Foreign Direct Investment to Ethiopia Reached 4.1 Billion USD Last Year

By Staff Reporter

FDI-Inflow-EthiopiaAugust 22, 2018 - Ethiopia attracted more than $4 billion foreign direct investment (FDI) during the last Ethiopian fiscal year which ended on July 8, 2018.

In a presser on Wednesday, Meles Alem, spokesperson for the country’s Ministry of Foreign Affairs, said the nation had managed to attract 156 big companies during the year with a combined capital of over $4.1 billion.

Despite continued unrest and poor metrics for doing business in Ethiopia, including severe government red tape, FDI inflow to the country has accelerated in recent years, making Ethiopia one of the top performing African countries in FDI inflow in 2016. It registered a 46% increase from prior year and reaching $3.1 billion, according to UNCTAD 2017 World Investment Report. Part of the reason is its huge population and the growth record it registered over the last many years.

Ethiopia ranks 161 (out of 190 economies) in World Bank's Doing Business ranking in 2018, down by two positions compared to the previous year. This is a very poor performance for a country like Ethiopia that aspires to be the next China in Africa. Part of the reason for this poor ranking is the onerous state bureaucracy and archaic rules for starting and running business in Ethiopia. So far, the Ethiopian state has been more of a drag on business growth in Ethiopia than the accelerant that many people believe to be the case.

According to UNCTAD, there are a number of constraints to foreign direct investment in Ethiopia, namely, the high interference of the State in the economy, poor infrastructure conditions, difficulties related to land acquisition, strict foreign exchange controls, very high transaction costs and weakness of institutions.

The total stock of FDI was estimated at 18.9% of GDP in 2017. According to data released by Ethiopia Investment Commission (EIC), the country's FDI inflow showed a five-fold increase in a decade,from $814.6 million in fiscal year 2007/2008 to $ 4.17 billion in fiscal year 2016/17 that ended in July.

“China has significantly increased its investment in the country over the past decade, notably in the construction, textile, power generation and telecommunications sectors. Agriculture (particularly horticulture) and leather goods are the sectors that attract the most FDI,” the spokesperson said.

The spokesperson attributed the increase in FDI to successful economic diplomacy carried out by embassies and consular offices worldwide.

According to the spokesperson, work is underway to attract more investment into the country this fiscal year by taking advantage of the prevailing peaceful situation in the country.



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