For a large country- the seco nd mos t populous in Africa- with grea t potential, in terms of re so urcerne nd owment and geographi ca l position , it should be considered an attTactive location for fore ignrnprivate in vestment. However , the qu an ti ty of foreign private in vestm ent that entered the co untryrnin the past decad e was disappointedly small when co mpared to other counh' ies in the reg ion . Therncu mulative foreign private in vestment in flo w to Ethiopia for the period 1994 to 2000, a tim e ofrneconomic growth and rapid private se ctor development , illustrate s thi s point clearl y. Thi s isrnbecause th e problems the nation ha s in the area s of policies, laws practices and incen tive sc he mesrnof fo reign pri vate in vestment.rnThe propo sal serves as a fi 'a m ework to di scuss pri vate foreign in ves tme nt inflow to Ethio pia; thernparti cular probl em , th e evolution and CUlTent form s of incentive regimes and the experience ofrnenacting and implemen t in g these sche mes. It is argued in thi s study that c urrent in centivernsc heme s problems are rooted in th eir ina bility to become a means of attracting private fore ignrninves tment-foreign ca pita l inflow .rnCertain l y, competi tion is one major reason for the dramatic increase in in ves hnent induceme nts.rnWhethe r n ation is pitted against nation, or rc g ion again st region, govel11m e nt s want to brin g tornthe ir own specific areas of jurisdiction t he jobs, tec hnology trans fe r, and oth er beneficial parts ofrnthe s o-called pac ka ge, which acc ompani es foreign direct investment. Consequently, just as thernexport s ubsid y war ha s heated up in recent year s, so ha s th e inves tment-incenti ve battle. Sim pl yrnfor the sake of re maining in th e incentive ba ll ga me, nations, which already have high ly attract ivernmarket systems, are no w offerin g oth er in vestm e nt sweeten ers. In certain re spects, th e incentivernwar is ludi crous. Thus the lure of investment in centi ves is the number on e "weapon" to win th ernbatt le o f gra nt ing in vestme nt- incenti ve sc hemes . The second moti vation for governme nts to o fferrninvestme nt incenti v e s is to attempt to offset condition s w ithin the host country, which ar ernwOlTi s ome to multinational enterpri ses.rnThus the study tTaces theoretica l and legal fi'ameworks of developin g countries w hi ch woul drnserve a s a standard against which Ethiopian policy, legislation and prac ti ce in the area should bernjudged; and the prob lem s of the in centive reg im es of pri vate foreign i nvestme nt in Ethiopianrnin vestm en t laws and practices, outlining the areas in whi c h both the lega l system a nd practice ofrnpri vate fo r eign investment fails both businesses and individ uals in the three successive regimes