WERABE UNIVERSITY

College of Agriculture and Natural Resource

Department of Agricultural Economics

The Challenge and Opportunity of Private Investment in Case of Hulbareg

District, Silte Zone, Ethiopia

BY
Senait Tefera

Advisor: Nassir M. (MSc)

Submitted to the Department of Agricultural Economics, College of

Agriculture and Natural Resource, Werabe University
In Partial Fulfillment of the Requirement for the course of senior research
project

April, 2024
WERABE, Ethiopia

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 ACKNOLOGMENT

First of all, I would like to thank the Almighty God for His endless protection and adoration.
Next to God a number of people have contributed to the completion of this research without
which its completion would not have been possible. I am highly grateful to my Advisor Nassir
M. (MSc) for his invaluable advice and guidance throughout the research work. We sincerely
thank for his advice and guidance in all areas of this research, from reviewing the original
proposal, editing the survey questionnaires, and reading and commenting on the draft submitted
research. Next to our advisor, we want to express our best thanks to our parents for the
encouragement and support money to us. Last but not least, we would like to thank all our close
friends and relatives who stood by us in providing computer

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 ACRONYMS AND ABBREVITON

GDP Growth Domestic Product

LDC Least Developed Country

GTP Growth Transportation Plan

MOFED Ministry of Finance Education Development

EIA Ethiopian Investment Agency

RIO Regional Investment Office

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 ABSTRACT
In Ethiopia, regional distribution of investment is totally unbalanced despite the clearly stated
objectives of the government to remove regional imbalance in the economic growth. Like other
regions, investment productivity in Central Ethiopia region, specifically Hulbareg district
underutilized in spite of the license given for investor’s .Therefore this study is attempted to
identify the major problem affecting the growth of private investment in the Hulbareg District,
Silte Zone, Ethiopia. In general the implication of this study is that private investment in the
Hulbareg district and the problems that associated with its activities and their possible solutions
by analyzing the data obtained from both primary and secondary sources regarding to this zone
through descriptive method of data analysis. Econometric methods of data analysis involving
logit model were used to analyze the problem affecting the growth of private investment in
Hulbareg distinct. The major problem of private investors in Hulbareg distinct were access to
infrastructure, land size, level of education, source of investment fund, access to inadequate
credit and source of raw material. Thus, the government has to take measures to promote private
investment at national as well as at regional levels. This could be done by establishing a true,
independent and efficient institution so as to create access to credit, access to land and provide
infrastructure facilities to the private sector. This would help in creating conducive investment
policies and promote the private sector in the development Activities.

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 TABLE OF CONTENT

Table of Contents
ACKNOLOGMENT____________________________________________________________i
ACRONYMS AND ABBREVITON_______________________________________________ii
ABSTRACT__________________________________________________________________iii
TABLE OF CONTENT________________________________________________________iv
LIST OF TABLES_____________________________________________________________vi
CHAPTER ONE_______________________________________________________________7
1. INTRODUTION_____________________________________________________________7
1.1. Background of the Study___________________________________________________________7
1.2. Statement of the Problem_________________________________________________________8
1.3. Research questions_______________________________________________________________8
1.4. Objective of the Study____________________________________________________________9
1.4.2 specific objectives_______________________________________________________________9
1.4. Hypotheses to be tested___________________________________________________________9
1.5. Significance of the Study___________________________________________________________9
1.6. Scope of the Study (Delimitations)__________________________________________________10
1.7. Limitations of the Study__________________________________________________________10
CHAPTER TWO_____________________________________________________________________11
2. LITERATURE REVIEW______________________________________________________________11
2.1. Concept and Definition of Investment_______________________________________________11
2.2. Investment Theory (modern)______________________________________________________11
2.3. Keynesian Theory of Investment___________________________________________________12
2.4 Accelerate Theory of Investment___________________________________________________12
2.5. Classical Theories of Investment___________________________________________________13
2.6. Neoclassical Theory of Investment_________________________________________________13
2.7. Saving, Investment and Economic Growth___________________________________________13
2.8. Investment and Employment______________________________________________________14
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 2.9. Factors That Enhance private Investment____________________________________________14
2.9.1. Good Investment Climate______________________________________________14
2.9.2. Investment finance___________________________________________________14
2.9.3 .Adequate Infrastructural Service_______________________________________14
2.9.4. Access to Land_______________________________________________________15
2.9.5. Problems of private Investment in Ethiopia_______________________________15
2.9.6. Opportunity of Private Investment______________________________________16
2.9.6.3. Opportunities in the Mining Sector____________________________________17
2.3. Conceptual (Theoretical) Framework________________________________________________20
CHAPTER THREE___________________________________________________________22
3.1. Description of the study area______________________________________________________22
3.2. Data Type, Source and Methods Of Collection________________________________________22
3.3. Sample Size and Sampling Methods_________________________________________________22
3.4. Methods of Data Analysis_________________________________________________________23
3.4.1. Descriptive Analysis__________________________________________________23
3.4.2. Specification of Econometrics Model____________________________________23
3.4.3. Defination of variable and Working Hypothesis___________________________25
CHAPTER FOUR____________________________________________________________28
4. RESULT AND DISCATION__________________________________________________28
4.1. Description of continuous variables___________________________________________28
4.2. Challenge and Opportunity of Private Investment_____________________________________32
4.2.1. Challenge :__________________________________________________________32
4.2.3. Opportunity:________________________________________________________32
4.3. Econometric Model Results_______________________________________________________33
CHAPTER FIVE_____________________________________________________________35
5. CONCIUSIN AND RECOMENDETION_______________________________________35
5.1. CONCLUSION___________________________________________________________________35
5.2. RECOMMENDATION_____________________________________________________________35
6. REFERENCES_____________________________________________________________37
7. APPENDIX________________________________________________________________38

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 LIST OF TABLES
Table 1. Proportionate sample distribution in selected each Keble’s 23

Table 2 of definition, measurement of explanatory variables and expected effects 27

Table 3.Descriptive statistics of sample households (for continuous variables) 28

Table 5.Estimation results of the logit model 33

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 CHAPTER ONE

1. INTRODUTION

1.1. Background of the Study

Investment is the change in the capital stock over a period of time. Importance of investment lies
in the fact that a rise in the capital stock of an economy may increase its productive capacity and
potential for economic growth. Capital is one of a number of factors of production together with
labor and raw materials that contribute to production. Investment is a major route through which
technical progress can be made (Hirschman, 2001). Investment has great contribution in the
attempt to bring rapid and sustainable growth in a country. It has potential of achieving required
economic targets (Hirschman, 2001).
Most of investment opportunities and problems prevailing at national level directly or indirectly
prevail at regional level. Hence, Central Ethiopian region being one of regional states of the
country has been enjoying the benefits of encouraging investment policies under the current
regime and had also been suffering from most of the obstacles of investment (OIC, 2006).
Until few years ago, investment activities in the zone had been almost non-existing under the
previous regime except, some limited public investments and the participation of private
investors had been almost negligible. Even before the establishment of investment official of the
zone, private investors had to contact the investment authority at the federal to get investment
license and necessary guidelines. However, recently the number of investors had increasing
though their performance is not the level (OIC, 2006) needed. The soil and climate document of
the Silte zone are suitable for production of different types of crop and livestock rising.
However, the performance of investment activities in the town is not satisfactory. There are no
much investment projects. Even the existing investment projects are unevenly distributed silt
zone investment office, 2007).Private investment plays a great role in country’s development
especially, in developing countries whose capital is scarce and their government lacks enough
capacity to cover all constraints and bring economic change for development. Thus, if private
investment involved in investment, gross domestic product (GDP) country will increase.
Rapid and sustained growth is facilitated by virtuous circle whereby entrepreneurship and
investment leads to higher productivity, making possible to invest large sums in future. In case of
this process, job is created and new technology is introduced, especially through international
trade and investment linkages. The private investment is the main engine of growth in market
economies. It thrives and delivers sustained growth when number of factors combines to produce

