Ethiopia needs significant inflows of FDI to meet its ambitious growth goals. Over the past year, to attract more foreign investment, the government passed a new investment law, acceded to the New York Convention on Arbitration, amended its 60-year-old commercial code, and digitized the commercial registration and business licensing processes. The government has also begun implementing the Public Private Partnership (PPP) Proclamation to allow for private investment in the power generation and road construction sectors.

The Ethiopian Investment Commission (EIC) has the mandate to promote and facilitate foreign investments in Ethiopia. To accomplish this task, the EIC is charged with 1) promoting the country’s investment opportunities to attract and retain investment; 2) issuing investment permits, business licenses, work permits, and construction permits; 3) issuing commercial registration certificates and renewals; 4) negotiating and signing bilateral investment agreements; and 5) registering technology transfer agreements. In addition, the EIC has the mandate to advise the government on policies to improve the investment climate and to hold regular and structured public-private dialogues with investors and their associations. At the local level, regional investment agencies facilitate regional investment.

The American Chamber of Commerce (AmCham) advances U.S. business interests in Ethiopia. AmCham provides a mechanism for coordination among American companies and facilitates regular meetings with government officials to discuss issues that hinder operations in Ethiopia. The Addis Ababa Chamber of Commerce organizes a monthly business forum that enables the business community to discuss issues related to the investment climate with government officials.

Foreign and domestic private entities have the right to establish, acquire, own, and dispose of most forms of business enterprises. The Investment Proclamation and associated regulations outline the areas of investment reserved for government and local investors. There is no private ownership of land in Ethiopia. All land is technically 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 2011 Urban Land Lease Proclamation allows the government to determine the value of land in transfers of leasehold rights to curb speculation by investors.

A foreign investor intending to buy an existing private enterprise or 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 three years, the government has not undertaken any third-party investment policy review by a multilateral or non-governmental organization. The government has worked closely with some international stakeholders, such as the International Finance Corporation, in its attempt to modernize and streamline its investment regulations.

The EIC has attempted to establish itself as a “one-stop shop” for foreign investors by acting as a centralized location where investors can obtain the visas, permits, and paperwork they need, thereby reducing the time and cost of investing and acquiring business licenses. The EIC has worked with international consultants to modernize its operations and has adopted a customer management system to build lasting relationships and provide post-investment assistance to investors. Despite progress, the EIC admits that many bureaucratic barriers to investment remain. U.S. investors report that the EIC, as a federal organization, has little influence at regional and local levels.

Currently, more than 95 percent of Ethiopia’s trade passes through the Port of Djibouti, with residual trade passing through the Somaliland Port of Berbera or Port Sudan. Ethiopia concluded an agreement in March of 2018 with the Somaliland Ports Authority and DP World to acquire a 19 percent stake in the joint venture developing the Port of Berbera. The agreement will help Ethiopia secure an additional logistical gateway for its increasing import and export trade.

The GOE is working to improve business facilitation services by making the licensing and registration of businesses easier and faster. In February 2021, the Ministry of Trade and Regional Integration (MOTRI) launched an eTrade platform ( etrade.gov.et ) for business registration licensing to enable individuals to register their companies and acquire business licenses online. The amended commercial registration and licensing law eliminates the requirement to publicize business registrations in local newspapers, allows business registration without a physical address, and reduces some other paperwork burdens associated with business registration. U.S. companies can obtain detailed information for the registration of their business in Ethiopia from an online investment guide to Ethiopia: ( https://www.theiguides.org/public-docs/guides/ethiopia ) and the EIC’s website: ( http://www.investethiopia.gov.et/index.php/investment-process/starting-a-business.html ). MOTRI has target timeframes for the registration of new businesses, but it often fails to meet its deadlines.

There is no officially recorded outward investment by domestic investors from Ethiopia as citizens/local investors are not allowed to hold foreign accounts.

