lOMoAR cPSD| 37089305

ADDIS ABABA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF ACCOUNTING AND FINANCE

Business Law
Group Assignment

Section 3

Name ID Numbers

Getnet Kibretu UGR/ 3427/15

Kenenisa Getachew UGR/8621/15

Kidus Muluken UGR/2447/15

Kaleab Getachew UGR/3057/15

Gelana Defaru UGR/2917/15

Hermela Agalu UGR/8760/15

Ibrahim Kemal UGR/2010/15

Submitted to: Instructor Sewagegne D.

Submission Date: 11/05/2024

 lOMoAR cPSD| 37089305

Contents
Introduction .................................................................................................................................................... 1

1. Negotiable instrument ................................................................................................................................ 2

1.1 Type of negotiable instruments and their function and problems. ....................................................... 2

1.2 The ways of Endorsing and transferring negotiable instruments ......................................................... 4

1.3 The rights and responsibilities of the parties in negotiable instruments. ............................................. 5

2. Labor Law: Identify the Ethiopian Labor Proclamation NO.1156/2019 ............................................... 7

2.1 The conditions of work Ethiopian Labor Proclamation NO.1156/2019 ........................................ 7

2.2 The role of trade unions in industrial peace and productivity .............................................................. 7

2.3 Dispute resolution mechanisms and discuss the advantages and disadvantages of each..................... 9

2.4 The rights and obligation of employer and employees .......................................................................11

2.5 Distinguish legal and illegal dismissal and discuss their respective consequences briefly. ........ 12

3. Banking Business ................................................................................................................................. 12

3.1. The Meaning Banking and Banking Services in the Types of Ethiopia. ..................................... 12

3.2The Evolution and development of banking services Ethiopia........................................................... 13

3.3 Types of banks in Ethiopia and their respective roles ........................................................................ 14

4. Public Enterprises ................................................................................................................................ 15

4.1 Meaning of Public Enterprise ............................................................................................................ 15

4.2 Historical Development of Public Enterprise .................................................................................... 15

4.3 Major Function of Public Enterprise ........................................................................................... 16

4.4 Types, governance, and grounds of dissolution in light of Proclamation No.25/1992 ...................... 17

4.5. Are They Paying Taxes? .................................................................................................................... 19

Conclusions .................................................................................................................................................. 20

References .................................................................................................................................................... 21
 lOMoAR cPSD| 37089305

Introduction
This assignment provides an overview of several important topics. It begins with an explanation
of negotiable instruments, The three main types of negotiable instruments are discussed, along
with the process of endorsement and transferring.

The rights and responsibilities of the parties involved in negotiable instruments are outlined,
including the issuer, payee, and drawee.

The Ethiopian Labor Proclamation No.1156/2019 is introduced, highlighting its coverage of work
conditions, trade unions, and the role they play in promoting industrial peace and productivity. The
proclamation emphasizes various aspects of labor relations, including wages, leave, health and
safety, and dispute resolution mechanisms.

Dispute resolution mechanisms are explored, including negotiation, mediation, arbitration, and
litigation. The advantages and disadvantages of each mechanism are discussed, considering factors
such as cost, time, control, and enforceability. And also include the The rights and obligation of
employer and employees

The banking business in Ethiopia is described, including its evolution, types of banks, and their
roles in providing financial services. The impact of government policies and initiatives on the
development of the banking industry is also mentioned.

Lastly, public enterprises are introduced as government-owned entities operating in various

sectors. The meaning, historical development, grounds for dissolution, and tax issues related to
public enterprises are briefly discussed.

Overall , this assignment provides a broad overview of negotiable instruments, labor laws, dispute
resolution mechanisms, banking business, and public enterprises.

1
 lOMoAR cPSD| 37089305

1. Negotiable instrument
1.1 Type of negotiable instruments and their function and problems.

A negotiable instrument is a document that represents a promise to pay a specific amount of money
to a specific person or bearer (whoever holds the instrument) on demand or at a specific time in
the future. The primary characteristic of negotiable instruments is that they can be freely
transferred from one party to another, typically by endorsement (a signature on the back of the
instrument). This makes them valuable for commercial transactions because they can be used as a
means of payment or a form of credit. For an instrument to be considered negotiable, it must meet
certain requirements, including:

• It must be in writing.
• It must be signed by the person making the promise to pay (the maker or drawer).
• It must contain an unconditional promise to pay a specific amount of money.
• It must be payable to a specific person or bearer.
three main types of negotiable instruments are: promissory notes, bills of exchange, and checks.
1. Promissory notes:
A promissory note is a written promise to pay a certain amount of money at a specified time. It is
a two-party agreement in which the maker of the note promises to pay the payee.The payee can
transfer the right to receive payment to a third party through endorsement, making the promissory
note a negotiable instrument.
Functions:
A promissory note is a written document that contains a promise from one party, known as the
issuer or maker, to pay a specific sum of money to another party, known as the payee, within a
predetermined timeframe.
Promissory notes are commonly used in various financial transactions, such as loans, debts, or
repayment agreements.
They provide a formal record of the borrower's commitment to repay a debt, including the
principal amount borrowed and any applicable interest or fees.

