Central Bank Allows Forex Transactions Inside Ind. Parks

Companies operating in industrial parks can transact in foreign currency while selling and buying raw materials with each other beginning this month, according to a new directive issued by the National Bank of Ethiopia (NBE).

The new directive was issued two weeks ago to enable investors to buy or sell raw materials or inputs in foreign currency when they are manufactured by companies that operate in any of the industrial parks. The purchaser will settle the payments from its foreign currency retention account.

Signed by Governor Yinager Dessie (PhD), the directive went into effect on February 4, 2019.

“It is found necessary to support the strategy of the government by creating smooth operation in industrial parks by addressing the emerging needs of investors, particularly that of foreign investors in industrial parks,” reads the directive.

The new directive also enables employers at the industrial parks to pay their non-national employees in foreign currency. The non-national employees are as well allowed to open foreign currency account at banks operating within the industrial parks.

The directive further privileged the non-national employees to transfer forex from their accounts to accounts abroad. But the national bank has set a limit on the foreign currency account of a non-national employee to be credited to the maximum of the employees’ net monthly salary.

To facilitate the process, commercial banks operating in the industrial parks are allowed to issue an interim export permit to an investor upon the summations of all export documents to sell or buy products as raw material.

Before the issuance of the directive, companies operating in the industrial parks were facing challenges in making transactions.

Abebe Abebayehu, a commissioner at the Ethiopian Investment Commission, states that the new detective is one of the reforms to solve problems encountered by companies in industrial parks.

“These kinds of innovative approaches could help industrial parks to become successful,” Abebe told Fortune.

Chargeurs Fashion Technologies Plc, a French-based company that invested two million dollars and became operational in 2017, is one of the beneficiaries.

Producing and supplying interlining, a material used as an extra lining between the ordinary lining and the fabric of a garment, Chargeurs Fashion supplies the product to companies operating in the parks.

“We import the raw materials in foreign exchange and could not sell them in local currency as we are indirect exporter companies,” said Hibret Lemma, managing director of the Chargeurs Fashion, whose company hires 25 employees and manufactures 24,000 linear meters of interlining a day.

For the first eight to nine months, the company was selling its products in a credit arrangement as it could not accept payments in foreign currency, according to Hibret.