Addis Ababa

February, 1998


In mid-1991 the previous military regime ended, and a new government was installed. At that time, the economy was to a large extent under the dominance of the state which controlled both product and factor markets, and owned a large part of the modern sector of the economy. There were severe price distortions of foreign exchange and interest rates as well as of goods and services. Since then, the focus of economic policy has been to switch from a command to a market economy and progressively integrate Ethiopia into the world market.

The first task was to dismantle the legal restrictions on private investment and withdraw the state from controlling prices and markets. To this end, domestic and external trade were liberalized, state monopolies were abolished, and, at the same time, public enterprises were made autonomous in terms of management and finance, cut off from budgetary support, and made subject to eventual divestiture. Simultaneously, integration with the global market was initiated through reduction of import tariffs and devaluation of the Birr (Ethiopia's currency). The maximum tariff rate was reduced from 230 to 80 per cent, while the Birr was devalued by 142 per cent against the US dollar. These measures changed the course of the economy within a relatively short period of about two years, between mid-1991 and 1993, bringing into operation market forces and removing substantially price distortions.

In subsequent years, the establishment of a market economy and integration with the world market was further reinforced. The foreign exchange auction market for import of goods was fully deregulated, and the auction itself was held more frequently, changing from biweekly to weekly. Availability of foreign exchange for payments of invisibles, such as business travel and medical treatment abroad, was also increased. Import tariffs were further reduced from a maximum of 80 to 50 per cent; the average rate being presently 24.5 per cent. Price controls which remained on a few essential goods were lifted, thereby virtually completing the deregulation of prices of goods and services. In addition, petroleum prices were made periodically adjustable to reflect changes in world price. Pan-territorial pricing of fertilizer was terminated as was fertilizer subsidy. Tariffs of electricity and water were adjusted upwards, the former being scheduled to cover costs fully and allow a profit margin in the coming few years. Telecommunications, on the other hand, continues to be operated on profit basis.

Privatization gathered momentum after an initial phase of preparation. Given the underdevelopment of the economy, there are only about 200 state-owned enterprises to be privatized including factories, state farms, hotels, construction firms, transport corporations, wholesale marketing firms, and small retail outlets and restaurants. State-owned marketing enterprises lost their monopoly with the removal of entry barriers for private firms, and shrank due to both deliberate down-sizing and competition, while insolvent enterprises that could not be resuscitated were allowed to go bankrupt. Retail shops, restaurants, a few factories and hotels have been privatized. Several other enterprises have also been offered for sale.

Currently, the main focus of the on-going economic reform is the widening of the scope of foreign investment to include telecommunications and electricity generation, complete the liberalization of the current account, and the deregulation of interest rates side by side with the creation of securities market. In keeping with the objective of progressively liberalizing the foreign trade regime for goods and services, payments on invisible trade are expected to be deregulated fully by the end of 1990s. This will enable Ethiopia to attain current account convertibility. At the same time, the maximum tariff on imports will be reduced and the average rate lowered to 19.5 per cent.

To summarize, a transition from a command to a market economy has been made. There remain, of course, several scores of enterprises in the hands of the state, but essentially due to the process of undertaking privatization itself, rather than lack of readiness to privatize. Perhaps more challenging is the elimination of price controls, removal of subsidies, commercialization of telecommunications and electricity, and convertibility on the current account. In all these areas, the achievement in policy reforms has been remarkable, as Ethiopia has succeeded to establish a market economy, with minimal price distortions and successively decreasing tariff rates, on a sustainable footing.


2.1 Tourist Arrivals

Ethiopia's tourism industry had suffered from the adverse effects of a prolonged civil war, recurrent drought and famine, strained government relations with tourist-generating countries, and restrictions on entry and movements of tourists during the years of the Dergue government from 1974 to 1991.

With the culmination of the civil war and the introduction of new economic policies by the new government, tourism is experiencing a more conducive climate for growth and development as evidenced by statistics compiled by the Ethiopian Tourism Commission.

International tourist arrivals in the year 1997 were 115,000 as compared to 79,000 in 1990, representing a 46% increase since the last full year of the Dergue. In terms of origin, the 1997 figures showed that 36% came from Europe, 33% from Africa, 14% from the Americas and 12% from the Middle East. Analysis of the figures also showed that holiday makers, business travelers and conference participants made up about 60% of all arrivals. The age profiles of arrivals indicate that the economically active age groups of 25 to 44 and 45 to 59, together representing about 76% of total arrivals, are interested in visiting Ethiopia.

