In the past, Ethiopia has been called the Cradle of Mankind, but today it seems Ethiopia is a guiding light for change, shining over all of Africa. 



As new Prime Minister Abiy Ahmed has made incredible moves in gender equality and inclusion with his gender balanced cabinet and appointment of the country’s first female President, Mrs Sahle-Work Zewde, there is also movement to transform Ethiopia into a middle-income nation through the Growth and Transformation Plan by 2025. 



<figure class="wp-block-image"> <a href="https://www.forbesafrica.com/wp-content/uploads/2019/09/FA-2019-ETHIOPIA-36pags-FORBES-vok_FORBES_Sept2019lr.pdf" target="_blank" rel="noreferrer noopener" aria-label=" (opens in a new tab)"><img loading="lazy" decoding="async" width="591" height="591" src="https://www.forbesafrica.com/wp-content/uploads/2019/09/ethiopia-cover.jpg" alt="" class="wp-image-41784" srcset="https://cms.forbesafrica.com/wp-content/uploads/2019/09/ethiopia-cover.jpg 591w, https://cms.forbesafrica.com/wp-content/uploads/2019/09/ethiopia-cover-300x300.jpg 300w, https://cms.forbesafrica.com/wp-content/uploads/2019/09/ethiopia-cover-100x100.jpg 100w, https://cms.forbesafrica.com/wp-content/uploads/2019/09/ethiopia-cover-150x150.jpg 150w, https://cms.forbesafrica.com/wp-content/uploads/2019/09/ethiopia-cover-80x80.jpg 80w" sizes="(max-width: 591px) 100vw, 591px" /><figcaption> Download the special report here</a> </figcaption></figure>



Needless to say, the people of Ethiopia have a renewed hope in what the future has in store.



In 2017, Ethiopia’s GDP expanded by 10.9% and is expected to grow by 8.5%, positioning Ethiopia as one of the fastest growing countries in the world and as a result, it is primed and ready to transform through Foreign Direct Investment. 



As part of the GTP II, Ethiopia is focused on streamlining investment in all sectors and enhancing the economy through the implementation of industrial parks, which will become key players in the country’s future. Ambassador to the United States, Mr Fitsum Arega says, “Industrial parks are enhancing the telecom, service, manufacturing and agriculture sectors by bringing potential for export growth, technology and skills transfer. 



Even more, they create a sustainable business environment, linking local workers to the processing of their products and greatly increasing the ease of investment.” The parks not only make foreign investment easier, but they ensure that the local markets and farmers continue to thrive. 



Many of the new changes and advancements in the country are facilitated by technology, which can be implemented in all sectors, from agriculture to transport. Hon. Oumer Hussen, Minister of Agriculture states, “Farmers always rely on the market. In industrial parks, there is a demand-driven approach for our farmers. That produces a big economic impact and guides them to using modernised techniques.” 



Technological adaptation in the agriculture sector is especially important as 85% of Ethiopia’s workforce are farmers. Hon. Getahun Mekuria, Minister of Innovation and Technology, states, “In the upcoming two years, at least 2-5% of Ethiopia’s GDP should come from technological value addition. We have planned different strategies: one is value addition to agricultural products such as coffee, as well as e-commerce. Another strategy our Ministry is pursuing is embarking on technological products such as drones. We could employ them to transport cargo, medical and pharmaceutical supplies to rural areas.” 



The technology sector is full of opportunity and Ethiopia has a vibrant young workforce to lead it. 



Alongside technology, the telecom industry also has its sights set on the future. The sector has experienced incredible progress in recent years and now has plans for nationwide 4G mobile service, as it strives toward 5G. 



Frehiwot Tamru, CEO of Ethio Telecom, states, “Telecommunication has a significant social, cultural and economic impact on modern society. It is fundamental for the economic development of any nation. I believe that the telecom market reform is to bring about economic growth of the country.” 



