海外發(fā)展研究所-埃塞俄比亞和AfCFTA的投資條款：問題和挑戰(zhàn)（英）-2022.12

1upportingInvestmentandTradeinAfricaEthiopiaEthiopiaandinvestmentprovisionsinAfCFTA:issuesandchallengesAlemayehuGedaandGutaLegesse,withinputsfromYohannesAyelethaBeleteCommitmentstoinvestmentintheAfricanContinentalFreeTradeArea(AfCFTA)canhelptoattractforeigndirectinvestment(FDI),whichhasvariousbenefitsfortheEthiopianeconomy.FDIcanhelpcatalysedomesticinvestment,leadtotransferoftechnologyandmanagerialskills,andcreatejobsandreducepoverty.owevertherearechallengesOnesynchronisingnationalinvestmentlawsTwotheproperimplementationoflaws.Three,thelackofastablepoliticalandmacroeconomicenvironmentFour,thecostsofdoingbusinessinEthiopia.Assuch,thisreportsuggestspossibleactionsfortheGovernmentofEthiopiaandothersaroundAfCFTAandInvestmentIssuestoovercomethesechallenges.leofcontents 1Acknowledgements 3Listofacronyms 4Executivesummary 51.Introduction 92.BackgroundoninvestmentandinvestmentpolicyinEthiopia 102.1.RecentFDIperformance 102.2.Nationalinvestmentpolicy,lawsandFDIpromotion 132.3.Internationalinvestment-relatedobligations 163.TheAfCFTAInvestmentProtocol:status,issuesandexpectedimpacts 193.1.Statusandnegotiationissues 193.2.ExpectedimpactsforEthiopia:broadview,industrialisation 244.InteractionsbetweenAfCFTAprovisionsanddomesticlaw 274.1.Pointsofconvergence 274.2.Pointsofdivergence 285.Conclusions:priorityactionsandsupportmeasures 32References 35cknowledgementsThisbriefinghasbeenpreparedbyAlemayehuGedaandGutaLegesse(AddisAbabaUniversity),withinputsfromYohannesAyele(ODI)andMarthaBelete(AddisAbabaUniversity)andcoordinationbyDirkWillemteVelde(ODI).WearegratefultotheUKDepartmentforInternationalTradestaffinAddisAbaba,MelakuDesta,FikremarkosMerso,discussionsandsuggestions.ThebriefinghasbeenfundedundertheRapidResearchWindow,aspartoftheSupportingInvestmentandTradeinAfricaprogramme,fundedbytheUKForeign,CommonwealthandDevelopmentOffice(FCDO).AllviewsprovidedarethoseoftheauthorsandnottheresponsibilityofODIorUKFCDO.AfCFTAPHAAUTOAfricanContinentalFreeTradeAreaAnimalandPlantHealthAgencyAfricanUnionstmentTreatynMarketforEasternandSouthernAfricaentforEnvironmentFoodRuralAffairstmentCommissionmmonwealthandDevelopmentOfficeforeignDirectInvestmentmocraticRepublicofEthiopiaeTreatmentmesticProductixedCapitalFormationalAuthorityonDevelopmentNationofEthiopiatmentCodemicCommunityalEconomicZoneervicedinspectionvtrinaireetphytosanitaireauxfrontirestesedNationsCommissiononInternationalTradeLawonsConferenceonTradeandDevelopmentEconomicCommissionforAfricaWorldTradeOrganization5RegionalintegrationschemesandagreementssuchastheAfricanContinentalFreeTradeArea(AfCFTA)anditsInvestmentProtocolareimportantnotonlybecausetheyoffermarketandinvestmentopportunitiesbutalsobecausetheycanlockingoodpoliciesbyservingasagenciesofrestraintthatforceacountrytofollowthecommitmentsithasmadeinsucharrangements.AfCFTAanditsInvestmentProtocolshouldbetakenasonesuchopportunitytostrengthenexistinginstitutionsorcreatenewinstitutionsandprovidefurtherincentivestoshapeinvestmentpolicymoregenerally.CommitmentstoinvestmentinAfCFTAcanhelptoattractforeigndirectinvestment(FDI),