1. Legal Framework Governing Investment in Ethiopia

Ethiopian investment law is primarily governed by the Investment Proclamation No. 1180/2020, its amendment Proclamation No. 1324/2023, and accompanying investment Regulation No 474/2020. The Ethiopian Investment Commission (EIC) is the key government organ responsible for implementing investment policies and overseeing investments in the country.

2. Types of Investments and Sectors

Investment is defined as an expenditure of capital in cash or in kind or in both by an investor either a Domestic or Foreign individual. A domestic investor can be an Ethiopian individual, enterprise incorporated in Ethiopia, the Government, Public enterprise, Cooperative society, Foreign national or enterprise treated as domestic investor as per a relevant law or a treaty. A foreign investor is an investor who is a foreign national, enterprise incorporated outside Ethiopia, an Enterprise in which a foreigner is a shareholder of and an Ethiopian permanently residing outside Ethiopia and prefers to be treated as a foreign investor.

3. Investment Sectors

The investment law follows the Negative listing approach to prohibit investment sectors to foreign investment. The categories of the list are, Areas reserved for joint investment with the government, Areas reserved for Domestic investors and Areas reserved for joint investment with domestic investors.

There are recent developments of opening previously restricted sectors to foreign investors such as the Communication Service Proclamation No 1148/2019 which lifted the restriction on foreign investors, Directive to Regulate Foreign Investors’ Participation in Restricted Export, Import, Wholesale and Retail Trade Investment no 1001/2024 and the Banking Business Proclamation No 1359/2024 which allows foreign banks to establish subsidiaries, branches, or representative offices in the country. 

4. Requirement to invest as a Foreigner

The requirements are that the investment shall be one that is allowed for foreigners and meet the provided minimum capital requirement. The minimum capital requirement is to bring in 200, 000 USD for single investment project which will be reduced to 150,000 USD if the investment is to be done in a joint venture with a domestic investor. The EIC provides a one window service for the investment permit, registration and licensing process of the business in collaboration with other relevant government organs.

5. Investment Incentives

Income Tax Holidays: Up to 10 years for investments in priority areas like industrial parks and renewable energy.

Customs Duty Exemptions: On capital goods, construction materials, and spare parts.

Export Incentives: Exemption from export taxes for goods and services intended for foreign markets.

Non-Tax Incentives: Lease of land at competitive rates, especially in industrial parks. Fast-tracked investment licensing and one-stop services through the Ethiopian Investment Commission.

6. Investor Rights and Protections

• A. Legal Protections

Repatriation of Profits: Foreign investors are entitled to repatriate profits, dividends, and capital without restrictions.

Investment Guarantees: Ethiopia is a member of international agreements such as the Multilateral Investment Guarantee Agency (MIGA) and has bilateral investment treaties (BITs) with several countries.

Expropriation Protections: Investments cannot be expropriated or nationalized unless done for public interest and with adequate compensation.

• B. Dispute Resolution Mechanisms

The law provides options for dispute resolution, including arbitration, and Ethiopia is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.