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How Ethiopian Bureaucracy Hinders Foreign Direct Investment

 Eyasu Zekarias

The Ethiopian government is currently confronted with a critical issue in luring fresh foreign direct investment (FDI) and promoting economic growth, primarily due to bureaucratic hindrances and a shortage of land, which are further compounded by the upcoming land proclamation. The intricate administrative processes and the restricted access to investment land present substantial barriers to FDI.

Land management in Ethiopia is decentralized to state and city governments, making it challenging for investors to acquire land outside of designated industrial parks. Research shows that obtaining enough land in Ethiopia is a significant obstacle for investors, as the process is unpredictable and pricing is difficult to determine.

The European Chamber in Ethiopia has recently published a policy paper focusing on the matter of land allocation for investors. Entitled “Access To Land: Simplifying Land Acquisition for Investors Outside Industrial Parks,” the paper sheds light on the obstacles encountered by investors looking for land for development purposes beyond industrial areas.

EuroCham Ethiopia has highlighted the issue of excessive bureaucracy at various administrative levels, from federal to district authorities, as a major concern raised by investors in relation to land acquisition. This bureaucratic hindrance is linked to the land decree issued in 1161/2019, which details the allocation of land for public use, compensation processes, and resettlement plans.

On March 12, 2024, the policy document was revealed, presenting a range of obstacles such as the absence of readily available investment land, an abundance of compensation claims, challenges in managing compensation, regional instability, and insufficient infrastructure.

The Ethiopian government faces ongoing challenges in implementing land ownership policies, despite its ownership of extensive land resources. These challenges include coordination gaps between federal and state authorities, fraudulent practices, administrative capacity constraints, inconsistent land allocation practices, and improper land use by investors. Research indicates that these factors contribute to the persistence of the problem.

The Investment Commission has acknowledged the concerns raised by investors regarding land issues and has pledged to address these challenges, according to a source familiar with the matter.

EuroCham Ethiopia has been serving as the voice of the European business community in Ethiopia for nearly a decade, with a membership of 180 companies. It functions as a standalone organization authorized by the Ethiopian Investment Commission.



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