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THE MAJOR FACTORS AND DETERMINANT OF THE LEVEL OF PRIVATE

INVESTMENT IN OROMIA REGIONAL STATE IN NORTH SHOA ZONE IN CASE OF
KUYU WOREDA

Research · August 2024

DOI: 10.13140/RG.2.2.33332.67207

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THE MAJOR FACTORS AND DETERMINANT OF THE LEVEL
OF PRIVATE INVESTMENT IN OROMIA REGIONAL STATE
IN NORTH SHOA ZONE IN CASE OF KUYU WOREDA

ODA BULTUM UNIVERSITY

COLLEGE OF BUSSINESS AND ECONOMICS

DEPARTEMENT OF ECONOMICS
A Research Paper Conducted and Prepared
By:
Abdella Mohammed Ahmed (M.Sc.)
And Submitted to
Department of Economics

Title: The Major Factors and Determinant of the Level of Private Investment
in Oromia Regional State in North Shoa Zone In Case Of Kuyu Woreda.

JULY, 2024

CHIRO, ETHIOPIA
 ACKNOWLEDGEMENT
My outstanding thank goes to Allah since He did great things for me throughout all my life
progression. I am thankful for my advisor Assistance professor Debala Bonsa and Dr. Leta Sera
for their tireless reading and commenting me starting from the proposal writing of this thesis
which enabled and directed me to the completion of this paper. Without their intellectual
comments and guidance this paper would not have such good shape. I‟m also grateful for Mr
Dawit Abdisa, And Dr. Yekin Ahmed. for assisting me when I working this paper in providing
information of E-view software running, for helping me in providing some necessary material of
reading, and intellectual comments. Moreover I am grateful for all my friends those who helped
me in writing this thesis and other essential support.
Lastly I am thankful for my mother Khadija Mohammed as her support and moral throughout my
previous life time really enabled me reach on this achievement. My today level attainment is one
of the realizations of what she had been envisioned for me at my early age and guided me
through this triumphant life.

1
 Abstract

The study was under taken in kuyu woreda on the factor affecting level of private investments.
Investment was the accumulation of capital stock over a given period of time that can change
income level of the citizen of countries. Investment increases the productive capacity of nation.
Investment has an invaluable contribution in the attempt to bring a rapid and a sustainable
economic growth in the nation. It is through expansion of investment, a nation can achieve
sustainable economic growth and development (Addis A, 2003). In Ethiopia the private sector
has been encouraged and invested its resources after the change of government and abolition of
command of economy in 1991 The study was focus on determinant of private investment
activities and tries to focus on the following questions.

 What are investment challenges and opportunities in woreda?

 How is the distribution of private investment in the woreda?
 What are the major determinants of private investment?
 What is the contribution of private investment in creating employment opportunity?

The sampling technique used by the study was stratified random sampling. It is the process of
grouping the members of population into relatively homogeneous strata prior to sampling. The
total investors in town are 48& they are divided into three based on their economic activities

To analyze its descriptive method of analysis was used. Sample used for this analysis was 43
respondents. Among those respondents 9 of them were from service sector, 18 from agriculture
sector, and 16 from agro industry.

Key words: Major, Factors, and Determinant, Level of Private Investment.

2
Acronomy

AAsURP Addis Ababa University research paper

EEA Ethiopian Economic Association

E.C Ethiopian Calendar

GDP Growth Domestic product

EIA Ethiopian Economic Authority

MEC Marginal Efficiency of Capital

MPC Marginal propensity to consume

MPS Marginal propensity to saving

MoFAED Ministry of Finance and Economic Development

UNDP Union Nation Development program

3
CHAPTER ONE 6

INTRODUCTION 6

1.1. Back ground of the study 6

1.2. Statement of problem 7

1.3. Objectives of the study 8

1.3.1. General objective 8

1.3.2. Specific objectives 8

1.4. Research question 8

1.5. Significance of the study 8

1.6. Scope of the study 9

1.7. Limitation of the study 9

1.8. Organization of the paper 9

CHAPTER TWO 10

LITERATURE REVIEW 10

2.1. Investment Definition 10

2.2. Theoretical literature Review 11

2.2.1. Different theories of investment 11

2.2.2. Determinants of private investments 14

2.2.3. Problems of private investment in Ethiopia 16

2.2.4. Empirical literature reviews 17

CHAPTER THREE 18

METHODOLOGY 19

3.1. Study area 19

3.2. Sources of data 19

3.3. Method of data collection 19

4
 3.4. Sample size 20

3.5. Sampling technique 20

3.6. Method of data analysis and interpretation. 21

CHAPTER FOUR 22

DATA ANALYSIS AND DISCUSSION 22

4.1. Back ground of respondents. 22

4.2. Investment potentials and opportunities in Kuyu woreda 24

4.2.1. Investment potentials 24

4.2.2. Investment opportunities 25

4.3. Distribution of private investment in Kuyu woreda 26

4.3.1. Sectoral distribution 26

4.3.2. Spatial distribution of private investment 27

4.4. Major determinants of private investment in Kuyyu woreda 28

4.5. Contribution of private investment in creating employment opportunity. 37

4.5.1. Contribution of private investment in creating employment opportunity by sectors

38

4.6. The socio economic impacts of lower investment 39

CHAPTER FIVE 40

CONCLUSION AND RECOMMENDATION 40

5.1. Conclusion 40

5.2. RECOMMENDATION 42

References 44

5
 CHAPTER ONE
INTRODUCTION
1.1. Back ground of the study
Investment is change in capital stock over a period of time. It is one of the determinants of
growth. Additionally, it is a major rout through which technical progress can be made (the social
science encyclopedia).

The role of investment to the development of a nation is very large. Investment increases the
productive capacity of an economy. A country undertakes investment on goods and services that
will enhance the productive capacity of economy or increases accumulated capital. In other
words, investment a lot for increment of GDP of the country which is in turn important for the
development of a nation (oshkoya, 1994).

Investment has an invaluable contribution in the attempt to bring a rapid and a sustainable
economic growth in the nation. It is through expansion of investment, a nation can achieve
sustainable economic growth and development (Addis A, 2003).
Oromia one of the regions of Ethiopia has a huge potential to attract investors and also is the
second in terms of certified projects between July 1992-2001(EIA, 1992).

However, this does not mean that all of these certified projects in the region have been
successfully implemented. Accordingly, Kuyu woreda is one of the woreda in Oromia region
which is known by different natural resources and also has conducive climatic condition for
investment activities. The number of investors has been increasing from year to year through
their performance may be required.

Even if the climate of Kuyu woreda is quit conducive for different investment activities, the
performance of investment activities in that woreda is not satisfactory as compared to resource
endowment and strategic location. Therefore, careful study is needed to increase the economic
power of woreda by transforming the idle resources to useful and also by reducing the factors
that undermine investment activities in that district area.

