Chinese OFDI and Private Companies in Ethiopia - Industrialization and Employment Opportunities

Abstract: Over the past few years, there has been considerable academic interest in studying the relationship between China and Africa. This study aims to describe what effect Chinese outbound foreign direct (OFDI) investments and private companies have had on employment opportunities and industrialization in Ethiopia. The research question reads: What effect has Chinese outbound foreign direct investments and Chinese private companies had on employment opportunities and industrialization in Ethiopia? Ethiopia’s development and industrialization will be examined through HDI and GDP per capita from 2005 to 2012, and computed with the Chinese OFDI. The East Asian Trade-led Economic Development Model and the framework of New Structural Economic is used as theoretical tools to analyze the case of Ethiopia and its industrialization development. This research examines the Chinese-Ethiopian economic and political relationship, through a mixed method with qualitative case study on Ethiopia, and statistical evidence on the Chinese OFDI, private companies and created job-opportunities. The results show that there is no significant net effect in the Ethiopian employment-rates. The Labor Force Participation does not correlate with the fairly low Chinese OFDI. The HDI and GDP per capita have had an overall increase, which shows industrialization and development in Ethiopia, along with a decrease in poverty. The increase in HDI and GDP per capita correlates with the increase in Chinese FDI. However, as argued in the analysis, there can be several other factors that affect the HDI and GDP besides the Chinese OFDI.