DABLO LAW FIRM LLP

Addis Ababa, Ethiopia – 5 March 2025   – Dablo Law Firm, one of Ethiopia’s premier full-service law firms, has officially joined LEX Africa, the continent’s largest and longest-standing legal alliance. This strategic move strengthens Ethiopia’s representation in LEX Africa’s expansive network of leading independent law firms across 30 African countries. Founded in 1993, LEX Africa is a Band 1 ranked legal alliance that provides cross-border and local African legal solutions to businesses, investors, and organizations operating across diverse sectors. The addition of Dablo Law Firm further enhances LEX Africa’s ability to offer world-class legal expertise across Africa. LEX Africa Chairperson Pieter Steyn says, "We are delighted and honoured to welcome Dablo Law Firm to LEX Africa.  Ethiopia is a key African jurisdiction and DABLO law firm expands our Pan African Team and presence to cover 30 African countries. We look forward to working together with our new Ethiopian colleagues". Commenting on the firm’s admission to LEX Africa, Managing Partner Dawit Kidane said: "Joining LEX Africa is a significant milestone for Dablo Law Firm and a testament to our commitment to delivering high-quality legal services with a Pan-African perspective. As Ethiopia continues to attract international investment, being part of LEX Africa allows us to offer clients seamless access to top-tier legal expertise across the continent." Deputy Managing Partner Addisu Hailegebrel added: We are honored to become LEX Africa’s exclusive Ethiopian member. This alliance not only expands our reach but also enables us to collaborate with some of Africa’s most respected law firms. Our clients will benefit from enhanced cross-border legal capabilities, and we look forward to contributing to the alliance’s continued success."* Deputy Managing Partner Bruk Geremew also commented, saying: “Becoming part of LEX Africa is a pivotal moment for our firm and the broader Ethiopian legal market. This alliance allows us to connect with Africa’s top legal minds, share knowledge, and enhance the services we offer to our clients—both local and international. As Ethiopia’s economy continues to evolve, having access to a trusted Pan-African legal network ensures that we remain at the forefront of delivering innovative, business-driven legal solutions.” DABLO Law Firm specializes in a broad range of legal areas, including corporate and commercial law, investment law, litigation and dispute resolution, employment law, real estate and construction law, intellectual property, banking and finance, regulatory compliance, tax and customs, NGO and civil society law, gaming and entertainment law, and public-private partnerships (PPP). With a strong understanding of Ethiopia’s evolving legal and business landscape, the firm is well-positioned to support both local and international clients navigating the country’s dynamic investment climate.   For media inquiries, please contact: Dawit Kidane [email protected] +251938888887  

DABLO Law Firm is pleased to announce the promotion of Mr. Iyasu Teketel to the position of Head of the Consultancy and Compliance Department.This decision reflects the firm’s confidence in Iyasu’s exceptional abilities, dedication, and proven track record of performance. In a statement, the Managing Partner of DABLO Law Firm, Mr. Dawit Kidane, expressed his enthusiasm for Iyasu’s new role, stating, “Iyasu’s extensive experience and outstanding contributions to the firm make him the ideal candidate for this position. His dedication and contribution have been instrumental to our success, and we are confident that he will lead the Consultancy and Compliance Department to new heights.” Iyasu’s promotion comes as a testament to his hard work, expertise, and commitment to the firm’s mission. His leadership is expected to further strengthen the Consultancy and Compliance Department, driving innovation and excellence in the firm’s operations. The firm also took the opportunity to acknowledge the remarkable contributions of Mr. Fitsum, the former Head of the Consultancy and Compliance Department. Mr. Dawit Kidane added, “We extend our heartfelt gratitude to Fitsum for his exceptional leadership and pivotal role in our firm’s achievements. We are pleased to share that Fitsum will continue to contribute to DABLO in another capacity, details of which will be communicated soon.” DABLO Law Firm invites its colleagues, partners, and clients to join in congratulating Iyasu on this well-deserved promotion and in expressing gratitude to Fitsum for his invaluable service. The firm remains committed to fostering talent and leadership within its ranks, ensuring continued growth and success in the legal and consultancy sectors.  