6
1.2. Statement of problem
Investment has paramount importance in the process of bringing rapid economic growth and
development of the nation. Different investment activities can be practiced in countries in which
rapid economic development policies are correctly formulated, programs appropriately planned
and resources well managed, allocated and implemented (EIA,2004 ).

But the fact proved that many Ethiopians are still suffered from absolute poverty: lack of clean
water, health problems, limited infrastructures, investment, uses of potential resources and etc.
Investment paves the way for large scale production, technical progress, increasing
specialization, wide market efficiency, creation of employment with new skill etc. So that it
could accelerate economic development or ( Said, 1998).

In Ethiopia the private sector has been encouraged and invested its resources after the change of
government and abolition of command of economy in 1991. This helps the economy and makes
some progress in terms of macroeconomics stability and economic growth (Addis A, 2003).

Oromia is one among the region in Ethiopia and has potentiality of attracting investors.

According to Ethiopian investment authority Oromia is the second in terms of certified project
between July 1992 and July 2001 however, this does not mean that all these certified projects in
the region have been successfully accomplished. Had these project been fully undertaken, they
would have created high employment opportunity required goods and services (IBID, 2004).

As part of Oromia region North shawa zone, Kuyu woreda is the suitable for investment
activities. This due to presence large labor force, large arable land for agricultural investment and
conducive for different types of investment activities. However regarding investment under
taking, there is a gap between what is available and what is utilized appropriately .The problem
still remained unsolved even though similar

7
The study was focus on determinant of private investment activities and tries to focus on the
following questions.

 What are investment challenges and opportunities in woreda?

 How is the distribution of private investment in the woreda?
 What are the major determinants of private investment?
 What is the contribution of private investment in creating employment opportunity?

1.3. Objectives of the study

1.3.1. General objective

 The general objective of the study is to explore the major determinant of private
investment in study area

1.3.2. Specific objectives

 To show investment challenges and opportunities in Kuyu woreda.
 To assess the distribution of private investment in the woreda.
 To know the major determinants of private investment

1.4. Research question

Taking the objective listed above into account attempts will be made answer the following
question.

 What is the investment challenges and opportunities in study area?

 How is the distribution of private investment in the woreda?
 What are the major determinants of private investment?
 What is the contribution of private investment in creating employment opportunity?
 What is the socio-economic impact of private investment?

1.5. Significance of the study

It is widely accepted that investment is the engine of economic development. The level of
private investment of a country is positively influences the level of economic development.
Consequently, the effective performance of the study will:

8
  Give information for investors and investment officials about factors that limit
investment activities
 Provide information for policy makers in identifying the most important factors limit
investment.
 Indicate remedial measures to be taken to make investment condition more suitable for
those potential investors
 Give certain hints to invite others to develop more comprehensive work in this area.

1.6. Scope of the study

The study had been under taken in Kuyu woreda in order to identify the determinant of private
investment by using sampling method. The study extends data from 2000-2015 years.

1.7. Limitation of the study

Although the study has some significance, it has its own limitations. These are

 Financial constraint as study area is large it need high money to cover the selected area.
There is shortage of time to collect data from respondents if it‟s very vest area.
The Study face source of data was not availability for further analysis.

1.8. Organization of the paper

This study consists of five chapters. It begins with introduction section which consists
background, statement of problem, objective of the study, significance of the study, scope of the
study, organization of paper. The second part deals with literature review of both theoretical and
empirical literature. The third chapter deals with methodology of the study and sources of data.
Chapter four deals with data analysis and discussion. The final chapter consists of conclusion
and recommendation.

9
 CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.1. Investment Definition
The term investment defined differently based on the nature of investment (Physical aspect,
financial aspect, owners, time horizon etc.

According to economics theory, investment defined as the per-unit production of goods, which
have not been consumed, but will however, be used for the purpose of future production.
Examples of this type of investment are tangible goods like constructions of factories or bridge
and intangible good like six months of on the job training. In terms of national production and
income, GDP has an essential constituent, known as gross investments. According to business
management theories, investment refers to tangible assets like machinery and equipment‟s and
buildings and intangible assets like copy right or patents and goodwill. The decision for
investment is also known as capita budgeting decision, which is regarded as one the key
decisions. In Finance, investment refers to the purchasing of security or other financial asset
from the capital market. It also means buying money market or real properties with high market
liquidity (Addis Alem, 2003).

Generally, investment is the use of money to earn profit. The term also refers to the expenditure
of funds for capital goods such items as factories, farm equipment, livestock and machinery. In
other words the people activities to protect the purchasing power of their saving against rising
prices or they want to buy their own business such as store or gas station. Investment promoters
economic growth and contributes to a nation‟s wealth. When people deposits, of only in a saving
account, the bank for example the bank ways of investment by loaning to various businesses
companies. In addition to borrowing from banks, most corporation issue stocks and bonds that
they sell to investors to raise capital needed for business expansion.

10
2.2. Theoretical literature Review
Theories of investment are varied and immense. There exists a considerable variation in thought
among economists as to what determinants of investment. One reason can be the complex nature
of the subject itself. Another reason can be disparities among societies in their institutional and
structural setting, which makes the development of universal theory of investment impossible.
Here it has to be noted that investment in physical stock of capital. Having this in mind, some of
the theories of investment are briefly rived as follows.

2.2.1. Different theories of investment

2.2.1.1. The classical theory of investment
According to classical economists, the capitalist make investment because they expect to earn
profit in the future depends on good they produce now. Among the classical economists, the
founder one is Adam smith. For example, Adam smith in his book “The wealth of the nations”
he elaborates this fact by arguing that, investment was made because the capitalist expected to
earn profit and the future expectation with regard to profit depend up on the present climate of
investment as well as the actual profit. (T.N Hajela, 16th revised edition)

2.2.1.2. The Keynesian theory of investment

Keynes (1936) was probably the first person who systematically analyzes the issue of investment
by considering of saving and rate of interest to increasing the employment opportunities on the
country. In this, book “The general theory of Employment, interest and money.” Key has
observed that quantity of designed investment depends on the prospector marginal efficiency of
investment or capital (MEC) relative to some interest rate, reflecting the opportunity cost of
invested funds. On the basis of this, Keynes analysis, the factor that governing the output and
employment was explained by using the saving and interest rate. As the marginal prosperity of
consumption of the people declining, it leads to rising in marginal prosperity of saving (MPS).
That has the consequences of expansion in investment because many credits available for the
investors. This investment has the multiple effects on the economy of the nations like expansion
of output and increases in the opportunity of employment (Ibid, P. 422).

