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Sub-Saharan Africa

Ethiopia risk report

Updated:

There are high levels of corruption in Ethiopia, although less high than in comparable regional countries. Examples of corruption include facilitation payments and bribes being necessary to keep land leased from the state or in order to obtain government contracts. Ethiopian anti-corruption law is primarily contained in The Revised Federal Ethics and Anti-corruption Commission Establishment Proclamation and the Revised Anti-Corruption Law which criminalizes major forms of corruption including active and passive bribery, bribing a foreign official, and money laundering. Facilitation payments are illegal, and it is forbidden for civil servants to accept gifts or hospitality that may affect their decisions. The legal anti-corruption framework is rarely enforced.

Judicial system Very high risk

Companies face a high risk of corruption when dealing with Ethiopia's judiciary. Bribes and irregular payments in return for favorable judgments are common (GCR 2015-2016). While the constitution guarantees judicial independence, in practice judges are highly vulnerable to corruption and subject to influence by high-level officials (BTI 2016). Companies do not consider the judiciary to be sufficiently independent and express insufficient confidence in the ability of the legal framework to resolve disputes and challenge regulations (GCR 2016-2017). Ethiopia's judicial system is weak, overburdened, poorly staffed and prone to corruption (ICS 2017). Trials are often closed to the public and the media, contributing to the lack of transparency in Ethiopia's courts (FitW 2015). However, less than one in ten companies indicate that the court system is a major constraint on their ability to do business (ES 2015). Enforcing a contract takes on average 530 days, which is faster than the regional average (DB 2017).

Ethiopia is not a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, but it is a member state to the International Centre for the Settlement of Investment Disputes (ICSID).

Police Very high risk

Corruption within Ethiopia's police is perceived to be rampant. Impunity within the police force is a serious problem (HRR 2016). Businesses do not have full confidence in the police services to protect them from crime (GCR 2016-2017). Almost half of respondents believe the police is corrupt (GCB 2013). Over half of companies indicate they pay for their own security (ES 2015). The solicitation of bribes by police officers remains a widespread problem (HRR 2016).

In January 2015, the Dire Dawa Bench of the Federal High Court convicted four law enforcement officers for corruption. The officers received jail time and fines for misappropriation of 246 cartons of Shisha in the discharge of their duties (Federal Ethics and Anti-corruption Commission, Feb. 2014).

Public services Very high risk

Companies face high risks of corruption in Ethiopia's public services provision. Petty corruption and the solicitation of bribes in return for the processing of documents are particularly common forms of corruption in the public services sector (HRR 2016, FitW 2017). About one in five companies indicates expecting to give gifts to obtain an electrical or water connection (ES 2015). Less than one in ten businesses report they expect to give gifts to public officials in order 'to get things done' (ES 2015). A third of Ethiopians indicate that they perceive public officials to be corrupt (GCB 2013). Recruitment to and promotion within the civil service is often dependent upon affiliation to the ruling party (GI 2017). A survey of foreign companies concluded that the national electricity provider EEPCo was among the most corrupt service providers in the country (Federal Ethics and Anti-corruption Commission 2014).

Starting a business in Ethiopia takes almost twice as many procedures as the regional average and takes a significantly longer period of time (DB 2017). Obtaining a construction permit in Ethiopia takes two fewer steps than the regional average and the time required is also slightly lower (DB 2017).

Land administration Very high risk

There is a high risk of corruption in Ethiopia's land administration. Businesses report that property rights are insufficiently protected in Ethiopia (GCR 2016-2017). Half of all companies expect to give gifts when applying for a construction permit (ES 2015). A third of Ethiopians report having paid a bribe to a land administration official (GCB 2013). Petty corruption and land-grabbing is common in the land administration sector (TI 2014). This is caused by the absence of strong institutions, transparency, clear policies, and a lack of resources (TI 2014). Officials have also engaged in forgery practices, thereby assigning themselves an estimated 15,000 titles illegally; only a few have been held accountable (TI 2014). There is no right to private ownership of land; all land is owned by the state and leased out for up to 99 years (ICS 2017). Expropriation may only happen when required by the public interest and with payment of adequate compensation (ICS 2017). The government revoked the leases of 3000 investors for "failing to develop the land" because they had not started production within the agreed-upon time frames (BTI 2016). Conflicts between international investors and local communities over land rights have occurred in the past; the government has been accused of performing land-grabs in favor of international investors (BTI 2016). Investors are advised to perform thorough due diligence on the attitude of local communities before making an investment (ICS 2017).

Registering property in Ethiopia is slightly faster than the regional average, while the number of steps required is in line with regional averages (DB 2017).

Tax administration Very high risk

There is a high risk of corruption in the Ethiopian tax administration. Business report bribes and irregular payments to be common practice when making tax payments and around one in six companies reports expecting to give gifts to tax officials (GCR 2015-2016, ES 2015). Likewise, two out of five Ethiopians report having paid a bribe to the tax services (GCB 2013). Companies rank tax regulation as a problematic factor for doing business (GCR 2016-2017); which, in turn, has impaired investment and economic growth in Ethiopia (BTI 2016). Companies face thirty tax payments each year, which is in line with the regional average (DB 2017).

