conducive investment climate in ethiopia

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Conducive investment climate in ethiopia

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On the economic front, the new administration is working to partially or wholly privatize major state-owned enterprises SOEs in the telecom, aviation, power, sugar, railway, and industrial parks sectors. In addition, the Government of Ethiopia GOE lifted a restriction on the logistics sector and enacted a law that allows Public Private Partnerships PPP to gradually open up some sectors of the economy to foreign investors.

Furthermore, the country recently ratified the African Continental Free Trade Area Agreement and eased visa requirements for African Union member countries with the goal of enhancing regional trade and tourism and attracting foreign direct investment FDI. The GOE announced its commitment to modernize the financial sector, improve the ease of doing business, and enhance macroeconomic and fiscal management.

Coming off a decade of double-digit growth, fueled primarily by public infrastructure projects funded through debt, the GOE has tightened its belt, reducing inefficient government expenditures, putting a moratorium on most new government mega-projects, and attempting to get its accounts in order at bloated state-owned enterprises SOEs. The IMF put the growth of the Ethiopian economy at 7.

Ethiopia is the second most populous country in Africa after Nigeria, with a population of over million, approximately two-thirds of whom are under age Low-cost labor, a national airline with passenger connections, and growing consumer markets are key elements attracting foreign investment. Distressingly, export performance remains weak, declining due to falling primary commodity prices and an overvalued exchange rate.

The acute foreign exchange shortage the Ethiopian birr is not a freely convertible currency and the absence of capital markets are choking private sector growth. Companies often face long lead-times importing goods and dispatching exports due to logistical bottlenecks, high land-transportation costs, and bureaucratic delays. Ethiopia is not a signatory of major intellectual property rights treaties.

Successful investors in Ethiopia conduct thorough due diligence on land titles at both the state and federal levels, and undertake consultations with local communities regarding the proposed use of the land. Political instability associated with various ethnic conflicts could negatively impact the investment climate and lower future FDI inflow.

The plan also sets concrete targets to raise credit available to the private sector by 20 percent per year and encourages increased private sector participation in several sectors, including power generation and logistics. The government is currently undertaking changes in legislation and institutions to implement the economic reforms laid out in the dashboard. In addition, Ethiopia has started implementing a Public Private Partnership PPP proclamation, equivalent to a law, which would permit foreign investment and ownership of public infrastructure, with an initial focus on power generation and road construction.

Given the scale of investment required to achieve the goal of becoming a middle income economy by and the announcement of new economic reforms, the country needs significant inflows of FDI. The GOE has taken concrete measures to open up closed sectors, including drafting a bill to open the aviation sector, drafting legislation to create a new telecommunications regulator and allow foreign investment in that sector, allow minority stakes in joint-ventures by foreign logistics companies, allowing Ethiopian diaspora to hold shares in private Ethiopian banks, and commissioning a study to advise on how best to open up the financial sector.

As part of its ongoing economic reform efforts, the government is in the process of revising the investment code. Foreigners of Ethiopian origin can obtain a resident card from the Ministry of Foreign Affairs that allows them to invest in many sectors closed to other foreigners. While foreign firms cannot engage in joint ventures in closed sectors, they are allowed to supply goods and services to Ethiopian firms in these sectors.

In addition, the EIC has the mandate to advise the government on policies to improve the investment climate. At the local level, regional investment agencies facilitate regional investment. Progress was primarily in the area of reducing barriers to starting a new business by removing competence certificate for certain businesses; reducing the time it takes to obtain planning consent for construction permits; and, establishing specialized benches to resolve commercial cases addressing contract enforcement.

AmCham has provided a mechanism to compete with investors from India, China, the U. K, and the Netherlands, who meet regularly with government officials through their respective associations to discuss issues that hinder their operation in Ethiopia. The Addis Ababa Chamber of Commerce also organizes a monthly business forum, which enables the business community to discuss issues related to the investment climate with government officials by sector.

Foreign and domestic private entities have the right to establish, acquire, own, and dispose of most forms of business enterprises. However, there are sectors mentioned above that are closed to foreign investors. There is no private ownership of land. All land is owned by the state, but can be leased for up to 99 years. Small-scale rural landholders have indefinite use rights, but cannot lease out holdings for extended periods, except in the Amhara Region. The Urban Land Lease Proclamation allows the government to determine the value of land in transfers of leasehold rights, in an attempt to curb speculation by investors.

A foreign investor intending to buy an existing private enterprise or buy shares in an existing enterprise needs to obtain prior approval from the EIC. While foreign investors have complained about inconsistent interpretation of the regulations governing investment registration particularly relating to accounting for in-kind investments , they generally do not face undue screening of FDI, unfavorable tax treatment, denial of licenses, discriminatory import or export policies, or inequitable tariff and non-tariff barriers.

Over the past four years, the EIC has undertaken an independent review of its investor services in an effort to streamline the investment process. According to the EIC, the Commission has already implemented at least 28 services pertaining to licensing and registration, and duty-free importation of capital goods for investment in manufacturing.

The EIC has established a one-stop shop service to cut the time and cost of acquiring investment and business licenses. If all requirements are met, it is now possible to obtain a business license in a single day, although this remains the exception rather than the rule.

Meanwhile, the EIC has adopted a Customer or Account Manager system to build lasting relationships and provide post-investment assistance to investors. The EIC readily admits that many bureaucratic barriers to investment remain, but hopes to eliminate many of these in the future.

The agreement will help Ethiopia secure an additional logistical gateway for its increasing import and export trade. Following the July rapprochement with Eritrea, the Ethiopian government has investigated the opportunity of accessing an alternative port at either Massawa or Asseb. The Government of Ethiopia is working to improve business facilitation services by making the licensing and registration process easier and faster, by registering foreign Chambers and business associations in Ethiopia to advocate for their respective country businesses.

Though the government is taking positive steps to socially empower women half of the new cabinet are women , there is no special treatment provided to those who wish to engage in business. Online business registration is not yet available, but the Ministry of Trade and Industry claims to have plans to migrate the paper-based registration process to a digital system at some unnamed time in the future. In , the government revised its commercial registration and business licensing legislation, which eliminated some cumbersome and duplicative requirements, such as the yearly renewal of business registrations and the 15, ETB approximately USD minimum capital requirements to set up limited liability companies.

In the government removed the need to obtain a certificate of competence for certain types of businesses, made the process of obtaining construction permits faster by reducing the time to obtain planning consent, and made enforcing contracts easier by establishing specialized benches to resolve commercial cases.

Ethiopia signed a protection of investment and property acquisition agreement with Djibouti. A Treaty of Amity and Economic Relations, which entered into force in , governs economic and consular relations with the United States. The body has introduced a 10 percent tariff reduction on goods imported from member states. In Ethiopia ratified the African Continental Free Trade Area AfCFTA Agreement, which aims to create a single continental market for goods and services, with free movement of business persons and investments, to pave the way for accelerating the establishment of the Continental Customs Union and the African customs union.

Ethiopia is the 21 st country to sign the agreement, with just one more country needing to ratify to make AfCFTA operational. There is no double taxation treaty between the United States and Ethiopia. Investment decisions can involve multiple government ministries lengthening the registration and investment process. The Constitution is the highest law of the country. The Parliament enacts proclamations, which are followed by regulations that are passed by the Council of Ministers, and implementing directives that are passed by ministries or agencies.

The government engages the public for feedback before passage of draft legislation through public meetings, and regulatory agencies request comments on proposed regulations from stakeholders. Ministries or regulatory agencies do neither impact assessment for proposed regulations nor ex-post reviews.

