Compare and contrast

current Ethiopian
investment proclamation
and previous investment
proclamation

Course title; Ethiopian investment law and

policy
Course code; Laws6205
Submitted to; Dr. Haile A.
Submission date; 6/25/2022

By, Mekuanint Belay

6/25/2022
Compare and contrast current Ethiopian investment proclamation, proclamation no.
1180/2020 and its regulation, regulation no. 474/2020 with previous investment
proclamation, proclamation no. 769/2012 and its regulation, regulation no. 270/2012

Introduction
On January 30, 2020, the House of People’s Representative approved Investment Proclamation
that replaces the Investment Proclamation No. 769/2012. The New Proclamation supplemented
by a new investment regulation to be enacted by the Council of Ministers investment regulation
474/2020.

The rationale for the reform includes the need to strengthen the private sector’s role in the
economy, modernize the investment administration system by consolidating relevant laws and
increase inward investment by addressing investment-related challenges, and establish effective
and transparent grievance handling procedures for investors. This paper briefly discusses the
difference between the two proclamations.

1. Expanded Investment Objectives

Under previous proclamation, Proclamation no. 769/2012 the policy priority is heavily orientated
towards attracting foreign direct investment in manufacturing and agriculture sectors with the
aim of primarily strengthening domestic production capacity.1 Whereas, current proclamation,
Proclamation no. 1180/2020 further expands the objectives2 to encompass, improve the global
competitiveness of Ethiopia’s economy, increase export performance, generate more and better
employment opportunities, accelerate the inward transfer and diffusion of knowledge, skill and
technology, maximize linkages between foreign and domestic investments and leverage foreign
capital to promote the competitiveness of domestic investors. Further, the current Proclamation
envisages regulating not just investment administration but also enhancing investment attraction,
retention and expansion with a view to ensure that investments deliver on their promises.

1
Investment proclamation, Proclamation No. 769/2012 art 5 with proclamation preamble
2
Investment proclamation, Proclamation No. 1180/2020 art 5 with proclamation preamble
 2. Shift in Approach to Sector Regulation
A negative list approach provides an exhaustive list of investment areas that are restricted to
foreign investments and makes all other sectors open for investment by foreigners. Pervious
proclamation, Proclamation no. 769/2012 which introduced a hybrid system of negative and
positive listing.3 In this proclamation, the areas that are restricted to foreign investment and the
areas that are permitted for foreign investors are all expressly listed in the law. Sectors that are
not on the list have been prohibited for foreign investors. But, current proclamation,
Proclamation no. 1180/2020 reverses positive-listing approach to a negative listing approach
whereby areas that will be restricted from foreign participation will be exhaustively provided in
investment Regulation no. 474/2020 with the implication that all other areas will be permitted
areas of investment for foreign investors.4

3. Areas of Investment
Proclamation no. 1180/2020 provides four categories of investment areas; areas exclusively
reserved for joint investment with government, areas exclusively reserved for domestic investors
and area exclusively reserved for joint investment with domestic investors and5 those fully open
for foreign investors. In previous law there are area reserved of government only6 but current
proclamation eliminates a category of sectors that will exclusively be held by the government
and introduces a new category of sectors in which joint investment with domestic investors will
be mandatory.7 Details of the sectors eligible for the above list provided in regulation no.
474/2020. those are; a) Freight forwarding and shipping agency services; b) Domestic air
transport service c) Cross-country public transport service using buses with a seating capacity of
more than 45 passengers;. d) Urban mass transport service with large carrying capacity; e)
Advertisement and promotion services; f) Audiovisual services; motion picture and video
recording, production and distribution; and g) Accounting and Auditing services. Also, a foreign

3
Investment proclamation, Proclamation No. 769/2012 art 6-9
4
Investment proclamation, Proclamation No. 1180/2020 art 6/2/
5
https://businessinfoeth.com/5-features-of-the-new-investment-proclamation-and-regulation-laws-of-ethiopia/
6
Investment proclamation, Proclamation No. 769/2012 art 6/1/
7
Investment proclamation, Proclamation No. 1180/2020 art 6/2/
investor jointly investing with a domestic investor in areas listed above shall not hold more than
49% of the share capital of the enterprise.8

4. Expanded definition
The definition of domestic investors under proclamation no. 769/2012 are Ethiopian nationals,
foreign nationals treated as domestic investor under separate laws and government, public
enterprises and cooperatives. Under Proclamation no. 1180/2020, these categories are fully
maintained but expanded to also include foreign nationals or foreign enterprises accorded a
domestic investor status previously. This expansion offers legal recognition to foreigners and
their descendants that have lived and invested in Ethiopia for generations.

Expanded definition of Investment and Capital in proclamation no. 769/2012 definition of

investment is limited to new investments in cash or in kind and the expansion/upgrading of
existing investments.9 Whereas, Proclamation no. 1180/2020 Expands this definition to include
the acquisition of existing enterprises, in whole or in part, as an eligible form of foreign
investment to be regulated by the New Proclamation. Further, the current definition of “capital”
is expanded to include intellectual property rights and other tangible and intangible business
assets as valid capital contributions.

