ASSESSMENT OF FOREIGN DIRECT INVESTMENT IN ETHIOPIA’S HORTICULTURE SECTOR: TRENDS, CHALLENGES AND PROSPECTS, AND ITS CONTRIBUTION TO DEVELOPMENT

Abstract

FDI plays an important role as an engine of employment, technological development, productivity enhancement, economic intensification, and more importantly, as an instrument of technology transfer, especially from developed to developing countries. Ethiopia having realized the inadequacy of the domestic capital and low national saving, opened several economic sectors to foreign investors. The country has also issued several investment incentives to encourage foreign investment. As a result, the main purpose of this study was to assess factors that affect FDI inflow, effectiveness, and growth in the Ethiopia’s horticulture sector. The research also investigated the major contributions of FDI in the horticulture sector to the development of Ethiopia in terms of employment creation, generation of revenue, transfer of technology, linkage with domestic firms in boosting national productivity. It analyzed the main challenges and limitations of FDI in the Ethiopian horticulture sector which imped its effectiveness and growth. This study employed mixed research method, where both qualitative and quantitative analysis were applied, using both primary and secondary data. By adopting descriptive research design, questionnaires and interview were the main data collection instruments used to gather primary data from experts, foreign investors and officials of various relevant institutions. The sampling methods used were both probability and non-probability sampling. For the selection of FDI samples in the horticulture sector, cluster probability sampling procedure was employed. The target population constituted 28 medium and large firms in the horticulture sector that are foreign owned. In the selection of samples (110) from experts with better knowledge and information from various institutions, convenience and purposive non-probability sampling techniques were used. The result of this study indicated that the contribution of horticultural FDI to the development of Ethiopia has been constrained by various challenges of poor infrastructure, institutional bureaucracy, and other organizational and human elements. Therefore, it requires an effective intervention of those challenges and impediments enhancing basic infrastructure provision, training and developing skilled manpower, institutional reforms, enforcement of technology transfer and timely implementation of projects, regular environmental auditing as well as a continuous follow up or monitoring for effective implementation of FDI projects to exploit all the benefits of FDI in the Ethiopian horticulture sector.