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Ethiopia's FDI Rising for viable economic policies

Ethiopia's FDI Rising for viable economic policiesPhoto: Inga Vesper/

In the factory’s main hall, workers assemble parts into the transformer casings. Transformers are used to change the voltage of an electricity supply.

By Bilal Derso

Some twenty-five years back, Ethiopia had rarely been attracting the Foreign Direct Investment (FDI) since the market was largely dominated by command economy.

Tribute to the viable economic policies of the current government and its engagement to make the country a destination for foreign-owned businesses, the annual FDI inflow to Ethiopia has reached 2.2 billion USD in the 2015/16 fiscal year.

While the figure placed Ethiopia among the leading FDI destinations in Sub-Saharan Africa, its FDI inflow has also been increasing by 12 percent per annum over years.

Following some unrest in different parts of the country, the government of Ethiopia has put in place a six-month State of Emergency since October 8, 2016 in order to restore order and handle the situation.

Some sources try to claim that the State of Emergency (SoE) slumped Ethiopia's FDI, what the Ethiopian Investment Commission /EIC/ refuted that a significant amount of FDI have been attained since the decree come to effect.

According to EIC, the 14.5 billion Birr worth foreign investment projects that were being attracted during the first half of the current fiscal year surpassed the target set to hit 11.4 billon Birr by 30 percent.

In the stated period, 121 investment projects drawn from China, India, Turkey and other countries became fully operational. The projects created over 12,200 permanent and temporary jobs for the young generation and have a significant contribution in the knowledge and technology transfer.

EIC Public Relations Director Mekonnen Hailu said that after establishing sound policies and strategies, the nation has been carrying out significant activities in attracting a great deal of investment.

"The investors also understood that the past unrest in some parts of the country was an incident that does not have any significant impact on the ongoing investment flow. And they have a full trust in government's capability to curtail future destructive activities," he stated.

Currently, companies across the globe have a growing interest to come to Ethiopia to invest in the agriculture, manufacturing and service sectors, the director said, adding that many of them are in the pipeline.

The second Growth and Transformation Plan (GTP-II) envisioned making Ethiopia a hub for light industries in the Sub-Saharan African by alleviating the limitations witnessed in the manufacturing sector and providing incentives to the private sector as well as small and micro enterprises (SMEs).

In this regard, the involvement of foreign owned investment projects in the manufacturing sector would also have a great role for Ethiopia to achieve its vision of transforming the agrarian economy to industry-led one.

According to EIC, the past six months were evidently successful in attracting well- known textile and leather manufacturing companies to Ethiopia's market.

EIC Director-General Fitsum Arega said that ten Chinese companies with rich experiences in garment industry decided to enter into Hawassa Industrial Park, the largest textile industrial park in the African continent. In addition to this, investment projects from France, Spain, Belgium, India, Turkey and Britain have also showed desire to do businesses here.

"The existing peace and stability, energy and infrastructure development as well as abundant workforce in Ethiopia are factors for these renowned foreign companies to commence tangible activities to invest in the country," the Director-General elaborated.

The investment projects believed to create significant job opportunities for the youth and would have a considerable role in the knowledge and technology transfer besides being a source of foreign currency earnings.

Industrial parks development has also a crucial importance in attracting foreign direct investment by providing investors with the necessary infrastructural and utility services and easing bureaucracy and infrastructural setbacks they have been encountering in Ethiopia.

Industrial parks will cut short the ups and downs investors would face in the operation phase by providing them with land, sheds and other facilities.

Mekonnen Hailu added, "Industrial parks have played a pivotal role in encouraging investors to come and do business in the country; and a Chinese steel firm with the capital of 23 million USD, for instance, become fully operational within 11 months in Eastern Industrial Park which customarily takes two and three years."

Currently, the government has built 12 specialized industrial parks for the agriculture, manufacturing and hospitality sectors across the country. Those expected to give additional impetus for investors want to involve in Ethiopia's wider investment opportunities.

"Apart from offering one widow service in industrial parks, the government pursues its close follow up and support for investors and provide them with attractive incentive packages so as to keep the momentum in Foreign Direct Investment flow," Mekonnen stated.
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