2.2.1.3. Accelerator theory of investment

After Keynes, the accelerator principle was the dominant theory of investment theory, especially
during the 1990‟s and early 1960‟s. The theory asserts that investment spending is proportions to
11
be change in output and is not affected by the cost of capital. i.e. rate of interest this means a
change in the rate of growth of income produces a magnified change in investment. As income
falls, investment falls quite significantly and rise income results in a magnified rise on the
absolute level of investment (Dorm Busch, 2004)

2.2.1.4. Neo classical theory of investment

Jorgensen in (1967 and 1971) criticize the acceleratory model pointing to its static assumptions
and developed on other the neo – classical model that put, net investment as being proportional
to the gap between the actual and desired capital stock, which is given by:

I t = k t
 k t 1
  k *
 k t 1

Where It I t
= is net investment

k t
= the existing capital stock at the end of comment period

k t 1
= is capital at the end of the presiding period.

*
k = is desired level of capitals stock

 = measures the fraction of the gap between the actual and the
*
desired level of capital stock. Here the desired capital stock ( k ) is positively related to the

expected level of output (y) and negatively related to rental costs of capital which in turn
dependents on interest rate expected rate of inflation and investment tax credit. Generally,
following to the accelerator theory of investment there is foundation of neo classical theory of
investment. Among the chief members of neo classical economists, Alfred Marshal is one as
them. He tries to explain the concept of investment based on rent. He asserts that what is
regulatory regarded as interest on free or a new investment of capital may be treated as a sort of
rent on old investment of capital. In addition, other neo-classical economists, Knut Wick sell
(1851 – 1926) dealt about investment. He tries to related investment with saving. (T.N Hajela
16th Revised Edition).

12
2.2.1.5. Tobin’s q
Tobin in 1969 pointed that investment decision is a function of the ratio the additional to the
value of the form due to an extra unit of capital installed to its replacement cost and this ratio is
called the Tobin‟s q .That is

q = Market value of installed capital

Replacement cost of installed capital

The numerator is the value of the economy capital and denominator is the price of capital if it
were purchased today. Tobin argued that net investment should depend on whether q is greater or
less than one. If q is greater than one then the stock market value installed capital at more than its
replacement cost. In this case, managerial can be rise the market values of their remain stock by
buying more capital. Conversely, if q is less than one then the stock market value installed
capital at less than its replacement cost. In this case, managers will not replace capital as it wears
out (Mankiw, 2000). In advantage of Tobin‟s q as measure of the incentive to the investment is
that it reflects the expected future profitability of capital as well as current profitability.

2.2.1.6. Disequilibrium Models

In a disequilibrium model, investment is viewed as being dependent on both profitable and
demand for output. In this approach decision about investment are of two levels. They are
decision to expand the level of productive capacity and the decision about capital intensity of
that additional capacity. The first decision depends on the degree of capacity utilization in the
economy as an indicator of demand condition. The second decision depends on profitability
variable like relative cost of capital and labor. The investment decision take place in setting in
which firms may be facing current and unexpected future sales constraint which is considerable
departure from the continuous market clearing assumed by both Neo classical and Tobin‟s of
models. Sneesens (1987) theorized that the net investment is positively related to the gap
between actual and long run equilibrium capacity.

This gap reflects the discrepancy between actual and equilibrium rates of capacity utilization
(sales constraints) and actual and equilibrium markup rates (profitability). Therefore, investment
depends on both profitability and prevailing sales, which determines the rate of capacity
utilization. (Akpalu: 1997)

13
2.2.2. Determinants of private investments
There are two factors that determine private investment. These are positive factors and negative
factors.

A) Negative factors

1. Availability of finance: Shortage of finance is one that constraints for investment particular in
developing countries. Firms could not able to generate adequate self – financing due to limited
amount of resources available for investment, it is also exacerbated by the absence and /or
inefficiently of capital market in developing countries (Birhanu Nega, 1999).

2. Real interest rate: the real interest rate has a negative relationship with private investment.
Accordingly, investment is more determined by the availability of bank credit than real interest
rate in developing countries. However, the neoclassical theory of investment postulated that
increases in real interest rate negatively by increases the user cost of capital (IBID, 1994).

3. Domestic Inflation rate: High domestic rate of inflation will have an address effect on
private investment. It enhances the riskiness of longer – term investment project. It reduced the
average maturity of commercial loans and distorts the information conveyed by prices in the
economy (ibid, 1994).

4. Foreign exchange constraint.

In most developing countries, with the availability and real price of foreign exchange negatively
affect investment activities. It is likely that for most developing countries, private investment
will be highly responsive to the foreign exchange constraints in the economy (IBID, 1994).

5. Change in term of Trade: The terms of trade are one of the most important indicators of
external shocks. Adverse movement in term of trade will increases of the costs of imports
relative to income and will reduce the purchasing power of exports.

By alleviating the foreign exchange constraints, the improvement in term of trade should lead to
and increases the imports of capital good and in private investment; while the opposite result
expected from deteriorating term of trade (oshikoya, 1994).

B) Positive factors

14
1. Income per Capital: Income per capital hypothesis to effect private investment positively.
The positive correlation is due to the ability of high-income countries to devote much more
income to saving so that investment (Mankiw, 2000).

2. Good investment climate

Expansion of investment requires peace and macroeconomic stability which is the key factor for
investment attraction sustained economic growth. Investor need free and fair condition to be
pursuing production is respected and corporations are kept at its possible level. Macroeconomic
stability can be achieved through adopting sound policies that helps to lower inflation, lower
interest rates and realistic exchange rate and relatively decrease the role of state through
privatization (MoFAED, 2002)

3. Investment finance

The availability of financial management, transparency, efficiency and equability of access is a

key factor for enhancing private investment sector development. The efficient management of
investment finance concerns both the financial institution and private sectors operators who use
for business development. Besides equitable disbursement system based on transparency and
objective evaluation is an essential element for all role players in financial sectors(IBID)

4. Adequate infrastructure services

The provision of good quality infrastructure service particularly telecommunication, electricity,

water and logistic is essential for efficient operation of investment. It also helps to integrate into
global market that helps to increase participation of investors (IBID)

15
2.2.3. Problems of private investment in Ethiopia
A) Low level of saving

Economic investment necessitates a corresponding level of saving mobilization either domestic

or external. However, in Ethiopian context, a level of domestic saving is necessary for the level
of investment is low. Hence owing to the reform program private sector activities in industry,
trade and transport have improved considerably, all of which owing to the removal of major
distortions and re-orientation in the incentive structure of the economy in favor of tradable goods
and private goods. However, in long run positive response to the measure to remove structural
and other rigidities that continue to inhabit quick private sector response saving and investment
(Addis Alem,2003).

B) In accessibility of credit

The main source fund investment for investment is loans from financial institution, but to the
development of this institution is not well and adequately available in the country. On the other
hand, reluctantly high collateral requirement suppresses. The incentive of investors, in the
additional, these institutions usually provide short term loan than long term development
(MoFAED, 2008).

