Tuesday, August 2, 2011


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;
WHERAS, the system of administration of investments needs to the 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 hereby proclaimed as follows:
1.    Short Title
    This Proclamation may be cited as the "Investment Proclamation No. 37/1996."
2.    Definitions In this Proclamation, unless the context 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;
  2. "enterprise" means au undertaking established for purposes of gaining profit;
  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 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 investor;
  7. "foreign capital" means capital obtained from foreign sources, and includes the reinvested profits and dividends of a foreign investor;
  8. "expansion/upgrading" 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, (hereinafter "the Authority"), established under this Proclamation or the executive organ of a Regional Government empowered to issue investment permits;
  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 activities;
  11. "government" means the Federal Government or a Regional 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.
    Investment Objectives, Areas and
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 economic development;
  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 the development of the country's economy;
  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. defence 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 passengers 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 electrical 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 investors. 3.    Nothing in this Article shall be construed to exclude domestic investors from investing in other areas of investment.
7.    Areas Reserved for Joint Investment
  1. Foreign investors shall be allowed to invest in the following areas only in partnership with domestic investors where the investment exceeds 20 million US dollars.
    a.    engineering and metallurgical industries;
    b.    pharmaceutical industries;
    c.    basic chemical and petrochemical 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 under 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 27%.
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 elgible 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.
Forms of Investment and Capital
Requirement for Foreign Investors
10.    Forms of Investment
  1. Investments may be effected in one of the following forms:
    a.    Sole proprietorships; b.    Business organizations incorporated in Ethiopia or abroad; c.    Public Enterprises established in accordance with the relevant law; d.    cooperative Societies formed in accordance with the relevant law. 2.    Any business organization under sub-Article (1) (b) of this Article shall be registered in accordance with the Commercial Code.
11.    Capital Requirements 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 500,000US dollars for a single investment project.
  2. Notwithstanding the provisions of sub-Article (1) of this Article, the minimum capital required of a foreign investor investing jointly with domestic partners shall be300,000 US dollars.
  3. The minimum capital to be required under sub-Article (1) of this Article be 100,000 US dollars or its equivalent in Birr with respect to a foreign investor who re-invest 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 US 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.
Investment Permit
12.    Requirement of Permit
  1. The following investors shall be required to obtain an 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 partnerships.
    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 incentives.
13.    Application for Investment Permit 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 information:
    1. the project profile;
    2. a 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 programme;
    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 an application made through an agent;
    7. other relevant information relating to the particulars of the project.
14.    Issuance of Investment Permit
  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 investment;
      d.    the amount of investment capital; and
      e.    other particulars as may be deemed necessary by the appropriate investment organ.
    3.    a holder of an investment permit shall not be required to obtain a trade or an operating licence 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 shall be submitted to the appropriate investment organ and amended accordingly.
15.    Renewal of Investment Permit
  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 corrective measures.
  2. The appropriate investment organ may revoke an investment permit where it is ascertained that:
    1. 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 person.
    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 revoke by any entity other than the appropriate investment organ having issued same.
17.    Investor's Right to Appeal
    An investor who has a grievance against a 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 a Regional Government as may be appropriate.  
    Transfer of Technology, Loans,
    Utilization of Foreign Currency
    and Remittance of Funds
18.    Technology Transfer Agreements
  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 investor. 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.
Investment Guarantees and Settlement of
21.    Investment Guarantees and Protections
  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 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 parties.
Investment Administration
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.
24.    Jurisdiction
    1. The administration of investment in respect of the following shall be under the jurisdiction of the Authority:
    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 licenses, 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 licence within 30 days where an application submitted to it pursuant to this Article is in full conformity with the requirements of the relevant law.
26.    Transmission 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 as well as periodic reports on investment activities therein.
    The Investment Board
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 own Secretariat.
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 hereunder;
  4. to cause the revision, as necessary, of investment incentives' regulations;
  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 to be charged 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;
  9. to publicly notify investors of directives issued by it from time to time.
29.    Meetings of the Board
  1. The Board shall meet regularly once in a month, However, it may hold extraordinary meetings at any time when necessary.
  2. There shall be a quorum where more than half of the members are present at meetings of the Board.
  3. Decisions of the Board shall be passed 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 of procedure.
The Ethiopian Investment Authority
30.    Establishment
  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 resource potential of the country and on the investment opportunities it offers; to promote concrete investment projects; to 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 investment;
  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 with;
  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 evidencing same;
  11. to negotiate bilateral investment promotion and protection treaties for conclusion between Ethiopia and capital exporting countries and to sign same upon approval by 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.
32.    Organization 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 or 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 Authority.
  1. 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 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 and Obligations
    The rights and obligations of the Investment Office of Ethiopia established under Proclamation No. 15/1992 are hereby transferred to the Authority.
    Miscellaneous Provisions
36.    Allocation of Land
  1. Where a Regional Government receives an application for the allocation of land for an approved investment it shall, on the basis of Federal and its own laws, deliver the required land to the investor within 60 days thereof.
  2. Regional Governments shall allocate land for investment activities and transmit information on such allocations to the appropriate investment organ.
  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 investments.
37.    Employment of Expatriates
  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 thereof.
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 Information
    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.    Repeal
  1. The Encouragement, Expansion and Coordination of Investment Proclamation No. 15/1992 (as amended) is hereby repealed.
  2. No laws, regulations, 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, insofar as they are not inconsistent with this Proclamation, until replaced by laws to be issued by Regional Governments; b.    incentives provided for in Proclamation No. 15/1992 and in 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 of incentives provided for in this Proclamation and in regulations to be issued hereunder, he may so 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.
Areas of Investment Reserved
for Domestic Investors
  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 offices;
  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, theatres and cinema halls operation;
  19. Printing industry.

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