FDI inflow to Ethiopia Dwindled by USD1.5 billion since 2017: Report

Foreign Direct Investment (FDI) inflow to Ethiopia plummeted by USD1.5 billion since 2017, according to an UNCTAD Investment Trends Monitor published on January 20, 2020.

Flows to Ethiopia, Africa’s fastest growing economy, slowed down, compared to 2018, by a quarter to USD2.5 billion in 2019, UNCTAD said. This is USD1.5 billion lower than the amount registered in 2017.

China was the largest investor in Ethiopia in 2019, accounting for 60Pct of newly approved FDI projects, according to UNCTAD, which reported that FDI flows to Africa amounted to an estimated USD49 billion in the past year– an increase of three percent.

While the decline in FDI inflow to Ethiopia is partly the result of the political unrest throughout the country in the past two years, tax measures undertaken by Donald-Trump administration in US have adversely impacted FDI of Ethiopia and other developing countries, according to Abebe Abebayehu, Commissioner of Investment.

Global foreign direct investment (FDI) flows slid by 13Pct in 2018, to USD1.3 trillion from USD1.5 trillion the previous year – the third consecutive annual decline, according to UNCTAD’s World Investment Report 2019.

The contraction was largely precipitated by United States multinational enterprises (MNEs) repatriating earnings from abroad, making use of tax reforms introduced by the country in 2017, designed for that purpose.

Hardest hit by the earnings repatriation were developing countries, where growth in FDI inflows remain unchanged at around three percent.

“The tax amendment implemented by Trump administration undermined the efforts of developing countries to attract FDI, while it has benefited the US,” said Abebe, in his interview Addis Maleda Newspaper, sister publication of EBR. “The political instability existed in the past two years had a negative impact on FDI inflow.”

Egypt remained the largest FDI recipient in Africa with a five percent increase in inflows to USD8.5 billion in 2019. The North African country’s efforts to implement economic reforms have resulted in strengthened investor confidence.

Recently, Ethiopia has introduced ‘home-grown economic reform’, one of whose target is averting different challenges faced by businesses and implementing different measures aiming at improving the investment and business climates of the country.

“We are trying to solve challenges faced by industries in Ethiopia. This includes improving power supplies to factories,” Abebe told Addis Maleda.