The total number of international tourist arrivals in Ethiopia, although growing, is by no means commensurate with the potentials of the country's attractions. The present constraints to growth are identified largely as shortage of tourist facilities and limited promotion.

The main tourist destination at the moment is the northern historic route encompassing Bahir Dar, Gondar, Axum, Makalle and Lalibela. Addis Ababa, the principal gateway to Ethiopia being a business centre and a conference venue as well, is in its own right a major destination.

The other destinations chiefly include the wildlife centres along the Great Rift Valley and the south-west, and the eastern historic area of Harrar.

2.2 Tourist Facilities And Services

a) Accommodation

The stock of hotel rooms in the country has sharply increased over the last few years, with impetus coming from the market-led economic policies and the liberalized investment policy of the present government, which encourage private foreign and domestic entrepreneurial effort. Reasonable tourist accommodation services are already available at all the major attractions, but improvements as well as new constructions are taking place currently in accordance with a newly promulgated classification and standardization system. There are attempts to attract major international hotel chains to the country in addition to the Hilton and the Sheraton that are already in.

The total number of rooms of acceptable standards to international tourists at present is about 3,500, out of which more than 1,300 are owned by the private sector. Virtually all the private sector rooms are results of the new economic policy which put an end to what one might call a state monopoly. Government owned and operated hotels, a legacy of the socialist past, are, under the new government, all slated for privatization, and already quite a number have changed hands.

b) Tour and Travel Operation

Tour operation and travel agency has shown a dramatic growth in the last six years, reaching a record number of 160 firms in 1997. This line of business had been a state monopoly during the previous regime.

c) Transportation

The chief mode of travel to Ethiopia for tourists is by air, and the main carrier is the Ethiopian Airlines, which deservedly has a fine reputation for service. Major international carriers such as the Lufthansa, Alitalia and Saudia also land at Addis Ababa, the principal gateway to Ethiopia. Several other airlines are at various degrees of negotiation to fly to Ethiopia.

Domestic air travel service is rendered mainly by the Ethiopian Airlines using Boeing and Fokker jets as well as smaller aircrafts. Competition in domestic service has been ushered in recently with the commencement of operation of a private firm. Land transport is generally used for short haul in the locality of the tourist attractions.

d) Tourism Facilitation Measures

Having identified major constraints relating to visa and customs regulations and banking services, the Federal Government has taken liberalizing steps which will help facilitate tourism trade. One would also note that the regional tourism bureaux set up in all the nine regions of the country would in no small measure facilitate tourism in the coming years.

The Ethiopian Tourism Commission, which closely works with the regional bureaux, tour operators' association, and hotel association has a pivotal role in bringing together the private sector and government regulatory authorities in the service of tourism.

2.3 Infrastructure

Ethiopia's tourism sector is poised to benefit from a programme of upgrading, expansion and new construction of airports, road and communication networks, electric power generation, and water works, the implementation of which is currently underway in various parts of the country. The airport improvements at Lalibela, Axum, Gondar, Bahir Dar, Makalle, Arba Minich and Dire Dawa are soon to be followed by a major expansion and modernization of the international airport at Addis Ababa. Road rehabilitation, upgrading and new construction is an area of infrastructural development vigorously embarked upon, involving in its present phase 6,000 Km. of trunk roads. These and other infrastructural improvements are financed from internal sources and external sources including the World Bank.

2.4 Manpower

The country has a thin layer of professional and skilled manpower and a large pool of trainable manpower with a strong cultural disposition for warm hospitality to guests. But in the competitive world of tourism, manpower training has become extremely important. The Ethiopian Tourism Commission has therefore completed the preparation of a plan to double the intake capacity of its training institute, and integrate with the institute a model hotel granted by the government in order to facilitate practical training.


3.1 Introduction

As a land of multiple tourist attractions and a visitor friendly people which is conscious of its historical heritage, Ethiopia is truly a country of great tourism potential. It was this recognition of a great potential that encouraged Ethiopia in the ninteen- sixties to start a tourism industry. After an initial period of rapid growth, the industry underwent a fast decline and virtual stagnation for many years due to the revolution that brought the military to power in 1974, the consequent turmoil, and recurrent drought and famines.

During the last six years, however, tourism has once again emerged as a growth industry taking advantage of the current peace and stability in the country and the liberalized economic policy of the new government. Ethiopia can now look forward to increasing its share of the world's tourism market which is registering a faster world-wide growth than most other industries. Ethiopia's nearly ideal location on the African continent and its relative proximity to the Middle East and Europe can add to the comparative advantage which its numerous and varied attractions bestow on it.

