Objectives

• Understanding Business Regulation From the legal point of view (what,

how and Why of Regulation)
The Role of the Government in the Economy
Definition and Objectives of Regulation
Theories of Regulation
 Regulations applicable for all businesses and sector-specific
Regulation
Requirements to start business
Requirements while in operation
Exit requirements
How to Design Regulation in a certain context
 Definition And Scope of Business Regulation
• The purpose of defining a discipline is to clarify the body of
study, its subject matter, to indicate the boundaries of its reach
and to inform readers about the objectives it intends to serve.
• It determines a discipline’s content and scope as well as its
underlying norms and targets.
• Definitions are, an ex post attempts.
• The consensus for a specific definition of a subject is only
achieved when the discussion in the subject reaches a certain
stage of development particularly in tem of subject-matter and
methodology.
 Definition of Regulation
• There is no generally accepted definition of regulation.
• It also has been conceived to represent different concepts in different
discipline
• In fact, it by itself is an interdisciplinary concept
• Baldwin and colleagues argue that there are three main conceptions:
regulation as “the promulgation of an authoritative set of rules,
accompanied by some mechanism […] for monitoring and
promoting compliance with these rules”,
 regulation as “all the efforts of state agencies to steer the
economy”, and
 regulation as “all mechanisms of social control – including
unintentional and non-state processes ”
 Regulation
• Selznick defines regulation as “sustained and focused control
exercised by a public agency over activities that are valued by the
community
• Regulation is about intervention in the behavior or activities of
individual and/or corporate actors (govern, alter, controlled,
guide…)
• Regulation has also been defined as
 the making and enforcing of rules by governmental actors;
the direct intervention of the state irrespective of the forms of
intervention;
all forms of influence affecting behaviour from whatever source
and for whatever purpose
 Regulation
• “Regulations include laws, formal and informal orders,
subordinate rules issued by all levels of government, and rules
issued by non-governmental or self-regulatory bodies to
whom governments have delegated regulatory powers.”
(OECD)
• It refers specific standards or instructions concerning what
individuals, businesses, and other organizations can or cannot
do.
 Cont….
• Regulation is state intervention in the private domain, which is a by
product of our imperfect reality and human limitations. We have
regulations only because “poisons” do exist.
• Regulation is often a synonym for government intervention in markets.
• The action of government to establish rules of conduct for citizens and
organizations
• by regulation we mean the discipline of individuals’ and firms’ behaviour
through legal rules which are defined by the following three attributes:
compulsory, backed by criminal/administrative sanctions, and publicly
enforced.”
 Cont…
• regulation’ captures a wide range of Government actions, from primary
legislation setting market frameworks through to detailed regulations
imposed and enforced by specialist thematic and sectoral regulators.
• But, regulation doesn’t always mean restriction. It limits,
enables, facilitates, or adjusts activities.
• Regulation may include rule making, policy making,
administration and even sometimes adjudication.
• Should regulation include:
 Intentionality? (Intentional and non-Intentional acts)
 Acts of the Government, Private individual, Community….?
 all interventions like tax, Subsidy, …..)
 Activities which are subject to regulation
 economic, social and/or environmental regulation?
 Are only private actors or both private and public actors are regulated?
 Are only economic activities regulated?
 Public and private activities
 Economic activities,
 Commercial activities
 Public regulation of private activities, private-private, public-public,
and even private-public relationships???
The regulation pyramid
Proc.
(HPR)
Regulation
(COM)
Directives (Ministries and
Agencies)

Codes, Guidelines, orders, Circulars,…

 Regulation of Business
• In its Broader Use, it Refers Regulation of the Business From entry
to Dissolution
Starting Business
Who can enter to a business
individual (nationals, foreigners, issue of capacity, married
persons ....)
Organizations (Foreign companies, Religious organizations,
NGOs)
how…. Registration requirement, licence, profession…)
Requirements (Capital, License , Registration , EIA, address, Local
content requirement for foreign investors, Employment
conditions)
Régulations of Business Operations (production and and
distribution )
Price regulation , quality and quantity regulation, Information
regulation, environmental regulation, working conditions
(occupational health, wage, working hour, …)

Exit (Regulation during dissolution) (when, how…)

 Business Regulation
• Initially, Business regulation was meant to control the rise of abusive
monopolies and oligopolies that unfairly drove out competition in the west.
• Latter, atrocious working conditions, unsafe and unhealthy products, business
bribery of politicians
• Regulation may “restrict who may participate in a market, where firms may
locate, the production process used, the quality or other parameters of the
goods and services produced, and the way products are marketed and
distributed.”
• There may be a General Regulatory Policy in the National Level and there are
usually Specific Regulation at Sector Level
 Entertainmen
Beverage t
Food

