Ethiopia Marching to Be Third FDI Destination in Africa

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Ethiopia is the oldest independent country in Africa with centuries old history. Though it has gone through ups and downs for years due to various internal and external problems, it has managed to reclaim its rightful place in the African continent with the leadership of the ruling Ethiopian People’s Revol utionary Democratic Front (EPRDF). It is currently among the most politically stable and economically growing countries in Africa. The country is endowed with untapped human and natural resources which is helping the nation to allure potential foreign investors.

The decisive pillars for attracting potential investors among others are stable macro economy, prevalence of secured political and economic environment, abundant and affordable labour, proximity to international markets particularly to Asia and Europe, improved infrastructure, and competitive incentive packages.

For example, Security in Ethiopia has been ranked 55th out of 148 countries by the World Economic Forum (Global Competitiveness Report, 2013-2014), well above most of its regional peers such as South Africa (109th), Kenya (131st), and Nigeria (142nd). In fact, Ethiopia ranked 36th and 38th globally in business costs of crime and violence, and organized crime.

As a result, Ethiopia has registered a record high annual foreign direct investment (FDI) marching towards becoming Africa’s Prime Foreign Direct Investment destination. According to a new report AAO obtained from the Ethiopian Investment Commission (EIC), the country’s annual foreign direct investment (FDI) has reached 2.2 billion USD, higher than expected by 2016.

The commission attributed the accom plishments in FDI inflow to the sound polices and favourable investment climate designed by the government in a bid to attracting potential investors in the areas of agro-processing, manufacturing, hotels and resort, industries and others. It was disclosed that Ethiopia’s FDI rate is seeing an annual 12 per cent growth for nearly two decades.

Ethiopian Investment Commission Comm issioner Fitsum Arega, stated that Ethiopia’s achievement in attracting FDI is equivalent to Africa’s largest economies, Nigeria and South Africa,making it the third largest direct foreign investment destination.

At a cultural bazaar organized by Indonesian Embassy in Addis Ababa, it was revealed that Ethiopia is steadily transforming itself into a trade and investment hub of the continent. “Ethiopia has become Africa’s prime Foreign Direct Investment (FDI) destination attracting businesses from across the world,” Indonesian Ambassador to Ethiopia Imam Santoso said on occasion.

Past years, FDI flow to Ethiopia was limited to attracting companies only from emerging markets, such as Turkey, China, India, Malaysia and Indonesia.

However, these days the nation has also become destination for United States and European investors with advanced knowl edge and technology. The US investment alone between 2013 and 2015 in Ethiopia was 4 billion USD, it was learnt on the occasion.

Ethiopia is Africa’s leading and among top 10 world’s fastest growing economies. The country has managed to register double-digit economic growth over the past 10 years with an average 10.5 per cent growth. Though slight differences appear between what the government and IMF and World Bank report, this well reputed achievement has caught the eye of large numbers of potential investors from all countries.

The modern railway, asphalted roads connecting all main cities and other towns are also basic factors to make business easily in the country. State capitals are getting new airport terminals, including some areas like Jinka, where there was none before. Celebrating its 70th anniversary this year, the Ethiopian Airlines is in the midst of a massive expansion that includes the latest Boeing and Airbus aircraft acquisition.

Its route is also growing, with New York, Los Angeles, Tokyo, Dublin, Cape Town and Manila added since early 2015. The vast arable lands, massive skilled human resources, the positive attitudes and commitment of the government to attract investors, are among others what make investors to be hopeful to do business in Ethiopia.

The various industrial parks being built in the major cities of the country are also luring local and foreign investors to invest and integrate their companies alongside of the parks.

The ever growing, diversified and stable economy, investment friendly policies, and stable political environment continue to attract investors from the globe. Before decades, China, Turkey, India etc. were the first to invest and contribute to the nation. However, following the government’s efforts to mobilize more investors from other countries, the European, American, Brazilian, Saudi Arabian, Sudanese, and Israelis have already joined the investment activities.

The coming of these investors from technologically advanced countries created more opportunities for investment in Ethiopia. Being the leading, Chinese investors are meaningfully contributing in the Ethiopian trade and investment activities followed by Turkish, Indian investors who are also engaging in the textile, pharmaceutical sectors. Some are also involved in the construction of huge sugar factories which are to be the backbone of the country’s growing economy to help it export processed goods and earn considerable amount of foreign currency. With the exception of Eritrea, Ethiopia is also trading and exchanging investment opportunities with Kenya, Sudan, Djibouti and Somalia which are also increasing the economic integration of the poverty stricken region of Horn of Africa.

“The World Bank Country Office in Ethiopia, apparently in response to the request by the government of Ethiopia, has conducted a survey of Chinese FDI (Foreign Direct Investment) in Ethiopia in November 2012. Major findings of the study include the growth of FDI from China to Ethiopia from zero in 2004 to about USD 60 million in 2010 and how Chinese FDI in Ethiopia is motivated by the desire to take advantage of the current state of the economy, which the Bank says is growing at a rate of 10 per cent in the past few years. According to the study, this increasing Chinese FDI is also motivated by the incentive provided by the governments of China and Ethiopia, political stability in the country and the idea of using Ethiopia as a strategic launching pad for Chinese expansion in the rest of Africa”.

Indonesian Ambassador to Ethiopia Imam Santoso has told ENA recently that Ethiopia has become Africa’s prime Foreign Direct Investment (FDI) destination attracting businesses from across the world. "The country is transforming into a trade and investment hub as it is preferred by many companies from China, India, Malaysia and Indonesia. The Ambassador attributed the successes to the sound polices of the country. Referring to the World Bank report, Ambassador Santoso said Ethiopia received 31 foreign projects worth USD 1.2 billion in FDI during the 2014 period. Researches show that the total Foreign Direct Investment in Ethiopia reached more than 2 billion USD.