Customs administration Very high risk

There is a high risk of corruption when dealing with Ethiopia's customs administration. The Ethiopian Revenues & Customs Authority was overwhelmingly cited as the most corrupt public institution in a survey among foreign businesses (FEAC 2014). Nearly a quarter of businesses expect to give gifts when obtaining an import license (ES 2015). Companies indicate that corruption at the border, burdensome import procedures, and tariffs are among the biggest obstacles to doing business (GETR 2016). The efficiency of customs procedures is perceived as low and time predictability is relatively poor (GETR 2016). Enterprises that are state-owned or that have close relations to top-level government officials have considerable advantages over private firms, including access to faster customs clearances, leading to an uneven playing field for local and foreign investors (ICS 2017). Companies spend almost twice as much time on border import compliance in Ethiopia compared to neighboring countries, costs, however, are in line with the regional average (DB 2017).

Public procurement Very high risk

There is a high risk of corruption in Ethiopia's public procurement sector. One in five companies indicate expecting to give gifts in order to obtain government contracts (ES 2015). Likewise, irregular payments and bribes are common in the process of awarding public contracts and licenses (GCR 2015-2016). Companies complain of unlawful contract termination and non-transparent tender award processes, and report favoritism towards vendors who provide concessional financing (ICS 2017). State-owned enterprises (SOEs) and companies owned by Ethiopia's ruling party dominate major sectors of the economy (ICS 2017). SOEs have advantages over private companies, including easier access to credit and easier customs clearance (ICS 2017). Foreign investors complain of the lack of level playing field; there are indications that SOEs receive preference in government tenders (ICS 2017).

While many tenders are publicly advertised, there are major instances of contracts being awarded without a tender (GI 2017). Metal & Engineering Corp, the biggest employer in the country, has frequently received contracts without a bidding process (GI 2017). Documents relating to procurement processes are difficult to obtain due to a burdensome bureaucracy and a lack of transparency (GI 2017). The FDRE Public Procurement & Property Administration Agency publishes a list of companies barred from future bidding due to past violations on its website (GI 2017).

Natural resources Very high risk

There is a high risk of corruption in Ethiopia's natural resources sector. Financial records relating to natural resource exploitation are not publicly available (GI 2017). There have been concerns that the Grand Ethiopian Renaissance Dam was developed without competitive bidding and the quality of the environmental assessment was lacking (TI 2015). Ethiopia's extractive industries, especially the mining sector, are a hotbed for corruption; state-owned drilling companies benefit from political favoritism, whereas private companies face high market-entry barriers (World Bank, 2012). Following its application in 2014, Ethiopia is currently working towards implementing the EITI standard to improve accountability and transparency in the mining sector (EITI 2017). Ethiopia's compliance with the standard will be measured starting in 2018 (EITI 2017).

Legislation

In principle, the legislative framework to prevent and sanction corruption in Ethiopia is strong. However, the government does not implement these laws effectively, and the judiciary is known to be politically influenced. The Revised Federal Ethics and Anti-corruption Commission Establishment Proclamation and the Revised Anti-Corruption Law criminalize attempted corruption and extortion, while the Criminal Code 2004 criminalizes active and passive bribery, money laundering and bribing a foreign official. Private sector corruption, including bribery and embezzlement, is criminalized; but there are no known cases of prosecution in the private sector (UNODC 2015). Further, bail is prohibited for anyone charged with corruption. The Assets and Property Registration Law calls for government officials and their relatives to register their assets and properties. The law also requires government officials to not accept any gift in connection with their duties. Facilitation payments are illegal. Article 444 of the Criminal Code, and the Proclamation on the Protection of Witnesses and Whistleblowers of Criminal Offences provide some legal protections for whistleblowers, but private sector whistleblowers are not covered (UNODC 2015).

Ethiopia has ratified the AU Convention on Preventing and Combating Corruption and the UN Convention against Corruption (UNCAC).

Civil society

Freedom of the press, access to information of public interest and prohibition of censorship are guaranteed by Ethiopia's constitution, but in practice, the state systematically engages in censorship (BTI 2016). The Criminal Code contains many provisions that limit freedom of the press, including criminal defamation provisions and restrictions on 'obscene' communication and criticism of public officials (FotP 2016). While the law guarantees access to information, in practice significant restrictions often entail an obstruction to journalists (FotP 2016). A state of emergency was declared in October 2016; the state has used these powers to harass, arrest, detain, and prosecute journalists critical of the government (HRR 2016). Ethiopia has the second-highest number of jailed journalists in Africa arrested over terror-related offenses (FotP 2016). The news media is dominated by state-owned broadcasters and government-oriented newspapers. There are several independent newspapers, but they struggle financially and often practice self-censorship by not reporting on political issues (FitW 2017). Ethiopia's press is classified as 'not free' (FotP 2016).

Freedoms of assembly and association are guaranteed by the constitution but are limited in practice (FitW 2017). Civil society organizations (CSOs) are weak, and while a pluralism of CSOs is officially tolerated, in practice they are unable to publicly engage in activities (BTI 2016). The government restricts activities of civil society and NGOs under the Charities and Societies Proclamation (the CSO law), which also restricts CSOs that receive more than 10 percent of their funding from foreign sources (HRR 2016).

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