Ethiopia and Japan, nations with ancient history and civilization, have long relations dating back to 1930 where the two countries signed a Treaty of Amity and Commerce. This was followed by a visit of Ethiopian Foreign Minister Heruy WeldeSillassie in 1931 to Japan to create economic cooperation. When it comes to their investment relations, Japanese companies have invested in agriculture, manufacturing, tour operations, machinery and equipment rental, consultancy service, tour operation, transport and communication sectors, according to a data Origins Business obtained from Ethiopian Investment Commission (EIC). These companies hired significant number of employees.
Leather products, coffee, tea, spices and other agri-products are some of the products Ethiopia exports to Japan. Whereas Japan exports vehicles, iron, machineries, electrical and electronics equipment’s, among others.
Ethiopia exported 9.8 billion Japanese Yen (JPY) worth commodities in 2021, according to a data from Japan’s Ministry of Finance. Ethiopia imported 7.8 billion JPY worth commodities to Japan in 2021.
To know more about investment ties, prospects and challenges between the two nations Yared Nigussie of Origins Business sat down with Ito Takako, Ambassador of Japan to Ethiopia; excerpts;
Origins Business: When you arrived in Ethiopia? Can you please tell us your prior expectations of Ethiopia and the actual environment that you’ve encountered after coming here?
Ambassador Ito Takako: I arrived here in October 2020. It’s now two years since I came here. And of course, as an Ambassador, I would like to strengthen bilateral relations in political, economic, social, and cultural fields. At that time, one of the biggest goals was to promote Tokyo Olympic and Paralympic Games. Now, I have to concentrate on strengthening business and economic ties. And thinking about the potential that Ethiopia, it has 110 million people — many of them (over 70%) are very young. I think there’s a great potential to accelerate economic relations between Japan and Ethiopia. But it is surprising to see only a dozen of Japanese companies are here. Before I arrived in Ethiopia, I was in Ontario province in Toronto, Canada, and the population back then was only 14 million but they had over 300 companies only in Ontario. Hence, we do need more to improve conditions for promoting business. Of course, we would like to have more information to be spread among the Japanese people. Also, we do need to work together for a better environment such as the foreign currency issues, transparency of the administration including taxation, and then also security issues and medical conditions because those things are very important for us.
Origins Business: Pertinent to the economic relations between the two countries could you please tell us more about the trade exchanges between the two nations?
Ambassador Ito Takako: We do have a lot coffee imports from Ethiopia. We also import roses or flowers, Sesame, and some leather products. Actually, there’s a Japanese Women entrepreneur who established Highland leather products. She is managing this company with all Ethiopian staffs. The factory produces high quality leather products, which are up for Japanese market at attractive prices. And the owner is trying to expand her business both in Ethiopia and other countries. There’re considerable potentials for having more exports from Ethiopia to Japan. In my view to boost manufactured products, training of the labor force and expanding infrastructures for transporting could help.
Origins Business: What about Ethiopia’s investment in Japan?
Ambassador Ito Takako: There are several Ethiopian entrepreneurs, who came to Japan opened their restaurants and small business. Tewodros Shiferaw, owner of Nahoo Television, for instance, used to lead a small company of his own as a President in Japan. He said he learned how to work hard in Japan; he came back here and become very successful—opened Cash Go, a mobile payment app and other businesses.
Origins Business: When it comes to TICAD, Prime Minister Fumio Kishida pledged in August 2022 during the eighth Tokyo International Conference on African Development (TICAD) in Tunis to provide $30 billion in a bid to support African development in three years. How much finance is Ethiopia going to receive from this fund? And which sectors will get the priority?
Ambassador Ito Takako: Well, actually it is the total amount both by the public and private sectors. And there’s no specifically assigned amount to Ethiopia but it depends on the conditions and environment for the business, especially the business companies will decide how much money they will invest, and for sure, there’s a competition in this area. Of course, as a government, we will try to invite for the official development assistance (ODA), but also the companies will decide where they can invest their money. That’s why I’m trying to work with this Ethiopian government to have a better environment for the Japanese financial assistance to be invested in Ethiopia. But it is good news that the Safaricom Ethiopia’s 27.2% stake is owned by a Japanese firm Sumitomo Corporation. They have already started soft launching in several local cities including Bahir Dar, Bishoftu, and Dire Dawa, and other seven cities, and the Corporation has been successful so far. They had their national launch program on October 6, 2022. Their success would certainly be a good model for attracting more Japanese investment and it would be a testimony to ensure that Ethiopia is a great destination for investment.
Origins Business: During the eight edition of TICAD held in Tunis Ethiopia and Japan investors signed Memorandum of Understanding (MoU) to enhance their business cooperation. Could you tell us what are the sectors these companies plan to work jointly and other details of the agreement?
