October 27, 2009

Oromia to Auction Land for Investment (Addis Fortune)


Land leasing zones of the Oromia Regional State are producing bid documents that will usher in auction and terminate the system of negotiation to give land to investors.

The decision to end negotiations was made by the board of Oromia Regional State that constitutes nine members including Aba Dula Gemeda President of the Region and Ismail Yassin, commissioner of the Oromia Investment Commission on August 25, 2009. In the past, the region used to grant land to investors depending on their proposals which, if accepted would lead to price negotiation based on the initial price set by the investment office.

This system was flawed, because it made it easy for some investors to hold land without undertaking their projects, according to Ismail who added that the existing practice also encouraged corruption and tampered capital statements for the sake of getting land.

The new system will be applicable in 24 towns in the region, including Adama, Bishoftu, Shashemene, Jimma, Nekemt, Assela, Ambo, Meki, Batu, and Bishangari. The 24 towns were picked for lease because of their suitability for investment, and because they are the ones considered the better developed parts of the Oromia, according to official at Oromia Urban and Rural Development Offfice. Bishan Guracha, a town bordering Hawassa, is also put in this category because of its proximity to Hawassa, from where the authorities hope investment will overflow to Oromia.

The new system is hoped to create transparency and accountability between the investors and the office, Hailu Tadesse deputy administration and special zone investment office head at Oromia Special Zone Office told Fortune.

The special zone has eight towns that will be subjected to the new system. Out of these towns six including: Lege Tafo, Sebeta, Gelan, Dukem, Sululta and Burayu, have begun preparing for the system and the other two are expected to follow. The bid document which is being produced for these towns started early September 2009 and will be completed by the end of October 2009, of it goes according to plan.

The bid document will include specifications for investments in agro industry, manufacturing, trade, social service as well as hotel and tourism.

Investments preferred by the region are those that are suitable to the environment, create jobs, substitute import, generate foreign currency and transfer technology.

The Oromia Investment Commission has designated more than 1.5 million hectares of land for investment as of August 2009, out of which over 100,000hct is for agro industry. In the six towns of the special zone alone 404,172sqm of land has been made available. Investors will have their hands on portions of this land if only they make the highest bid.

According to the new system, however, which may not be very investment friendly, in the opinion of an expert, investors have to wait for land auctions to be announced in the media.

countries like Kenya, Ghana, Nigeria, Tunisia, Morocco, Egypt, Republic of South Africa, Algeria and Sierra Leone have had long experiences of living with corruption regarding land provision for investment, in the past. They worked that problem out by introducing auction, according to Nega Namaga (PhD), an economist and general manager at Ethiopian Higher Education Institution Association, who did his doctoral thesis on the issue.

Oromia may have introduced the new system because of an emerging saturation of investment, he says. While the new system, if properly implemented, could minimize corruption and lead to growth, he fears that it may scare away most investors except those who badly wanted to get land in the region.

All zones are expected to finalize the preparation of their documents over the next two weeks, according to Mohammed Ibrahim, deputy investment commissioner of Oromia. The draft documents will then be submitted to bid committees in the zones themselves.

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