Following independence, Senegal's economic policy shifted from a largely laissez-faire, noninterventionist stance to a policy of increasing government participation in economic affairs. By 1975, the government had effectively nationalized groundnut trade and processing, assumed majority control of the two main phosphate companies, and nationalized water distribution and electricity production. Half a generation later, in 1991, a slow privatization of the parastatal sector was under way.
In spite of its parastatal tradition, Senegal encourages private investment, which remains substantial. The investment code, enacted in 1962 and significantly revised in 1972, 1978, and 1981, encourages both domestic and foreign private investment in industrial, agricultural, mineral, transport, tourist, and other enterprises that conform to the goals of the national development program. Incentives include tax advantages and exemptions from customs and duties.
An industrial free trade zone located outside Dakar offers preferential access to West African Economic Community, ECOWAS, and European Economic Community countries. Aside from exchange-control regulations, there are no restrictions on the repatriation of capital and earnings for amounts up to CFA 200,000; above this amount, prior government approval is required. By the beginning of 1992, 15 firms had begun operations in the zone. In December 1983, Senegal signed a bilateral investment treaty with the United States, becoming the first sub-Saharan African nation to do so.
Foreign investment rose steadily from 13.8% of GDP in 1993 to 16.5% in 1997. In 1997, annual foreign direct investment (FDI) inflows peaked at $176 million, but have declined since, with some ups and downs. In 2001, FDI inflow was $125.5 million, up from $88 million in 2000. Most private investment in Senegal has come from France, and the telecommunications sector has attracted the most foreign investment.