Abstract:
This study explores the relation between FDI and the privatization of state-owned
companies. We believe that privatization impacts FDI, as the mechanism of promoting
involvement of the private sector always goes hand in hand with steps of liberalization
and by allocating the stock of newly privatized firms to foreign investors. They do
anticipate FDI to promote restructuring attempts, as capital inflows, technologies and
management skills that follow FDI make the environment more productive and offer
governments a good climate for the privatization of dysfunctional firms. Our findings
help our conclusion. This study aims to see whether privatization has long run or short
run significant impact on economic growth of Ethiopia by considering GDP per capita as
a proxy for economic growth and claims on private sector % of GDP as to measure of
the magnitude of privatization. In order to analyze the secondary data from 1994 up to
20219. The result of the study shows debt, privatization and foreign direct investment
found tohave positive and statistically significant impact on long run economic growth in
Ethiopia. On the other hand, both privatization and debt has statistically insignificant
impact while foreign direct investment has positive and statistically significant impact on
short run economic growth. Based on finding of the study, the study recommended
economic growth can be improved significantly when the privatization policy
accompanied with other structural changes was implemented. The government of
Ethiopia should strive to strengthen privatization policies together with other policies.
Still, privatization alone will not be the enhanced solution to the elusive quest for growth.