2
 lOMoAR cPSD| 37089305

Problems:
Risk of Default: If the issuer fails to fulfill their promise to pay according to the terms and
conditions specified in the note, the payee may face difficulties in recovering the owed amount.
This can lead to financial loss and potential legal actions.

Unclear or Disputed Terms: Disputes can arise if the terms of the promissory note are unclear,
ambiguous, or disputed by either party. In such cases, it may be challenging to enforce the note
and ensure proper repayment.

Insufficient Collateral: If a promissory note is secured by collateral, such as assets or property,

there is a risk that the value of the collateral may be insufficient to cover the outstanding debt
if the issuer defaults. This can result in financial loss for the payee.

Lack of Liquidity: Promissory notes may lack liquidity, especially if they have a longer
maturity period or are not easily transferable.
2. Bills of exchange:

A bill of exchange is a written order from one party to another to pay a specified amount of money
at a certain time. It is a three-party agreement in which the drawer orders the drawee to pay the
payee.
Functions:

Bills of exchange are widely used in international trade to facilitate payments between parties
in different countries.
The drawer issues a written order to the drawee to make payment to a payee within a specified
time or on demand.
Bills of exchange provide a flexible payment mechanism, allowing the seller to receive
payment while giving the buyer a predetermined period to arrange funds.

Problems:
Dishonor: If the drawee refuses to accept or pay the bill, it can lead to financial disputes and
complications between the parties involved. This can result in delays, legal actions, and
financial losses.
Non-Payment: The drawee may fail to fulfill their payment obligation, leading to difficulties
in recovering the funds and potential financial losses for the payee.

3
 lOMoAR cPSD| 37089305

Fraud and Counterfeit: Bills of exchange are susceptible to fraud and counterfeit activities.
Dishonest parties may create forged bills or manipulate genuine bills, resulting in financial
losses for the payee.
Exchange Rate Fluctuations: Exchange rate fluctuations between the time of issuing the bill
and its payment can impact the amount received by the payee, leading to potential financial
uncertainties.

3. Checks
A check is a written order from a bank account holder to pay a specified amount of money to a
payee. It is a two-party agreement in which the account holder instructs the bank to pay the payee.
Checks are often used in everyday transactions.
Function:

Checks allow individuals and businesses to make payments to others by instructing their bank
to transfer funds from their account to the payee's account.
They provide a written record of the transaction and can serve as proof of payment.
Problems:

Insufficient Funds: If the drawer's account lacks sufficient funds to cover the check amount,
it will result in a bounced check. This can lead to penalties for the drawer, inconvenience for
the payee, and potential fees imposed by both banks involved.
Forgery and Stolen Checks: There is a risk of checks being forged or stolen, either from the
drawer or during transit. Unauthorized individuals can alter or forge signatures, leading to
unauthorized withdrawals or fraudulent transactions.
Check Fraud: Criminals may engage in check fraud by creating counterfeit checks, altering
payee names or check amounts, or manipulating the check's magnetic ink character recognition
(MICR) line. This can result in financial loss for the payee or financial institution.
Processing and Clearance Time: Checks typically require time for processing and clearance,
which can delay funds availability for the payee.
1.2 The ways of Endorsing and transferring negotiable instruments
Business transactions frequently involve the use of negotiable instruments as a form of payment,
such as checks, promissory notes, and bills of exchange. These instruments can be endorsed and
transferred to other parties in order to facilitate payment or to transfer ownership.

4
 lOMoAR cPSD| 37089305

Endorsement:
An endorsement is a signature on the back of a negotiable instrument that indicates the endorser's
agreement to transfer the instrument to another party. There are several types of endorsement:

• Blank endorsement: This is the simplest form of endorsement, where the endorser simply
signs the back of the instrument. This type of endorsement makes the instrument payable to
the bearer, which means that anyone who possesses the instrument can cash it.
• Special endorsement: This type of endorsement specifies the name of the person to whom the
instrument is being transferred. The instrument is then payable only to that person or to their
order.
• Restrictive endorsement: This type of endorsement places a restriction on the use of the
instrument. For example, an endorsement that says "for deposit only" means that the instrument
can only be deposited into the endorser's bank account and cannot be cashed.
Transferring

