Ministry of Finance has prepared a new directive for investment incentives and will take over investment board duty.
With the aim of encouraging new private investments, the Government is preparing a new investment incentive draft. Initiated by the Ethiopian Investment Commission, the Ministry of Finance is preparing the draft incentive document.
The purpose of revising the incentive is said to encourage investors in accordance with the new investment proclamation approved in January 2020.
According to Tadesse Kassa /PhD/, legal advisor of the commission, the new draft will have measured shifts on investment incentive, “The first change will be the draft gives the Ministry of Finance power to decide on incentive packages which is the mandate of investment board and also will change amounts of incentives of the different investment sectors.”
As he said, currently using the old incentive directive more than seven governmental offices have the power to decide on the new draft but now only the ministry of finance will have the power to decide.
Including the National Bank, main Department of Immigration and National Affairs, Ministry of Trade and Industry, Ministry of Foreign Affairs, Ethiopian Customs Commission, Ethiopian Investment Commission, Industrial Park Development Corporation, and regional administration currently have the power to decide on incentive package under the Ethiopian investment board chaired by the Prime Minister on the 2012 incentive regulation.
The board has authority to forward recommendation for approval to the council of ministers on incentive related amendments including granting new or additional incentives than what is provided for under existing regulation.
Also as Tadesse said, the change to authorize Ministry of Finance to decide on the package may create confusion since most of the investment related works are done by the investment commission.
Ethiopia offers a comprehensive set of incentives, particularly for priority sectors, such as: Customs duty payment exemption on capital goods and construction materials, Investors have the right to ask a refund of customs duty paid on inputs, Income tax exemption of up to 6 years for manufacturing and agro-processing, and up to 9 years for agricultural investment. Additional 2-4 years income tax exemption for exporting investors located within industrial parks and 10-15 years exemption for industrial park developers;
As part of its promotion of investment in Ethiopia, recently the Ethiopian investment commission has held discussions with ambassadors, government officials, investors from America, Asia, Australia, Africa, and other countries and also with regional investment office representatives on the newly amended investment legislation conducive investment opportunities in the country.
As the commission said, the government is highly working on the growth of investment to increase income generated from export.
By increasing both local and foreign investment the government is planning to enable the country earn nine billion dollar in the coming ten years from export of manufactured products.
As the commission said, besides increasing the investment the government is doing certain due diligence to make the country among the top 50 countries in the world in terms of the ease-of-doing business to boost its quest for industrialization.
In a bid to create a large number of job opportunities, increase the contribution of the manufacturing industry to the GDP and align the development of the industry with the sustainable and green economic development strategy, the government is planning to give a lot of incentives to investors.
Besides the effort to attract new investment, the plan is also aiming to boost the production and productivity capacity of existing firms.
The ministry also identified some of the possible challenges to achieving the plan. Strong competition in the international market in terms of product quality and quantity makes the world competitive.
The commission also invited foreign investors to work in joint-venture with Ethiopian investors particularly in value addition and other investment areas. Improving the quality of exportable products, and focusing on high-tech industries have also been identified as efficient solutions to increasing the competitiveness of the manufacturing industry.
“The new laws aim to increase in-bound investment and address some of the administrative challenges facing investors on the ground.”
In terms of Fiscal incentives the current directive of incentive gives Tax holidays for priority sectors, Duty free import of capital goods, Provision of land with competitive lease prices, Income tax holidays (1 – 9 years), Duty exemption of raw materials used as inputs for export, Investment credit support further accessible and efficient one – stop- shop services at EIC and industrial parks is also consider as benefits for investors.
During the last five months the country has earned 1.1 billion dollar from foreign direct investment as the EIC commissioner Lelise Name said, however as she said certain challenges to the investors has held up the growth such as security challenges, bureaucracy, land and local awareness have been raised as challenges for the investment.
Because of the political instability in the country, as the commissioner said until 2019 more than 400 investments has been burned down and only one percent of them has been reorganized.