The Ethiopian government has been making various efforts to attract foreign investors to enter the Special Economic Zones (SEZs) through various initiatives like the recent Invest in Ethiopia Forum held in the capital, Addis Ababa. This forum is among the activities being carried out to stimulate and increase investment. The main objective is to attract foreign investors to Ethiopia by promoting the country’s advantages in various sectors; increasing Foreign Direct Investment (FDI) flows and benefiting from the sector.
The country is currently experiencing a significant increase in FDI in its SEZs, as reported by the Industrial Parks Development Corporation (IPDC). In an exclusive interview with The Ethiopian Herald, IPDC’s Investment Promotion and Marketing Deputy CEO, Zemen Junedi, revealed that a wider range of international investors are now entering Ethiopia’s SEZs, expanding beyond the previously dominant presence of investors from China and India.
These days, Ethiopia is attracting strong interest from countries such as Japan, Vietnam, various Southeast Asian nations, African countries, and others, according to Zemen. These investors are involved in sectors such as smart solar technology, agro-processing, automobile assembly, aerospace manufacturing, and other advanced industries.
Zemen attributed this growing investor’s interest to recent economic reforms that have made Ethiopia a more appealing destination for global capital. SEZs are increasingly seen as gateways for multinational companies seeking to establish a presence in Ethiopia’s emerging market, especially those entering for the first time.
As is known; efforts have been made to promote Ethiopia’s favorable conditions for FDI. This has led to the flow of capital, technology and knowledge transfer, etc. It has been possible to attract foreign investments to Ethiopia, which have made significant contributions and have also contributed to foreign exchange earnings. Information shows that Ethiopia still has many opportunities to attract new foreign investors. Economists recommend that ongoing efforts should be continued to increase the number of FDI attracted to Ethiopia by promoting these benefits.
What should be done to attract more foreign direct investment and ensure the economic benefits of the sector? Economists indicated that Ethiopia, which has many advantages that can attract FDI, still needs to do a lot to fully utilize these advantages.
Zenebech Admasu (PhD), a researcher at the Ethiopian Economics Association, noted that FDI is crucial to bringing economic growth to a country, and said that FDI has made a significant contribution, especially to countries like Ethiopia that are facing financial shortages.
According to her, FDI has the best chance of starting large projects in Ethiopia. While foreign direct investment brings capital, the blessings that come with job creation and technology play a major role in the country’s economic growth and revitalization.
Another benefit of FDI is the better job opportunities it creates for Ethiopia’s large labor force. Foreign investors, especially those engaged in sectors with affordable labor, such as industrial parks, have the opportunity to create good job opportunities, develop skills, and transfer technology.
Zemen also emphasized the increasing role of local talent and businesses. Previously, Ethiopian employees held mostly lower-level roles, but now they are advancing into senior and managerial positions within SEZs.
Similarly, international companies have a wide range of opportunities to create market linkages; they increase export trade by making domestic products accessible to the international market. This has a significant role in increasing the country’s foreign exchange earnings, Zenebech said.
In addition, she pointed out that foreign direct investment can stimulate domestic investors and create a sense of competitiveness. If domestic investors work closely with foreign investors, they can help and support their capabilities by transferring technology. This will increase their competitiveness and encourage them to work harder.
Economist Kostantinos Berhetesfa (PhD), on his part stated that Ethiopia is suitable for both domestic and foreign direct investment. The country has more than 70% of young work force, water resources, potential mineral resources and other basic benefits that investors need.
There were problems in the past but improved now. He cited the financial system as an example. He recalled that the financial system was not transparent and convenient; the recent permission for foreign banks to enter the country has contributed greatly to the sector. Any investor works with a loan from a bank; therefore, he comes after confirming whether there is a bank that can lend him money.
He also recalled that lack of capital market system has also had a negative impact on the sector; solving this problem now brings a good opportunity. The existence of a capital market expands the opportunities that foreign and domestic investors had to borrow from banks only. Therefore, when they want to do big projects, they have the opportunity to generate capital by presenting their ideas to the capital market and selling shares.
Dr. Zenebech also mentioned that mechanisms that allow for the expansion of FDI have improved; the projects being seen are encouraging. In addition to promoting Ethiopia as an investment-friendly country, it is necessary to improve guidelines and create enabling environment by issuing policies that are conducive to implementation, facilitating the flow of foreign capital into Ethiopia.
The recent reform of the Foreign Direct Investment Policy is one example. This will help the private sector play a significant role in the economy. The existence of various incentives also helps attract investment. The lifting of restrictions on sectors that were previously prohibited to foreign investors under the revised proclamation will also create many opportunities.
Macroeconomic reforms that are conducive to investment are also effective; this has a major role in resolving the bottlenecks in the sector. It is necessary to create trust among investors. This is what investors will do if they invest in the country. By building this trust, it is necessary to increase production and productivity and bring about growth, she said.
Providing the infrastructure needed by foreign direct investment is another way to attract investment. For this, special economic zones (industrial parks) including Ethiopian Airlines can be mentioned. Industrial parks can also attract investment by providing integrated services, as they provide roads, electricity and other infrastructure, she added.
Dr. Zenebech said that Ethiopia, which has a large workforce, natural resources and raw materials is the preferred country. So it is important to seize the opportunity. She also explained that there are those who come considering the stable political situation and conditions that allow for continuous investment.
According to her, Ethiopia can meet most of the criteria. For example, a foreign investor who wants to engage in textile production is attracted to Ethiopia because he can find the raw materials here.
In addition to the country’s natural resources and other favorable conditions, its proximity to Europe and Asia is also important. She mentioned the “Invest in Ethiopia” forum as a good example to promote its potential. Similar forums should be organized and promoted widely. The promotion work should not be limited to the country alone, but should also be carried out in the places where the investor is located. This can be done through consulates in different countries.
She stressed that it is necessary to work to increase investor confidence in various ways. “Since investment primarily requires peace, it is necessary to build investor confidence. This will not only attract new investors but also help retain existing ones.”
Kostantinos (PhD) also indicated that peace is a fundamental issue for facilitating investment. In addition to peace and security, it is appropriate to address other problems, including corruption. This can be implemented and investment can be increased by using the blessings that Ethiopia has. It has a better chance of attracting foreign direct investment compared to neighboring countries.
He stated that the government should continue to strengthen the work being done to fully utilize the diverse opportunities that Ethiopia has in the investment sector. He especially emphasized that it is necessary to fight the widespread corruption.
According to Dr. Kostantinos, the media is a great tool for this; it is expected to reveal the sources of corruption through investigative reports; “The government is expected to provide the necessary legal protection and create conditions for the media to fight corruption and malpractices professionally,” he underlined.
In the first ten months of the current fiscal year, the flow of foreign direct investment has reached USD 2.84 billion. The number of new foreign investors who have obtained foreign direct investment licenses has also increased and reached more than 363.
As to Zemen, the development of industrial corridors across the country has further boosted both domestic and foreign investment. For example, companies operating in the Jimma SEZ have successfully exported avocado products to European and American markets. This SEZ has also created sustainable market linkages for around 10,000 local farmers.
Additionally, new investments in the coffee and tea sectors are underway with machinery currently being installed for production. He concluded that most companies that have signed agreements with IPDC are either in the process of installing machinery or have already commenced production.
BY BACHA ZEWDIE
THE ETHIOPIAN HERALD SUNDAY EDITION 29 JUNE 2025
