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Ethiopia Continues Attracting Foreign Direct Investment

Ethiopia Continues Attracting Foreign Direct InvestmentPhoto: allAfrica

(File photo).


Lately, the Ethiopian Investment Commission announced that the country's Foreign Direct Investment (FDI) has increased by 35 per cent on average over the last six months as compared to same period of last year. The Government has committed itself to a programme of economic reforms and liberalisation. However, it continues to control the services sector, with a state monopoly on the telecom market and virtually full control by local banks in the financial sector.

There are a number of constraints to foreign investment, namely the high interference of the State in the economy, poor condition of infrastructure, difficulties related to land acquisition, strict foreign exchange controls, very high transaction costs and weakness of institutions. The Government's interventionist policies, which are not focused on developing the private sector, have also proven to be a considerable obstacle.

This increment which is valued to be more than 1.2 billion dollars is due to conducive investment environment the government has maintained in these months. As to the commission, this amount highly exceeds the record gained during the beginning of the first Growth and Transformation Plan (GTP I). 

The Growth and Transformation Plan (GTP) is a national five-year plan created by the Ethiopian Government to improve the country's economy by achieving a projected gross domestic product (GDP) growth of 11-15% per year from 2010 to 2015. The plan includes details of the cost (estimated at US$75–79 billion over the five years) and specific targets the government expects to hit by pursuing the following objectives.

In fact, this reality has been reported by some international outlets. For instance, The Gulf Today was quoted as saying, "Ethiopia is rapidly attracting huge FDI from global investors."

The nation has won the international reputation for registering double digit growth for the last twelve years in a row. This has to be attributed to the stable political climate, peace, expanding infrastructure, incentive packages for investors with viable policies and clear strategies most importantly, committed leadership.

It is a hard fact that investors would invest their resource if they make sure that there is sustainable peace together with the necessary infrastructure. This, for sure, has boosted their confidence to invest in Ethiopia.

Some media outlets reported that the recent unrest in different parts of the country affected the FDI flow to the country. To the contrary, the FDI flow in the country is significantly rising. It is within this time the US delegation led by Senator James Inhofe has discussed with Prime Minister Hailemariam Dessalegn ways to furthering the relations with the new US administration, particularly in trade and investment.

The giant and reputable companies from Europe, America and Asia are coming and settling themselves in industrial parks over the last six months. Recently, one of the Chinese textile companies situated in the Hawassa Industrial Park has began exporting its products. This is a manifestation of the efforts in developing industrial parks for the industrialization move.

Parallel to this, the rise in the flow of FDI has necessitated the expansion of multi-million dollar industrial parks in other parts of the country. Hence, recently, the government has begun the construction of the third of the four integrated agro-industrial park in the Southern Nations, Nationalities and Peoples State with 2.6 billion Birr.

To attain the aspirations of the second GTP, the country has set to develop these Integrated Agro-Industry Parks to successfully garner the FDI planned to secure in the second GTP.

Installing various service infrastructures like banking, insurance, telecom and postal services in the industrial parks is attracting potential investors who were tired of getting these services from different public offices.

It is worth mentioning here that Ethiopia being the second populous country in Sub-Saharan Africa, its adequate and cheap labour force is a point of attraction for investors .

The availability of adequate power is the real concern of investors. To this end, Ethiopia is working aggressively to generate power for its dynamic economic growth. This is one of the reasons that make the incumbent responsive to the demand of the potential investors.

Fortunately, Ethiopia is a nation endowed with abundant renewable energy resources from hydroelectric, wind, solar and geothermal sources. Understanding this blessing, the government is developing the resources with all its efforts. Tangible results have also been registered in this regard. Still, strenuous efforts are under way to boost the energy production from the current less than 5,000 MW to over 17,000 MW by 2020.

With the ongoing power generation projects and ones to be launched in the coming years would not only satisfy the local demand but also address the needs of neighbouring countries thereby becoming a regional power hub in East Africa.

In last word, what the government and people of Ethiopia have been doing to ensure peace and stability in the country has won the recognition of the potential investors across the globe.

Since the industrial parks are there with relevant service utilities with efficient service delivery, the nation continues to be the hot destination of FDI. It is a job for every one especially, the EIC, the missions abroad, the business community and Ethiopian diaspora to seize every opportunity to promote the blessings Ethiopia has. If the nation has considerable FDI, the pace of development would be advanced thereby realizing the noble vision to become a middle income economy.

Significant progress has been made in terms of transport infrastructure and electricity production in order to improve Ethiopia's attractiveness. For the last ten years, China has been increasingly investing in the country, especially in the construction, textile, electricity and telecommunications sectors (in 2013, large investments were made in this sector). Ethiopia ranks 146th (out of 189 economies) in the World Bank's Doing Business 2016 report, an increase of two positions over the previous year, mostly due to improvements in resolving insolvency.

Agriculture (particularly horticulture) and leather goods are the sectors attracting most FDI. Agricultural land renting also brings in foreign investors. Moreover, the country took advantage of the crisis of the Bangladeshi textile sector (following a disastrous collapse of a factory building in 2013) in order to attract foreign companies to its textile industry. The main investor countries are Saudi Arabia, China, the United States, India and Turkey.

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