7
conductive environment for the private sectors to develop. Private investment is crucial pre-
requisite for economic growth because it allows entrepreneurs to set economic activity in motion
by bringing resources together to produce goods and services.

The Ethiopian Investment Agency (EIA) and Regional Investment Offices (RIO) licensed some
56,421 investment projects with an aggregate capital of Birr1.1 trillion during 1992/93-
2010/11.Out of these projects 84.1 percent were domestic, 15.7 percent foreign, and 0.2 percent
public investment. In terms of capital, 39.4 percent was attributed to domestic investors, 35.4
percent to foreign investors and 25.2 percent to the public sector (NBE, Annual report,
2010/11).The resilience of the Ethiopian economy is projected to continue through 2011/12 and
show 11.0 percent growth compared to 5.5 percent for sub-Saharan Africa and 4.4 percent for the
entire world.

1.2. Statement of the Problem

Investment is essential macroeconomic activity which plays a great role in a process of
development and growth. It gives the way for large scale production, technical progress,
increasing specialization, wide market efficiency, employment creation and etc. Investment has
got particular attention among researchers and policy makers in 1990. Many economic policies
and theories have been formulated and implemented emphasizing on the importance of capital
accumulation for economic growth (Hirschman, 2001. However, this does not mean that all of
the certified projects in the region have been successfully accomplished. Had this project been
fully and properly undertaken, then they would create high opportunity for the mass, satisfied the
needs and desires of society by making available the required goods and services, and would
have contributed to economic growth and development (OIC,silt zone is one of the zones in the
centeral Ethiopia region. The investment activities in the zone are not being performed well. It
has potential for investment in agricultural and services sectors. It is endowed with suitable
climate and soil. But, investment activities in the zone are at its lowest level (centeral Ethiopia
zone investment office, 2007), therefore, this study tries to analyze factors that challenges
investment activities in Habru distinct.

1.3. Research questions

The study were addresses the following research questions
• What was be the major challenge of investment activities in the Hulbareg distinct?
• What was the role of investment in creating job opportunity in the Hulbareg distinct?
• What was share of government, people and invertors in addressing investment problems?

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1.4. Objective of the Study

1.4.1. General Objective

The primary objective of the study is to analyze the challenges and opportunities of private
investment in Hulbareg district in Silte Zones of the four towns in Central ethiopia region
between the years 2004/5 and 2014/15. For this purpose, the researcher was used both time series
and cross sectional analysis. The cross-sectional analysis was used to determine whether the
factors identified in the time series analysis are still constraints to private investment.

1.4.2 specific objectives

The specific objectives of the study were:
1. To identify the challenge and opportunity of private investment in the study area.
2. To identify factors for low investment activities in the study area
3. To identify factors government, people and invertors in addressing investment problems?

1.4. Hypotheses to be tested

The following specific hypotheses were tested:
 Macroeconomic and political instability have inhibited private investment.
 Lack of a financial system oriented towards business has been a constraint to private
investment.
 Public investment crowds in/out private investment.

1.5. Significance of the Study

This study will be important to the growth of investment sector in particular and the Economic
growth in Ethiopia in general by providing recommendable solutions those mitigate the obstacles
in private investment and providing conducive investment theories and models important for the

country’s policy makers and governors because the government support the prospects of private

sector in the country irrespective of the determinants of private investment behavior in each
region. In addition to the above described significance, it will also help private investors (both
existing and potential), the government in providing the needs and interest of both parties each
other, and the society in general for the contribution of knowledge, material and other factors
important for the growth of private investment. Furthermore, the results of this study will be used
as a reference for further investigations by showing the important gaps those need more and deep
study for academicians and researchers including students.

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1.6. Scope of the Study (Delimitations)
This study was bounded to cover the medium and large scale Manufacturing Industry Investment
Hulbareg district and Silte Zones of four towns in Central Ethiopia region.

These regions were account for massive investment activity in the area according to the Central
Statistical Agency. The subjective scope of the study will be limited to analyze the time series
data related with economic growth indicators (e.g. growth rate of GDP, internal funds, etc) and
cross sectional analysis related with firm characteristics, perceptions about the economy and
business environment, production and sales pattern and so on and their impact on manufacturing
industries.

1.7. Limitations of the Study

In this study the researcher feared that there may be two main limitations. The first one is related
with the problem of representation to draw inference at national level. This was be the gap for
further study in a wide survey at the national level that can investigate every investor. The other
pitfalls may be related with respondent’s willingness and transparency to disclose accurate
and relevant information and filling the questionnaire papers and returning it on time due to little
concern or know-how on the benefit of such investigations.

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CHAPTER TWO

2. LITERATURE REVIEW

2.1. Concept and Definition of Investment

Many economists define and interpret investment in various ways. They use the word capitals,
capital accumulation and capital formation interchangeably with the investment.
Todaro (2015) define it as, investment is the part of national expenditure devoted to the
production of capital goods over a period of time according to the actor, capital accumulation
occurs when some proportions of present income is saved and invested to augment future output
income, new factories, machineries, equipment and materials increases the physical capital stock
of nation and make it possible for expanding output levels to be achieved. These directly
productive investment are supplemented by investment in what is known as social and economic
infrastructures, roads, electric, water and sanitation, communications and the like which facilitate
and integrate economic activity. Herfert (2017) has defined investment as a fixed and initial
operating resource used for production of goods, provision of service and the development of
science and technology capacity. According to Dornbush and fisher (2014) investment also
defined as it is a follow of spending that adds to physical stock of capital leaving human and
financial capital a side. Capital is a stock, whereas investment is a flow .Investment is also
categorized in to three components: Business fixed investment:-a business a spending on
machinery and structure such as factories, residential investment consisting of investment in
housing and inventory investment, consisting of additions to the stock of inventories (Mankiw,
2020).Once individual receives income, there like two exist two option:- to spend it or to save it.
Irrespective of using your own income investment can be defined as postponed consumption
(Stephen sears, 2013). Individuals may postpone their current consumption to accumulate for the
sake of accumulating. For any or all of these reasons individuals save their part of income rather
than spend all of their income.
This shows that investment depend on saved. Income, but the extent may depend on the level of
consumption.

