Determinants of Food, Beverage and Tobacco FDI Inflow and Import for COMESA region with particular reference to Ethiopia

In a globalized world countries need to compete based on their competitive advantage to grip the pursuit of globalization so as to improve the quality of life by creating investors friendly environment for both domestic and foreign investors. For developing countries like countries in Africa, improving the competitive position in the global network is crucial since the domestic saving is hardly significant to use the comparative and competitive advantage. The research assesses the competitiveness of Ethiopia in attracting FBT sector investment with in Common Market for Eastern and Southern Africa (COMESA) region and the country’s dependency on import of these items. COMESA has 19 member states and it is endowed with abundant natural resources (labor and land). Despite this, most countries in the region categorized as net food importing countries, less attractive for FDI and the majority of their population live in poverty. According to literatures; network, location factors and production factors can determine import and competitiveness. When firms connected and integrated to the global economy through import and FDI, their productivity increases through the technological spillovers and competitions arise from the globally competitive firms. This intern influences the position of firms in attraction of FDI and import. Since MNCs motives in locating their firms and reasons for import are different; and determined by location and production factors identifying the key factor is crucial for improving quality of life a given country or region. In order to find the status, connectivity and position of COMESA member states in Food, Beverage and Tobacco (FBT) sector investment and import network, UCINET country to country network diagrams and charts were generated. These software packages also used to identify Ethiopia's competitors within COMESA network in attraction of FDI to FBT sector. In addition, to investigate the location and production factors that determine countries competitiveness in attracting FDI to FBT sector and import of FBT, the study employed six year balanced panel data analysis using STATA. The regression result demonstrated, market size, and health and primary education were the most significant location factor for attracting FBT sector FDI at global and regional level respectively. Regarding factors that affect FBT import; arable land per capita, availability of scientists and engineers, higher education and training, and goods market efficiency were the most significant factors that determined FBT import at global level. Intensity of local competition, quality of education, labor market efficiency and market size were the crucial factors that determined FBT import of COMESA region. The study also identified that, Ethiopia's main competitors with in COMESA network by investment number were Egypt, Kenya and Uganda. In terms of value of investment inflow Egypt was the only competitor of Ethiopia. Despite the rank, the amount of investment inflow to Ethiopia was far behind Egypt. Broad band internet subscription and GDP per capita were the most determining factors that make Ethiopia's competitors best destination for foreign investors with in COMESA region. Market size (both domestic and foreign) were highly significant factor in determining investors decision in FBT sector. This mostly because of the nature of FBT items; that most of the products are perishable. Accordingly, investors demand closest market for their products. For the sector innovation come out to be significant to affect import at global level. This could be the fact that 60% of globally imported FBT items during the periods were value added, which highly linked with innovation, research and development.