Privatization and Capital Accumulation : Empirical Evidences from Ethiopia

This paper examines the connectivity between privatization and private capital accumulation. Many previous studies have proved that privatization has had a direct and positive effect on capital accumulation through attracting private investment. Ethiopia, which is one of the least developed countries (LDCs), and having spent a two decades of communism, has implemented privatization programme as a means of attracting a sizable investment including the foreign direct investment (FDI). We used data over ten years, 1994/95-2003/04, and applied correlation and regression analyses to find out the effect of the Ethiopian privatization programme on capital accumulation. The empirical results show that privatization was insignificant to capital accumulation. We suggest that the country needs to improve economic and political stability and openness coupled with re-vitalizing the privatization programme to prevent the Ethiopian economy from the further capital sabotage