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It is impossible for Ethiopia to stay separated from the rest of the world but foreign investment can either bring opportunity or challenges depending on the capacity of local businesses. Joining the World Trade Organization was at one time a distant idea but now it’s becoming a reality.
In addition to helping the country grow economically, investment can be the impetus for social change.
Double digit economic growth, political stability and increasing per capita income are attracting foreign investment into the country. Ethiopia can benefit a lot from foreign investments. Foreign currency flowing into the country, increasing productive capacity, job opportunities and transfer of skills are just some the ways locals benefit.
To get the most out of the opportunities Ethiopia took steps to build its economic muscle to take on the challenges of operating in the competitive global market.  Programs like AGOA (African Growth and Opportunity Act), a legislation approved by the US government in 2000 to help sub-Saharan Africa develop its economy while improving  its relationship with the US, and projects from the World Bank have been working to help local business and entrepreneurs improve their capacity. If the transition is not handled wisely our country will dissolve into the big ocean or the big ocean will overflood the small river. As is the case with many developing countries, Ethiopia will face many challenges when small businesses are forced to compete with large corporations.
Foreign companies already have a great deal of expertise and capital. Meanwhile many domestic businesses have not yet familiarized themselves with proper management practices. Local companies have also not fully transformed into the information age and have much less technology at their hands. For things to work out well the capacity of local businesses must increase dramatically in many ways.
Ethiopia has also finalized work to join the Eastern and Southern African Common Market (COMESA) free market area.
This is a good opportunity for some sectors of the industry that are increasingly looking for other markets and a bad one for another sector which is relatively weak when compared with similar sectors in other countries.
Competence of Ethiopian industries has been growing and the industries are in their stage of producing items meeting international standards. Ethiopia has also been making various arrangements bilateral agreements, sub-regional free markets like COMESA, and international markets through negotiations with WTO. Out of these, there are 16 bilateral trade agreements concluded by the nation with African, Asian, European and North American countries.
Under the Free Trade Area (FTA) a designated group of countries agree to eliminate tariffs, quotas and preferences on most (if not all) goods that they trade among themselves.
However recent research states that Ethiopian electrical and plastic product manufacturing industries will be affected severely if Ethiopia decides to eliminate tax completely on imports from COMESA member states.
The research paper, entitled ‘The Impact of Joining the COMESA FTA on The Ethiopian Economy: The Case of the Manufacturing Industry’ by Yasmin Wohabrebbi, states that Ethiopia will lose almost three percent of the total tariff revenue that would have been collected from trade with COMESA member states if it joins the COMESA Free Trade Area.
Nevertheless, the research further states “this policy measure will bring welfare gains to the consumers”. The research also suggests that the major sources of revenue loss and consumers’ gain will focus on manufacturing products. “This gradual liberalization will also bring a negative effect on textile and leather manufacturing industries but these two industries have the relative potential to withstand their competitors in the COMESA market unlike those of electrical and plastic manufacturing industries,” the report says.
Ethiopia has shown a lot of protectionism in its market which makes it unpopular with traders in many neighbouring countries and the wider Comesa area but its industries become more and more giant and competitive.