Educati
Agriculture
on

Health

Constructio
n
Tele Regulation

Transpo
Professional
rt
Works

Energy Financial Media

Sector Hotel
Various interests and business regulation

1. The interest of the business

Generally
The interest of big businesses
The interest of new/small …businesses
The interest of the management, the owners , creditors
The interest of the workers
2. The interest of the state (security, law and order, tax,..)
3. The Interest of the society
Health (quality ..)
Environment
Price
 Regulators and Regulatees/Regulated
• Regulator
 an entity or mechanism that keep regulation in force
Usually a government organ. But, the Market, the regulatees
themselves may also act as regulators
Government regulator are usually specialized entities

• Regulatees /Regulated
Individuals or other entities which are subject to regulation
the government itself may be regulated
In business regulation, all those which engage in business
 Reasons and objectives of regulation
• Reasons • Objectives
Market failure Reconciling the interests of the business
with those of the society
Negative externalities
Increasing competition and efficiency
Natural monopolies lower prices, increasing quality, and more
Ethical arguments choice while maintaining production
sustainability
Generally, enhancing Growth and
Development
 Summery for Business regulation
• Formulation of rules, guidelines, codes of conducts, formal and
informal orders
• regulation is not achieved simply by passing a law, but requires
detailed knowledge of, and intimate involvement with, the regulated
activity as well as enforcement of the rules.
• Regulation during Entry(starting a business), Operation and
(exit)Dissolution.
• Price, quality, quantity, externalities(env’t,…), health, working
conditions,
• Even if there are general themes in business regulation like
registration requirement, licensing requirement, price, quality,..etc,
Government Regulation, Self and Market Regulation

• Even if regulation is usually associated with the government,

business regulation can be
Government Regulation
Self regulation
Market regulation

• Each of the three have there own advantages and disadvantages.

 Government Regulation
• Government regulation is (Regulation of Business by the
government) the most important and widespread form of Business
Regulation
• Regulation is usually seen as one mechanism for governments to
influence the behaviour of the Business. A Government may
intervene in the Economy through the following means.
Monetary Policy
 Fiscal Policy
Regulation
 Direct engagement in the business through SOES
 Monetary Policy
• Monetary policy is concerned with money supply in an economy.
• The central bank adopts various measures to control money supply and
commercial credit.
a. Open Market Operations: buying and selling of treasury bills.
b. The Bank Rate Policy: The rate of interest at which the central bank offers
loans to commercial banks or discounts their bills
c. Variation in Capital Reserves: All commercial banks are required to keep a
fixed proportion of deposits as reserves with in the central bank.
d. Variation in Cash Reserves: The commercial banks are also required to keep a
fixed proportion of their total deposits in cash form
* Monetary policy may also be taken as part of Financial Regulation
 Fiscal policy
• Fiscal policy refers to the set of decisions taken by a government
regarding the revenue and expenditure structure of the economy.

• It may be expansionary fiscal policy or contradictory fiscal policy.

• Government revenue (tax Vs non tax)

• Government expenditure (public goods, recurrent expenditures, …)

• Budget Deficit and deficit financing (borrowing )

 Government Regulation
• The usual rationale for Government regulation is market failure, the three
most common of which are
a. externalities,
Externalities arise when producing or consuming a product imposes costs
(negative externalities) or confers benefits (positive externalities) on others.
b. information problems,
information imbalance about the quality or safety of a product, or the
qualifications of a service provider
c. monopoly.
arises when a firm (or group of firms acting in concert) has enough market
power to raise prices above the competitive level and thereby extract higher
profits at the expense of consumers and economic efficiency
For and against Government R.
For Against
Prevents unhealthy monopolies and Not needed -- Market forces will
oligopolies compel businesses to work for the
Protects consumers from unsafe and benefit of consumers.
unhealthy products. Regulation is inefficient. Businesses
Protects working people from unsafe have to hire hordes of people to
working conditions. comply with the endless regulations
Protects those who lack a strong voice imposed by government..
in government- “Levels out the playing Regulation kills jobs. Because it
field” with giant corporations. lessens competitiveness
Protects consumers against excessively Regulation increases prices. Complying
high prices. with regulations costs money;
 Government regulation
• It is all about the relationship between business and government and in
particular the government’s role in influencing business decision making
• Better regulation and structural reforms are necessary complements to sound
fiscal and macroeconomic policies
• Government Regulation may take various forms
a. traditional command and control regulation
b. Incentive regulation (subsidy, tax, ….)
• The level of government regulatory power is also related with the political
Economy of the concerned state.
 Political economy
• Political economy is a discipline that explores the
responsibilities of the state with regard to the economy.
• it is the study of the interaction of politics and economics.
• It is about how, given the existing political constraints, societies
can be led to best achieve specific economic objectives.
• This includes not only how to ‘‘overcome’’ political constraints
within the existing institutional framework, but also the design
of political institutions to better achieve economic objectives
Some political economy thoughts/theories

Classical capitalism

Marxism

 Keynesia (Keynes).

