Lack of adequate Foreign Direct Investment (FDI) in Ethiopia is said to have an adverse effect on the economy and the country would not be able to attract FDI as it was the case for other African countries.

The foregoing remark was made here on Tuesday by an Ethiopian expert residing in the States at a business luncheon program organized by Initiative Africa.

Eyob Easwaran, vice President, Deutsche Bank Group Capital Partners Inc., said that though in Ethiopia, particularly over the last few years, there were certain key positive aspects in terms of overall economic development, there were still a number of weaknesses that should be addressed properly to bring about a better achievement in the country's economic scene.

According to Eyob, certain areas, especially those which have to do with the private business, were still blocking the flow of FDI, which otherwise could be conducted smoothly and in a business-friendly manner.

The escalating corruption and lack of transparency, weak communication system, absence of property rights, the slow pace of privatization, non-liberalized financing sectors and large size of non-performing loans among others were some of the serious problems the country is facing to day, according to Eyob. "If there is a smell of corruption, no US investor would like to come and invest," Eyob said, adding that investors would also like to have titles on their properties.

Further explaining areas that need to get a special treatment in order to bring about the desired goal, Eyob said there should also be efficient public services and a low bureaucratic bottleneck. Speaking about the scarce communication system, Eyob said Ethiopia was the worst place to get connected from the rest of the world. "It would take an hour to have a telephone connection from the States to Ethiopia," he said. There were also, according to him, minimal uses of IT solutions and access to information and communication. "If we could afford to buy arms, we could also afford to buy computers."

If the country wants to attract FDI, Eyob further said, it should also allow the private sector to have the largest share of the country's economy. More than anything, however, Eyob said, "we should stop shooting at each other."

Commenting on the idea of opening the financial sector to foreign investors, Berhane Mewa, president of the Ethiopia and Addis Ababa Chambers of Commerce, urged that liberalizing the financial sector alone was not good enough unless the system to make investors work in a favorable environment was put in place. "Could banks operate in an environment where lending money is controlled by the government?" asked Berhane, adding that it would take more than opening the sector to foreign investors.

Eyob had also mentioned basic requirements businesses need to perform to step into an investment in a given country. He said that businesses had to look at business risks such as the volatility of local business environment and regulatory changes, types of contracts like revenue and operation and maintenance contracts as well as loan arrangements, among others.

Businesses representing private companies, bankers, embassy representatives attended the lecture.