2.2. Investment Theory (modern)

The modern theory of investment was developed since 1930’s either macro oriented, based on
international trade theory or micro oriented, based on industrial organizations theory (Tiany,
2015). The former includes the general theory (Keynes,) and the acceleratory theory. The latter
includes the industrial organization theory (Hymer, 2015). Participatory theory (Brained and
Tobin, 2012) and electric theory (Dunnin, 2017).
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2.3. Keynesian Theory of Investment
The theory of investment behavior goes back to Keynesian (2012) General theory who first
called attention to existence of an independent investment decision function in the economy. He
observed that investment depends on the prospective marginal efficiency of capital relative to
some interest rate that is reflective of the opportunity cost of investment fund. He further there
pointed out that because the rational assessment is volatile. He described this volatility of
expectation by saying that investment decision depends on the private investors or entrepreneurs’
optimism or pressurizing about the future, (serven L and Andres soliano, 2009).
Investment theory has remained one of the unsettled issues of economy. Keynes for example,
understand that investment depend on the future marginal return to the cost of investing funds.
However, he also pointed out the importance of human instincts in investment decision making,
owing to intractable problems surrounding the computation of future returns to investment in the
world of uncertainty.

2.4 Accelerate Theory of Investment

The accelerator theory postulated linear relationship between investment and output. According
to this theory, given an investment requirement associated with a given target for output growth.
that means a change in the rate of growth of income produced a magnified change in investment.
As in come falls, investment falls quite significantly and arise in income result in arise an
absolute level of investment (Dornbush and Fisher, 2014)
In 1950 and 1960 the accelerators theory investment postulated a linear relationship
betweeinvestment and output become popular. According to this theory, the investment
requirement for certain desired target of output growth is computed from a given incremental
capital output ratio. However, this model disregards the importance of expectations profitability
and cost capital to a forward looking of nature of investment.
Creating and improving the investment climate is a top priority for the modern world particularly
for the development of African countries because investment is considered as an engine of
economic growth and even poverty reduction in the long run. These tasks of attracting desirable
investment for Africa countries are dispensable and should be pursued. Such type of investment
leads not only to a simple growth, but also creates a sustainable jobs and opportunity for citizens,
in this broadest context, investment provides the mechanism needed to finance the growth and
development of any economy (Gitman and Jolelak, 2010). But what happened to many African
countries is that they have drained their exchange and cost their financial a budgetary charm in
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such a way that they can neither invests for their state business neither centers nor spend for the
welfare of the people. The best alterative may be to attract private investment.
The investment climate can be achieved through different means. Among all, privatization
plays an important role either directly or indirectly. Privatization gives a dual effect to the
investment climate.
• They sales proceeds used as private investment and revenue to government.
• Privatization process creates a favorable condition for attracting investment during its
operation. Such favorable conditions include the development of local markets,
regulatory environment and liberalization of markets (Gitman and Jolelank, 2010).

2.5. Classical Theories of Investment

The classical school argued that capitalist make investment because capitalist make profit in the
depends on what profit are now. For example, Adam smith in his book “ the wealth of nation “
elaborated this fact by arguing that, investment were made because the capital expected to earn
profit on invested future capital depending up on the present climate of investment as well as
actual profit. However, the rate of profit tends to full with economic progress, accumulated
increase completion among capitalist, raise wages and tends to lower when the rate of which
capital profit and hence investment (Jhingon, 2018).

2.6. Neoclassical Theory of Investment

For the neoclassical theories, the marginal benefit of investment can be represented as addition to
future expected output that will be accrued, with investment capital stock; the marginal cost can
be r1epresented by the cost associated with buying and renting an additional unit of capital. The
desired level of capital is positively related to the rented cost of capital which is in turn depend
on real interest rate. (Dornush, 2014).

2.7. Saving, Investment and Economic Growth

Investment depends on saving. Saving drives growth through an automatic translation of saving
to growth and enhancing investment. If capital accumulation is needed as the engine of growth,
understanding the interaction between saving recipe that rising saving is the major way to
increase growth. A nation that implicitly required that each country’s extra saving be
automatically translated in to higher domestic investment (soliman, 2016).

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Investment is the most volatile component of GDP. GDP=C+I+G+NX, where, C=consumption,
I= Investment, G= Government expenditure, NX= Net export.
Hence, when expenditure on goods and service falls during recession much of the decline is
usually due to a drop in investment spending (Mankiw, 2010). Investment has significant
contribution in the process of economic development of nation.

2.8. Investment and Employment

Keynes argues that intervention is important in minimizing the problem of unemployment. He
proposed that aggregate demand is the sum of consumer spending, investment, government
expenditure export. Hence, the dynamic forces to minimize the problem of unemployment are
private investment and government expenditure (Mankiw, 2000)
By providing educational opportunities for the people in LDCs, it is possible to enhance capital
formation and expanding employment opportunities. Hence, what can be inferred from the
analysis of Keynes (1996) is that investment in educational sector has the potential of raising the
employment level in particularly LDCs. That is investment in human capital promotes the
expansion of employment through capital accumulate

2.9. Factors That Enhance private Investment

2.9.1. Good Investment Climate

Expansion of private investment requires peace and macroeconomic stability. The former is the
key factor for private investment attraction and sustained economic development productive
capacity. They also need to have conditions where contractor and property are respected
(Mankiw, 2000).

2.9.2. Investment finance

The availability of financial management, transparency, efficiencies and equitability of access is
the key factor to enhance private sector development. Efficient management or investment
finance concerns both the financial institution and private sectors operators who use resource for
business development.

2.9.3 .Adequate Infrastructural Service

The provision of good quality of infrastructure service particularly telecommunication, electrical,
water and logistics is essential for the efficient operation of investment.

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2.9.4. Access to Land
Land is an important input for investors so to implement their project .Since it is a fixed asset
and it is not possible to increase supply, government should adopt sound policy such as
establishing land lease policy and establishing industrial zone that helps to improve land
provision process to investors (MOFED, 2002).

2.9.5. Problems of private Investment in Ethiopia

2.9.5.1. Low Level of Saving

The investment and saving determinants can be drawn from empirical literature on investment
behavior with appropriate consideration of the structural feature of an economy. Economic
investment necessitates a corresponding level of saving mobilization either domestic or external.
However, in Ethiopian context, the level of domestic saving necessary for the level of investment
is very low. Hence, owning to the reform program the private sector activity in industry, trade,
and transport have improved considerable, all of which owning to the removal of measure
distortion and re orientation in the incentive structure of the economy in favor of tradable and
private goods.

2.9.5.2. Inaccessibility to Credit

The main source of fund for investment is loans financial institutions. But, the development of
these institutions are not well and adequately available in the country, on the other hand, relative
high collateral requirement suppresses the incentive of investors (MOFED, 2002).

2.9.5.3. Lack of Infrastructural Facilities

The existing development of infrastructure in Ethiopia sustains new economic activities are not
adequate. The availability of road, electricity, water and telecommunications are not sufficient
(MOFED,).

