Ethiopia: Attracting Many More Investors in Forestry

Posted on :Wednesday , 12th October 2016

Forestry investment is one of the untapped investment opportunities in Ethiopia. Obviously, investment in forestry could yield attractive returns to all actors and contribute substantially to the economic, social and environmental development of countries.

Yes, in line with the existing core values of nurturing and caring for forest ,environmentally and socially conscious investors are actively exploring the "ins and outs" of forestry opportunities as they are motivated by opportunities that are profitable.

Forestry, as an investment, offers a number of unique advantages. It has low risk, less and volatility than other assets. On the other hand it becomes a land based asset and it affords capital appreciation even in recession, competitive returns, timing of harvest flexible.

Even if investing in the forestry sector is said to be lucrative for many reasons, nation 's private investors involvement is minimal, for various underlying reasons. A number of documents from the various states confirm that the sector has not been fully tapped and at the same time there is evidences of market inefficiencies, that is there is a demand and supply imbalance of pulp. With all these potentials, the sector was not be well introduced or communicated to potential investors across the board.

According to the Ethiopian Privatization Agency EPA, an estimated of 2.5 million hectares of natural forest presently remains in 58 designated National Forest Priority Areas (NFPA). Of these, 13 are managed under integrated forest management systems, with about 80,000 hectares of industrial forest having been established for limited sustainable exploitation.

Moreover, nation has two forestry enterprises in Amhara and Oromia States. These enterprises have been playing a pivotal role in the mass seedling plantation campaigns. But, there are insignificant number of privatly owned forestry companies in Ethiopia . Therefore, enhancing participation of private investors in such sector needs special attention than never before. Investors need to be welcomed to invest in integrated commercial production of structural timber, pulp-wood, match wood or even fuel wood.

In fact, the demand increment of industrial and construction woods is growing sharply. This is because there is a big demand of paper, pulp, utility poles for electric poles as well as housing, and furniture in the world.

The engagement of private sector in Ethiopia's forestry is insignificant. But Ethiopia's forest sector provides untapped business opportunities. The demand for wood based forest products is growing. From 300,000 to 400,000 hectare of industrial plantation is required in the next two decades. There are favorable incentives and government give support to attract private investors.

The existing incentives in the Forestry sector for Private sector actors should be clearly and boldly told to private investors. For instance, the Tax exemption Investment projects in forestry development are exempted from income tax for up to 9 years depending on locations.

To meet the demand, participation of all stakeholders ,the Ministries of Ethiopian Investment, Agriculture, Environment, Forest and Climate Change as well as the media outlets need to work together in terms of attracting many more private investors to the lucrative forestry investment.

Yes, an investment opportunity occurs when rising demand for a commodity is matched by a falling supply. The private investors should be well informed in a bid to win their minds and hearts as well as profit margin.

In all, institutions and experts in charge of the subject as well as international institutions should come to the consent that forestry investment is now a proven asset opportunity for investment and is widely acknowledged as a stable element of investment portfolios adding diversity and reliability.

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