Get real time updates directly on you device, subscribe now.
Untiring endeavor to scale up GDP, FDI with time
Fekadu Wubete
Daily Nation on May 29, 2017 stated that, Ethiopia has overtaken Kenya in its total GDP growth. The newspaper cited projection of the World Bank that Ethiopia’s GDP will grow by 8.3 percent in 2017 and this could boost the country’s GDP to 78.3 billion USD from 73 billion USD last year.
Similarly, IMF on April 22, 2017 stated that, Ethiopia has outpaced Kenya in its GDP and economic growth prospection in the past two years. Other international chroniclers had also broadcast information gleaned from the Kenyan media that Ethiopia’s capability to register double-digit growth in this year has enabled the country to beat Kenya by 3.6 billion USD.
According to the forecast of aforementioned institutions, prosperous time has come to Ethiopia to outpace Kenya in economic development. They confirmed that desirable opportunity has been created for Ethiopia to overtake Kenya’s age-old dominance in the area of economic growth. And hence, Kenya’s dominance in the economic performance of east Africa has been replaced by Ethiopia.
Some economists also affirmed that, Ethiopia has managed to outpace Kenya in its GDP increment due to huge population growth and its prospect to enhance domestic market. In addition, they said Ethiopia is attracting foreign investors and its cheap labor supply has enabled to push up the growth. Accordingly, Ethiopia’s economy is growing indubitably; even though, the per capita income of Kenyans is far better than Ethiopians; Ethiopia’s economy is growing with an eye popping manner vying to go past Kenya in the near future including per capita calculation.
Ethiopia’s economy is moving in an upward trajectory. Presently, Ethiopia is being admired by the international community for its encouraging performance in its economic growth. Its investment friendly atmosphere has enabled it to attract more FDI than most African countries. This FDI attraction capacity has resulted in a sizable change in the industrialization and improvement infrastructure.
Development efforts of the country in the past two decades have coerced the international community to reckon Ethiopia as one of the fastest growing non-oil economies of the world, is a remarkable achievement. Viewed from various parameters, Ethiopia’s economy is scaling up in paralleled way. The investment policy, opportunities and incentives in Ethiopia are attracting numerous investors world-wide and their influx has enabled to open many investment projects, employ thousands of citizens and improve the overall income of citizens thereby fostering economic growth of the country.
Indispensably, huge investment of the government in public utilities and infrastructures has also played its own role. Currently, the government is undertaking construction of mega projects massive electrification programs (like the Grand Ethiopian Renaissance Dam-GERD), light and heavy railways and sugar milling factories). No doubt, private investment, parallel to public investment, has also played significant role in the current sizable economic growth.
As witnessed by the UN Trade and Development symposium earlier, Ethiopia has managed to become one of the top investment and FDI destination countries in Africa, only next to Angola, Nigeria, Ghana and Egypt. The growth of Ethiopia’s economy has become glaringly conspicuous it is being recorded amid international economic downturn and investors lacking interest to invest in Sub-Saharan Africa.
Particularly, pro-poor investment policy of the government has been incessantly prodding Ethiopia to transform its general economic arena. Investment of the government in health, road construction, among others, has helped to alleviate poverty time after time and make the economic outlook of the country very much rosy. For instance, decades ago the economy was down trodden and down trending.
In the contrary, these days business and investment clime have been improving with time, following the increment of investment and burgeoning domestic market. Sector wise, the manufacturing sector has played the most important role to enhance the economic growth of the country. This sector has particularly risen by 46% where the construction of industrial parks like the one in Hawassa has played a pivotal role to attract foreign investors and enhance catchment of FDI.
Ethiopia has attracted a great deal of FDI since its implementation of practicable investment policy. Currently, the nation is being visited by delegations of multi-national companies and high-profile investors interested to assess investment opportunities and undertake projects in Ethiopia.