C) Lack of infrastructural facilities

The existing development of infrastructure in Ethiopia is sustain new economic activities is not
adequate. The availability of road, electricity, water and telecommunication is not sufficient
service to operate beside bureaucratic nature to obtain this service in frustrating and tremendous
(MoFAED).

5. Other problems of private investment

Other problem that hinders Ethiopia from attracting private investment are the existence of
attractive investment opportunities in other developed country, investor‟s wrong perception of
the country as a whole and inadequacy and inappropriateness of investment related information.
For many reasons the necessary information investment activates and opportunities in the
country are not accessible and are note timely available. Besides, investors need reliable
information about the market structure, socio-political and economic situation of the country

16
before deciding to invest but such information is either incomplete or total missed (EIA,
2009/10)

Political in stability: political instability often brings about sudden radical changes in property
rights, lives and the rules of governments business conduct. Political in stability in those events
generates uncertainty about the stabilities of the existing political system and affects the
authority and the effectiveness of the government. It weakens a government to develop and
implement the economic policy reform necessary for long-term economic growth (EIA).

Corruption: is among the factors that deter expansion of private investment in addition other
institutions factors corruption is pervasive and universal phenomenon. It affects democratic and
non-democratic countries, rich and poor countries. Generally, private investment has a complex
and negative relationships with the overall socio political and policy environments a nation and
global level public investment in basic infrastructure (transport, communication, power,
education)

2.2.4. Empirical literature reviews

There are some empirical words on the determinants of private investment in both developed and
developing countries most of the studies focused on testing several hypothesis are advanced to
explain variation in private investment in the countries. The result indicated the factors that
influence private investors decisions are very among nations when we look the studies conducted
in our countries:

According to, Befekadu Degfe and Berhanu Nega, (1999/2000), the main constraint to private
investment in Ethiopia and the poor performance of this sector is not lack of liberalization.
Instead, it is all the factors that domestic investors have been complaining about shortage of
demand, inability to complete with cheap imports, shortage of capital, difficult in obtaining land
at reasonable cost, bureaucratic in competence, unfair competition etc. that need serious and
quick attention. If the investment atmosphere improves and domestic investors are to plant the
role they expected in developing the national economy.

17
On the other hand, research wade by Ethiopian economic association (1992) indicate that non-
economic factors like political instability uncertainty and risk are extremely importance factors
in determining the extent of private investment in Ethiopia. Such factors make private investment
or relevant to commit large expenditure on investment and results in to land level of investment
in the country. According to Girma (2004) in his paper “Distribution of private investment
makes study on the factors that have a bearing impact on regional and sectoral distribution of
private investment projects. According to this study the special and sectoral distribution of
investment projects in Ethiopia could be associated with initial conditions of development of
region and/or sectoral as well as with pessimistic or optimistic expansions of individuals‟
investors.

18
 CHAPTER THREE
METHODOLOGY OF THE STUDY
3.1. Study area
Kuyu is one of the woreda in North Shoa of the Oromia region of Ethiopia. It found 156km far
always from Addis Ababa. Kuyu woreda is bordered on the south by West shoa, on the East by
Dagam, on the north by Ejere, on the west by Abay River which separates it from Go jam zone,
of Amara Region. The altitude of this woreda ranges from 1,380-1,680meters above sea level;
however, some points along the southern and western boundaries have altitudes ranging from
2229-2870 meters. The 2007 national census reported a total population of 113,023, of whom
53637 were men and 104,386 were women; 59386 or 5.99% of its population were urban
dwellers. Kuyu woreda has 24 kebele.

3.2. Sources of data

The study used both primary and secondary data. The primary source of data has been collected
from the sample of investors selected through questionnaires prepared& distributed to those
investors who have been selected as sample of study areas, as the study supposed to obtain
relevant data and information for study.

On other hand the source of secondary data for the study was gathered from different research
paper, internet, published & unpublished documents, and different reports from investment office
in woreda.

3.3. Method of data collection

Primary data for the research was collected through interview and questionnaire. Because
interview method enables.

- To get more contact between the study and respondents

- To explain the question in understandable way
- To understand and recommend the solution for prevailing problems, etc.
Enable to talk the study freely with respondents.
-

19
The questionnaire was prepared in both open-ended and closed ended in the form of
understandable. The questionnaires prepared were distributed to selected sample respondents,
and response were collected and entered for analyzing purpose.

Data was collected from public or official documentation. These data are the major sources of
information to the study because they include,

 Unpublished documents
 Reports on investment activity

3.4. Sample size

In Kuyu woreda there are 48 investors (46 males and 2 female). Among these investors 18 are
agro-industrial sector investors (17 male and 1 female) , 20 agriculture(1 female and 19male) and
10 are service sectors. Generally, the study have been selected 43 sample respondents for study(2
female and 41 male).

3.5. Sampling technique

There are two general types of sampling methods probability & non-probability sampling. Non
probability sampling is sampling procedure which does not affords any basis for estimating the
probability that each population has being included in the sample. Other name is deliberate,
purposive & judgment sampling. On the other hand, under probability sampling every items in
the population has an equal chance to include in the sampling. Its sampling techniques in which
every sampling unit in population has equal & independent chance of being included selected for
the sample. Basic principle of probability sampling is sample would have been representative of
all population from which it drawn if all members of the population have an equal chance of
being selected in the sample. Random sampling is a key to the process of probability sampling.

The sampling technique used by the study was stratified random sampling. It is the process of
grouping the members of population into relatively homogeneous strata prior to sampling. The
total investors in town are 48& they are divided into three based on their economic activities.
They are classified as investor who invest on agriculture (20 out of 48)investor who invest on
agro-industry(18 out of 48) investor who invest on service sector(10 out of 48)

20
 To design sample size the study used Yamane formula:
n=N/1+N(e) 2 n=sample size

N= total of investors in town

e=level of precision.

by using 95% of confidence level& 5% of level of precision,

n = 48/1+48(0.0025)=43

Agro-industry=43(18)/48=16

agricultural=43(20)/48=18

service =43(10)/48=9

By using this technique 18, 16 and 9 were taken from agriculture, agro-industry, service sector of
the district respectively. In these manner the study can draw 43 sample size that can
representative total investors in the town. Stratification process should maximize variation
between groups& minimize variation within groups. The study used stratification because there
is more or less heterogeneity between investors. Its more efficient than simple random sampling.

3.6. Method of data analysis and interpretation.

The analysis of data involves descriptive type. The collected data from source have been
organized and classified according to their similarities using tables, graphs and percentages. The
interpretation of figure data has been expressed in clear, precise and meaningful way. Based on
this some reasonable recommendation have been forwarded.

