BY MENGISTEAB TESHOME
It is crystal clear that the nation should attract Foreign Direct Investment (FDI) in order to attain progress in its economy and get rid of poverty. Investment creates opportunities for citizens such as job to the unemployed, helps flourishing manufacturing, large agriculture firms, trade and infrastructure.
The FDI venture demands huge financial capability, technology and human capital. Nations at the formative years of their development cannot afford accumulating huge sum of capital for development endeavor. The absence of saving culture and subsistence way of life inhibits them not to do so.
Lack of commitment and neglecting small scale financial institutions on parts of the government in developing countries, hampers economic progress. To alleviate poverty, inculcating the public to develop the culture of saving through small scale saving and credit associations can be taken as a way out. Governments also do not have a capacity to mobilize finance from local sources, hence to fill the gap looking for foreign Direct Investment can be taken as better alternative and to that end creating conducive environment for local and foreign investors is vital. Introducing new investment laws, providing tax holiday and land in affordable price, supplying piped water, internet and electric service and loan from local banks, adjusting the exchange rate of local currency against hard currency can be mentioned in this regard.
FDI played important role for the successful achievement of many Asian countries economies.
The secret behind the Asian tiger economy, which achieved economic miracle only with in three decades, is the inflow of FDI and the effective and efficient utilization of the resource in selective sector. In addition boosting their export by 300 percent attributed to where they are now. The developing countries on other parts of the world drew lessons from Asian tigers on how to use FDI in the development path.
FDI provides a platform to boost the host country’s export performance. Foreign multinationals provide additional channels to enter new foreign markets and helps to tap other countries market.
Though there are many bottlenecks, the stock of inward FDI in Ethiopia has grown amid all challenges in the past three four years and the rate of accumulation has slowed since the onset of the global crisis.
Several factors can be stated for this success in Ethiopia but the most important determinants are the availability of untapped natural resources and cheap labor are among others. In addition the availability of cheap electric power, smooth bureaucratic apparatus and legal system played pivotal role to attract foreign investment.
As the level of economic growth rate in Ethiopia is increasing, the number and types of FDI also increasing. However, the significant contribution of FDI in the Ethiopian economic growth is not well studied.
Currently many foreign countries officials testify the attractiveness of Ethiopia for foreign investment. Among them Ambassador of Morocco to Ethiopia, Nezha Alaoui M’hammdi says Moroccan investors are keen to invest in Ethiopia in manufacturing and agriculture sector.
Ethiopian Investment Commission Commissioner, Lelise Neme has also explained to Morrocan Ambassador about the investment opportunities and the existing conducive environment for investment and business in Ethiopia.
The commissioner also provided the assurance of the Ethiopian government’s provision of full support for Moroccan investors that have shown interest to invest in Ethiopia.
Similarly, the Commissioner has received the South Korean business team from Venta Flower Private Limited Company and discussed the investment opportunities of Ethiopian Horticulture production.
During the one-week visit, the team will meet with different Government institutions officials and associations leaders, according to the Ethiopian Investment Commission.
In addition to Agro-Industrial Parks, the team will also visit different farms of flowers, fruits, and vegetables and irrigation farms.
Lelisie told the team that the commission will facilitate and support to meet the objectives of their travel purpose in Ethiopia.
In relation to the effort, senior officials of the government Planning and Development Minister Fitsum Assefa (PhD) and Finance State Minister Eyob Tekalign (PhD) confirmed that companies are investing by withstanding the pressing domestic and international challenges and Ethiopia could absorb 700- million- USD worth of Foreign Direct Investment (FDI) in the current fiscal year.
In an exclusive interview with Ethiopian Press Agency (EPA) the two senior officials noted that in its endeavor to make Ethiopia attractive to FDI globally, the government has made various policy amendments and carried out activities to meet the demand of multinational companies.
The state minister further highlighted that Ethiopia has secured 3.8 billion USD from FDI over the past three years amidst the northern conflict, the outbreak of coronavirus pandemic and other tenacious challenges. Those investment projects have created hundreds of thousands jobs in agriculture, construction, service, hotel, tourism, and other sectors.
The flourishing of Foreign Direct Investment in a country depends on the measures taken by the government in its efforts to develop the entire economy and ensure inclusive progress. Activities that are being done in the agriculture sector in particular are promising in bringing the desired development, he added.
“There are two types of investors: the one who sees Ethiopia’s successive economic growth and its enabling investment environment and potential. There are also investors that are frustrated by temporary problems. The government has been implementing different mechanisms to attract potential investors.”
Sharing the above rationale, Planning and Development Minister Fitsum Assefa (PhD) said that Ethiopia’s economy has gone through various challenges due to the conflict in the northern part of the country, drought and COVID-19 pandemic. The intensified pressure of some interest groups has also caused shortage of hard currency reserves.
Mentioning the reform process as a driving force for the steady growth of investment, the minister pointed out that the government is working towards ensuring inclusive development and attracting companies with rich knowledge and technology packages.
“By the same token, following the introduction of the reform process, remarkable progress has been registered in the execution of projects thereby supplementing the overall economic progress of the country. Projects are means of executing the national development plans.”
Finally, Ethiopia will secure and sustain the flow of FDI despite various challenges observed locally and externally. The reform leadership is committed to undue challenges through well-established approaches and there is hope and courage to make Ethiopia emerging as one of the fastest-growing economies in the horn of Africa.
The recorded outcome should be strengthened further because there are a number of resources and human capital to stir the sector in hospitality, manufacturing, mining and agriculture among others.
It is understood that Ethiopia is the home of more than 120 million people in which 70 percent of it under the age of 30.
This implies that the country has huge potential to utilize its young labor force. As academic institutions particularly technical and vocational colleges are burgeoning and this implies that in the future, the labor market could enjoy the semi and well -skilled professional. The availability of huge number of labor force not only meets demand but also can create huge market opportunities for the flourishing manufacturing and service sectors.
In order to attract foreign investment so far the government has made its level best. Investment laws which were a constraint factors for attracting FDI are revoked and the new one are introduced. The recent agreement made between the government and TPLF for attaining long lasting peace could develop local and foreign investor’s confidence to put their money, skill, knowledge and technological capacity here.
Agriculture is the main stay of the nation economy and almost 80 percent of the labor force is engaged in this sector. This again implies the country has a huge potential for the flourishing of agro-industries. Such situation also creates forward and backward link between the two sectors. This again broadens chances to export value added products which intern boost the nation capacity to garner foreign currency.
In sum, as Ethiopia sets its sights on transforming the country into a middle-income country by 2025, and to become a leading manufacturing hub in Africa, the nation is ready to welcome more investors to invest in a number of sectors and make sure the aspired goal.
THE ETHIOPIAN HERALD FRIDAY 25 NOVEMBER 2022
