Monday, June 17, 2024

Government bureaucracy hindering Foreign Direct Investment

By Eyasu Zekarias, Photo by Anteneh Aklilu


By Eyasu Zekarias

The Ethiopian government faces a pressing challenge in attracting new foreign direct investment (FDI) and fostering economic development due to bureaucratic delays and land scarcity, exacerbated by the forthcoming land proclamation. The complexity of administrative procedures and the limited availability of investment land pose significant obstacles to FDI.

Outside of designated industrial parks, the management of land in Ethiopia is decentralized to state and city governments, complicating the process for investors seeking land outside these zones. Research in the sector indicates that acquiring sufficient land in Ethiopia is a major hurdle for investors, with unpredictable timelines and pricing adding to the difficulty.

The European Chamber in Ethiopia recently released a policy document addressing the issue of land provision for investors, titled “Access To Land: Streamlining Land Acquisition for Investors Outside Industrial Parks.” The document highlights the challenges faced by investors seeking development land outside of industrial zones.

EuroCham Ethiopia identified excessive bureaucracy across multiple administrative levels, from federal to district authorities, as a key concern raised by investors regarding land acquisition. This bureaucratic bottleneck is attributed to the land decree issued in 1161/2019, which outlines the allocation of land for public benefit, compensation procedures, and resettlement arrangements.

The policy document, unveiled on March 12, 2024, outlines various challenges, including the lack of pre-prepared investment land, excessive compensation claims, difficulties in compensation management, regional instability, and inadequate infrastructure.

Despite the Ethiopian government’s ownership of vast land resources, challenges persist in the implementation of land ownership policies. Coordination gaps between federal and state authorities, fraudulent practices, administrative capacity constraints, inconsistent land allocation practices, and improper land use by investors exacerbate the situation, according to research.

The policy document underscores the need for the government to establish clear and consistent policies that facilitate investment and economic development by ensuring efficient land management practices.

A source close to the Investment Commission acknowledged the concerns raised by investors regarding land issues, pledging to address these challenges.

EuroCham Ethiopia, representing the European business community in Ethiopia since 2012, comprises 180 members and operates as an independent association licensed by the Ethiopian Investment Commission.

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