Developmentall state
 clasicial capitalism
• Advocates for a laissez-faire economic system where government
intervention shall not exist. Smith ruled out government intervention
except for defence and justice
• There is universal law that governes political economy
• They assumed a perfectly competitive system where the market is
guided by invisible hand that shall regulate the market
• markets has the capacity to self-regulate and little state regulation is
needed
• individual hardship and failure can result from the market. But, the
market as a whole will not fail despite individual failures
 Classical capitalism
• Presumes every person as the best judge of his self-interest who, in
furthering that interest, would also further the common good.
• An individual if left free, will strive for maximizing his wealth; and
hence all individuals, if left free, will maximize the common
wealth.
- A smith
- T malthus
- David Recardo
 marxism
• Marx argued that each stage of human development produced its own particular
laws of motion
• Marx analyses most human societies as class societies, in which a particular
class (slave-owners, feudal lords, capitalists) appropriates the surplus product
of the direct producers (slaves, serfs, workers).
• the Marxian theory tried to explain the plight of capitalism and advocated for
government planning and action
• planned economic development where the role of government is crucial
• Saw history and the economic system materially as a struggle between different
classes and groups in society caused by conflict between the modes and
relations of production
• believed that the role of government is crucial until such conflict vanishes in
communism.
 Marxism
• It believed that economic order results from the unplanned and
uncontrolled acts of individuals and that control must ultimately
reside outside the individual (i.e. in the state)
• The Marxist thought advocated for greater government role in the
economy.
 John Maynard Keynes
• The kenesian school recognises the power of the market. But, it
seeks for government intervention by reasons of monopolies,
externalities, public goods and income inequalities.
• The unregulated free market lacks valuable human sentiments: that
it fosters callousness or insensitivity towards the plight of those who
fail or who are unable to take part in the economic struggle.
• It believed that market failure is deeper and more challenging to the
institution of a private enterprise system and criticized the claims
for market self-regulation
 Developmental state
• the developmental state approaches consider markets and the
government as rival institutions competing for controlling and
coordinating the economy
• It believes that the market failures associated with the problems of
coordinating resource mobilization, allocating investment and
promoting technological catch-up at the developmental stage level
are so pervasive that state intervention is necessary to remedy the
problem.
• government should govern the market.
 Political Economy of Ethiopia
1. Pre-1974
• Modern Ethiopian state is completed around 1900 under the leadership of Emperor
Minilik II.
• From this period to the end of the Imperial rule in 1974, it can be taken as the
formative stage of modern business in the country.
- Feudalism as a political economic system.
2. 1974-1991
• Following the military over through of the Imperial rule, “the working peoples of
Ethiopia”, with the aspiration to “transform Ethiopia in to a socialist society”,
abolished the monarchy
• rural land, urban land and extra house, and major enterprises of production,
distribution and services, became the property of the people.”
 Political Economy of Ethiopia
• In a one chapter (consisting of 9 articles) provisions, the 1987
constitution affirmed, among others, that;
 “the state shall guide the economic and social activities of
the country
“the form of ownership of the means of production are
socialist…”
“The state shall, through ownership of key production,
distribution and service enterprises play the leading role in the
economy.”
“Private ownership shall be, guided by state policy, carry out
activities beneficial to the national economy.”
 Political Economy of Ethiopia
• Eradication of “idolatry of personal gain” was taken as “the basic
principle” of socialism on which the state is build; transfer of all
resources “that are crucial for economic development” and ensuring,
“by participating in essential economic activities not amenable to
complete government ownership, that the public interest is properly
served” were given priority during that time.
• Generally, most of the era of the Derg Regime can be characterised as a
socialist system in which the government controls the economy through
central planning
 Political Economy of Ethiopia
1991-2018
• Among the “fundamental objectives” the Ethiopian Nation,
Nationalities and peoples “have aspired” while adopting FDRE
constitution is advancing their economic and social development.
• The new government acknowledged the impossibility of achieving
these objectives through the central planning of the previous regime.
But, it also acknowledged that the government have significant role in
the economy. Hence preferring a mixed system that lean to the left.
• The 2005 election and the post-election violence that followed has
been acknowledged as a historical juncture for many developments in
Ethiopia
 Political Economy of Ethiopia
• With the believe of getting legitimacy from economic changes in the
country, the Ethiopian government adopted a “developmental state” in
which “the proactive public sector shall lead development” in the
country.
• The government made large investments through public enterprises
even using funds borrowed from both domestic and foreign sources.
• New huge public enterprises were established including METEC and
Sugar Corporation while existing enterprises were expanded. One of
the mandates METEC was given is “to expand and enhance
engineering and technological capabilities...”
 Post 2018 developments
• A public uprising forced the ruling coalition, the Ethiopian People’s
Revolutionary Democratic Front (EPRDF) to make unprecedented
political “reforms” and leadership changes in 2018.
• The political “reform” touches every aspects of public life in the
country including the economy
• (promise to) economic openings and more privatization
• But, the government still admits its role in the economy
• The Medemer “philosophy”????
 Political Economy and B. regulation
• The regulatory role of the government is not rejected by the different
political economic thoughts
• But, the level of government regulation recognized under each political
economic thoughts vary.
• The level of government intervention in the economy in general and the
extent of government regulation of business in particular decreases from left
to right.
Commun Socialis Develo
ism m pmenta Keynesi
l state an Capitali
sm
 Self Regulation
• In principle, self-regulation involves a system of private ordering, without any
form of state intervention; that is, without any imposition of rules by those
with political power.
• Self regulation comprises any rule imposed by a non-governmental actor to a
rule created and enforced by the regulated entity itself
• it connotes some degree of collective constraint, other than that directly
emanating from government
• ‘self regulation’ is placed somewhere middle in the continuum between no-
regulation and government regulation.
• But, there are varieties of self regulation mechanisms which differed from
each other based on the level of autonomy from government and whether
they do have some degree of legal force or not.
Self Regulation
• From the perspective of level of autonomy from government, self regulations may
be
rules private to firms, groups or organisations
Codes of conducts developed by public interest groups
Self regulatory mechanisms approved by a government minister or some independent public
authority
• From the perspective of having legal force, self regulatory mechanisms may be
formally binding
Comply or explain
norms the breach of which leads to non-legal sanctions, such as ostracism; or
standards, compliance with which is purely voluntary.
• Guidelines, standards, code of conducts by individual businesses, association of
business enterprises, chambers of commerce
• Self-regulation can be motivated by self interest or by altruistic moral concerns
(Dis)advantages
Advantages Disadvantages