Once a negotiable instrument has been endorsed, it can be transferred to another party. There are
two main ways to transfer a negotiable instrument:
• Delivery: A negotiable instrument can be transferred by physically delivering it to another
party. This is typically done by endorsing the instrument and then handing it over to the
recipient.
• Endorsement and delivery: The instrument can also be transferred by endorsing it and then
delivering it to the recipient. This is often done when the instrument is being transferred to
someone who is not physically present.
In both cases, the new owner of the instrument has the right to receive payment when the
instrument is due. However, the new owner takes on the risk that the instrument may not be paid,
so it is important to ensure that the instrument is valid and that the parties involved are trustworthy.
1.3 The rights and responsibilities of the parties in negotiable instruments.

Legal documents known as "negotiable instruments" are transferable from one party to another
and represent a promise to pay a specific amount of money. Checks, promissory notes, and bills of
exchange are the three most popular kinds of negotiable instruments. The following are the rights
and duties of the parties to a negotiable instrument:.

5
 lOMoAR cPSD| 37089305

Rights and Responsibilities of the Issuer (Drawer):

• The issuer is responsible for creating and issuing the negotiable instrument.
• The issuer has the right to demand payment from the drawee or debtor according to the terms
specified in the instrument.
• The issuer has the responsibility to ensure that the instrument is properly filled out, signed, and
delivered to the intended recipient.
• The issuer is obligated to honor the terms of the instrument, including making timely payments
to the payee or fulfilling other obligations outlined in the instrument.

Rights and Responsibilities of the Payee:

• The payee is the party who receives the payment under the negotiable instrument.
• The payee has the right to demand payment from the issuer or drawer according to the terms
of the instrument.
• The payee has the responsibility to properly endorse the instrument when necessary to transfer
its ownership.
• The payee is responsible for ensuring the validity and authenticity of the instrument, including
verifying the accuracy of the amount, date, and other details.

Rights and Responsibilities of the Drawee:

• The drawee is the party on whom the instrument is drawn and who is instructed to make the
payment to the payee.
• The drawee has the responsibility to accept or honor the instrument if it meets the requirements
specified in the instrument.
• If the drawee accepts the instrument, they become the primary debtor and are responsible for
making the payment to the payee.
• The drawee has the right to examine the instrument for authenticity, accuracy, and conformity
with the required formalities.
Rights and Responsibilities of the Holder in Due Course:

• The holder in due course refers to a party who possesses the negotiable instrument in good
faith, for value, and without notice of any defects or defenses.

6
 lOMoAR cPSD| 37089305

• The holder in due course has the right to enforce payment on the instrument against all parties
liable on it, including the issuer, drawee, or prior endorsers.
• The holder in due course has the responsibility to exercise reasonable care in acquiring and
handling the instrument, ensuring that it is obtained legally and without any knowledge of any
irregularities or defects.
2. Labor Law: Identify the Ethiopian Labor Proclamation NO.1156/2019
2.1 The conditions of work Ethiopian Labor Proclamation NO.1156/2019
According to Ethiopia labour proclamation No.1156/2019, article 2 sub article(7) stated that
Condition of work” means the entire field of labour relations between workers and employers
including hours of work, wage, leave, payments due to dismissal, workers health and safety,
compensation to victims of employment injury, dismissal because of redundancy, grievance
procedure and any other similar matters.

2.2 The role of trade unions in industrial peace and productivity

According to Ethiopia labour proclamation NO.1156/2019 article 113 sub article (1), Workers and
employers shall have the right to establish and organize Trade Unions or employers’ associations,
respectively, and actively participate there in. so trade union is according to proclamation no
1156/2019 article 113 sub article 2(a) Trade Union” means an association formed by workers;

Trade unions play a crucial role in promoting industrial peace and enhancing productivity within
organizations. Here's a detailed explanation of their role in these areas:

• Collective Bargaining: In order to establish collective bargaining agreements (CBAs), trade

unions act as the workers' representatives in negotiations with employers. The terms and
conditions of employment, such as pay, working conditions, benefits, and workplace
regulations, are outlined in CBAs. Trade unions support the development of an equitable
workplace by engaging in collective bargaining, which addresses worker concerns and fosters
cooperation between labor and management. The likelihood of conflicts and disruptions is
decreased because it increases the sense of security and fulfillment among the workforce.
• Worker Protection: Trade unions fight for the welfare and rights of workers. They guarantee
that workers are treated fairly, are safeguarded from exploitation, and are working in a secure
environment. Trade unions contribute to the identification and remediation of workplace

7
 lOMoAR cPSD| 37089305

hazards, which helps to lower accidents and injuries, by actively participating in health and
safety committees. Unions promote industrial peace and a more peaceful workplace by
defending workers' interests.

