Absract: Since 1991 the current Government of the Federal Democratic Republic of Ethiopia has been following a "democratic developmental" state model both at the federal, regional and local level administrations. The main objective of this study was to the main features and extent of independence of urban local governments from the influences of the private sector and identifies the critical challenges faced in the sample Urban Local Governments in Amhara National Regional State. In this study,

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... sequential exploratory design was employed and both quantitative and qualitative (mixed) approaches were used. Data was gathered from primary and secondary sources. In the five sample town administrations, a total of 50 respondents were selected randomly and participated to solicit data through questionnaire and key informants who were purposively selected from various local government institutions. The major findings of the study showed that the local governments are not autonomous and independent from the influence of the private sector. Local government bureaucracy is not independent from the interferences of the local authorities. The capacity, commitment, and effectiveness of local authorities are not adequate. The local government employees are not ethical and lack the capacity to implement policies. The principal values and principles of democracy such as free and fair election, representation of the society in the local councils and respects of human rights are not satisfactory. A number of challenges such as lack of good governance and rule of law are identified by respondents. Based on the findings, the study recommended that local governments should build the capacity of local authorities, institutions and public employees, respect human and democratic rights, fight corruption and forge strong public private partnership.