Ethiopia: Africa’s Third Largest Recipient of Foreign Direct Investment

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Brunno Casella of UNCTAD, (right) with James Wakiaga, economic advisor at UNDP Ethiopia, on launching the UNCTAD World Investment Report on June 24, 2014.
Brunno Casella of UNCTAD, (right) with James Wakiaga, economic advisor at UNDP Ethiopia, on launching the UNCTAD World Investment Report on June 24, 2014.

The World Investment Report released on Tuesday, June 24, 2014, revealed that Ethiopia was the third largest recipient of foreign direct investment (FDI) in Africa in 2013, with a 240pc increase from the amount in 2012. The country has also registered a significant increase in their Foreign Direct Investment (FDI) stock – the amount of investment from aboard held within the economy.

The report released last Tuesday, June 24, 2014, by the economic think tank, United Nations Conference on Trade & Development (UNCTAD), stated that the FDI inflow to the country had reached 953 million dollars in 2014, up from the 279 million dollars it was in the previous year.

Its foreign direct investments inward stock also reached close to 6.1 billion dollars in 2013, up from 941 million dollars in 2012.

The net sales value of cross border merger and acquisition (M & A) in the country has also increased by more than double to 366 million dollar in 2013, from 146 million dollars in 2012.

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Though the amount of FDI inflow in the form of M & A has increased a considerable amount in the year, the major part of the country’s investment inflow comes from green field projects, according to the report.

The country was a destination for foreign investment projects worth 4.5 billion dollars, which is a dramatic performance increase from the 441 million dollar value of green field investment projects the country hosted in 2012.

On the regional basis in Africa, which increases its share of reception by five percent, the East and the South showed a significant increase as recipients of investments from foreign sources. The flows to Southern Africa almost doubled to 13 billion dollars, mainly due to record high flows to South Africa and Mozambique, while the inflows to Ethiopia and Kenya lifted the regions FDI by 15pc to 6.2 billion dollars, the report finds.

“Ethiopian industrial strategy may attract Asian capital to develop its manufacturing base,” it reads.

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Investment in light manufacturing from China, Turkey and India has the major share in the increase of the amount of foreign investment into Ethiopia.

With a continuing significant increase of the inflow this year, the robust economic growth and the growing middle class of Ethiopia, has contributed to the attractiveness of Ethiopia as a preferred destination of cross boarder investors, said Bruno Casella from UNCTAD, who presented the major findings of the report on Tuesday while announcing its official release.

“Ethiopia is closer to FDI than other parts of Africa,” he said.

Two days after the release of the UNCTAD’s report, the International Monetary Fund (IMF) Staff Mission on the 2014 Article IV Consultation with Ethiopia has also released a statement confirming the findings of the world investment report.

“Strong external loan and higher foreign direct investment allowed for a modest increase in gross international reserves,” says the statement, which also predicts the real gross domestic product (GDP) of the country between eight and 8.5pc for 2013/14 and 2014/15.

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The current 1.5 trillion global FDI inflows is projected to rise to 1.6 trillion dollars in 2014, 1.75 trillion in 2015 and 1.85 trillion in 2015, according to the report.

Source: addisfortune

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