• Low cost of enforcement • May promote free-riding

• Problem of feasibility and stability
• Rent seeking by self regulators
Market Regulation
• Synonymous for deregulation
• The price, quality, quantity…of goods and services need to be regulated
by the invisible hand of demand and supply
• The government is needed to enforce contracts
Theories of regulation
• The theories try to adress “why the business need to be regulated”
• Theories of regulation may be classified in to two
1. Public interest theories and
2. Private interest theories
Capture theory
Public choice theory
Bootleggers and Baptists
The economic theory
Public interest theory
• The theory holds that politicians seeking to serve the public interest will
regulate only to correct those market failures.
• “Public interest theories of regulation build on the assumption that
regulation is made to pursue some desired economic or social objectives
that benefit the society on the whole, not specific groups.
 unhindered markets often fail because of the problems of monopoly or
externalities.
governments are benign and capable of correcting these market failures through
regulation
• Regulation is needed to fix market failures due to,
Monopoly
Excessive competition
 Externalities
Information asymmetries
Critics

• how public interest is defined, and how policy-makers and regulators

resolve the tensions among alternative formulations of economically
and socially desired objectives.
• regulators may act in the pursue of their own benefit rather than in the
public interest (e.g., they may be interested in the protection or
expansion of their institutional role), or they may lack the expertise to
understand how to affect the behavior of the regulated, or they may
have insufficient tools and resources to perform regulation effectively.
Private interest theories
• regulation is not really intended to protect the consumers from
monopolists or to prevent socially undesirable outcomes, but to pursue
the goals of powerful industrial actors.
• Assumes that “all actors are assumed to rationally pursue their own
interests, especially including the transfer of wealth and the attainment of
rent positions.”
Regulation is not for public purpose
There are different private interest theories
The Capture Theory of Regulation
• The capture theory of regulation is mainly associated to the work of George Stigler,
who argued that: “As a rule regulation is acquired by the industry and is designed and
operated primarily for its benefit” (Stigler 1971: p. 3).
• It stipulates that
Government’s basic resource is the power to coerce.
An interest group that can convince the government to use its coercive power to the
group’s benefit can improve its well-being at the expense of others. Agents (firms,
individuals, government officials, and interest groups) are rational and try to maximize
their own utility (well-being).
politicians and regulators end up being “captured” by special interests, usually the
producers they are intended to regulate. As a result, laws and regulations serve not the
public interest, but those special interests.
Critics

• Many regulations do not appear to serve the industry being

regulated. The capture theory fails to explain why regulators would
get captured and by whom
Public choice theory
• Public choice is not a theory of regulation per se, but an economic
analysis of government behavior that recognizes that
(1) individuals in government (politicians, regulators, voters, etc.) are
driven by self-interest, just as individuals in other circumstances are, and
(2) they are not omniscient. Public choice analysis posits that government
officials are not systematically engaged in maximizing the public interest,
but are attempting to maximize their own private interests.
public choice is concerned with the economic waste inherent in efforts to
change laws or regulations in order to privilege one group over another.
Such activity is called rent-seeking.
The economic theory

