The administration of Prime Minister Abiy Ahmed (PhD) has been amending the investment law to enable the private sector engagement in the manufacturing of weapons, ammunition and explosives, which were exclusively reserved for the state, in a joint venture arrangement with the government.
The bill, drafted by the Ethiopian Investment Commission and a technical team, also allows the private sector to invest in air transport and postal services, engage in the import and export of as well as the transmission and distribution of electricity partnering with the state.
Drafted by a 17-member technical team composed of experts from the Addis Abeba University, the federal government and private institutions, the bill is up for deliberation and validation at workshops by representatives from the private sector, institutions and development partners in two sessions.
The amendment aims to catch up with the changes in the global and local economy, according to Fantu Farris, co-chair of the technical team.
"The initiative to amend the law also shows the country's initiative in opening up the investment climate for the private sector," she said.
The team, which operates under the management team of the Commission, has been revising the law since January. In amending the proclamation, the team reviewed the investment laws of 25 countries including Uganda, Kenya, Tanzania, Brazil, Argentina and China.
The bill also defined the membership and structure of the Commission's board of directors. In the existing structure, the composition and number of members of the board of directors is not specified. However, the amendment stipulates the members to be nine people pooled from the ministries of Finance, Trade & Industry, Agriculture and Revenues, as well as from the energy sector.
Existing law does not allow the membership of representatives from the private sector to be represented in the board of directors. The new law proposes one non-voting private sector representative to join the board of directors.
The amendment will also bring a new organ to life, which will be reviewing grievances from investors. In the existing system, the investors lodge complaints with the Commission. Investors can also appeal to the Investment Board if they are not satisfied with the decisions of the grievance hearing body.
"We expect the bill to be legislated in the first quarter of the coming fiscal year," Abebe Abebayehu, head of the Ethiopian Investment Commission, said.
Tewodros Meheret, a lawyer and legal consultant and a lecturer at Addis Ababa University's College of Law and Governance Studies, says the revision would potentially help the country in attracting more foreign direct investment (FDI).
"The bill relaxes many areas of investment, which will definitely motivate foreign investors to invest in the country," said Tewodros.
In the last fiscal year, the country managed to attract 3.3 billion dollars in FDI, making the country the fifth largest FDI recipient in Africa. The value is also nearly half of the total inflow to East Africa. Manufacturing is the biggest driver of FDI, accounting 69pc of the total value.
Zemedeneh Negatu, investment consultant and chairperson of Fairfax Africa Fund, recommends the government consider different incentive packages in a bid to attract as many foreign companies as possible.
"In doing so, the country will get many global companies that will invest in the country as well as transfer knowledge to local firms," Zemedeneh said.
Update(CLARIFICATION): We have reported that the Ethiopian Investment Commission has drafted a bill to amend the existing investment law where it opens the manufacturing of weapons and ammunition to the private sector through joint venture arrangements with the government. However, it came to our attention that the existing investment law allows joint venture investments in these sector with the government. We sincerely apologise for any misunderstanding and inconvenience this may have created for our readers and the Commission.
eepBp Take Away:
Improving the doing business indicators is critical to enable more private sector participation in Ethiopia and revisiting the investment proclamation is where it begins.
What good non-voting member does in the board structure?
What good is to bring a new organ (reviewing grievances) to life while the existing structure is supposed to do the same?
In the local experience, introducing new structure does little to make improvement, often times adding unnecessary procedures, delays and costs.