Between 1950 and 1960, the imperial government of Ethiopia enacted legislation and implemented a new policy to encourage foreign investment in the Ethiopian economy.
In addition, the government guaranteed protection to industrial enterprises by instituting high tariffs and by banning the importation of commodities that might adversely affect production of domestic goods.
The government also participated through direct investment in enterprises that had high capital costs, such as oil refineries and the paper and pulp, glass and bottle, tire, and cement industries.
Thus, by the early 1970s, Ethiopia's industrialization policy included a range of fiscal incentives, direct government investment, and equity participation in private enterprises.
On February 7, 1975, the government released a document outlining Ethiopia's new economic policy, which was explicitly socialist in philosophy and intent.
The decree also removed all restrictions on profit repatriation and attempted to provide more extensive legal protection of investors than had the 1983 proclamation.
Under the new system, the private sector would be able to participate in all parts of the economy with no limit on capital investment (Ethiopia had a US$ 250,000 ceiling on private investment); developers would be allowed to build houses, apartments, and office buildings for rent or sale; and commercial enterprises would be permitted to develop industries, hotels, and a range of other enterprises on government-owned land to be leased on a concessionary basis.
Additionally, state-owned industries and businesses would be required to operate on a profit basis, with those continuing to lose money to be sold or closed.
Whereas there were many areas yet to be addressed, such as privatization of state enterprises and compensation for citizens whose land and property had been confiscated, these proposals generated optimism among some economists about Ethiopia's economic future.