2022 - Ethiopia FDI Policy Report - Policy Studies Institute National Graduate Institute for

A three-part strategy to enhance domestic capacity and generate FDI-local linkage To maximize the benefits of FDI and avoid the creation of foreign enclaves, a three- part strategy is essential: (i) strengthening domestic firms and labor so they are capable of working with and learning from FDI, (ii) proper FDI selection and attraction, and (iii) the creation of FDI-local firm linkage. [...] Chapters 3 and 4 delve into the impact of FDI on the nation’s balance of payments and the transfer of technology and management know-how. [...] Here, value or quality refers to such actions as the generation of gross or net export, the transfer of technology and management knowledge, the introduction of products or processes new to Ethiopia, upgrading of workers and engineers, procurement of domestic inputs and services, and assisting domestic firms to actively participate in global value chains. [...] The Balance of payments and the transfer of technology and managerial know-how (mainly ch.3&4, also ch.2) The two positive impacts expected of FDI are an improved balance of payments and accelerated transfer of technology and advanced management practices to domestic enterprises. [...] A review of existing literature and international experiences indicates that the impact of FDI on the balance of payments is ambiguous theoretically and empirically, and much depends on the country and the specific sector under study.