Introduction Ethiopia has embarked on a new era of economic policy, marked by currency devaluation and a significant revamp of the foreign currency exchange regime.The National Bank of Ethiopia (NBE) has revised its long-standing practice of fixing and controlling the exchange rate, opting for a market-based exchange regime. It has introduced a new Foreign Exchange Directive (FXD/01/2024) on July 29, 2024, which repealed all the previous sporadic directives governing the foreign exchange regime and consolidated the applicable rules into a single directive. This move is the fourth and by far the most radical currency devaluation measure taken by the government since the fall of the Derg regime in 1991.  DABLO has examined the content of the new Directive, and here are the key legal changes brought by the Directive. Market-Based Exchange Regime: The role of the NBE has been reduced to monitoring the overall operation while the foreign exchange regime is to be governed by the market. Banks are allowed to freely set exchange rates and trade currencies with their customers and among themselves.[1] The NBE will compile an Indicative Daily Exchange Rate based on reports of daily exchange rates used by the banks. This rate will serve as a reference to set exchange rates but is by no means binding on the banks, as they are free to negotiate the market rate. Banks are required to report their daily foreign exchange rates to the NBE using a predetermined format.[2] The directive has introduced a two-tier structure for spot foreign exchange markets. The first tier is the wholesale or inter-bank forex market, where authorized banks engage in foreign currency transactions with one another.[3] The second tier is the retail forex market, where authorized banks or foreign exchange dealers conduct transactions with their customers. In this market, banks are permitted to negotiate buying and selling rates freely with their customers, allowing for greater flexibility in pricing based on market conditions and customer agreements. Currency Surrender: One of the most notable changes in the Directive is the elimination of the requirement for commercial banks and exporters to surrender their export earnings to the NBE. This change aims to give exporters greater flexibility in managing their finances. Exporters are now permitted to retain 50% of their export earnings in foreign currency, up from the previous 40%.[4] Exporters are permitted to use the foreign currency solely for their own purposes and may retain it in their retention account indefinitely.[5] Import Restrictions and Currency Allocation: The Directive lifts the previously imposed import restriction on 38 product categories while maintaining the restriction on capital account outflows. It is interesting to note that while the Directive uncategorical lifts the restriction on the 38 product categories, a letter written by the Ministry of Finance on July 30, 2024, maintained the restriction imposed on imports of fully assembled automobiles that run on fuel and three-wheel vehicles. The Directive also removes the rules governing banks’ allocation and distribution of foreign exchange, which was previously managed through a waiting list system for various import categories. Engagement of Non-Bank Actors: The Directive paves the way for non-bank actors to engage in foreign currency transactions at market rates. These entities must obtain prior authorization or a license from the NBE.[6]  Accordingly, on October 2, 2024 the National Bank has announced that five companies who applied for licenses and fulfilled the minimum requirements set by the Bank have been granted licenses to operate as Independent Foreign Exchange Bureaus. Franco Valuta Imports: Although the directive initially lifted restrictions on Franco valuta imports[7],  the Ministry of Finance has reinstated the ban on imports that do not utilize foreign exchange from the banking system. In a letter sent to the Customs Commission and the National Bank of Ethiopia on November 8, 2024, the Ministry announced its decision to reimpose the restriction. As a result, the Franco valuta ban has been reinstated just three months after it was lifted by the directive. Foreign Currency Accounts: The directive significantly relaxes the regulations governing foreign currency accounts for foreign institutions, foreign direct investment (FDI) companies, international organizations, embassies, foreign NGOs,[8] and the Ethiopian diaspora.[9] It permits the opening of three types of foreign currency accounts: Foreign Currency (FCY) Accounts for Foreign Entities, FCY Accounts for Residents and Non-Resident Ethiopians, and Retention Accounts for exporters of goods and services. Foreign entities are now allowed to maintain multiple accounts across different financial institutions, unlike the previous times where they were allowed to maintain a single foreign currency account.