IFC to help improve doing business in Ethiopia

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MoT to launch electronic business licensing and trade registration system

ERCA to revisit laws and business processes on customs and domestic tax fronts

The International Finance Corporation (IFC) is to cooperate with the Ministry of Trade (MoT) and Ethiopian Revenue and Customs Authority (ERCA) to help improve the country’s investment and trade climate. MoT will launch an electronic business licensing and trade registration system shortly, while ERCA is revisiting its laws and business processes.
Ethiopia ranked 104th out of 183 countries in the World Bank Group’s Doing Business Report 2011.  This ranking has placed Ethiopia one of the lowest countries worldwide despite the various laws, regulations and amendments the government is undertaking regularly. The country’s performance is uneven across the WB’s ‘Doing Business Indicators’.  It ranks relatively high in paying taxes indicator, enforcing contracts, and dealing with construction permits, while performing poorly in dealing with registering property, protecting investors, getting credit, and particularly trading across borders. Ethiopia ranked 119th out of 139 economies in the Global Competitiveness Index 2010-2011.
IFC said it conducted assessment for the last one year to understand the market and policy failures and constraints that potentially hinder Ethiopia’s ability to develop, grow and build the private sector taking into consideration the government’s Growth and Transformation Plan (GTP).  On the basis of the assessment, a three-year Ethiopian Investment Climate Program, designed in collaboration with the government and a wide range of private sector stakeholders, was launched at a cooperation agreement signing ceremony held on March 8, 2013 at the Sheraton Addis.
IFC, MoT, and ERCA signed the agreement which would enable the IFC to extend support to the government in its effort to improve the business environment by streamlining and simplifying high priority regulations, processes and practices considered burdensome to private businesses, and addressing investment climate issues that are holding back further investment and productivity growth. 
The program, projected to cost USD 10 million, will be implemented in partnership with key development partners including Canadian International Development Agency (CIDA), Swedish International Development Agency (SIDA), and Department for International Development (DfID).  “It [the cost] would be shared among IFC, partners, donors and the government,” Adamou Labara, Resident Representative for IFC in Ethiopia said adding “IFC will provide technical support, share knowledge, and bring best practices, and build the capacity of the government.”  
According to Labara, through the program, the number of businesses to be registered will increase by at least 10 percent; while time and cost of business registration is expected to reduce by 25 percent. IFC will also provide ERCA with implementation support and capacity building, among others, related to simplifying and harmonizing trade procedures and documentations, integrating risk management systems in border clearance and inspection regimes as well as reducing the time and costs of complying with tax obligations, according to Labara.
“The signing of the agreement, which we are now entering, is intended to take those findings and recommendations into action and hence is of immense benefit to ERCA and to tax payers,” said Abraham Nigusie, Deputy General Director of ERCA. According to Abraham trade logistics and domestic business tax are the two pillars, which the authority considers as core areas of its business and mandate. “In this respect, we in particular value the technical expertise that the IFC team will bring to the work in light of their regional and international experience,” he said at the signing ceremony.
ERCA aspires at upholding its values of professionalism, integrity and customer focused quality service, according to Abraham. “We, therefore, are ready to make legal and process reviews as reality demands.” Abraham also noted that the authority currently is revisiting its laws and business processes both on the customs and domestic tax fronts.
Ali Siraj, State Minister of Trade, says his ministry welcomes this program as it is of great help for the ministry to realize the electronic business licensing and registration system it plans to launch in the coming few weeks.  The system is believed to stimulate the country’s economic growth and business expansion as it will be simplified, uniform, streamlined and harmonized for business licensing and registration. “It could also be a very important instrument to fight corruption,” Siraj said.
The government has fully funded the pilot project, and has been working hard to realize it for the last three years, according to Siraj who is hopeful that the pilot project will provide ample evidences, insights and experiences to the nationwide business licensing and registration system the ministry is about to embark on in partnership with the IFC.  
“We believe that the new pilot project will increase licensing and business registration effectiveness and efficiency by reducing burdensome registration practices,” Siraj said.
According to the State Minister, modernized and simplified business registration system has been a high priority agenda to the ministry. “This cooperation agreement with IFC is timely and crucial in many ways.”
There are more than 505,000 registered businesses and entrepreneurs in the country, including 20,000 in Addis Ababa. The number of business registration centers, according to Siraj, is 900 out of which 125 are in the capital.