21
 CHAPTER FOUR
DATA ANALYSIS AND DISCUSSION OF THE STUDY
This chapter focuses on the analysis of factors affecting investment activities in Kuyyu woreda.
To analyze its descriptive method of analysis was used. Sample used for this analysis was 43
respondents. Among those respondents 9 of them were from service sector, 18 from agriculture
sector, and 16 from agro industry. This analysis was as follows:

4.1. Back ground of respondents.

The data about the background of respondents includes sex, age, education level, and the
ethnicity.

Table 4.1.back ground the responden

No Variable Level/item No of respondents Percentage

1 Sex Male 41 95
female 2 5
2 Age 25-40 3 7
41-55 18 42
56-65 22 51

4 Education Illiterate 4 9
Level 1-10 3 7
certificate 4 9
Diploma 12 28
Degree 20 46
5 Ethnicity Oromo 25 58
Amhara 15 35
Gurage 3 7

6 Religion Muslim 5 12

22
 Orthodox 20 46
Protestant 12 28
Wakefata 6 14
Catholic 0
Others
Source: primary data (2016)

As it shown in table 4.1. 95% of the respondents are male and the remaining 5 are females.
Gender distribution have significant effect on investment. The distribution of respondents with
regard to their age 7%respondents is between25-40 age and 42% are respondents between 40-55
years, 51% of the respondent‟s between55-65 &above years.so that age are one of factor
affecting level of private investment because most of investor participate on investment activities
when they become 40 years or when they matured in mind & able to run their own capital.

Regarding to their educational level 9%,7%, 9%, 28% and 46% of the respondents‟ illiterate, 1-
10, certificate, diploma and degree holders respectively. This reflects that their educational level
was affect investment activities. It means that education was help them to utilization their
resource efficiently &wisely to contribute for economic growth of the country.

The ethnic distribution of respondents indicated on table 4.1 is that 84% are Oromo, 12%
Amhara and 4% Gurage ethnic group does no effect on investment activities.

With regard to religion distribution of respondents 68%, 12%, 8%, 4% 8% of respondents are ,
orthodox, protestant, Muslim, waqeffata and catholic respectively. From these The study
concluded that the majority of woreda are Orthodox. But this does not mean that religion has an
effect on investment.

Table4.2. Back ground of the respondents in terms investment activities they engaged in.

No Sector No respondents Percentage

1 Agriculture 18 42

3
Agro industry 16 37

23
4 Service 9 21
5 T OTAL 43 100
Source: primary data.

As it is indicated on table 42% of the respondents are engaged in agriculture and 37%, 21% of
respondents are engaged in agro industry and service sector respectively. The study observe that
as there is no an equal distribute of capital investment on each sector.

Fig 4.1. Licensing year of investors from 1998 E.C -2015/16 E.C (respondents)

Number of investors

45

35
31(72
25
.09%
15 )

8(1
5 5(11
8.6
.62.
0 00

1998-2010, E.C 2003-2012E.C 2005-2014/15E.C licensing year

Source:primary data

Regarding licensing year of the investor of the investors on the fig4.1,31(72.09%), 5(11.62%)
and 8(18.67%) of the respondents where licensed in between 1998-2010E.C, 2003-2012 E.C and
2005-2015 E.C respectively.

4.2. Investment potentials and opportunities in Kuyu woreda

4.2.1. Investment potentials

The district has potential for investment which in turn can create investment opportunities in
wide range of the area. Among the many unexploited and underutilized potential resources in the
district, are

24
  Abundant and available labor force
streams that can be used for irrigation scheme
 Land that can be used for intensive cultivation.
 Enough land for teff ,maiz oil seed production process are abundant resource.

4.2.2. Investment opportunities

The district area has sample potentials (both natural and human resource, it has so many
unexploited investment opportunities for investors. These studies also identified investment
opportunities in certain sectors, which are expected to emerge as significant investment, are as
for new investments.

The identified opportunities are.

A. Agriculture and agro-industry

The location and favorable climate of the woreda gives a big chance for the development of
agricultural sector.

The woreda has following investment opportunities in agriculture and agro-industry

 production and processing of , fruits, vegetables etc

 Dairy and fattening of cattle‟s
 Production and processing of modern honey (bee farming)

B. small and medium scale industry

Industrialization is the main measure of development strategy for any country. Investors have
the following investment opportunities from their local raw materials

 Fruit and vegetable processing industry

 Honey and honey derivate processing industry food industries
 Milk and meat processing industry
 Food and wood processing industry

25
 C. social services

The social services are another unexploited area in the district. Thus investors can engage in the
district, thus investors can engage in the following.

 Health institutions
-Health centers
-Clinics
 Educational institutions
 Technical, schools and colleges.
 Hotels and restaurants

4.3. Distribution of private investment in Kuyu woreda

4.3.1. Sectoral distribution

The investment law of a country is strengthening the inter-linkage between the sectors.
Moreover, it aims at achieving a strong and developed agricultural sector which is the back bone
of economy the country. Even if the government gives equal opportunity to invest on each
sector, there is still uneven distribution of investment project in different sectors.This is because
there is no equal awareness between sectors.

Table 4.3 number and investment capital of projects (2009-2014/15)

Types of investment Agriculture Agro-industry Services Total

Number of projects 6 5 4 15
Investment capital 50,244800 34,898005 15,346,795 100,489,600
Source: computed data obtained from woreda investment office, 2015.

As study could observe from the above table, out of the total approved projects, the agricultural
sector has the highest share in terms of the number of projects which accounts for 40% of
the total followed by Agro- industry sector accounting 33% and services sectors 27%
respectively. In terms of capital volume also agriculture sector takes the lead by 50% of total
capital, while the agro-industrial and service sector has the share of 34.72% and 15.28%
respectively.

26
From the above data the study observe that service sector capital is the lowest of all because the
involvement of private investors and capital committed to this sector is low since they are more
profit motive than maximizing social welfare

4.3.2. Spatial distribution of private investment

In order to attain the balanced growth, the investment should be distributed evenly. But in Kuyyu
woreda, investment projects are not evenly distributed over the kebeles. Instead, it is highly
concentrated in a few kebeles.

Table 4.4number and capital of private investment perfect by kebeles

No Kebeles Investment in capital

Number of investment projects
Agro- Agriculture
industry service
1 Dawicha 2 3 2 16,187,770
Qerrensa
2 D/Birbisa 2 2 3 14,217,914
3 Gose 1 2 1 13,116,002
4 Wagidi 1 3 2 8,396,952
5 Akkale 1 2 2 10,295,900
Gose
6 Biriti 2 2 1 9,519,162
7 Charrawa 2 4 2 20,460,000
8 Garmama 1 2 2 8,295,900
Total 12 20 17 100,489,600
Source: Kuyus woreda investment office, 2015.

From the above table we can easily understand the higher number of projects in D/Qerrensa with
its respective capital and followed by D/Birbisa, Gose and others.

