According to the World Bank, Ethiopia's economy is growing at an annual rate of over 9% since 2015, a majority of which can be attributed to foreign direct investment. Even with the regulations on foreign direct investment in Ethiopia, the many incentives offered by the country through the Ethiopian Investment Commission (EIC) have fueled growth tremendously.
Foreign Investment in Ethiopia is Channeled to Specific Sectors
A foreign investor is allowed to invest in all areas of investment except those reserved for the Government, Ethiopian nationals and other domestic investors.
Authorized sectors for foreign investors come from a "positive list" attached as the Schedule to the Regulation 270/2012. The list covers more than 150 sectors and sub-sectors, but include several manufacturing sectors (basic metals industry, fabricated metal products, computer, electronic and optical products, electrical products, machinery & equipment, etc.), agro & agro-processing (food industry, crop production, animal production, forestry), ICT, hotel and tourism, construction contracting, healthcare, architecture, some specific products for import and/or export.
Sectors that are not mentioned in the foreign investor "positive list" nor in the list of sectors restricted to the Government or Ethiopian nationals are, in theory, opened to foreign investment subject to a case by case authorization from the Council of Ministers.
But Investment Incentives Provide Positive Outlook for Ethiopia
The Investment Proclamation offers to an investor up to three investment incentives, namely:
- Depending on the sector of investment and the location of the project within the country, tax exemption up to 6 years can be granted to the investor on its corporate income tax;
- To a certain limit, the investor can import its capital goods for the project on a duty free basis; and
- The tax exemption can be carried over on a following year until the project becomes profitable.
Some additional incentives are provided for export product-manufacturing companies and shall be requested at the Ethiopian Investment Commission at the time of preparation of the file for investment permit.