Hon. Getahun Mekuria, Minister of Innovation and Technology, adds, “As a government, we see [the telecom sector] as a very good environment for creating jobs and wealth because it will unleash the power of the service industry. The GDP coming from technology will be huge.”



&nbsp;The transportation sector also plays a prominent role in the Growth and Transformation Plan. Tewolde Gebremariam, CEO of Ethiopian Airlines, says “Our ever-expanding freight transport fleet facilitates the export of goods, which has led Ethiopia to stand next to Kenya in horticulture export.” 



Other transportation entities, such as the Maritime Authority, are working toward impacting exports, as well. Hon. Dagmawit Moges, Minister of Transport, says, “Lower logistics costs would make our exports more competitive on a global market. The cost of imported items, on the other hand, would decrease, enhancing our country’s purchasing capacity.” 



These advancements in infrastructure will enhance the country’s ability to transport product from farms to markets and beyond. Hon. Jantirar Abay Yigzaw, Minister of Urban Development and Housing, says, “With the construction sector booming, we are planning a number of new projects, like the Grand Ethiopian Renaissance Dam. 



The first railway line connecting Djibouti to Addis is already operational. The construction sector constitutes a notable portion of Ethiopia’s GDP, and the government is committed to increase funding for infrastructure.”



From every direction, Ethiopia is exceeding expectations, strengthening their economy, and breaking boundaries in its improvement of the country, whether that be through its commitment to social change, gender inclusion, or advancements in technology, agriculture or infrastructure. It seems that the Growth and Transformation Plan of 2025 is not just a plan. Becoming a middle-income nation is a certainty. 



&#8211; Matthew Scott Rose

Penresa

FOCUS ON ETHIOPIA: How The Cradle Of Mankind Is Fearlessly Leading By Example

Two of the largest banking and financial services institutions in the world, HSBC and UBS, have&nbsp;recently closed their local representative offices&nbsp;in Nigeria.



There’s also trouble brewing elsewhere in Nigeria’s business world that’s prompted fears about the climate for foreign direct investment in the country. Foreign direct investment is an investment made by a firm or individual in one country into business interests located in another country.



For instance, Nigeria’s government in September&nbsp;accused HSBC of money laundering&nbsp;after an analyst working for the lender said a second term for President Muhammadu Buhari&nbsp;may stall economic recovery &nbsp;in Africa’s biggest oil producer.



There are also tensions between Nigeria’s central bank and the South African telecom company MTN. In 2015, MTN was&nbsp;fined about $5bn&nbsp;for failing to cut off unregistered SIM cards. This was later reduced to $1.7 billion after a long legal dispute and the intervention of South Africa’s then President Jacob Zuma.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow"> Recently, the central bank has&nbsp;ordered MTN to repatriate $8 billion&nbsp;it said has been taken out of the country illegally.</blockquote>



Analysts are&nbsp;concerned&nbsp;that the Nigerian government’s attitude towards MTN and the two banks may erode the confidence of foreign direct investors. Their fears seem to be well founded: foreign direct investment in Nigeria&nbsp;fell to&nbsp;$1 billion in the first half of 2018, from $1.48 billion in the first half of 2017.



Foreign direct investment is crucial for any economy. So how can Nigeria attract and keep the right kind of investment from global companies? Compromise will be key, both for the government and foreign firms.



<h4 class="wp-block-heading">Why foreign direct investment?</h4>



Foreign direct investment is often preferred to exporting. That’s because while exports merely involve moving goods from one country to another, foreign direct investment actually involves an investor establishing foreign business operations or acquiring foreign business assets.



This often includes establishing ownership or controlling interest in a foreign country (for instance an American business establishing a physical business presence in Nigeria). Many emerging economies like China, Brazil, Vietnam and India have&nbsp;built their growth on FDI flows.