• argued that government regulation is the result of the forces of demand and
supply between politically effective economic interest groups and the
government.
• government regulation is nothing but supply of rules of behaviour to the
economic interest groups in consideration of the support the politicians may
get from the groups and that the demand for regulation comes from the
groups that seek the economic benefits the government can provide through
regulation
• It differed from the capture theory by arguing that the 'capture' of the
regulator is not only by the regulated parties as it is also by interest groups
other than the regulated parties and that the 'capture' of the regulator is not
accidental but a result of conscious exercise of the political behaviour of
people which is not different from their choice-making behaviour in the market
Economic regulation and social regulation

• Regulation Can be broadly categorised in to economic and social

regulation based on the focus and objectives it sets.
• Accordingly, regulatory measures taken by the government or those in the
industry are meant to serve either social Objective or economic objectives
• But, the two objectives are not mutually exclusive.
Economic regulation

• In a market economy,
• individual firms make decisions about what to produce, how much to
produce, how much to charge, and what inputs to use.
• Consumers and workers decide how much to spend, how much to save,
how much to work, and what to buy.
• Through the interaction of supply and demand, markets allocate goods
and services to their highest and best uses
• Economic regulation is the use of government power to restrict the
decisions of economic agents
• Government control the behaviour of business in the marketplace
Economic Regulation

