Financial Incentives

 

 
Ethiopian Investment Incentive Inventory
Incentive Name Brief Description Legal Reference Name Law Section/Article Sectors

Eligebility Criteria

(Description

Awarding Authority Implementing Authority
Skills development and retention cost-sharing grant for domestic industrialists (matching grant for training of local personnel)

Government cost sharing on labour recruitment and training as below:

Year 1: 85%

Year 2: 75%

Year 3:50%

Year 4:25%

As condition, domestic industrialists are expected to apply sound management practices and ensure retention of trained labour force. Cost of training new personnel, upon departure of trained ones, will be fully covered by the employer.

Investment Board Decision

N/A Textile & leather manufacturing in industrial parks (100% for export)

1) Domestic investor status

2) Investment in Industrial park

3) Commitment for cost sharing....................................

Ethiopian Investment Commission Ministry of Finance and Economic Cooperation
Skills development and retention cost-sharing grant for domestic industrialists (matching grant for recruitment of expatriates)

Cost-sharing on recruitment of expatriate managers and special technicians as below:

Year 1: 85%

Year 2: 75%

Year 3: 50%

Year 4: 25%

Domestic industrialists who are beneficiaries of the above incentives are expected to match to at least 75% productivity by foreign investors operating in same industrial park in year one, and raise performance to 85% and 100% in years two and three, respectively.

Investment Board Decision N/A Textile & leather manufacturing in industrial parks (100% for export)

1) Domestic investor status

2) Eligible sector

3) Investment in industrial park

4) Commitment for cost sharing

5) Undertaking for scaling up production capacity

Ethiopian Investment Commission Ministry of Finance and Economic Cooperation
Development Bank of Ethiopia (DBE) - Export credit guarantee Guarantee by DBE that covers 80% of loan and interest provided by commercial banks to exporters with bankable export project except for coffee export Export credit guarantee Directive No.SBB/41/2007 Article 3

 N/A

1) Valid investment permit and/or business license

2) Bankable export project (assessment based on DBE's credit policy and procedures and found within acceptable risk level)

3)  Presentation of a bona-fide order from a foreign buyer

4) Credit worthiness (submission of documents on company's credit discipline and financial statements)

5) Collateral equivalent to at least 40% of loan for new producer exporters (operational for less than 12 months)

Development Bank of Ethiopia Development Bank of Ethiopia
Development Bank of Ethiopia (DBE) - Soft/Subsidized project loan Soft loan for strategic investment projects in priority sectors. Repayment term goes up to 20 years; and interest rate ranges between 9%-9.5% depending on export capability. Also longer grace period (up to five years) is provided, and the project itself is taken as a collateral Development Bank of Ethiopia Credit Policy  N/A Strategic investments in priority sectors (agriculture, agro processing,  manufacturing and extractive industries).  Mainly for domestic investors, foreign investors are encouraged to come with own capital and foreign loan

1) Eligible sector/Sub-sector of investment

2) Project viability (assessment of project feasibility including size, capacity, value addition etc.) based on Sector-specific parameters of the bank

3) Credit worthiness (assessed based on previous track record)

1) Normally: Development Bank of Ethiopia

2) For project loan that accounts more than 25% of DBE paid-up capital (35% in case of corporate clients): National Bank of Ethiopia

Development Bank of Ethiopia
Development Bank of Ethiopia (DBE) Subsidized loan - Higher debt: equity ratio for project finance to domestic investors located outside of industrial parks (75:25) Domestic investors engaged in eligible sectors for Development Bank of Ethiopia's finance can access 70:30 debt:equity (75% loan with 25% equity) Development Bank of Ethiopia Credit Policy  N/A Strategic investments in priority sectors (agriculture, agro processing,  manufacturing and extractive industries)

1) All the general eligibility criteria for project loan holds

2) Domestic investor status

Development Bank of Ethiopia Development Bank of Ethiopia
Development Bank of Ethiopia (DBE) Subsidized loan - Highest debt: equity ratio for project finance to domestic manufacturers located in industrial parks (85:15) Domestic investors engaged in the manufacturing sector and undertaking their investment in industrial parks (with export orientation) can access 85% start-up loan from the Development Bank of Ethiopia

Development Bank of Ethiopia Credit Policy.

Investment Board Decision.

 N/A Manufacturing and horticulture with 100% export

1) All the general eligibility criteria for project loan holds

2) Domestic investor status

3) Investment located in industrial parks and horticulture clusters

Development Bank of Ethiopia Development Bank of Ethiopia
Development Bank of Ethiopia (DBE) - Lease financing Soft loan for capital goods/machinery  purchase by SMEs (domestic businesses with paid up capital ranging between ETB 500,000 - ETB 7.5 million). Development Bank of Ethiopia finances full cost of machinery including installation cost (ETB 1 million - 30 million) using the capital good/machinery as a collateral; interest rate of about 9%; repayment schedule goes up to five years with grace period of about six months after commissioning/commencement of production or service provision. The investor has to contribute at least 20% of the machinery value for running cost. Ownership is transferred up on full repayment.

