Impacts of foreign direct investment on domestic textile manufacturing industry (legal and practical analysis)

Abstract

Foreign Investment, either made by foreign investor or domestic investor, is very much necessary for the development of a country.. It is necessary for economic development of countries, especially for least developing countries, byfilling a gap that is created by lack of the capacity (such as technology, skilled labor, capital and access of global market). Domestic investors in developing states can also benefit from foreign direct investment through transfer of advanced technology, acquiring modern management system, generating investment capital and creating opportunity to get access in to global market. Of course, from conflicting theory offoreign direct investment and Federal Democratic Republic of Ethiopian Industry Development Strategy we can understand that as foreign direct investment has also its own negative effect on host state especially on infant domestic industries irrespective of its advantage. There for the host state (Ethiopia) should focus on the advantage of foreign direct investment by minimizing or eliminating if possible its negative effect. The researcher discuss the impacts of foreign direct investment on domestic textile manufacturing industry from the perspectives of expectation of Federal Democratic Republic of Ethiopian law and policy of by evaluating the practical aspects of foreign direct investment and domestic textile manufacturing industry in Ethiopia. The study find out that as there is much of positive impacts and some of negative impact. There is a gap of law that governs the effects of foreign direct investment in Ethiopia and transfer of technology. It also needs to minimize those effects by taking some regulatory and practical action.