Determinants of Foreign Direct Investment: Reflections from Ethiopia

Ethiopia was under command and closed economy system until 1991. The period 2001-2011 is characterized by the remarkable flow of foreign direct investment (FDI) to despite the fact that the rate of accumulation has slowed since the onset of the global crisis in 2008. The level in 2011 was almost five times the level in 2000. What was the reason for such a remarkable boost in FDI? Which factors contribute for the growth of FDI in the country? And what were the roles of the government in the achievement? This paper tries to seek data based explanations for these questions. Both secondary and primary data were applied to analyze the trend of FDI development in Ethiopia. The paper systematically reviewed and presented those factors evidenced as determinants for the flow of FDI. It also identified and explained those factors which are determining the flow of FDI in the context of Ethiopia. Massive supply of infrastructure such as electricity, road access, telecommunication and excellent airway in the country is directly associated with the recorded FDI growth. To this end, exerting efforts on improving the quantity, maintaining the quality of infrastructure, and enhancing good governance can have significant contribution for the enhancement of FDI which again have direct positive contribution for economic advancement.