The Impact of Governance on Foreign Direct Investment Performance in Amhara Region Title

Abstract

The low level of Foreign Direct Investment (FDI) inflow in Amhara Region given the vast natural and historical endowments and relatively cheap labour availability motivated the researcher to conduct study on governance. Also, the Regional Government has expressed its managerial dilemma on the problem of investment. Hence, various studies revealed that governance is one of the indispensable factors in bringing growth and development in general and increasing inflow of FDI in particular. Therefore, the general objective of the study is to evaluate the influence of governance on FDI inflow in Amhara Region. Thus, the study pursues a causal research methodology; and Regression Model is adopted to measure the overall strength of association between Governance and Outcome variable-FDI. The Likert five-scale interval measurement was used and the overall items reliability measured 8.2 Cronbach’s Alpha. Using stratified sampling, 150 experts from twelve institutions are selected as the sample of the study. Finally, the empirical findings of the study show Public administration’s Efficiency, Accountability and Decency have significant influence on the FDI inflow in the Amhara Region .Hence, the Research Hypothesis (H1) is accepted since the predicator variables have significant impact on outcome variable (FDI inflow). Therefore, the regional government should take immediate steps to improve the investment incentive regimes; bank loan; service delivery systems; on-line information delivery on essential aspects of investment procedures, improve availability of investment plots and related issues; and ensure equitable distribution of investment projects. However, further study should be made to incorporate other factors that affect the FDI performance in the region since the variables of the study are too small to generate sufficient generalizations.