Assessment of foreign direct investment inflows into Ethiopia in light of peace and security challenges from 2018 to 2022

Abstract

This paper aims at assessing the foreign direct investment inflows to Ethiopia from 2018 to 2022. A qualitative research method is applied to analyze current and relevant documents, government reports, and case studies, obtained through library research. The results indicate that investment inflows during the year 2018 to 2022 were volatile due to the global COVID-19 pandemic and unsecured political conditions in Ethiopia. During the onset of the Tigray war, FDI inflows to Ethiopia declined by 6%, even though it accounted for more than a third of foreign investment in the sub-region. According to the findings of this paper political instability associated with various ethnic conflicts, most notably the conflict in the Northen Ethiopia, as well as the insecurity in the Horn of Africa, and the acute shortage of foreign currency is currently viable challenges for foreign investors. On the other hand, the interest rate, FDI-friendly economic environment, adequate supply of labor force, adequate raw materials supply, proxy to international markets, conducive fiscal and monetary policy, and easy import and export procedures are economic opportunities for foreign investors in Ethiopia. The article suggests that the government should maintain stable political conditions and peace to attract more investment inflows into Ethiopia in the future as well as the need for a comprehensive assessment of the overall risks faced by foreign investor in Ethiopia due to the high degree of peace and security and foreign direct investment interconnectedness and interdependence. Policymakers can use this information and needs to develop policies that address the risks faced foreign investor operating in conflict-prone regions in Ethiopia. The study highlights the need for policymakers to promote peace and stability to attract FDI inflows, especially from developed countries.

POLICY IMPLICATIONS

The article suggests that the government should maintain stable political conditions and peace to attract more investment inflows into Ethiopia in the future and the need for a comprehensive assessment of the overall risks faced foreign investor in Ethiopia due to the high degree of peace and security and foreign direct investment interconnectedness and interdependence. Policymakers can use this information and needs to develop policies that address the risks faced foreign investor operating in conflict-prone regions in Ethiopia.

Keywords:

• Foreign direct investment
• peace
• conflict
• investment inflows
• reform
• security
• Ethiopia

REVIEWING EDITOR:

• Aye Goodness, University of Agriculture, Nigeria;
• Yamini Sharma, Taylor and Francis, India

SUBJECTS:

• Economics
• Public Administration & Management
• Economics and Development
• Development Policy
• Security Studies - Pol & Intl Relns

Availability of data and materials

Data and material would be made available upon request.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 Societal warfare includes civil, ethnic, and communal conflicts.

2 Foreign direct investment (FDI) in Ethiopia - International Trade Portal (lloydsbanktrade.com).

Additional information

Notes on contributors

Surafel Getahun Ashine

Surafel Getahun is a senior lecturer and researcher in the Department of Political Science and International Relations at Dire Dawa University. He received his bachelor’s degree in political science and international relations from Addis Ababa University and his MA degree in peace and development studies from Haramaya University. Surafel has more than 10 years of experience in government and non-governmental organizations. Since September 2019, he has been working at Dire Dawa University as a lecturer and peace and conflict researcher. In addition, Surafel is a senior political analyst. So far, he has given various commentaries and conducted over 400 radio, newspaper, and television interviews, mostly focused on national and international issues. Further, Surafel has presented more than 15 research papers in national and international workshops and published more than 5 articles.