12 July 2017

Ethiopia, Western World From Donation to Economic Partnership

Photo: Ministry of Foreign Affairs of Ethiopia
The Industrial Parks Development Corporation has inaugurated the Mekelle Industrial Park and the Kombolcha Industrial Park.
analysis

A US - based KKR has invested 200 million USD in floriculture

Ethiopia's relation with North American and European countries that has been largely characterized by assistance has transformed to business and development over the past few years, Ethiopian Investment Commission said.

Out of the total 25 billion Birr FDI came from Asian, European and North American countries between mid 2012 and mid 2017, the share of North American and European countries was close to 10 billion Birr, about 40 per cent of the total investment, according to data.

Over the past 10 years Chinese and Indian investment had the lion's share in Ethiopia. Now the situation is changed and flow of North American and European investment has become nearly equivalent to those came from Asia, Mekonnen Hailu, Public Relation Director with the Investment Commission told The Ethiopian Herald.

The year 2012 was the starting point for North American and European to significantly grow investment in Ethiopia and the trend has continued in the subsequent years.

During mid 2012 to mid 2017, some 46 North American investment projects with the combined capital of over 1.9 billion Birr were operational and created job opportunities for over 5,743 citizens in permanent and temporary basis.

North American investment reached the highest stage in 2014 in which 14 projects with 1.2 billion Birr aggregate capital were set to work and created 1,135 jobs.

In the past six years, some 150 European investment projects with the combined capital of 7.9 billion Birr became operational and created 8,336 permanent and temporary jobs.

Meanwhile, European investment hit the highest level in 2012, when 27 projects with a sum total capital of 3.2 billion Birr were fully functional and employed 1,825.

The Director stated that Ethiopia's fastest economic growth over the past decade changes its relation with the North American and European countries from aid and donation to business and economic partnership.

He said: "The right macroeconomic policies and reforms Ethiopia has put in place over years coupled with the peace and political stability sustained in the country have transformed the relationship from that has been characterized with assistance in to that of trade and investment."

Mekonnen noted that efforts of Ethiopian missions in North America and Europe to promote the country's investment opportunities and encourage investors to involve in its economy is also the contributing factor for the transformation.

The economic analyst Dr. Fikru Deksisa agreed on Mekonnen's idea. He said the involvement of US flagship companies such as Reykjavik, DuPont and General Electric in Ethiopia's economy showcased the transformation.

Stating a US company called KKR has invested 200 million USD in cut flower business, Dr. Fikru said the engagement of such big corporates is beneficial for Ethiopia in attracting others to come.

The economic analyst noted that North American investment would have special benefit for Ethiopia's economy due to its enormous financial and technological potentials.

He said: "North American investment is different from other countries' investment in its reach knowledge and technology package. It introduces us with new way of doing things and will have an immense role in knowledge and technology transfer for Ethiopia."

Concerning European investment, Mekonnen said the Continent's giant companies have been attracted by Ethiopia's sustainable economic growth, availability of land and abundant labor.

He said: "More investment is coming to Ethiopia by seeing the performance of European companies that are already investing here like Bosch, the German engineering and electronics firm and Diageo, a British company involved in the brewery business as well as Sweden-based Ericsson in the telecom industry. Many European business delegations have also paid frequent visits."

Information obtained from Ministry of Foreign Affairs indicated that during the past few years many European companies came to Ethiopia with significant group of business delegations and undertaken networking with Ethiopian business counterparts.

Due to steady efforts ofall stakeholders to attract investment, the country that has no business with Western world for decades has appeared in the map of North America's and European investment destinations, Mekonnen said.

Ethiopia's economic partnership with the western world has not been reached at the desired level compared with the age-long diplomatic and people-to-people ties, according to Dr. Fikru. Mekonnen said the government has built specialized industrial parks across the country that would play a pivotal role in easing the bureaucracy and infrastructural setbacks investors have been encountering.

"The parks would also reduce the ups and downs investors have been facing in the operation phase by providing them with land, sheds and infrastructural facilities and introducing a single electronic window service," the Director added.

Dr. Fikru underscored that Ethiopia's missions in North American and European countries should extend their efforts to conduct promotional activities and held business forums to attract investors in some priority areas such as energy development, agribusiness, IT and aviation.

He said: "The government is expected to facilitate conditions and designing attractive incentive packages for foreign investors and encourage them to have a meaningful involvement in Ethiopia's economy.

The incumbent has also furthering its engagement with various stakeholders to enable Ethiopia benefit from the West's huge financial and technological capabilities, Dr. Fikru recommended.

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