In a sweeping policy reform aimed at attracting foreign capital and invigorating the country’s trade sector, the Ethiopian Investment Board has issued a landmark Directive No. 1082/2025 lifting long-standing restrictions on foreign participation in export, import, wholesale, and retail trade.
The move marks a significant departure from Ethiopia’s traditionally protectionist stance, signaling a bold shift toward liberalizing its domestic markets. Experts told that such move drives the nation to a better level of economic liberalization.
According to a report from Ministry of Trade and Regional Integration, for years Ethiopia maintained a cautious approach to foreign investment in its trade sectors, reserving large swaths of commercial activity particularly in import and retail for domestic investors. The aim was to shield local businesses from foreign competition and to incubate a homegrown entrepreneurial base.
However, the government now acknowledges that Directive No. 1001/2024 which allowed limited foreign entry into selected sectors under specific conditions, failed to achieve the anticipated scale of transformation. Despite preferential policies, complaints about poor service delivery, inefficiency, and limited product access persisted across sectors was prevailed.
To incentivize domestic traders, the government provided numerous chances to put them in advantageous position including subsidy and tax holidays that remained in veins.
This necessitated the invitation of foreign entities to engage in retail and whole sale trade including import and export business.
According to the Investment Board, the new directive is designed to support Ethiopia’s macro -economic, structural and sectorial reforms by creating a competitive business environment that fosters both domestic and foreign enterprise.
The Provisions of Directive 1082/2025 sets out clear and transparent conditions which foreign investors can participate in previously restricted trade sectors. The directive entails that export trade obtained green light for key commodities in which foreign investors can now freely invest in the export of raw coffee, oil seeds, chat, pulses, hide and skins, forest products poultry and livestock.
To secure an export trade license, investors must submit a due diligence report validating their business integrity, financial capacity, and absence from global sanction or watch lists.
Foreign investors have been given broad access with the exception of fertilizer and petroleum. All import sectors previously reserved for domestic investors are now open. However, foreign investors must submit a verified integrity reports.
Compliance documents indicating the source of funds and record of accomplishment in line with international norms are also mandatory.
Foreign investors can now participate in wholesale trade. They are permitted to sell imported goods, purchase and distribute domestically manufactured products.
All wholesale entrants are required to present similar integrity and capacity reports, ensuring accountability and preventing market abuse. Perhaps the most dramatic policy change lies in retail trade. Under the new rules, foreign investors must bring a minimum of 2.5 million Dollars in paid-up capital (cash and/or assets). In addition to these, a comprehensive due diligence report is mandatory.
However, the Board reserves discretionary authority to approve a reputable single brand retail business to operate at a smaller capital base, indicating potential flexibility for globally recognized consumer brands seeking market entry.
To ensure robust oversight and prevent anti-competitive practices, institutional oversight is necessary. To facilitate all activities, the Ethiopian Investment Commission (EIC) will handle investor applications and issue investment permits.
In line with this, the Ministry of Trade and Regional Integration will monitor retail and wholesale conduct, and issue operational licenses.
A joint Regulatory Committee, comprising the EIC, Ministry of Industry, Ministry of Revenue, Customs Commission, and the National Bank of Ethiopia, among others, will evaluate implementation outcomes and ensure the policy’s effectiveness. The move has its own implications and signal to Global Investors.
This liberalization effort comes at a time when Ethiopia is courting international finance, aiming to stabilize its economy amidst mounting debt and inflation. Analysts suggest that Directive 1082/2025 could attract multinational firms seeking new African markets, particularly in agribusiness, retail, and logistics.
“Ethiopia is signaling that it is open for business,” said a senior official at the Ministry of Finance. “But we are doing so on terms that safeguard national interests and encourage long-term partnerships, not short-term extraction.”
However, there are also challenges ahead, while the directive offers hope for revitalizing Ethiopia’s trade sectors, some local entrepreneurs fear displacement and rising foreign dominance. Critics warn that unless carefully monitored, liberalization could widen inequality and concentrate market power in the hands of foreign conglomerates.
Nevertheless, the government appears prepared. “This is not a free-for-all,” said Ambassador Girma Birru, Chair of the Investment Board. “It’s a rules-based opening designed to reward integrity, transparency, and mutual benefit”
As Ethiopia endures the complexities of economic reform, Directive No. 1082/ 2025 stands as a bold experiment. It plays crucial role in balancing openness with national development goals. Its success will depend on fair enforcement, investor accountability, and the government’s ability to shield vulnerable local actors while leveraging foreign capital for inclusive growth.
According to the Investment Commission, in the last five months the commission has been registering foreign investors who show interest to do business here. So far, 40 foreign companies have been registered to start business here.
The investment board ratified the Regulation No. 1001/2016 EC which paves the way for the reinvigoration of the retail and wholesale trade which was banned for the last 50 years since the downfall of the imperial regime. Strict regulations, however, have been introduced to safeguard local interests.
Allowing foreign investors could intensify competition within the retail and wholesale sectors, potentially benefiting consumers through lower prices and increased product variety.
The influx of foreign investment is expected to stimulate economic growth by creating jobs, increasing tax revenue, and modernizing infrastructure.
Foreign investors often bring advanced technologies and management practices, which could lead to improvement in supply chain efficiency and logistics within the retail and wholesale sectors.
Smaller, local businesses may face challenges competing with larger international companies, requiring them to adapt and innovate to remain competitive.
The government will need to establish clear and transparent regulations to govern foreign investment in these sectors, ensuring fair competition and protecting the interests of all stakeholders.
Some experts suggest a phased approach to opening the sectors, starting with specific segments or geographical areas to mitigate potential risks and allow for adjustments.
It is crucial to provide support and training to local businesses to enhance their competitiveness and facilitate their participation in the evolving market.
The government needs to strike a balance between promoting competition and fostering the growth of local businesses, ensuring sustainable and inclusive development.
The potential opening of Ethiopia’s retail and wholesale trade sectors to foreign investors is a significant policy decision with the potential to transform the economic landscape. Careful planning, transparent regulations, and targeted support for local businesses will be crucial for realizing the full benefits of this initiative.
According to the World Bank Documents, the country is dedicating on the expansion of the private sector, especially through foreign investment in the industrial parks.
The impact of relaxation in rules would be more pronounced in apparel, luxury goods, home decor, footwear, and electronics.
The home grown reform program introduced five years ago requires launching a comprehensive and well-coordinated economic reform agenda, encompassing macro-financial measures to stabilize the macro-economy and arrest financial sector vulnerabilities; structural reforms to alleviate business constraints to create an enabling environment for private sector investment; and sectorial policies to address sector-specific institutional and market failures and enhance productivity in key economic sectors.
The revised bill would be instrumental to enhancing productivity, supporting the country’s economic growth, enhancing investment and saving, and to support the homegrown economic reform in a meaningful manner.
Over the past six years, various sectors and sub-sectors have been opened up for domestic and foreign investment to make Ethiopia a business friendly nation alongside implementing plenty of legal and administrative reforms during the stated period.
BY ABEBE WOLDEGIORGIS
THE ETHIOPIAN HERALD FRIDAY 27 JUNE 2025