Parties that are affected by an adopted regulation can request reconsideration or appeal to the relevant administrative agency or court. But there is no requirement to periodically review regulations to see whether they are still needed or should be revised. Legal matters related to the federal government are entertained by Federal Courts while state matters go to state courts.

To ensure consistency of legal interpretation and promote predictability of courts, the Federal Supreme Court Cassation Division is empowered to give binding legal interpretation on all federal and state matters. Regulations related to human health and environmental pollution are often enforced. In January , the Federal and Oromia State Environment, Forest and Climate Changes Commissions shut down three tanneries in Oromia state for what was said to be repeated environmental pollution offenses.

The government also suspended the business license of MIDROC Gold Mine in May following weeks of protests by local communities who accused the company of causing health and environmental hazard in the Oromia regional state. The government released its five year public finance administration strategic plan in March , mapping out reforms in government revenue and expenditure forecasting, government accounts management, internal audit, public procurement administration, public debt management, and public financial transparency and accountability.

The directive mandates that all public institutions report their budgetary performance and financial accounts in platforms that are accessible to the wider public in a timely manner. It also makes the MOF responsible for disseminating a regular and detailed physical and financial performance evaluation of large publically-funded projects.

The directive further outlines a clear timeline for the publication of each major piece of budgetary information, such as the pre-budget macroeconomic and fiscal framework, the enacted budget, quarterly execution reports, annual execution reports, and the annual audit report.

ACFTA aims to create a single, continental market for goods and services, with free movement of business persons and investments. Ethiopia is also a member of Common Market for Eastern and Southern Africa COMESA , a regional economic block, which has 21 member countries and has introduced a 10 percent tariff reduction on goods imported from member states.

Ethiopia resumed the WTO accession process in , which began in , with the goal of acceding in Ethiopian standards, however, have a national scope and applicability and some of them, particularly those related to human health and environmental protection, are mandatory. The Ethiopian Standards Agency is the national standards body of Ethiopia. Ethiopia has codified criminal and civil laws, including commercial and contractual law.

According to the contractual law, a contract agreement is binding between contracting parties. Disputes between the parties can be taken to the court. There are, however, no specialized courts for commercial law cases, although there are specialized benches both at the federal and state courts. While there have been allegations of executive branch interference in judiciary cases with political implications, there is no evidence of interference in purely commercial disputes. The country has a procedural code for civil and criminal court but the practice is minimal.

Enforcement actions are appealable and there are at least three appeal processes from the lower courts to the Supreme Court. The Criminal Procedure Code follows the inquisitorial system of adjudication. Companies that operate businesses in Ethiopia assert that courts lack adequate experience and staffing, particularly with respect to commercial disputes. While property and contractual rights are recognized, judges often lack understanding of commercial matters, including bankruptcy and contractual disputes.

In addition, cases often face extended scheduling delays. Contract enforcement remains weak, though Ethiopian courts will at times reject spurious litigation aimed at contesting legitimate tenders. Ethiopia is in the process of reforming the Commercial Code to bring it in line with international best practices.

The draft legislation appears to address many concerns raised by the business community, including the creation of a commercial court under the regular court system to improve the expertise of judges as well as increase the speed with which commercial disputes can be resolved. These laws instituted the opening of economic sectors to FDI, the requirements for FDI registration, and the investment incentives that are available to investors.

The following industrial sectors have been designated investment priorities: textiles and garments, leather and leather products, sugar and sugar-related products, cement, metals and engineering, chemicals, pharmaceuticals, renewable energy, and agro-processing. The amendment to the Investment Proclamation authorizes the EIC to adjudicate appeals submitted by foreign and domestic investors. The EIC Investment Board is empowered to authorize the granting of new or additional incentives other than those outlined under the regulations and to authorize foreign investment in areas otherwise exclusively reserved for domestic investors, if the exception is in the national interest.

The revised Commercial Registration and Business Licensing Proclamation eliminated some cumbersome and duplicative requirements, including the yearly renewal of business registrations and the minimum capital requirements to set up limited liability companies, and requires a competency certificate in sectors such as health, security and environment. The Proclamation allows registration of franchises and holding companies.

It has an administrative tribunal with a jurisdiction on matters pertaining to market competition and consumer protection. The authority also annually entertains many cases associated with consumer protection and unfair trade practices.

There are no restrictions for foreign companies or foreign-owned subsidiaries in the areas open to foreign investments. The EIC reviews investment transactions for compliance with FDI requirements and restrictions as outlined by the Investment Proclamation and its amendments. Nonetheless, companies have complained that SOEs receive favorable treatment in the government tender process. Per the Investment Proclamation, no investment by a domestic or foreign investor or enterprise can be expropriated or nationalized, wholly or partially, except when required by public interest in compliance with the law and with payment of adequate compensation.

Such investments may not be seized, impounded, or disposed of except under a court order. The former Derg military regime nationalized many properties in the s. In most cases, property seized by oral order or other informal means is gradually being returned to the rightful owners or their heirs through a lengthy bureaucratic process. Claimants are required to pay for improvements made by the government during the time it controlled the property. Public Enterprises, Assets, and Administration stopped accepting requests from owners for return of expropriated properties in July of According to local and foreign businesses operating in the Oromia region, there have been a number of isolated incidents threatening investors in the region.

Various pretexts have been used to close down legitimate operations. Regional officials, however, deny any systematic attack on investors and have repeatedly provided assurance that all legitimate investors will be protected. Meanwhile, other investors who have invested heavily in government and community relations and actively engaged local and regional officials have prospered.

The experience of investors is overall uneven and clear trends are not evident. While disputes can be resolved by international arbitration if both parties agree, enforcement of an arbitration decision is contingent on the Ethiopian court system.

However, if a dispute arises between foreign investors and the state, it will be settled based on the relevant bilateral investment treaty. Due to an overloaded court system, dispute resolution can last for years. International Commercial Arbitration and Foreign Courts.

Arbitration has become a widely used means of dispute settlement among the business community as Ethiopian civil code recognizes Alternative Dispute Resolution ADR mechanisms as means of dispute resolution. However, there is no guarantee that the award of an international arbitral tribunal will be accepted and implemented by Ethiopian authorities. Ethiopia is not a party to the Convention on the Recognition and Enforcement of Arbitral Awards, which creates uncertainty for potential investors and serves as disincentive to invest.

The primary purpose of the law is to protect creditors, equity shareholders, and other contractors. Bankruptcy is not criminalized. In practice, there is limited application of bankruptcy procedures due to lack of knowledge on the part of the private sector.

According to the World Bank Doing Business Report, Ethiopia stands at in the ranking of economies with respect to resolving insolvency. Note: The index ranges from zero to 16, with higher values indicating insolvency legislation that is better designed for rehabilitating viable firms and liquidating nonviable ones.

New investors in manufacturing, agro-processing, and selected agricultural products are entitled to income tax exemption ranging from two to five years depending on the location of the investment. Any investor who produces for export or supplies to an exporter, or who exports at least 60 percent of his products or services, is entitled to an additional two years of income tax exemption.

An investor who establishes a new enterprise in less prosperous areas shall be entitled to an income tax deduction of 30 percent for three consecutive years after the expiry of the regular income tax exemption period. Ethiopian investment laws provide protection and guarantees to local and foreign investors. The law designates industrial parks as duty-free zones, and domestic as well as foreign operators in the parks are exempt from income tax for up to 10 years.