In Ethiopia, determinants of private investment include both economic and non-economic

factors, domestic credit constraints that are proxies by credit availability. Problem of

27
infrastructure implied by the low public investment expenditure, entrepreneur capacity of society
in the situation of risk and problem of land acquisition, both establishment of new figure and
market place, are some of economic factor, whereas problem caused by administration bottle
necks and government policies that couldn‟t create confidence among the public, mainly because
of experience of bad policies in the past, are non-economic factors (Addis, 1996).

Accordingly, the performance of investment activities in the woreda is low. Lengthened decision
for investment request, lack of infrastructure, and man power in investment office are among the
problems. But the question is „‟what are the major factors that are responsible for this poor
performance of private investment in the woreda?‟‟ a number of possible explanations were
forwarded by respondents, out of which the major or severe ones are discussed in this section.

Based on their experience and application of investors, the official of Kuyyu woreda investment
office has mentioned the following factors shown in the table below.

4.4. Major determinants of private investment in Kuyyu woreda

The performance of private investment activities in Kuyyu woreda is not so much good. A
number of respondents forwarded their explanation out of which the major or severe one are
discussed in this section.

Table4.5. Major Determinants of private investment in the woreda (from respondents).

Problems Respondents
Frequency Percentage

In adequate infrastructure 10 23.25%

Lack of sufficient and accessible market 5 11.62%
Problem on side of investors 3 6.97%
Inadequate promotion 5 11.62%
Weakness from investment office 2 4.65%
In adequate support from government 1 2.32%
Tax burden 7 16.27%
Constraint of entrepreneurial skill 3 6.97%

28
 Social problem 4 9.30%
Inadequate credit service 3 6.97%
Total 43 100%
Source: primary data

From the above table the study can see that inadequate infrastructure, lack of sufficient and
accessible market, problem on side of investors, , inadequate promotion, weakness from
investment office, inadequate support from government, tax burdens are 23.25%11.68%
12.5%,4.16%,6.97%,4.16%,12.5% respectively. From these one can understand that there is
inadequate infrastructure, weakness from investment office, inadequate support from
government, tax burden and problem on the side of investors are severe problems of the woreda.

These factors shown on the table are discussed in the subsequent section including the response
of investors, where it is necessary. Source: primary data investors, clim

 Infrastructure facilities problems

Ethiopia‟s infrastructure development is one of the lowest in the world. Successive governments
had given little attention to the development of the sector. Difficult geographical conditions,
policies, inadequate investment and wide spread have played their role in retarding the expansion
and improvement of infrastructures services. Beyond the cause, Ethiopia‟s past instability and
civil war had not only discounted government investment initiatives for investment and
expansion but also destroyed and left to deteriorate road networks, telecommunication systems,
power generation and transmission networks and other related services. This dismal condition
also had their effect on investment activity, economic growth and development (AAURP, 2003).

The main important input in investment activity is the level of infrastructural facilities of the area
under investigation.

The availability of social and economic infrastructural like road, telecommunication, electric
power and water supply are essential. So, rational investors will take in to account many
conditions in investing higher capital, one of which is infrastructure. So without availability of
such facilities, investment activity is un thinkable.

29
Table 4.6. Response of investors on the infrastructural facility problems.

Response Types of Freq Percentage

infrastructure
With infrastructure problems Road 18 41.86
Water supply 8 18.60
Network 5 11.62
Electricity 12 27.90
With no infrastructure 0 0
problems.
Total 43 100
Source; primary data

According to the above table of sample respondents, 99.97% of the respondents replied that there
is an infrastructure problem in the district, i.e there is inadequate infrastructure facilities that
negatively affect the investment activities of the district. The over all, infrastructure status of
woreda is highlighted below.

 Road

Irrespective of its classification and location of road, transportation has a vital role in the
development endeavors. Inadequacy of road limits the accessibility of large potential market in
the woreda. Among those who said there is infrastructure facilities problem 41.86% of them
replied that they have road infrastructure problem. Thus, it is the most important factor that
influences the investors to invest their capital.

 Electricity

To bring rapid economic development, electric power is another essential requirement for
expansion of investment. Out of the respondents 27.90% of them has electricity problem. Few
towns of the woreda get the electric service. Then problem is not only the absence of this service
in other areas of kebeles but also its unreliability where its availability in some of those towns,
the services provided is interrupted.

 Telecommunication
30
The 11.62% of the respondents answers that there is a problem of telecommunication. The
telecommunication service provided and operated by Ethiopian Telecommunication Corporation
included only woreda‟s center town but few kebeles town in the woreda have not access to these
communication services.

 Water supply

Also 27.68% of the respondents faced shortage of water supply in the woreda. As it is known,
water is very important in the healthy life of the society which greatly affects the productivity of
labor.

Generally, the implication of the above study revealed that lack of physical infrastructure and its
poor quality is the factors significantly affecting the investment performance of the woreda. But
0% of respondent said that there no infrastructure problem.

 Lack of sufficient and accessible market

Befekadu(1994) has argued the importance of market demand and as an engine of private sector
development and economic growth through higher prices and increases in production.

A research made by (EEA 1999/2000) indicates that the main constraint to private investment in
Ethiopia is shortage of demand. In ability to compete with cheap imports, shortage of capital,
difficult in obtain land of reasonable cost. Bureaucratic in competence, unfair computation etc.
that need serious and quick attention if the investment atmosphere is to improve domestic
investments or are to play the role they are expected in developing national economy.

Market is essential factor for achieving required level of investment. Here market is used for the
availability of demand for outputs and services provided by companies, which highly depends on
the purchasing power of the society and the desire ability of the products of this enterprise. The
per capital income at country level is also low; the demand for goods and services is limited.

Data collected from the investors who are on operation regarding the existence of market for
their product is shown below.

Table 4.7 Response of investors on the lack of accessibility of market.

31
Response Respondents
Frequency Percent
Yes 17 39.53
No 26 60.46
Total 43 99.99
Source: primary data.

As information provided on the table, 60.46%of investors responded that there is inaccessible
market for their product due to low purchasing power of the society and inefficient of the
companies in having large market share.

Few investors 39.53% of them said that they have adequate market for their goods and services
due to their location to the town.

According to the investors opinion the market demand challenges them to compete in the
domestic market with foreign firms and also buying capacity restricts the wide distribution of the
product. The low incentive the investors attain, discourage investors to undertake additional
investment activity. So, to overcome the problem of market, the income of rural and urban
people should be increased through traditional and modern irrigation and credit accessibility.
And also, the local and international market information which is unavailable for the investors
have to update to integrate domestic investors with external market for the expansion of
agricultural and agro-industry products.

 Weakness from investment office.

