WHEREAS, the encouragement
and promotion of investment has become necessary so as to accelerate
the economic development of the country and to improve the living
standards of its peoples;
WHEREAS, in addition to that
of domestic investors, it is deemed essential to widen the scope
of participation of foreign investors and to facilitate conditions
thereof with a view to enhancing the country's investment activities;
WHEREAS, the system of administration
of investments needs to be transparent and efficient;
WHEREAS, to these ends, it
has become necessary to revise the existing law on investments;
NOW THEREFORE, in accordance
with Article 55(1) of the Constitution of the Federal Democratic
Republic of Ethiopia, it is proclaimed as follows:
1. Short Title
This Proclamation may be cited as the " Investment Proclamation
In this Proclamation, unless
the context requires otherwise requires:
1/ "investment" means expenditure of capital by an investor to establish a
new enterprise or to expand
or upgrade one that already exists;
means an undertaking established for the purpose of gaining profits;
3/ "capital" means
local or foreign currency, negotiable instruments, machinery or
equipment, buildings, initial working capital, property rights,
patent rights or other business assets;
4/ "investor" means
a domestic or a foreign investor having invested in Ethiopia;
5/ "domestic investor"
means an Ethiopian or a foreign national permanently residing
in Ethiopia having made an investment, and includes the Government
and public enterprises;
6/ "foreign investor"
means a foreign national or an enterprise, owned by foreign nationals,
having invested foreign capital in Ethiopia, and includes an Ethiopian
permanently residing abroad and preferring treatment as a foreign
7/ " foreign capital"
means capital obtained from foreign sources, and includes reinvested
profits and dividends of a foreign investor:
" means increasing in value, by more than 25%, the full production
or service capacity of an existing enterprise, be it in variety,
volume or both, through additional investment made to the extent
determined in regulations to be issued for the implementation
of this Proclamation;
9/ "appropriate investment
organ" means the Ethiopian Investment Authority , (here in
after " the Authority "),established under this proclamation
or an executive organ of a Regional Government empowered to issue
10/ "public enterprise"
means an undertaking, wholly owned by the Federal Government or
a Regional Government established to carry out for gain manufacturing,
distribution, service rendering or other economic and related
means the Federal Government or a Region government.
3. Scope of Application
The provisions of this proclamation
shall not be applicable to investments in the prospecting, exploration
and development of minerals and petroleum resources.
4. 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 realization of sustainable economic and social development;
their particulars being the following:
1/ to accelerate the Country's
2/ to exploit and develop
the immense natural resources of the Country;
3/ to develop the domestic
market through the growth of production, productivity and services;
4/ to increase foreign exchange
earnings by encouraging expansion in volume and variety of the
Country's export products and services and the improvement of
their quality as well as to save foreign exchange through production
of import substituting products;
5/ to encourage balanced development
and integrated economic activity among the Regions and to strengthen
the intersectoral linkages of the economy;
6/ to enhance the role of
the private sector in the acceleration of development of the country's
7/ to render foreign investment
play its proper role in the country's economic development;
8/ to create wide employment
opportunities for Ethiopians and to foster the transfer of technical
know-how, of managerial skills and of technology required for
the progress of the country.
5. Areas of Investment
Reserved for the Government
The following investment areas
are exclusively reserved for the Government:
1/ defense industries;
2/ production and supply of
electrical energy with installed capacity of above 25 megawatts;
3/ air transport services
using aircraft with a seating capacity of more than 20 passenger
or with a cargo capacity of more than 2,700 kg.
4/ rail transport services;
5/ telecommunication and postal
services with the exception of courier services;
6. Areas of Investment
Reserved for Domestic Investors
1/ The following investment
areas are exclusively reserved for Ethiopian nationals:
a/ banking and insurance business;
b/ production and supply of electric energy with installed capacity of up to 25 megawatts;
c/ air transport services
using aircraft with a seating capacity of up to 20 passengers
or with a cargo capacity of up to 2,700 kg.
2/ The investment areas enumerated
in the schedule attached hereto are exclusively reserved for domestic
3/ Nothing in this Article
shall be construed to exclude domestic investors from investing
in other areas of investment.
