The Socioeconomic effects of Foreign Direct Investment in Ethiopia: Evidence from Awash-Kombolcha-Woldia Railway Project (original) (raw)
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Journal of social economics research, 2019
This study deals with the challenges and opportunities of investment to the people of Sebeta town, Ethiopia. Currently, countries throughout the world are intensifying investment activities in African countries. Ethiopia is one of them. The focus of this study is to investigate the challenges and opportunities of investment to the people of Sebeta town of Oromia Regional State. To achieve this objective, both primary and secondary data was used. For this purpose, informants selected from the displaced people, government officials, workers of different investment types and selected residents of the town were participants of FGD, interview, observation and case study. In such away, 141 individuals were directly involved in this study. In anthropological studies, analysis is an instrument to extract meanings from the information obtained during the field work. In such a manner, data were presented in a qualitative type. The result of the study showed that local communities lost their land, rivers were contaminated by waste released from companies, labor exploitation and numbers of workers in several companies were disabled, and instability in the town. Investment also brought several opportunities for local people as source of income, skills and technology transfer. Local communities used daily labor, self-employment informal sector to sustain their livelihood. Based on the findings of the research, some alternatives were forwarded that could solve the problem and capitalize the opportunities available. Therefore, implementing proclamations and regulations of the country, prioritizing people in decision making and reconstructing the livelihoods of displaced households need emphasis by the concerned bodies. Contribution/Originality: This study contributes to the existing literature by dealing with the challenges and opportunities of investment to the people of Sebeta town, Ethiopia. 1. INTRODUCTION Flow of investments in developing countries may seem to be a fairly recent phenomenon. However, such operations have a long history in many countries. During colonial times, foreign powers established large plantations in Asia, Africa, and Latin America. They use local populations for labor and host country populations benefited little (Vhugen, 2012). Since 2008, what appeared as a new boost of neo-colonial resource exploitation in Africa by investors from more-developed countries, led to heated debates on land grabbing in the media, and created concern among civil society and international organizations, as well as development agencies and researchers (Kaarhus et al., 2010). Scholars have long debated the impact of investment on the economies of developing countries. Many argue that investment is beneficial for the receiving country (host) which leads to infrastructure expansion, creates more
FOREIGN DIRECT INVESTMENT IN ETHIOPIA, BENEFITS AND ROLES
Foreign direct investment (FDI) is an essential component of an international economic system, as well as a primary force of development. However, the benefits of FDI have not been distributed fairly among countries, sectors, and local communities. The goal of this study was to investigate the role and advantages of FDI in Ethiopia. As a result, we used both primary and secondary data. The sample size for the primary data in the study was 384 respondents. The data was analyzed using descriptive and OLS regression model. As a result, the study found that technology, skill, and knowledge transfer to local employees in foreign firms in Ethiopia was limited because key technical positions were held by foreigner employees. Foreign corporations exhibit little charitable concern since there were no clear policy guidelines and minimal mobilization and coordination by local administrators. Besides, FDI had a positive and significant effect on employment growth. It means that FDI had benefits in terms of reducing unemployment problems, although the salary and incentive packages of foreign firms were not adequate for their local employees to live decent life.
Investigating Investment Practices in Ethiopia: Success Stories and Challenges Ahead
Developing Country Studies, 2014
Ethiopia has pursued its own investment policies aimed at transforming its economic structure. After the incumbent regime assumed to power, it has tried to boost private investment. The general objective of this study is to investigate the distribution and challenges of investment, and explore practices aligning with in the context of development theories in Ethiopia. To this end, secondary data was collected from government offices, unpublished documents, books and reviewed journals to underpin the theories with the existing investment realities of Ethiopia. The distribution of investment portray that most of the investment is concentrated in Addis Ababa, unfairly making it "Metropolis" and other regional states of Ethiopia as "Satellites" that can be accounted for the existence of large market potential and location advantage. The various incentive packages introduced by government are not effective to attract investment to periphery areas. It is possible to underpin various development theories with the practice of Investment in Ethiopia. The surplus labour theory is partially applicable in the context of Ethiopia where most of the family members are disguisedly unemployed. This is aggravated by the high population density and seasonal nature of agriculture. This paper tried to investigate if there is infant industry argument implementation in Ethiopia and it is difficult to generalize thereof. The policy lacks to specify until when is the support, no measure to know whether they pass that stage for lifting the protection and is difficult to state its presence. The theory of Developmental state, the neoclassical counterrevolution market-friendly approach and Keynesian Growth theory recognizes that there are many imperfections in developing countries and governments do have a key role to play in facilitating the operation of markets. This is very aligned with what the current government is practicing. The development orientation of Ethiopia is Agricultural development will lead to industrialization. This implies that gradually there will be a structural change of the economy from agriculturalist to industrial, very aligned with structuralism development theory. It is found that the basic challenges of investment are presence of nominal investors, bad governance, low saving; investors rush to service sector and corruption. Therefore, it is recommended to boost the private sector by going beyond incentive such as infrastructures, finance, good governance, investigating regional states potential investment specializations and creating interregional trade.
