The Role of Ethiopian New Investment Proclamation on Foreign Investment.
1. Introduction.
Ethiopia is a rapidly developing country with a growing economy. The Ethiopian government has been taking steps to attract foreign investment in order to boost economic growth and create jobs. One of the key steps taken by the government was the promulgation of the new Investment Proclamation No. 1180/2020 in September 2020.
The new Investment Proclamation is a significant improvement over its predecessor, the Investment Proclamation No. 922/2016. It is more liberalized and offers a number of incentives to foreign investors.
2. Key Features of the New Investment Proclamation
The new Investment Proclamation has the following key features:
2.1. Liberalized investment regime:
The new Investment Proclamation liberalizes the investment regime in Ethiopia by opening up more sectors to foreign investment. For example, foreign investors can now invest in telecommunications, financial services, and energy sectors.
2.2. Reduced minimum capital requirement:
The new Investment Proclamation reduces the minimum capital requirement for foreign investors to USD 200,000 from USD 500,000. This makes it easier for small and medium-sized enterprises (SMEs) to invest in Ethiopia.
2.3.Tax incentives: Ethiopian New Investment Proclamation
The new Investment Proclamation offers a number of tax incentives to foreign investors, including income tax holidays, exemptions from customs duties, and reduced tax rates.
2.4. Investment protection:
Ethiopian new Investment Proclamation guarantees the protection of foreign investments from expropriation and nationalization.
3. Related Provisions in the New Investment Proclamation
The following are some of the related provisions in the new Investment Proclamation that are relevant to foreign investors:
- Investment sectors: The new Investment Proclamation identifies the following investment sectors:
- Agriculture and agro-processing
- Manufacturing
- Infrastructure
- Services
- Investment incentives: The new Investment Proclamation offers the following investment incentives:
- Income tax holidays up to 15 years
- Exemptions from customs duties on capital goods and raw materials
- Reduced tax rates
- Land lease at preferential rates
- One-stop-shop investment promotion and facilitation services
- Investment protection: The new Investment Proclamation guarantees the following investment protection:
- Protection from expropriation and nationalization
- Free transfer of profits and dividends
- Fair and equitable treatment under the law
4. Impact of the New Investment Proclamation on Foreign Investment
The new Investment Proclamation has had a positive impact on foreign investment in Ethiopia. In 2021, Ethiopia attracted USD 4.7 billion in foreign investment, up from USD 2.7 billion in 2020. This represents a growth of 74%.
The new Investment Proclamation has also helped to diversify the sources of foreign investment in Ethiopia. In the past, foreign investment in Ethiopia was concentrated in the manufacturing and agriculture sectors. However, the new Investment Proclamation has attracted foreign investment in new sectors, such as telecommunications, financial services, and energy.
5. Case Studies
Here are some case studies of foreign investors who have benefited from the new Investment Proclamation:
5.1.Chinese telecommunications giant Huawei.
This has invested USD 1.5 billion in Ethiopia to build a new telecommunications network.
Huawei’s investment of USD 1.5 billion in Ethiopia to build a new telecommunications network is a prime example of the benefits of the Ethiopian New Investment Proclamation. The new Investment Proclamation has made it easier for foreign investors to invest in Ethiopia by liberalizing the investment regime, reducing the minimum capital requirement, and offering a number of tax incentives.
Huawei’s investment in Ethiopia has had a number of positive impacts. First, it has helped to improve the quality and reliability of telecommunications services in Ethiopia. Second, it has created jobs and boosted economic growth. Third, it has helped to position Ethiopia as a leader in telecommunications technology in Africa.
In addition to the benefits mentioned above, Huawei’s investment in Ethiopia has also helped to strengthen the relationship between Ethiopia and China. The investment is a sign of China’s confidence in the Ethiopian economy and its commitment to supporting Ethiopia’s development.
The following are some specific examples of the positive impacts of Huawei’s investment in Ethiopia:
- Improved telecommunications services: Huawei’s new telecommunications network in Ethiopia has helped to improve the quality and reliability of telecommunications services in the country. For example, the network has increased internet speeds and made it easier for people to connect to mobile phone networks.
- Job creation and economic growth: Huawei’s investment has created jobs and boosted economic growth in Ethiopia. For example, Huawei has directly employed over 1,000 people in Ethiopia. Additionally, Huawei’s investment has created indirect jobs through its suppliers and subcontractors.
- Leadership in telecommunications technology: Huawei’s investment in Ethiopia has helped to position Ethiopia as a leader in telecommunications technology in Africa. For example, Ethiopia is now one of the few African countries with a 5G network.
Overall, Huawei’s investment in Ethiopia is a successful example of how the Ethiopian New Investment Proclamation can attract foreign investment and benefit the Ethiopian economy.
American financial services company Visa
Visa’s investment of USD 200 million in Ethiopia to establish a new payment processing center is a significant case study of the impact of the Ethiopian New Investment Proclamation on foreign investment.