The nation’s effort to woo high-profile and capable investors has also expedited desirable development in the investment and manufacturing sectors. So far, high-profile and high-tech companies of Turkey, India and China have started production in the Hawassa and Addis Ababa industrial villages. These companies are producing high-end produce targeted to European and American consumers, which in turn has become a magnetic power to attract dearly needed hard currency.
Currently, with a view to enhancing FDI attraction, parallel to the official inauguration of the construction of the Hawassa Industrial Park-two, the country has signed memorandum of understanding (MoU) with Japanese investors intended to construct a manufacturing village in Bole-Lemi- 2. According to the MoU, Ethiopia will construct industry village on 186 hectares of land in the aforementioned village, used to settle high-tech Japanese manufacturers. The park is assumed to introduce a more sophisticated style of production to the country and engage high-tech Japanese manufacturers in the investment activity of the country.
Ethiopia has been long-awaiting to become the preferable destination of technology-savvy Japanese investors. Hence, engagement by Japanese investors will help boost productivity and attract same high-tech investors from all over the world. The nation is constructing industry as a means to help investors involve in production speed. However, the Bole-Lemi- 2 industry village will also enable Japanese investors to construct their own industry shades as they like and involve in manufacturing activities the way it suits them.
Eying at effect far-reaching and outstanding economic development, the lion’s share of the budget of the country is being earmarked to prioritized sectors of development that play indispensable role in poverty alleviation, including agriculture, health, and education. Similarly, the nation has been implementing the 2ndGrowth and Transformation Plan (GTP-2).
It has enshrined broad-spectrum development program to realize the MDGs; speedy economic growth envisioned as much as 11 percent per year at low and, 14.5 percent at best case scenario (eying to double the size of the economy by 2015). Cognizant of the instrumentality of investment in job creation and extricating, millions of citizens out of rock-bottom poverty, the GTP-2 has prioritized investment and manufacturing as a vital means to increase the flow of FDI into Ethiopia.
To this end, in addition to the available incentive packages, the government is expressing a commitment to further assist investors and enhance the development of the country through mass flow of investment. Accordingly, it said it will continue to selectively woo capable investors with feasible projects that can create thousands of jobs, increase quality of export produce and foreign currency earnings.
However, investors are expressing their worry that the ever changing investment laws of the country, tax, and excise and incentive system of the government may be cumbersome to smooth of production. Others are also venting their disappointment that the increasing cost of input, and uncivilized bureaucracy may impede their productivity. Similarly, they said weakness in technological capacity building, lack of amply trained work force, poor management capacity and problems related to marketing may hinder their fruitfulness.
Cognizant of these problems, the nation has reviewed its strategic approach. The new trend includes, being selective when inviting investors to come to Ethiopia, training highly skilled human power by intertwining technology institutes with industries and effecting good governance to amply red-tape and iron-out bottle necks of investment.
The other strategy being implemented by the government is, building industrial parks in different parts of the country. Building industrial parks are considered as a turnkey solution to the investment sector and encourage investors to resume production speedily. Constructing parks furnished with essential infrastructures are anticipated to facilitate manufacturing; attract more investors; create more job opportunities and undertake voluminous industrial activities in an environment-friendly manner.
The nation understands as there are encouraging results as well as stumbling blocks that should be improved with strenuous effort. For instance, the current growth in GDP and FDI has been registered through shortage of capital, skilled human power and other valuable resources. And hence, utmost efforts shall be exerted to alleviate problems far better than the previous times, sustain the current level of development and reinvigorate it further. Therefore, the nation shall work to enhance efforts to attract more investment. And it is resolutely working to put in place conducive climate for investment, with a supportive policy framework; lower transport and energy costs; reduced formal and informal barriers to trade; increased labor market flexibility and effective competition policies.
Moreover, with its massive industrialization program, the government will work to create greater room for the private sector, both foreign direct and domestic investment and rapidly address related to access to land, infrastructure, trade logistics, customs regulations and skills. Such measures will ultimately address numerous constraints and can facilitate the agglomeration benefits from industrial clustering, including the emergence of backward and forward linkages will over time boost more FDI attraction and GDP growth.
