Capital Ethiopia Newspaper

New investment rules on the way

A new body, the Ethiopia Investment Board (EIB) is to be created with members from the government and the private sector to address together investment issues. EIB will have a board chair and director general appointed by the government. The number of members it can have is also dictated by the government.  

EIB is one of the three investment bodies under the investment proclamation; The Ethiopia Investment Agency and Regional Investment Bodies are the other two.

EIB will supervise the Ethiopian Investment Agency and can decide on appeals and present investment proposals to the government. It is expected to hold board meetings once a month. Passing resolutions requires majority vote.

Revamped Ethiopian Investment Agency

The new proclamation also revamps the functions of the Ethiopian Investment Agency (EIA).

Now the Agency can own property, sign agreements, institute litigation and be litigated against.  It will have the power to give, revoke, and renew investment licenses. These new capacities are expected to render the Agency more efficient.

EIA will have a director general appointed by the government. The Director General’s role will include reporting the Agency’s work schedule, job performance and budget to the Ministry of Finance and Economic Development (MoFED).

The budget comes directly from the government and is accountable to the Prime Minister.

New rules for local and foreign investors

There are also new rules that affect both local and foreign investors.

Cooperative Unions, government development enterprises, individuals and those who operate under a foreign country’s trade law are all affected.

Investors whose licenses have been revoked must wait a year before re-applying for a new one. Those who already have a license need to renew it at the investment office every six months.

The threshold for a foreigner to invest in Ethiopia is USD 100,000. If it is a joint venture it is USD 60,000 or USD 50,000 for a consulting investment. For a joint venture consulting minimum investment is USD 25,000.

A local investor under the new proclamation includes a foreigner with permanent residence in Ethiopia as well as people of Ethiopian origin and corporations. People of Ethiopian origin who want to be classified as foreign investors are allowed to do so under the new rule.

The Ethiopia Investment Agency (EIA) will have the jurisdiction on investments by foreigners, joint foreign Ethiopian venture investment, and foreigners with permanent residence in Ethiopia.

The federal government responsible for enforcement of the regulation will have a desk at the EIA and give service to those with an investment license. Credit lines, housing permits for foreign investors and environmental impact assessments will be handled through this desk.

This will replace the previous proclamation concerning investment.

An associated directive has also been drafted by the council of ministers for local investors.

Investment incentives for locals

People who get involved in the communications and technology sector in Addis Ababa are exempted from tax for two years.

Agriculture, Manufacturing or Information Communication Technology (ICT) development as well as investors whose products are at least 50% for export will also be exempt from taxes for two years.

People who already meet this criterion enjoy a one year tax holiday.

A local investor who would like to import its capital project materials may be tax exempted under certain conditions.

Nevertheless, 18 different investment sectors are not eligible for the incentives provided under the draft directive such as non-factory weaving and handicrafts, crust stage leather, hotels and resorts excluding those that have star status.

Criminal charges can be filed against people who are guilty of not following the rules under the new customs proclamation.