The overriding importance of provisioning infrastructure, improving labor supply and facilitating land acquisition in order to attract private capital in high potential agricultural areas of the country can’t be stressed enough. To this end, both the Federal Government of Ethiopia and regional administrations coordinate efforts and work together to constantly upgrade existing infrastructure, ensure the supply of labor and review policies and strategies to increase their instrumentality to attracting private investment in agriculture.
The Ministry of Agriculture and Rural Development encourages committed and motivated investors to engage in the agricultural sector. For this purpose MoARD had established an agricultural investment support directorate which was responsible for organizing, coordinating and providing comprehensive technical and administrative support to investors. Now, the directorate has been reorganized and renamed as the “Agricultural Investment Land Administration Agency” under the Council of Ministers Regulation No. 283/2013 and it is responsible for facilitating agricultural investment as well as land administration and transfer processes.
The following requirements must be met in order to invest in the sector:
- Investment License
- Valid pass port for the foreigners
- Investment permit (for foreigners)
- Company profile, past experience of the investors
- Memorandum of association and memorandum of articles
- Power of attorney of the company for the foreigners
- Shall prepare and submit appropriate business plan
- Shall sign a contract agreement before starting any developmental activities
Ethiopia offers one of the most attractive policies and incentives packages (reference: Investment Promotion of Act 375/1996, Act 249/93, 543/2007; labor act 466/1997 and 456/1997 land administration and land use proclamation).
Some of these include:
- Private investors shall have a right to acquire and use land, by rent from the government.
- Landholder may transfer permanently his holding right;
- Any investor who rented rural land in lease may secure as mortgage right to use his land or an asset produced on it, or both for effected period of the lease.
- The investor can mobilize its laborers from region to region without any restriction while ensuring the standard benefit of the workers.
- Investors are allowed to introduce or employ scientists and technicians in case of local unavailability;
- Income tax exemption from 2-5 years depending up on the area of investment, the volume of export and the location in which the investment is undertaken.
- Income derived from an expansion or upgrading of an existing agricultural enterprise is exempted from income tax for a period of two years, if it exports at least 50% of its products and increases, in value, its production by 25%.
- The government gives a 2 to 5 years land rent payment grace period based on the commercial crop harvest period, which gives economic yield.
- Business enterprises that suffer losses during the tax holiday period can carry forward such losses for half of the income tax exemption period, after the expiry of such period.
- A 100 percent exemption from the payment of import customs duty and other taxes levied on imports is granted to goods and construction materials necessary to establish a new enterprise or for expansion or upgrading;
- As well as, spare parts worth up to 15 percent of the value of the imported capital goods.
- Exemptions from customs duties or other taxes levied on imports are granted for raw materials and packing materials necessary for the production of export goods.
- All goods and services destined for export are exempted from any export and other taxes levied on exports.
- Capital repatriation and remittance of dividends and interest is guaranteed to foreign investors under the investment proclamation.
- Ethiopia is a member of the World Bank affiliated Multilateral Investment Guarantee Agency/MIGA/ which issues guarantees to investors (expropriation)
- Moreover, Ethiopia is at any time ready to conclude bilateral investment promotion and protection agreements with any country.
- Ethiopia has also signed the World Bank treaty, The Convention on Settlement of Investment Disputes between States and nationals of other states (ICSID)