FOREIGN CAPITAL OUTFLOW LIBERALIZATION UNDER THE ETHIOPIAN INVESTMENT LAW: ITS COMPATIBILITY WITH DEVELOPMENT NEEDS

Abstract

Ethiopian investment legal regime and policy have the mission of enhancing investment and promoting investment opportunities through creating conducive investment climate for investors so as to bring economic development in the country. Foreign investors aim to generate profit and repatriate their capital including returns to their home country or to third country at any time they want, while the host countries including Ethiopia also requires foreign capital for balance of payment as well as need to control capital outflow in fear of large currency transfer, causing financial instability. Countries are free to exercise capital flow liberalization or control based on their economic and financial development standards while concluding BITs at international level. Except few BITs, most Ethiopian BITs allow foreign investors to fully repatriate their investment (capital) and returns at any time they want, while the stands of domestic investment laws are not clear in relation to capital repatriation from foreign investment, but expressly allow the repatriation of current account transaction like profit, dividend etc. This study aims to investigate whether Ethiopian investment legal regime on foreign capital outflows are designed to meet the developmental policy objectives of the country. In doing so, doctrinal and comparative legal research method is applied using both primary and secondary source of data to critically analyze the structural and application of the relevant legal regimes. The study reveals that there exist discrepancy between Ethiopian BITs and domestic investment laws and practice in regulation of capital outflow liberalization; and also the liberalization strategy of Ethiopian BITs would pose treat for the country to control capital outflow. The concept of full liberalization of foreign capital outflow under Ethiopian investment legal regime requires to be compatible with the developmental needs of the country. Laws and policy decisions made in relation to foreign capital outflow liberalization from foreign investment need evaluation by its pros and cons for development and the economical power of the country. Thus, the foreign capital outflow liberalization standards of Ethiopian investment law and relevant regulatory measures require rethinking to make it compatible with the development needs of the country.