Karuturi to Borrow from Sovereign Fund After First Ethiopia Crop
Karuturi Global Ltd., the world’s largest rose grower, is a company based in Bangalore, India, has been investing in Ethiopia previously, through foreign direct investment in the form of investment in agriculture. In 2012, Karuturi produced 21,000 metric tons of corn that sold for about $6.5 million. This success has caused Karutari to borrow $100 million from a
sovereign wealth fund that it will use to invest in farming in Ethiopia, and some other East African nations, after its sells that first crop from the plantation in Ethiopia. The project plans to grow and process cereals, sugar, palm oil, and vegetables and is supported by senior Ethiopian officials.
An increase in foreign direct investment, the long-term investment by private multinational corporations (MNCs) in countries overseas, is depicted through the investment by Karutari in the building of new areas and facilities in Ethiopia for agriculture. The senior officials in Ethiopia support thisinvestment by the MNC Karuturi because they believe that it will benefit the economy. This is true because the investment by Karuturi injects foreign capital into the Ethiopian economy, which increases aggregate demand. Karuturi will demand things like fertilizer and tools for cultivating the crops that they plan to grow, increasing aggregate demand. Also, a positive advantage as a result of FDI that also contributes to increasing aggregate demand is that the MNC Karuturi will provide more opportunities for employment in Ethiopia. The hiring of new workers in Ethiopia increases the income of those workers, which increases their demand for other products. This, combined with the increased demand from Karuturi, shifts the aggregate demand curve from AD to AD1. As a result, real output will increase from YE
to Y1, and consequently economic growth will be stimulated, also seen as an increase in total output by the Ethiopian economy.
sovereign wealth fund that it will use to invest in farming in Ethiopia, and some other East African nations, after its sells that first crop from the plantation in Ethiopia. The project plans to grow and process cereals, sugar, palm oil, and vegetables and is supported by senior Ethiopian officials.
An increase in foreign direct investment, the long-term investment by private multinational corporations (MNCs) in countries overseas, is depicted through the investment by Karutari in the building of new areas and facilities in Ethiopia for agriculture. The senior officials in Ethiopia support thisinvestment by the MNC Karuturi because they believe that it will benefit the economy. This is true because the investment by Karuturi injects foreign capital into the Ethiopian economy, which increases aggregate demand. Karuturi will demand things like fertilizer and tools for cultivating the crops that they plan to grow, increasing aggregate demand. Also, a positive advantage as a result of FDI that also contributes to increasing aggregate demand is that the MNC Karuturi will provide more opportunities for employment in Ethiopia. The hiring of new workers in Ethiopia increases the income of those workers, which increases their demand for other products. This, combined with the increased demand from Karuturi, shifts the aggregate demand curve from AD to AD1. As a result, real output will increase from YE
to Y1, and consequently economic growth will be stimulated, also seen as an increase in total output by the Ethiopian economy.
An increase in total output to Y1 should increase economic growth. Also, increased employment and earnings could have a multiplier effect on the host economy, in this case Ethiopia, stimulating growth. Another consequent gain in revenue that can add to economic growth is that the Ethiopian government can gain extra tax revenue from the MNC. This growth can then be transferred into economic development through the use of the extra revenue to provide essential services, such as infrastructure, health, and education, all of which can be used to get Ethiopia out of the poverty trap and can build upon one another so that development continues to grow and increase.
Other ways that this FDI can contribute to economic growth is that in the future, Karutari could increase infrastructure, particularly around the area where it is growing crops and placing its investment. This would not only benefit the MNC by allowing them to export the crops more efficiently and at a smaller cost, but it will also allow Ethiopian farmers to gain use of that infrastructure, such as roads, and decrease their costs in the same way. This will increase their revenue and increase GDP, increasing economic growth, which can be used towards providing essential services, increasing economic development.
In terms of economic development, the MNC, Karutari, could in the future provide education and training. This will benefit workers because they can make
more informed decisions about numerous things, such as sanitation and diseases, which will hopefully increase their health and allow them to work more and send their children to school, increasing their standard of living and economic development.
A possible disadvantage associated with FDI is that if Karutari only invests short-term, they will have stripped that land of resources and left because planting crops uses up the natural resources in the soil. This would hurt profits in the future and therefore hurt economic growth and revenue that could be used for development in the future.
However, while MNCs like Karutari may have some negatives, overall they bring new opportunities and chances for growth and development.
Other ways that this FDI can contribute to economic growth is that in the future, Karutari could increase infrastructure, particularly around the area where it is growing crops and placing its investment. This would not only benefit the MNC by allowing them to export the crops more efficiently and at a smaller cost, but it will also allow Ethiopian farmers to gain use of that infrastructure, such as roads, and decrease their costs in the same way. This will increase their revenue and increase GDP, increasing economic growth, which can be used towards providing essential services, increasing economic development.
In terms of economic development, the MNC, Karutari, could in the future provide education and training. This will benefit workers because they can make
more informed decisions about numerous things, such as sanitation and diseases, which will hopefully increase their health and allow them to work more and send their children to school, increasing their standard of living and economic development.
A possible disadvantage associated with FDI is that if Karutari only invests short-term, they will have stripped that land of resources and left because planting crops uses up the natural resources in the soil. This would hurt profits in the future and therefore hurt economic growth and revenue that could be used for development in the future.
However, while MNCs like Karutari may have some negatives, overall they bring new opportunities and chances for growth and development.