whichhasvariousbenefitsfortheEthiopianeconomy.FDIcanhelpcatalysedomesticinvestment,leadtotransferoftechnologyandmanagerialskills,andcreatejobsandreducepoverty.TheabilitytocreatejobsisamajorreasonforEthiopiatodesignattractiveincentiveschemesandprovisionsoninvestorprotectiontoattractFDI.AnalysisofEthiopia’sinvestmentpoliciesshowsthat,despitevariousincentivesoffered,asbymostcountriesinthecontinent,thelevelofinvestmentattractedissignificantlybelowthelevelthatisneeded.Understandingthereasonforthisrequiresanin-depthstudy,andthisbriefingattemptstointroducesomeofthemajorchallengesbyfocusingonEthiopia’spartofsigningtheAfCFTAAgreementingeneral.GiventheimportanceofFDIfortheEthiopianeconomy,implementationoftheAfCFTAanditsInvestmentProtocolisanopportunitythatEthiopiacouldleveragetoshapeitsinvestmentiasinvestmentpoliciesandlawswiththeminimumglobalstandardandtosharpenitsuniqueappealforinvestors.avoidaracetothebottom’inabidtoattractinvestment.ThisrequiresaddressingthesynergiesbetweeneralinvestmenttreatiesBITsthateachldalsobeusedtoaddressmajorchallengesrelatedtotheEthiopiangovernmentiscurrentlyusingspecialeconomiczones(SEZs)bothtoattractFDIandtorealiseitsindustrialisationdrive.EthiopianeedstoexplorefurtherhowtoensurethattheInvestmentProtocoliswellalignedwithEthiopia’sSEZstrategy.TheAfCFTAInvestmentProtocolhasthepotentialtoofferacontinental-wideframeworkforanefficientinvestmentinformationsystem,whichmayemergeasasystemicspillovereffectoftheInvestmentProtocolatcountrylevel.ItmayalsoactasanagencyofrestraintandincreasetheconfidenceofinvestorswhomayinturnfacilitatefurtherinvestmenttoEthiopiaRealisingthebenefitsoftheincomingInvestmentProtocolanddealingwithpotentialchallengesrequiresaddressingtheissuesthatthisbriefingidentifies.ThisprocessneedstobeguidedbyEthiopia’s10-yeardevelopmentplan.Theunderlyingvisionofthecountryisstructuraltransformation(industrialisation)andjobcreationthroughsupportingstrategicsectors,especiallythosewithstrongbackwardandforwardlinkagesandjobcreation.Weidentifyarangeofchallengesanddiscussthepolicyimplications.Atableattheendofthissectionsummarisesthemainpoints.ThefirstchallengerelatestosynchronisingnationalinvestmentlawswiththevariousBITs,henEthiopiaaccedesandtheAfCFTAInvestment6Protocol.Ethiopiahassigned35BITs,and22ofthemareinforcewhile12recentlysignedotocoloffersEthiopiatheopportunitytoaddressthischallenge.TheInvestmentProtocolneedstoensurethatmarketactorsdonotabusemarketpower,restrictmarketentryandfocusonrentextractionwithlittlevalueadded.Thus,theprotectionofinvestorsneedstobebalancedwithregulatingtheactivitiesofinvestorsandinvestmentfacilitation,whicharebecomingincreasinglyimportantfeaturesofmodernagreements.Meanwhile,moderninvestmentagreementsincreasinglyleaveoutdisputesettlement,whichhasbecomeacontroversialmatter,leavingthistoBITsornationallaws.Ethiopiashouldbetoaddressanticompetitivepracticesbynegotiationalignmentwithitscompetitionlaw.Thesynchronisationcanalsobeextendedtoincorporatedisputesettlementissues.Otherareasofdisparitiesthatrequirefurtherconsiderationforforeigninvestors;capitalsharerestrictions;employmentofexpatriatestaff;andforeignexchangeuseandtransferoffunds.ItisimperativethatthegovernmentofEthiopiaworkontheseareasaheadoftimesothecountrycanbenefitfromtheAfCFTAInvestmentProtocol.vestmentlawiswelltargetedtoindigenousownership,jobcreationandrelatedsafeguardmeasuresthatareconsistentwiththenationalinterest.However,thereisaneedforproperimplementationandenforcementoftheinvestmentandotherlaws.Forinstance,,strictsupervisionandreviewofFDIapplicationsisneededtorestrictfraudulentinvestmentsasthecountryhasincurredsignificantlossingovernmentrevenuesandexperiencedabuseofthelaw(suchasimportingsecond-handmachines,excessiveloan-takingwithoutdeliveringoutputs,relocatingearly,etc.)bysomeforeigninvestorsinrecentyears.However,achievingthisinanefficient,timely,cost-effectiveandtransparentmannerisdifficult,whichhindersforeigninvestmentinEthiopia.Moreconcretely,thesechallengesofproperimplementationoflawsarefoundtobepervasiveinrelationtoaccesstolandforinvestmentcontractsenforcement,lackofinternalcoordinationbetweenregionalstatesandthefederalstateindecidingoninvestment-relatedissues,especiallyonland.Thesechallengespartlyarisefromcapacityproblemsinimplementationagencies,especiallyinregionalgovernment.Forinstance,thenew2020InvestmentProclamationsetupancialsfromthefederalgovernmenttocoordinateandstreamlineinvestmentactivities.UnlesstheseinvestmentonchallengesareaddressedupfrontanyfurtherimprovementintheinvestmentlawthroughtheAfCFTAAgreementtoattractandbenefitfromforeigninvestmentmayyieldfewbenefits.Inthisregard,speedyestablishmentoftheproposedinvestmentcouncil;quickresolutionoflanddisputesjointlythroughtheEthiopianInvestmentCommission(EIC)andregionalauthoritiesuntilthecouncilbeginsfunctioning;andefficientcommunicationwithexistingforeigninvestorswhohavesuchproblemsaresomeofthepolicyactionsthatauthoritiescouldtakeasapositivesignalinattractinginvestment.Thecapacitychallengesnotedabovearerelatedtotheinstitutionaldimensionofimplementation,anditisworthlookingdeeperattheresponsibilitiesassignedtotheEICasanimplementationagencyanditsabilitytohandlethese.ThelistofresponsibilitiesgiventotheEICisextensive,rangingfrompolicyformulationtoimplementationandmonitoring(ProclamationNo.1180/2020)–andyetitappearsthattheEICdoesnothavesufficientcapacitytoundertakethemallinanefficientandcost-effectivemanner.TheInvestmentProtocolmaynotbeeffectiveinfacilitatinginvestmenttoEthiopiaifsuchinstitutionalchallengesarenotaddressed.Theshort-termpolicydirectionstoaddressthischallengeinclude(1)streamliningandsimplifyingtheactivityoftheEICandcoordinatingitsworkwithregionalbureausofinvestment;(2)establishingclearresponsibilitiesfortheimplementingorgansoftheinstitutionandmakingthemaccountablewhentheyfailtoperformtheirdutiesinatime-boundcontext;and(3)makingtheimplementationstepsandresponsibilities7transparentthroughanopeninformationtechnologysystemthatcanbemonitoredbothbyinvestorsandbyresponsiblehigherauthorities.Inthemediumtolong-run,engaginginsignificantcapacity-buildingattheEICcontinuouslyandimplementingappropriatestaffretentionschemestoavoidhighstaffturnoverwillbeimportant.Thethirdchallengeisthelackofastablepoliticalandmacroeconomicenvironment