Wednesday, August 17, 2022
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    Stimulating the flagging investment

    The major attributes that are usually mentioned in connection with why Ethiopia is often described as a nation which is conducive to foreign direct investment are: political and social stability; a growing economy; excellent climate and fertile soils; strong guarantees and protections; abundant and affordable labor; regional hub with access to a wide market; improved economic infrastructure and competitive incentive packages. Accordingly, several investors from China, Turkey, India and many other countries have flocked here investing billions in diverse areas. The encouraging trajectory of the past decade or so, however, has hit a wall owing to a variety of obstacles, particularly the violent unrest that took place in different parts of the country in the past one year. This requires urgent action and follow-up on the part of the government. 

    Any country which aspires to be a preferred investment destination is bound to face stiff competition from others. It has the potential to attract and has actually drawn investors to such strategic sectors as textiles and garments, leather, shoes and leather products, horticulture, industry parks development, ceramic products, electronics and electrical products as well as agro-processing, sugar and related; tems chemical, pharmaceuticals and metal and engineering industries. The relative instability though has temporarily slackened the enthusiasm to tap this potential. Much work informed by well-thought-out plans needs to be undertaken in order to restore the interest to previous levels.

    The repeated organizational restructuring the government had been forced to make over the years is one critical problem. Government agencies pop up now and then only to be disbanded or merged with other agencies sometime later. Similarly, initiatives launched with much fanfare are abruptly abandoned and replaced by other plans. In the meantime, managers and experts are regularly shunted from one institution to another prompting frequent disruptions and fresh starts. Such ceaseless experimenting is costing the country and its people dear as it leads to delays in finding a solution even to the simplest of problems facing foreign investors and thereby erodes their trust in the government. This wasteful practice needs to be stopped; after all, the country ill affords to be a lab rat for failed experiments.

    Another grim challenge is the widespread corruption within the ranks of the mid-level bureaucracy. The scourge, which has assumed epidemic proportions, does not only vex investors, but also mars Ethiopia’s image. It is incumbent on the government to ruthlessly eradicate the sources of the bane through the self-evaluation exercise it has embarked on or other means. Unless elements within the mid-level bureaucracy who are perpetrating crimes that hassle the public and investors are brought to heel, they are liable to jeopardize the national interest by spooking foreign investors who were wooed into choosing Ethiopia and turning off potential investors. This is a pressing matter which necessitates the utmost attention.

    The government shoulders the responsibility of ensuring that the appropriate compensation is paid to investors, both local and foreign, whose properties were damaged during the recent unrest as well as to put in instituting various incentive schemes which benefit them. This is vital in terms of reassuring investors contemplating pulling out and to persuade those reconsidering their decision to invest here. Aside from consolidating political stability it is imperative to ramp up efforts to attract foreign direct investment in priority areas. This calls for the introduction of an incentive scheme as part of the strategy to create a favorable environment that fosters investor confidence. In this regard it is imperative to identify each and every bureaucratic obstacle that gave rise to legitimate grievances and take steps to bring about a transformational change, including firing corrupt or incompetent officials, with the aim of guaranteeing investor satisfaction.

    The present investment atmosphere requires a profound change. The experience of investor-friendly countries like Rwanda can be benchmarked with a small tweak. adopting a control regime that assures the proper utilization of foreign currency, cementing long-term political stability, amending or repealing obsolete or unworkable laws, regulations and procedures and replacing them with ones which spur investment, addressing infrastructure-related drawbacks, purging the bureaucracy from the top to bottom of elements lacking merit, responding with alacrity to investors’ requests, and lifting the restrictions imposed by the state of emergency decree that impedes investment are some of the activities that ought to be undertaken towards promoting Ethiopia’s investment potential. It is essential to be open to the idea of a fundamental change if investors are to put their money here with a degree of confidence and they are to contribute meaningfully to national development. Ethiopia should be able to entice a significant inflow of FDI to such sectors as agro-processing, manufacturing industry, transport, hydropower, telecom, road and railway infrastructures and industry parks among others. The rapid growth of the past decade can be sustained and inclusive by putting in place and implementing an enabling framework that enhances FDI. That is why the government is duty-bound to reinvigorate post-haste the flagging investment. 

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