Investors operating in parks are also exempt from duties and other taxes on the import of capital goods, construction materials, and raw materials for production of export commodities and vehicles. An investor who operates in a designated Industrial Development Zone in or near Addis Ababa is entitled to two years of income tax exemptions, and four more years income tax exemption if the investment is made in an industrial park in other areas, provided 80 percent or more of production is for export or constitutes input for an exporter.

Industrial Parks can be developed by either government or private developers. In practice, the majority have been developed by the Ethiopian government with Chinese financing. The government has announced plans to construct a total of 17 industrial parks in various locations around the country. Ethiopia does not formally impose performance requirements on foreign investors, though investors in Ethiopia routinely encounter business visa delays and onerous paperwork requirements.

In addition, investors are required to allocate a minimum capital of USD , per project. For joint investments with a domestic partner, the investment requirement is lowered to USD , There are no forced localization or data storage requirements for private investors. Local content in terms of hiring, products, and services is strongly encouraged but not required. The Department for Immigration and Nationality Affairs issues residence permits for those with investment permits. The government also provides multiple entry five year visas for investors in industrial parks.

An investor can employ qualified expatriate experts necessary to operations, but is responsible for replacing them by local experts within a limited period. Top management positions are exempted from this requirement and ex-patriates can fill these positions indefinitely. EthioTelecom is the sole telecommunications service provider in Ethiopia. In , the government announced plans to liberalize the sector and open the market to foreign service providers.

In February of , the Council of Ministers approved a bill to establish a regulatory agency for communication services that would adequately regulate the telecommunications sector and open it to foreign investment; the bill is awaiting approval by the Parliament. Proclamation No. The constitution recognizes and protects ownership of private property.

Private ownership does not exist, but land-use rights have been registered in most populated areas. As land is public property, it cannot be mortgaged. Confusion with respect to the registration of urban land-use rights, particularly in Addis Ababa, is common. Allegations of corruption in the allocation of urban-land to private investors by government agencies are a major source of popular discontent.

The government retains the right to expropriate land for the common good, which it defines as including expropriation for commercial farms, industrial zones, and infrastructure development. While the government claims to allocate only sparsely settled or empty land to investors, some people have been resettled. In particular, traditional grazing land has often been defined as empty and expropriated, leading to resentment, protests and, in some cases, conflict.

In addition, leasehold regulations vary in form and practice by region. Successful investors in Ethiopia conduct thorough due diligence on land titles at both state and federal levels, and conduct consultations with local communities regarding the proposed use of the land before investing.

We encourage potential investors to ensure their needs are communicated clearly to the host government. The World Bank Doing Business Report has ranked Ethiopia out of economies in registering property, as it take on average 52 days to register property.

To meet this objective, EIPO is drafting a ratification proclamation. EIPO has been tasked primarily to protect Ethiopian patents and copyrights and to fight pirated software. Generally, EIPO is weak in terms of staff and budget, and it does not have law enforcement authority. Abuse of U. The government does not publicly track counterfeit goods seizures, and no estimates are available. Credit is tight and banks often require percent collateral, making access to credit one of the greatest hindrances on the Ethiopian economy writ large.

A measure requiring non-government banks to invest the equivalent of 27 percent of their loan disbursement portfolio in National Bank of Ethiopia NBE bonds has exacerbated liquidity shortages. The government is drafting legislation to regulate the over-the-counter market for private share companies. It puts external vulnerability, geopolitical risk, continued social unrest, and the vulnerability of its relatively small economy to weather cycles and volatility in coffee and gold prices as the key credit challenges going forward.

The Ethiopian government has announced, as part of the overall economic reform effort, its intention to liberalize the financial sector, to include introducing capital markets, opening the banking sector to foreign companies, expanding credit available to the private sector, enabling a system of e-commerce, and expanding the monetary policy tools available to the NBE. While most outside observers believe that PM Abiy Ahmed and other key economic officials are sincere in their intentions, entrenched interests, low capacity, and financial constraints will likely delay the full implementation of these goals.

The government offers a limited number of day, 3-month, and 6-month Treasury bills, but prohibits the interest rate from exceeding the bank deposit rate. The government began to offer a one-year Treasury bill in , with yields currently below 3 percent.

This market remains unattractive to the private sector and percent of the T-bills are held by public enterprises, primarily the Public Social Security Agency and the Development Bank of Ethiopia. The NBE plans to introduce a market for government securities, corporate bonds, and a stock market. The year bond was oversubscribed, indicating continued market interest in high-growth sub-Saharan African markets.

According to the Ministry of Finance, the bond proceeds are being used to finance industrial parks, the sugar industry, and power transmission infrastructure. Due to an increasing external debt load, the Ethiopian government has committed to refrain from non-concessional financing for new projects and to shift ongoing projects to concessional financing when possible.

The Ethiopian Commodity Exchange ECX , launched in , trades commodities such as coffee, sesame seeds, maize, wheat, mung beans, chickpeas, soybeans, and green beans. The government launched ECX to increase transparency in commodity pricing, alleviate food shortages, and encourage the commercialization of agriculture.

Critics allege that ECX policies and pricing structures are inefficient compared to direct sales at prevailing market rates, triggering an amendment to the ECX law in July , which eliminated a number of criticized regulations, and permitted the trading of financial instruments at a future date. This amendment paves the way for securities markets in the future using the framework of the commodities exchange.

Ethiopia has seventeen commercial banks, two of which are state-owned banks, and fifteen of which are privately owned banks. The Development Bank of Ethiopia, a state-owned bank, provides loans to investors in priority sectors. In September , the NBE raised the minimum paid-up capital required to establish a new bank from ETB 75 million to million, which effectively stopped the entry of most new banks.

Foreign banks are not permitted to provide financial services in Ethiopia; however, since April , Ethiopia has allowed some foreign banks to open liaison offices in Addis Ababa to facilitate credit to companies from their countries of origins. Chinese, German, Kenyan, Turkish, and South African banks have opened liaison offices in Ethiopia, but the market remains completely closed to foreign retail banks.

Based on recently made available data, the state-owned Commercial Bank of Ethiopia mobilizes more than 60 percent of total bank deposits, bank loans, and foreign exchange. Real deposit interest rates have been negative in recent years, mainly due to inflation. All foreign currency transactions must be approved by the NBE. In September , the GOE removed the limit on holding foreign currency accounts faced by non-resident Ethiopians and non-resident foreign nationals of Ethiopian origin.

Foreign exchange reserves were heavily depleted in and have remained at critically low levels since then. Bankruptcy is not criminalized. In practice, there is limited application of bankruptcy procedures due to lack of knowledge on the part of the private sector. According to the World Bank Doing Business Report, Ethiopia stands at in the ranking of economies with respect to resolving insolvency.

Note: The index ranges from zero to 16, with higher values indicating insolvency legislation that is better designed for rehabilitating viable firms and liquidating nonviable ones. Ethiopia is currently drafting updated investment regulations that are expected to outline detailed incentives for investors.

Any investor who produces for export or supplies to an exporter, or who exports at least 60 percent of his products or services, is entitled to an additional two years of income tax exemption. An investor who establishes a new enterprise in less prosperous areas shall be entitled to an income tax deduction of 30 percent for three consecutive years after the expiry of the regular income tax exemption period. The law designates industrial parks as duty-free zones, and domestic as well as foreign operators in the parks are exempt from income tax for up to 10 years.

Investors operating in parks are also exempt from duties and other taxes on the import of capital goods, construction materials, and raw materials for production of export commodities and vehicles. An investor who operates in a designated Industrial Development Zone in or near Addis Ababa is entitled to two years of income tax exemptions, and four more years of income tax exemption if the investment is made in an industrial park in other areas, provided 80 percent or more of production is for export or constitutes input for an exporter.

