Foreign Direct Investment in Addis Ababa Since 1991: Constraints, Challenges and Opportunitie

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Date

2007-06

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Addis Ababa Universty

Abstract

This study endeavored to identify the constraints, challenges and opportunities of FDI in Addis Ababa since 1991 . To this end, related literature, proclamations and publications were reviewed; concerned GOs, experts of the area in focus and sample foreign investors were interviewed. Survey rnethod was applied to collect data from 377 operational foreign investments. The investments were categorized under different sectors and, therefore, proportionate stratified random sampling was used to all the sectors to obtain 10 per cent sample from each sample frame. On the other hand, purposive sampling technique was deployed to find the GOs and experts working in the area of FDI. Questionnaire, for the investors, and interview questions for the experts and GOs were the data collection instruments. The data obtained was qualitative and quantitative in nature, It was analyzed qualitatively through narration and quantitatively through SPSS Software Programme respectively, The results of the study indicated that there are many constraints of FDI basically due to the GOs operating in the area under discussion. These include bureaucracy in the GOs, cost and access to land, lack of infrastructure in the investment sites, corruption, and the strict FDI pol icy are among others. The challenges to thE) sector are relatively few and easy to bear. These include cultural shock, language barrier, homesickness, penetrating markets, managing the business and adjusting to the new climate are among the pertinent ones. Apart from these, the investment opportunities for FDI are also discussed in detail. Manufacturing, Rea-estate, Urban-Agriculture,Ag ro-processing , Construction, Consultancy, Exporting of agricultural and Industrial Products and Education are the major ones. To positively address the FDI climate of the country, possible recommendations are forwarded. These include, among others, improving the bureaucracy in the GOs, fighting corruption, building the image of the country, making EIA a "one-stop-agency" which conducts all the licensing including issuance of land, mobilizing resources from Ethiopians in Diaspora, conducting regular meetings with foreign 'investors, providing clear incentive package~ , relaxing the restrictions on some of the sectors, liberalizing ownership of land, and seeking peaceful resolutions to internal and external conflicts. \,

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Keywords

Foreign Direct Investment

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