2.9.5.4.Absence of Effective Demand

Because of low living condition in the country and low income of the society, the demand for
new technology and modern product is low which kill the intention of investors to invest in some
new business area (MOFED, 2002)

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2.9.5.5. Regulatory Constraint
The main reason explained among other by investors are :it is almost impossible to transfer
ownership in acceptable period and this prevents investors from obtaining assets loan from bank,
requirement of asset be in the name of borrowers before taking its collateral .
As there are no enough competent worker in administration, it is impossible to start operating
quickly even it takes a lot of know how what kinds of activities can be performed in an identified
site according to the master of the city (MOFED ,2002).

2.9.6. Opportunity of Private Investment

2.9.6.1..Opportunity of Private Investment in Agriculture Sector

The ultimate goal of the government of Ethiopia is to achieve rapid and sustainable growth by
taking aggressive measures on industrialization and structural transformation. This implies
the nation has an ambition to reduce the share of agriculture and to increase the role of industry
in the national economy.

The agriculture sector in turn will be matured by the government to supply sufficient appropriate
input to the industries. Therefore this national goal the private investment is expected to play
enormous role in agriculture sector.

The opportunities given in the private agriculture sector are

Input in floriculture, commercial farming in low land area, high value horticulture product in
high land close to major city, will encourage to contribute in crop and livestock production both
in commercial and small holder farming system (.national planning commition 2018)

2.9.6.2. Opportunities in the Industrial Sector

During GTP , the main strategic direction of the industrial sector will development of micro and
small enterprises, as they are believed to be a spring board for the growth and development of
private sector investment in general and large and medium manufacturing enterprises in
particular(MOFED 2010). However, in the second growth and transformation plan the
major strategic directions of the government are to establish light manufacturing industries,
which are labor intensive and benefiting citizens, globally competitive and leading in
Africa and environment friendly; to establish the foundation, which enables to create an
industrialized country by moving into the development of strategic heavy industries
(National Planning Commission 2018).

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Op opportunities given to private investment in industrial sector are

1. Micro and small enterprise, it gives private investment in available in growth transportation
plan, the focuses of the government will be to words attracting quality investment, enhancing
product.

2. large and medium enterprise, such us textile and garment, leather and leather products, sugar
cement ,metal, sugar related industry, engineering chemical and agro processing industries. it
give productivity, boosting exportshare,acceletating technological learning and strength linkage
among industry.

3. Private investment also encourages using the facilities developed in industrial park. With
regarding to industrial park development the private investment will have better opportunity in
growth transportation plan.

4. Creat productive joint venture with the government.

government will give due attention to words the transportation of domestic investor from
trade( national planning commission ,2018)

2.9.6.3. Opportunities in the Mining Sector

During the first growth and transformation plan, the main focus of the government was to create

favorable environment for private investors for exploration and development of mineral
resources(M. Among the various government initiatives that were aimed to support the private
sector include: undertaking collection, analysis and interpretation of geo-science
information for potential investors. Broadly speaking, the main strategic direction of the mining
sector during GTP I was creating institutional and regulatory frame work that develop favorable
environment for the private sector to contribute towards the development of the mining sector.

Investment opportunities given to private investors in the mining sector are Exploration and
development of mineral resource. all mining investment areas give to the privateInvestmenduring
the second grow transportation plan Mineral and petroleum investment expansion.

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2.9.6.4. Opportunities in Infrastructure Development

The overall strategic directions of infrastructure sector during the second growth and
transformation plan are ensuring infrastructure that supports rapid economic growth and
structural transformation, creating mass employment opportunity, creating an institution having
strong implementation capacity, ensuring public participation and benefit, constructing
decentralized infrastructure development system, solving financial constraints, ensuring fairness
and profitability and ensuring integrated planning and administration of infrastructure

Development ( National Planning Commission 2018).

Opportunities provided to private investment in the country's infrastructure development are

Road investment. Private micro and small contractors as well as large and medium construction
companies can engage in rural and urban road contraction. Telecommunication .micro and small
enterprise has been involved in the cons traction of telecom infrastructure like cons traction of
network and related facility.

Transport services. There will a plan to increase the capacity and role of private investment in
transport service provision.

2.9.6.5. Empirical Literature Review

.A study by fry (2000) on developing countries for the period 1989-1999 indicates a significant
relationship between the growth rate of GDP and private investments. This is because as Fry, as
GDP increases, income also increases and causes the domestic market to rise. The decline in
GDP decreases market demand and this low level of market demand is the major constraint for
private investment in developing countries.

The other crucial factor affecting private investment in LDC there is insufficient infrastructure.
The provision of infrastructure primarily depends on government investment.
The other important factor which influences private investment is interest rates. As indicates in
theoretical review of literature many people argue that private investment and interest rate are
negatively relate

18
High domestic inflation rate, proxy of macroeconomic instability, will have a negative effect in
the development of private investment .many developing countries suffer from high,
unpredictable inflation and price variability ‘
The other factor which limit private sector involvement are financial constraints, uncertainty,
information constraints and political and administration problems. But, from above constraints
the financial constraints is considered as the most barriers to private investors ..
There were no studies regarding private investment and factor determining in Ethiopia before the
launching of the 1992 economic reform. Because of political and ideological reason the
importance of private investment was intentionally undermine by the previous regime.
At that period not only politician but also academics have lost interest in the private sector. It
was assumed that public enterprise would play very important role interims of contribution to
output, investment and employment .but after the launching of economic reform in 1992,
academic interest in private sector investment began to emerge. Although the period is too short
to allow in depth studies and analysis, some general views exist among academic as to how
private sector behave in Ethiopia.
The concern is mainly with whether the components of the policy package introduced by the
economic reform program are appropriate or not for the development of a good private section.

Note that, in to days globally competitive business environment, infrastructure is a critical

factor .lack of adequate and efficient infrastructure i.e. transport, power , and
telecommunication ,means not only high transportation cost for those that are already in business
affecting their competitions ,but could also be serious barriers to entry for few business.
Inadequate or poor railway in country implies limited access to natural resources and potential
markets .similarly unreliable electric power supply ,particularly in production activities could
result not only in loss revenue but also loss of market .also ,the loss of business of poor
telecommunication ranges from loss of a potential business (contracts which are never pursed
due to lack of information ) to a real loss associated with loss of customers owing to orders
missed or late shipments(Berhanu ,2002).
Economic reforms must be credible, maintained for long term investment particularly in areas
such as infrastructure, large scale manufacturing etc. investors must be confident that the rules
are clear, defensible and will not change frequently. the lack of resoluteness on controversial
policies, such as the land policy in Ethiopia, not only creates a wait and see attitude on the part of
investors, but also spends a negative signal generating suspicion on the continuity of other

19
policies .any policy ambiguity ,particularly related to critical factors carry major risks there by
keeping investors at bay (ibid

2.3. Conceptual (Theoretical) Framework

According to Yaw (2000), private investment depends on three broad categories of variables.
The first one is the Keynesian model that described it as “the growth rate of GDP, internal funds
(e.g. change in credit to the private sector, and capacity utilization) can affect private investmen
and shown in the following equation: I = δ (K*- K1), where, I = net investment, K*= desired
capital stock, K = last period’s capital stock and δ = partial adjustment coefficient. The
second model shows that (neoclassical) private investment can be determined by the ratio of
market value of existing capital stock to its replacement cost, real interest rate, user cost of
capital, and public investment ratio. Finally, there are uncertainty variables that can affect private
investment. This include the variability of user cost of capital, real exchange rate, inflation rate,
distortions in FX market (peroxided by the black market premium), real GDP, and the debt to
GDP ratio, and debt service as a ratio of exports of goods and services. The relationship between
the dependent and Independent Variables is depicted with the diagram below.