Ethiopia Investment Prospects: A Sectoral Scan
SSRN Electronic Journal, 2012
Ethiopia is in the midst of a sustained growth surge that is becoming increasingly broadbased, building on major improvements in educational attainment, improved health outcomes, and infrastructure capacity in terms of access to power, transportation and telecommunications. The Government's Growth and Transformation Plan sets ambitious targets for further improvements in these areas, together with significant reforms aiming to improve trade logistics, by rolling-out the authorized economic operator program across export-oriented industry parks and improving the main export corridor to Djibouti. This industrialization push coincides with global trends that provide Ethiopia an opportunity to integrate its economy into the modern "Made in the World" production system, including by attracting labor-intensive production, which is leaving China and other East Asian economies due to their rising wage rates. This paper considers Ethiopia's prospects to succeed in this endeavor. It reviews overall economic management and performance indicators and provides a horizontal overview of the investment framework. It then summarizes the investment prospects in several major sectors of the economy, in light of Ethiopia's emerging capacities and global developments: agriculture, mining, oil & gas, economic infrastructure, manufacturing, and selected services, including health and tourism.
2014
Foreign Direct Investment (FDI) plays an important role as an engine of employment, technological development, productivity enhancement, economic intensification, and more importantly, as an instrument of technology transfer, specially from developed to developing countries. The Government of Ethiopia having realized the inadequacy of the domestic capital and low national saving, opened several economic sectors to foreign investors. The government has also issued several investment incentives, including tax holidays, duty free import of capital goods and export tax exemption to encourage foreign investment. The very essence of this research is assessing the contributions of FDI to the development of SZO in terms of local employement creation, generation of revenue, transfer of technology, linkage with domestic firms in boosting local productivity.It assessed the effectiveness of FDI in the development of SZO and at the same time challenges that hinder the effectiveness of FDI were a...
THE MAJOR FACTOR AND TREND OF FOREIGN DIRECT INVESTMENT IN ETHIOPIA
Abdella Mohammed Ahmed (M.Sc.), 2024
Many developing countries are competing to attract foreign direct investment with a belief that it can be a tool for poverty reduction. However, developing countries are not only lagging behind in attracting FDI, but also the pattern of FDI inflow to the developing countries is highly uneven. Numerous studies in recent years have focused attention on the determinants and trends of foreign direct investment in developing countries; however, previous studies conducted in Ethiopia were not adequate when it compared with the importance of the issues. This paper assessed the determinants and trend of Foreign Direct Investment (FDI) in Ethiopia. The study employed time series data from the period 2000 – 2017 to identify and assess the trend and potential determinants of FDI inflow, such as, market size, market potential, macro–economic instability, infrastructural facilities, trade openness, exchange rate and government expenditure. The data were collected from relevant sources such as, Ministry of Finance and Economic Cooperation (MoFEC), National Bank of Ethiopia (NBE), Ethiopian Investment Commission (EIC) and Central Statistics Agency (CSA). The study first discussed the trend of FDI growth rates. In addition, data were also analyzed using regression analysis to identify the cause - effect relationship of dependent and independent variables. The result disclosed that there is no consistent growth of FDI in the country. Hence, inflow of FDI to the country can easily be affected by various macroeconomic variables. It is observed that FDI is distributed unevenly throughout the different sectors of the country with the highest share going to the manufacturing sector (68%). The evaluation of the regional distribution of FDI shows that despite the many reforms made to encourage FDI flow to less developed regions, the performance of these regions in attracting FDI is quite low and high number of FDI is concentrated in Addis Ababa city administration and in proximity town around Addis Ababa. The findings of the study further showed that economic growth, Trade openness, exchange rate and infrastructural development have significant positive impact on FDI inflows, while macroeconomic instability such as, inflation, government expenditure, and low level of market size have negative impact on FDI inflow. The study recommended that it requires a thoughtful commitment to address all variables having negative impact on the inflow of FDI, as these factors increase the transaction costs of doing business in the country and affect the image of the country in the eyes of potential investors. As a satisfied investor is an important promoter for potential investors, the government should also support the existing investors by introducing an aftercare program aims to identifying and resolving the problems encountered by the existing investors.