7. Areas Reserved for
1/ Foreign investors shall
be allowed to invest in the following areas only in partnership
with domestic investors where the investment exceeds 20 million
United States Dollars.
a/ engineering and metallurgical industries;
b/ pharmaceutical industries;
c/ basic chemical and pert-chemical industries;
d/ fertilizer industries.
2/ The equity share of the
domestic partners in a joint investment, made pursuant to sub-Article
(1) of this Article Shall not be less than 27%.
3/ Nothing in this Article
shall be construed to prevent domestic investors from investing
in said areas solely by themselves.
4/ The Supervising Authority
of Public Enterprises shall receive and evaluate project proposals
submitted by any foreign investor intending to invest in partnership
with the Government; it shall submit same to the Government for
decision and, upon approval, designate a public enterprise to
invest as partner in the joint investment.
8. Areas of Investment
Open for Foreign Investors
1/ All areas of investment,
other than those exclusively reserved under this Proclamation
for the Government, Ethiopian nationals or domestic investors
or for joint investments, shall be open for foreign investors.
2/ Foreign investors shall
have the option to invest either on their own or in partnership
with domestic investors in areas of investment sub-article (1)
of this Article; provided that in the case of joint investment,
the equity share of the domestic partners shall not be less than
9. Investment Incentives
1/ Areas of investment specified
by regulations to be issued by the Council of Ministers pursuant
to the investment objectives stated under Article 4 of this Proclamation
shall be eligible for investment incentives.
2/ The regulations to be issued
pursuant to sub-article (1) of this Article shall determine the
type and extent of entitlement to incentives.
10. Forms of Investment
1/ Investments may be effected
in either of the following forms:
a/ Sole proprietorships;
b/ Business organizations incorporated in Ethiopia or abroad;
c/ Public Enterprises established in accordance with the relevant
d/ Cooperative societies formed in accordance with the relevant
2/ Any business organization under sub-article (1)(b) of this Article
shall be registered in accordance
with the Commercial Code.
11. Capital Requirement
for Foreign Investors
1/ Any foreign investor, to
be allowed to invest pursuant to this Proclamation, shall be required
to allocate a minimum capital of 500,000 United States Dollars
for a single investment project.
2/ Notwithstanding the provisions of sub-article (1) of this Article,
the minimum capital required
for a foreign investor investing jointly with domestic partners
shall be 300,000 United States Dollars.
3/ The minimum capital to
be required under sub-Article (1) of this Article shall be 100,000
United States Dollars or its equivalent in Birr with respect to
a foreign investor who re-invests profits or dividends, drawn
from an existing investment, in another new project.
4/ The minimum capital required
of a foreign investor investing in engineering or other technical
consultancy services shall be 100,000 United States Dollars.
5/ Any foreign investor having
brought investment capital into the country shall have same registered
in accordance with this Proclamation and obtain a certificate
issued by the Authority.
12. Requirement of Permit
1/ The following Investors
shall be required to obtain investment permit:
a/ foreign investors;
b/ foreign nationals taken for domestic investors pursuant to Article
2(5) of this Proclamation;
c/ domestic investors investing in areas eligible for incentives;
d/ domestic and foreign investors making joint investments in
2/ Notwithstanding Article
2(1) of this Proclamation, a foreign investor intending to buy
an existing enterprise in order to operate it as it stands or
to buy shares in an existing enterprise shall have to obtain prior
approval from the Authority. A request for such approval shall
be decided upon within 30 days of receipt of an application accompanied
by complete information.
3/ The provisions of this
Article shall not affect the right of a domestic investor intending
to invest, in conformity with the relevant laws of the Country,
in areas not eligible for incentives or, waiving his right of
entitlement, in those areas eligible for t incentives.
13. Application for
An application for investment
permit shall be made in a form designed for such purpose and submitted
to the appropriate investment organ together with the following
1/ the project profile;
2/ list of the type and quantity of machinery and equipment intended to
be exempted from import duties and taxes.