Private Investment
Decisions of
Manufacturing
Industries

Growth rate of Uncertainty variables:

GDP
Variation in user
Internal Funds
cost of capital,
Capacity
utilization Real exchange rate
Inflationrate…ETC.

Real interest Rate

User cost of capital
Public investment
rati

20
 CHAPTER THREE
3. METHODOLOGY
3.1. Description of the study area
The demonstration was conducted in Hulbareg district in Central Ethiopian region. This woreda
is named after the sub-group of the Silte people parte of the Silte zone. the town has a latitude
and longitude of 8° 1N 38°20E with an elevation of 2,113meters above sea level. the distance
between Addis Ababa to Werabe is 182km.The climate of the area is hot humid and
characterized by unimodal rainfall pattern with high and torrential rainfall that exceeds from
May to October. The main production system in the study area is agriculture on the production
of cereals (such as sorghum and teff), fruits and vegetables .In addition to farming; they are
engaged in small scale farmers to receive additional income

3.2. Data Type, Source and Methods of Collection

Both primary and secondary data will used in this primary cross sectional data will obtain from
the sample households. Secondary data will collect from the different records of district’s office
of Agriculture, journal, web site and other relevant source, for this study primary data will
collected by preparing semi structured questionnaires through interview and personal observation

3.3. Sample Size and Sampling Methods

The sampling house hold will be selected will select by utilizing multistage random sampling
method. Probability sampling techniques will employ to select participants from investment
organizations available in the study area.
From Silte Zone, Hulbareg district was purposively selected due to near to our campus and
extent of private investment the Zone. This information is obtained from north Silte Agricultural
Office. The procedures are done as follow:
In the first stage, Hulbareg district was selected purposively due to the major challenge and
opportunity of private investment in the district. In the second stage, out of the total kebeles , two
kebele were selected by simple random sampling. In the third stage, 50 sample private investor
were selected using simple random sampling technique from each selected kebeles based on
probability proportion to size sampling technique. The sample size for the study was determined
based on Yamane (1967) since the population is homogenous in agro-ecology and production

22
system. The simplified formula provided by Yamane is used to determine the required sample
size at 90 % confidence level and 10 % level of precision.
. The simplified formula used to determine the sample size of the study was specified as follows.
N
n
1  N (e) 2

Where: n=statistically acceptable sample size

N=Total size of target population

e=level of precision (error level) at 90 % confidence level (0.1).
Therefore, the sample size for this study was 80.
Table 1. Proportionate sample distribution in selected each Keble’s

No of kebele Name of kebele Total population Target Sample size

population
1 Bilwanja 2500 220 44
2 Werku (check 2144 180 36
the name)
Total 4644 400 80
Source own survey, 2024

3.4. Methods of Data Analysis

3.4.1. Descriptive Analysis

The Descriptive statistics such as means, standard deviation, percentage t-test, chi-square test
will use to compare the charge in parameter of the participants and non-participant group. The
study employed both qualitative and quantitative analysis so as to produce a good researcher
document. The descriptive statistics that are used in this study include percentages, standard
deviation, mean and frequency of occurrence to our quantitative data numerically.

3.4.2. Specification of Econometrics Model

To analyze challenge and opportunity of privet investment the study will use multiple Logistic or
Probit model of estimation. It is an essential method of econometric analysis to recognize and
realize patterns of the influencing factors. The most important variables that could determine the

23
privet investment include level of education, access to adequate credit, Access to infrastructure
facility, source of investment fund, land size and source of raw material that are discussed
below.

The logit model

Binary explanatory variables can be represented as dummy variables and a binary choice
model assumes occurrences between two alternatives. There are several methods to analyze
the data involving binary outcomes. However, for this particular study, logit model was
selected. In logit model probabilities are bound between 0 and 1. Moreover, logit best fits to
the non-linear relationship between the probabilities and the explanatory variables. The
dependent variable in this case is a dummy variable, which takes a value of zero or one
depending on whether or not investors are invest or not However, the independent variables are
both continuous and binary. In this study, logistic econometric model was used to identify the
factors (the independent variables) that affect private investment activity in the study area.

The econometric model specification of the variables will be as follows.

Li = ln P/1-p= β0+ β1X1 + β2X2 + β3 X3 + β4X4 + β5X5 + β6X6+ β7X7+ β8X8+ β9X9+
β10X1

Where,

Ln=natural logarism

1-p=non participant on private investment activity

P= participant on private investment activity

β0=constant terns

X1=Level of education

X2= Access to adequate credit

X3=Access to infrastructure facility

X4=Source of investment fund

24
X5=Land size

X6= Source of raw material are the explanatory variables.

X7=House hold size

X8=Interst rate

X9=Investment incentive

X10=House hold sex

3.4.3. Defination of variable and Working Hypothesis

Dependent Variable:

Participation in Investment Activity (PART)

This is a dummy dependent variable of the model and assumes value 1 for participant
households, and 0, non-participant households.

The Independent variables:

The independent variables of the study were those variables which were hypothesized to have
associations with private investment decision. The findings of past studies on private investment
decisions, the existing theoretical knowledge as well as the researcher’s knowledge and
experience in the area of private investment was used to select the explanatory variables and
structure the working hypotheses. Thus, the following variables were identified to have
direct/indirect effect on private investment decision.

Level of education (EDLVL): This variable refers to the formal and informal education of the
same investor. It was assumed that education is a key factor for investment decision because any
investment activity involves risks. Moreover, investment is irreversible activity. Therefore;
before getting into investment activity; investors should asses all the pros and cons of their
decision. Education was hypothesized to positively influence on investment decision.

Access to credit use (ACCRDT): This is a dummy variable, which takes a value1 if the investor
has access to adequate credit and 0 otherwise. Economic theory has shown that access to credit

25
plays a significant role in promoting investment. It was hypothesized that affecting the growth of
private investment to have positive impact on the privet investment.

Distance to nearest market (DISMKT): This is a continuous variable, which measure in kilo
meter (Km) Several studies and economic theories have shown that infrastructure plays a key
role in promoting investment. The existence of adequate infrastructure attracted more investors
to invest. . Infrastructure facilities like road, water supply, electric power supply, telephone,
education, health, postal, & other.

