Applicants seeking to operate a special economic zone in Ethiopia must commit a minimum of USD 75 million in funding over time, according to a new proclamation passed by Parliament. The capital contribution can come from equity, debt financing, or a combination of the two.
The Ethiopian Parliament has approved a new proclamation outlining regulations for special economic zone development in the country. Investors are required to apply to the Ethiopian Investment Commission for an investment permit to formally become a zone operator, according to the proclamation. Operators will have the right to design, construct, develop, and manage zone facilities.
Responsibilities include sub-leasing land, transferring ownership of parcels, and renting or selling buildings. Developers must also build necessary infrastructure like utilities and customs facilities. They are expected to adhere to construction timelines and obtain approvals for any land transactions. Speculatively trading or transferring undeveloped land is prohibited.
The proclamation establishes that financial services will be allowed and regulated within zones. The National Bank of Ethiopia will issue separate directives on regulating financial institutions. Reforms aim to enhance competitiveness regarding foreign currency, remittances, and acceptable transaction currencies.
A minimum land allocation of 75 hectares is required. The Corporation may auction lands for zone housing and infrastructure projects. And the Commission has authority to designate suitable public lands as special economic zones under the new policies.
Under the new law, applicants to develop zones must commit a minimum capital of $75 million for construction over the development period. Once approved, developers gain rights to build infrastructure, lease lands, and provide utilities to support businesses. Approval is granted by the Ethiopian Investment Board, while the Ethiopian Investment Commission oversees investment permits.
The proclamation also widens the scope of permitted activities in zones. In addition to manufacturing, zones can now accommodate agriculture, services, and other industries based on Ethiopia's development targets and competitive advantages. This aims to further stimulate job creation and trade.
The proclamation allows foreign banks to set up branches within zones under the new guidelines. Preferential access to multiple foreign currencies is also envisioned as an added incentive for SEZ-based exporters versus firms operating nationally.
When the proclamation was tabled before Parliament for legislation, some parliamentarians expressed support, arguing the regulations will help attract foreign investment and boost much-needed foreign currency reserves.
However, others raised constitutional concerns about certain provisions. They noted Ethiopia's constitution states that the right to own land and natural resources lies exclusively with the state and its people. Giving the Investment Commission or Board the authority to identify and allocate land for zones may go against this, critics of the proclamation argued.
Supporters of the proclamation countered that the land is still owned by the state and the allocation is simply granting licensed usage rights to certified zone developers. They believe this approach will facilitate efficient development of special economic zones within the legal framework.