[10] Additionally, foreign nationals employed by these entities can fully utilize their accounts without being required to surrender any portion of their foreign currency earnings. For Ethiopians, both resident and non-resident, the directive broadens the scope of foreign currency accounts, enabling them to receive funds from international remittance service providers, salaries, rental income, and other legitimate sources. These accounts can also be used to make payments for foreign services, further enhancing financial flexibility. Repatriation of Capital: To enhance Ethiopia’s appeal as a destination for foreign direct investment, the directive establishes clear and streamlined procedures for the repatriation of capital and earnings. It explicitly recognizes the rights of foreign investors to transfer funds abroad in convertible currency, ensuring ease of capital movement. Under this directive, foreign investors can repatriate profits and dividends earned from their investments, proceeds from the sale or liquidation of an enterprise, and funds obtained from the transfer of shares or ownership in a business.[11] Additionally, investors who are unable to commence operations are entitled to reclaim their initial investment, while profits from portfolio investments in equity or debt securities can also be repatriated. Eased Rules for External Loans and Supplier Credit: The directive introduces significant reforms to enhance financial flexibility and investment opportunities. It removes the previous interest rate ceiling on foreign borrowings, allowing banks and companies to negotiate competitive financing terms with external creditors freely. Additionally, it expands the list of eligible entities that can access foreign loan, now construction companies can now access supplier credit to import machinery. However, to maintain regulatory oversight and financial stability, all loan agreements with external creditors must be registered and approved by the National Bank of Ethiopia (NBE). [12] Foreign Investments in Security Market: The Directive opens the Ethiopian Securities Market to foreign investments, paving the way for international participation and investment. However, its implementation is to be governed by specific regulatory requirements established by the National Bank of Ethiopia and the Ethiopian Capital Market Authority (ECMA).[13] Special Privileges for Companies in Special Economic Zones: Under the Directive, Companies operating in Special Economic Zones (SEZ) are granted special foreign exchange privileges, including the ability to retain 100% of their foreign exchange earnings. [14] Limits on Foreign Currency: The rules governing the amount of foreign cash travelers could carry while traveling to and from the country have been relaxed.[15] The Directive also stipulates specific time limits for holding and converting foreign currency for individuals entering the country. Off-Shore Accounts: The Directive also allows the opening of off-shore accounts for Strategic Foreign Direct Investment projects.[16] Projects with special significance and contribution in terms of size, job creation, import substitute, foreign exchange inflows, technology transfer, or sector-specific impact could be allowed by NBE’s Executive Management to own off-shore accounts. Sanction: The Directive imposes a sanction of USD 2,500.00 (two thousand five hundred US Dollars) per violation on banks and other licensed entities for any violation of the Directive. In addition, NBE has also been given the discretion to impose further sanctions. Conclusion In conclusion, the introduction of the Foreign Exchange Directive (FXD/01/2024) represents a transformative shift in Ethiopia’s economic landscape, signaling a move towards greater market flexibility and financial openness. By removing restrictions on foreign exchange and creating a more liberalized environment for both domestic and foreign investors, the directive aims to foster economic growth, attract foreign direct investment, and improve financial stability. While the transition to a market-based exchange rate system and other key reforms offers significant opportunities, ongoing regulatory adjustments, such as the reimposition of the Franco valuta import ban, highlight the complex balancing act the government faces in managing the country's economic interests. As Ethiopia continues to adapt to these changes, the ultimate success of these reforms will depend on how effectively they are implemented and their ability to generate sustainable growth in the evolving global economy. Footnotes [1] Article 4, The Foreign Exchange Directive No. FXD/01/2024 (herein under FXD 01/2024) [2] Article 5, Id. [3] Article 4.3, Id. [4] Article 6.2, Id. [5] Previously, the directive permitted exporters to retain 50% of their foreign currency earnings for only one month, after which they were required to sell it to commercial banks at a freely negotiated rate. However, as of November 14, 2024, the National Bank of Ethiopia has revised this policy, allowing exporters to retain the 50% indefinitely, providing greater flexibility in managing their foreign exchange holdings. [6] Article 4.2, FXD 01/2024. [7] The importation of goods for which foreign exchange from the domestic banking system is not payable. [8] Article 13, FXD 01/2024. [9] Article 14, Id. [10] Article 13.2.1, Id. [11] Article 16.2, Id. [12] Article 17.1, Id. [13] Article 20, Id. [14] Article 21.3, Id. [15] Article 22.7, Id. [16] Article 19, Id.

