Ethiopia’s economy has taken a fairly promising shape, and is now dubbed one of the fastest growing economies in the world. Although the numbers vary depending on who publishes them, most analysts agree that it has at least been growing at a high single digit rate for the past decade. To add to that, the forward looking outlook for the Ethiopian economy still appears solid according to the prevailing consensus.
If harnessed effectively, Ethiopia also has the added advantage of a favorable climate, vast arable land, a number of rich countries in its surroundings, and a large work force with a reasonable level of education. Add to that the attractive tax and related incentives put forth by the government, one can make a potent case to attract Foreign Direct Investment (FDI) to this country of over a hundred million people.
According to a recent report, FDI to Africa has been lower since the decline of commodities prices that affected the traditionally strong resources rich African economies such as Nigeria, Angola, and South Africa. With these countries now in official recession, foreign capital looking for the next profitable venture in Sub Saharan Africa can’t miss Ethiopia’s impressive growth story to make a sensible investment.
As Ethiopia aspires to make the transition from a mainly agriculture based economy to an industry led African super power, the role of FDI can’t be overemphasized. In fact, if all of the FDI making its way to the country is properly channeled to the right industries with clear objectives, it can effectively lead to building the much needed local capacity with meaningful critical mass of game changing sectors.
The link between FDI and job creation is a clear one. If we go by the experience of other countries that have targeted FDI as an integral part of their growth policy, the outcome with regards to job creation from a gainful employment stand point becomes even more lucid. Moreover, its positive impact on important economic indices such as human capital development and institutional memory is uncontestable.
Furthermore, FDI receiving countries mostly end up improving their labor force as a result of various new training to their work force that is required to hone skills to accommodate a fairly demanding working environment that is usually linked to equity investment. This is simply one of the outcomes of FDI coming from relatively well-off nations with developed work ethic and a much higher productivity culture.
With the increase in effective FDI, Ethiopia’s much touted “technology transfer” efforts can also be achieved as a result of the capital injection that comes with new know how and knowledge. From the fresh capital in the from FDI to the receiving country, one other area that can benefit from the availability of such funds is the local market as it positions itself to supply to the new industries.
With the Ethiopian government having set priority areas for FDI, employment in areas such as textile manufacturing, agro industry, FMCG, chemical & pharmaceutical industries as well as various engineering activities will benefit. As much as foreign employers will be discerning in their choices of whom to hire, jobs in these sectors are bound to be plenty while attracting the highly skilled and most competitive candidates only