3/ in case of a business organization,
the memorandum and articles of association;
4/ in the case of expansion
or upgrading, a brief description of same and the implementation
5/ in the case of planned
employment of expatriate staff, a statement on the time schedule
for their replacement by Ethiopians and the training programme
designed for such replacement;
6/ power of attorney in the case of application made through an agent;
7/ other relevant information
relating to the particulars of the project.
14. Issuance of Investment
1/ Upon receiving an application
for investment permit made in full compliance with the provisions
of Article 13 of this Proclamation, and after ascertaining within
10 days that the intended investment activity would not be contravening
the operational laws of the country and that, in particular, it
complies with conditions stipulated in environmental protection
laws, the appropriate investment organ shall issue an investment
permit to the applicant.
2/ An investment permit shall
contain the following:
a/ the name and nationality of the investor;
b/ the investment activity;
c/ the Region or Administration intended for carrying out the
d/ the amount of investment capital; and
e/ other particulars as may be deemed necessary by the appropriate
3/ a holder of an investment
permit shall not be required to obtain a trade or an operating
license until the completion of project implementation and the
commencement of production or of rendering of service.
4/ an investment permit may
not be transferred to another person without the authorization
of the appropriate investment organ.
5/ where an investment permit
is transferred to another person or where any change occurs in
its content, it has to be submitted to the appropriate investment
organ and amended accordingly.
15. Renewal of Investment
1/ An investment permit shall
be renewed annually until the commencement of production or rendering
of service. However, the investor shall submit progress reports
on the implementation of the project, to the appropriate investment
organ, at the end of every six months.
2/ An application for renewal
of an investment permit shall be submitted at least a month before
the end of a period of one year for which the permit remains valid.
3/ The appropriate investment
organ shall renew the investment permit where satisfied as to
the existence of sufficient cause for the delay in the commencement
or completion of implementation of the project.
16. Suspension or Revocation
of Investment Permit
1/ Where an investor violates
the provisions of this Proclamation or regulations or directives
issued for its implementation, the appropriate investment organ
may suspend the investment permit until the investor takes due
2/ The appropriate investment
organ may revoke an investment permit where it is ascertained
a/ the investor obtained the permit fraudulently or by submitting false information or statements;
b/ the investor has transferred the permit to another person without the authorization of the appropriate investment organ.
c/ the investor has failed, without good cause, to renew the permit in accordance with Article 15 of this Proclamation; or
d/ incentives granted are
misused or illegally transferred to another persons.
3/ The appropriate investment
organ shall, prior to suspending or revoking a permit, notify
the investor in writing as to the causes for taking such action
and allow him a period of one month to present his views thereon.
4/ The appropriate investment
organ shall suspend or revoke the permit where the investor fails
to respond within the time limit prescribed in sub-article(3)
of this Article or presents unacceptable justifications.
5/ Upon revocation of an investment
permit, the investor shall immediately lose entitlement to all
benefits, and shall refund all financial benefits received by
way of incentives.
6/ An investment permit may
not be suspended or revoked by any entity other than the appropriate
investment organ having issued same.
TO A P P E A L
An investor who has a grievance
against the decision of the appropriate investment organ on issues
relating to an investment permit or incentives may, within 30
days from receipt of the decision, appeal to the Investment Board
or to the concerned organ of the Regional Government as may be
18. Technology Transfer
1/ Where an investor intends
to conclude a technology transfer agreement related to his investment,
he shall submit same to the Authority for approval and registration.
2/ Where the Authority receives
a technology transfer agreement, pursuant to sub-article (1) of
this Article, it shall give its decision thereon subsequent to
the necessary evaluation in accordance with the Council of Ministers
Regulations No. 121/1993.
19. Loans and Utilization
of Foreign Currency
1/ An investor who acquires
an external loan shall have such loan registered with the National
Bank of Ethiopia in accordance with directives of the Bank.
2/ For transactions related
to their investment, foreign investors shall be allowed to open
and operate foreign currency accounts in authorized local banks
in accordance with directives of the National Bank of Ethiopia.