• Economic regulations intervene directly in market decisions such as

pricing, competition, market entry or exit.
• Economic regulation usually governs a broad base of activities in
particular industries using economic controls such as price ceilings or
floors, production quantity restrictions, service parameters and qualities.
• Economic regulation consists two types of regulation: Structural
regulation and Conduct regulation.
 Economic regulation
• Structural regulation is Used to regulate the market structure,
It regulates entry and exit, requirement of qualification for providing professional
services.
Limited the number of firms, by limiting new entrants and prohibiting existing firms from
exiting a market
• Conduct regulation regulates the behavior in the market. Price regulation,
quantity, quality standards, rules on advertisement
• Through Economic regulation, the government may Control prices or wages,
allocate public resources, Set the number of participants,
Price Regulation
• “For a very small expense the public can facilitate, can encourage, and
can even impose upon almost the whole body of the people the
necessity of acquiring those most essential parts of education. The public
can facilitate this acquisition by establishing in every parish or district a
little school, where children may be taught for a reward so moderate that
even a common labourer may afford it.” (Smith, 1776, Vol. 2, p. 785).
• Price regulation is used interchangeably with price control. The
fundamental idea behind price controls is that if the free movement of
certain prices produces very bad consequences or if it makes it
impossible, or very difficult, to attain some important national goals, it is
legitimate to keep an eye on these prices.
Price Regulation
• Price controls’ does not necessarily mean government imposition of some
precise
• It rather may refers variety of policies by which market prices that are
causing problems can be modified or influenced.
• Maintaining low level for essentials or increasing prices for harmful goods
• It may include
a legal maximum on a given price ( E.g. rent)
a legal minimum (as the minimum wage)
a minimum price at which the government promises to buy and a
maximum at which it promises to sell
Price regulation
• Government price controls can be employed to provide basic rights to
citizens while keeping a productive flow in the economy
• Time and sector need to be considered
• In terms of the scope of price control, price control in a country may be
General price Control Vs specific price control
• General price control is a price control over all goods and services
• Specific …over specific products
• Price controls are most frequently imposed in markets with natural
monopoly or oligopoly components without free entry, where the
undertaking(s) concerned are likely
Price Regulation
• While price regulation may inhibit the excessive profit by the regulated
entity, it avoids incentives to minimise costs
• It seems to be appropriate in case of monopoly production and
government firms (SOEs)
• Price regulation may be
Discretionary price setting (setting price randomly)
Price setting for particular services based on costs
Price cap regulation (price for upcoming period= starting price + (Inflation –
productivity)
Social regulation
• Aimed at such important social goals as protecting consumers and the environment and providing
workers with safe and healthy working conditions
• Includes regulations which apply to all businesses
 Pollution laws
 Safety and health laws
 Job discrimination laws
• Others that only apply to certain businesses
e.g. Consumer protection laws for businesses producing and selling consumer goods
• social regulation aims to cope with market failures independent of the market structure, namely
externalities and/or information problems.
• Social regulations protect public interests such as health, safety, the environment, and social
cohesion.
• The economic effects of social regulations may be secondary concerns or even unexpected, but
can be substantial
• Correcting the ill side effects of capitalism
Social regulation
• Regulations about the discharge of harmful wastes
• Safety regulation in workplaces
• Information on the packaging of goods or labels
• Banning discrimination on the recruitment of personals on any ground
• Prohibition of supply of certain goods or services unless they get special
license
• Nowadays, the distinction between economic and social regulation is
diminishing.
• First, the regulation of natural monopolies deals with externalities and
information problems as well, whereas social regulation cannot ignore
competition issues.
• A second factor undermining the significance of the distinction between
economic and social regulation is that the former is not exclusively
concerned with natural monopolies. Actually, some of the oldest forms of
economic regulation were established not to counter market power, but
rather to insulate the supply of certain services from ‘excessive’ or
‘destabilizing’ competition
Business regulation In Ethiopia
• There is no clear legal definition for regulation in Ethiopia even if there are
regulatory works done by ministries and different agencies
• The FDRE constitution is not also clear about the role of the government in the
economy in general and business regulation in particular. But, significant portion
of the constitution deals about the economy. The preamble for example
provides
• “Strongly committed, in full and free exercise of our right to self-determination,
to building a political community founded on the rule of law and capable of
ensuring a lasting peace, guaranteeing a democratic order, and advancing our
economic and social development”
• “Convinced that to live as one economic community is necessary in order to
create sustainable and mutually supportive conditions for ensuring respect for
our rights and freedoms and for the collective promotion of our interests;”
Business regulation In Ethiopia
Article 12 Conduct and Accountability of Government.
1. The conduct of affairs of government shall be transparent.
2. Any public official or an elected representative is accountable for any
failure in official duties.
Article 40 The Right to Property
Business regulation In Ethiopia
Article 41
Economic, Social and Cultural Rights
1. Every Ethiopian has the right to engage freely in economic activity and to pursue a livelihood of
his choice anywhere within the national territory.
2. Every Ethiopian has the right to choose his or her means of livelihood, occupation and profession.
3. Every Ethiopian national has the right to equal access to public funded social services.
4. The State has the obligation to allocate ever increasing resources to provide to the public health,
education and other social services.
5. The State shall, within available means, allocate resources to provide rehabilitation and assistance
to the physically and mentally disabled, the aged, and to children who are left without parents or
guardian.
6. The State shall pursue policies that aim to expand job opportunities for the unemployed and
the
poor and shall accordingly undertake programmes and public works projects.
7. The State shall undertake all measures necessary to increase opportunities for citizens to find
gainful employment.
8. Ethiopian farmers and pastoralists have the right to receive a fair price for their products, that
would lead to improvement in their conditions of life and to enable them to obtain an equitable
share of the national wealth commensurate with their contribution. This objective shall guide the
State in the formulation of economic, social and development policies.
9. The state has the responsibility to protect and preserve historical and cultural legacies, and to
contribute to the promotion of the arts and sports.
Business Regulation In Ethiopia
Article 42 Rights of Labour
Article 43 The Right to Development
Article 4 Environmental Rights
Article 49 Capital City
The Special interest of the State of Oromia in Addis Ababa, regarding the
provision of social services or the utilization of natural resources and
other similar matters, as well as joint administrative matters arising from
the location of Addis Ababa within the State of Oromia, shall be respected.
Particulars shall be determined by law.
Business Regulation
Article 50 Structure of the Organs of State
Article 51 Powers and Functions of the Federal Government
Article 52 Powers and Functions of States
Article 55 Powers and Functions of the House of Peoples' Representatives
Article 62 Powers and Functions of the House of the Federation
Article 74 Powers and Functions of the Prime Minister
Article 77 Powers and Functions of the Council of Ministers
Article 89 Economic Objectives
