The main objective of this study is to explore Ethiopian public enterprises in light of competition neutrality framework with particular emphasis to the banking sector.
Establishing SOEs is one of the modes of government intervention in the economy. Such direct role of the government in the economy will have both positive and adverse effects in the commercial environment. It has positive contributions since public enterprises tried to achieve different social objectives as their primary roles. In contrast, as a result of being owned by the government, they are preferential treated in different manners that impede business activity of private undertaking in the same market. Such preferential advantages are not based on better performance, superior efficiency, better technology or superior management skills but are merely government-created. To overcome such adverse effects the OECD come up with a competition neutrality framework that connotes a similar set of rules to public enterprises and private undertaking. It further demonstrates major set of rules from different countries experiences. These are the similar rules in taxation regime, procurement rules, bankruptcy rules and proceeding, the general applicability of the competition law and its enforcement, and the prohibitions of subsidies including exclusive market advantages.
Currently the Ethiopian government own public enterprises in different sectors of the economy that needs critical assessment from competition neutrality points of view. The Ethiopian banking sector in general and one of the state owned bank called CBE conducts are criticized as competition distorting. This triggers the study to explore the status of SOEs in light of the areas of competition neutrality framework particular emphasis to the banking sectors. The research was conducted based on qualitative research approach by analyzing laws, documents and data collected through interview. This research is particularly studied by exploring the legal and practical treatment of private and public banks from Ethiopian taxation regime, public procurement ,competition law and enforcement, bankruptcy laws and de facto/de jure exclusive markets. Moreover, it tried to pin point adverse effects of such anti competition neutrality rules on private banks.
Table of Contents
CHAPTER ONE
INTRODUCTION
1.1.Background of the study
1.2.Statement of the Problem
1.3.Objective of the study
1.3.1.General objective
1.3.2.Specific Objective
1.4.Research Question
1.4.1.General Research Question
1.4.2.Specific Research Question
1.5.Significance of the Study
1.6.Review of Literature
1.7.Research Methodology
1.7.1.Research Design
1.7.2.Data sources and Collection Tools
1.7.3.Sampling Techniques
1.7.4.Method of Data Analysis and Interpretation
1.8.Scope and Limitation of the study
1.9.Organization of Chapters
CHAPTER TWO
GENERAL OVERVIEW OF STATE OWNED ENTERPRISES AND BANKING BUSINESS IN ETHIOPIA
2.1. Introduction
2.2. Meaning of State Owned Enterprises
2.3. The Raison d’être for the Establishment of State Owned Enterprises
2.4. Major Distinctions of Public and Private Enterprises
2.4.1. Differences in Objectives and Proximity to the Government
2.4.2. Difference in Legal Framework and Extent of Public Accountability
2.5. The Current Legal and Policy Environment of Banking Business in Ethiopia
CHAPTER THREE
COMPETATION NEUTRALITY FRAMEWORK IN GENERAL
3.1. The Concept of Competitive Neutrality Framework (“CNF”)
3.2. The Major Priority Areas of Competitive Neutrality Framework
3.2.1. The Treatment of SOEs under the Taxation Legal Regime
3.2.2. The Scope of Competition Law and its Enforcement on SOEs
3.2.3. The proper Application of Procurement Rules and procedures
3.2.4. The scope of the Bankruptcy laws and proceeding
3.2.5. Monopoly Power and Exclusive Rights
3.2.6. Controlling of Direct and Indirect subsidies to SOEs
3.3. Corporate Governance of SOEs and Competitive Neutrality Framework
CHAPTER FOUR
ETHIOPIAN PUBLIC ENTERPRISES IN LIGHT OF COMPETITION NEUTRALITY; THE CASE IN BANKING SECTOR
4.1. The Current Roles of Ethiopian Government in the Business
4.2. Competitive Neutrality Framework in Ethiopia
4.2.1. Ethiopian Public Enterprises In Light of Taxation Neutrality: Focus On Banking Business
4.2.1.1. Ethiopian SOEs from Business Taxation Perspective
4.2.1.2. Ethiopian Public Enterprises from Value Added Tax Outlook
4.2.1.3. Ethiopian Excise tax and Custom Proclamation in light of Competitive Neutrality
4.2.2. The Scope of Ethiopian Bankruptcy Laws and Proceeding on SOEs
4.2.3. Exclusive Advantages and Subsidies to Public Enterprises: Focus in Banking Busines
4.2.3.1. Civil Servants’ Salary Payment Restrictions
4.2.3.2. Financing of Grand Housing Program
4.2.3.3. The Exclusive rights of CBE to process Letter of credit
4.2.3.4. Private Banks Obligation to Buy Government Treasury Bonds
4.2.3.5. Practical Restrictions to Open Branches in Industrial Park and Public Universities
4.2.3.6. Anti competition Neutrality Rules under the Civil and Commercial codes of Ethiopia
4.2.4. Ethiopian Public Enterprises Under the Competition Law and Enforcement Scheme
4.2.4.1. Objectives of Ethiopian Competition Law
4.2.4.2. The Scope of Ethiopian Competition Law
4.2.4.3. The Enforcement of Ethiopian Competition Law against SOEs and Its Challenges
4.2.4.4. The Case of Merger Regulation in the Ethiopian Banking Sector
4.2.5. Ethiopian Public Procurement From Competition Neutrality Viewpoint
4.2.5.1. The scope of the Ethiopian procurement Law
4.2.5.2. The power of the Federal Public Procurement and Property Administration Agency
CHAPTER FIVE
CONCLUSION AND RECOMMENDATION
5.1. Conclusion
5.2. Recommendation
Research Objectives and Themes
The primary objective of this study is to explore the status of Ethiopian public enterprises within the framework of competition neutrality, with a specific focus on the banking sector. The research aims to evaluate how government-owned enterprises, particularly the Commercial Bank of Ethiopia (CBE), are treated compared to private sector competitors in terms of legal, regulatory, and market access advantages.