Ethiopia’s Investment Prospects: A Sectoral Overview*
African Review of Economics and Finance, 2013
Ethiopia is in the midst of a sustained growth surge that is becoming increasingly broadbased, building on major improvements in educational attainment, improved health outcomes, and infrastructure capacity in terms of access to power, transportation and telecommunications. The Government's Growth and Transformation Plan sets ambitious targets for further improvements in these areas, together with significant reforms aiming to improve trade logistics, by rolling-out the authorized economic operator program across export-oriented industry parks and improving the main export corridor to Djibouti. This industrialization push coincides with global trends that provide Ethiopia an opportunity to integrate its economy into the modern "Made in the World" production system, including by attracting labor-intensive production, which is leaving China and other East Asian economies due to their rising wage rates. This paper considers Ethiopia's prospects to succeed in this endeavor. It reviews overall economic management and performance indicators and provides a horizontal overview of the investment framework. It then summarizes the investment prospects in several major sectors of the economy, in light of Ethiopia's emerging capacities and global developments: agriculture, mining, oil & gas, economic infrastructure, manufacturing, and selected services, including health and tourism.
Determinants of foreign direct investment in Ethiopia: Systematic review
International Journal of Business and Economic Development, 2019
The determinants of FDI include any host country’s situations that affect the inflow of FDI, like market size, the economic growth rate, real growth domestic product, infrastructure, natural resource, the political situation etc. In recent years, Ethiopia has started encouraging the inflow of FDI by improving the investment climate and by providing different incentive packages. The focus of this review is to identify the major determinants of foreign direct investment (FDI) in Ethiopia. The results show that variables like real growth domestic product, liberalization, exchange rate devaluation, and trade openness are significant and have a positive correlation with the inflow of FDI in Ethiopia. On the other hand, variables like inflation, poor infrastructure, the volatile and high lending interest rate havea significant and negative association with the inflow of foreign direct investment. Finally, the study recommends possible intervention of the government through infrastructure development and formulation of sound fiscal and monetary policies to control the negative impact of inflation, interest rate and other macro variables.
Challenges and Opportunities of Investment to the People of Sebeta Town,Oromia Regional State
This study deals with the challenges and opportunities of investment to the people of Sebeta town. Currently, countries throughout the world are intensifying investment activities in African countries. Ethiopia is one of them. The developing countries are in need of heighted investment activities for employment and income generation. Despite its positive impact pertaining to employment, investment also brings challenges to the community. The focus of this study is to investigate the challenges and opportunities of investment to the people of Sebeta town of Oromia Regional State. To achieve this objective, both primary and secondary data was used. For this purpose, informants selected from the displaced people, government officials, workers of different investment types and selected residents of the town were participants of focus group discussions, interview (semi-structured), observation and case study. In such away, 141 individuals were directly involved in this study. In anthropological studies, analysis is an instrument to extract meanings from the information obtained during the field work. In such a manner, data were presented in a qualitative type. The result of the study showed that local communities lost their land, which used to serve for farming and residential purposes with inadequate cash compensation, rivers were contaminated by waste released from companies, labor exploitation and number of workers in several companies were disabled, and instability in the town. Investment also brought several opportunities for local people as source of income, skills and technology transfer. Local communities used daily labor, self-employment informal sector to sustain their livelihood. Based on the findings of the research, some alternatives were forwarded that could solve the problem and capitalize the opportunities available. In this regards, implementing proclamations and regulations of the country, prioritizing people in decision making and reconstructing the livelihoods of displaced household's need emphasis by the concerned bodies.