I. Introduction Ethiopia has recently enacted the Special Economic Zone (SEZ) Proclamation No. 1322/2024, marking a pivotal legislative milestone designed to bolster investment opportunities and drive economic growth. The proclamation provides a refined definition of SEZs, characterizing them as designated areas under the oversight of the Ethiopian Investment Board. These zones are equipped with customs control mechanisms, business-friendly policies, streamlined trade facilitation, robust infrastructure, and attractive tax incentives. The framework encompasses a diverse range of investment zones, including industrial parks, free trade zones, and agricultural hubs, positioning Ethiopia as a competitive destination for both domestic and foreign investors.[1] The legislation is designed to stimulate private sector engagement, attract foreign direct investment (FDI), and generate employment opportunities. By fostering export growth, promoting import substitution, and integrating Ethiopia into global value chains, the proclamation aims to position the country as a key player in the international economy. Additionally, it introduces a comprehensive policy framework for economic reforms within Special Economic Zones (SEZs), aimed at enhancing the business climate and boosting competitiveness. The legislation also establishes a robust regulatory framework to govern the operation, management, and oversight of these zones, ensuring transparency, efficiency, and sustainable development. This strategic initiative underscores Ethiopia's commitment to driving economic transformation and creating a more dynamic and investor-friendly environment. II. Key Provisions of the SEZ Proclamation The SEZ Proclamation introduces a structured approach to the establishment, operation, and governance of special economic zones in Ethiopia. Some of its core features include: Designation of SEZs: The law provides clear criteria for designating and developing SEZs, including industrial parks, free trade zones, logistics hubs, and service-oriented economic zones.[2] Regulatory Oversight: A dedicated regulatory authority is established to oversee SEZ operations, ensuring compliance with national economic policies, the primary body being the Ethiopian Investment board[3] of the Ethiopian Investment Commission. Other Regulatory bodies such as the National Bank of Ethiopia (NBE) and the Ministry of Trade and Regional Integration (MoTRI) will also be involved as per their scope and authority of regulation. Investment Incentives: In addition to incentives provided in the Investment Incentives Regulation Number 517/2022, businesses operating in SEZs benefit from tax, import and export exemptions within the SEZ, customs duty waivers, relaxed foreign exchange regulations, zero rated VAT and exemptions from other indirect taxes, and duty-free construction material and capital goods importation into SEZs and more. Further, it also provides non-fiscal incentives such as exemption from expropriation (excluding for the reason of public interest), work permits, remittance and opening of foreign currency accounts.[4] Simplified Business Environment: The law introduces streamlined procedures for business registration, licensing, and dispute resolution within SEZs.[5] Infrastructure and Private Sector Involvement: The proclamation encourages private sector participation in SEZ development and management through public-private partnerships (PPPs) as well as domestic and foreign private investors. Involved Entities: The law introduces SEZ Enterprise[6], SEZ developers[7], SEZ Sub-developers[8] and the SEZ operators[9] as individuals contributing to the design, construction, operation, ownership and maintenance of the SEZ. III. Comparison with the Previous Legal Framework Prior to the enactment of the SEZ Proclamation, Ethiopia’s industrial and economic zones were primarily governed by the Industrial Parks Proclamation No. 886/2015 and various sectoral regulations including the Industrial Parks Regulation Number 417/2017. The new SEZ law introduces several key changes: Scope and Classification: The previous framework focused primarily on industrial parks in federal regions, whereas the new law expands the scope to include free trade zones[10], logistics parks[11], and service hubs within the territory of Ethiopia offering a more diversified economic model. Regulatory Structure: The old framework lacked a centralized authority for economic zones beyond industrial parks, whereas the new law establishes a dedicated regulatory body to oversee all SEZs. The Ethiopian Investment Board[12], with cooperation of the NBE, MoTRI and the Ministry of Labour and Skills will oversee the entry, operation and exit of SEZs. Investment Incentives: While the Industrial Parks Proclamation provided tax incentives, the new SEZ law enhances these benefits by introducing more flexible foreign exchange rules[13] and broader tax relief measures[14] in addition to non-fiscal incentives. Business Operations and Facilitation: The new law simplifies administrative procedures for investors, reducing bureaucratic hurdles and enhancing ease of doing business within SEZs by introducing one-stop services within the SEZs.[15] IV. Implications and Future Prospects The SEZ Proclamation is expected to attract increased foreign direct investment and enhance Ethiopia’s global trade competitiveness. By offering a more structured and investor-friendly environment, the law aligns with Ethiopia’s broader economic liberalization agenda. With effective implementation, infrastructure development, and coordination among relevant stakeholders, the law is bound to achieve its economic objectives. V. Conclusion Ethiopia’s adoption of the SEZ Proclamation No. 1322/2024 marks a progressive shift in its economic policy framework. By addressing limitations in the previous regulatory regime and expanding the scope of economic zones, the law lays a solid foundation for sustainable economic growth. Investors and businesses should closely monitor regulatory developments and implementation strategies to maximize the opportunities presented by Ethiopia’s evolving SEZ framework. Footnotes [1] Article 2(1), Special Economic Zone Proclamation No. 1322/2024. [2] Articles 5 –12,Id. [3] Article 13 and 2 (41), Id. [4] Articles 57 and 58, Id. [5] Article 14(1) (x) Id. [6] Article 2(17) Id [7] Article 2(14) Id. [8] Article 2(15) Id. [9] Article 2(16) Id. [10] Article 2(5) Id. [11] Article 2(9) Id. [12] Article 2(41), Article 13 Id [13] Article 34 (3), (4) Id. [14] Article 57 – 58, Id. [15] Article 14 (1) (x) Id.