- Analysis of State-Owned Enterprises (SOEs) in Ethiopia and their regulatory environments.
- Evaluation of competitive neutrality principles in taxation, bankruptcy law, and procurement.
- Assessment of exclusive advantages and subsidies granted to public banks over private ones.
- Examination of the institutional challenges in enforcing competition law against state-backed entities.
Excerpt from the Book
4.2.1.1. Ethiopian SOEs from Business Taxation Perspective
Ethiopia has different types of tax impositions in different commercial activities .The first is linked with business income taxation. Public enterprises in general and state owned banks in particular that engaged in commercial activities taxed equally with corresponding private undertaking. The rate, assessment and payment, grievances procedure, exemptions and deductions should be accorded to taxation neutrality. The new income tax proclamation stipulated a flat rate of 30% business income tax on bodies. Basically the proclamation failed to define what body implies. The inclusion or other wise of public enterprise under body is not clear despite SOEs operate a commercial activity. However, the tax administration proclamation tried to clarify the implication of bodies from income tax perspective. Accordingly, it stipulated as;
"[Body] means a company, partnership, public enterprise or public financial agency, or other body of persons whether formed in Ethiopia or elsewhere;" [Emphasis added]
Hence, public enterprises are considered as body like that of other company or partnership and the law subjects them to pay a business income tax with equal ranges. Not only in the case of the tax rate but also the income tax proclamation doesn't grant any preferential treatments related to deductions of expenditures. The whole entitlement or duties that apply for other private undertaking will simultaneously apply to SOEs. Thus, all public enterprises including Ethiopian commercial bank required to pay business income tax to the government. The income tax proclamation tried to put both private and public enterprises with equal footing. Thus, the Ethiopian tax law is one step ahead in light of competitive neutrality framework.
Summary of Chapters
CHAPTER ONE: INTRODUCTION: This chapter provides an overview of public enterprises, the research problem, and the methodology used to analyze the competitive position of SOEs in Ethiopia.
CHAPTER TWO: GENERAL OVERVIEW OF STATE OWNED ENTERPRISES AND BANKING BUSINESS IN ETHIOPIA: This chapter explores the theoretical reasons for state intervention and the historical development of the Ethiopian banking sector.
CHAPTER THREE: COMPETATION NEUTRALITY FRAMEWORK IN GENERAL: This chapter discusses the conceptual framework of competitive neutrality as defined by the OECD and its various pillars, including taxation and procurement.
CHAPTER FOUR: ETHIOPIAN PUBLIC ENTERPRISES IN LIGHT OF COMPETITION NEUTRALITY; THE CASE IN BANKING SECTOR: This chapter analyzes the legal and practical conditions of Ethiopian public enterprises, highlighting anti-competitive practices in the banking sector.
CHAPTER FIVE: CONCLUSION AND RECOMMENDATION: This chapter summarizes the research findings and provides specific policy recommendations to the Ethiopian government and relevant regulatory institutions.
Keywords
Competitive Neutrality Framework, State Owned Enterprises, Ethiopian Banking Sector, Commercial Bank of Ethiopia, Competition Law, Taxation Neutrality, Public Procurement, Anti-competitive Practices, Market Distortion, Bankruptcy Law, Regulatory Capture, Financial Regulation, Fair Competition, Government Intervention, Economic Policy.
Frequently Asked Questions
What is the core subject of this research?
The research fundamentally examines the role of Ethiopian public enterprises in the economy, specifically evaluating whether they compete on an equal footing with private sector firms under a competitive neutrality framework.
What are the central themes of the work?
The central themes include market competition, regulatory barriers, the legal treatment of State-Owned Enterprises (SOEs), the role of government subsidies, and the specific dynamics of the Ethiopian banking sector.
What is the primary objective of this study?
The primary goal is to investigate how Ethiopian public enterprises are situated regarding competitive neutrality, with a specific focus on identifying anti-competitive practices within the banking sector.
Which methodology is employed in this research?
The study utilizes a qualitative research approach, incorporating the analysis of relevant laws, government documents, and primary data collected through semi-structured interviews with key institutional stakeholders.
What does the main body of the work cover?
The main body focuses on priority areas like taxation, bankruptcy laws, public procurement procedures, competition law enforcement, and the identification of exclusive advantages given to state-owned banks.
Which keywords best characterize this work?
Keywords include Competitive Neutrality, SOEs, Banking Sector, Ethiopia, Commercial Bank of Ethiopia, and Competition Law.
How does the Commercial Bank of Ethiopia (CBE) maintain its competitive edge?
According to the study, the CBE benefits from de facto and de jure exclusive advantages, such as exclusive rights to process government letters of credit and restrictions on where private banks can open branches.
What role does the National Bank of Ethiopia (NBE) play in these competition issues?
The NBE acts as a regulator for the banking sector but has been criticized for enacting directives that private banks perceive as distorting competition, often without consulting the relevant competition authorities.
Why is the lack of a comprehensive competition policy a significant issue in Ethiopia?
The absence of a clear policy allows government entities to act in favor of SOEs, leading to inconsistent rules and practices that create an uneven playing field for private sector competitors.
- Quote paper
- Saleamlak Yemane (Author), 2019, Ethiopian Public Enterprises in Light of Competition Neutrality. The Case in Banking Sector, Munich, GRIN Verlag, https://www.grin.com/document/595668
