets: rehabilitation of 728 kilometer of trunk roads, upgrading of 5023 kilometer of trunk and link roads, construction of 4331 kilometer of new link roads, heavy maintenance of 4700 kilometer of asphalt and gravel roads and routine maintenance of 84649 kilometer of road works. Also, under universal rural access program: 11212 kilometer of new rural roads by Regional Road Authorities and a construction of 71523 kilometer of wereda roads by woreda road offices will be undertaken.

2. Energy: a. Ethiopia has the potential to become the electricity generation hub of the Eastern Africa power pool. The country is bestowed with abundant hydroelectric generation potential. In addition, the country also has several renewable

energy resources such as geothermal, wind and solar. The International Development Association (IDA) is helping Ethiopia’s energy sector to bring this potential to fruition. In the late 1990s, IDA supported the financing of Gilgel Gibe I hydro power plant with about US$200 million. This 184 megawatt (MW) plant was the largest power plant in Ethiopia until recently. IDA is now supporting Ethiopia with a credit of US$41 million to construct a transmission inter- connection with Sudan that wi ll enable Ethiopia to realize its power export revenue generation capacity. Several other projects funded by IDA totaling about US$400 million are helping Ethiopia increase rural access to electricity. Ethiopia is now connecting more than 300,000 new consumers (about 2 million people) every year by expanding its rural grid network. In areas that are too remote, Ethiopia is providing solar-based electricity to institutions such as schools and health centers. In addition to financing projects, IDA is supporting technical capacity building of the Regional Energy Bureaus that will enable them to appraise off-grid and other renewable energy projects such as mini-hydro and biomass projects. IDA-financed projects also aim to increase the efficiency of the energy sector through various demand-side management measures. IDA has helped Ethiopia conserve energy by financing the replacement of around 5 million conventional incandescent lamps with efficient compact fluorescent lamps.