By our staff reporter
Real estate businesses report that the recently approved asset recovery proclamation law, which grants authorities to investigate cases dating back 10 years, is significantly affecting their operations. Experts suggest that this new law may exacerbate the parallel market.
Since its issuance on January 9, market participants—especially in the construction and real estate sectors—have expressed that the new proclamation, which allows the government to seize assets, is adversely impacting their business activities.
One real estate developer interviewed by Capital noted that homebuyers, particularly those living abroad, have been demanding the return of their previously paid funds since the law was ratified.
He remarked, “They would rather access their money with a penalty.”
Other developers concur that the introduction of this law has caused further stagnation in an already struggling real estate industry. A market participant pointed out that various economic activities connected to housing construction projects are also being negatively affected by the new law.
For instance, delayed building projects will face additional challenges, impacting other businesses reliant on this type of economic activity. An anonymous businessman told Capital, “The proclamation extending retroactive seizures up to 10 years has put many economic players, especially in the diaspora community, in a state of panic.”
He explained that the diaspora previously sent money through various channels, particularly during times when bank and parallel exchange rates were extremely high.
“Now that the government has announced its intention to scrutinize assets for recovery, the business community—including the diaspora—feels compelled to liquidate their assets,” he stated.
He further noted, “This situation has significantly fueled the black market over the past few weeks.”
He added, “It’s clear that people are in a panic to divest their money, which has led to a sharp increase in the parallel market rates recently, after a period of stability following economic reforms six months ago.”
The legitimacy of the contentious proclamation, which aims to investigate cases predating the law’s ratification, has also been questioned by other businessmen.
“I don’t understand why they chose ten years. Why not twenty or thirty years?” one businessman asked.
Legal experts advising businesses told Capital, “Most actors, including government officials and foreign investors, have been funneling illegally obtained funds abroad.”
One real estate developer lamented the lack of new buyers, stating, “Buyers are demanding the return of their funds, as stipulated in our contracts, but fulfilling those requests has become challenging in a sluggish market.”
A legal expert expressed concern that the law could serve as a political tool. According to the asset recovery law, the goal is to establish a rule-based economic system, as existing legal frameworks fail to address unexplained wealth effectively.
The controversial bill’s preamble asserts the necessity of comprehensive asset recovery laws to tackle crimes generating proceeds, covering aspects such as asset identification, investigation, freezing, seizure, confiscation, and asset management, as current laws lack sufficient provisions to address fundamental legal and practical issues.
It further noted the necessity of enacting the law, as unexplained assets negatively impact the country’s tax system, foreign currency stability, financial flows, and foreign direct investment. Currently, the existing legal framework is limited, allowing for action only against public servants and employees of public organizations regarding unexplained wealth.
The law allows for retroactive seizures of assets for up to ten years, targeting both tangible and intangible assets valued at over ten million birr.
The scope of the law encompasses a range of assets, including stocks, bonds, bank credits, and other economically beneficial resources.
