Countries have chosen various economic options in order to record rapid economic growth. Likewise, Ethiopia has been applying various economic options to come-out of the vicious circle of poverty. Of the various options, the country is focusing on foreign investment. However, economists criticize the economic option that bases foreign investment fearing that it makes the country dependent on others. But, if it is not managed properly, the negative side would be magnified and becomes a threat.
Haromaya University Instructor and Researcher, Frazer Tilahun explained that as it is a development input, foreign investment has taken as basic instrument for development. Especially let alone for developing countries like Ethiopia, developed countries are also facilitating conditions to attract foreign investors. In this regard, USA is ranking first, he says mentioning various sources. Because of the rate of income of developing countries getting decline and decline, it has minimal role to build improved economy, hence, they have no option better than attracting foreign investment.
Explaining that foreign investment has greater impact in gaining the transformation of monetary, knowledge and technology as well job creation, Frazer said foreign investors should engage in development sectors that requires vast financial and knowledge which is not covered by local enterprises. According to him, as land and human power are abundant local resources, it is imperative to develop the economy through attracting foreign investment. In so doing, the economy will grow faster, demand and supply become equivalent, foreign direct investment increases, the capacity of technology adaptation and knowledge acquirement.
Though the significance of foreign investment is critical; unless managed carefully, the damage will be countless, he said. Economic dependence has occurred when the country is opening doors for foreign investors to operate freely without a certain limitation and able to involve in low economic sectors which can be covered by local enterprises, he added. They will also be a threat to the country when they transfer the profit to others.
Dr. Beyene Taddesse an economist said instead of creating jobs from lower to higher levels, foreign investors are utilizing modern technologies in order to minimize labor cost. Dangote Cement Factory is a case in point in this regard. The factory has created job for less number of citizens. In order to address the shortage of foreign currency, foreign investors are expected to come up with with huge amount of foreign currency and return it through export products. The truth on the ground is, many of them come up with few amount of capital and begin operation by borrowing huge amount of money from Ethiopian Banks.
This process is benefiting the investors alone rather than addressing the economic problem in the country. Here, it is imperative to mention the experience of investors engaged in agriculture, fruits and vegetables, and flowers over the past years. The investors disappeared from the country without even paying the bank debt. The investors also influence the country to operate as they wish. Because of the financial difficulty it faces, the incumbent also make them free until it is arduous to realize the selling price of products and the profit margin.
The process does not help the country to earn the expected amount of foreign currency. On the other hand, such an investors make deforest the protected areas and contribute greatly for environment pollution, he said. As to Dr. Beyene, some reluctant investors influence the investment, trade and tax system and make it suitable for them to operate illegally. Some are involved in local political affairs and even support the political parties. By and large, they intrude hands to simply control the sector. Such a process gave a chance to them to control the local market.
In spite of the fact that the capacity of low level investors may getting declined and declined. By and large, nations investment objective will be off the target. Thus, before foreign investors are operating, clear agreement need to be signed between foreign investors and the incumbent on issue of job creation, foreign currency and environment protection. If the agreement is not clear, it is difficult the process of making investors liable by law or influence the diplomatic relations with countries. If foreign investors should not be managed carefully and they would lead the country to greater economic deprivation and make the diplomatic relations rough to the countries investors’ belong to. In this globalized world, it is difficult to trim down foreign investment economic options, so said, Getachew Minas an Economist.
Unless, it protect the national interest, if the supervision and control system is getting weaken, there is always economic dependency. As to him, creating joint investment options by foreign and local investors and addressing problems related to foreign investors help reduce the th at and reat. If the foreign investors start to produce for local market, breakneck situations would be occured.
All economists agreed in one point, if investment movement doesn’t centralize local enterprises, the foreign investors may control the local market. On the process, the local investors may displace farmers from arable land. And this became a bottleneck for the national development. By the end of 2020, the investment sector is expected to take 41.3 percent share of the Growth Domestic Product.
Herald January 3/2019
BY GIRMACHEW GASHAW
