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July 9, 2007
Observations on Ethiopia

The Ethiopian government turned to Emory Law Professor Fred Tung for help in revising its commercial code, which governs business formation and transactions. This essay is excerpted from Tung’s online blog.

I’m just back from a week in Ethiopia, where I consulted with the Ministry of Justice on reform of Ethiopia’s commercial code. My short stay there — my first time in Africa — left me with many impressions about business, law, economics and society, which I am still processing.

The commercial code incorporates a lot of stuff, including business organization law and bankruptcy law. The Ministry of Justice and foreign commercial interests are vitally interested in modernizing commercial law — and with it, the economy. The Minister himself showed up on the first day of our meetings, along with the French ambassador. The current code was enacted in 1960 during the reign of Emperor Haile Selassie. Since then, Ethiopia has been through coups, communism and contested elections. The current government has committed to privatizing the socialist economy it inherited.

A modern commercial code, of course, is but one (probably not the first) factor in successful development of the economy. The country is quite poor: over 80% of the population survive by subsistence farming and livestock grazing. The capital Addis Ababa feels like a typical third-world capital, in some ways more so. Traffic is not as bad as Bangkok or Jakarta or New Delhi, but pollution from the cars is probably worse. Few of the autos seemed to use tailpipes, as the smell of exhaust in the passenger compartment was quite strong in every car I rode in. There is more livestock herding through city streets than I’ve ever encountered.

One striking aspect of Ethiopia — that everyone from cab drivers to Ministry lawyers comment on — is its ethnic fragmentation. A political compromise in 1995 formalized a system of ethnic federalism. The country is divided into nine ethnically-based administrative regions, each of which has its own official language. Court proceedings, for example, are conducted in different languages in each region. Each person’s national ID card specifies his or her ethnic group. The dominant language in Addis Ababa is Amharic, but any attempt to promote a national language — as Mao did by mandating Mandarin education in primary school in China — is apparently fraught with political peril. Eritrea of course seceded in 1993, and separatist movements in other regions are active.

The implications of this ethnic-political structure are of course far-reaching. Forgive the reduction, but to the American-trained lawyer-academic interested in economic development, this feels like one big transaction cost. Besides language and ethnic fragmentation to make commercial interaction more difficult internally, the country also relies on the Julian calendar and a system of time keeping based on sunrise and sunset. For example, “one” o’-clock in the morning is one hour after sunrise (or our 7 a.m.). These latter of course may simply be artifacts — and not causes — of an incomplete engagement with external commercial activity. On the whole, though, the circumstances suggest that economic progress will be slow. Commercial law reform is probably necessary, but hardly sufficient.

I met a doctor on the flight home who spends several months of each summer leading U.S. medical teams in Africa doing spot medical relief all over the continent. He captured my sentiments pretty well when he described his sense of an overwhelming task, where one has to be content with the small steps one can effect in a short time.

For more on Tung’s reflections on Ethiopia, visit his blog at www.theconglomerate.org/.

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