3.2 Tourist Attractions

In its considerably vast area (1,112,000 sq.Km.), Ethiopia possesses numerous tourist attractions varied in type and appealing to a wide range of interests. The attractions include historical, cultural, archaeological, anthropological, scenic, climatic, therapeutic, and wildlife resources. Such a unique combination of attractions within a single country has no match on the African continent, or rarely any where else.

The ancient city of Axum once the centre of a powerful empire, is still graced with magnificent obelisks that are millenia old but seem to anticipate modern sky scrapers in design. Other monuments and ruins of ancient palaces and temples abound in the city and its vicinity. In addition to being perhaps the most important spiritual centre of Orthodox Christianity in Ethiopia, Axum has the distinction of being the last repository of the much reverred Biblical ARK of The covenant.

The medieval city of Lalibela, a holy city to Ethiopian Christians, is to the traveler an architectural marvel. Here stand some of the World's most wonderful churches hand-carved out of monolithic rocks and mountain sides, complete with columns, arches, inner sanctums, niches, windows, passages and drainages. Rock churches also abound in other parts of Ethiopia's north, particularly in the Lasta and Tigrai regions.

The Islamic world credits Ethiopia as being the land of sanctuary for the prophet Mohammed's first Arab followers, who had to flee from their country due to persecution. The Al Negashi Mosque at Wukro is today a reminder of that Mohammedan sojourn and religious tolerance in Ethiopia.

Ethiopia's 17th century capital city, Gondar, with its imposing castles; the island monasteries of Lake Tana and their centuries-old mural paintings; and the mysterious carved stone monuments of Tia in the central region form some of the historic attractions of the country. The walled city of Harar in the east with its numerous mosques and shrines of venerable age, narrow winding streets, traditional architecture and interior decoration, and a glorious past as an important centre of caravan trade and Islamic culture in Ethiopia is yet another attraction.

Anthropological finds such as the 3.5 million-year-old skeleton of "Lucy" or Austrolopithecus Afarensis at Hadar, the 4.4 million-year-old remains of Homo Ramides Afarensis which is considered to be man's anthropoid ancestor, and the earliest hand tools of humans unearthed in the Omo valley attest to the fact that Ethiopia was a cradle of mankind. These discoveries appeal not only to the specialists, but also to all those interested in the early beginnings of humans and their civilization.

Ethiopia is sometimes referred to as a mosaic of peoples and cultures due to its ethnic diversity. More than 80 languages are spoken and two of the world's major religions (Christianity and Islam) plus a number of some other less-known faiths are followed, resulting in rich and varied cultures. Religious and other cultural festivals, with roots in the distant past, are very colorful and still continue to form an important part of communal life.

The physical features of the country are very remarkable for they incorporate high plateaux, long mountain ranges, lofty peaks, deep gorges, the largest cave in Africa (Sof Omar), the lowest depression on Earth (Dallol), the Great Rift Valley, savannah land, tropical forests, deserts, beautiful lakes, including Lake Tana - the source of the Blue Nile, spectacular waterfalls, and volcanic hot springs.

Though situated not far from the equator, much of the land has a climate tempered by high altitude. Ethiopia's tourism slogan "Thirteen Months of Sunshine" partly arises from the idyllic year-round, spring-like climate of most regions of the country.

The wildlife resources of Ethiopia entitle it to a share in Africa's reputation in that regard. Virtually all types of Africa's big game can be found in Ethiopia in their natural states and habitats. Out of the 845 species of birds and 260 species of mammals registered in Ethiopia, as high as 49 are endemic animals. Ten national parks, 13 wildlife reserves and sanctuaries, and 18 controlled hunting areas have been established in order to protect these resources of the country.

Not all of Ethiopia's attractions are very widely known, but some are quite famous. Indeed, eight national attractions have been recognized by UNESCO as world heritage: Axum's obelisks, Gondar's castles, the island monasteries on Lake Tana, Hadar (where Lucy was discovered), Tia's carved standing stones, the walls of Harar, and the Semien National Park.

3.3 Type of Tourism offered by Ethiopia

Ethiopia's wealth of varied attractions gives it a great potential for cultural and educational tourism, photo safaris, hunting safaris, bird watching, water sports including river rafting, desert trekking, mountain camping and other forms of eco-tourism. Health tourism, on account of the cool climate of most regions of the country and the numerous hot springs in many volcanic areas, is an additional type of tourism with great potential.

Conference tourism, long aided by the presence of a number of international organizations in Addis Ababa including the headquarters of the Organization for African Unity and the Economic Commission for Africa (ECA), is poised to gain greater significance as a consequence of the newly built ultra-modern facilities at the ECA and the Sheraton Addis.

