ADDIS ABABA-Ethiopian Investment Commission (EIC) said it has concocted new incentives to encourage local and foreign manufacturing companies to engage in joint venture (JV) in Ethiopia. Temesgen Tilahun, Deputy Commissioner of EIC told The Ethiopian Herald that besides attracting FDI, the government has given due emphasis to supporting and building the capacity of local manufacturers to engage in the manufacturing industry.
“The other alternative for them is to engage in JVinvestment with foreign investors,” he added. The government is now providing several incentives for local manufacturers including extensive loan supply through the Development Bank of Ethiopia. In addition, it is also covering staff training and foreign employees’ remunerations expenses. Local investors have limitations in terms of knowledge, technology, experience, and international market linkage to engage in the manufacturing industry.
The government is preparing a performance-based incentive framework to encourage local investors. On the other hand, foreign investors might face challenges in understanding local contexts. And JV could be ideal to overcome these limitations from both sides. However, according to Temesgen, the effort to form an effective joint venture in the newly built industrial parks has not been successful mainly due to the fact that some local investors supply low-quality materials, such package containers, to foreign companies.
“There is a need for building the capacity of local investors so that they can take part on an equal footing in the value chain with the foreign ones,” he added. Temesgen stated that industrialization would not be realized by merely attracting FDI. Countries that achieved industrialization in a short period of time have also adopted an effective joint venture investment as one pillar of their industrialization. According to the commission, facilitating Joint Venture investment 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.
Herald January 31/2019
BY TSEGAYE TILAHUN