20. Remittance of Funds
1/ Any foreign investor shall
have the right, in respect of an approved investment, to make
the following remittances out of Ethiopia in convertible foreign
currency at the prevailing rate of exchange on the date of remittance:
a/ profits and dividends accruing from investment;
b/ principal and interest payments on external loans; c/ payments related to a technology transfer agreement registered in accordance with this Proclamation;
d/ proceeds from the sale or liquidation of an enterprise;
e/ proceeds from the transfer
of shares or of partial ownership of an enterprise to a domestic
2/ Notwithstanding the Payment
of Tax on Gains from Capital Proclamation No. 108/1994, remittances
referred to in sub-Articles 1(d) and (e) of this Article shall
be exempt from such taxes.
3/ Expatriates employed in
an enterprise may remit, in convertible foreign currency, salaries
and other payments accruing from their employment in accordance
with the foreign exchange regulations of the country.
21. Investment Guarantees
1/ No investment may be expropriated
or nationalized except when required by the public interest and
then, only in compliance with the requirements of the law.
2/ Adequate compensation,
corresponding to the prevailing market value, shall be paid without
delay in case of expropriation or nationalization of an investment
for public interest.
3/ Any foreign investor may
remit compensation paid to him pursuant to this Article out of
Ethiopia in convertible foreign currency.
22. Settlement of Disputes
1/ Where any dispute arises
between a foreign investor and the Government in respect of an
investment, all effort shall be made to reach an amicable settlement
through mutual discussions.
2/ A dispute not amicably
settled may be submitted to the competent court of the country
or to an international arbitration within the framework of any
bilateral or multilateral agreement to which the Government and
the country of which the foreign investor is a national are contracting
23. Organs Involved
in Investment Administration
The administration of Investment
shall be carried out through the following organs:
1/ The Investment Board;
2/ The Authority;
3/ Regional investment organs
to be defined by laws of regional governments.
1/ The administration of investment
in respect of the following shall be under the jurisdiction of
a/ investments made by foreign investors;
b/ investments made by foreign nationals taken for domestic investors;
c/ investments made, in areas eligible for incentives, by domestic investors who are required to obtain trade and operating licenses from concerned federal organs;
d/ joint investments by domestic
and foreign investors.
2/ Investments other than
those referred to in sub-Article (1) of this Article shall fall
under the jurisdiction of regional investment organs.
3/ Notwithstanding the provisions
of sub-Article (1) and (2) of this Article the granting of incentives
by way of exemptions from import taxes and customs duties shall
fall under the exclusive jurisdiction of the Authority.
4/ Where an investor with
a permit from a regional investment organ applies for incentives
of exemption from import taxes and customs duties, the said organ
shall, after examining and ascertaining its acceptability within
15 days, transmit the application to the Authority, together with
the necessary information. The Authority shall give its decision
within 10 days of receipt of such complete information.
25. One-stop shop service
1/ The issuance of trade and
operating license, the granting of work permits to expatriate
employees; and the registration of business organizations as required
under the relevant laws shall, with respect to investors holding
investment permits, be carried out by the Authority or by a regional
investment organ as may be appropriate, representing the competent
federal or regional executive bodies respectively.
2/ The Authority and regional
investment organs shall carry out their functions under sub-Article
(1) of this Article in compliance with the relevant laws thereof.
3/ The Authority or a regional
investment organ shall issue a license within 30 days where an
application submitted to it pursuant to this Article is in full
conformity with the requirements of the relevant law.
of Information on Investment
Each regional investment organ
shall transmit to the Authority information compiled with respect
to the resource potential and investment opportunities of the
region and periodic reports on investment activities therein.
27. Members of the Board
1/ The Investment Board shall
have seven members.
2/ The Prime Minister shall
be the Chairman of the Investment Board.
3/ Five members of the Board
shall be designated by the Prime Minister.
4/ The General Manager of
the Authority shall be a member of the Board.