Table 4.8 responses of investors on the weakness of investment office

Responses Respondents
Frequency %tage
Yes 23 53.48%
No 20 46.52%
Total 43 100%

32
Regarding the weakness of investment office 53.48% of our respondents replied as there is
severe weakness from the side of investment office and 48.52% of them answer as there is no
weakness of investment from investment offices. According to information available from Kuyu
woreda, there is only one person who manages the private and public investment. Many
respondents said that there is a weak investment incentive from the offices and also we cannot
get at office and other place when we want him for our problem because he does solely. So, to
improve such problem the investment office of Kuyyu woreda must encourage investors and
employ additional investors.

 Problem on the side of investors

Problem on the side of investors in this woreda can see that there is increasing problems can be
also observed from the investors themselves. This is because they are not in a position of to
manage and control the overall activities of their enterprises. Most of these weaknesses are
believed to emanate from their low education status.

Fig 4.2. Educational status of investors.

50%

45%

40%

35%
degree
30%
diploma
25% certificate
20% high school

15% illitrate

10%

5%

0%
degree diploma certificate high school illitrate

Source: computed data obtained from kuyu woreda investment office.

33
As we can see from the above figure around half of the samples (47%) are certificate holders
while those investors have degree, diploma, high school and illiterate contribute 10%, 23%, 16%
and 4% respectively. The implication is that it becomes difficult to investors to run and give right
decision for their business activities. The output or their productivity is also very poor because
they do not have employee workers with revant skills and experience; instead they employ their
relatives or unskilled manpower who is willing to work at lower wage.
 Inaccessibility to credit service

An investment activity in any place is depending on capital accumulation and savings or loans
from financial institutions.

Table 4.9 In accessibility to credit service (investors)

Response Respondents
Frequency Percentages
Yes 19 44.19
No 24 55.81
Total 43 100
Source:-primary data.

According to the above table 55.81% of the respondents replied that there is lack of accessibility
to credit service in the Kuyyu woreda and 44.19% replied that there is accessible credit service
that can positive affect and increase the level of investment activities in Kuyyu woreda.

 Inadequate support from Government

The government should have selected those sectors in which it can perform better than the
private sector and serve as forward and backward linkages that play a major role in encouraging
private investors to work around those enterprises and obtain entrepreneurial skills from them. It
might also have chosen very few sectors that are quite profitable for cross-subsidy purpose to
expedite the expansion of services to non-profit making region (Addis Alem, 2003).

Government intervention is the most important factor to bring development through investment.
The government has to intervene in provision of infrastructure facilities and different supports
like giving for investors‟ necessary assistance and incentives to encourage them. But in kuyu
34
woreda inadequacy of government support is one of investment problem. This does not generally
mean that the government is not interfering in the investment but the problem is on the real
application of its promise as on the paper.

Table 4.10 .Is there adequate support from government (response of investors)

Response Respondents
Freq Percent
Yes 14 33.66
No 29 67.44
Total 43 100
Source: primary data

From sample investors in the above table, 33.66% of them said that there is adequacy of
government support, while 67.44%said that there is inadequacy of government support.

One can understand from this result of disincentives given financially or technically decrease
participation of private investors.

Only 33.66% replied that some incentives given for them in new activities. Example land,
exemption from tax for two years if investors start on new uncultivated land.

 Lack of promotion to attract investors

Promotion is the short term incentives to encourage and attract investors. Hence, resources
should be spent on promotional tools that are used to penetrate business leads, and stimulate,
reward and motivate investors.

Tables 4.11. Is there promotion to attract new investors?

Response Respondents
Freq Percentage
Yes 15 34.85
No 28 65.15
Total 43 100
Source: primary data
35
The above table tells us that 34.85%, 65.15% of respondents said that there is adequate
promotion and inadequate promotion to attract new investors respectively. From this study
understand that there is no high promotion to attract new investors and which in turn promote the
development of investment activities.

Generally, regardless of different attempts taken by government to promote investment the

performance of private investment activities still need great effort to promote the potential of
private investment in Kuyyu woreda and also to couple with the problem of unemployment and
the reluctance of the private investors to invest in different activities.

 Constraint of entrepreneurial skill

Availability of skilled labor is the essential one for successfulness of investment activities. Even
if there are a number of labor forces in the Kuyu woreda, there is highly lack of skilled labor. But
there are large numbers of unskilled labor.

Table 4.12.lack of entrepreneur skill (response of investors)

Response Respondents
Freq Percentage
Yes 29 67.44
No 14 32.56
Total 43 100
Source: primary data

The table show that 67.44% of the respondents said that there is lack of skilled labor and 32.56%
said that there is skilled labor in the Kuyyu woreda. The study said that lack of entrepreneur skill
have affect the level of private investment activities. Since skilled entrepreneur labor rise level of
output production.

 Social problem
Behavior of Societies around which the investors are investing was played a great role in
encouraging or discouraging investment activities. If there is social problem it hinder the
growth of investment in particular & economy of country in general are affected.

36
Table 4.13.Social problem (investor‟s response)

Response Respondents Percentage

Yes 29 67.44
No 14 32.56
Total 43 100
Source; primary data

As the table show 67.44% of respondents said that there is social problem and 32.56 % said that
there is no social problem. Since majority of respondents response as it have affect investment
the study also reached on as it have negatively effect investment activities.

 Tax burden
It is obvious that increase in tax, reduce investment and decrease in tax encourages
investment.
Table 4.14.Tax burden (investors responses)

Response Respondents
Freq Percentage
Yes 32 75
No 11 25
Total 43 100
Source; primary data

As indicated, in the above table, 75%, 25% of respondents said that there is tax burden and no
tax burden respectively. The study improves that when tax burden is high the investors are not
incentive to invest their capital compared with present value of interest rate and deposit money to
financial institutions.

4.5. Contribution of private investment in creating employment opportunity.

From the vicious contribution of private investment, employment creation is one of the leading
issues. To show this fact study can see the next table4.14 below which shows the contribution of
private investment to employment Creation by domestic investments. Domestic investment takes
great shares in creating employment opportunity both permanent and temporary.

37
Table 4.15 Employment creation of domestic investment projects (2009-2014/15).

Types of employees Types of investment

Domestic
Permanent 215
Temporary 1487
Total 1702
Source: from computed data.

During the stated year, the permanent employment created by private sector reach 215 and 1487
has created temporarily.

From this total numbers the domestic investment takes over12.63% of permanent employee and
87.37% temporary workers.

4.5.1. Contribution of private investment in creating employment opportunity by sectors

In Kuyu woreda different sectors of investment projects approved has contributed to
employment.

Table4.16 Investment and employment creation of projects approved by sector (2009-2014/15).

Sectors Domestic
Employment creation
Permanent Temporary
Male Female Male Female
Agriculture 75 29 212 405
Agro-industry 59 18 165 274
Services 23 11 115 314
Total 157 58 492 993
Source: from investment office of Kuyyu woreda.

