Increasing Agricultural Productivity:
Encouraging Foreign Direct Investments in the COMCEC Region
79
Source: Federal Investment Bureau of Ethiopia
Investment has come from a variety of sources, including the Netherlands, Denmark, India, and
the Arabian Gulf countries, with Saudi Arabia the largest source of agricultural FDI. 113 Major
investments announced, if not yet fully implemented, include plans by Saudi Star Agricultural
Development Plc, owned by Saudi/Ethiopian businessman Sheikh Mohammed Al-Amoudi, to
invest $2.5 billion by 2020 in a rice-farming project in the Western Gambella region. 114 Saudi
Star has already leased 10,000 hectares and plans to lease another 290,000 ha., 160,000 of
which have already been allocated. The project is intended to produce 1.5 million MT of rice per
year and, because of a deliberate strategy to avoid substantial mechanization, is expected to
employ 250,000 Ethiopians. The project is expected to export 60 percent of its production,
principally to Saudi Arabia.
Other large-scale projects include Karuturi Global Ltd. (KARG), an Indian food processor, which
in 2008 leased some 312,000 hectares, also in Gambella 115, and announced plans to invest up to
$4 billion to produce commodities including palm oil, sugar and rice. Another Indian firm,
Shapoorji Pallonji, in 2010 signed a deal to lease up to 50,000 ha. to cultivate pongamia
pinnata—a feedstock for biodiesel – while Indian firm Emami Biotech Pvt. Ltd. in 2009 signed a
deal to lease 40,000 ha. to cultivate jatropha, also for biodiesel production.116
Some evidence suggests that these FDI inflows have had a positive impact on agricultural
productivity and development of human capital in Ethiopia: “As the transmission mechanisms
[by which FDI influences growth and economic development] cannot be measured directly, the
development of the productivity of the agricultural sector and the development of human capital
(from 1995 to 2008) are regarded as proxies. Both have increased significantly since 2000,
113 Ethiopian News Agency (2013), “Minister stresses need to build Ethio-Saudi relation on firm foundation,” February 28,
2013.
114 Bloomberg (2011), “Saudi Billionaire's Company Will Invest $2.5 Billion in Ethiopia Rice Farm,” March 23, 2011.
115 Ibid
116 S. Paul (2010), “Shapoorji, Ethiopia ink 50,000ha land deal,” Hindustan Times & Wall Street Journal LiveMint, March 11,
2010.
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