OPPORTUNITIES AND CHALLENGES OF FOREIGN DIRECT INVESTMENT IN ETHIOPIA: EVIDENCE FROM SELECTED SECTORS

Abstract

Ethiopian Government has adapting different strategies and incentive packages to enhance its foreign direct investment performance. The main aim of this paper is to identify challenges and opportunities for foreign investors of Agro processing sector and Textile & Garment sector. Political, economic, socio cultural, technological and legal variables are given much emphasis in the study. To this end primary data are collected from 119 and 35 foreign investors Agro processing sector and Textile &Garment sector respectively and employees of Ethiopian Investment commission. Questionnaire and interview were the main data collection tools used in collection of primary data. The study has found insufficient supply of foreign exchange, getting financial loan, getting investment land, political instability, raw material supply and electricity as the main challenges of foreign investors. On the other hand, law cost of labor, huge market potentials, and encouraging investment proclamation are among the prospects foreign investors can reap because of investing in Ethiopia. Finally, the study recommended formulating harmonized national investment land giving procedure with some flexibility and increasing EIC’s medium of communication that may enable to solve the observed problems and enhance the efficiency of foreign investors.