Challenges and Opportunities of Private Investment, Case of South Wollo Zone

Abstract

Abstract This paper was designed to analyze the challenges and opportunities of private investment in South Wollo zone manufacturing firms perspectives. The paper contains five parts; part one about the introduction section comprising of background of the study, problem statement, objectives, significance, and scope of the study, part two empirical and theoretical literature, part three the research methodology, part four the analysis of data, and part five summary of major findings, conclusion, and recommendation. Both primary and secondary data was utilized for the accomplishment of the intended objectives. The secondary data focused on the macro economic factors those are perceived to affect the smooth functioning of private investment and show the future potential of the private investment section. The totals of 34 manufacturing firms are surveyed in the paper using census method. In the time series data 10 years data was utilized and the investment distribution by sector and by region was also analyzed. The findings of the study showed that the distribution of investment both by sector and region was not fair enough. The macro economic factors can determine the growth of the private investment including the expansion of public investment. According to the findings in this paper distribution of investment by region was dominated by Addis Ababa (69.7%), Oromia, Amhara, Dire dawa, and SNNP regions took the 2nd, 3rd, 4th, and the 5th ranks. The distribution by sector showed that rent, real estate, and business activities takes the highest investment with about 61.3% and Hotel and restaurant takes the lowest portion of investment with about 3% and the manufacturing sector takes the second rank with not more than 14.3% but in terms of approved project capitals the manufacturing takes the largest portion with about 31.6%. Lack of demand, getting credit, higher level of interest, infrastructure are among the major obstacles for private investment. Moreover the uncertainty variables can highly affect the investment sector. Demand uncertainty, interest rate uncertainty, and foreign exchange rate uncertainty variables are the major factors those affect the private investment sector. Macro-economic variables and the expansion of public investment affect the expansion of the private investment as the finding showed in this paper.