BY BACHA ZEWDIE
Ethiopia has been undertaking multifaceted economic reforms over the past two years. In fact, the overall assessment indicated that it was necessary to address existing problems in the investment sector by formulating policies, enacting laws, amending rules and regulations, improving the investment management system and resolving grievances related to investment activities.
It has been more than a year since the investment law was amended to enable the government to achieve its economic reforms in the sector. The basic premise of the Investment Law is to identify the many problems that investors face in entering Ethiopia and to establish an investment law and investment management system that is effectively applicable.
Overall, the country has been undertaking economic liberalization for the past two years. In this regard, the government’s liberalization scheme also necessitates the passing of this law. As a result, a system is being set up that addresses investors’ concerns that extend from hearing their grievances to setting up a response timeframe and making the responsible government body accountable.
The Ethiopian Investment Commission organized and held discussions with embassies, investors, government officials and development partners so as to encourage investors to utilize the ample opportunity that the country’s amended investment law offers. Besides, the discussions have also incorporated the impact of COVID-19 on investment and how to deal with it.
The discussion forums mainly focused on promoting investment opportunities in the county besides clearing up misconceptions about the reform in the investment sector. In addition, discussions have been also held about the post-COVID-19 investment opportunities in the country.
The new investment proclamation and new regulation enacted in 2019 and 2020 respectively have made some investment sectors open to foreigners which were not the case previously. This is a big move as it allowed foreign investors to fully engage in investment in the country expect in few sectors which are exclusively given to the state due to specific reasons said Daniel Teressa, Investment Commission’s Deputy Commissioner, attending the seventh session discussion recently held with investors form the US and Canada.
The other issue that the legal reform in the investment sector improved is the ease-of-doing-business in the country, according to Daniel. Earlier, the process to begin a business in Ethiopia had been time-consuming which also restricted the inflow of foreign direct investment into the country.
Daniel further said that most of the time investment attraction is measured in terms of capital. Ethiopia is among the top five countries in the East African region that are in a better position in this regard. During this time of transformation and difficulty, effective investment sector reform and amendment of laws are critical to sustaining this record.
“The country’s plan for the current budget year is to attract investment worth four billion USD regardless of the challenges imposed by COVID-19 pandemic. The impact of the pandemic on investment has been severe especially on companies engaged in the export sector as a result of the lockdown’s effect on international trade.”
“Fortunately, our government has taken some remedial measures to protect the companies such as permitting them to sell export standard products locally and shifting their products to personal protective products like face masks,” he said. “We use these sessions as a means to promote our investment opportunities breaking through the COVID impact.”
There are post-COVID-19 recovery plans at the national level. Ethiopian Investment Commission along with stakeholders will implement the post-COVID-19 plan, Daniel noted.
At the policy and legal level, various initiatives have been undertaken to increase the awareness of investors about fundamental changes being made by the Ethiopian government and their implications, as well as the ideas adopted in the new proclamation. The aim is to make this law clear to investors and accelerate the investment climate in Ethiopia.
As a government, discussions provided an opportunity to better understand what the problems of investors are. Apart from this, the government has identified the challenges in the investment sector to come up with solutions.
Thus, what are the major changes brought about by the new investment law? What changes have taken place since the proclamation was approved and put into effect? What is expected of the outcome of discussions with various stakeholders?
Dr. Tadesse Kassa, Chief Legal Adviser of the Ethiopian Investment Commission said: “We have been discussing with the ambassadors of various countries about the changes we have made in the investment sector.”
In addition to political work, economic analysts analyze the pros and cons of the economy and present it to investors in their respective countries. Conversations with these individuals are important, he said.
Since they are the primary sources of information about investors from their respective countries, he said, finding these people means indirectly reaching out to the investors.
Therefore, it is salient to work with these institutions, treat them as stakeholders, and develop solutions whenever they encounter problems. “That’s why we call these stakeholders and show them the ways in which we have changed and listen to their suggestions,” he noted.
According to Dr. Tadesse, the ambassadors of all countries have positively accepted the changes in the investment law and their impact in promoting the growth and participation of the private sector.
The ambassadors also appreciated the work done in modernizing the investment process and in addressing the complaints of investors swiftly.
One of the major changes brought about by the new investment law is that it details the sectors that are open to foreign investors. Considering the limitations of the previous investment law, as well as the government’s approach to private investors over the years, the expectation is that a similar law would be enacted.
Particular emphasis was placed in making previously closed sectors open to private investors as much as possible. The new investment law enables public-private partnerships to take part in investments activities that were previously solely controlled by the government.
In addition, attempts have been made to create opportunities for foreign investors to engage in investments previously allowed only for local investors. This is one of the so-called liberalization of the economy, the commission’s chief legal adviser said.
According to Dr. Tadesse, the second and fundamental change brought about by the new investment law is the establishment of a transparent, modern and multi-stakeholder investment system that addresses grievances in relation to investment management. Significant steps have been taken in this regard.
In the past, when investors have complaints about services, there was no clear and consistent management to solve their grievances from top to bottom. Under the new investment law, however, it is clear when and how investors submit complaints and when to get a response.
Attempts have also been made to provide details on how to file a complaint to the Board if the investors do not agree with the Commission’s decisions or if they observe loopholes in the workings of other executive bodies. Investors are expected to have complaints in the process and efforts have been made to respond to their concerns in a swift and clear manner.
According to Dr. Tadesse, the third and most important amendment deals with the possibility of suspending or revoking investment licenses. Under previous investment laws, there were undisclosed rules, so there was a risk that the management would gain greater power and that the investor could be improperly suspended or had his license revoked. In contrast, under current investment law, the reason for their suspension and revocation is clear.
Efforts have been made by both the government and the investors to establish a transparent and accountable system. The investor has the right to be heard when an investment license is suspended or cancelled.
“It takes time to change our investment climate,” said Dr. Tadesse adding, making laws and policies alone is not the answer to everything. The fundamental answer is to establish and maintain a transparent system of government. “We also need to build the capacity of the implementers. Although we have travelled a long distance, we still have a long way to go; we will continue to strengthen this,” he said.
The Ethiopian herald December 23/2020