Source of investment fund (SOINVF): This variable refers to sources of investment fund for
financing investment projects by sample investors. A value 1 will be assigned to this variable if
the source of investment finance will own capital and 0 otherwise. A study by Aramyan et al.
(2007) reveals that high solvency (sufficient amount of own capital) motivates investors to make
investments because they are less dependent on financial Intermediaries.

Land size (LANS):It should be noted that any investor who were like to have land for
investment activity is required to have an investment permit. It is quite obvious that land is one
of the major factors of production and investment could not be materialized without having
access to land. Recent empirical studies confirm that access to land is significantly and positively
related to private investment (Kefay, 2005). This variable is expected to have a positive
association with private investment.

.Source of raw materials (SORM): This variable refers to the source of raw material. This
variable takes a value 1 if the sample investor uses purely domestic source of raw materials and 0
otherwise. In the context of this study will hypothesized that those investors who procured their
raw materials from foreign sources would face more difficulties (delays, foreign exchange
constraint, administrative red tape. etc.) than those who procure them from domestic source

House hold sex (HH,sex): this is dummy variable, which takes value 1 if the investor who is
male and 0 otherwise. From economic theory and empirical observation, we know that sex is one
of the factors of production. Therefore, the relationship between gender and investment activities
would be strong and significant. As a result, it was be hypothesized that the variable has a
positive impact on investment decision

26
Interest rate (INTRAT): This variable measures the attitudes of respondents towards prevailing
bank lending interest rate. This variable was hypothesized to have negative effect on private
investment.

Investment incentives (INVINC): This is dummy variable, which takes a value 1 if the sample
respondents benefited from investment incentive and 0 otherwise. As the name implies incentive
to investment would promote more investors .incentives are in the form of duty free import of
machinery and equipment, tax holidays and others. Thus, it will be assumed to attract more
investors and expected to be associated positively with investment decision making behavior.

Household Familysize (HHfz): It is total numbers of family member who lives in one roof
(number of people living together and utilizing scarce resources) measured in adult equivalent.
Empirical studies by Musa et al. (2014), Mburu (2014) and Kabir et al. (2015) showed that
family size was positively affect the investment Thus, family size will be expect to have a
positive influence on private investment in the study area
Table 2 of definition, measurement of explanatory variables and expected effects
Variable Definition Measurement Effects
Dependent
Participant in investment Dummy variable 1, participant. +
activity 0,non participant
Independents
Enducation level Dummy variable 0 illiterate +
1 literate
Land size Continuous variable Hectare _+
Access to credit use Dummy variable if =1accesses to credit +
0,other,wise
Distance nearest to Continuous variable Kilo meter -
market
Source of investment fund Dummy variable if=1,finaced _
0,other wise
Interest rate countinous Low, high, normal -
variable
Source of raw material Dummy Amount +
variables
Sex of House hold head Dummy If 1 male +
variable 0,other,wise
Investment incenitive Dummy If=1benefit +
variable 0,other ,wise
House hold size The total Adult equivalent
number of +
investor
Source: own computation, 2024
27
 CHAPTER FOUR

4. RESULT AND DISCATION

4.1. Description of continuous variables

This chapter the thesis presents the results and discussion of descriptive and economic analysis
of the study. Descriptive analysis was employed to describe demographic and socio-economic
characteristics of sample house hold.

Table 3.Descriptive statistics of sample households (for continuous variables)

Participants Non-participants
Combined t-value
Variables

Mean SD Mean SD Mean SD

LANS 2.05 0.79 1.93 0.82 1.99 0.8 0.1

HHfz 4.6 1.86 4.43 1.98 4.47 1.9 0.263

DISMKT 6.38 1.83 5.93 1.93 6.15 1.88 0.14

INTRAT 2.05 0.79 1.93 0.82 1.99 0.82 0.246

Sourse; own survey results, 2024

Distance to nearest market: the survey result showed that the average distance of the sample
household from the nearest market was 6.15km with standard deviation of 1.88.the mean
distance of the participants and nonparticipants group from the nearest market was 6.38km and
5.93kmwith standard deviation of 1.93respectivly which was statistically insignificant between
groups.

28
Land Size; It is quite obvious that land is one of the major factors of production and investment
could not be materialized without having access to land. . An access of land is one critical factor
that should be considered before establishment of any project. So, investment activity should be near the
area where access of land are easily accessed and are available for its continuous functioning to its
proposed period of time (own survey; 2018).there is no access land around the investment project.
In the study area, the total land house holding size of the sample households was 1.99ha with standards
deviation of 0.8.The average land holding size of participant and non-participant household was 2.05ha
and 1.93harespectively.the mean difference between the participants and non-participants households in
terms of land holding size as insignificant.
House hold Family size; It is total numbers of family member who lives in one roof (number of
people living together and utilizing scarce resources) measured in adult equivalent. The result
revealed that the average family size in adult equivalent was 4.47.The result also showed that
the mean family size of participant and non-participant households respectively were 4.6 and
4.34.

Table3.Descriptive statistics of the dummy variables

Participants non-participants Total 2

Variables PART Freq % Freq % freq %

HH sex Male 11 37.93 18 35.29 29 36.25

Female 18 62.06 33 64.7 51 63.75 2.13
Total 29 100 51 100 80 100

SORM Purely use 20 68.96 9 31.03 29 36.25

domestic raw
Material 4.75
Not use purely 9 31.04 42 76.92 51 63.75
use domestic
raw material
Total 29 100 51 100 80 100
User to credit 8 27.58 30 58.82 38 47.5
ACCR use 3.35
Non access 21 72.41 21 41.17 42 52.5
credit use
Total 29 100 51 100 80 100

29
EDULVL Literate 9 31.03 19 37.25 28 35
0.19
Illiterate 20 48.72 32 62.75 52 65
Total 29 100 51 100 80 100
finance 10 34.48 21 26.25 31 38.75
SOINVF
Non finance 19 65.52 30 58.82 49 61.25
0.001
Total 29 100 51 100 80 100

Benefited 21 72.41 23 45.1 44 55

INVINC
non benefited 8 27.58 28 54.9 36 45
0.03
total 29 100 51 100 80 100

Sources: own survey result, 2024

Education level: According to the study result in Table 4 showed that from the total sample
household’s about65%and 35% were illiterate and literate respectively. The survey also indicates
that 48.72 %, 62.75% and 31.03%, 37.25%of the respondent households were illiterate and
literate of participant and non-participant households respectively.

Access to credit use: The relative smallness most households makes direct investment Access to
credit use Recall that the financial problems facing households is how best to investment
intrinsically difficult. A sol investor obviously cannot advertise in local newspaper his/her
willingness to finance investment. Instead, financial intermediaries such as bank, investment
companies or crudities union. The study result in the table above showed that out of the total
sample respondents, 47,5 % of the sample households used credit services while 52.5 % had not
use credit. The survey result also described that 72.41 % of participants’ and41.17% of non-
participants had not access to credit service while27.58% of participants and 58.82% of non-
participants were credit users

Source of Investment Fund

As precisely indicated in the above table 4 out of 80 respondents26.25 % of respondents replied ,

that they obtain the Source of investment fund from finding agencies,while61.25 of the
respondents funding from their own finance(saving or )relatives. A source of investment fund is
one critical factor that should be considered before establishment of any project. So, investment

30
activity should be considered easily available and sufficient for its continuous functioning to its
proposed period of time. The survey result also described that 65.52 % of participants
and58.82% of non-participants had not used financing, while34.48% of participants and 26.25%
of non-participants were finance user.

