This page contains a guide to the existing investment proclamations and regulations. The general aim of investment incentives is to influence the locational decisions of investors and thus to reap the positive effects of foreign direct investment fdi. Ethiopia investment policies and incentives and opportunities. Effectiveness of investment incentives in developing. Survey asked about three most critical factors for investment decisions answer in percent 18 33 37 personal resons skilled and competititvely investment climate serbia 50 total respondents 32 35 77 attractiveness of incentives labor cost investment climate nicaragua 71 respondents.
Aug 15, 20 the export incentives under the current investment incentives, with the above stated incentives, will be discussed below. Ethiopia investment policies and incentives and opportunities unido. In most countries these are coordinated by a dedicated investment promotion agency ipa3. Effectiveness of investment incentives in developing countries evidence and policy implications dr. In part i of top 5 opportunities for investment in ethiopia, i recommended financial services, telecoms, and heavy constructions as sectors that investors should look into. Amend the investment incentives and investment areas reserved for dome stic investors regulation no. This paper measures the impact of foreign direct investment fdi on economic growth in ethiopia based on annual time series data over the period 1974 to 2011. Ethiopia once the byword for famine in the region is garnering attention from foreign investors. In most developing countries like ethiopia, the government is offering huge tax incentives to attract capital and support the economy through foreign direct investment fdi. Investment policy and promotion strategy for ethiopia to 2010. A read is counted each time someone views a publication summary such as the title, abstract, and list of authors, clicks on a figure, or views or downloads the fulltext.
Table 1 below shows the shares3 of the different sectors of the. Pdf savings, investment and economic growth in ethiopia. Ethiopia investment guide 20172018 aln ethiopia mesfin. To encourage private investment and promote the inflow of foreign capital and technology into ethiopian, the following incentives are granted to both domestic and foreign investors engaged in. Investment incentives and investment areas reserved for. The highlights of investment proclamation and guideline bellows are compiled from investment proclamation no. Whereas, exchange rate volatility, corruption, and lack of clear policies and regulatory impediments were identified as the three main factors that have the potential to deter foreign investment in ethiopia. However, upcoming economies are suffering and paying the price for tax incentives offered to foreign companies.
Investment guide for ethiopia business environment investment policy investment areas incentives guarantees taxation investment opportunities investment procedures addis ababa, ethiopia january 2004 published by. Investment policy and promotion strategy for ethiopia to 2010 45. The liberalization of the economy prompted improved incentives and more efficient marketing in the country. Development bank of ethiopia dbe export credit guarantee. Guisinger and associates 1985 investment incentives and performance requirements for exportoriented firms 33% reuber 1973. Domestic investors council of ministers regulation. Investment guide for ethiopia business environment investment policy investment areas incentivesguarantees taxation investment opportunities investment procedures addis ababa, ethiopia january 2004 published by. Investment incentives for fdis are significant and include 100 per cent exemption. Box 113 addis ababa, ethiopia in collaboration with. Eighteen major agroecological zones have been identified in the country, and over 3 million ha land has been made available for investment.
Best practice in attracting investment introduction in todays globalized economy, few countries can remain competitive without foreign direct investment fdi. Before planning to invest in ethiopia and begin the investment procedure, it is advisable to consider the. Investment incentives in ethiopia fikadu and associates law. Organisation for economic cooperation and development pursuant to article 1 of the convention signed in paris on 14th december 1960, and which came into force on 30th september 1961, the organisation for economic. One of the policies in ethiopia is a tax holiday with the main goal of enhancing investment. A preferred location for foreign direct investment in africa. According to regulation number 2702012 as amended in july 2014, any investor engaged in the areas of investment specified in the schedule attached with it except some may import dutyfree capital goods and construction materials necessary for the establishment of a new enterprise or the expansion or upgrading of an existing enterprise. Fiscal incentives are tax measures geared to encourage industrial development designed to assist manufacturing entrepreneurship.
Jan 22, 2014 to encourage private investment and promote the inflow of foreign capital and technology into ethiopia, the following incentives are granted to both domestic and foreign investors engaged in areas eligible forinvestment incentives. Investment incentives in ethiopia to encourage private investment and promote the inflow of foreign capital and technology into ethiopia, the following incentives are granted by the ethiopian investment code to both domestic and foreign investors engaged in areas eligible for investment incentives. It in particular examines how fdi affects gdp growth, both directly and also conditioning on trade liberalization that ethiopia adopted in early 1990s. The african setting while the african continent has immense human and natural resources, a combination of factors, including the colonial heritage, structural weaknesses of individual economies, susceptibility to the disastrous effects of natural and manmade. It is responsible for facilitating the implementation of new investment projects, providing after care services for new and existing investments, as well as organizing investment promotion activities both locally and internationally. The impact of tax holiday on investment in ethiopia. Ethiopian investment policy and its incentives fikadu and. With the potential benefits including technology transfer, employment gains, skills upgrading. Almost half of the flows from the east african region were absorbed by ethiopia. Tax incentives are often instances of tax competition, with the risk that ultimately all countries will lose by attracting investment that would otherwise have gone to anothere. Investment incentives in ethiopia to encourage private investment and promote the inflow of foreign capital and technology into ethiopia, the following incentives are granted by the ethiopian investment code to both domestic and foreign investors engaged in. Ethiopia has become a preferred destination for foreign direct investment and emerging. The industrial sector has been growing, and by 2025, ethiopia is expected to. Fdi inflows to the country have accelerated in recent years.
