Policy Studies Institute Emphasizes Need for Enhanced Synergy between Foreign, Domestic Investors

Addis Ababa, May 9/2024(ENA) A workshop organized by the Institute of Policy Studies has underscored the need to enhance synergy between foreign and domestic investors in Ethiopia.

Opening the workshop, Policy Studies Institute (PSI) Director-General Beyene Petros said the study titled "Policy and Strategic Directions of Foreign Direct Investment in Ethiopia: Challenges and Prospects" examines the current landscape, role, participation and challenges of FDI.

The study found that strategic directions should be implemented to maximize the benefits of foreign investment. 

PSI lead researcher Amare Matebu said attractive incentives must be offered to foreign investors to make them comfortable and efficient.

According to him, investment will not be truly beneficial if a foreign investor is not paired with a local investor and the local investor does not develop the necessary capacity and knowledge.

He suggested various collaborative models such as joint venture, technology transfer, and supplier relationships to foster stronger linkages.

The research revealed also that while Ethiopia has been relatively successful in attracting foreign investment over the past 31 years, the quality and distribution of these investments have been suboptimal. 

Only 58 percent of the 6,136 licensed foreign manufacturing firms are operational and the majority of jobs created (83 percent) are concentrated around the capital Addis Ababa.

To address these gaps, the study recommended that the government enhances its efforts to improve the linkage between foreign and local investors. 

Domestic firms often lack the necessary knowledge, capital, and technology to effectively partner with foreign counterparts, and the government should provide support to facilitate these connections.

The lead researcher said, "If we can achieve better integration between foreign and local investors, we will be able to fully capitalize on the benefits of FDI, such as improved access to international markets and technology transfers."