The trick is to attract “quality foreign direct investment” that links foreign investors into the local host country economy. The International Growth Centre, a&nbsp;British-funded&nbsp;research centre that aims to promote sustainable growth in developing countries,&nbsp;characterises&nbsp;“quality” here as contributing to:



<ul><li>decent and value-adding jobs and enhancing the skill base of host economies;</li><li>transfer of technology, knowledge and know-how;</li><li>boosting competitiveness of domestic firms and enabling their access to markets.</li></ul>



<h4 class="wp-block-heading">What Nigeria can do</h4>



There are a few things Nigeria can do to boost foreign direct investment. For starters, it must play fair. Foreign and domestic businesses should be treated equally. They should be open, transparent and dependable conditions for all kinds of firms.



Another area that needs attention is infrastructure. Businesses need easy access to ports, an adequate and reliable supply of energy and relative certainty that the country will be good to invest in. 



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow"> Good institutions&nbsp;also promote FDI.</blockquote>



The government should encourage partnerships between foreign and local businesses. Foreign firms might be familiar with global good business practices, but local firms will be more familiar with the indigenous context. This synergy could be very beneficial.



It’s also critical that Nigeria gets its regional governments involved: there are many regions in Nigeria, and these regions all have unique opportunities and challenges.&nbsp;



Our latest research&nbsp;shows that when the central government of Nigeria ran out of ideas and foreigners wanted to exit the agricultural sector, the regional government of Kwara state stepped in to create a positive business climate based on the cooperation of local banks, community members, and the foreigners themselves culminating in the&nbsp;Shonga farms&nbsp;public-private venture. 



This has kept the firm in Nigeria. It’s also brought private investors to the table, bolstering the firm and the local economy.



Nigeria should also tap into its huge&nbsp;diaspora. There are many Nigerians living outside the country who understand its challenges. They should be encouraged to help, or asked to work with their networks to invest in the country.



<h4 class="wp-block-heading">What foreign firms can do</h4>



Foreign firms also have a role to play. They can enhance their success in Nigeria (and elsewhere on the African continent) in several ways.



First, they need a long term strategic plan. This means thinking carefully about what sectors or activities to target. Many foreign firms come to developing countries when things are rosy but leave when conditions change. They don’t properly consider that solving such problems will gain them a competitive advantage in the long run.



If they stay and follow a learning curve, foreign firms will better understand the local business context. They’ll also gain credibility among ordinary people and possibly get more customers and support that way.



In the same vein, foreign businesses should create local solutions that meet ordinary people’s needs. The banks leaving Nigeria have&nbsp;been accused&nbsp;of only catering to the needs of wealthy Nigerians, who are&nbsp;perceived as corrupt. A more diverse portfolio that catered to the needs of ordinary Nigerians would have nullified this claim.



Foreign firms must also work closely with credible and strategic local firms, and be willing to enter into dialogue with the Nigerian government where necessary. This is crucial especially as administrations may change or government policy may evolve. Dialogue could ensure that all parties are on the same page.



<h4 class="wp-block-heading">Act local, think global</h4>



It’s unfortunate that these banking institutions have decided to leave Nigeria. Hopefully both the Nigerian government and other foreign investors can learn from this.



The main takeaway for both foreign investors and governments involved in foreign direct investment is that it would be prudent for all parties to act locally but think globally.



<ul><li><a href="https://theconversation.com/profiles/tolu-olarewaju-405190">Tolu Olarewaju</a>: Lecturer in Economics, Staffordshire University</li></ul>



READ MORE |&nbsp;<a href="https://www.forbesafrica.com/investment-guide/2012/11/01/nigeria-invest-not-invest-question/">Nigeria: To Invest Or Not To Invest? That Is The Question</a>



READ MORE |&nbsp;<a href="https://www.forbesafrica.com/focus/2018/06/05/investment-marketplace-coming-to-africa/">Investment Marketplace Coming To Africa</a>

Tag: Foreign Direct Investment

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FOCUS ON ETHIOPIA: How The Cradle Of Mankind Is Fearlessly Leading By Example

How Nigeria Can Attract And Keep The Right Kind Of Foreign Direct Investment