US State Dept. Cites Property Seizures And Conflict As Major Hurdles For Investors In Ethiopia
Ethiopian ‘Corridor’ Projects Draw U.S. Fire Over Property Rights and Expropriation Risk
Date: September 30, 2025 (Reflecting the release and analysis of the U.S. State Department’s recent report)
Core Trend: The United States views Ethiopia’s investment climate as persistently fraught with risk and systemic weaknesses, overshadowing recent government-led economic reforms and posing a significant challenge to the desired strengthening of U.S.-Ethiopia economic ties.
In-Depth Analysis
The latest 2025 Ethiopia Investment Climate Statement from the U.S. Department of State,released in September 2025, presents a candid assessment of the Ethiopian economy, indicating a significant disconnect between the government’s ambitious reform agenda and the practical reality for foreign investors, including U.S. businesses.
1. Systemic Weaknesses Undermining Reforms:
- Political Instability and Security: The report bluntly names ongoing conflicts in the Amhara and Oromia regions as a primary deterrent. It states that internal conflict “restricts travel, leads to frequent expropriation of assets, and limits the government’s ability to intervene.” This instability contributes to the displacement of millions of people and heightens the risk of asset loss for foreign firms.
- Weak Property Rights and Expropriation Risk: A major concern highlighted is the government’s controversial “corridor development” projects, which have reportedly resulted in the expulsion and demolition of properties—including foreign-owned ones—with “little to no warning or compensation.” The report also cited instances of tourist lodges in conflict zones being occupied by security forces without payment.
- Dominance of State-Owned Enterprises (SOEs): Despite Ethiopia’s claims of privatization and liberalization (notably of telecommunications and banking), the State Department asserts that the government “continues to manipulate the system to benefit inefficient SOEs,” often requiring foreign companies to lease equipment from these state entities, undermining fair competition.
2. Economic Hurdles and Regulatory Uncertainty:
- Currency Crisis: While the Government of Ethiopia implemented a major currency float in July 2024—a move commended by international financial institutions like the IMF and World Bank—the report notes that the gap between the official bank exchange rate and the parallel (black) market rate is re-emerging, contributing to persistent foreign currency shortages that severely hamper business operations.
- Taxation and Customs Issues: Foreign businesses reportedly face “excessive and questionable tax bills,” and the Customs Commission is criticized for making “frequent, non-transparent, and retroactive changes to regulations,” leading to financial losses for investors.
- Dispute Resolution: The report notes that despite Ethiopia acceding to the New York Convention on Arbitration in 2020, the judicial system remains plagued by delays, limited commercial expertise, and allegations of political interference, weakening the rule of law for investors.
3. U.S. Policy Implications:The report reinforces the U.S. government’s cautious stance toward fully normalized economic relations. While the U.S. State Department, through recent diplomatic calls, has commended Ethiopia’s macroeconomic reforms, the detailed Investment Climate Statement serves as a clear warning to American businesses, suggesting that until the fundamental issues of security, property rights, and state-centric economic control are resolved, the long-term risk of investing in Ethiopia remains high. This assessment is particularly significant as Ethiopia continues to pursue its $10.5 billion assistance package with the IMF and World Bank, which requires sustained reform efforts.
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