Ethiopia attracted $2.2 billion in foreign direct investment in the first half of its 2017/18 fiscal year (July 2017 to June 2018), according to figures from the Ethiopian Investment Commission announced by Investment Commissioner Fitsum Arega and reported by Ecofin Agency on 29 March 2018. The commission said the figure was 22 per cent higher than in the same period a year earlier, and that manufacturing and export oriented production benefited most.
Officials quoted in the report credited government investment in infrastructure, especially industrial parks. They cited the Bole Lemi I and Hawassa parks as fully operational, with more under construction.
The bigger picture
The six month figure reported above fits a wider trend documented by the United Nations Conference on Trade and Development (UNCTAD). In its World Investment Report 2019, UNCTAD reported that foreign direct investment inflows to Ethiopia contracted by 18 per cent to $3.3 billion in 2018, yet the country remained the biggest recipient of such investment in East Africa.
UNCTAD said investment went into petroleum refining, mineral extraction, real estate, manufacturing and renewable energy, and that it was diversified both by sector and by country of origin. It pointed to economic liberalization, investment facilitation measures and investment ready special economic zones as reasons for positive prospects. The report also noted that Hyundai Motor Company had opened a manufacturing plant in Ethiopia, its first in East Africa, with a planned capacity of 10,000 vehicles a year.
What happened next
The following year’s World Investment Report 2020 reported that inflows to Ethiopia contracted by a fourth to $2.5 billion in 2019. UNCTAD said investment was adversely affected by instability in certain parts of the country, including regions with industrial parks. Even so, Ethiopia remained the biggest recipient in East Africa, and China was the largest investor in 2019, accounting for 60 per cent of newly approved projects, with significant investment in manufacturing and services.
Why industrial parks mattered
The industrial parks named in this article were central to the strategy. UNCTAD’s 2019 report, which focused on special economic zones, cited zones that were ready for investors as a key reason for Ethiopia’s positive outlook, and its 2020 report linked the slowdown partly to instability near those same parks.