5. Expanded Waiver of Minimum Capital

Under the previous Law, foreign investors are required to commit a minimum foreign capital
ranging from USD 50,000- USD200, 000 depending on the sector of investment and joint
investment with domestic investors. Waiver of such capital was restricted to investors re-
investing their profits and dividends in the country. The current Proclamation maintains the same
minimum capital requirement but broadens the waivers to also include (a) persons elected as
members of board of directors following the conversion of a private limited company to share
company thereby legitimizing the concept and practice of nominal shareholding to qualify as

8
Investment regulation, Regulation No. 474/2020 art 5
9
Investment proclamation, Proclamation No. 769/2012 art 2 /1,2/
director and (b) foreign investors buying the entirety of an existing enterprise owned by foreign
investors or the shares thereof.10

6. Expanded Investment Administration Organs and Clarification of

Mandates
Under the Proclamation 769/2012, the key investment administration organs are the Investment
Board (“Board”), the Ethiopian Investment Commission (“EIC”) and the regional investment
bureaus. Proclamation no. 1180/2020 provides clarity on the composition and mandate of these
organs and introduces new bodies. The Organs of investment administration shall comprise the
following: 1/ The Ethiopian Investment Board; 2/ The Ethiopian Investment Commission; 3/ The
Federal Government and Regional State Administrations Investment Council; and 4/ Investment
administration Organs established pursuant to Regional Laws and Investment Board11.

In current proclamation grant Additional Mandate to EIC some are, Regulating Brownfield
Investments As such, in previous la EIC had no jurisdiction in administrating investments that
are made by way of a brownfield investment. Current Proclamation expands EIC’s mandate
allowing all foreign investors, both entering Ethiopia through Greenfield and brownfield
investments to obtain EIC’s services.

Current Proclamation grants EIC12 the mandate to work with MOLSA in regulating matters
related to (a) the necessity of expat employees; (b) the implementation of trainings for Ethiopians
replacing expats; (c) mechanisms to avail suitable local workforce to investors and (d)
procedures for the issuance, refusal and cancellation of work permits with Collaboration in the
Ministry of Labor and Social Affairs.

Also, EIC is granted new powers to facilitate visas for investors coming into Ethiopia and for
investors and families already in Ethiopia.13 Furthermore, the current law grants up-to five years
of multiple entry business visas to owners, shareholders, general managers, board members and
top management of investors upon valid confirmation by the EIC. EIC is required to work in

10
Investment Proclamation, proclamation No. 1180/2020 art9/4/
11
Investment Proclamation, proclamation No. 1180/2020 art 44
12
Investment Proclamation, proclamation No. 1180/2020 art 38
13
Investment Proclamation, proclamation No. 1180/2020 art 23
collaboration with Immigration, Nationality and Vital Events Agency for the proper
implementation of this mandate.

Currently, the Ethiopian Civil Aviation Authority and Ethiopian Energy Authority are granted
delegated powers to issue suspend and revoke investment permits in the area of aviation and
energy. This list is expanded to include the Ethiopian Communication Authority which is granted
similar mandate to issue, suspend and revoke investment permits for investors in
telecommunication sector.14

7. Investment permit

In previous law and current investment law The following investors shall be required to obtain
investment permits those are foreign investors, domestic and foreign investors, investing in
partnership, foreign nationals, not Ethiopian by origin, treated as a domestic investors and
domestic investors investing in areas eligible for incentives and who are seeking to be
beneficiaries of such incentives.15but current law add another investor to obtain investment
permit that are An investor seeking to expand or upgrade an existing investment, provided that
the investment is eligible for incentives and the investor seeks to be beneficiary of such
incentives.16

8. Coordination with Regional Investment Bureaus

In order to create a uniform, coordinated and efficient national investment administration

system, the current Proclamation mandates EIC to create investment desks within its office in
Addis Ababa to facilitate the efficient provision of pre and post investment services and resolve
investment bottlenecks encountered by investors. Furthermore, current Proclamation allows for
an efficient coordination between EIC and regional states in the application and allocation of
land to investors.

14
Investment Proclamation, proclamation No. 1180/2020 art 4/2/
15
Investment proclamation, Proclamation No. 769/2012 art 12 and Investment Proclamation, proclamation No.
1180/2020 art 10
16
Investment Proclamation, proclamation No. 1180/2020 art 10/1/e
 9. Provision of Investment Land
Proclamation 1180/2020 introduces a new mandate to regions to establish transparent and
predictable system for land allocation. Thus, regional states are required to identify and classify
land to be used for investment projects. Regions may establish special procedures that will allow
them to respond to land requests by investors within a maximum of 60 days (for manufacturing
sector) and maximum of 90 days for other sectors.17

10.Technology Transfer Agreement

According to previous investment law when Technology Transfer Agreement apply for
registered in agency there is requirements set those are; a completed application form signed by
the recipient of the technology, a photocopy of the authenticated agreement between the recipient
and provider of the technology, a photocopy of a valid business license or investment permit of
the recipient of the technology and a certificate of registration or business license of the provider
of the technology. And this requirement is provided in investment regulation no. 474/2020 but
current proclamation does not list or set requirements.

