Decentralization has gaining currency, as a strategy to promote private sector investment at local government units. In ethnically divided society,however, it has a number of challenges in promoting the sector development. Elite capture, preferential treatment and favoritism based on ethnicity and corruption are the main constraints for private investment promotion at local government units of Ethiopia. These have also caused governance and capacity constraints. Investors lack the confidence to move and locate investment decision in different locality based on their preference due to political fear, administrative and institutional constraints. Thus, most investments concentrated in a few area where they have got better treatment. This book reveals how ethnic decentralization adversely affects the promotion of private sector investment, particularly in the Ethiopian context. It helps scholars engaged in decentralization vis-a-vis urban development issues.