Jan 7 , 2023

Investors that hold business licenses get to enjoy incentive packages such as importing duty-free goods and construction materials, provided they get confirmation from the Ethiopian Investment Commission and regional bureaus that they have not started operation.

The investors have been complaining following the Investment Incentive Proclamation issued five months ago, where business license holders were exempted from the packages as they were considered operational. The bill states that new investors who did not acquire a business license or an investor who desires to upgrade existing investments can import duty-free capital goods and construction materials essential to operate.

Following the complaints, the Ministry of Finance sent a letter to the Commission and regional investment bureaus to check and confirm the status of license holders as a prerequisite to be included in the package.

Tax holidays for priority sectors, duty-free imports of inputs for export goods manufacturing and the provision of land at nominal lease prices are part of the government's incentives to foreign and domestic investors.

Zeryakob Belete, consultant and managing director at Nexus Investment Solutions, worries that leaving the checkpoints at the hands of the Investment Commission and regional bureaus will make the judgment subjective, paving the way for fraud.

"There should be a clear directive," he said.

Officials at the Ministry claim that this is a short-term plan.

Mulay Weldu, tax policy director at the Ministry, said they are conducting a study to figure out where the problem lies while addressing the issue through the Commission and regional bureaus for the time. He said that amending the banks' requirements list to provide a loan and other services to investors that are not fully engaged in production is part of the long-term plan set by the Ministry.

The Addis Abeba Investment Commission has received the letter. The Director of Investment Licence, Tekliye Akal, believes investors should not be exposed to this much trouble to enjoy the benefits.

According to the director, the central bank should set a standard on the banks' requirement list to provide service to new investors.

"It is discouraging to investors," he said.

The Commission issued 1,588 new and 1,493 expansion licenses in the past five months.

Domestic and foreign investors that were lured into investment by the incentive packages are met with disappointment.

The diaspora Yared Mekonnen who has lived in the US for the past twenty years, produces marble and granite with 150 million Br paid-up capital after securing land around Koyefeche, on the outskirts of the capital.

He was dismayed by the requirement of expansion to be eligible for the benefits that convinced him to invest in the first place. He said that the banks do not activate the diaspora account without a business license which made it impossible to get the incentive package. Yared was left with no option but to expand the business, adding 50 more employees to his company. He recalls that the road to expansion is not as easy as it seemed with the requirement to present tax documents for a company that did not start production yet.

The payments for the machinery at Djibouti Port waiting to see the light of day had cost him foreign currency by the day until the Investment Commission permitted the expansion under special circumstances.

"I have been fooled," he said. "What I got is not what I expected."

A regulatory department to assess if the incentive is serving its purpose and investors are benefiting from it is under formation, according to Wubetu Tadesse, director of the incentive department at the Ethiopian Investment Commission.

The letter dispatched from the Ministry mentions that bureaus that authenticated the business licenses should confirm the investments have not begun production. However, the Deputy Head of the Addis Abeba Trade Bureau, Mesfin Assefa has no knowledge of the circular from the Ministry.

PUBLISHED ON Jan 07,2023 [ VOL 23 , NO 1184]

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