The Politics of Private Sector Investment in Local Economic Development

What is it about?

Private investment is one of the prominent approaches to local economic development. The focus of this study is the exploration of the political elements of private investment in local economic development activities in the backgrounds of local governance. A combination of quantitative and qualitative research methods challenged the idea that private investment, considered economically, contributes to local economic development, an assumption that isolates private investment from the surrounding environments. Therefore, the study found out that private investment in Gurage Zone has been showing an inconsistent trend in terms of its contribution to land development, employment creation, and capital generation. This inconsistency is reflective of the nature of private investment which is a depoliticized, delocalized, and de-bureaucratized program highly isolated from the local realities. This again is related to the detrimental effect of local governance structure which is fragmented, asymmetrical, poorly structured, and de-contextualized, thereby creating weak-bureaucratic services, inefficient partnership, and poorly structured governance platforms. Thus, the study concludes that private investment in Gurage zone is being restrained because of its isolation from the local realities, political imperatives, bureaucratic networks, and resource contexts, supposed to be controlled by the local governments.

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Why is it important?

To improve the private sector’s investment performance in alignment with local governance platforms and planning processes, it is so worthwhile to critically analyze the impact of the private sector’s investment on local economic development. And, this requires deeply assessing the impact of the political environment on the activities of private investors.