In a historic move, the Ethiopian Investment Board has issued Directive No. 1001/2024 allowing foreign investors to enter sectors previously reserved for domestic investors. This shift, marking a departure from investment policies in place since the 1970s, is aimed at attracting foreign investments and revitalising Ethiopia's integration into the global market.
The directive particularly impacts the export sector, a major source of revenue for Ethiopia, generating up to US$3 billion annually. However, foreign investors interested in export activities such as coffee, khat, oil seeds and other commodities, will need to meet certain preconditions, including demonstrating a history of significant procurement from Ethiopia.
The directive has also liberalised the import sector, permitting foreign manufacturers and agents of manufacturers to import and sell various products without substantial restrictions, with the exception of fertilisers and petroleum. Those not manufacturing abroad must commit to importing at least US$10 million worth of commodities to maintain their licences.
In wholesale and retail trade, the directive permits foreign investors to engage more broadly, including as importers and purchasers from local manufacturers. It also opens up retail trade to foreign entities, provided they meet infrastructure investment and operational thresholds, like establishing multiple retail outlets within specific time frames.
The Ethiopian Investment Commission will oversee the implementation of these regulations, ensuring compliance and promoting fair competition.
The directive aims not only to attract foreign investment but also to integrate Ethiopia more effectively into the global economy by addressing previous challenges such as unfair competition and market monopolies.
The liberalisation introduced by the directive marks a fundamental policy shift but still represents a cautious approach to change, with numerous preconditions and eligibility criteria for potential investors. These conditions are intended to attract large-scale strategic investors with the potential to generate significant revenue and introduce transformative changes to the economy.
In issuing this directive, the government has acknowledged that previous investment policies – largely focused on domestic growth and integration into the global value chain – failed to yield the expected results and came up against unfair competition and unlawful practices. The new directive aims to start shifting this, although further liberalisation may also be necessary.
For a more detailed analysis of the directive's implications and opportunities for foreign investors, readers can access the full publication by Mekdes & Associates here. This insightful piece is essential for stakeholders and potential investors aiming to understand the strategic impact of Ethiopia's new economic policies.
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