Source of Row Materials precisely indicated in the above table 4 out of 80 respondents 36.25%
of respondents replied that they obtain their raw materials from around investment project,
63.75% replied that they obtain their raw material from local outside of the city. A source of raw
material or service provider is one critical factor that should be considered before establishment
of any project. So, investment activity should be near the area where raw materials are easily
accessed and are sufficient for its continuous functioning to its proposed period of time. The
survey result also described that 31.04 % of participants and76.92% of non-participants had not
been used purely domestic raw material, while68.96% of participants and 31.03% of non-
participants had been used purely domestic raw material.

Investment incentives: The proclamation number 15/1992 removed restriction on private

investment and allowed for wide participation of private sectors several investment incentives
were provide under article 130 of the proclamation. The proclamation provide that domestic and
foreign investment should be exemption of important and export taxes and duty to income taxes
holiday s and to some other benefits the duration of income tax holiday was two and three years
for existing enterprise and newly ,enterprise established, respectively from the data of
commitment of orientation. Investment designated priority regions and sector of investment
should enjoy income taxes holiday for five. survey result also described that 55% is benefit and
45% had not benefit. The result also showed that 72.42%,participant benefited,45.1% non-
participant benefited and17.58% non-participant ,54.9% non-participant had not been benefited
in the investment incentives.

House Hold Sex; The survey result showed that out of the total respondents about 36.25% and
63.75 % were male headed and female headed respectively. The result also indicated that
37.93% and 62.07 % participant household in investment activities and 35.29 % and 64.7 % of
Non-participant households were male headed and female headed households respectively.

31
4.2. Challenge and Opportunity of Private Investment

4.2.1. Challenge :
Poor business environment: this refers to the general frame work of regulation not being clear
and unequal provision of service, anticompetitive policies by the government and practice by
private enterprises, inefficient legal system and negative attitudes toward a private investment.

Distorted incentive policies: i.e. this refers to only some groups benefiting from incentives such
as controls on product and factor prices, tax incentives, trade protection, state subsidies, and
access to resources.

Inadequate legal framework: Insufficiency of laws defining property right, regulating

enforcement of contracts, ensuring effective competition, establishing bankruptcy procedures
and regulating labor contracts.

Weak financial systems: i.e., inefficiency of the financial market and financial institutions in
providing credit and other money related services.

Inaccessible to land: i.e., difficulties in gaining access to land through outright purchase or
leased contracts.

Poor infrastructure: i.e., shortage of communication networks, domestic and international

links, and reliable power supplies.

Lack of skilled labor: i.e., not fitting to the increasing demand for skilled or highly trained
human capital that can cope with emerging technologies.

Absence of supplies network: i.e., not creating appropriate conditions and supportive policies
investors to contribute to the development of the networks.

Hence, along with macroeconomic factors, microeconomic factors should be considered to create a
business friendly environment for the recovery and expansion of private investment.

4.2.3. Opportunity:
the opportunity of private investment in the study area are

 it creates additional financing capacity outside public budget,

 to save money,
32
  Accelerated the economic growth trends
 .bridge construction
 It create employment opportunity

4.3. Econometric Model Results

The econometric analysis was planned to investigate factors affecting investment activities. The
logit regression model results of estimated coefficients (Table 5), showed that participation in private
investment is significantly influenced by five explanatory variables from ten proposed variables. The
variables sources of raw material, access to credit use, sources of investment fund, land size, and
educational level of the household head were significant variables which affected the household
participation in private investment. Out of those five significant variables, four variables which are
sources of raw material, sources of investment fund, land size, and educational level of the household
head affected participation negatively while access to credit use affected participation of the household to
private investment positively.
Marginal effects after logit

y = Pr (PART) (predict = .0.40

Table 4.Estimation results of the logit model

Variable Coefficien Z P>|z| dy/dx

t
HH sex* -0.743 -1.42 0.15 -.0.18
SORM * -0.301** -2.33 0.02 -.31
ACCRDT* 1.116** 2.03 0.043 .27
EDLVL* -0.586*** -0.34 0.074 -.46
LANS -1.413*** -1.81 0.07 -0.35
SOINVF -1.247*** -1.80 0. 072 .-0.31
INVINC* 1.68 -2.39 0.117 .039
HH fz 0.116 0.81 0.42 0.29
DISMKT 0.137 0.91 0.36 .0.34
INTRAT 0.18 0.55 0.5 0.45

Cons, -1.086 -0.77 0.443

Number of observations, 80
LR chi2(10) = 18.57
Log likelihood = -46.143154
Pseudo R2 = 0.1675
Probe > chi2 = 0.0461
(*) dy/dx is for discrete change of dummy variable from 0 to 1.

33
** and *** show the significant level at 5%and 10% respectively.

Education level: Education level of household head affect participation in private investment
negatively and significantly at 10% significance level. Holding all other variables remain
constant, being literate the participation in private investment is decreased by 46% as compared
to illiterate households. Due to the comparison of one job from the other in order to increase their
profitability, develop their skills. seen one job as inferior to the other.

Access to credit use: Access to credit use of the household had significant and positive effect at
5%probability level in private investment participation. By keeping the other variables constant,
households who had access to credit increases their participation in the private investment by
about 27% as compared to non-credit users. this is duo to the existence of rule and regulation to
start anew business.

Source of raw material: Sources of raw material was found to be negatively and significantly
influenced the probability being participation in private investment activities at 5% probability
level. Other variables held constant, the demand of sampled households in using of domestic raw
material for investment activities were probability reduced by 31%,the sours of raw material or
service are not easily accessed and not sufficient for its continues functioning to proposed
period of time.the raw material found outside the country, from board ,and arowd the project
area.