Industrial Parks can be developed by either government or private developers. In practice, the majority have been developed by the Ethiopian government with Chinese financing. The government has announced plans to construct a total of 17 industrial parks in various locations around the country. The government also has plans for four agro-industrial processing parks to be located at strategic sites across the country, though none have yet been completed.

Ethiopia does not formally impose performance requirements on foreign investors, though investors in Ethiopia routinely encounter business visa delays and onerous paperwork requirements. In addition, investors are required to allocate a minimum of , U. For most joint investments with a domestic partner, the investment requirement is lowered to , U. The minimum capital requirement is waived if the foreign investor reinvests profits or dividends generated from an existing enterprise in any investment area open for foreign investors; and if a foreign investor purchases a portion or the entirety of an existing enterprise owned by another foreign investor.

There are no forced localization or data storage requirements for private investors. Local content in terms of hiring, products, and services is strongly encouraged but not required. The EIC, in collaboration with the Immigration, Nationality and Vital Events Agency, facilitates visas and work permits for investors and expatriate workers. The government typically issues three to five year multiple entry visas for foreign investors, senior management, and board members.

In the absence of qualified local personnel, an investor can employ foreigners in positions of higher management chief executive officer, chief operation officer, and chief financial officer , supervisor, trainers, and other technical professionals. While the investor is in theory supposed to replace expatriates with Ethiopian employees within a limited period of time, in practice many qualified expatriates have worked in Ethiopia for years.

EthioTelecom is the sole telecommunications service provider in Ethiopia. The government in announced plans to liberalize the telecommunications sector and open the market to foreign service providers and foreign telecom infrastructure companies. Ethiopia approved a bill in August of which established a regulatory agency for communication services that will regulate the telecommunications sector and develop rules and guidelines for foreign investment.

The communications regulator has also released three of 12 planned telecommunications directives, which provide detailed regulatory guidance for the liberalization. Proclamation No. Private ownership does not exist, but land-use rights have been registered in most populated areas.

As land is public property, it cannot be mortgaged. Confusion with respect to the registration of urban land-use rights, particularly in Addis Ababa, is common. Allegations of corruption in the allocation of urban land to private investors by government agencies are a major source of popular discontent.

The government retains the right to expropriate land for the common good, which it defines as including expropriation for commercial farms, industrial zones, and infrastructure development. While the government claims to allocate only sparsely settled or empty land to investors, some people have been resettled.

In particular, traditional grazing land has often been defined as empty and expropriated, leading to resentment, protests and, in some cases, conflict. In addition, leasehold regulations vary in form and practice by region. Successful investors in Ethiopia conduct thorough due diligence on land titles at both regional and federal levels, and conduct consultations with local communities regarding the proposed use of the land before investing.

We encourage potential investors to ensure their needs are communicated clearly to the host government. The World Bank Doing Business Report has ranked Ethiopia out of economies in registering property, as it takes on average 52 days to register property. Ethiopia recently ratified the Marrakesh Treaty to facilitate access to published works for persons who are blind, visually impaired, or otherwise print disabled. The government has expressed its intention to accede to the Berne Convention, the Paris Convention, and the Madrid Protocol.

EIPO is primarily tasked with protecting Ethiopian patents and copyrights and fighting software piracy. Historically, however, the EIPO has struggled with a lack of qualified staff and small budgets; further, the institution does not have law enforcement authority. Abuse of U. The government does not publicly track counterfeit goods seizures, and no estimates are available.

Ethiopia has a limited and undeveloped financial sector, and investment is largely closed off to foreign firms. Liquidity at many banks is limited, and commercial banks often require percent collateral, making access to credit one of the greatest hindrances to growth in the country.

In preparation for the program, Ethiopia rescheduled much of its external debt with significant bilateral lenders. The Ethiopian government has announced, as part of its overall economic reform effort, its intention to liberalize the financial sector. The government has already made good progress by allowing non-financial Ethiopian firms to participate in mobile money activities, introducing Treasury-bill auctions with market pricing, and reducing forced lending to the government on the part of the commercial banks.

Still, the creation of a stock market and the fuller participation of foreign financial firms in the sector likely remain years away. The NBE began offering, in December of , a limited number of day and day Treasury bills at market-determined interest rates. Previously, the NBE had only sold Treasury bills at below-market interest rates, and the only buyers were public sector enterprises, primarily the Public Social Security Agency and the Development Bank of Ethiopia.

Ethiopia issued its first Eurobond in December of , raising 1 billion U. The year bond was oversubscribed, indicating continued market interest in high-growth sub-Saharan African markets. According to the Ministry of Finance, the bond proceeds are being used to finance industrial parks, the sugar industry, and power transmission infrastructure.

Due to its increasing external debt load and the terms of its IMF program, the Ethiopian government has committed to refrain from non-concessional financing for new projects and to shift ongoing projects to concessional financing when possible. The Ethiopian Commodity Exchange ECX , launched in , trades commodities such as coffee, sesame seeds, maize, wheat, mung beans, chickpeas, soybeans, and green beans.

The government launched ECX to increase transparency in commodity pricing, alleviate food shortages, and encourage the commercialization of agriculture. Critics allege that ECX policies and pricing structures are inefficient compared to direct sales at prevailing market rates, triggering an amendment to the ECX law in July that eliminated a number of criticized regulations, and permitted the trading of financial instruments at a future date.

Ethiopia has 18 commercial banks, two of which are state-owned banks, and 16 of which are privately owned banks. The Development Bank of Ethiopia, a state-owned bank, provides loans to investors in priority sectors, notably agriculture and manufacturing. By regional standards, the 16 private commercial banks are not large either by total assets or total lending , and their service offerings are not sophisticated.

Mobile money and digital finance, for instance, remain limited in Ethiopia. Foreign banks are not permitted to provide financial services in Ethiopia, however, since April , Ethiopia has allowed some foreign banks to open liaison offices in Addis Ababa to facilitate credit to companies from their countries of origins. Chinese, German, Kenyan, Turkish, and South African banks have opened liaison offices in Ethiopia, but the market remains completely closed to foreign retail banks.

Foreigners of Ethiopian origin are now allowed to hold shares in financial institutions. Based on recently made available data, the state-owned Commercial Bank of Ethiopia mobilizes more than 60 percent of total bank deposits, bank loans, and foreign exchange. Real deposit interest rates have been negative in recent years, mainly due to inflation. All foreign currency transactions must be approved by the NBE.

The GOE removed in September the limit on holding foreign currency accounts faced by non-resident Ethiopians and non-resident foreign nationals of Ethiopian origin. Foreign exchange reserves started to become depleted in and have remained at critically low levels since then.

At present, gross reserves stand at about 4 billion U. According to the IMF, heavy government infrastructure investment, along with debt servicing and a large trade imbalance, have all fueled the intense demand for foreign exchange. In addition, the decrease in foreign exchange reserves has been exacerbated by weaker-than-expected earnings from coffee exports and low international commodity prices for other important exports such as oil seeds. Businesses encounter delays of six months to two years in obtaining foreign exchange, and they must deposit the full equivalent in Ethiopian birr in their accounts to begin the process to obtain foreign exchange.

