Determinants of Private Industrial Investment in Ethiopia
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Date
1997-05
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Publisher
A.A.U
Abstract
Despite the importance of private sector in economic development,
private industrial investment in Ethiopia has been encountered
with a number of serious problems and, as a result, its
development level remains low. These problems are related to lack
of demand, lack of credit, lack of technology, lack of inputs,
inappropriate policy, and lack of infrastructure. This study has
identified the root causes of these problems with their degree
of severity applying non-parametric techniques. This helps to
know how private manufacturing industrial owners and potential
investors perceive the impact of financial, regulatory,
technical, marketing and other constraints . The response of the
respondents indicates that these problems are a serious
constraints to undertake industrial investment and expansion. The
most severe problems to undertake industrial investment in
Ethiopia are related with credit and policy. The severity of the
problems which handicapped industrial investment are independent
of regional location of industries. Therefore, it is important
to policy makers to focus on solutions for common problems of
industrial expansion and investment in various regions. In order
to understand the partial effects of different factors
determining private industrial investment in Ethiopia, OLS
regressions for short -run model specifications are estimated for
the period 1970/71-1994/95 . The regression results indicates that
while the GDP, credit availability, government capital
expenditure and real interest rate had insignificant
contribution, the retained earnings (the industry's cash inflow)
has a significant role in private manufacturing investment
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Keywords
Determinants of Private, Ethiopia, Industrial Investment