ETHIOPIA Trends and Developments Contributed by: Getu Shiferaw, Awoke Mitku, Gutema Kajela Ejeta and Debora Belachew, Mehrteab & Getu Advocates LLP
Overview of the Ethiopian Market Ethiopia has a large domestic market with a rapidly growing population of more than 120 million people. Ethiopia presents a compelling investment opportunity, having one of Africa’s fastest-growing economies. The country’s mar - ket is attractive for investors due to the following factors: • ongoing economic growth at a promising rate and the development of investment-friendly policies, especially in the agriculture, manu - facturing, mining, tourism and service sec - tors; • competitive production costs, including ener - gy and labour costs, which is advantageous for investors in the agricultural, manufacturing and service sectors; • enabling infrastructure including several hydroelectric power generation dams, rail - ways and airports; • access to regional and international markets through membership of the Common Market for Eastern and Southern Africa (COMESA) and the African Continental Free Trade Area (AfCFTA), and pending accession to the World Trade Organization (WTO), where the acces - sion process is now in the final stage; • abundant natural resources such as tantalum, potash, gemstones, gold and iron ore, which offer huge potential opportunity for explora - tion and development; and • attractive investment incentives such as income tax holidays, duty-free privileges, loss carry-forward rights, a guarantee against expropriation and a guarantee of efficient and
inaccessible to foreign investors. In April 2020, however, a new investment proclamation was enacted by the Ethiopian Parliament as part of the country’s market liberalisation initiative, and Ethiopia changed to a negative listing approach such that all investment areas not specifically reserved for domestic investors, joint investment with the government and joint investment with domestic investors became accessible to for - eign investors. Spurred by this foreign direct investment-friend - ly approach, the Ethiopian government has been liberalising the Ethiopian market almost in all investment sectors, including the following. Banking For a long time, banking was reserved for domestic investors only. The Ethiopian banking business, which has a long history of domestic ownership, has been facing challenges such as a lack of competition, a complex and underde - veloped regulatory environment and a shortage of skilled professionals. However, the govern - ment has recently opened the sector to foreign investors, a significant development that has the potential to accelerate growth and development through the attraction of new capital, technology and expertise. Foreign investment in the banking sector has been permitted by Banking Business Proclamation No 1360/2024, which was enacted by the Ethiopian Parliament in December 2024. The Banking Business Proclamation, among other things: • opened the banking sector to foreign inves - tors and provides that foreign banks can join the sector by establishing a subsidiary, branch, or commercial representative office (CRO), or by acquiring shares in a bank;
effective repatriation of funds. Market Liberalisation Trends
Prior to 2020, Ethiopia was implementing a posi - tive listing approach in relation to foreign direct investment, with certain investment areas being
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