3.4 Types of Tourists Encouraged

Ethiopia's policy welcomes all tourists, without regard as to national origin, creed, colour or economic standing. However, in light of the tourist facilities available at present and the probable carrying capacities of some of the well known attractions, much promotion is aimed at the moment at the rather affluent market. Future developments and promotions will include a wider spectrum of the international market.


Quite a number of studies have been conducted on tourism development, the latest of which is The National Tourism Development Plan conducted in two phases by Tourconsult International S.A of Italy. The first phase of the study was conducted in 1990 dealing with the southern region of Ethiopia and the second phase, which was completed in 1995, dominantly dealt with western, eastern and northern regions, thus complementing the 1990 National Tourism Development Plan. As reconfirmed in this study, the country possesses a variety of tourist attractions and offers numerous sites for the development of tourism.

The northern tourist circuit known as the "Historic Route" comprises the most important tourist sites such as Bahir Dar, the Blue Nile Falls, Lake Tana and its island monasteries, Gondar, the Simien National Park, Axum, Yeha, Debre Damo, Adigrat, Makalle, Lake Hayk, Lalibela, Dessie and Bati Market. The tourist attractions in these sites have been relatively well promoted since the 1960s, and many tour operators in Europe and North America have included them in their offers. However, shortage of adequate accommodation establishments and related facilities for sports, recreation and entertainment have seriously affected the growth of tourism in the area.

The southern, eastern and south western parts of the country are also endowed with natural and cultural attractions. The Great Rift Valley with its seven beautiful lakes, numerous hot springs and a variety of wildlife, offers great potentials for the development of tourism. But inadequacy of accommodation and other related facilities have become serious obstacles to the growth of tourism in the areas . The National Tourism Development Plan has, therefore, identified various sites for short and long term development. Of these, the following sites have been identified as potentially attractive to foreign investors.

  1. Shalla-Abiyata Development Project

The Shalla-Abiyata Lakes National Park is found 200 kms south of Addis Ababa in the Great Rift Valley. Abiyata Lake is well known for its aquatic bird life. Thousands of Asiatic and European birds migrate to Abiyata's shore during the northern winter. Lake Shala islands are breeding places of most species of Abiyata birds. The Lake is also known for its hot springs.

The objective of the Project is to diversify the tourist supply base of the country by developing natural tourist sites, up to now dominated by historic tourist attractions. The Project foresees to establish the necessary infrastructure including a hotel, camping sites, and thermal and mud baths.

  1. Awash National Park Lodge

Awash National Park is some 225 kms due east of Addis Ababa and is located in the northern edges of the Great Rift Valley. The Park encompasses 46 types of mammals such as lions, cheetah and leopard as well as aquatic animals such as hippopotamus and crocodiles. Also over 400 different species of birds have been recorded in the Park.

The proposed lodge will afford facilities for tourists interested in observing or hunting wild life, and in enjoying the spa water found in the Park.

  1. Semien Mountains National Park Lodge

The Semien Mountains National Park is a sanctuary of the rarest animals and plants and is a centre for observation and trekking. The proposed Lodge which will be located close to the foot of the Mountains is meant to ease the burden of tourists visiting the Park.

  1. Sof-Omar Cave Development Project

The Sof-Omar Cave is a complex system of large and small passages, halls and grottoes, formed by Web river, one of the main tributaries of Wabe Shebelle river. Despite its immense touristic value, the Cave has so far remained inaccessible to tourists due to lack of roads and electrification both inside and outside the Cave. The objective of the Project is to develop tourist infrastructure at the Cave to make it a regular tourist destination. The infrastructure will include a road inside and outside the Cave, electric lighting of the underground tourist path having a length of around 1.2 kms, and a tourist facility centre comprising a lodge and a restaurant.

  1. Hotels along the "Historic Route"

The "Historic Route" has always been on the top of the list of tourist destinations in Ethiopia. However, shortage of adequate accommodation, recreation and entertainment facilities has seriously affected the growth of tourism in the area. Three hotels are proposed to be set up at Bahir Dar, Lalibela and Makalle, respectively, where the problem is more acutely felt.

Table of Contents

1. Overview of Economic Policy
2. Background to the Tourism Sector
2.1 Tourist Arrivals
2.2 Tourist Facilities and Services
3. Ethiopia's Tourism Potential
3.1 Introduction
3.2 Tourist Attractions
3.3 Type of Tourism Offered by Ethiopia
3.4 Types of Tourists Encouraged
4. Potential Areas of Investment