Despite the importance of private sector in economic development,rnprivate industrial investment in Ethiopia has been encounteredrnwith a number of serious problems and, as a result, itsrndevelopment level remains low. These problems are related to lackrnof demand, lack of credit, lack of technology, lack of inputs,rninappropriate policy, and lack of infrastructure. This study hasrnidentified the root causes of these problems with their degreernof severity applying non-parametric techniques. This helps tornknow how private manufacturing industrial owners and potentialrninvestors perceive the impact of financial, regulatory,rntechnical, marketing and other constraints . The response of thernrespondents indicates that these problems are a seriousrnconstraints to undertake industrial investment and expansion. Thernmost severe problems to undertake industrial investment inrnEthiopia are related with credit and policy. The severity of thernproblems which handicapped industrial investment are independentrnof regional location of industries. Therefore, it is importantrnto policy makers to focus on solutions for common problems ofrnindustrial expansion and investment in various regions. In orderrnto understand the partial effects of different factorsrndetermining private industrial investment in Ethiopia, OLSrnregressions for short -run model specifications are estimated forrnthe period 1970/71-1994/95 . The regression results indicates thatrnwhile the GDP, credit availability, government capitalrnexpenditure and real interest rate had insignificantrncontribution, the retained earnings (the industry's cash inflow)rnhas a significant role in private manufacturing investment