11.Social and Environmental Protection

A new clause is introduced that obliges investors to promote social and environmentally
sustainable values including environmental protection standards and social inclusion objectives
in carrying out their investment projects.18But in previous law does not constitute social duty as
mandatory.

12.Immovable Property Ownership

Proclamation 769/2012 grants foreign investors or foreign nationals treated like a domestic
investor the right to own immovable property requisite for their investment and a dwelling
house.19 Under existing law, the right to own immovable properties requisite for investment is

17
Investment Proclamation, proclamation No. 1180/2020 art 51
18
Investment Proclamation, proclamation No. 1180/2020 art 54
19
Investment proclamation, Proclamation No. 769/2012 art 24
maintained or in investment purpose and does not include land. However, only large investors
will be permitted to own one dwelling house.20

13. Grounds for Suspension of Investment Permits

Proclamation 769/2012 provides that an investment permit may be suspended if the investor
violates the provisions of the proclamation, regulation or directives issued without providing
details of the specific grounds for suspension.21 Under current Proclamation, specific grounds are
exhaustively listed on the basis of which an investment organ may suspend investment permits.22

14.New Rules on Work Permit

The previous investment law provides that any investor may employ duly qualified expatriate
experts required for the operation of its business. The current Proclamation qualifies this clause
stipulating that the qualified expats must be in the positions of higher management, supervision,
trainers and other technical professions.23 Further, it is provided that such expats may only be
employed when it is ascertained that Ethiopians possessing similar qualifications or experiences
are not available. In terms of foreigners in top management positions, the current Proclamation
maintains the existing rule that there will be no restrictions on top management positions but
further clarifies what “top management” constitutes. Also current Proclamation grants the spouse
of an investor or a foreign worker the right to be employed and obtain a work permit in Ethiopia.

15.Grievance Handling
This is intended mainly to provide the framework for a potential investor to contest any decision
of an investment organ that fully or partially rejects its application to make an investment. 24 If
properly utilized, this can help the Government forestall the escalation of complaints into costly
investor–State disputes, thereby preventing waste of public resources. From investors’
perspective, the grievance handling mechanism can be essential to obtain resolutions for their
complaints in the early stages without incurring huge expenses

20
Investment Proclamation, proclamation No. 1180/2020 art18
21
Investment proclamation, Proclamation No. 769/2012 art 19
22
Investment Proclamation, proclamation No. 1180/2020 art13
23
Investment Proclamation, proclamation No. 1180/2020 art 22
24
Investment Proclamation, proclamation No. 1180/2020 art 25
Under Proclamation no. 769/2021, investors are permitted to lodge any complaint related to their
investment with the EIC with the right of appeal to the Board. Whereas, an elaborate grievance
handling rules are provided under Proclamation no.1180/2020 offering alternative and
predictable timelines for resolution of investment disputes. These include; Complaints to the EIC
and Complaints against Decisions of federal agencies.

16.Investment Disputes
Without prejudice to right of access to justice through competent courts, Proclamation no.
1180/2020 provides that any dispute between an investor and the state will be resolved through
consultation and negotiation.25 It further provides clear recognition to federal government
agencies to submit to arbitration if desired.26 The previous law did not have a provision for
investor-State dispute settlement (ISDS). This procedure applies once all the above procedures
for handling investors’ grievances have been followed and the matter has escalated into a
dispute. If a dispute between an investor and the Government cannot be resolved through
negotiation or consultation, in principle, it must be submitted to the competent Ethiopian court.27
Arbitration can be used as an alternative to resolving a dispute between a foreign investor and the
Government if there is a specific agreement to this effect.

17.Mandatory investors’ corporate social responsibility (CSR)

Mandatory investors’ corporate social responsibility requires that investors comply with
environmental laws, respect Ethiopian cultures, values and integrate local communities in their
investments.28 Effective supervision of the conduct of investors and their impact on society is
also important to ensure that they carry out their CSR, thereby contributing to sustainable
development. It is equally vital to encourage investors to engage in CSR activities voluntarily
without breaching legal requirements, preferably by exceeding their legal CSR commitments.

25
Investment Proclamation, proclamation No. 1180/2020 art 28
26
Investment Proclamation, proclamation No. 1180/2020 art 28/2/
27
Investment Proclamation, proclamation No. 1180/2020 art 28
28
Investment Proclamation, proclamation No. 1180/2020 art 54
Conclusion
Current Investment Proclamation sets out rules to further encourage and promote foreign
investment by setting Negative listing approach to areas accessible for foreign investors. Details
added regarding; national content requirements for staff investment administration, allocation of
investment land and grievance handling procedures and new dispute resolution mechanisms.

Reference
 Laws
 Investment proclamation, Proclamation No. 769/2012
 Investment proclamation, Proclamation No. 1180/2020
 Investment regulation, Regulation No. 474/2020
 Internet
 https://businessinfoeth.com/5-features-of-the-new-investment-proclamation-and-
regulation-laws-of-ethiopia/