Ethiopia last year beat Kenya as the largest recipient of foreign direct investment (FDI) in the East African region, raising fresh concerns in Nairobi about the fast-rising rival.
A report released by financial consulting firm EY titled the ‘EY Attractiveness Survey 2019’ released in September showed Ethiopia attracted foreign investments worth Sh726.6 billion last year compared to Kenya’s inflows which stood at Sh207.6 billion in the same period.
Tanzania attracted foreign investments of Sh103.8 billion.
The publication did not document FDI figures for Rwanda and Uganda. It, however, said the FDI to Kenya created 6,000 jobs last year from 64 unnamed projects. More jobs were created in Ethiopia at 16,000 from 29 projects.
In Tanzania, 3,000 jobs were created from 19 projects.
Amid ruffling of feathers in Nairobi among diplomatic circles, experts said Ethiopia is attracting higher foreign inflows than its regional peers, thanks to an “efficient” business environment and the lure of a huge untapped domestic market.
“Ethiopia has affordable electricity supply and is served by an efficient airline,” said Mr Francis Kamau, a tax partner at audit and consultancy EY East Africa.
“It also has a huge domestic market with guaranteed access to external markets through its well-served Special Economic Zones.”
Kenya’s FDI attraction is helped by its status as the region’s financial centre, and a hub for many multinationals doing business in the region.
Two of Kenya’s largest blue-chip companies, KCB Group and Safaricom, have continued to eye establishment of operations in neighbouring Ethiopia where reformist Prime Minister Abiy Ahmed is opening up the economy, creating an opportunity for foreign investors.
KCB said last year it is hoping to enter the market of 100 million people through a partnership with an Ethiopian bank or opening a fully-fledged subsidiary in the country, which has no foreign bank.