Ethiopia: Premier Forms Committee to Draw Investment

Prime Minister Abiy Ahmed (PhD) has formed a new national steering committee to oversee and reform the investment climate and employment regime.

To be chaired by Prime Minister Abiy, the steering committee will have high-level government officials and regional state heads as members and is expected to be operational in the coming weeks. A representative from the Ethiopian Investment Commission will be the secretariat of the new committee.

The committee will consolidate the existing National Ease of Doing Business Steering Committee as a subcommittee under it. After the formation of the new National Investment & Employment Steering Committee, the Ease of Doing Business Subcommittee will be jointly led by the ministries of Trade & Industry and Innovation & Technology.

Six months ago, the Office of the Prime Minister formed the National Ease of Doing Business Steering Committee in a bid to relax the regulations involved in running businesses in the country to make it more suitable for investment. It also aims at bringing informal businesses on board the formal system.

The National Ease of Doing Business Committee has representatives from eight ministries and agencies including the Investment Commission; the ministries of Finance, Innovation & Technology and Trade & Industry; the National Bank of Ethiopia; and the offices of the Prime Minister and Attorney General, among others.

The initiative also envisions placing Ethiopia among the top 100 countries in the Ease of Doing Business Index by 2021. The World Bank's 2019 Ease of Doing Business Index places Ethiopia at the rank of 159 among 190 countries.

The Investment Commission is the coordinator of the reforms, while the Office of the Prime Minister is the initiator. The other government institutions will implement the reforms by forming task forces.

The Committee has been holding a monthly meeting for updates, while the Investment Commission has been meeting with implementing agencies on a bimonthly basis. Implementing agencies and ministries have also been sending weekly updates to the Committee.

Since becoming functional, the Committee managed to recommend the reform of eight proclamations and regulations along with 40 procedural and administrative legal frameworks.

The registry of a movable asset as collateral for credits, a value-added tax refund system and the registry of microfinance institutions and leasing companies into the National Bank of Ethiopia credit system are among the laws that followed the reform. The mandatory requirement to obtain a business license, which includes newspaper publication of trade names and lease or rental agreements, was also lifted.

Introduction of an electronic single window system, issuance of an online construction permit and tax payment through banks were also introduced as part of the reforms over the past couple of months. In the past six months, the government has digitised title deed records in Addis Abeba and added commercial benches at the Federal High Court as part of the reforms.

Though all of the reforms were reported to the World Bank, the upcoming Ease of Doing Business Index to be released in October will not consider most of them, since the Bank counts reports until the end of last April, according to Abebe Abebayehu, commissioner of the Ethiopian Investment Commission.

"Most of the reforms were implemented after April," said Abebe.

Launching online business registration; reducing the number of days to obtain a business license from 11 to five and cutting the procedures from 32 to four; and fully implementing one-stop-shop services at all levels are the medium-term plans of the Committee to be achieved by December of this year.

Replacing cash register machines with software for Value Added Tax (VAT) invoices; automating tax payment systems; fully automating court processes; the legislation of the amended commercial code; implementation of e-payment, national ID and e-signature are among the long-term plans to be achieved by May 2020. Cutting the number of days to obtain a business license from five to two and the procedures to one from four are also targets of the long-term plan.

"The performances of this year enable us to conduct impact outcome studies of the reforms," said Prime Minister Abiy, adding that the outcome of the reforms would attract more investment that could help create three million jobs. "Therefore, we'll upgrade our focus to employment and investment."

In the past 10 months of the just-ended fiscal year, the country was able to attract 2.8 billion dollars worth of foreign direct investment (FDI). During the just-ended fiscal year, the country has created 1.4 million jobs.

Zereyaqob Belete, the managing partner of Nexus Investment Solution, a decade-old investment consultancy firm, says the undergoing reforms will have a significant impact in attracting more FDI from Western countries.

"The reform will break the bureaucratic chains and reduce the level of corruption," said Zereyaqob, "which will end up cutting the unforeseen expenses of the investors, encouraging them to invest in Ethiopia."

Zereyaqob also suggests the government give attention to the stability and security of the country, another major factor for the improvement of the investment climate.

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