DABLO Law Firm LLP has proudly earned a prestigious ranking in the Chambers and Partners 2025 Global Guide, solidifying its position as a leading law firm in Ethiopia. This accolade highlights the firm's exceptional expertise across a wide range of practice areas, including corporate and commercial law, dispute resolution, regulatory compliance, and intellectual property. The recognition by Chambers and Partners follows the firm’s 2024 Legal 500 ranking and its shortlisting for the 2025 Chambers Africa Awards. It is a testament to DABLO's unwavering commitment to delivering top-tier legal services. The firm's international reach is further enhanced through its membership in the Alliott Global Alliance, a worldwide network of independent law firms. In addition to the firm's overall ranking, Principal Managing Partner Dawit has also been individually recognized by Chambers and Partners. This honor underscores his leadership and the high standards of excellence he upholds within the firm. Reflecting to this recognition, Mr. Dawit said "We are on a mission to become a law firm known for exceptional legal services in Ethiopia, and this is just the beginning" Chambers and Partners, a renowned research firm based in London, United Kingdom, has been producing international rankings for the legal industry since 1989. The rankings by Chambers and Partners are highly respected and serve as a definitive mark of excellence within the legal profession, guiding clients to the best legal service for their needs.  

DABLO LAW FIRM is proud to announce its shortlisting for the prestigious “Ethiopian Law Firm of the Year” award at the Chambers Africa Awards 2025.This recognition by Chambers and Partners, a globally renowned authority on legal rankings and insights, underscores the firm’s dedication to excellence and the trust placed in it by its clients. The nomination reflects DABLO LAW FIRM’s commitment to delivering exceptional legal services across a range of practice areas, including corporate and commercial law, dispute resolution, and regulatory compliance. It also highlights the firm’s growing reputation as a leading legal practice in Ethiopia and beyond. DABLO LAW FIRM’s achievements are further amplified by its membership in the Alliott Global Alliance, a worldwide network of independent law firms, which enhances its ability to serve clients with international needs. Chambers and Partners, based in London, United Kingdom, has been a trusted name in legal rankings since 1989. Its awards and guides are widely regarded as a definitive mark of excellence in the legal profession, helping clients identify the best legal services for their requirements. The firm extends its congratulations to all other shortlisted law firms and looks forward to continuing its journey of excellence in the legal field.  

     I.          Introduction In recent years, Ethiopia has undertaken a significant policy shift in its approach to foreign direct investment (FDI) by opening sectors that were previously reserved exclusively for domestic investors. As part of the government's Homegrown Economic Reform (HGER) agenda, key reforms have been introduced, including allowing foreign investment in the telecom sector, opening export, import, wholesale, and retail trade to foreigners, establishing capital markets, launching a public-private partnership (PPP) framework, and enabling foreign investors to collaborate with the government on strategic projects. Furthermore, the foreign exchange regime has undergone a major overhaul, shifting from a managed exchange rate regime to a floating exchange rate regime. These reforms mark a decisive move towards liberalizing the economy and attracting greater foreign direct investment. Among these policy shifts, arguably the most significant is the opening of the financial sector to foreign investment. On December 17, 2024, the Ethiopian Parliament approved the new Banking Business Proclamation No. 1360/2024, marking a historic milestone as it allows foreign banks to re-enter the Ethiopian market after a 50-year absence. This landmark legislation opens the door for foreign banks to participate in Ethiopia's financial sector through various modalities, including establishing subsidiaries, opening branches, or acquiring shares in domestic banks. The move represents a significant step in liberalizing one of the last remaining closed sectors in the country, signaling a decisive shift from the government's long-standing protectionist policies toward a more open and market-oriented approach. This reform is expected to enhance competition, attract foreign direct investment, and modernize Ethiopia's banking industry, aligning with the broader goals of the nation's economic reform agenda. This article explores the key features of the new Banking Business Proclamation and highlights the opportunities it creates for foreign investors.    II.         Historical Context The idea of foreign banks operating in Ethiopia is not new. In fact, the country's first bank, the Bank of Abyssinia, was established in 1905 and was foreign-owned, with shares subscribed internationally. Following the brief Italian occupation of the country during World War II, Italian banks entered the market, later followed by British banks. However, all foreign banks were nationalized in 1975 following the fall of the Imperial Regime. The subsequent rise of the Derg, a military junta that adopted socialist ideology, led to a significant shift in Ethiopia's economic policies, including the closure of the banking sector to foreign entities. This closure lasted for nearly half a century, despite the fact that the Derg regime only lasted for 17 years. Even after the fall of the Derg regime in 1991, the banking sector remained closed to foreign investment, with a slight shift in policy allowing private domestic banks to operate starting from 1994.  