After strongmen Meles Zenawi’s death, MNCs should invest time now in building relationships with influential politicians that could become the new head of state in 2015. Meles’ grip on power for the last two decades meant that business affairs were often dealt with at a personal level. He attracted FDI through personal relationships and resolved business disputes on a personal basis. Until Ethiopia transcends to a more liberal economy in the long term, personal contacts will continue to be crucial for doing business.
Meles’ economic policies combined a dominant state role with private investment by leading international and regional companies. He was responsible for the country’s rapid economic growth in recent years (8% in 2012). However, the ongoing reform agenda to liberalize the economy and privatize parastatals is likely to slow as political attention shifts to an internal power struggle as Meles’ autocratic leadership style prevented the emergence of a strong successor.
In the long term however, the implementation of economic reforms will accelerate. Ethiopia relies heavily on inbound flow of funds from donors (US$4 billion of aid annually) and investors (US$184 million in 2010). To guarantee the continued inflow of foreign direct investment, the new prime minister elected in 2015 is likely to continue many of Meles’ economic policies.
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