To encourage private investment and promote the inflow of foreign capital and technology into ethiopia, the following incentives are granted by the ethiopian investment code to both domestic and foreign investors engaged in areas eligible for investment incentives. As shown in table 1, domestic investment in ethiopia has increased rapidly since the introduction of liberal policies in 1992. Checklist for foreign direct investment incentive policies. Evidence from ardl approach to cointegration and tydl grangercausality tests article pdf available october 2014 with 7,7 reads. Investment objectives of the federal democratic republic of ethiopia the objectives of the investment policy of the federal democratic republic of ethiopia are designed to improve the living standards of the peoples of ethiopia through the. Ethiopian investment policy and its incentives fikadu. Savings, investment and economic growth in ethiopia. Making investment incentives work for structural transformation and inclusive development. Tax incentives in one form or the other are prevalent in all regions of the world number of. Investment incentive, policy implemented by government to promote the establishment of new businesses or to encourage existing businesses to expand or not to relocate elsewhere. Department of state 2015 investment climate statement may 2015 5 the 2012 amendment to ethiopias investment proclamation introduced provisions for the establishment of industrial development zones, both staterun and private, with favorable investment, tax, and infrastructure incentives.
This is significantly below the ssa average of 47% with ethiopia at low risk. Investment incentives repatriation of investment and profits repatriation. To encourage private investment and promote the inflow of foreign capital and technology into ethiopian, the following incentives are granted to both domestic and foreign investors engaged in areas eligible for investment incentives. The gradual shift to private ownership, which is being overseen by two government agencies, the ethiopian investment authority and the ethiopian privatization. Chapter 5 the economics of international investment incentives. Impact of foreign direct investment on economic growth of. Investment brochure to ethiopia ethiopia investment commission. Pdf determinants of foreign direct investment in ethiopia. Investment incentives in ethiopia one of the steps taken by the government to enhance investment in ethiopia is the provision of investment incentives. The effectiveness of tax incentives in attracting foreign. To encourage private investment and promote the inflow of foreign capital and technology into ethiopia, the following incentives are granted to both domestic and foreign investors engaged in areas eligible.
Chapter 3 overviews of foreign direct investment and tax incentives in ethiopia 12 3. Investment incentives in ethiopia fortune of africa ethiopia. Opportunity for investment in ethiopias hospitality. Investment incentives in ethiopia fikadu and associates. Investment promotion and incentives in ethiopia igad land. Investment incentives in ethiopia a brief note on investment incentives in ethiopia.
However, the gap between domestic investment and savings has remained wide thereby reinforcing the need for fdi in the development of the economy. Saporna ethiopian civil service university abstract many developing nations formulate tax policies aimed at stimulating rapid economic growth. Ethiopias vision of becoming a middle income country by 2025 is built around economic, social, and environmental pillars ethiopian investment comission 9 1. The fiscal incentives under the current legal system are incentives relating to customs duty, income tax duty, and export incentives. The government of ethiopia has attempted to promote private sector investment through the provision of investment incentives, by implementing an investor friendly taxation, trade and credit system, and by simplifying and clarifying business and administrative procedures for investors. Ethiopias investment code provides incentives for developmentrelated investments. A new report and investor survey published today by the world bank group concludes that, on balance, foreign direct investment fdi benefits developing countries, bringing in technical knowhow, enhancing work force skills, increasing productivity, generating business for local. The introduction of tax relief and land incentives has helped to boost investor confidence as well. Vienna, austria, october 25, 2017reducing risk in developing countries is key to spurring investment and growth. The increase in tourist and conference guest numbers helped ethiopias hospitality income revenue rise from 17 billion birr usd 724 million in 2012, to 18.
It expands the productive capacity of a nation and plays a crucial role in the economic growth and development process. Review of investment incentives international growth centre. A new report and investor survey published today by the world bank group concludes that, on balance, foreign direct investment fdi benefits developing countries, bringing in technical knowhow, enhancing work force skills, increasing productivity, generating business for. Top 5 opportunities for investment in ethiopia part ii. The economics of international investment incentives the attitude towards inward foreign direct investment fdi has changed considerably over the last couple of decades, as most countries have liberalised their policies to attract all kinds of investment from multinational corporations mncs. Guarantee by dbe that covers 80% of loan and interest provided by commercial banks to exporters with bankable export project except for coffee export. In some countries in transition, such instruments may be seen as a counterweight to the investment disincentives. For further information read ethiopian investment guide 2015 or visit vestethiopia. Ethiopian investment policy and its incentives below you will find a summary of the investment policy and incentives provided as per the ethiopian investment laws.
Foreign direct investment fdi in ethiopia investing. Recent government reforms and incentives are unlocking investment and business opportunities in a variety of exportoriented sectors including manufacturing, agriculture and agroprocessing and industrial zones development, amongst others. Opportunity for investment in ethiopias hospitality sector. Invest in ethiopia structural reforms set to unlock east. Investment promotion and incentives in ethiopia tsegaye teldu 1. Opinion emerging economies have introduced tax incentives for various reasons.
Chapter 5 the economics of international investment. Ethiopias primary law concerning foreign investment is the investment proclamation. Areas of investment opportunities and incentives setting up an investment operating an investment factors at a glance legal and institutional framework annexes 3 5 6 18 22 23 28 32 1 an investment guide to ethiopia. There is no restriction on the modality of participation. The range of incentives offered is extensive and includes. This page contains details on the incentives as laid out by the council of ministers. How to benefit from import customs duty incentives for. Ethiopas investment commission eic is mandated with promoting investments in ethiopia. The reader is advised to consult the above stated laws to have a comprehensive understanding of ethiopian investment incentives scheme. Ethiopia offers one of the largest and most diverse agricultural investment opportunities in the continent. Ethiopian business development services network ebdsn p. Income tax exemption for new enterprise 11 any investor who invests to establish a new enterprise shall be entitled to income tax exemption as provided for in the schedule attached hereto.
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