A Project Report On The Effectiveness of the Ethiopian Investment Policy
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Date
2007-03
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Publisher
A.A.U
Abstract
This is a study that aims at evaluating the success of the Ethiopian investment policy m
achieving its goals. Success in this study is measured in terms of the rate of execution of
accredited investment projects and the resulting capital generated and jobs created. In this regard
facts reveal below average success. However the composition of foreign investment projects
which is dominated by the manufacturing sector is in line with the country's development
program and can potentially allow the transfer of technology and managerial skills. The
Ethiopian investment climate is characterized by fluctuating capital inflow and employment
creation due to different social, political and economic factors that affect the operation of foreign
investment projects in the country.
In an attempt to make a practical examination of the effectiveness of the investment policy the
study has considered 3 foreign direct investment firms engaged in the three dominant sectors in
which foreign investors are engaged namely agriculture, manufacturing, and construction. The
core points of focus of the study in examining the effectiveness of the policy were issues related
to technological transfer, employment generation, managerial skill development and ,salary and
benefits. In addition to these, the study has attempted to see the possible effects of the foreign
companies on local firms in encouraging business activities through creating backward and
forward linkages. There was also an attempt to get a clear picture of the investment climate by
incorporating views and facts from officials in the investment agency who are in charge of
licensing promotion and following up of foreign investment ventures in Ethiopia.
Based on the findings of the study, there has been a controversial outcome as far as the transfer
of appropriate technology is concerned, while the transfer of skills to employees as well as
improvement in salary and benefits has been encouraging, there is minimal success in attaining
the development of local businesses through linkages with the foreign companies as they
purchase most of their inputs and sell most of their products in foreign markets resulting in a
weak backward and forward linkage with local firms.
In putting the pieces together Ethiopia hasn't done its homework to enjoy the fruits of foreign
direct investment, making it necessary for every stakeholder to do their level best to change the
story.
Description
The Case of Foreign Direct Investment (FDI)
Submitted In Partiat Fulfillment for a Masters Degree in
Busin.e ss Administration
Keywords
Effectiveness of the Ethiopian, Investment Policy