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Ethiopia. The role of foreign direct investment in economic development

Issue 8 from 08.09.2020

In this article the impact of foreign direct investment (FDI) on economic development of Ethiopia is studied. Starting from 2012 FDI inflow to Ethiopia, primarily from China, Saudi Arabia, Turkey, India, and European Union, is growing significantly.

The role of the Government in attracting FDI to the country is important. The Government continues to open Ethiopian economy to the foreign capital. In the article specific measures implemented by the Government, like generous investment incentives to FDI, infrastructure development and construction of industrial parks, are addressed. The analysis of the impact of FDI on economic development of Ethiopia in the article includes discussion of how FDI contributes to creation of new businesses, jobs, human capital enhancement, transfer of technologies, as well as export promotion. Sector analysis shows that FDI has an important impact on employment via job creation in launched greenfield projects and spillover effects in related value chain industries. New industries, like cut flowers industry, are created from the scratch.

Human capital enhancement goes through training of skilled workers and wider “learning-by-doing”. New forms of business training, for example, e-commerce training program are commenced. The analysis shows that in all of these directions the results are positive, though the efficiency of technology transfer is limited by the absorption capacities of the host country, and increased competition among exporting businesses may lead to crowding out of traditional domestic exporters. In general, the results show that FDI has a positive impact on Ethiopia’s economic development. The effect may be higher with the improvement of the business climate in the country.

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Foreign direct investment in the Lao People's Democratic Republic: Challenges and prospects

Issue 12 from 08.12.2021

In the article the inflow of foreign direct investment (FDI) into the economy of the Lao is examined, in particular, the evolution of the policy, methods and rules of FDI attraction and regulation, as well as the dynamics and sectoral structure of FDI inflows. In result of Lao’s targeted proactive government policy, the FDI inflow since 2005 have risen substantially, owing primarily to domestic and foreign investments in hydropower and mining. Since the 3^rd five-year National Plan for 1991-1995, the promotion of FDI has become a priority for the government. Since 2005, the annual rate of economic growth has exceeded 5%, and by 2020, the poverty of the people has dropped significantly. Through continuous, inclusive and sustainable economic growth the country managed to get out of “least developed countries” status by 2020. The Lao PDR government continues to improve the legal framework and law enforcement practice in the field of FDI.

China, Thailand and Vietnam lead the investment process among the 10 most active foreign investors. Lao government clearly defined the desirable industries for foreign direct investment, which meet national interests - hydropower, mining, infrastructure facilities, industrial and agricultural enterprises, tourism.  In this article an overview of the most important FDI sectors in Laos is provided.

Authors have come to conclusion that the scope, volume and focus of implemented  and ongoing FDI projects has benefited the Laos in terms of socioeconomic growth, foreign exchange earnings, job creation, as well as modern equipment, technology and skills transfer. The attention of the Lao government to practical details of foreign investment in important national projects contributes to successful use of external resources for national goals.

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