III.         Key Changes and Objectives The prospects for foreign banks operating in Ethiopia have become increasingly promising. As part of the Homegrown Economic Reform Agenda (HGER), discussions on opening the banking sector to foreign investors have been ongoing for years. This effort has now culminated in the enactment of Proclamation No. 1360/2024, which repeals and replaces the previous Banking Business Proclamation No. 592/2008. The new legal framework formally permits foreign banks and investors to participate in Ethiopia’s banking industry, marking a significant shift in the country’s financial sector. Key Objectives Improving Competitiveness and Efficiency: One of the primary reasons for the amendment of the Banking Business Proclamation is to improve the competitiveness and efficiency of the banking industry by opening the sector to foreign investment. The proclamation expands the definition of "Bank" to include foreign banks, along with their subsidiaries and branches, marking a significant step towards integrating foreign investors into the financial industry. Attracting Foreign Direct Investment (FDI): The proclamation is designed to attract foreign direct investment into the banking sector, which is expected to bring in new capital, advanced technology, and innovative financial products. This is particularly important given Ethiopia's rapidly growing population of 120 million and an expanding middle class, making it an attractive destination for foreign banks. Enhancing Financial Inclusion: By allowing foreign banks to operate in Ethiopia, the government aims to enhance financial inclusion, particularly in underserved areas. Foreign banks are expected to bring higher standards of service and a wider range of financial products, which could help bridge the gap in financial access for many Ethiopians.  IV.         Modalities for Foreign Banks Entering the Ethiopian Market The proclamation establishes multiple avenues for foreign banks to enter the Ethiopian market. Beyond allowing foreign banks to operate, it also permits foreign nationals to acquire shares in Ethiopian banks. The available entry options include: Establishing Subsidiaries: Foreign banks can establish either partially or fully owned subsidiaries in Ethiopia. This allows them to operate as independent entities while adhering to Ethiopian banking regulations. Opening Branches or Representative Offices: Foreign banks can open branches or representative offices in Ethiopia. However, they are prohibited from operating both deposit-taking and non-deposit-taking branches simultaneously. Acquiring Shares in Existing Domestic Banks: Foreign banks can acquire shares in new or existing domestic banks. The proclamation sets limits on the amount of shares that foreign investor can acquire. In such case, the maximum amount of shares a strategic investor could acquire is 40 percent of the total subscribed share of the bank. Foreign individuals could hold up to seven to ten percent of the total share of the bank while foreign juridical persons are permitted to own up to ten percent of the total subscribed shares of the bank.  In any case, the proclamation limits the aggregate shareholding by foreign nationals and foreign-owned Ethiopian organizations to 49 percent of the subscribed shares of domestic banks. Exceptional Circumstances for Acquisition: In exceptional circumstances, foreign banks may be permitted by the National Bank of Ethiopia (NBE) to partially or fully acquire existing domestic banks. This is allowed only if the bank being acquired is well-established, reputable, and financially sound.    V.         Framework for Investment, Operations, and Regulations The Proclamation establishes a framework for foreign banks entering Ethiopia's financial sector, covering investment requirements, profit repatriation, property ownership, and employment of foreign nationals.  Key provisions on investment, property ownership, and employment, as well as the National Bank of Ethiopia's role in issuing further directives, are discussed below. Investment Requirements and Repatriation of Profits: Foreign banks entering the Ethiopian banking sector are required to structure their investments as foreign direct investment (FDI) using foreign currency. The bank's capital must be fully paid in cash up front. Additionally, if an Ethiopian organization is partially owned by foreign nationals, it must invest through FDI based on the aggregate percentage of foreign ownership, and this investment must also be made in foreign currency. The proclamation allows for the repatriation of dividends earned by foreign nationals from investments in banks and the salaries of foreign national employees, in line with the Foreign Exchange Directive FXD 01/2024 of the National Bank of Ethiopia. Property Ownership and Foreclosure: Foreign banks are permitted to own property in Ethiopia for the purpose of conducting their banking business. This will enable foreign banks to establish a physical presence and operate effectively within the country. However, issues related to properties acquired through foreclosure or mortgages will continue to be governed under Ethiopia’s existing legal regime. Employment of Foreign Nationals: In line with Ethiopia’s Investment Law, the proclamation allows foreign nationals to hold key positions such as Chief Executive Officer (CEO) and Senior Executive roles in banks. However, this is contingent on the non-availability of qualified Ethiopian nationals for these positions. Foreign employees may serve for a maximum of five years, with the expectation that their tenure will facilitate the transfer of knowledge and skills to local employees. Regulatory Oversight: The National Bank of Ethiopia (NBE) will play a pivotal role in regulating foreign bank operations. The NBE is tasked with issuing additional directives to address several key aspects of foreign bank activities, including: Minimum initial capital requirements for establishing foreign banks and their branches. Composition and fit-and-proper criteria for the board of directors of foreign banks. Permissible activities for foreign banks operating in Ethiopia. Minimum capital requirements for opening branches of foreign banks.  