The Federal Ethics and Anticorruption Proclamation number 1236/2020 aims to combat corruption involving government officials and organizations, religious organizations, political parties, and international organizations. The Federal Ethics and Anti-Corruption Commission (FEACC) is accountable to parliament and charged with preventing corruption among government officials by providing ethics training and education. MOJ is responsible for investigating corruption crimes and prosecutions. The Office of the Ombudsman is responsible for ensuring good governance and preventing administrative abuses by public offices.

Transparency International’s 2022 Corruption Perceptions Index, which measures perceived levels of public sector corruption, rated Ethiopia’s corruption at 39 (the score indicates the perceived level of public sector corruption on a scale of zero to 100, with the former indicating highly corrupt and the latter indicating very clean). Its comparative rank in 2021 was 87 out of 180 countries, a seven-point improvement from its 2020 rank. In 2020 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 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. Allegations of corruption in the allocation of urban land to private investors by government agencies are a major source of popular discontent in Ethiopia.

Ethiopia is not a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Ethiopia is a signatory to the African Union Convention on Preventing and Combating Corruption. Ethiopia is also member of the East African Association of Anti-Corruption Authorities. Ethiopia signed the UN Anticorruption Convention in 2003, which was eventually ratified in November 2007. It is a criminal offense to give or receive bribes, and bribes are not tax deductible.

Contacts at a government agency responsible for combating corruption:

Federal Police Commission
Addis Ababa
+251 11 861-9595

Advocacy and Legal Advice Center in Ethiopia
Hayahulem Mazoria, Addis Ababa
+251-11-551-0738 / +251-11-655-5508
https://www.transparencyethiopia.org 

Ethnic conflict – often sparked by historical grievances or resource competition, including land disputes – has resulted in varying levels of violence across Ethiopia. According to the 2022 Global Humanitarian Overview, there were an estimated 4.2 million Internally Displaced Persons (IDPs) in Ethiopia at the end of 2021, with high levels of need also identified among non-displaced people living in conflict-affected areas. The primary cause of displacements was conflict and insecurity, followed by drought and seasonal floods and flash flooding.

Most significantly, in early November 2020, a conflict broke out between a regional political party in the Tigray Region and the federal government. The conflict quickly enlarged, with Eritrean troops present in parts of Tigray Region, and Amhara Region forces controlling much of Western Tigray. The conflict in northern Ethiopia has led to many deaths, widespread displacements, extensive destruction of infrastructure, widespread gross human rights violations, gender-based violence, a vast reduction in public services, and widespread hunger.

Insecurity, often driven by ethnic tensions, persists in many other areas, notably in the southern and western Oromia Region; eastern Southern Nations, Nationalities, and People’s Region; and in the Hararges on the border of the Somali Region. In western Oromia, the Oromo Liberation Army-Shane and other unidentified armed groups have intensified attacks against public and local government officials; this violence has spilled over into other parts of Oromia. In far western Ethiopia, ethnic violence and clashes in Benishangul-Gumuz Region have continued throughout 2021 and into early 2022, leaving hundreds dead and hundreds of thousands displaced. Amhara has experienced altercations in 2022 between regional security forces and youth militias.

When Prime Minister Abiy came to power in 2018, political space opened significantly, although it has since regressed especially after the government declared a State of Emergency in November 2021. While the State of Emergency was lifted in February 2022, during its implementation thousands of people, mostly of Tigrayan ethnicity, were arbitrarily detained and freedom of the press was significantly curtailed. Constitutional rights, including freedoms of assembly and expression, are generally supported at the level of the federal government, though the protection of these rights remains uneven, especially at regional and local levels. While opposition parties mostly operate freely, authorities, especially at the sub-national level, have employed politically motivated procedural roadblocks to hinder opposition parties’ efforts to hold meetings or other party activities; this was especially true in the run-up to the June 2021 general election.

The space for media and civil society groups has generally become freer following reforms instituted by Prime Minister Abiy. 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, resulting in self-censorship. Civil society reforms have spurred an expansion of the sector, though many civil society groups continue to struggle with capacity and resource issues.