Trends and patterns of foreign direct investment inflow in Ethiopia

Most countries in the world welcome and compete for foreign direct investment because foreign direct investment is an engine of economic development of the host countries. This paper analysis the trend and pattern of foreign direct investment flows in to Ethiopia over the period of 2000–2013/14. The study is based on secondary data. This study applied linear regression, annual growth rate and compound growth rate models. The major findings of this study are the average value of foreign direct investment in Ethiopia was 448.12 million dollars, but there is sharp fall noticed that is 108.5 million dollars during 2008/09; the highest amount of foreign direct investment received within the study period was in 2013/14, amounting to 1279.4 million dollars. The maximum annual growth rate recorded in 20111 that is 117% and the minimum annual grow rate registered were (−59% and -51%) in 2007, 2008 respectively, but the compound annual growth rate was 17.44% per each year. FDI flows to Ethiopia have been unevenly distributed among the regions. The share of FDI inflow in Ethiopia is maximum recorded during 2004/05 that is 38.4% from the total inflow of FDI in East Africa and the minimum share of FDI inflow registered in 2008/09 that is 2.4% (108.5 million dollars). The researcher suggested that the government should be improving domestic infrastructures, providing targeting financial incentives, promoting local skills development to meet investors need and expectations, devalued its currency and open more to the external world and undertake more economic reforms to improve their attractiveness towards foreign investors.