VI.         Potential Benefits and Challenges Following the enactment of the proclamation and subsequently opening the door to foreign investment in to the financial sector is expected to have both its benefits and challenges for the Ethiopian economy as well as the potential investor seeking to invest in the country. The new development would have the following benefit: Enhanced Competition and Efficiency: The entry of foreign banks into Ethiopia's financial sector can stimulate healthy competition, compelling local banks to improve their efficiency, service delivery, and technological adoption. Diverse Financial Products: Foreign banks bring advanced financial expertise and a wider range of products, such as derivatives, trade finance, and specialized credit facilities. Knowledge and Skill Transfer: With foreign banks come experienced professionals and innovative practices. Local financial institutions and regulators can benefit from exposure to international banking standards, risk management frameworks, and digital technologies, strengthening the overall financial ecosystem. Global Integration and Investment: Foreign banks can facilitate the inflow of foreign direct investment (FDI) by linking Ethiopia to global financial markets. The entry of foreign banks to the Ethiopian financial sector, among others would pose the following challenges Market Domination Risks: Foreign banks often possess greater resources, advanced systems, and international networks, potentially overshadowing local banks. This dominance could stifle domestic financial institutions, leading to market imbalances and reduced competition in the long term. Economic Risks: Increased foreign bank participation exposes Ethiopia’s economy to external risks such as exchange rate volatility and potential capital flight. Resource Disparity: Foreign banks' access to sophisticated technologies and funding could widen the gap between them and local banks. This disparity might restrict domestic banks’ ability to compete effectively and exacerbate inequalities in financial service access. Regulatory Challenges: Integrating foreign banks requires robust regulatory frameworks and institutional capacity to monitor and mitigate risks. Conclusion The new Banking Business Proclamation represents a significant step forward in Ethiopia's economic liberalization efforts. By opening the banking sector to foreign investment, the government aims to improve the competitiveness and efficiency of the financial industry, attract foreign direct investment, and enhance financial inclusion. The proclamation provides clear modalities for foreign banks to enter the Ethiopian market, ensuring that their operations are aligned with the country's economic goals and regulatory framework. As Ethiopia continues to implement its Homegrown Economic Reform Agenda, the entry of foreign banks is expected to play a crucial role in driving economic growth and development.  

I.              Introduction Ethiopia has introduced a new Directive to Regulate Foreign Investors’ Participation in Restricted Export, Import, Wholesale and Retail Trade Investments,Directive No. 1001/2024 aimed at gradually liberalizing the import and export sectors to facilitate foreign investment and enhance market openness. The directive addresses both legal and practical gaps in the existing investment regulations, introducing specific provisions governing the import, export, wholesale, and retail trade activities of foreign investors. II. Implications of the Directive The Directive introduces significant changes for both investors and consumers in Ethiopia’s trade sector. For investors, it creates new opportunities in import, export, wholesale, and retail trade while imposing strict capital requirements, export obligations, and sectoral restrictions, shaping the investment landscape. Consumers stand to benefit from greater product availability, competitive pricing, and improved service quality due to increased foreign market participation. However, local businesses may face heightened competition, which could impact market stability and product diversity. From a regulatory standpoint, the Directive reinforces the Ethiopian Investment Commission’s (EIC) authority in ensuring compliance, requiring investors to navigate evolving approval processes and enforcement mechanisms. III.          