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Chinese Foreign Direct Investments in Ethiopia – The potential for development or a development trap?

Gebre Tensaye, Isabelle LU (2015) NEKH01 20152
Department of Economics
Abstract
In a progressively globalized world the catapults of economic globalization, is in large, due to increased flows of foreign direct investments (FDI) across the world. FDI flows are considered essential vehicles for economic growth and development. The complex entities that embody a multinational company (MNC ) are often simplified to encompass either an exploitation approach of LDCs by MNCs or the beneficial aspect of employment creation, capital and technology transfer as well as other valuables necessary for economic development when associated with FDI. As FDI has the potential to progressively boost economic growth and development, LDCs, including Ethiopia, are in constant competition for it. Consequently reforming government policies... (More)
In a progressively globalized world the catapults of economic globalization, is in large, due to increased flows of foreign direct investments (FDI) across the world. FDI flows are considered essential vehicles for economic growth and development. The complex entities that embody a multinational company (MNC ) are often simplified to encompass either an exploitation approach of LDCs by MNCs or the beneficial aspect of employment creation, capital and technology transfer as well as other valuables necessary for economic development when associated with FDI. As FDI has the potential to progressively boost economic growth and development, LDCs, including Ethiopia, are in constant competition for it. Consequently reforming government policies to attract MNC’s by lowering entry barriers and offering favourable investment climates in order to attain its benefits.
Principal trade partners in Sub-Saharan Africa have been firms from previous colonial rulers with the United Kingdom, France, Germany, Belgium, the Netherlands along with America that were at the forefront of commercial interests in the region. Nevertheless, economic cooperation between South-to-South countries have throughout the past decades deepened, causing conventional trade partners to experience severe competition. This is the case of China-in-Africa. Its longstanding relations with the African continent have in recent decades intensified, ascertaining Chinas steadily increasing level of trade, aid and investment flows in Africa. Trade volumes between China and Africa have escalated from one billion USD in 1980 to approximately 210 billion USD by 2013 (African Economic Outlook, 2015). Consequently establishing China as the single largest bilateral trade partner and foreign direct investor to the region. (African Statistical Yearbook, 2012; African Economic Outlook, 2015)
Ethiopia is one of the Sub-Saharan countries that have experienced significant economic growth the past decade, increasing its GDP by an average of 10.7 percent a year from 2004 to 2014 (UNCTAD, 2015). Chinese activities in the Ethiopian economy has followed the trend of African investments where it currently is the leading trade partner to the country. Regarding the fact that China itself is an emerging market economy with specific commercial interests in the African continent, it has given spur to a neo-colonial discussion of dependency and financial dominance of Chinese involvements in Africa. The discourse has been focusing on disproportionate gains from trade where China invests deeply into countries rich in natural resources such as; arable land, minerals and energy – all necessities for securing future growth for itself, through and by investments in these sectors. In light of these facts, this study examines if the Ethiopian economy has benefited from Chinese investment as trade with China is steadily increasing. (Less)
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author
Gebre Tensaye, Isabelle LU
supervisor
organization
course
NEKH01 20152
year
type
M2 - Bachelor Degree
subject
keywords
China, Ethiopia, foreign direct investment, economic growth, spill over effects, employment creation, technology transfers
language
English
id
8165727
date added to LUP
2015-11-06 15:35:54
date last changed
2015-11-06 15:35:54
@misc{8165727,
  abstract     = {In a progressively globalized world the catapults of economic globalization, is in large, due to increased flows of foreign direct investments (FDI) across the world. FDI flows are considered essential vehicles for economic growth and development. The complex entities that embody a multinational company (MNC ) are often simplified to encompass either an exploitation approach of LDCs by MNCs or the beneficial aspect of employment creation, capital and technology transfer as well as other valuables necessary for economic development when associated with FDI. As FDI has the potential to progressively boost economic growth and development, LDCs, including Ethiopia, are in constant competition for it. Consequently reforming government policies to attract MNC’s by lowering entry barriers and offering favourable investment climates in order to attain its benefits. 
Principal trade partners in Sub-Saharan Africa have been firms from previous colonial rulers with the United Kingdom, France, Germany, Belgium, the Netherlands along with America that were at the forefront of commercial interests in the region. Nevertheless, economic cooperation between South-to-South countries have throughout the past decades deepened, causing conventional trade partners to experience severe competition. This is the case of China-in-Africa. Its longstanding relations with the African continent have in recent decades intensified, ascertaining Chinas steadily increasing level of trade, aid and investment flows in Africa. Trade volumes between China and Africa have escalated from one billion USD in 1980 to approximately 210 billion USD by 2013 (African Economic Outlook, 2015). Consequently establishing China as the single largest bilateral trade partner and foreign direct investor to the region. (African Statistical Yearbook, 2012; African Economic Outlook, 2015) 
Ethiopia is one of the Sub-Saharan countries that have experienced significant economic growth the past decade, increasing its GDP by an average of 10.7 percent a year from 2004 to 2014 (UNCTAD, 2015). Chinese activities in the Ethiopian economy has followed the trend of African investments where it currently is the leading trade partner to the country. Regarding the fact that China itself is an emerging market economy with specific commercial interests in the African continent, it has given spur to a neo-colonial discussion of dependency and financial dominance of Chinese involvements in Africa. The discourse has been focusing on disproportionate gains from trade where China invests deeply into countries rich in natural resources such as; arable land, minerals and energy – all necessities for securing future growth for itself, through and by investments in these sectors. In light of these facts, this study examines if the Ethiopian economy has benefited from Chinese investment as trade with China is steadily increasing.},
  author       = {Gebre Tensaye, Isabelle},
  keyword      = {China,Ethiopia,foreign direct investment,economic growth,spill over effects,employment creation,technology transfers},
  language     = {eng},
  note         = {Student Paper},
  title        = {Chinese Foreign Direct Investments in Ethiopia – The potential for development or a development trap?},
  year         = {2015},
}