Monday, May 20, 2024
BusinessInvestment board lays groundwork for trade business liberalization

Investment board lays groundwork for trade business liberalization

Petroleum, fertilizer imports to remain off limits

Under the leadership of Prime Minister Abiy Ahmed (PhD), the Ethiopian Investment Board has guardedly enacted a law that permits foreign participation in the import, export, wholesale, and retail trade businesses.

The Board has approved a directive that outlines commodity restrictions and other prerequisites for import and export trade.

Foreign businesses looking to get a coffee export permit will need to present evidence of having procured at least USD 10 million worth of coffee each year for at least three consecutive years leading up to the permit application.

The threshold goes down to USD 5 million a year for oilseed export permits, and USD one million a year for khat. The directive does not outline requirements for livestock exports.

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Dagato Kumbe, deputy head of the Ethiopian Investment Commission (EIC), says more details will be disclosed in the coming week.

“There is a huge amount of interest from foreign investors. [The directive] will bring massive change in the trade system,” he said.

The liberalization is part of the second Homegrown Economic Reform Agenda (HGER). Dagato says the decision was not an easy one to make.

“We paid attention to how we can balance the sector for local investors as well,” he told The Reporter. “We have a strategy to govern the implementation process.”

Manufacturers or official agents representing manufacturers will be able to attain import permits for their products, while firms that already have an export manufacturing business in the country can also apply for import permits.

The import of strategic products such as fertilizers and petroleum products, however, will remain strictly under state domain.

The directive also sets out floor area thresholds for foreign retail businesses looking to open supermarkets in Ethiopia with 2,000 square meters as the minimum.

Tadesse Lencho (PhD) is a prominent law expert and managing partner at TBeST Law LLP, a firm providing corporate and commercial legal services across several sectors. He sees the pending liberalization as a positive game changer.

Tadesse predicts foreign firms, especially in the coffee industry, will be lining up for export permits.

“I think this will be good for the country’s economy as it invites competition in the sector,” Tadesse said. “The international market is more interested in engaging with the international trade system than locals. The horticulture industry flourished because many of the exporters and buyers in the international market are foreign investors. Market access is very important here.”

Tadesse expects to see the changes reverse harmful trends in the country’s international trade.

“We know that Ethiopian exporters aren’t making money from exports; they just want the forex to make profits from imports. This has been undermining the country’s economy,” he said.

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