Foreign Investment in Export Trade Under the new directive, foreign investors are allowed to engage in export trade by purchasing and exporting designated commodities, including raw coffee, khat, oilseeds, pulses, hides and skins, forest products, poultry, and livestock. However, their participation is contingent upon demonstrating relevant experience, operational capability, or established market linkages within the sector. Export Trade Requirements To qualify for export trade participation, foreign investors must meet the following financial thresholds:[1] Raw Coffee: Must have purchased at least USD 10 million worth of Ethiopian products over the past three consecutive years and commit to an annual purchase of USD 10 million. Oilseeds: A minimum purchase of USD 5 million over the past three years, with an annual commitment of USD 5 million. Khat and Spices: A minimum purchase of USD 1 million over the past three years, with an annual commitment of USD 1 million. Hides, Skins, Leather, and Poultry: A minimum purchase of USD 500,000 over the past three years, with an annual commitment of USD 500,000. Live Animals: No prior purchase history or contractual obligation is required. For new foreign investors without a prior purchase history, the directive sets the following minimum investment requirements to ensure substantial financial commitment and sectoral engagement: Raw Coffee: A minimum investment of USD 12.5 million is required. Oilseeds: Investors must commit at least USD 7.5 million. Khat and Spices: A minimum investment of USD 1.5 million is mandated. Hides, Skins, Leather, and Poultry: Investors must allocate at least USD 750,000. Investment or business licenses are subject to renewal only upon confirmation that the investor has met their obligations.[2] Failure to comply may result in suspension or cancellation of the license, leading to the loss of associated rights and benefits. IV.          Foreign Investment in Import Trade Foreign investors may engage in all income-generating import sectors, except for the fuel and fertilizer trade, provided they demonstrate the necessary expertise, capacity, or market linkages.[3] Ethiopia restricts fuel and fertilizer trade to safeguard foreign exchange reserves, regulate prices, stabilize markets, and protect local industries. To maintain economic stability and support domestic production, the government prioritizes foreign currency allocation for essential sectors such as energy and agriculture while implementing targeted subsidies to ensure affordability. State-owned enterprises, including the Ethiopian Petroleum Supply Enterprise (EPSE) for fuel and the Ethiopian Industrial Inputs and Production Supply Enterprise (EIIPSE) for fertilizer, oversee distribution to regulate supply and mitigate global price fluctuations. To qualify for participation in the import sector, foreign investors must meet at least one of the following conditions:[4] Manufacturing Requirement: Provide evidence that the product they intend to introduce into the market is self-manufactured. Authorized Agency: Present proof of agency authorization for the imported product. Export Participation: Demonstrate prior involvement in the Ethiopian investment sector and provide proof of exporting at least 50% of their product or service to foreign markets. Investment Threshold: If not a manufacturer or authorized agent, commit to importing goods valued at a minimum of USD 10 million annually, submit a detailed business plan, and enter into a formal agreement with the relevant licensing authority. Additionally, the directive also applies to the renewal, suspension, and cancellation of import licenses, ensuring consistency in regulatory oversight.[5] V.            Foreign Investment in Wholesale and Retail Trade Wholesale Trade Participation Except for the wholesale trade of fertilizer, foreign investors are allowed to sell both locally sourced and imported products within Ethiopia’s domestic wholesale market. To obtain an investment permit, they must meet the following requirements:[6] Contract Commitment: Provide written evidence of their willingness to enter into a contractual agreement. Commercial and Logistics Infrastructure: Establish modern commercial networks and logistics services to ensure efficient business operations. Regulatory Compliance: Meet the minimum commercial and logistical standards set by the relevant ministry. Retail Trade Participation Investment permits for foreign investors in the retail sector are granted based on land or retail space occupation and investment commitments, as follows:[7] Supermarkets: The investor must operate within a minimum retail space of 2,000 square meters and commit to establishing at least five supermarkets within three years. Hypermarkets: The investor must operate within a minimum retail space of 5,000 square meters and establish at least two hypermarkets within three years. Malls: The investor must operate within a minimum retail space of 10,000 square meters and demonstrate the capacity to develop a shopping mall. Before obtaining an investment permit, investors must first meet all preconditions for securing a trade permit. The Ministry of Trade is responsible for overseeing the registration and licensing process for supermarkets, hypermarkets, and malls in accordance with the applicable regulatory framework. For foreign investors with minimal capital and qualifications, the regulatory board will assess applications based on specific conditions applicable to small-scale trade operations.[8] Conclusion The newly enacted directive represents a significant step toward opening Ethiopia’s market to foreign investors while ensuring compliance with sector-specific requirements. By introducing clear financial thresholds, operational criteria, and licensing conditions, the government aims to attract strategic investments while maintaining regulatory oversight. Investors looking to enter the Ethiopian market should carefully assess these requirements to ensure compliance and optimize their investment strategies. Footnotes [1] Article 6, Ethiopian Investment Board Directive to Regulate Foreign Investors’ Participation in Restricted Export, Import, Wholesale and Retail Trade Investments No.1001/2024. [2] Article 7, Id. [3] Article 8, Id. [4] Article 9, Id. [5] Article 10, Id. [6] Article 11, Id. [7] Article 13, Id. [8] Ibid.