| Abstract: | This study focuses on foreign direct investment (“FDI”) and its importance to the economy of Ethiopia. Recognizing that FDI, notwithstanding the type, can contribute to economic growth and development, most countries including Ethiopia are constantly working to attract it, and hence its demand has become highly competitive. However, FDI does not go without some negative effects, such as conflicts between host and investor country, and the creation of damaging competition to local firms. These negative effects could be minimized if policies and strategies for the promotion and attraction of FDI is part of, and integrated into, general economic development and economic reform policies, and not seen in isolation. Although Ethiopia has implemented strategies to attract more FDI, a refinement of some of these policies is needed if the country is to be successful in this regard. The general objective of this research project is to assess the trends of FDI inflows in Ethiopia and its contribution to economic growth from 1992 to 2013 G.C and so as to forward some achievable recommendations. Secondary data from the Federal Investment Bureau of Ethiopia, Ministry of Finance and Economic Development (MoFED) , World Bank and from other responsible institutions were collected and analyzed to get data and information on trends of FDI inflows and its contribution toward the economy of the country and Key Informant(KI) interviews from the federal investment agency of Ethiopia, from the Ministry of Finance and Economic Development, and from various beneficiaries were employed to assess the real contribution of FDI to the economic development. Explanatory and descriptive research methods where longitudinal data and information in the past twenty-one consecutive years from 1992 to 2013 was collected and analyzed, qualitative, quantitative and document reviews were used in the course of the study. The findings from this research showed that trends of FDI are increasing averagely at a rate of 0.8 from year to year which in turn increase capital inflows and employment. Manufacturing, Agricultural, and Real Estate sectors have showed the highest share of capital inflows via FDI. The majority of foreign direct investment share is taken by Oromia followed by Addis Ababa and Amhara, respectively. According to the findings from this study FDI inflows created a wider ranges of employment opportunities and has a significant positive contribution for the development of the country |