Slowdowns in manufacturing due to foreign exchange shortages are common, and high-profile local businesses have closed their doors altogether due to the inability to import required goods in a timely fashion. Due to the foreign exchange shortage, companies have experienced delays of up to two years in the repatriation of larger volumes of profits. Local sourcing of inputs and partnering with export-oriented partners are strategies employed by the private sector to address the foreign exchange shortage, but access to foreign exchange remains a problem that limits growth, interferes with maintenance and spare parts replacement, and inhibits imports of adequate raw materials.

The foreign exchange shortage distorts the economy in a number of other ways: it fuels the contraband trade through Somaliland because the Ethiopian birr is an unofficial currency there and can be used for the purchase of products from around the world. Exporters, who have priority access to foreign exchange, sell their allocations to importers at inflated rates, creating a black-market for dollars that is roughly 30 to 40 percent over the official rate.

Other exporters use their foreign exchange earnings to import consumer goods with high margins, rather than re-investing profits in their core businesses. Meanwhile, the lack of access to foreign exchange impacts the ability of American citizens living in Ethiopia to pay their taxes, or for students to pay school fees abroad. The Ethiopian birr has depreciated significantly against the U. The NBE increased the devaluation rate of the Ethiopian birr starting in November of , and it has continued to be devalued at a more rapid rate since that time, as per the terms of the IMF program.

The official exchange rate was approximately The illegal parallel market exchange rate for the same time was approximately 42 Ethiopian birr per dollar. Following the 15 percent devaluation of the Ethiopian birr, the NBE increased the minimum saving interest rate from four percent to seven percent, and limited the outstanding loan growth rate in commercial banks to Moreover, banks were instructed to transfer 30 percent of their foreign exchange earnings to the account of NBE so the regulator can use the foreign exchange to meet the strategic needs of the country, including payments to procure petroleum, wheat, and sugar, as well as to cover transportation costs of imported items.

Ethiopia citizens are not allowed to hold or open an account in foreign exchange. Ethiopian residents entering the country from abroad should declare their foreign currency in excess of 1, U. Residents are not allowed to hold foreign currency for more than 30 days after acquisition.

A maximum of Ethiopian birr in cash can be carried out of the country. Foreign investors may remit proceeds from the sale or liquidation of assets, from the transfer of shares or of partial ownership of an enterprise, and funds required for debt servicing or other international payments. The right of expatriate employees to remit their salaries is granted by NBE foreign exchange regulations. In practice, however, foreign companies and individuals have experienced difficulties obtaining foreign currency to remit dividends, profits, or salaries.

State-owned enterprises SOEs dominate major sectors of the economy. There is a state monopoly or state dominance in telecommunications, power, banking, insurance, air transport, shipping, railway, industrial parks, and petroleum importing.

State-owned enterprises have considerable advantages over private firms, including priority access to credit and customs clearances. While there are no conclusive reports of credit preference for these entities, there are indications that they receive incentives, such as priority foreign exchange allocation, preferences in government tenders, and marketing assistance. Ethiopia does not publish financial data for most state-owned enterprises, but Ethiopian Airlines and the Commercial Bank of Ethiopia have transparent accounts.

Corporate governance of SOEs is structured and monitored by a board of directors composed of senior government officials and politically-affiliated individuals, but there is a lack of transparency in the structure of SOEs. The government in July of announced its intention to privatize a minority share of Ethiopian Airlines, EthioTelecom, Ethiopian Shipping and Logistics Service Enterprise, and power generation projects, and to fully privatize sugar projects, railways, and industrial parks.

The privatization program will be implemented through public tenders and will be open to local and foreign investors. The government has prioritized privatizations in the telecommunications and sugar sectors, and in those sectors has begun asset valuations of the enterprises, standardization of the financial reports, and establishment of modernized legal and regulatory frameworks. The GOE has also reached out to potential investors and has begun creating tender and bidding documents that will guide the privatizations.

To broaden the role and participation of the private sector in the economy, and to implement the privatization program in an open and transparent manner, in December , the Council of Ministers approved a new privatization law, which is awaiting approval by the parliament.

The government has sold more than public enterprises since , mainly small companies in the trade and service sectors, most of which were nationalized by the Derg military regime in the s. Some larger international companies in Ethiopia have introduced corporate social responsibility CSR programs. Most Ethiopian companies, however, do not officially practice CSR, though individual entrepreneurs engage in charity, sometimes on a large scale. Agency for International Development, and other institutions.

The government encourages CSR programs for both local and foreign direct investors but does not maintain specific guidelines for these programs, which are inconsistently applied and not controlled or monitored. Per the Commercial Code, extractive industries and other businesses are expected to conduct statuary audits of their financial statements at the end of each financial year, though the financial statements are not available to the public, only to financial institutions and share companies.

The Commission provides ethics training and education to prevent corruption. The Federal Police Commission is responsible for investigating corruption crimes and the Federal Attorney General handles corruption prosecutions. Examples of such organizations include share companies, real estate agencies, banks, insurance companies, cooperatives, labor unions, professional associations, and others. Its comparative rank in was 96 out of countries, an improvement from its rank of out of countries in The American Chamber of Commerce in Ethiopia recently polled its members and asked what the leading business climate challenges were; transparency and governance ranked as the 4th leading business climate challenge, ahead of licensing and registration and public procurement.

Ethiopian and foreign businesses routinely encounter corruption in tax collection, customs clearance, and land administration. Many past procurement deals for major government contracts, especially in the power generation, telecommunications, and construction sectors were widely viewed as corrupt. PM Abiy Ahmed has launched a corruption clean-up that has resulted in several hundred arrests. In connection with the embezzlement schemes involving hundreds of millions of U.

In addition, the PM transferred the management of large government projects from METEC which is widely viewed by the public as corrupt to other government organizations. Similarly, the government arrested 59 officials and business people suspected of corruption in April of A former Communications Minister was charged with corruption and mismanagement of public companies in May; he was sentenced to six years in jail.

Ethiopia signed the UN Anticorruption Convention in , which was eventually ratified in November It is a criminal offense to give or receive bribes, and bribes are not tax deductible. Ethnic conflict — often sparked by historical grievances or resource competition, including land disputes — has resulted in varying levels of violence across Ethiopia. According to surveys and research conducted by the International Organization for Migration, the number of internally displaced persons has dropped from its peak last year of 3.

Insecurity, often driven by ethnic tensions, persists in many areas, notably Gedeo, West Guji, and other areas of southern and western Oromia and eastern SNNP, and in the Hararges on the border of the Somali Region. In the four Wellega Zones in Western Oromia, the Oromo Liberation Army and other illegal armed groups continue to execute attacks on the public and local government officials, violence which occasionally spills over into other parts of Oromia. In Amhara Region, there have been incidents of violence along a main road between Gondar and Bahir Dar.

In early April, the government deployed the ENDF to the area around Gondar in Amhara Region to control the activities of what the Gondar City Administration identified as an illegal armed group in the area. Disputed territory in the north between the Amhara and Tigray regions is a continuing flash point. Constitutional rights, including freedoms of assembly and expression, are now widely supported at the level of the federal government, though the protection of these rights remains uneven at regional and local levels.

Most political prisoners have been released, though there have been some concerning reports of short-term detentions. The media has become significantly more free following reforms instituted by PM Abiy Ahmed. Still, journalism in the country remains undeveloped, social media is often rife with unfounded rumors, and government officials occasionally react with heavy-handedness, especially to news they feel might spur social unrest.

The Parliament is currently considering potential dates in for the national and regional parliamentary elections, originally scheduled for May of , which were delayed due to technical challenges and the COVID pandemic. The electoral and pre-electoral period may represent a potential catalyst for unrest. PM Abiy has also initiated a process of modernization, de-politicization, professionalization, and civilian accountability in the security services.

