Major features of Ethiopia’s new investment law: an appraisal of their policy implications

This paper analyses the major features of the 2020 Ethiopian investment law and their policy implications. The law has liberalized many areas of the Ethiopian economy to pave the way for increasing the private sector’s share and diminishing the Government’s role. It adopted the negative list approach to liberalization to simplify the process of determining investment fields that are open for foreign investors. It laid out procedures for handling investors’ grievances and for resolving investor–State disputes, principally through domestic institutions. It also obliges investors to discharge their corporate social responsibilities. The paper argues that these features of the law demand transparent, efficient and competent government institutions to properly regulate and protect investments and to attain sustainable development as the ultimate goal of the law. For this purpose, it also argues that two factors are essential: ensuring effective institutional coordination and supplementing the mandatory corporate social responsibility requirements with voluntary engagement. In addition, it contends that the Government needs to strengthen linkages between foreign and domestic investment, promote decent jobs and sustainability, enhance human resources and infrastructure, and build a stable political system to reap the significant development benefits of investment, as envisaged in the investment law. The paper also suggests that other countries, in Africa and beyond, can benefit from applying these lessons in designing or reforming their investment policies to maximize the sustainable development gains from foreign investment.