Ambassador Ito Takako: There are different types of MoUs. One is confined to Ethiopia. Others are Japanese company and African and regional wise. For instance we can mention ITOCHU, the Japanese corporation, which’s conducting a trade in Ethiopia — importing Coffee and Sesame agricultural commodities to Japan. ITOCHU further provides a range of goods and services that will support people’s lives; the ITOCHU Group operates in a comprehensive array of business domains, from upstream areas, such as transactions involving raw materials, to downstream domains, such as retail. They are also trying to have the arrangement with the International Organization for Migration (IOM) to assist the activities in Ethiopia from the finance they’ve benefited from Ethiopia; this could be mentioned as one of the arrangements. Another one, I think is the Japan Tobacco International (JTI), which is now operating here in one of the top five taxpayers to Ethiopia; they would have the cooperation with the Minister of Finance to fight against the smuggling of illegal tobacco into Ethiopia. At a regional level, we have several Japanese banks, which will cooperate for the project financing with the Economic Commission Africa (ECA) of the United Nations for trade insurance. These efforts are not necessarily for Ethiopia, but Ethiopia can also apply if there are good projects they can work on.
Origins Business: What are the challenges and prospects of investing in Ethiopia for the Japanese businesses?
Ambassador Ito Takako: Shortage of foreign currency is a big challenge. And often Japanese businesses want to establish a manufacturing plant here, they may have to import some parts from abroad they also take some foreign currency. And if you’re not doing in priority areas of investments there are very limited to transactions, which is very difficult to conduct businesses. The issue regarding foreign currency is that when the vendor or the company makes profits, they cannot send that money — repatriate this benefit out of this country, which is I can say restrictive compared to other investment destinations in African countries. If you have the freedom to get the money in and out of the investment destination, it is more attractive than having a restriction of having a foreign currency and also sending back the benefit. Therefore, it is also very challenging for Ethiopia to compete with other countries.
Secondly, the transparency of administration at the grassroots officers’ level as to the tax administrations or the registration of the offices is less in Ethiopia. In Singapore and in many Asians countries, they can register in a day, or not more than a month. Contrarily, it takes longer time in Ethiopia, which would really discourage other companies to come and invest. Those are some of the issues I would like to draw attention. And hopefully that can be improved.
Origins Business: What about the prospects of investing here?
Ambassador Ito Takako: Well, there’s increasing interest in Ethiopia after the eighth TICAD Summit. I received several Japanese business people who are coming here to see what the aspiring businesses to be engaged in are. And I think Ethiopia has to grab this opportunity when the interest is high. And I’m telling those people that there is a chance, and also the government is open to the opinions for improvement of the investment environment. In this regard, we should work together to improve and to get the money. And they have good business relations between Japanese companies.
Origins Business: Besides solving the lack of foreign currency and bureaucratic red tape what needs to be done to attract more Japanese investment to Ethiopia?
Ambassador Ito Takako: Lack of security can be raised. Nowadays, we have an increasing number of Japanese tourists or Japanese residents having troubled with some thieves and robberies in Addis Abeba; that’s not helpful. And another issue would be expanding access to education for the children, if they want to move in and have a longtime establishment here, education or health services are very important. The labor market shouldn’t be forgotten. How we can have the labor force, which is young and trainable to stay and continue to improve is a big issue. Japanese companies promotes the Kaizen and then, but if you’re having a frequent turnover of the labor force, those training will be wasted. Hence, we want to have fewer turnouts and a good, committed labor force, and continue to work with companies together.
Origins Business: Some investments are shying away from Ethiopia due to the war in north and northeast Ethiopia. What is Japan’s current stance in the active war in Ethiopia?
Ambassador Ito Takako: Though investments in the northern part are not operational companies are also looking into other destinations, including the southern part of Ethiopia. Hopefully, once peace is realized, we can cooperate for the rehabilitation and reconstruction in the northern part as well. Peace is important. No one is willing to come to the country where there’s a war and their work forces get confiscated, or the property will be damaged and confiscated. It’s not attractive at all. If you’re thinking of expanding business activities, realizing peace is very much crucial. But when it comes to the question of how to achieve the peace? I think that’s up to Ethiopians to decide. That would and should be the sooner the better, because there are people who are suffering. There are many people, especially woman and children, who are suffering. I am a mother too. I don’t bear baby to fight and to kill other people. We want those children to have a better life than you have right now.
Finally, I would like to stress that Ethiopia Japan can work together for better life. And then we want the people not just the top level but also at the grassroots level, people are ready to improve the situation. Taking a change is a bit of difficult, but be courageous one and look for a better life is much better.