Addis Abeba — Despite favorable perception by investors, Ethiopia's productivity levels remain very low when compared to almost all peer groups in Africa, attracting relatively little Foreign Direct Investment, says World Bank report.

The Productivity and Investment Climate Survey of 2006/2007 that involved over 600 investors and managers sees Ethiopia as more open for business than ever.

With the improved business registration, tax administration, and competition policy, the survey also suggested that the perceptions managers have of the investment climate in the country has improved dramatically since the first Investment Climate Survey in 2001.

"But reforms appeared to have stalled," indicated the report, entitled Investment climate and Competitiveness in Ethiopia, adding Ethiopian products remain uncompetitive in international markets.

The Investment Climate Assessment (ICA) is one of the periodic reports that the World Bank does in all borrower countries.

Given that Ethiopia's domestic wages are a third the average in Sub-Saharan Africa, and given the substantial investment in infrastructure over the past decade, the report said Ethiopia should be able to compete in a range of export commodities.

"The limited progress in raising productivity has contributed to Ethiopia's current macroeconomic challenges, in particular the poor supply response to incentives and infrastructure spending, and the growing shortfall between imports and exports," it noted.

Manufacturing accounts for about 5 percent of Ethiopia's output, according to the World Bank It said Ethiopia's Doing Business rating has also gradually declined from 101 to 116 as other countries reformed faster.

The report said the Ethiopian economy has enjoyed a buoyant expansion since the drought-related contraction in 2002/03.

The report attributed this in part to favorable weather, but also substantial growth in services, real GDP rebounded from negative growth in 2002/03 to average annual growth of 10.3 percent from 2003/04 to 2007/08.

Despite this growth, according to World Bank Country Director for Ethiopia and Sudan, Ken Ohashi, "some issues remained serious." The key outstanding issues, according to the report, included the competition regime in general, access to finance, tax rates, microeconomic conditions and access to land.

As a result, World Bank Country Director said the investment boom previously predicted, did not quite materialize.

"The strong impression we have from reviewing the available information and the feedback we get from the business community is that the momentum for improving the investment climate had stalled," the director said.

"This of course is consistent with the macro picture we see, in which the supply response has fallen far short of the rapid demand growth," he said.

As the dark clouds of the global economic slowdown begin to lift, the director said it is important that Ethiopia put itself in a position to take advantage of the global economic turn-around with the best possible investment climate