Africa Economy Ethiopia FA FDI Governance

Expectations towards the Draft Ethiopian Commercial Code

Ethiopia has undertaken significant economic reforms in the last few years. The country has announced its plan to reform the economy, and increase private sector participation through FDI.

On the economic sector, the country is working to partially or wholly privatize major state-owned enterprises (SOEs) that includes but not limited sectors like aviation, power, telecom, and sugar.

Furthermore, Ethiopia liberalizing the logistics sector and enacted a commandment that allows Public-Private Partnerships (PPP) to progressively open up some sectors of the economy to foreign direct investments. Ethiopia recently ratified the African Continental Free Trade Area Agreement and lessened visa requirements for African Union member states with the mission of enhancing regional trade and attracting foreign direct investment (FDI). These efforts are important to attract FDI. Further, the country also expressed its commitment to improve the ease of doing business, modernize the financial sector, and enhance macroeconomic policies.

Also read: Ethiopia suspends Ethiopian Airlines privatisation

Of course, Ethiopia’s economy is a developing one with high-level potential of booming if managed well. Ethiopia is the second most populous state in the continent following Nigeria, with having a population of over 100 million. Low-cost labor, a national airline with more high profile and world-class passenger connections will possibly have a real potential for investment attraction apart from the growing consumer markets. The largest volume of foreign direct investment (FDI) in Ethiopia comes from China, followed by Saudi Arabia and Turkey.

Here, the issue is if the country must have a well-oriented commercial law that can shoulder the investment flow that may rise. The Ethiopian Commercial Code is almost 58 years old since promulgation, therefore it needs serious revision. The revision of the law has to be ended up with devotion of enabling investments to flourish and creating wealth further to the old fashion of controlling and controlling only.

It is, therefore, expected that the revised commercial code will address the followings

  • To have a well versed provisions towards synchronizing the Ethiopian trade system;
  • To create a simple but organized procedure towards company formation, function and dissolution;
  • To put well oriented financial structure in its corporate sense;
  • To incorporate forward-looking corporate governance system;

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