Since 1992, the Government has successfully implemented a series of reform programmes in order to transform the economy from command to market economy, speed up the integration of the economy into the world economy and encourage the wider participation of the private sector in the development of the national economy. Such reforms include, among others, the following short-term economic stabilization and structural adjustment measures:· deregulation of domestic prices; · liberalization of foreign trade; · privatization of public enterprises; · abolition of all export taxes and subsidies; · devaluation of the exchange rate followed by the introduction of inter-bank foreign currency market and the determination of exchange rates based on market forces; · enhancing private sector development and private-public partnership through providing effective industry association; and creating a forum for consultation between the private sector and the government; · promulgation of a liberal investment law for the promotion and encouragement of private investment, both foreign and domestic; · issuance of a new labour law; · strengthening and enhancing institutional support for the export sector through strengthening/revitalizing existing institutions and establishing such new institutions as :o the Ethiopian Livestock Marketing Authority; o the Ethiopian Leather and Leather Products Technology Institute, o the Ethiopian Export Promotion Agency;

As a result, a great deal has been achieved since 1992 in moving from a highly centralized economy to a more liberal market economy. Particularly, as a result of such liberalization, the economy has showed a marked improvement growing at annual average rate of 6.4 percent in the last several years. The rate of inflation declined from around 20 per cent in 1992 to an annual average rate of below 4 per cent for the last ten years. The country’s foreign exchange has improved, the budget deficit has declined to acceptable level and above all private investment activities have flourished.

Initial Investment Capital and Investment Areas A foreign investor, who intends to invest on his/her own, except in consultancy services and publishing, is required to invest not less than USD 100,000 in cash and/or in kind as an initial investment capital per project. The minimum capital required of a wholly foreign investor investing in consultancy services or publishing is USD 50,000, which may be in cash and/or in kind. A foreign investor reinvesting his/her profit or dividends, or exporting 75 per cent of his/her outputs, however, is not required to allocate a minimum capital.

A foreign investor is allowed to invest in all areas of investment except those reserved for government, Ethiopian nationals and other domestic investors. Areas of Investment Reserved for Domestic InvestorsThe following areas are exclusively reserved for domestic investors:

• retail trade and brokerage;
• wholesale trade (excluding supply of petroleum and its by-products as well as wholesale by foreign investors of their products locally produced);
• import trade (excluding LPG, bitumen and up on the approval of the Council of Ministers; materials used as inputs for export products);
• export trade of raw coffee, chat, oil seeds, pulses, hides and skins bought from the market and live sheep, goats and cattle not raised or fattened by the investor;
• construction companies excluding those designated as grade 1;
• tanning of hides and skins up to crust level;
• hotels other than those star-designated, motels, pensions, tea rooms, coffee shops, bars, night clubs and restaurants excluding international and specialized restaurants;
• travel agency, trade auxiliary and ticket selling services;
• car-hire and taxi-cabs transport services;
• commercial road transport and inland water transport services;
• bakery products and pastries for the domestic market;
• grinding mills;
• barber shops, beauty salons, and provision of smith workshops and tailoring services except garment factories;
• building maintenance and repair and maintenance of vehicles;
• saw milling and timber making products;
• customs clearance services;
• museums, theaters and cinema hall operations;
• printing industries.

Notwithstanding the provision of paragraph 1 of this schedule, the following areas of investment are exclusively reserved for Ethiopian nationals:

• banking, insurance and micro credit and saving services;
• travel and shipping agency services;
• Broadcasting services; and air transport services using aircraft with a seating capacity of up to 20 passengers.