Pharma FAQ

  • Investing in Ethiopia
  • Pharma Cluster Industrial Parks
  • Taxes
  • Domestic Market Access
  • Import of Inputs
  • Electricity
  • Labor
  • Finance
  • Construction
  • Export

     1, What is the legal framework for foreign investment in Ethiopia?

There are various laws and regulations related to foreign investment in Ethiopia, including:

  • Investment Proclamation (No. 769/2012)
  • Investment (Amendment) Proclamation (No. 849/2014)
  • Investment Incentives and Investment Areas Reserved for Domestic Investors Council of Ministers Regulation (No. 270/2012)
  • Investment Incentives and Investment Areas Reserved for Domestic Investors Council of Ministers (Amendment) Regulation (No. 312/2014)
  • Industrial Parks Proclamation (No. 886/2015)
  • Directive on Transparency in Foreign Currency Allocation and Foreign Exchange Management (No. FXD/46/2017)

The full text of each of these laws/regulations can be found at this link: http://www.investethiopia.gov.et/information-center/publications. Further information on investment legislation and processes can be found on the website of the Ethiopian Investment Commission: http://www.investethiopia.gov.et/.

 

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1. What are the key laws governing industrial parks in Ethiopia?

The Industrial Parks Proclamation (No. 886/2015) governs development of and investment in industrial parks in Ethiopia. The full text of the proclamation can be found at this link: http://www.ipdc.gov.et/index.php/en/resources-en.

 

2. Does Ethiopia have industrial parks specialized in pharmaceutical manufacturing?

Yes, Kilinto Industrial Park—under construction now and scheduled to be finished in early 2019—will be open to investment by pharmaceutical manufacturers exclusively (including manufacturers of human medicines, veterinary medicines, and medical supplies).

In addition, another industrial park dedicated to pharmaceutical manufacturing is being planned, and will be located in Debre Berhan (approximately 113 kilometers from Addis Ababa).

 

3. Where is Kilinto Industrial Park located? 

Kilinto Industrial Park is located in Addis Ababa (the capital of Ethiopia), approximately 25 kilometers from the city center.

 

4. When will construction of Kilinto Industrial Park be finished?

Construction of Kilinto Industrial Park is scheduled to be finished in early 2019.

 

5. What is the size of Kilinto Industrial Park?

Kilinto Industrial Park contains 279 hectares of land, 166 hectares of which will be dedicated to manufacturing.

 

6. What is the price of land in Kilinto Industrial Park? 

The land lease rate in Kilinto Industrial Park is an average 3.59 USD per m2 per annum, which is based on a cost recovery (not-for-profit) approach. The duration of land leases will be 40 years. In addition to the land development cost, firms investing in Kilinto are expected to pay an additional ETB 1 (or the equivalent in USD) per m2 per annum for the duration of lease period.

 

7. What services does Kilinto Industrial Park offer? 

Kilinto Industrial Park offers serviced land, which includes all of the essential infrastructure—such as a state-of-the-art wastewater treatment plant, reliable water supply, and a dedicated power substation.

In addition, a one-stop shop will be located in the park, offering government services related to customs clearance, investment licensing, administration, product registration, etc. Joint warehousing, calibration, and testing services will also be available in the park.

Investors in Kilinto Industrial Park will construct their own factories and sheds, as these must be tailored to the types of products being produced.

 

8. What types of products can be manufactured in Kilinto Industrial Park?

Any pharmaceutical product can be manufactured in Kilinto Industrial Park, including active pharmaceutical ingredients (APIs), excipients, final medicines and formulations, medical supplies, and pharmaceutical packaging.

 

9. What is Kilinto Industrial Park’s transport connectivity?

Kilinto Industrial Park will be connected by the new electric railway to the Port of Djibouti, which is 863 kilometers away. This railway offers cold chain services.

Being in Addis Ababa, Kilinto Industrial Park is located 20 kilometers from Addis Ababa Bole International Airport. This airport is the hub for Ethiopian Airlines, which serves over 100 international passengers and 36 cargo destinations. Ethiopian Airlines also provides care logistics.

 

10. What is the climate around Kilinto Industrial Park?

The climate around Kilinto Industrial Park is warm and temperate, with average temperatures ranging from 14.8-18 °C. Humidity ranges from 47-80% across the year.

 

11. Will the pharmaceutical industrial park to be developed in Debre Berhan be competitive?

Yes, the pharmaceutical industrial park in Debre Berhan will be competitive. All of the services offered in Kilinto Industrial Park will also be offered in the industrial park in Debre Berhan (including wastewater treatment, water supply, and electricity).

It is approximately 113 kilometers from Addis Ababa, and is connected by paved road (4 lanes total). In addition, it will be connected to the Port of Djibouti by the new electric railway. The climate in Debre Berhan is similar to that of Addis Ababa.

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1. What corporate tax incentives are available to pharmaceutical manufacturers that invest in industrial parks?

The following tax holidays are available to pharmaceutical manufacturers in industrial parks. These tax incentives do not apply to pharmaceutical manufacturers operating outside of industrial parks.

