Since the early 2000s, the federal government has continuously aimed at implementing an economic reform programme designed to stabilise the financial position of the country, promote private sector participation in the economy and attract foreign investment. Nevertheless, the private sector remains relatively small, characterised by small companies, low labour productivity and a high degree of corruption. Although official and unofficial barriers, such as corruption, still deter foreign investment and certain sectors remain off-limits to foreign participation (e.g. banking), the country has taken several steps to liberalise its foreign investment laws, such as those relating to agriculture, and to streamline the regulatory environment.

Positive developments in relation to corruption and investments:

• The legislative framework against corruption in Ethiopia is comprehensive and strong.
• Recent years have seen some improvements in the perception of corruption in Ethiopia, which could reflect greater anti-corruption efforts, including in the fight against high-level corruption.
• Ethiopia enacted an Assets and Property Registration Law in March 2010 as part of its anti-corruption efforts. The law requires that government officials and their relatives register their assets and properties and is aimed at reducing the prevalence of corruption in the country.
• The government-established Ethiopian Investment Commission (EIC) provides investment information and a one-stop shop that reportedly has cut the cost of obtaining investment and business licences.

Risk of corruption:

• Practices of corruption are increasingly taking the form of private-to-private corruption whereby private companies yield procurement contracts to other private companies in return for bribes.
• Land distribution and administration is continuously reported to be a sector where corruption is institutionalised. Corrupt practices involve facilitation payments as well as bribes in order to be allowed to keep land that is leased from the state.
• Public procurement is another area riddled with corruption. For instance, it is not uncommon for government tenders to be discontinued after bids are received, re-released several times without being filled, or awarded to bidders with strong links to the government and ruling party with little to no transparency in these processes.
• The customs administration lacks qualified staff, and customs laws are usually enforced arbitrarily, with some privileged groups, most notably companies owned by the ruling party and government officials, consistently evading customs and excise laws. In turn, this engenders ample possibilities for corruption in interactions with customs officials.