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Ethiopia Losing Appeal for Foreign Investors as Attacks Spread

Ethiopia’s attraction as a favorite new destination for foreign investors is fast dissipating as businesses owned by Nigerian billionaire Aliko Dangote and Dutch flower growers come under attack in growing political unrest.

The government declared a six-month state of emergency Sunday to deal with protests by ethnic Oromo and Amhara communities that began 11 months ago over dispossession of their land, political marginalization and state repression. The security forces have killed about 700 people during the demonstrations, according to the Association for Human Rights in Ethiopia. The government says the attacks are being orchestrated by “foreign elements.”

Last year, investors had been touting Ethiopia as a hot new investment destination, lauding the way the government has ramped up infrastructure spending and embraced foreign capital to propel economic growth at the fastest pace on the continent. That appeal is losing its luster as the protests present the biggest challenge to Ethiopia’s ruling coalition since it gained power by force a quarter of a century ago.

‘Tacit Support’
“Foreign investors are viewed as parties to the regime’s development agenda and part of the wider international community’s tacit support for Ethiopia in spite of human rights transgressions,” Mark Bohlund, an economist with Bloomberg Intelligence in London, said by e-mail. “The attacks are likely to have a severe impact on foreign direct investment in the affected areas in the short term and prompt investors to suspend operations indefinitely until security has been restored.”

Dutch-owned Africa Juice BV was set alight last week by a crowd of hundreds in Oromia, the country’s most populous region, which has experienced fatal unrest since November. Another Dutch-owned business, Bishangari Lodge, was burned on Oct. 5. Then trucks belonging to Saudi billionaire Mohamed al-Amoudi’s Derba Cement and those of Dangote Cement Plc were damaged as demonstrators blocked roads and stoned vehicles.

Opponents of the government argue that Ethiopia’s economic gains haven’t been matched by increased political freedoms since the ruling party cracked down on the opposition in 2005, after losses in that year’s elections. Critics of the government’s human-rights record, including Amnesty International, cite the strict limits the state has imposed on independent media and its “pervasive violations” of civil political rights.

“The issues that need to be resolved are big, and investors will be wary as to whether the current government will be able to address them,” Jared Jeffrey, a political analyst at NKC Africa Economics, said by e-mail. “The longer it takes for the necessary reforms to be made the more fragile the state will become and the higher the risk to investors.”


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