Ethiopian Investment Commission announced that the country has been able to secure 559 joint venture investment projects over the last five years. That is good news. But, given the huge potential the country can offer, the figure may not look attractive.
Moreover, the little diversity in terms of ownership and business sector is another point to ponder. For example, the sector that attracted joint venture businesses to the country was mainly manufacturing; and origin of investment ownership for the joint venture businesses was mainly China.
It is true that having a huge amount of investment potential without creating an enabling business climate in any country is nothing but wastage of resource! Having learnt the deeply-entrenched problem this country has faced in drawing foreign investment and business over the years, the reformist government has recently come up with various measures to change the statuesque and make Ethiopia truly an investment and business-friendly country.
The new changes coming into the country herald that the next chapter of Ethiopia’s growth and development will be spearheaded by active private sector. A national high-level committee, headed by Prime Minister Abiy Ahmed, has been driving reforms to improve the investment laws and business climate. It has actually made progress in facilitating a conducive business environment and removing regulatory obstacles that hamper investments.
The government has already opened doors for international investors to join new investment opportunities by announcing its plan of privatizing state-owned business firms such as sugar, telecom, railway, industrial parks and others. This means that the government is unfolding additional investment opportunities for the private sector in general and for the foreign investment in particular.
While the overall situation looks bright, industrialization would not come true by attracting FDI alone. Countries that achieved industrialization in a short period of time have employed an effective joint venture as a strategy in attaining their ambition.
Attracting foreign investors to local business in the form of joint ventures or direct investment has its own merits. And the benefits are not restricted to one side alone. To begin with, it helps the country in filling the critical gaps that it is facing. Shortages related to capital, capacity, market access and competitiveness, technology, expertise and so on can be complemented by matching foreign investors.
Joint venture also puts local investors on an advantageous position to fill their own specific gaps which otherwise difficult for them to. Working together with experienced and better equipped foreign companies enables them to beef up their capacity and hence become competitive in the global market.
Likewise, foreign companies working with local investors also get advantages in many ways. In the case of joint venture, they are entitled to additional incentives. For instance, the deposit required from a foreign company to claim a joint venture investment license is only 150, 000 USD, which is 50,000 USD lower than required for foreign direct investment.
In general, facilitating joint venture is crucial to boost investment in the country as combining resources and expertise from different companies offers greater opportunity to grow faster, increase productivity and generate better profits.
The good news is that EIC is currently facilitating business-to-business relations at international, local levels to increase joint venture companies as the on-going economic reform is providing plenty of new investment opportunities.
Thus foreign investors need to grab those new opportunities and further explore the untapped potential Ethiopia can offer. It is a country, indeed, reputed for having amassed huge and untapped investment potentials.
The Ethiopian Herald, December 26/2019