5/ The Board shall have its
28. Powers and Duties
of the Board
The Board shall have the following
powers and duties:
1/ to supervise and follow
up, as the superior authority, the implementation of this Proclamation
and the activities of the Authority;
2/ to decide on policy issues
arising in connection with the implementation of this Proclamation;
3/ to issue directives necessary
for the implementation of this Proclamation and regulations issued
4/ to cause the revision,
as necessary, of investment incentives' regulation;
5/ to decide on appeals submitted
to it by investors against decisions of the Authority with respect
to the issuance of investment permits and the granting of incentives;
6/ to determine service fees
and charges to be collected by the authority;
7/ to approve the organizational
structure and personnel regulations of the authority;
8/ to approve the annual work
programme and budget of the Authority.
29. Meetings of the
1/ The Board shall meet regularly once in a month.
However, it may hold extra-ordinary
meetings at any time when necessary.
2/ There shall be a quorum
where more than half of the members are present at meetings of
3/ Decisions of the Board
shall be passed by majority vote; however, the chairman shall
have a casting vote in case of a tie.
4/ Without prejudice to the
provisions of this Article, the Board shall draw up its own rules
1/ The Ethiopian Investment
Authority is hereby established as an autonomous public institution
having legal personality.
2/ The Authority shall be
accountable to the Investment Board.
31. Powers and Duties
of the Authority
The Authority shall have the
following powers and duties:
1) to serve as a nucleus for
matters of investment and, consequently, promote, coordinate and
enhance activities thereon;
2/ to initiate and submit
to the Board policy and implementation measures needed to create
a conducive investment climate for both domestic and foreign investors
and to follow up the implementation of same upon approval;
3/ to collect, compile, analyze
and disseminate information on the resources potential of the
country and on the investment opportunities it offers; to promote
concrete investment projects; and provide upon request, match-making
service of possible joint investment partners;
4/ to organize with a view
to helping promote investment, such activities as exhibitions,
conferences, training and seminars locally or abroad as may be
appropriate; to give advisory support to investors;
5/ to realise liaison and
coordination between investors, public offices, Regional Governments
and other relevant organs, with a view to enhancing investment.
6/ to prepare and distribute
pamphlets, brochures, films and other materials that help enhance
7/ to issue investment permits
and decide on applications for incentives pursuant to Article
24 of this Proclamation;
8/ to monitor the implementation
of investment projects for which it has issued permits and ensure
that the terms and conditions of the investment permits are complied
9/ to approve and register
technology transfer agreements related to investments;
10/ to register capital imported
into and invested in Ethiopia by foreign investors and issue certificates
11/ to negotiate bilateral
investment promotion and protection treaties for conclusion between
Ethiopia and capital exporting countries; and to sign same upon
approval of the Council of Ministers;
12/ to give advice and technical
support to regional investment bureaux with a view to building
up their capacity;
13/ to perform such other
functions as may help to promote and enhance investment.
of the Authority
The Authority shall have:
1/ a General Manager and a
Deputy General Manager to be appointed by the Government; and
2/ the necessary staff.
33. Powers and Duties
of the General Manager
1/ The General Manager shall
be the chief executive officer of the Authority and, as such shall,
subject to the general directives of the Board, direct and administer
the activities of the Authority.
2/ Without limiting the generality
of sub-Article (1) of this Article, the General Manager shall:
a) exercise the powers and duties of the Authority specified in Article 31 of this proclamation;
b) employ and administer the
personnel of the Authority in accordance with regulations approved
by the Board;
c) prepare and submit to the
Board the work programme and budget of the Authority; and implement
same upon approval;
d) effect expenditure in accordance
with the budget approved for the Authority;
e) represent the Authority
in all its dealings with third parties;
f) prepare and submit to the
Board reports on the performance and financial operations of the
3/ The General Manager may,
to the extent necessary for the efficient performance of the functions
of the Authority, delegate part of his powers and duties to other
officials as well as employees of the Authority.
34. Source of Funds
The authority shall have receive
its funds from the following sources:
1/ budgetary allocations made by the Federal Government;
2/ service fees collected by the Federal Authority;
3/ income, assistance and
grants obtained from any other sources.
35. Transfer of Rights
The rights and obligations
of the Investment Office of Ethiopia established under Proclamation
No. 15/1992 are hereby transferred to the Authority.