1. Government shall have the duty to formulate policies that ensure that all Ethiopians can
benefit from the country's legacy of intellectual and material resources.
2. Government has the duty to ensure that all Ethiopians get equal opportunity to improve
their economic condition and to promote equitable distribution of wealth among them.
3. Government shall take measures to avert any natural and manmade disasters, and, in
the event of disasters, to provide timely assistance to the victims.
4. Government shall provide special assistance to Nations, Nationalities, and Peoples least
advantaged in economic and social development.
5. Government has the duty to hold, on behalf of the People, land and other natural
resources and to deploy them for their common benefit and development.
6. Government shall at all times promote the participation of the People in the formulation
of national development policies and programmes; it shall also have the duty to support
the initiatives of the People in their development endeavors.
7. Government shall ensure the participation of women in equality with men
in all economic and social development endeavors.
8. Government shall endeavor to protect and promote the health, welfare
and living standards of the working population of the country.
Article 90 Social objectives
1. To the extent the country’s resources permit, policies shall aim to provide all
Ethiopians access to public health and education, clean water, housing, food and
social security.
2. Education shall be provided in a manner that is free form any religious
influence, political partisanship or cultural prejudices
Article 92 Environmental Objectives
1. Government shall endeavor to ensure that all Ethiopians live in
a clean and healthy environment.
2. The design and implementation of programmes and projects of
development shall not damage or destroy the environment.
3. People have the right to full consultation and to the expression
of views in the planning and implementations of environmental
policies and projects that affect them directly.
4. Government and citizens shall have the duty to protect the
environment
Business regulation in Ethiopia
Article 94 Financial Expenditures
Article 96 Federal Power of Taxation
Article 97 State Power of Taxation
Article 98 Concurrent Power of Taxation
Article 99 Undesignated Powers of Taxation
Article 100 Directives on Taxation
 Economic regulation in Ethiopia
• Regulation of Entry
Constitution
Commercial Code
Public enterprises Proclamation
Civil Society proclamation
A Proclamation on the Defense Forces of the Federal Democratic Republic of
Ethiopia
Commercial Registration and Business Licensing Proclamation
Media proclamation
Banking, Insurance, MFI Proclamations
EIA
Telecom proclamation
• The invest proclamations and regulations
• Trade Practice and Consumers’ Protection Proclamation restricts anti-
competitive behaviours
Regulation of Conduct/operation
a. Price regulation
- Ministry of trade fixed price regulation on oil and some basic goods,
- Tariffs on public transport
- Interest rate regulation
- minimum wage
- What else?
b. Quality regulation
The Ethiopian quality and standards authority established under
Proclamation No. 102/1998, is empowered to regulate quality in Ethiopia.
• The authority is empowered, among, others to
to solely approve and declare Ethiopian standards
 to formulate, approve, declare and issue Ethiopian standards for a
general and specific application as may be necessary
to order, subject to prior notice, the closure of factories or business
undertakings or the cessation of operations, or ban the movement of
products, where the products and or processes do not conform to the
relevant compulsory Ethiopian Standards;”
• Ethiopian conformity assessment enterprise
• The Transport Authority
C. Advertisement
Social regulation
- Environmental regulation
- Labour regulation
- Consumer protection
Regulatory institutions
• Regulation may be Self regulation, market regulation and state regulation or
a combination of two or three of them.
• Regulation, however, is usually used to mean state regulation.
• in State regulation, there are , specific regulatory agencies.
• Specific Regulatory agencies
 do not fall clearly into the realm of any of the three branches of
governmentt
Independent regulators are separate “agencies” at arms’ length from the
political system
They are referees enforcing the “rules of the game” in business activities
• In countries like Sweden, a clear distinction is made between the policy-
making government, with its ministers and their departments, and the
policy-implementing agencies.
 Regulatory institutions in Ethiopia
• Most of the ministries have regulatory power
• Proclamation No. 1097/2018 has established 19 ministries (replaced by
Proclamation No. 1263-2021
• There are also specialized agencies established to regulate various sectors.
National Bank regulates financial institutions
Ethiopian Electricity Authority
Ethiopian Telecommunications Authority
the Ethiopian Civil Aviation Authority
the Transport Authority
The Maritime Affairs Authority,
 the Ethiopian Radiation Protection Authority (as regulator of the market
for radiation services and use of radioactive materials),
• the Quality and Standards Authority (as standard setter for quality of goods
and services),
• the Education Relevance and Quality Agency (as regulator of the quality and
relevance of higher education),
• the Ethiopian Roads Authority (as regulator of the construction and use of
highways and roads of the national network),
• the Ethiopian Drug Administration and Control Authority (as regulator of the
manufacture, trade, use and trial of drug and medical equipment)
• the Ethiopian Broadcasting Authority
Ministries
the Ministry of Peace; the Ministry of National Defence;
the Ministry of Foreign Affairs; the Ministry of Finance;
the Ministry of Agriculture;
the Ministry of Trade and Industry; the Ministry of Innovation and Technology;
the Ministry of Transport; the Ministry of Urban Development and
Construction;
the Ministry of Water, Irrigation and Energy; the Ministry of Mines and Petroleum;
the Ministry of Education; the Ministry of Science and Higher Education;
the Ministry of Health the Ministry of Women, Children and Youth;
the Ministry of Labor and Social Affairs; the Ministry of Culture and Tourism;
 The regulatory process
a. Formal rulemaking
b. Informal rulemaking
- Notice
c. Onsite and offsite examination
d. Public Involvement
f. Taking Administrative measures and/or criminal prosecution
Designing and enforcing of Regulation
• Regulation plays an important role in helping markets function effectively, and
ensuring that they support wider policy goals.
• Regulation can also distort competition particularly by affecting the scope for
new firms to enter markets, and the ability and incentives of firms to compete
with each other.
• It is important to identify possible unintended consequences of regulation.
Carrying out a competition assessment of new policy can help with this.
• To reduce distortions, policy makers should seek to minimise regulation, subject
to achieving the wider policy objective.
• Market-based approaches can sometimes be an effective alternative to direct
regulation, harnessing markets in a way that fits with wider policy goals.
• Therefore, a careful designing and enforcement of regulation is vital.
Designing
• Balancing, self regulation , market regulation and state regulation
• Identification of economic and social objectives for regulation
• Making regulatory impact analysis,
• examines and measures the likely benefits, costs and effects of
new or changed regulations.
• the consideration of regulatory alternatives.
• ensuring regulatory transparency and administrative simplicity.
 Regulatory Alternatives
• In the OECD countries various alternatives are identified.
Explicit government regulation also known as ‘black letter law’
-Prescribes how regulated parties must act under the law, and it generally
imposes punitive sanctions
Performance-based regulation
-is regulation that sets objectives or standards for outcomes and allows the
regulated entity some flexibility to determine the means by which they will
meet these objectives.
management-based regulations
-requires businesses to demonstrate that they are meeting regulatory
objectives through the requirement to have in place management processes
directed at achieving regulatory outcomes.
Co-regulation
-an industry or professional body develops the regulatory arrangements
(e.g. a code of practice, accreditation or rating schemes) in consultation
with a government.
-While the industry administers its own arrangements, the Government
provides legislative backing to enable the arrangements to be enforced.
Self-regulation
Non regulation
enforcing, evaluation and revision of regulation