Table 4.15 above shows from the three major sectors, the agriculture takes the biggest share in
temporary employment creation in both sex 212(14.25% male and 405(27.23%)female. The
investment and employment share in this sector is mainly accounted by oil processing, dairy and

38
milk processing, fruit processing machine and crop grinding machine etc. And the agro-industry
sector has the second share in temporary employment creation with 272(11.09%) male and
165(18.29%) female. The investment and employment share in this sector is mainly accounted
by planting sugarcane trees, maize and teff production, planting mango and avocado trees and
poultry and livestock rearing by domestic investors. And also the service sector is the third with
115(7.73%) male and 314(21.11%) female which include activities such as construction of
school, health center, road and water by contract from the authority of the woreda.

Also from the table we can see that the agriculture is the leading one in permanent employment
creation 75(34.88%) male and 29(13.48%) female. Agro-industry and Service sector is
59(27.44%), 18 (8.37%) and 23(10.69%), 11(5.11%) with both male and female respectively.

Generally, the temporary employment creation to be created takes its highest figure in agro-
industry sector for domestic investment projects. This is due to the temporary demand for labor
during the planting and processing season.

4.6. The socio economic impacts of lower investment

Investment contribution to the economic development through its multidimensional effect;
creating employment opportunities for job seekers, satisfying the needs and desire of the society
through provision of goods and services, increasing specialization and contribution to GDP at
large. Besides to this, private sectors the major source of income and essential to poverty
reduction. If private investment is low, has its own challenges on the socioeconomic
development of woreda and to the country and also it contributes less to the welfare of the
society and per capital income of individuals. Still there is private investment to employment
creation to job seekers. In addition to employment creation, the existing employment opportunity
is not benefiting the society as the whole since the investors are hiring their relatives and
unskilled individuals at lower wage this in turn makes investors unproductive while the lower
wage rate also makes the workers reluctant to hard work.

39
 CHAPTER FIVE
CONCLUSION AND RECOMMENDATION OF THE STUDY
5.1. Conclusion
In the process of economic development investment has a significant role. It gives a way for
large scale production, technical progress creation of employment opportunities, etc. hence, it
can be considered as engine of economic development. The performance of private investment
activities in Kuyu woreda can be observed from the different angles such as distribution of
investment projects in the woreda, their status and trends that are in turn was highly influenced
by the existing investment opportunities and the nature of investment environment. Favorable
climate condition, availability of suitable land for investment and active labor force has their
own shares for attracting investors. In addition to this, fertility of soil availability of raw
materials etc to invest in agro-industrial sector agricultural sector, and service sector. The
government gives different incentives and guarantees like protection against measures of
expropriation and nationalizing states in government‟s investment proclamation. Despite this
opportunities, incentives and grantees the overall investment activities of the woreda tends to
function imperfectly.

That is

 Uneven distribution of investment projects in the woreda.

 Low awareness of both government officials and at woreda level and investors on the
benefit of investment.
 Inefficient production of the investors
 Spatial distribution of investment projects in the woreda is also uneven.

In Kuyyu woreda, study seen that the number of investment projects has been the increasing
from year to year, but this does not mean that the investment activity of the woreda are
performing well, because the number of projects on operation is not more efficient as expected.
This study has identified the following major determinant of private investment in the woreda.

40
These are:

 Inadequate infrastructural facilities such as road, water supply, electric power and etc.
 Problem on side of investors
 Inadequate support from government
 Lack of promotional effort
 Lack of access to credit service
 Lack of skilled labor
 Tax Burden
 Lack sufficient and inaccessible market
 Weakness of investment office
 Social problems & other are some investment problem in study area.

41
5.2. RECOMMENDATION
As long as the study tried to studied, there are basic problems that tackle the rapid growth of
investment that in turn obstacle to economic growth. So to achieve fast growth of investment
activities the identified problems should be solved. To alleviate the problems, the study gives the
following re commendations.

The government should allocate sufficient budget in improving infrastructural facilities in study
area. It should also request different nongovernment organization to assist an improving it and
investors should motivate to participate in improving of such kinds of problem.

 Government body or investment official of the district should take effective action within a
short time, when licensed investors leave the land idle without cultivating it. Those actions
are such as taking away land given and give it to others who want to make it productive in
short time i.e. within a given time.
 The government should support investors technically, morally and materially. Because if
they are supported they run to increase their investment activities which is engine for
economic growth.
 There should be promotional effort by allocating sufficient budget to attract new investors to
the district as they take the existing opportunities.
 Credit service should be provided to the investors in order encourage them in running of their
investment activities when they face capital limit (constraint).
 The investors should train their employees before new technology start to be implemented in
order to overcome presence of lack of skilled labor in the district.
 Tax levied by government on income of investors should be appropriate. Tax should not be
levied by guessing the capital of investors rather than it should be levied based on income
generated by investors.
 Before engaging in investment activities the investors should take effective research to
identify for which product the present (existing) market is feasible. And then produce product
which can fit the existing market is feasible.
 Government bodies should create awareness in mind of societies around which investment
take place and if they turn over on awareness, it should take effective blame for the action
taken by societies on retarding investment.

42
 To improve problem raised the investment office of study area must encourage investors and
employ additional investors.
 Having money and engaging in investment opportunity only cannot increase investment
production. So, investors should know how to increase investment production by themselves
or employ skillful manager.

43
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towards the solution, Addis Ababa chamber of commerce paper presented at the
workshop on key business concept and negotiation skills for running successful business
organized by investment office of Ethiopia and UNDP, Addis Ababa, Ethiopia.
 Social science encyclopedia,1996

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 APPENDIX

ODA BULTUM UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ECONOMICS

Questionnaire

The main objective of this questionnaire is to get strong and realistic information on assessments
of factor affect level of private investment in Kuyu woreda. No need to write your name

Demography of respondents.

1. Sex male female

2. Age 15-30 30-40_ above
3. Educational level illiterate_ 1-8 9-12

First degree certificate

Master Degree

4. In which sector are you investing?

a. Agriculture d. hotel and tourism

b. industry___ e. trade ___

C. construction

f. if none of the above please specify___________________________________

5. Which one of the following infrastructural facilities is not fulfilled for you?

A. road b. electric power ___ c. telecommunication d. water supply ___ e .if any
please specify__________________________________________________________

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 6. What are the factors that hinder your investment in the woreda? ______________________

7. Is there available market for your product to sell at the right time and place?

Yes no

8. Have you faced administrative constraint before or after your engagement?

Yes No

9. Is there adequate support from the government?

Yes No

10. Is there lack of entrepreneurial skills?

Yes no

11. Is there adequate promotion? Yes no

12. Is there tax burden? Yes no

13. Is there social problems? yes no

14. Is there the corporation of the society on investment activity?

Yes no

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