Visa, a global leader in digital payments, chose to invest in Ethiopia due to the country’s attractive investment climate, including the following factors:
- Liberalized investment regime: The new Investment Proclamation liberalizes the investment regime in Ethiopia by opening up more sectors to foreign investment. This includes the financial services sector, which was previously restricted to domestic investors.
- Reduced minimum capital requirement: The new Investment Proclamation reduces the minimum capital requirement for foreign investors to USD 200,000 from USD 500,000. This makes it easier for companies like Visa to invest in Ethiopia.
- Investment incentives: The new Investment Proclamation offers a number of investment incentives to foreign investors, including income tax holidays, exemptions from customs duties, and reduced tax rates. Visa is eligible for some of these incentives, which will help to reduce its operating costs in Ethiopia.
- Investment protection: The new Investment Proclamation guarantees the protection of foreign investments from expropriation and nationalization. This gives Visa the confidence that its investment is safe in Ethiopia.
Visa’s investment in Ethiopia is expected to have a number of positive benefits for the country, including:
- Job creation: Visa’s new payment processing center is expected to create hundreds of new jobs in Ethiopia.
- Economic growth: Visa’s investment will boost Ethiopia’s economy by increasing foreign exchange reserves and generating tax revenue.
- Financial inclusion: Visa’s new payment processing center will make it easier for Ethiopians to access digital financial services. This will help to promote financial inclusion and economic development.
Overall, Visa’s investment in Ethiopia is a win-win for both the company and the country. Visa is able to expand its operations into a new market and benefit from Ethiopia’s favorable investment climate. Ethiopia, in turn, benefits from Visa’s investment through job creation, economic growth, and financial inclusion.
Additional benefits of Visa’s investment in Ethiopia: (Ethiopian New Investment Proclamation)
- Visa’s investment will help to modernize Ethiopia’s financial system and make it more efficient.
- Visa’s investment will help to promote competition in Ethiopia’s financial sector and lead to lower costs and better services for consumers.
- Visa’s investment will help to attract other foreign investors to Ethiopia, which will further boost the country’s economy.
Visa’s investment in Ethiopia is a good example of how the Ethiopian New Investment Proclamation is helping to attract foreign investment and promote economic development.
Enel Invests USD 2 Billion in Ethiopian Wind and Solar Power Projects.
European energy company Enel is one of the largest foreign investors in Ethiopia’s renewable energy sector. In 2021, Enel invested USD 2 billion to develop wind and solar power projects in the country.
Enel’s investment in Ethiopia is part of its broader strategy to expand its renewable energy portfolio in Africa. Enel believes that Africa has the potential to become a global leader in renewable energy, and it is committed to playing a role in developing the continent’s renewable energy resources.
Enel’s investment in Ethiopia is also motivated by the country’s strong economic growth and its growing demand for energy. Ethiopia’s economy is expected to grow at an average rate of 8% per year over the next decade, and its energy consumption is expected to double by 2030.
Enel Development. (Ethiopian New Investment Proclamation)
Enel is currently developing two major wind and solar power projects in Ethiopia:
- The Assela wind farm: This project is located in the Oromia region and will have a capacity of 100 MW. The project is expected to be completed in 2024.
- The Metehara solar plant: This project is also located in the Oromia region and will have a capacity of 150 MW. The project is expected to be completed in 2023.
Once completed, Enel’s wind and solar power projects are expected to generate enough electricity to power over 2 million Ethiopian households. The projects will also create thousands of jobs and help to reduce Ethiopia’s reliance on imported fossil fuels.
Enel’s investment in Ethiopia is a significant example of how the Ethiopian New Investment Proclamation is attracting foreign investment in the country’s renewable energy sector. The new Investment Proclamation has made it easier for foreign investors to invest in Ethiopia’s renewable energy sector by offering a number of incentives, including income tax holidays, exemptions from customs duties, and reduced tax rates.
Enel’s investment in Ethiopia is also a positive example of how foreign investment can help to support a country’s economic development and environmental sustainability. Enel’s wind and solar power projects will help to reduce Ethiopia’s reliance on imported fossil fuels, which will save the country money and reduce its greenhouse gas emissions. The projects will also create thousands of jobs and help to improve the lives of millions of Ethiopians.
Conclusion
The Ethiopian New Investment Proclamation is a significant piece of legislation that has made it easier for foreign investors to invest in Ethiopia. The new Investment Proclamation has liberalized the investment regime, reduced the minimum capital requirement, and offered a number of tax incentives to foreign investors. The new Investment Proclamation has also guaranteed the protection of foreign investments from expropriation and nationalization.
As a result of the new Investment Proclamation, Ethiopia has attracted a record amount of foreign investment in recent years. Foreign investment has helped to boost economic growth and create jobs in Ethiopia.
Additional Analysis
In addition to the key features and related provisions mentioned above, there are a few other aspects of the Ethiopian New Investment Proclamation that are worth noting:
- Dispute resolution: The new Investment Proclamation establishes an investment dispute resolution center to settle disputes between foreign investors and the Ethiopian government. The center will use international mediation and arbitration rules to resolve disputes.
- Transparency and accountability: The new Investment Proclamation requires the Ethiopian government to be transparent and accountable in its dealings with foreign investors