A STUDY ON IMPACTS OF INVESTMENT POLICY OF ETHIOPIA ON RURAL EMPLOYMENT WITH PARTICULAR REFERENCE TO FLORICULTURE INDUSTRY

Abstract

Ethiopia has passed through a lot of changes for the last two decades in terms of economic reforms where by several policy proclamations and provisions had been taken up by the government. Since May 1991, the climate for foreign investment has improved dramatically. Private investment policies are more liberal, commercial performance standards have been applied to public enterprises, tax and tariffs have been reformed, and the currency has been devalued. In 1996, a revised investment proclamation was approved that created additional incentives for foreign investors. Major provisions included duty-free entry of most capital goods and a cut in the capital gains tax from 40 to 10%. In addition, the government opened a number of previously closed sectors of the economy to foreign investment, although financial services, large-scale power production, telecommunications, and other public utilities remain off limits. This study assesses the policy measures taken up by the government and how it impacts investment flow to the country’s economy. Official figures indicate that as of from 1992 to 2011 out of a 55, 265 investment projects 6, foreign investors had been given licenses. In 1998, amendments to the 1996 investment proclamation allowed Ethiopian expatriates and permanent residents the ability to invest in industries that had previously been reserved for nationals only. The inflow of investment by domestic, foreign and public investors peaked in 2011 at $40billion. Investment projects launched between the period 2002 to 2011 creates job opportunity to 7.3million people of temporary and permanent employment. Floriculture industry is an agro industry activity that experienced a dramatic boom in Ethiopia since 1992, particularly following the economic reform and investment policy provisions by the government that creates conducive investment climate and more stable economic environment. Attempt has made and detailed analysis got due attention to assess the impact of the investment policy and how it opens up the door for the emergence of floriculture industry and its economic impact, rural job creation. Number of investment projects launched to undertake flower farming showed a sharp rise from 1992 where it reaches to peak at 351 in 2011 with highest number in 2008, in which 79 new flower farms are established. It creates a job opportunities for 386,074 personnel of both

skilled and unskilled labour for permanent and temporary employment during the mentioned period. This in turn resulted in improving the livelihood of the rural community where the flower farms are located. A total of USD184.1million foreign earning has been gained by the country in 2011 and it reaches to USD301million from 2000 to 2010. Furthermore, technology transfer and experience sharing from those expertises of other countries counts significantly and impacts the sector, undeniably, positively. Although the sector is contributing to country’s economy and being one of the sectors that contribute to the country’s foreign earning, there are some concerns from different groups on its environmental and social impact particularly health and safety of workers on flower firms. It should be taken as centre of discussion among all concerned parties to minimize the negative implications and support the sector to maximize country’s potential benefit from the industry.