A) Capital Goods Leasing Business Proclamation No. 103/1998, Amendment Proclamation No. 807/2013

B) Development Bank of Ethiopia Lease Finance Policy.

 N/A Agriculture, agro processing, manufacturing, tour operations, mining and quarries, construction

1) Eligible sector/Sub-sector of investment

2) Local firms operating at SME scale (paid up capital ranging between ETB 500,000 - ETB 7.5 million; employment of more than 6 workers)

3) Business plan feasibility

4) Credit worthiness (assessed based on previous track record)

Development Bank of Ethiopia Development Bank of Ethiopia
Subsidized land lease and shed rental rates in industrial parks Industrial park developers can access land at promotional rate. Industrial park enterprises pay subsidized shed rental/sub-lease rate for developed lands. Investment Board Decision N/A Manufacturing Manufacturing in industrial parks meeting the specific criteria for the park (sector of investment, export performance etc.) Ethiopian Investment Commission Industrial Parks Development Corporation
Access to suppliers credit for import of goods by exporting companies Subject to National Bank of Ethiopia's (NBE) assessment and approval, and limited to finance an export-oriented investment that generates forex National Bank of Ethiopia's  External Loan and Supplier's Credit Directive No. FXD/47/2017 Article 4 Export-oriented investments

1)  Export of goods or services

2) Allowed only for direct business related import

3) Repay the credit from the export earning

4) Submission of the following documents: a) Application letter; b) Valid investment permit/ business license; c) Foregin capital registration certification; d) Document justifying repayment capacity; e) Pro-forma invoice with repayment period

National Bank of Ethiopia National Bank of Ethiopia
Franco valuta import of capital goods, raw materials, spare parts and other accessories  

A)Regulation
on the Importation of Goods on Franco Valuta Basis No 88/2003

B) ERCA Directive on franco valuta No 66/2004; Amendment Directive No 88/2006

Regulation No 88/2003, Article 2(9) Manufacturing

The eligibility criteria are different depending on type of items:

1) Capital goods, raw materials, and personal items -   allowed for Ethiopians and foreign nationals of Ethiopian origin.

2) Non-capital items important for the investment, and spare parts and other accessories of capital goods imported duty free - allowed for foreign investors engaged in the manufacturing sector; with a condition that such items are not available in the local market

3) Labels and packaging materials - allowed only as inputs to export products

Ethiopian Revenue and Customs Authority, Ethiopian Investment Commission Ethiopian Revenue and Customs Authority
Priority forex access for manufacturers, construction  companies and conversion/transfer of sales from shares  or liquidation of FDI Priority forex access for manufacturers, construction companies and conversion/transfer of sales from shares  or liquidation of FDI Transparency in Foreign Currency Allocation and Foreign Exchange management Directive No. FXD/46/2017  Article 6 Manufacturing, Construction   National Bank of Ethiopia Commercial Banks of Ethiopia
Export earnings retention Retention of 30% of export earnings for an indefinite period of time; and retention of 70% of export earnings for 28 days National Bank of Ethiopia's Retention and Utilization of Export Earnings  and Inward Remittances Directive No. FXD/48/2017  Article 5 Export of goods and services

 ) Export of goods or services

2) Export earnings on process

3) Opening foreign exchange retention account in an authorized bank

National Bank of Ethiopia  Commercial Banks of Ethiopia
Access to foreign loan (with debt; equity ratio of 60:40 for foregin investors)

a) Foreign investors can raise up to 60% of their finance through loan from foreign markets

b) Domestic investors engaged in export-oriented business that generate forex can access foreign loan

National Bank of Ethiopia's  External Loan and Supplier's Credit Directive No. FXD/47/2017 Article 4

a) Economy wide for foreign investors

b) Limited to export business for domestic investors

1) Application letter

2) Valid investment permit/ business license

3) Foreign capital registration certification

4) Document justifying repayment capacity

5) Draft loan agreement

National Bank of Ethiopia National Bank of Ethiopia
Reduced charge for opening Letter of Credit (LoC) by manufacturers (reduced from the regular rate of 3.5%  to 0.5%) Availed by public banks Letter written by Ministry of Finance and Economic Cooperation   Manufacturing   Commercial Bank of Ethiopia, Development Bank of Ethiopia Commercial Bank of Ethiopia, Development Bank of Ethiopia