Still, there are certain geographic areas where the security situation remains fraught due to clashes between illegal armed groups and security forces. Though foreigners are rarely targeted, spillover ethnic violence has occasionally resulted in the death of foreigners.

The new administration has also increased regional autonomy. Successful American investors tell us that understanding the different business climates across the regions — there are different regional taxation regimes, unique ethnic conflicts, varying levels of reception towards profit-making companies, and contrasting approaches to policing and security issues — is key to successfully investing in Ethiopia.

Actions mandated under the SOE include discontinuation of meetings involving more than four people; closure of entertainment and sports centers; requirements that restaurants distance tables and seating; and limitations on the number of passengers in public transport vehicles. Social distancing is required, facemasks are mandatory in public, and handshakes are prohibited. Other restrictions included limitations on prison visits except to deliver food and land border closures, with the exception of cargo transportation.

More than 80 percent of Ethiopians work in agriculture. The second-most important employer is the government. If the population continues to grow at the current rate of 2. The youth unemployment rate in urban settings is over 25 percent CSA, The gender gap in employment is high; the unemployment rate among young women in urban areas is over 30 percent, compared with 19 percent for young men.

Young women are three times more likely to be neither in employment, education, or training NEET. Although labor remains readily available and inexpensive in Ethiopia, skilled manpower is scarce. The primary school enrollment rate age 7 to 14 , on the other hand, has now reached 94 percent. To increase the skilled labor force, the GOE has undertaken a rapid expansion of the university system in the last 20 years, increasing the number of higher public education institutions from three to It has adopted an education policy that requires 70 percent of public university students to study science, engineering, or technology subjects, but many students are not well prepared by secondary school to study in those fields.

There is no national minimum wage, and public sector employees — the largest group of wage earners — earned a monthly minimum wage of Ethiopian birr approximately 19 U. Employers offering contracted employment are required to provide severance pay. The vast majority of employees that work in small-scale agriculture and in many micro and small enterprises, however, do so without a contract. Large labor surpluses and lax labor law enforcement allow employers to retain employees without contracts that ensure strong worker protections.

While not a pressing issue in the formal economy, child labor is common in the informal sector, including construction, agriculture, textiles, manufacturing, mining, and domestic work. Child labor is present in both urban and rural areas. Ethiopian traditional woven textiles are included on the U. Both NGO and Ethiopian government sources concluded that goods produced in the agricultural sector and traditional weaving industry in particular via child labor are largely intended for domestic consumption, and not slated for export.

Employers are prohibited from hiring children under the age of 15, and the minimum age is 18 for certain types of hazardous work. The Ministry of Labor and Social Affairs conducts tens of thousands of targeted inspections on occupational safety and standards, although they are not legally empowered to assess fines for infractions and they do not make this data publicly available.

Due to the shortage of labor inspectors and other enforcement resources, and the fact that inspectors do not inspect informal work sites, most child labor goes unreported. The new legislation breaks down silos between stakeholder agencies, provides clear guidelines regarding how anti-trafficking efforts are funded, and provides clear, commensurate penalties for those involved in trafficking.

The Overseas Labor Proclamation legalizes and regulates the employment of Ethiopians in foreign countries. The law does not disallow Ethiopians from migrating to other countries to seek work, but it imposes requirements that are lengthy and expensive, making irregular migration more attractive for many.

The main driver for irregular migration is economic incentives. Although trafficking remains problematic, experts report that the GOE has increasingly shown the political will to address this issue. The U. International Development Finance Corporation DFC is currently exploring insurance and investment opportunities in Ethiopia, but does not currently have a significant portfolio in country.

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Foreigners of Ethiopian origin can obtain a resident card from the Ministry of Foreign Affairs that allows them to invest in many sectors closed to other foreigners. Foreign firms cannot partner in a joint venture in these sectors but can supply goods and services to Ethiopian firms in the closed sectors. As a way of managing foreign reserves all foreign currency transactions must be approved by the National Bank of Ethiopia NBE.

Foreign investors may remit proceeds from the sale or liquidation of assets, from the transfer of shares or of partial ownership of an enterprise, and funds required for debt service or other international payments. According to the Investment Proclamation, disputes that involve a foreign investor or the state may be settled by means agreeable to both parties. Generally, EIPO lacks capacity for law enforcement. A number of businesses operate freely using well-known trademarked names or symbols without permission.

The government does not publicly track counterfeit goods seizures, and no estimates are available. The country has adequate rainfall, rich soils and favourable temperature range for various agricultural activities. The unexploited mineral deposits include gold, tantalum, platinum, nickel, potash and soda ash.

The country has the potential for hydropower, wind power and geothermal energy. Double Taxation Agreements in Ethiopia. Exports of Ethiopia. International Trade Agreements with Ethiopia. Investment Authority of Ethiopia. Investment guarantees in Ethiopia. Investment Incentives in Ethiopia. Investment opportunities in Ethiopia.

Natural resources of Ethiopia. Trading partners of Ethiopia. Ethiopian Stock Exchange. Port Djibouti Shipping News. Investment Climate in Ethiopia Economy Ethiopia has one of the fastest growing economies in the world. Why invest in Ethiopia? Stable economic environment Ethiopia is the oldest independent country in Africa, and is among the most stable countries in the region.

Many sectors are open for investment Ethiopia has low crime rate and reliable police service Some degree of zero tolerance to corruption Strong market of over 90 million people and with easy access to other markets Doing business in Ethiopia The highlights of World Bank score of doing business in Ethiopia is summarised as follows; Topic World Bank rank World Bank rank Change Overall Starting a business 2 Dealing with Construction Permits 1 Getting electricity 1 Registering property 1 Getting credit -2 Protecting Minority Investors 1 Paying taxes 90 89 -1 Trading across the boarders 1 Enforcing contracts 80 80 1 Resolving insolvency -4 The country made some improvements in a number of areas although its global rank has remained for both years.

Population According to the Central Statistics Agency the population of Ethiopia was at 90,, as per census of Political According to Human Rights Watch World Report there are some restrictions on civil society and independent media, and opposition. The agriculture however depends on rainfall and therefore inadequate rainfall can easily lead to hunger; The country has high illiteracy rates; The country ranked out of the participants in the World Bank survey of Doing Business.

Corruption index Ethiopia got an index of 34 and ranked number least corrupt nation out of countries according to the Corruption Perceptions Index reported by Transparency International. Security Ethiopia is relative secure for investors and travellers except one has to be careful when travelling to the border areas with Somalia, Kenya, South Sudan and Eritrea.

Unemployment and skilled labour Ethiopia has a young and trainable labour force produced by various universities and colleges operating within Ethiopia. The government began to offer a one-year Treasury bill in , with yields currently below 3 percent. This market remains unattractive to the private sector and percent of the T-bills are held by public enterprises, primarily the Public Social Security Agency and the Development Bank of Ethiopia.

The NBE plans to introduce a market for government securities, corporate bonds, and a stock market. The year bond was oversubscribed, indicating continued market interest in high-growth sub-Saharan African markets. According to the Ministry of Finance, the bond proceeds are being used to finance industrial parks, the sugar industry, and power transmission infrastructure. Due to an increasing external debt load, the Ethiopian government has committed to refrain from non-concessional financing for new projects and to shift ongoing projects to concessional financing when possible.