Formulation/final medicine production inside of industrial parks
In Addis/surrounding areas Outside of Addis/surrounding areas
Base 6 years 8 years
30% export (in terms of value, successively for 3 years) + 2 years + 2 years
60% export (in terms of value, successively for 3 years) + 2 years + 2 years
TOTAL Up to 10 years Up to 12 years

 

Active Pharmaceutical Ingredient (API) production inside of industrial parks
In Addis/surrounding areas Outside of Addis/surrounding areas
Base 8 years 10 years
30% export (in terms of value, successively for 3 years) + 2 years + 2 years
60% export (in terms of value, successively for 3 years) + 2 years + 2 years
TOTAL Up to 12 years Up to 14 years

 

Pharmaceutical packaging production inside of industrial parks
In Addis/surrounding areas Outside of Addis/surrounding areas
Base 3 years 4 years
30% export (in terms of value, successively for 3 years) + 2 years + 2 years
60% export (in terms of value, successively for 3 years) + 2 years + 2 years
TOTAL Up to 7 years Up to 8 years

 

2. What taxes are levied on exports?

There are no taxes levied on exports.

 

3. What taxes are levied on imports?

Pharmaceutical manufacturers are exempted from paying duties and other taxes on the import of capital goods, construction materials, spare parts, and vehicles.

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1. What policies are in place to facilitate access to the domestic market? 

Since government purchases account for the majority of the Ethiopian pharmaceutical market, there are measures in place that leverage public procurement to facilitate market access. 

The Pharmaceuticals Fund and Supply Agency (PFSA) manages a long-term procurement guarantee mechanism, which is available to those manufacturers operating in Ethiopia that win a PFSA tender and for those products that a manufacturer exports. This long-term guarantee is only available to exporters, and the length of the guarantee depends on the percentage of production that the manufacturer exports: up to 3 years for 30% exporters and up to 5 years for 60% exporters.

In addition, PFSA offers a 25% price preference and prepayment of 30% of the tender value to manufacturers operating in Ethiopia that have been awarded a contract by PFSA.

 

2. How is the registration process for companies that manufacture locally Vs importers?

Registration is straight forward for local manufacturers, taking a maximum of 2 months. Pharma companies are further advised to set up their manufacturing plants in Industrial Parks where they can have faster registration, better services and necessary infrastructure. The GoE is keen to work with other governments to facilitate and improve its quality and regulatory process.

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1. What policies are in place to facilitate the import of inputs?

First, firms in industrial parks are allowed to import inputs on a duty-free basis. In addition, investors located in the park will benefit from a streamlined customs clearance procedure.

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What is the cost of electricity?

The recent progressive increment of power tariff rate will increase production cost for high power users in industrial parks,

 

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1. What are the wages for different types of workers in the pharmaceutical manufacturing sector?

Wages for different categories of workers in the pharmaceutical manufacturing sector are approximately as follows:

  • Laborers: 60-90 USD/month
  • Operators: 90-130 USD/month
  • Professionals (pharmacists, chemists, biologists, accountants, etc.): 200-450 USD/month
  • Middle managers: 450-650 USD/month
  • Managers: 850-2200 USD/month

 

2. Are there any support measures related to the hiring of expat employees?

Yes, there are several support measures related to the hiring of expat employees:

  • Up to 5 years of personal income tax exemption for expat employees not working in R&D
  • Up to 10 years of personal income tax exemption and a 10-year residence permit for expat employees working in R&D
  • Import of personal effects by expat employees are exempted from duties and other charges
  • Simplified access to long-term employment visas and work permits
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1. What is the policy related to foreign investors accessing domestic sources of capital to meet their financing needs?

As much as possible, the Government of Ethiopia recommends that foreign investors use foreign sources of capital to meet their financing needs. Foreign investors can source a portion of the capital that they require through the Development Bank of Ethiopia, but the Government of Ethiopia prefers that they do so only in the most pressing cases.

 

2. What is the policy related to depreciation?

The depreciation rate differs based on the type of good and the depreciation method (straight-line or declining). Details can be found in the Council of Ministers Federal Income Tax Regulations (No.410/2017), which can be accessed at this link: http://www.erca.gov.et/images/Documents/Regulation/Domestic_Tax_Regulations/Income_Tax_Regulations_compressed.pdf.  (The English version starts on page 36.)

 

3. What is the policy related to offering dividends to foreign investors?

After payment of all applicable taxes, repatriation of dividends with convertible currency is guaranteed for all foreign investors.

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1. Are there any local contractors that can build clean rooms up to GMP standards?

Yes, there are contractors (e.g. CCECC, CCCC) that have substantial experience with industrial park development in Ethiopia. Companies should approach these contractors to discuss their experience in building GMP-qualified clean rooms.

 

2. Is there guidance on local GMP construction standards? 

Yes, the Ethiopian GMP guidelines for pharmaceutical products can be found at this link: http://apps.who.int/medicinedocs/documents/s22357en/s22357en.pdf.

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1. What is the prospect of manufacturing in Ethiopia and accessing the African market?

Africa represents a frontier pharmaceutical market valued at >$25B with a high potential for growth. With regards to regional markets COMESA is having discussions to allow easing registration process, while both EAC and COMESA are working on regulatory harmonization. As Ethiopia is a signing party of the Continental Free Trade Agreement better opportunities will be available for local manufacturers to access the African market.

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