.Macroeconomicstabilityreferstostableandlowinflationandbalanceofpaymentsandsustainableeconomicgrowth.Withaninvestmenttogrossdomesticproduct(GDP)ratioof35%againstadomesticsavingstoGDPratioofabout15-22%overthepastfiveyears(andalargetradedeficit),FDIhasbeencrucialforEthiopiasince2013,notonlytobridgeabalanceofpaymentsdeficitproblem,whichisrelatedtochallengesofgrowthintheexportandimport-substitutingsectors.Notwithstandingthegovernment’seffortstoattractFDI,forthispurposeamongothers,itsforeignexchangeproblemsandfrequentregulationstorationforeignexchangethroughapolicyofforeigncurrencysurrender(thelatestsurrenderratebeingabout70%)couldbeamajorhurdletoattractingFDI.Inrelationtothis,first,a70%toinvestmoreateaggravatetheproblem.Theymayalsoleadtoillicitactivities(suchasover-andunder-invoicingofimportsandexports,respectively)forthosealreadyengagedinEthiopia.Furthermore,periodicviolentconflictthatattimesleadstodestructionofproperty(inshort,politicalinstability)aremajorchallengestoinvestmentinEthiopia.ThefourthchallengerelatestocostsofdoingbusinessinEthiopia.Ethiopiaisalandlockedcountrywithunderdevelopedinfrastructureandassociatedhighlandtransportationcosts,Bank’sDoingBusinessrankings,at146(of190countries)in2016,deterioratingto189insverylowcomparedwithitsregionalpeerssuchasUgandawitharankofKenyaat56andRwandaat38inthesameyear,2020.Thus,aspecialfocusoninvestmenteraccesstoforeignexchangeforinvestorsengagedinexportingandimport-substitutingactivities,wouldbeashort-termpolicydirectionworthlookingintotoalleviatethechronicforeignexchangeproblemandattractforeigninvestmentatthesametime.Forinstance,toattractforeigninvestment,thegovernmentisdevelopingseveralindustrialparksinimportanteconomiccorridorswithfullydevelopedinfrastructuressuchaselectricity,water,roads,etc.inallyinmanyAfricancountriesanemergingtrendrelatestothesignificantengagementoffirmsfromemergingeconomiessuchasChina,IndiaandTurkey,amongothers,bothintraditionalFDIsectorsandalsoinmajorinvestmentsofhostcountriesfinancedbycredit(oronomiesThisisanewgreyareaofandfastgrowth.Vendorfinancing-basedinvestmentfromChina’sEXIMbankinEthiopia,forinstance,ismuchmoreimportantthanChineseFDIinEthiopia.ThetrendissimilarinmanyAfricancountries.Thisareaisworthdeeperstudyinthefuture,especiallyregardingitsimplicationforstandardFDIinhostcountries.Toconclude,thetablebelowsummarisesthepolicyimplicationsofthisreport,bothfortheagenciesTheseeffortsneedtobefollowedbyanindepthstudyandstrategy–whicharebeyondthescopeofthisstudy.8SummaryofpossibleactionsfortheGovernmentofEthiopiaandothersaroundAfCFTAandInvestment(Protocol)issue(highlightedinthebrief)LinktoAfCFTAPossibleaction/optionsforgovernmentinrelationtoinvestment(shortrun)Furthercomplementaryactions/supportneeded(mediumrun)AligningexistinglawsandAfCFTAInvestmentProtocolProvisionsoninvestmentprotectioninAfCFTAExaminethePan-AfricanInvestmentCode(PAIC)andemergingAfCFTAinvestmentissuesandalignthemwithEthiopianlawandnegotiationsintheInvestmentProtocolaccordinglyDeeperstudiesand/orcapacity-buildingonstrategyandscenariosfornegotiationImplementationoflaws,especiallybyregionalgovernments,thatincludesdisputeswithlandaccessanduseissuesInvestmentfacilitationinAfCFTAInvestmentProtocol(1)SpeedysetupofthenewinvestmentcouncilstatedinthenewInvestmentProclamation;(2)quickresolutionofdisputesonlandissuesbyajointEICandregionalauthoritiescommitteeuntilthecouncilbeginsfunctioning;and(3)effectiveandefficientcommunicationwithforeigninvestorsthathavesuchproblems(1)Capacity-buildingoninvestmentfacilitation;(2)Astudytoidentifymajorchallenges(asapriority);(3)establishinganaccountableandtransparentsystembothintheEICandinregionalinvestmentauthoritiesStablepoliticalandmacroeconomicenvironmentAfCFTAtoleadtobetterpublic–privatedialoguethatcanhelpaddresstheseissuesInclusivepoliticsandpeacefulresolutionofconflictsCapacity-buildinginmacroeconomicmanagementForeignexchangeshortageandrationingNotexplicitlyrelatedtoAfCFTA(anationalproblem)Aspecialfocusoninvestmentfacilitationandenhancedincentives,includingextendedaccesstoforeignexchange,forinvestorsengagedinexportingandimport-substitutingindustriesAttractinginvestmentfromtheAfricaregion,includinglimitedofferingofequitiesinprofitablepublicfirmsTheuseofindustrialparks(SEZs)PossibleissuesaroundharmonisationofinvestmentprotocolandSEZpoliciesDevelopinganegotiationpositionabouttheirfurtheruseinthecontextoftheInvestmentProtocolwillhelpEthiopiaprepareaheadoftimeImplicationsofinvestmentfinancingfromemergingeconomiesforFDIUpcomingnegotiationsontheInvestmentProtocoloftheAfCFTADeliberatingonthisissueduringthenegotiationsontheInvestmentProtocolAdeeperstudyonimplicationsforattractingFDIandhowtohandlebothtypesofinvestmentinthefuture9JustbeforetheemergenceofCOVID-19asaglobalpandemicinearly2020,theEthiopiangovernmenthadembarkedonafar-reachingeconomicreformandliberalisationprogrammeoGiventhelonghistoryofafairlycontrolledeconomy,thisreformwasbelievedtobecrucialforthegrowthofforeigndirectinvestment(FDI)inEthiopia.Thekeyfeaturewastoincreasethegovernment’sefficiencyandtoliberalisetheeconomy,includingprivatisingkeypublicenterprises,openingtheEthiopianeconomytoforeignfirmsandspeedingupthedrivetoaccessWorldTradeOrganization(WTO)membership.ThisreformwasalsosupportedbymajorWesterndonorsandinternationalfinancialinstitutionswithapromiseofsignificantexternalfinance.ThentheCOVID-19pandemichittheeconomyin2020,andthenorthofthecountryslidintosevereconflictin2021,withdetrimentaleffectsbothtothereformandtotheprospectsofsecuringthepromisedexternalfinanceandattractingnewFDI.highgrowthof10.4%perannumformorethanadecade(AlemayehuandAddis,2015).However,accordingtoofficialdata,growthdeclinedto6%in2019/20owingtotheeffectsofHowever,evenbeforeitwashitbytheeconomiceffectsofCOVID-19andtheconflictinthenorth,theEthiopianmacroeconomyhadbeengenerallycharacterisedbysignificantimbalances,partlybecauseofstructuralfactorsandpartlybecauseofmacroeconomicmismanagement,includingcorruption.Morespecifically,therewasasignificantgapbetweengrossdomesticsavingsandinvestment,ahightradedeficit,alargebalanceofpaymentsinflationAsaresultbyinflationwasveryoodatandtheexport–importgapremainedsignificantbecauseimportswere(andstillare)aboutfivetimesexports.Thisannualexternalgapwasgenerallybridgedby