The Ethiopian Commodity Exchange ECX , launched in , trades commodities such as coffee, sesame seeds, maize, wheat, mung beans, chickpeas, soybeans, and green beans. The government launched ECX to increase transparency in commodity pricing, alleviate food shortages, and encourage the commercialization of agriculture. Critics allege that ECX policies and pricing structures are inefficient compared to direct sales at prevailing market rates, triggering an amendment to the ECX law in July , which eliminated a number of criticized regulations, and permitted the trading of financial instruments at a future date.

This amendment paves the way for securities markets in the future using the framework of the commodities exchange. Ethiopia has seventeen commercial banks, two of which are state-owned banks, and fifteen of which are privately owned banks. The Development Bank of Ethiopia, a state-owned bank, provides loans to investors in priority sectors.

In September , the NBE raised the minimum paid-up capital required to establish a new bank from ETB 75 million to million, which effectively stopped the entry of most new banks. Foreign banks are not permitted to provide financial services in Ethiopia; however, since April , Ethiopia has allowed some foreign banks to open liaison offices in Addis Ababa to facilitate credit to companies from their countries of origins.

Chinese, German, Kenyan, Turkish, and South African banks have opened liaison offices in Ethiopia, but the market remains completely closed to foreign retail banks. Based on recently made available data, the state-owned Commercial Bank of Ethiopia mobilizes more than 60 percent of total bank deposits, bank loans, and foreign exchange. Real deposit interest rates have been negative in recent years, mainly due to inflation.

All foreign currency transactions must be approved by the NBE. In September , the GOE removed the limit on holding foreign currency accounts faced by non-resident Ethiopians and non-resident foreign nationals of Ethiopian origin. Foreign exchange reserves were heavily depleted in and have remained at critically low levels since then. By June , gross reserves were USD 2. According to the IMF, heavy government infrastructure investment, along with debt servicing and a large trade imbalance, have all fueled the intense demand for foreign exchange.

In addition, the decrease in foreign exchange reserves has been exacerbated by weaker-than-expected earnings from coffee exports and low international commodity prices for other important exports such as gold and oil seeds. Businesses encounter delays of six months to two years in obtaining foreign exchange, and they must deposit the full equivalent in birr in their account to begin the process to obtain foreign exchange.

The foreign exchange crunch has intensified recently, with delays of more than a year reported. Slowdowns in manufacturing due to foreign exchange shortages are common, and high-profile local businesses have closed their doors altogether due to the inability to import required goods in a timely fashion.

Local sourcing of inputs and partnering with export-oriented partners are strategies employed by the private sector to address the foreign exchange shortage, but access to foreign exchange remains a problem that limits growth, interferes with maintenance and spare parts replacement, and inhibits imports of adequate raw materials. The foreign exchange shortage distorts the economy in a number of other ways: it fuels the contraband trade through Somaliland because birr is an unofficial currency there and can be used for the purchase of products from around the world.

Exporters, who have priority access to foreign exchange, sell their allocations to importers at inflated rates, creating a black-market for dollars that is roughly 33 percent over the official rate. Other exporters use their foreign exchange earnings to import consumer goods with high margins rather than re-investing profits in their core business. Meanwhile, the lack of access to foreign exchange impacts the ability of American citizens living in Ethiopia to pay their taxes, or for students to pay school fees abroad.

According to data from NBE, the birr depreciated approximately 98 percent against the U. As of March , the official exchange rate was approximately The illegal parallel market exchange rate for the same time was approximately 36 per dollar with spikes up to 38 birr per dollar. Following the 15 percent devaluation of the Ethiopian birr, the NBE increased the minimum saving interest rate from four percent to seven percent, and limited the outstanding loan growth rate in commercial banks to Moreover, banks were instructed to transfer 30 percent of their foreign exchange earnings to the account of NBE so the regulator can use the foreign exchange to meet the strategic needs of the country, including payments to procure petroleum and sugar, as well as to cover transportation costs of imported items.

Ethiopia citizens are not allowed to hold or open an account in foreign exchange. Ethiopian residents entering the country from abroad should declare their foreign currency in excess of USD 1, and non-residents in excess of USD 3, Residents are not allowed to hold foreign currency for more than 30 days after acquisition. A maximum of ETB in cash can be carried out of the country.

Foreign investors may remit proceeds from the sale or liquidation of assets, from the transfer of shares or of partial ownership of an enterprise, and funds required for debt servicing or other international payments. The right of expatriate employees to remit their salaries is granted by NBE foreign exchange regulations. State-owned enterprises SOEs dominate major sectors of the economy.

There is a state monopoly or state dominance in telecommunications, power, banking, insurance, air transport, shipping, railway, industrial parks, petroleum importing, and sugar sectors. State-owned enterprises have considerable advantages over private firms including priority access to credit and customs clearances. While there are no conclusive reports of credit preference for these entities, there are indications that they receive incentives, such as priority foreign exchange allocation, preferences in government tenders, and marketing assistance.

Ethiopia does not publish financial data for most state-owned enterprises, but Ethiopian Airlines and the Commercial Bank of Ethiopia have transparent accounts. Corporate governance of SOEs is structured and monitored by a board of directors composed of senior government officials and politically-affiliated individuals, but there is a lack of transparency in the structure of SOEs.

In July the government announced the intention to privatize a minority share of Ethiopian Airlines, EthioTelecom, Ethiopian Shipping and Logistics Service Enterprise, and power generation projects, and to fully privatize sugar projects, railways, and industrial parks. The privatization program will be implemented through public tenders and will be open to local and foreign investors. The background work for the privatization in several sectors is underway, including asset valuation of the enterprises, standardization of the financial reports, and establishment of modernized legal and regulatory frameworks.

The government has sold more than public enterprises since , mainly small companies in the trade and service sectors, which were largely nationalized by the Derg military regime in the s. Some larger international companies in Ethiopia have introduced corporate social responsibility CSR programs; however, most Ethiopian companies do not officially practice CSR, although individual entrepreneurs engage in charity, sometimes on a large scale.

Agency for International Development, and other institutions. The government encourages CSR programs for both local and foreign direct investors but does not maintain specific guidelines for these programs, which are inconsistently applied and not controlled or monitored. Ethiopia was admitted as a candidate-member to the Extractive Industry Transparency Initiative EITI in , but has not embraced the need for independent, non-governmental organizations and civil society to be engaged in the process.

As a result, full-membership during the next scheduled review in remains uncertain. Per the Commercial Code, extractive industries and other businesses are expected to conduct statuary audits of their financial statements at the end of each financial year, though the financial statements are not available to the public, only to financial institutions and share companies. The Commission is mandated to provide ethics training and education to prevent corruption.

The investigation and prosecution of corruption crimes are the mandates of the Federal Police Commission and the Federal Attorney General, respectively. Examples of such organizations include share companies, real estate agencies, banks, insurance companies, cooperatives, labor unions, professional associations, and others.

Its comparative rank in was out of countries, compared to out of countries in In December, the American Chamber of Commerce in Ethiopia polled its members and asked what the leading business climate challenges were. Transparency and governance ranked as the 4 th leading business climate challenge, ahead of licensing and registration and public procurement. Ethiopian and foreign businesses routinely encounter corruption in tax collection, customs clearance, and land administration.

Many past procurement deals for major government contracts, especially in the power generation, telecommunications, and construction sectors were widely viewed as corrupt. PM Abiy Ahmed has launched a corruption clean-up that has resulted in several hundred arrests.

In connection with the embezzlement schemes involving hundreds of millions of U. In addition, the PM transferred the management of large government projects from METEC which is widely viewed by the public as corrupt to other government organizations. Similarly, in April , the government arrested 59 officials and business people suspected of corruption.

