The World Investment Report has put Ethiopia as one of the top performing African countries in FDI flow, registering a 46 percent increase in 2016 and the 2019 report shows that Ethiopia brought in $3.3 billion worth of Foreign Direct Investment (FDI) and was the top destination in East Africa.
Kenya, another East African country, received $1.6 billion worth of FDI. These investments were mainly in manufacturing, hospitality, chemicals, and the oil and gas sector. FDI flows slid by 13 percent in 2018, to US$1.3 trillion from $1.5 trillion the previous year the third consecutive annual decline, according to UNCTAD’s World Investment Report 2019.
The Ethiopian government on December launched a national initiative that aimed to improve the investment climate by spurring opportunities for foreign businesses.The national initiative, which aimed at improving the East African country’s investment climate, was launched by Prime Minister Abiy Ahmed, who noted Ethiopia’s investment climate as underperforming and now as report indicated Ethiopia is on the right track.
The International Monetary Fund (IMF), as part of its economic outlook for Africa that was published in October this year, forecasted that Ethiopia will host Africa’s fastest growing economy in 2019, as the country’s economy is projected to grow at 8.5 percent during the current Ethiopian fiscal year, which will end on 7 July, 2019.
The United Nations Conference on Trade and Development (UNCTAD) report stated that Ethiopia is the top FDI recipient in Eastern Africa and 5th among the largest FDI destination in the continent.
According to the report, FDI inflow in Ethiopia during 2018 was 3.3 billion USD. As number of industrial parks established and assuming recovery in global FDI flows is expected to attract greater amount of FDI inflow in 2019, it stated. The report added that although China was one of the major sources of FDI, foreign investors from other economies have started investing more in Ethiopia’s agro-processing, hotels and resorts, as well as in its manufacturing activities.
According to the report for the third year in a row, FDI is down all over the world, but not in Africa.Global money is banking on African growth, reduced barriers to cross-border trade and affordable access to commodities.
Ethiopia attracted new FDI in manufacturing, which would create opportunities for local SMEs to link to global supply chains. From 2017 to 2018, global FDI fell from $1.5 trillion to $1.3 trillion, according to an analysis by the UNCTAD. The conference released its 2019 World Investment Report this week, showing that global FDI not only hit its lowest level since the global financial crisis, but has also been on the decline for three consecutive years.
Now Africans are further increasing their opportunity to further attract FDI by signing different regional and continental agreements. The African Continental Free Trade Agreement (AfCFTA) was signed into law in May and allows 52 African countries to buy and sell goods without tariffs, which will make them less expensive and therefore more appealing to African consumers.
“The AfCFTA agreement will bolster regional cooperation,” Mukhisa Kituyi, secretary-general of UNCTAD said. “Along with upbeat growth prospects, this bodes well for FDI flows to the continent.”
In 2017, France was the top foreign investor in Africa, followed by the Netherlands, the United Kingdom, and the United States. Critically, UNCTAD’s data shows that from 2013 to 2017, Chinese FDI in Africa grew 65 percent, only topped by the Netherlands, for which FDI was up more than 200 percent.
Despite the decline in FDI for Egypt, UNCTAD data shows that the country was still the largest recipient of FDI continent wide.”Many East African nations have become more open to investment. They are shifting their priorities and have a strategy,” he said. “Now, they are continuing to build the island as a business hub and offering more business services to East African countries.”
Africa needs to expand its intensification capacities for investment in order to close financial gap. In order to achieve its goal of structural transformation, it is necessary to boost domestic resource mobilization.
Ethiopia’s industrial parks play vital role to attract investment, create jobs opportunities, promote exports, facilitate technology transfer and promote industrial development and structural transformation. Ethiopia is among the latest countries to establish industrial parks. As new comer, Ethiopia can learn many valuable lessons from other countries both successful and less successful ones, report noted.
Ethiopia is already one of the few real investment destinations in Africa and can score with industrial parks. Ethiopia shines with its economic policy; industry and the services sector are making steady progress. In the coming years, Ethiopia, as an agricultural exporter, will benefit above all. An expansion of the road network and the development of marketing structures make increasing exports possible.
The report by the Economic Commission for Africa (ECA) released before week ago stated that the fastest growing sub-region in Africa, with growth rising from 6.1 percent in 2017 to 6.2 percent in 2018, is driven by strong public spending on infrastructure and rising domestic demand.
East African countries are on the right track according to the report data. Growth in the sub-region reflected strong growth in Ethiopia, Djibouti, Kenya, Rwanda, Tanzania and Uganda with only Burundi growing at below three percent, the report added.
According to the report, Africa grew by 3.2 percent in 2018, slightly lower from 3.4 percent in 2017 sustained by improved global growth that was increasing demand for Africa’s exports due to rising commodity prices and higher investments in infrastructure.
This growth rate is not sufficient to eradicate poverty and achieve the other Sustainable Development Goals (SDGs) by 2030 which the continent needs to beef up to double digit by boosting its current investment from 25 percent of GDP.
ECA Macroeconomics and Governance Director Adam Elhiraika said Africa needs to triple this growth if countries are to achieve the goals. “Africa will need to raise an estimated 11 percent of its GDP per year for the next 10 years to close the financing gap and attain the SDGs,” he pointed out.
Elhiraika further noted that in order to achieve the goals, studies estimate the financing needs for Africa to be in the range of 614 billion to 638 billion in a year. According to the director, Africa has made notable progress in education, health, and other social outcomes. Africa’s growth is forecast to pick up to 3.4 percent in 2019.
The Ethiopian Herald June 18, 2019
BY HAILE DEMEKE
