Today Ethiopian city administration There are multiple actors playing against Ethiopia’s stated wish to become an economic wunderkind in the content. To start with, unlike government officials’ repeated promise, the bedrock of Ethiopia’s economy remained at odds with where market forces play big roles – the private sector. It is a well established cliché that the economy in Ethiopia is either dominated by state-owned enterprises (SOEs) or is run by a private sector deeply affiliated to the regime in power. “I will have a hard time to believe you if you tell me businesses outside these two frontiers can survive and flourish in Ethiopia,” a foreign investor told this magazine. His business is suffering under Ethiopia’s endless “bureaucratic bottleneck, from license registration to dealing with customs authorities,” he conceded, unsure if it was a good thing to reveal his name and the type of his business. There too, he has a point.
The government and the party – often one and the same – see nothing wrong with a state reining over the economy; their examples in this are the Asian Tigers – China being a favorite darling. What’s more, the government and the party’s interest in doing business is protected by the law and defended by the party’s loyalty to a developmental state ideology in which doing business, first and foremost, is the affairs of a state and a party in power.
But five outstanding factors characterize Ethiopia’s potential failure to become an investor friendly destination and a favorite destination for FDI: confusion and failure to enforce existing rule of law; slow moving bureaucracy; mediocre administrative capacity; asymmetrical relationship between the federal government and regional states; and medieval banking sector.
Confusion and failure to enforce existing rule of law
Asrat Birratu (name changed), is a former University law professor who is now a senior legal advisor working mainly for foreign businesses entering Ethiopia. For Asrat, who has a firsthand knowledge about the country’s investment law, the bottlenecks begin from the law itself.
There are only 104 investment areas listed under the ‘Investment Regulation No. 270/2012’, which identifies investment incentives and areas restricted from foreigners. While sectors like telecommunication are strictly reserved for the State, some others, such as finance, are earmarked for domestic investors. “In other sectors there is room for joint ventures. There are also permissible ventures for any interested party – both local and foreign – to involve,” Asrat told this magazine. But often one is met with confusion “as there are business areas that are neither forbidden nor allowed for foreign investors.”
Confusion regarding the rule of law is not endemic to local and foreign private businesses who want to invest in Ethiopia; nor is it unique between various government institutions; but it is a common phenomenon within the same government institution.