FDI for Sustainable Development

by staff writer

It is undeniable fact that private investment is a powerful development enabler. It creates jobs, build skills, spur innovation, provide essential infrastructure and services, boost economies and strengthen standards in public and corporate governance. Investment, both foreign and domestic, needs to be scaled up significantly in the years to come so as to contribute for the overall economic advancement of the country.
Private investment also essential enabler of economic and human development. Apart from creating employment, it boosts the activity of local firms, suppliers and distributors by creating demand and a market for their products and services. Moreover, it can improve access to the quality of infrastructure and services critical for the development of entrepreneurship and small businesses, such as banking and finance.
While most investment is undertaken by domestic firms, international investment can bring particular benefits. It can encourage innovation and productivity growth by bringing in or generating new information and technologies such as through knowledge intensive activities like research and development.
In addition to this, investment can help to spread new technologies and expertise, for example through the creation of business linkages and by providing improved access to international markets and global value chains. If adequately framed, investment can improve the human resource base by fueling the development of skills in the host economy through educational and training programs to meet market needs.

There is no question that both local and foreign companies are also increasingly driving the efforts to improve the sustainability of their operations and contribute to sustainable development. There are many practical examples of the power of investment to accelerate economic development. In Southeast Asia, for instance, private investment and trade have driven development, and the region’s record in export performance speaks for itself. In some cases, however, it has been less able to translate this success into lasting and inclusive development, partly due to a lack of appropriate policy frameworks to support sustainable development through investment.
According to various international organizations, there have been significant increases in FDI to developing countries especially in the past decades. When we come to Ethiopia, the government is trying hard to ensure sustainable economic development via foreign direct investment (FDI).
It is obvious that Ethiopia continues to stride on its rapid economic growth performance – sustaining the double-digit growth trend of the past 14 years with broad contributions from all economic sectors.
At the same time, foreign investment showed continued increase in the past decade – reaching a record USD 4.2 billion in 2016/17. This is, in fact, a great leap compared to investment flows that were under half a billion USD in 2005/6 and under USD 1.2 billion in 2010/11 where it has quadrupled in not more than five years. The combined reading of these trends shows that Ethiopia is on the right path to becoming Africa’s prime investment destination.
The nation has seen a steady growth in foreign direct investment flows in the last several years and 2017 has been another record year for FDI flow in the history of the country. According to UNCTAD Investment Report, Ethiopia has become an investment hotspot in Africa and while FDI flows to the rest of the continent continued to decline, Ethiopia attracted more foreign direct investment than ever before. With a record growth of 46 percent foreign direct investment flow, the country has become one of the largest recipients of FDI in the continent and the second largest least developed countries host economy.
It is a plain truth that various opportunities for investment exist in many large and rapidly growing sectors that include government priority areas such as manufacturing (textile and apparel, agro-processing, leather and leather related products, pharmaceuticals, light machineries manufacturing), basic and import substitution (steel, equipment, chemical and pharmaceuticals) as well as agriculture and service sectors.
Ethiopia provides ample opportunities specially in the manufacturing sector. The plan aims to bring significant growth of the manufacturing industry so that it plays leading role in job creation, structural shift in Ethiopia’s export and address trade imbalance. In order to achieve the above goals and accelerate growth and expansion of the industrial sector a number of implementation strategies are devised. These strategies mainly focus on the implementation of project and programs which are gear towards attracting quality investment, enhancing production and productivity, boosting export shares, accelerating technological learning and strengthening the linkages among industries.
With a view to achieving economic transformation, several standard industrial parks have already been constructed and others are being constructed in various regions of the country. So far, four government and one private industrial parks that are put in place by the government have already started operation with full potential. Even other industrial parks which designated in various sector such as textile and apparel, argo-processing, information technology that are being under construction and make Ethiopia the best place for investment.
The nation is working hard to catapult its economy from agriculture-based into industry -based economy. In this regard, Ethiopia expects more form FDI. Knowledge transfer, job opportunity, capital, market and foreign currency are needed. For this reason, promoting country’s potential all over the world is still the assignment of the government and the private sector.

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