Enacting laws is not enough

Enforcement and follow up is needed
-Reporting
-Field examination
Regulation is flexible. Needs evaluation and revission
 Cost of regulation and Regulatory Failures
• Cost of regulation
Formulating and implementation cost
Monitoring, enforcement cost
• Regulatory Failures
Capacity/knowledge problem of the regulator
Rent-seeking behaviors of the regulators (mal administration)
Compliance and compliance failures
• Regulatory compliance refers to obedience by a target population with regulations.
• A study in OECD countries identified eight causes of non-compliance from the
point of view of those targeted:
− Failure to understand the law.
− Collapse of belief in law.
− Procedural injustice.
− Costs of regulatory compliance.
− Deterrence failure.
− Incapacitation of those regulated.
− Failure of persuasion.
− Failure of civil society.
 Transnational Business Regulation
1.Globalization and Business
a. TNCs and other foreign investors (Branch, agent,
participation, New subsidiary, New company)
b. International Trade
- Import
- Export
- (transit)
 Trans-National Regulation

2. Regulation

• The regulation of international business transactions occurs through a

dispersed, diverse and incomplete system of governance at the national,
transnational and international levels.

• Regulatory rules at industrial, national and international level may some

times be incompatible in form, procedure, and content
 Transnational Business Regulation
a. Self Regulation by TNC

- Should it be the same across jurisdictions?

b. Transplantation of regulatory rules by domestic Regulators

- Globalization enables nations to adopt regulatory models and rules

of other nations or international organizations
 Transnational Business Regulation

C. Inter-governmental bodies
- WTO
(GATT, GATS…)
- The United Nations Commission on International Trade Law (UNCITRAL)
(different conventions and model laws)
D. Private organizations
- Icc
e.G INCOTERMs
 Incoterms
1. RULES FOR ANY MODE OR MODES OF TRANSPORT
• EXW | Ex Works
• FCA | Free Carrier
• CPT | Carriage Paid To
• CIP | Carriage and Insurance Paid To
• DAP | Delivered at Place
• DPU | Delivered at Place Unloaded
• DDP | Delivered Duty Paid
2. RULES FOR SEA AND INLAND WATERWAY TRANSPORT
• FAS | Free Alongside Ship
• FOB | Free On Board
• CFR | Cost and Freight
Business regulation During the Covid-19
Pandemic
 Summery Business Regulation
1. Entry regulation (Regulation during starting a business)
- Who, what, when, how,
2. Operation/conduct
- How
- Price, quality, quantity,
- Information and advertisement
- Working condition, Environment,
- local content requirement,
- 3. exit
 Assignment one
Legal Requirements for Starting A Business in Ethiopia: A comparative Study with Kenya and Tanzania
- For individuals, companies and foreign investors
- Procedures
- Capital requirements
- Technological platform to process
- Payments
- Will be rewarding if you look the practice, at least, in Dessie too
Assignment Two (Concept)
First based on the sector they work
1. Environmental Regulation in Ethiopia
2. Labour Regulation in Ethiopia
3. Regulation of Advertisement
4. Regulatory Power of Federal and Regional Governments in Ethiopia
5. Constitutional and Legal framework regarding quality regulation in Ethiopia
6. Regulation of minimum wage in Ethiopia
7. Regulation of labour discrimination in Ethiopia
8. Regulation of residential house rent in Ethiopia
9. Price Regulation in Ethiopia
10. The economic role of the FDRE government under the FDRE constitution
11.