Source of Investment fund: This variable influenced the participation in private investment
significantly and negatively at 10%probaplity level. By keeping other variables constant, 31% of
households were used their own money (own funding source) as compared to those who
borrowed from financial institution. They were get their fund from their relative

Land size; land is one of the major factors of production and investment could not be
materialized without having access to land. This variable is expected to have negative
association with private investment. An access of land is one critical factor that should be
considered before establishment of any project. . Land size had a negative and significant effect
on households’ participation in private investment. This implies that households with large area
less likely to participate in investment activities, holding other variables constant. So,

34
investment activity should be near the area where access of land are easily accessed and are
available for its continuous functioning to its proposed period of time (own survey; 2018)

CHAPTER FIVE

5. CONCIUSIN AND RECOMENDETION

5.1. CONCLUSION
Private Investment is very crucial for one country in order to come out of the dark cave of
poverty. This is especially true for developing countries like Ethiopia. Without private
investment it is difficult to have development that means, if there is low investment, there is
unemployment which in turn affects the level of income and the leads to poverty therefore
constraints of private investment activities should be identified. To conduct such research, Habru
district private investors were selected as a sample population. In order to assess the study has
collected the necessary data and information through questionnaires from investors and
secondary data used from Habru distinct investment. Finally the collected date and information
were analyzed, and the following findings were obtained these are land size, access to credit use,
source of raw material, source of investment fund and educational level. There are also
challenges that are faced by the investors in their investment activity which can limit their
involvement in the investment activity. lack of credit facilities, skilled man power, and drop out
of student and fluctuation of price. The objective of the study was identifying the challenge and
opportunity of private investment in the study area. in the Logitregression model result revealed
that among10 explanatory variable five explanatory variable were significantly affect in the in
the private investment. most specifically, these variableinclud :-education level, land size ,source
of investment fund,sorce of raw material were found to be negatively significant affecting the
private investment. On the other hand access to credit has positively related with the private
investment.

5.2. RECOMMENDATION
Depending on the above findings, the study would like to forward the following
recommendations; it is good for the improvement of private investment activities in the city.

35
 Source of investment fund for the investors got from their own saving, their relative,
and from financing agency which has negative impact on their investment activities.
A source of investment fund was one critical factor that should be considered before
establishment of any project. So, investment activity should be considered easily
available and sufficient for its continuous functioning to its proposed period of time.
 Access to credit to private sectors has positive and statically sufficient effect on
private investment. The quantity finance must therefore be addressed in order to
ensure continuity participation of private sectors in investment. Therefore, in the
study area, emphasis need to be given in strengthen the role of financial institutions
for private investment development
 Investors and source of raw material should contact and create conducive situation
through having a good relationship and create a short term programs to make decision
on what and when to supply. .
 investment activity should be near the area where access of land are easily accessed
and are available for its continuous functioning to its proposed period of time (own
survey; 2018)
 Education level is fundamental in improving the private investment activity of the
farmers. Therefore, the regional government needs to strengthen farmer’s access to
education that could be implemented through expansion of participant private
investment .or expansion of formal and non-formal education in the study area.

36
 6. REFERENCES

Aredo, Dejene. “The Iddir: A Study of an Indigenous Informal Financial Institutiin

Ethiopia,”Saving and Development, No. 1, Vol. 17 (Milano, Italy: Finafrica Foundation,
2012), pp.75-90.

Aramyat,2007,opportunity and service investment

Carmen Ferrando Martinez-Carrascal, Annalisa, 2008 . Impacts of financial position on

investments
Dorn Bush and Fishers, 2004. Economics Mc Graw Hill publishing company, Massachusetts
institute of technology
Ellis Harupara, 2008. Macroeconomics, determinants of private investment in Namibia. Msc
thesis AAU
Ethiopian Investment Authority,2006
Gitman and Jilak,2000. Finance growth and development
Hirshman,2001. Contribution of investment in economic development
Jhingan M.L, 2008. The economics of development and planning, New Delhi kornark publisher
Kefay, 2005, determinat of private investment at national level
Lawrence J.Gitman, 2007. Principles of managerial France 8th edition.
Macmillan Dictionary of modern Economics, 2000. 4th editions
M.P.Todaro, Economics Development World, 7th edition Replikan press: - New Delhi, 2002.
Ministry of Finances and Economic Development,2002
National planning commission at2018
Oromia Investment Commission, 2006. Investment profile.
ServernL and Andres soliano,1992.Economic Adjustment and Investment performance in
developing countries.
Solman,2006. the relationship of saving and national growth
Tiany,1996. International trade theory and industrialization
Todaro,2005. National expenditure and investment http://www.investment-and-finance.net

37
 7. APPENDIX
Dear Respondents,

I would like to thank in advance for your cooperation in filling the questionnaire. The objective
of this questionnaire is to collect data of private investment opportunities and its challenges in
Hulbareg distinct. The information you provide would be very crucial for the study. Therefore,
you are kindly requested to be honest and frank in filling all the items provided in the
questionnaire.

General direction

1. No need write your name

2. Try to answer every question according to the instruction

3. If you want to give additional suggestion, use the space provided at the end of the
questionnaire.
4. Questionnaire on Challenges and opportunity of private Investment activities in Habru.

1. General Characteristics of Household

1.1 Sex of households, 1, Male 0, Female

1.2 Educational status: 0 Illiterate 1, illiterate

1.3. House hold size , , ,

2. Land size
2.1. Do you have your own land? 0. No 1.Yes
2.2. If yes, its total land size------- ha?
2.3. Do you rented or purchased land for investment? 0. No 1.Yes
3. Access to Credit use

38
3.1. Do you have an access to credit? 0. No 1. Yes
3.2. If yes, where do you get the sources? 1. Commercial bank, 2.service cooperatives,
3.Neighbor and relative, 4.micro finance institutions, 5.others------?
3.3. For what purpose do you take credit? 1. Purchase of investment good and service,
2.purchase of fertilizer, 3.purchase of oxen, 4.for family consumption 5.others------
3.3. If you say no in question number 3.1,what are your reasons?1. Collateral problem
2.Noaccess to credit supply, 3.No, need, 4.high interest rate, 5.others--
4. Source of raw materials

4.1. Is there source of raw material is available to private investment?

1. yes 0.No

if you say yes please list down?

______________________________________________________________________________
__________________________________________________________________
_______________________________

5. Investment incentives

5.1. Is there is any motivation of engage private investment?

0. No 1.Yes

5.2. If you say yes, what kinds of motivation did you get?

1. Loan from bank

2. Freeland (without lease)

3.Guidancandcounselingservice
4.Others (specify)__________________

6. Distance to nearest market

6.1. How far is your investment site from market place------?

6.2. What are problems in marketing of your product? 1. Transportation 2.low price, 3.law
bargaining power, 4.too far from market place, 5.others (specify)

39
6.3. Where do you sell you sell your from products? 1. On farm (local assembler), 2.through
cooperative service, 3.taking to the local markrt, 4.others (specify) -----

6.4. Do you get reasonable price for your produce in 2009E.C? 0. No 1.yes

7, Interest rat

7.1. By what amount the private investor use to engage your activity?

7.2. How do you see the interest you pay on interest? 1, high 2, normal 3, low

7.2. Was the interest rate sufficient to carry out your purpose? 1. Yes 0.no

7.3. If your answer is no, what alternative options did you take?

7.4. Would you state the amount of interstyou not pay so far?

8. Source of investment fund

8.1. What is the major source of fund to start your private investment activity?

1, loan from bank 2, loan from individual 3, loan from NGO 4, personal saving

5, others-------

8.2. Do you have problems related with Private investment opportunities in Habru?
1, Yes _____

0,
No_____
8.3. If yes, in what areas are your investment problem lacks of

• financial institution _________

• inaccessibility to credit _____________

• Land ______________________________

• Lack of infrastructure facility ____________

• lack of securities ____________________

• Other______________________

Thank you for your cooperation!

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