Since May 1991, the climate for foreign investment has improved dramatically. Private investment policies are more liberal, commercial performance standards have been applied to public enterprises, tax and tariffs have been reformed, and the currency has been devalued by 58%. The devaluation was the policy action required for the rescheduling of Ethiopia's foreign debt in 1992. Foreign exchange is now auctioned. In 1996, a revised investment proclamation was approved that created additional incentives for foreign investors. Major provisions included duty-free entry of most capital goods and a cut in the capital gains tax from 40 to 10%. In addition, the government opened a number of previously closed sectors of the economy to foreign investment, although financial services, large-scale power production, telecommunications, and other public utilities remain off limits. Official estimates are that as of June 1996, 52 foreign investors had been given licenses. In 1998, amendments to the 1996 investment proclamation allowed Ethiopian expatriates and permanent residents the ability to invest in industries that had previously been reserved for nationals only.
The inflow of foreign direct investment (FDI) peaked in 1997 at $288.5 million and has declined sharply since. In 2000, FDI inflow was $134 million and in 2001, only $19 million.