Ethiopia’s peace and stability, effective activities carried out in the field of infrastructure development, incentives for the investment sector, as well as the country’s potential natural resources and wide market opportunities, have allowed it to become one of the leading countries in Africa in terms of attracting Foreign Direct Investment (FDI). This has played a typical role in the development of the investment sector and has contributed a great deal to the country’s economic growth.
The country’s investment sector is one of the sectors that have constantly achieved great progress and growth. However, in the past few years, the security problems created in different parts of the country, combined with the global COVID pandemic, economic crisis, and wars, had an impact on the country’s investment activities.
Gladly, various measures taken by the government have allowed the investment sector to revive. The Ethiopian Investment Commission (EIC) has stated that the problems that have put pressure on the investment sector are being solved step by step. For example, in the last fiscal year, it was possible to attract 3.82 billion Dollar of FDI. 329 new investment licenses were issued. 115.2 million Dollar of foreign currency was obtained from all industrial parks. MoU’s have been signed with 70 companies that have shown interest in entering industrial parks. Monitoring and inspection activities have been carried out on 205 projects located in nine industrial parks.
Taking into consideration the current national and international situation and protecting the country’s interests, revisions of bilateral investment agreements have been completed and new negotiations have been made. Preparations have been made to benefit from new regional trade and investment opportunities.
Ethiopia’s investment potential and good opportunities have been introduced at many international investment forums and exhibitions. In addition to this, it is planned to attract 4.5 billion Dollar of FDI in this fiscal year and to issue new investment licenses for 341 projects (excluding industrial parks).
As efforts to increase investment continue, Foreign Direct Investment is on the rise. The number of domestic and foreign investors entering industrial parks has increased significantly. Organizations engaged in investment activities are contributing significantly to product growth, foreign exchange earnings, job creation, and technology transfer and market linkages.
The development of Industrial Parks is one of the activities that have been given attention that will contribute to the realization of Ethiopia’s structural economic transition. Industrial parks have the main fundamental missions of attracting FDI, expanding job creation and realizing technology transfer. The parks will contribute greatly to the national economic development by creating jobs for the community living in the areas where they will be built and creating a working environment that is suitable for the environment.
In addition to the 12 industrial parks built by the government and managed by the Industrial Parks Development Corporation and regional governments and the Diredawa Free Trade Zone, there are also industrial parks built and managed by private investors in various areas of Ethiopia. One of these private industrial parks is Eastern Industry Park. The industrial park is located in Dukem area, and 153 companies are engaged in production activities in the park. 95% of the companies are owned by Chinese investors, while the rest are owned by companies from India, England, and other countries. These producers are contributing significantly in terms of job creation, foreign exchange earnings, technology, and knowledge transfer.
One of the factories in the park is Di Yuan Ceramics. The manager of the factory, Xu Bo, pointed out that the factory was established seven years ago with an investment of 50 million Dollar, and said that it produces wall and floor ceramic products. It has created job opportunities for 800 Ethiopians and 50 Chinese. They also explain that Ethiopians are benefiting from the transfer of skills and technology. The manager also said that the support of the government has contributed greatly to the improvement of the factory.
According to David Zhou, General Manager of “Huajia Aluminum Industry PLC”, the factory started working eight years ago with an investment capital of 181 million Birr and has created job opportunities for more than 170 Ethiopians. The factory has produced 16 types of aluminum profiles and is supplying them to the domestic market.
He explained that the investment of the factories in the industrial park will strengthen the Ethio-China economic ties and the good relations between the two countries are contributing to the efficiency of the factories. He stated that the Ethiopian Investment Commission has been supporting the factory from the beginning and that the factory works in cooperation with the local community, the state and the federal governments.
On his part, Jay Yifan, General Manager of Linde Ethiopia Garment PLC, pointed out that the factory manufactures and markets different brands of textile products. More than one thousand Ethiopians are employed in the factory.
The Deputy Commissioner of Industrial Parks and Promotion of the Ethiopian Investment Commission, Zeleke Temesgen (PhD), said that “Eastern Industry Park” is the first among the private industrial parks in Ethiopia. According to him, the manufacturers in the park are contributing significantly to job creation, export trade and foreign exchange earnings. Most of the production work in the factories in the park is carried out by Ethiopian experts. This indicates that the skills and technology transfer plan is well underway. Apart from this, foreign investors are working with domestic investors.
According to Zeleke (PhD), there are currently 3309 Chinese investment projects in Ethiopia with a capital of more than 8.5 billion Dollars. These projects have created job opportunities for more than 325,000 citizens. Chinese investors are playing a leading role in the number of investment projects, capital capacity, job creation, and technology and knowledge transfer.
The deputy commissioner explained that the economic reform measures taken in the investment sector are contributing to accelerating the development of the sector. According to him, the Investment Proclamation has been amended in a manner that can increase the flow of investment. Proclamation of Special Economic Zone was also approved. Following this, the commission prepared guidelines and started working.
Stating the procedures implemented by the complete macro-economic reform will create favorable investment opportunities for foreign and domestic investors, Dr. Zeleke said that the investment flow in the first three months of this fiscal year has increased by 12% compared to the same period of the previous fiscal year.
Measures taken to make the investment climate more conducive have contributed to this growth. One of the tasks of the commission is to monitor and support investors. He also explained that the monitoring and support activities will help investors to expand their businesses and other investors to come to Ethiopia.
“Currently, Ethiopia is the primary foreign investment destination in East Africa. In spite of this, there are many things that need to be done to attract more investments in terms of Ethiopia’s potential. The potential of the country, combined with the economic reforms being undertaken by the government, will enable it to become a preferred investment destination at the international level. The flow of investment in various sectors is increasing significantly. Especially in the sectors identified as strategic (manufacturing, agriculture, information technology, mining, tourism), a high investment flow is being seen,” he said.
Dagato Kombe, Deputy Commissioner of the Ethiopian Investment Commission, said that the country’s potential investment capacity and the government’s economic reform measures are among the reasons for the increase in investment flows. According to Dagato, the economic reform measures will create opportunities for investors to come to Ethiopia and engage in investment.
“When the investors come from abroad, they consider different options. And we have to offer a better option to attract the investors. One of the queries from investors is the lack of foreign exchange. The foreign currency is very important to purchase raw materials and to meet other inputs. Promising beginnings are being seen that the recently implemented foreign exchange management reform will contribute to easing the shortage of foreign exchange,” he said.
As to him, one of the measures taken to improve the investment environment is the opening of business sectors that were previously closed to foreign investors. With this, it was decided that foreign investors should engage in expenditure, import, wholesale, and retail business activities.
Since July 2024, 72 requests have been submitted following the decision. Out of these, 41 are requests for participation in import and 31 are for participation in export. Among the 22 companies that submitted proposals, the requests of 12 companies were approved by the Ethiopian Investment Commission. Eight Chinese companies are among those whose requests were approved.
BY BACHA ZEWDIE
THE ETHIOPIAN HERALD SUNDAY EDITION 27 OCTOBER 2024
