Ethiopia Bad for Business: Report

The International Property Rights Index (IPRI), a global publication that measures the strength of property rights systems in different countries around the world, has ranked Ethiopia 119 out of 125 countries it measured, painting a concerning picture of Ethiopia’s business environment.

The annual index by the Property Rights Alliance, which highlights the role property rights play in creating a prosperous economy and just society, is entirely dedicated to the measurement of intellectual and physical property rights.

This year’s report, released at the end of September 2023, also examines the relationship between property rights and other economic and social indicators of well-being, including gender equality, energy, innovation, and competition.

“Robust legal and political frameworks for property rights not only protect the intangible and tangible assets of inventors but also incentivize creators to produce goods that are better and safer than before,” states the Alliance.

In this year’s index, Ethiopia scored 3.244 out of a possible 10 points, ranking 24 out of 30 in Africa. According to the IPRI report, one of the most significant challenges to business operations in Ethiopia is the country’s regulatory environment. Navigating the various licensing and approval processes can be time-consuming and frustrating for businesses, often leading to delays and increased costs. 

Another major challenge, the report states, is the lack of transparency and predictability in the legal system. The IPRI report notes the weakness of Ethiopia’s legal and political subindex, with a score of 2.987 out of 10, indicating a lack of effective legal protection for property rights and business interests.

However, Ethiopia’s lowest score on the index is attributed to political instability, positioning it above only two other countries among the 125 nations assessed in the report.

This week, Reuters reported that equipment leasing company Ethio Lease, Ethiopia’s only foreign-owned firm to obtain a financial services license from the central bank, said it was closing down operations, stating a 2021 amendment to a directive applicable to the business made it impossible for the company to write new leases.