36. Allocation of
1/ Where a Regional Government
receives an application for the allocation of land for an approved
investment it shall, on the basis of the Federal and its own laws,
deliver the land to the investor within 60 days.
2/ Regional governments shall
allocate land for investment activities and transmit information
on such allocations to the appropriate investment organs.
3/ Regional Governments shall,
in the allocation of land, give priority to approved investments.
4/ The appropriate investment
organ shall, in cooperation with the concerned Regional Government
entities facilitate and follow up the allocation of land for approved
37. Employment of
1/ Any investor may employ,
in accordance with the law, duly qualified senior expatriate experts
and managers required for the operation of his business; provided,
however, that before exercising this right, he shall ascertain,
by way of making a proper announcement, that Ethiopians with comparable
qualifications are not available.
2/ An investor who employs
expatriates, pursuant to sub-article (1) of this Article, shall
be responsible for replacing, within a limited period, such expatriate
personnel by Ethiopians and for arranging the necessary training
38. Foreign Nationals
Taken for Domestic Investors
1/ Rights and privileges as
well as restrictions solely relating to foreign investors shall
not be applicable to a foreign national who invests in Ethiopia
being taken for a domestic investor.
2/ A foreign national intending
to be taken for a domestic investor shall declare same by filling
in a form designed for such purpose, by the Authority, and submit
it together with his application for investment permit.
39. Duty to Provide
Any executive organ of the
Federal or of a Regional government shall have the duty to provide
information relating to investment whenever so requested by the
appropriate investment organ.
40. R e p e a l
1/ The Encouragement, Expansion
and coordination of Investment Proclamation No. 15/1992 (as amended)
is hereby repealed.
2/ No laws, regulation, directives
or practices inconsistent with this Proclamation shall have effect
with respect to matters provided for in this Proclamation.
41. Transitory Provisions
1/ Notwithstanding the Provisions
of Article 40 of this Proclamation:
a) The provisions of Proclamation
No. 15/1992 (as amended) pertaining to the powers and duties of
regional investment offices shall remain in force, in so far as
they are not inconsistent with this Proclamation, until replaced
by laws to be issued by the Regional Government;
b) incentives provided for
Proclamation No. 15/1992 and directives issued thereunder shall
remain applicable in respect of investments approved prior to
the effective date of this Proclamation.
2/ Where an investor, eligible
for incentives under Proclamation No. 15/1992, opts instead to
be a beneficiary incentives provided for in this Proclamation
and in regulations to be issued hereunder, notify the appropriate
investment organ and become entitled thereby.
42. Effective Date
This Proclamation shall come
into force as of the 18th day of June, 1996.
Done at Addis Ababa, this
18th day of June, 1996.
NEGASSO GIDADA (DR.)
PRESIDENT OF THE FEDERAL
DEMOCRATIC REPUBLIC OF ETHIOPIA
1. Radio and television broadcasting services;
2. Retail trade and brokerage;
3. Wholesale trade (excluding the sale by foreign investors of their products produced locally)
4. Import trade;
5. Export trade of raw coffee, oilseeds, pulses, hides and skins and live sheep, goats and cattle not raised or fattened on own farm;
6. Construction companies excluding grade 1 contractors;
7. Tanning of hides and skins up to crust level;
8. Hotels other than star designated, motels, pensions, tearooms, coffee shops, bars, night clubs and restaurants excluding international and specialized restaurants;
9. Tour operation, travel agency, commission agency and ticket office;
10. Car hire and taxi-cab transport;
11. Commercial road transport and inland water transport services;
12. Bakery products and pastries exclusively for the domestic market;
13. Grinding mills for grains;
14. Barber shops, beauty saloons, goldsmith shops and tailoring excluding garment factories;
15. Building maintenance services, repair and maintenance of vehicles;
16. Saw milling, slicing, pealing and chopping of logs, and manufacture of wood products exclusively for the domestic market;
17. Customs clearance service;
18. Museums, theaters and cinema halls operation;
19. Printing industry.