Ethiopia Red Tape Is Barrier for Business as Country Opens Up (Bloomberg)

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By Samuel Gebre

Ethiopia Red Tape Is Barrier for Business as Country Opens Up

Bureaucracy remains a stumbling block for businesses as Ethiopian Prime Minister Abiy Ahmed strives to roll back decades of tight controls and maintain one of the fastest rates of economic growth in Africa.

The country’s World Bank Ease of Doing Business ranking has been above 159 of 190 countries for the past five years, and the government wants to improve that to below 100 in 2021, according to the prime minister’s office. The government has introduced an online system to register businesses, a new import-export platform to simplify trade document processing and the state is amending policies and will introduce a new investment law.

“Ethiopia has already identified what needs to be done,” Charles Robertson, Renaissance Capital’s global chief economist, said in an emailed response to questions. However, one of the major challenges for companies is access to credit and this won’t suddenly “be miraculously better,” he said.

Ethiopia is among Africa’s fastest growing economies — the World Bank estimates 6.3% in the 2020 fiscal year — yet it remains one of the most state-controlled on the continent. Abiy, 43, is seeking to attract billions of dollars in foreign investment by selling state assets from the sugar industry, the phone system, railroads, and other infrastructure.

Decades of state bureaucracy in the Horn of Africa nation of more than 100 million people make it difficult to fully benefit from the reforms.

“Regulatory changes don’t mean ease of doing business,” said Getachew Alemu, an independent economist. “The bureaucrats are the same.”

While there have been improvements in key offices at the federal level, especially the Ethiopian Investment Commission, this isn’t the case at the lower administrative levels, where manual filing is still the norm.

“Launching a business in Ethiopia still requires considerable levels of courage and resilience,” said Addis Alemayehu, chief executive officer of Addis Ababa-based 251 Communications. The business reforms will trickle down and “contribute a fair share toward an investor confidence boost and slight decline in risk-aversion,” he said.

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