The government’s growth strategy calls for structural reforms designed to strengthen the private sector, boost competition, and increase investment which is pivotal and decisive to speed up the end of Ethiopia’s long reliance on state-led economic development.
Of late, the House of Peoples’ Representative of Ethiopia has ratified investment law that envisages further opening up the economy and attracting more Foreign Direct Investment (FDI) to the country. The ratification of the law is expected to add momentum to Ethiopia’s reform efforts by attracting the private sector, diffusing new technology and expertise. The new law, which updates investment proclamation, consolidates reforms and confirms that many of the economic sectors to be open for private sectors.
In an exclusive interview with The Ethiopian Herald, Mekonnen Hailu, Public Relations Director of the Ethiopian Investment Commission (EIC) said that the new investment law is revised by considering the global investment climate. The previous law somewhat was restrictive to foreign investment in certain sectors to protect local enterprises. However, the amended law allows foreign investors to take part in various areas that were restricted before.
The objectives of the new investment law are primarily to enhance the competitiveness of the national economy by promoting investments in productive and enabling sectors.
Ethiopia is among the top FDI recipient in Africa and top destination in the Horn of Africa. With the recent reform and privatization of state-owned companies FDI is expected to increase significantly going beyond the previous year.
However, there are still issues that need to be improved, particularly the supply of foreign currency and effective service delivery to attract more investors, Mekonnen indicated.
According to EIC, this year in the first six months of the 2019/2020, more than 1.6 billion USD investment capital came to Ethiopia in the form of FDI, which is the biggest compared to the preceding year performance.
Privatization will speed up the economy and the newly amended investment law will enable the country to create more employment opportunities for its citizens, advance the transfer of knowledge, skills and technology required for the development of the country. Moreover, it would increase foreign exchange earnings by encouraging the expansion in volume, variety and quality of the country’s export products and services.
Placing the country on the right track to become a middle-income country by 2025 as envisioned in the government’s Second Growth and Transformation Plan (GTP-II) will require broader reforms, more foreign direct investment, and greater integration with the global economy. Ethiopia is negotiating with the accession of WTO which drives to further strengthen and deepen the integration of the country with the rest of other countries.
In line with its recent homegrown economic reform program, which addresses macroeconomic imbalances and creates a foundation for growth supported by the private sector, Ethiopia over the last six months has implemented important reforms to provide more space for private sector investment, as he stated.
Many of the sectors are still dominated by state-owned enterprises, such as financial markets, telecommunications, logistics, and transportation. The ongoing wide-ranging reform and the opening of those sectors to the private sector, if carried out in accordance with the set objectives and in the right direction would address challenges related to financing and unemployment.
Pertaining to the opening of state- owned companies for the private sector, two international companies are to join ethio telecom. The opening of state owned companies for the private sector will further modernize the sector, enhance service delivery and promote skill and technology transfer.
Many observers believe that the government’s push for reforms will attract much more private sector investment in the years ahead. Now, most of the companies are on the process of privatization, and this will further strengthen private investment and boost investment flow towards the country.
The Ethiopian Herald March 4/2020
BY HAILE DEMEKE
