SOCIO-ECONOMIC EFFECTS OF FOREIGN DIRECT INVESTMENT ON LOCAL COMMUNITY IN ETHIOPIA

Abstract

This study described socio-economic effects of foreign direct investment (FDI) on local community in Ethiopia focusing on two themes—labor and landholders. The study used both qualitative and quantitative methods. Qualitatively, the data were gathered from landholders, local elders and labors through semi structured interviews and focus group discussions. Quantitatively, sample of 120 participants was selected from landholders and labors purposively. The finding of this study revealed that FDI has both positive and negative effects on local labors. The positive effects are: creation of job opportunity; increment of real wage; transfer of knowledge and technology. In contrast, the negative effects are: wage difference between skilled labors, and absence of standardized rules and regulations to employ local labors. On the other hand, FDI has negative effect on landholders—inadequacy of compensation; absence of enough precondition to resettle the landholders; expropriation of landholders from their lands; loss of diversified mode of income and become dependent on only paid compensation; and addiction of youths to chat and alcohol. The researcher recommended that the landholders should be informed by neutral organization such as civil society organization about the investment, and adequate compensation should be paid for them.

Keywords

• FDI, Local Community, Social Effect, Economic Effect, Landholders