Determinants of foreign direct investment in Ethiopia

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Foreign direct investment has been the most reliable and largest source of external finance. It plays an important role as an engine of employment creation, technological transfer, productivity enhancement, economic intensification and more importantly, as an instrument of technology transfer, especially from developed to developing countries. The objective of this study is to identify the determinants of foreign direct investment in Ethiopia. This study employed combined research methods where both qualitative and quantitative data were used in the assessment. Questionnaire and interviews were the main instruments used to gather first-hand information from experts and FDI owners as well as key officials of Ethiopian investment offices and Ethiopia investment Commission. The sampling methods used were both probability and non-probability sampling. Purposive sampling was used to select experts with better knowledge and information from different sector offices. The study sample included 97 respondents from different foreign expert’s offices, 15 FDI owner officers and 4 local (domestic) officers. Totally 116 respondents were involved in this study. The methods of data analysis were descriptive statistics by using frequency and table. The result of this study showed that availability of infrastructures, privatization policy, lower corruption, lower labor cost, availability of raw materials, political stability, investment law and regulations, geographical proximity, lower inflation rate and e-commerce are the determinant factors for foreign direct investment in Ethiopia. This study recommended that the government has to deepen its current effort in developing infrastructural facilities such as road, information and communication technologies, electricity system and improved services which are regarded as necessary conditions to draw sizable FDI.


A Thesis Submitted To The Department Of Management Presented In Partial Fulfillment Of The Requirement For The Degree Of Master Of Business Administration (Finance)


Economic development, Determinants, Growth