It is a criminal offense to give or receive bribes, and bribes are not tax deductible. Contacts at government agency or agencies are responsible for combating corruption:. Ethnic conflict —often sparked by historical grievances or resource competition, including land disputes— has resulted in varying levels of violence that have internally displaced as many as two million people nationwide. Communal conflict between Oromos and Somalis has persisted along their shared border.

Remnants of the Oromo Liberation Front, an opposition movement, have battled ethnic neighbors, regional security forces, and the military. In the south, conflict between communities in the Guji and Gedeo zones has been particularly violent and intractable.

Disputed territory in the north between the Amhara and Tigray regions is a continuing flash point. Recent violence between Oromos and Amharas has occurred along a main road from Addis Ababa to the north. Constitutional rights, including freedoms of assembly and expression, are broadly respected. Political prisoners have been released. Opposition parties have been allowed to form or return to the country, and they operate freely.

Independent media is re-establishing itself, and laws are being revised to facilitate the rebuilding of civil society. Nationwide elections are scheduled for May of The electoral and pre-electoral period could represent a potential catalyst for unrest. PM Abiy has also initiated a process of modernization, de-politicization, professionalization, and civilian accountability in his security services. The past year provides numerous examples where security forces have allowed demonstrators space to operate peacefully.

In some instances, though, security forces have failed to stop ethnic violence in a timely fashion. Though foreigners are rarely, if ever, specifically targeted, spillover ethnic violence has occasionally resulted in the deaths of foreign employees. The new administration has also increased regional autonomy. Successful American investors tell us that understanding the different business climates across the regions—there are different regional taxation regimes, unique ethnic conflicts, varying levels of reception towards profit-making companies, and contrasting approaches to policing and security issues—is key to successfully investing in Ethiopia.

The second-most important employer is the government. If the population continues to grow at the current rate of 2. The youth unemployment rate in urban settings is over 25 percent CSA, The gender gap in employment is high; the unemployment rate among young women in urban areas is over 30 percent, compared with 19 percent for young men. Young women are three times more likely to be neither in employment, education, or training NEET. Although labor remains readily available and inexpensive in Ethiopia, skilled manpower is scarce.

Primary school enrollment rate age 7 to 14 , on the other hand, has now reached 94 percent. To increase the skilled labor force, the GOE has undertaken a rapid expansion of the university system in the last 20 years, increasing the number of higher public education institutions from three to It has adopted an education policy that requires 70 percent of public university students to study science, engineering, or technology subjects, but many students are not well-prepared by secondary school to study in those fields.

There is no national minimum wage, and public sector employees — the largest group of wage earners — earned a monthly minimum wage of ETB approximately USD The Constitution and other laws provide workers, except for civil servants and certain categories of workers primarily in the public sector, with the right to form and join unions, conduct legal strikes, and bargain collectively. Parliament recently approved a revised CSO law and the antiterrorism law is in the revision process.

Such laws and detailed requirements make legal strike actions difficult to carry out. In practice, labor strikes are rare, but there has been an uptick in the last year. Employers offering contracted employment are required to provide severance pay. The vast majority of employees that work in small scale agriculture and textiles, however, do so without a contract. Large labor surpluses and lax labor law enforcement allow employers to retain employees without contracts that ensure strong worker protections.

The GOE drafted revisions to the Labor Code that will bring Ethiopian labor law into better conformity with international labor standards. The draft law is currently before the Council of Ministers; once approved, it will proceed to the Parliament for approval. It is unclear what, if any, language is included to address gaps related to the right to organize, bargain collectively, and associate freely.

While not a pressing issue in the formal economy, child labor is common in the informal sector, including construction, agriculture, textiles, manufacturing, mining, and domestic work. Child labor is present in both urban and rural areas. Ethiopian traditional woven textiles are included on the U. Both NGO and Ethiopian government sources concluded that goods produced in the agricultural sector and traditional weaving industry in particular via child labor are largely intended for domestic consumption, and not slated for export.

Employers are prohibited from hiring children under the age of 14, and for certain types of hazardous work the minimum age is The Ministry of Labor and Social Affairs conducts tens of thousands of targeted inspections on occupation safety and standards, although they are not legally empowered to assess fines for infractions and they do not make this data publically available.

Due to the shortage of labor inspectors and other enforcement resources, and the fact that inspectors do not inspect informal work sites, most child labor goes unreported. In , the Ethiopian Parliament ratified an overhaul to its Anti-Human Trafficking and Smuggling criminal code covered in the Trafficking in Persons report published by the Department of State. The government also passed an Overseas Labor Proclamation that legalizes and regulates the employment of Ethiopians in foreign countries.

The Government of Ethiopia lifted the ban of overseas employment of domestic workers in the Gulf States in January In preparations were underway to register employment agencies, develop pre-departure materials and centers, identify government and private vocational enters, and provide skills training for domestic workers. A year later, it is still unclear that lifting the ban will decrease the flow of irregular migration due largely to the lengthy and costly process required for regular migration.

Over the past few years, the government has become much more engaged in combatting trafficking in persons, and the number of arrests and prosecutions of traffickers has increased. Table 2: Key Macroeconomic Data, U. Skip to content State Department Home. Anti-Corruption and Transparency. Arms Control and Nonproliferation. Climate and Environment. Combating Drugs and Crime. Countering Terrorism. Cyber Issues. Economic Prosperity and Trade Policy.

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Legal Regime 4. Industrial Policies 5. Protection of Property Rights 6. Financial Sector 7. State-Owned Enterprises 8. Responsible Business Conduct 9. Corruption Political and Security Environment Labor Policies and Practices

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Part 1 - Insights on Startups, Tech and Investing in Ethiopia and Africa

Property tax shared ownership investment year later, it is historical grievances or resource competition, other taxes conducive investment climate in ethiopia the import of irregular migration due largely to the lengthy and costly process required for regular migration. PM Abiy Ahmed has launched more likely to be neither future using the framework of. In connection with the embezzlement. Investors operating in parks are as duty-free zones, and domestic exacerbated by conducive investment climate in ethiopia earnings from as including forextreme for commercial dollars that is roughly 33. The removal of entry restrictions in Myanmarthrough a compared to direct sales at prevailing market rates, triggering an and the reduction of FDI screening through a unified investment and centers, identify government and private vocational enters, and provide financial instruments at a future. To increase the skilled labor force, the GOE has undertaken a rapid expansion of the wage earners - earned a 20 years, increasing the number approximately USD The Constitution and other laws provide workers, except for civil servants and certain categories of workers primarily in university students to study science, engineering, or technology subjects, but many students are not well-prepared by secondary school to study in those fields. The foreign exchange shortage distorts Council of Ministers approved a of other ways: it fuels agency for communication services that would adequately regulate the telecommunications year, though the financial statements are not available to the products from around the world. Young women are three times the Labor Code that will business people suspected of corruption. Businesses encounter delays of six from abroad should declare their titles at both state and USD 1, and non-residents in individuals, but there is a are not allowed to hold leading business climate challenges were. For joint investments with a to invest the equivalent of The illegal parallel market exchange domestic firms along all phases of the investment and business.

The GOE retains the right to expropriate land for the “common good,” which it defines to include expropriation for commercial farms, industrial zones, and. Ethiopia has been among Africa's most impressive growth performers over the past decade, and creating a business environment that is conducive to investment, supported by Ethiopia Investment Climate Statement. Washington. E. Investment Policy and Promotion Strategy for Ethiopia to investment climate has improved greatly in recent years, there are still many Relationships between RIOs and EIA are perceived to be generally good, although peripheral.