Investment regulation in Ethiopia is subjected to several laws that are mainly enacted to facilitate, promote and enhance foreign direct investment in Ethiopia. This article contains a brief description of the existing laws pertaining to investment.
- Investment Proclamation No. 769/2012 (DOWNLOAD)and its amendment Proclamation No. 849/2014 (DOWNLOAD), and Council of Ministers Regulations No. 270/2012 (DOWNLOAD) Investment Incentives and Investment Areas Reserved for Domestic Investors and its amendment Regulation No. 312/2014 (DOWNLOAD)
- The Ethiopian Commercial Code of 1960’s. (DOWNLOAD)
- Council of Ministers Regulation No. 313/2014 to establish the Ethiopian Investment Commission and Ethiopian Investment board. (DOWNLOAD)
- Industrial Park Proclamation No. 886/2015 (DOWNLOAD) and Council of Ministers Regulation No. 417/2017 on Industrial parks. (DOWNLOAD)
1. The Investment Proclamation and Regulation
The investment proclamation no. 769/2012 (as amended in 2014) and investment regulation no. 270/2012 (as amended) are the primary laws that dictate the general outline of investment in Ethiopia. They prescribe the requirements to be a qualified investor and to establish tenable investment in Ethiopia. These requirements include areas reserved for specific investors, forms of investment, and capital requirement.
Requirements pertaining to the Area of investment
Areas of investment exclusively reserved for the government (Article 6.1 of the Proclamation)
- Transmission and distribution of electrical energy through the integrated national grid system;
- Postal services with the exception of courier services;
- Air transport services using aircraft with a seating capacity of more than fifty passengers.
- Areas of investment allowed for foreign investors in joint venture with the government (Article 6.2 of the Proclamation)
- Manufacturing of weapons and ammunition
- Telecom services
Areas of Investment Reserved for Ethiopian nationals: (Article 3.1 of the Regulation)
The following areas of investment are exclusively reserved for Ethiopian nationals:
- banking, insurance and micro credit and saving services;
- broadcasting services;
- mass media services;
- attorney and legal consultancy services;
- preparation of indigenous traditional medicines;
- advertisement, promotion and translation works;
- air transport services using aircraft with a seating capacity of up to 50 passengers.
Areas of Investment Allowed for Foreign Investors: (Article 4 of the Regulation)
- All areas of investment shown in this schedule except those areas provided for in number 1.3.3, 1.4.2, 1.7, 1.11.3, 1.11.4, 5.3, 6.2, 8.2, 9.2, 9.3, 12 are open for foreign investors
- Packing, forwarding and shipping agency services (recent decision of Ethiopian Investment Board)
- Please note that we mentioned above areas those exclusively reserved under the Proclamation and Regulation for the Government or joint venture with the Government or for Ethiopian nationals.
Capital Requirement for Foreign Investors
- Any foreign investor, to be allowed to invest according to the Proclamation, is required to allocate a minimum capital of 200, 000 US dollars for a single investment project.
- The minimum capital requirement for a foreign investor investing jointly with domestic investors shall be 150,000 US dollars.
- The minimum capital required of a foreign investor investing in architectural or engineering works or related technical consultancy services, technical testing and analysis or in publishing shall be:
- 100,000 US dollars if the investment is made wholly on his own;
- 50,000 US dollars if the investment is made jointly with domestic investors.
Forms of Investment in Ethiopia (see the article on forms of investment)
Foreign investors in Ethiopia are allowed to carry out their business in any of the following forms;
- Sole proprietorship;
- Business organizations incorporated in Ethiopia or abroad (shall be registered in accordance with the Commercial Code or any other relevant law).
In addition to the requirements, the laws also deal with investment administration, investment guarantees and protections, and investment incentives. The proclamation also sets the procedures on investment permit which is dealt on the article dealing with investment procedures.
2. The Ethiopian Commercial Code of 1960’s
The commercial code provides the legal bases for doing business in Ethiopia. The commercial code is composed of five books; (1) Traders and Businesses, (2) Business organizations, (3) Carriage and Insurance, (4) Negotiable Instruments and Banking Transactions and, (5) Bankruptcy and scheme of arrangements.
3. Council of Ministers Regulation No. 313/2014 to establish the Ethiopian Investment Commission and Ethiopian Investment Board
This regulation establishes the bodies empowered to regulate and administer the investment laws, the Ethiopian Investment Commission and Ethiopian Investment Board. It is important to note that these regulatory bodies have the mandate to promote, facilitate, regulate, and administer foreign direct investments but not domestic investment (this falls under the ambit of the Ministry of Trade and industry).
4. Industrial Park Proclamation No. 886/2015 and Council of Ministers Regulation No. 417/2017 on Industrial Parks
These laws emphasise on the establishment and administration of industrial parks. The laws have the aim to enhance domestic and foreign direct investments through the establishment of industrial parks so that the country can realize an effective economic transformation and development.