,amongotherthings,significantflowsofFDI,whichhelpedpartlyaddressthecountry’sforeignexchangeproblem(Alemayehu,2008;AlemayehuandAddis,2015).ItispartlyforthisreasonthatthegovernmentisgivingitsunreservedsupporttoattractingFDI.iccontextthatEthiopiaratifiedtheAfricaContinentalFreeTradeArea(AfCFTA)Agreement,whosesecondphasewillfocuson,amongotherthings,negotiationoftheInvestmentProtocol.ThisbriefingaimstoreviewinvestmentpolicyinEthiopiaandimplementationofthisinthecontextoftheAfCFTA.ItalsoaimstoshowhowntProtocolandrelatedinternationalagreementstowhichEthiopiahascommittedtocreateaconduciveenvironmenttoattractmoreFDIandrealisethecountry’sindustrialisationstrategy.onpresentsbackgroundinformationonEthiopia’sFDIperformance,investmentpolicyandalignmentwithinternationalobligations.Section3focusesontheAfCFTAAgreement,includingtheInvestmentProtocol,andtheAfCFTAAgreementanditsincomingInvestmentProtocolanddomesticinvestmentlaw.Section5concludesbypointingoutoutstandingchallengesandtheirimplicationsforpolicyactionstoenhanceEthiopianinvestmentpolicy.nvestmentRecentFDIperformanceTheEthiopiangrowthpatterninthepastdecadeissimilartothegeneralexcellentgrowthancontinentTheeconomygrewatanaverageannualrateofbetween2000and2012.Computingfrom2003,theaverageannualgrowthratewasaround11%fornineconsecutiveyears.Thegrowthcontinuedinthenextdecade(2011/12–2018/19),withasimilaraverageannualgrowthrateof9.2%.GrowthininvestmentwascrucialforthisinvestmentinGDPaveraged38%,whiledomesticsavingsasashareofGDPrepresentedjust21.5%.1Duringthisperiod,FDIasashareofGDPaveragedabout4.2%(accountingforabout11%oftotalgrossinvestment).TheroleofChinainbothinvestmentandfinancingofinvestment(especiallyinpublicinfrastructureinvestment)issignificant–thusChinaistheleadingFDIsourcecountryforEthiopia.FigurePatternofinvestmentFDIsavingsandgrowth2013/14–2019/20(%)505099864202013/142014/152015/162016/172017/182018/192019/20GDPGrowthInvestmentShareGDP(%)GrossDomestiSaving(%GDP)FDIShareinGDP(in%)NoteInvestmentshareandgrossdomesticsavingsonleftaxis;GDPgrowthandFDIshareinGDPonrightaxis.SourceAuthorscomputationbasedonNBEandUNCTADdata1AlemayehuandAddis(2015)arecriticalofboththeofficialgrowthrateandthesavingrate.Examiningiffromdifferentperspectiveincludingagrowthmodelbasedgrowthaccountingexercise,theyestimatethegrowthduringthisspecialdecadetobeaboutnotor11%noted;theyalsoinferredthesavingratetobeaboutofGDPThisstillwasanexcellentgrowthperformancewhichisaboutthecontinent’saveragewhichabout5%duringthesametime.(Table1andFigure1).ThestockofFDI,whichwasonlyaround$1billionin2000,hadincreasedto$4.3billionin2010.After2010,itincreasedconsistently,reaching$15billionin2016and$22.25billionin2018,accordingtoEthiopianInvestmentCommission(EIC)data.Thishadfurtherincreasedto$27.5billionin2020–thusFDIhasgrownmorethanfivefoldinthepast10years.Despitethisrecentsignificantincrease,theshareofEthiopianFDIstockinthetotalstockofFDIinAfricaisnegligibleItwasaboutbeforeandhadincreasedto2.8%by2020($27.4billion).AlthoughthislatterfigureissignificantintheEastAfricaregion,beingaboutathirdoftheregion’sFDIstock,itisverysmallwhencomparedwiththeAfricantotalstockofrillionInadditiontheannualflowofFDIasapercentageofgrossfixedcapitalformation(GFCF)wasaround0.7%in1990.Thisfigurehadreachedalittleover6%in2013,albeitwithupsanddownsovertheyears,andhadnotfundamentallychangedin2020,atabout7.1%ofGFCF.ThereisaneedtoexaminethefactorsbehindthisgeneralpoorperformanceinEthiopiaandwhatneedstobedonetoimprovethesituation.TableRecentpatternofFDI,worldandEthiopia00000000FDIstock($billion)Share(inworld/Africa,%)World7,37719,89941,354100.0100.0100.0nomies78066.0conomies930.5Africa13.1icashareinAfrica36.8264.75.9hareinAfrica0.9414.206510.7owsbillionAnnualgrowth(%)Proj.Proj.62017201820190172018201920202021*World5.2,436.71,530.2-20.2-12.86.5-34.710Developedeconomies.5894.32707.65749-33.5-20.95.8-58.315Developingeconomies653.89692.4878.47Africa6.24940.1845.3747.149EastAfrica8.37.7265.8-8.3-4.0Ethiopia4.14.0173.312.5495-3.0-17.6-23.0Note:*Theprojectionsfortheworld,developedanddevelopingeconomiesandAfricarangefrom10%to15%,to20%,5%to10%and0%to10%,respectively.SourceAuthorscomputationbasedonUNCTAD(2021a)AlthoughdatacomparabletotheUnitedNationsConferenceonTradeandDevelopment(UNCTAD)datainTable1arenotavailablebysourcecountry,availabledatafromtheEICcanhelpusinferthemajorFDIsourcecountriesforEthiopiaandthenatureofthatFDI.TheArabiaandTurkey.OthersignificantsourcecountriesincludeIndia,theNetherlandsandtheUK.Usingdatafor1992–2017,theshareofFDIstockfromChinainthetotalstockofFDIinEthiopiawas12%.ThisisfollowedbySaudiArabiaandTurkey,at5%each,andIndiaandChina/Ethiopiajointventures,at4%each.Theother15sourcecountries,includingtheUKandtheUSintheWestandSudanandEgyptinAfrica,hadashareoflessthan1%eachinthetotalstockofFDIinEthiopia(EIC,2015;Addis,2022).2ThestockofFDIdatausedforthis,whichisabout$10.45billionaccordingtotheUSDepartmentofStatein(aswellasinAddis,2022),bothofwhicharebasedonEICdata,issignificantlylowerthanthestockofFDIinEthiopiaof$22.5billionin2018and$27.35billionin2020,seenintheUNCTADdatainTable1.FDIisinvariablydestinedforthenaturalresourceintensivesector(Alemayehu,2019),FDIinEthiopiagoesprimarilytomanufacturing.Themanufacturingsectortookabout70%ofFDIstockbetween1992and2017(45%andstilltheleaderwhenmeasuredbythenumberofprojectstoo).ThisisfollowedbyFDIinconstructioncontracting,includingwaterwelldrilling(11.1%ofthestockofFDI),agriculture(8.6%)andrealestate,machineryandequipmentrental(6.4%)(EIC,2019;Addis,2022).Notwithstandingtheirrelativelysmallsize,recentFDIflowsareimpressive.ThiscanbeseeninbothTable1andFigure2.Figure2showsthatFDIinflowswerenegligiblebefore2013.TheaverageannualinflowofFDItoEthiopiawasjustabout$11millioninthe1970s,deceleratedtoanaverageannualfigureof$0.4millioninthe1980sandpickedupalittletoatabout$300millionuntil2012.In2013,itjumpedforthefirsttimetothe$1billionmark,about3%ofGDP.FDIinflowswerelowbefore2013despitetheliberalisationofvariouseconomicsectorstoforeigninvestorsintheearly1990s.Variousfactors,suchastheprotractedcivilwarinthecountrysincethe1970s,warwithneighbouringEritrea(1998–2000)andthe2005failedtheglobalfinancialandeconomiccrisisaswellastheineffectivenessofthecountry’sinvestmentpolicy(seebelow)couldalsoexplainthispoorperfor