• Dispute Resolution: Any workplace will inevitably experience conflicts and disagreements
between employers and employees. Through grievance processes and official arbitration
processes, trade unions are essential in resolving these conflicts. Unions aid in the fair and
impartial management of conflicts by offering a structured framework for doing so, preventing
conflicts from escalating and interfering with productivity. They serve as mediators, making
sure that both parties have a voice and facilitating discussions to arrive at amicable solutions.
• Skill Development and Training: Initiatives to improve workers' skills and competencies are
frequently carried out by trade unions. To raise the standard of the workforce, they support
training initiatives, apprenticeships, and vocational education. Trade unions contribute to
higher productivity by making investments in employees' growth and training by making sure
they have the knowledge and abilities to do their jobs well. Because skilled workers are more
likely to be content and motivated, they produce more work and are more successful as a
group.
• Promoting Work-Life Balance: Trade unions work to create reasonable work schedules, rest
periods, and leave regulations that support work-life balance. They support reasonable
working hours, restrictions on overtime, and provisions for leave and holidays. Trade unions
help workers feel more satisfied overall, experience less stress, and be more productive by
addressing their well-being and work-life balance. Maintaining a healthy work-life balance
also lowers the risk of burnout and turnover, which promotes a dependable and effective
workforce.
• Employee Engagement and Participation: Trade unions support worker involvement and
participation in decision-making. They advocate for programs like employee surveys, joint
consultation committees, and worker representation on boards. Unions give employees a voice
by allowing them to participate in decision-making, which boosts job satisfaction and fosters
a sense of loyalty to the company. Employees feel valued and empowered as a result of this
engagement, which increases productivity.

8
 lOMoAR cPSD| 37089305

2.3 Dispute resolution mechanisms and discuss the advantages and disadvantages of each.
Dispute resolution mechanisms are methods used to resolve conflicts or disagreements between
parties in a structured and orderly manner. Several dispute resolution mechanisms exist, each with
its own advantages and disadvantages. Here are some commonly used mechanisms:

1. Negotiation: Parties engage in direct discussions to reach an agreement without the

involvement of third parties. Negotiation can be informal or formal, depending on the
circumstances.
Advantages:
• Informal and flexible process.
• Parties have control over the outcome and can tailor solutions to their specific needs.
• Can help preserve relationships and maintain confidentiality.
Disadvantages:
• Relies heavily on the willingness of parties to compromise.
• Power imbalances between parties may affect the negotiation process.
• Lack of a formal decision-maker may lead to difficulty in enforcing agreements.

2. Mediation: In mediation, a neutral third party, called a mediator, assists the disputing parties
in reaching a mutually satisfactory agreement. The mediator facilitates communication,
identifies the issues, and helps generate options for resolution. The mediator does not make
decisions but rather facilitates the parties' decision-making process.

Advantage:
• Neutral mediator facilitates communication and helps parties find common ground.
• Parties have control over the outcome and actively participate in the resolution.
• Less adversarial than litigation, preserving relationships.

Disadvantages:
• Success depends on the willingness of parties to cooperate.
• Mediators' recommendations are non-binding, so parties may not reach an
agreement.
• Possible costs associated with hiring a mediator.

9
 lOMoAR cPSD| 37089305

3. Arbitration: Arbitration is a more formal process where parties present their case to one or
more neutral arbitrators who make a binding decision. The arbitrator's decision, called an
award, is usually based on evidence and arguments presented by the parties. Arbitration can be
either binding (the decision is final and enforceable) or non-binding (parties can reject the
decision and proceed to litigation).

Advantages:

• Parties have the flexibility to choose the arbitrator and tailor the process.
• Faster and more private than litigation.
• Binding decision provides certainty and finality.
Disadvantages:

• May be more formal and adversarial than other methods.

• Limited opportunity for appeal.
• Costs associated with hiring arbitrators and administering the process.
4. Litigation: Litigation involves resolving disputes through a court system. Parties present their
cases before a judge or jury, who make a final decision based on the applicable laws and
evidence presented. Litigation follows formal legal procedures and can be time-consuming,
costly, and adversarial in nature.

Advantages:

• Legal rules and procedures provide a structured process.

• Court decisions are enforceable by law.
• Access to a judge or jury who can make a final decision.

Disadvantages:

• Time-consuming and expensive.

• Adversarial nature can damage relationships.
• Lack of control over the outcome, as the decision rests with the court.
It's important to note that the advantages and disadvantages can vary depending on the specific
circumstances and the preferences of the parties involved. Choosing the most appropriate dispute

10
 lOMoAR cPSD| 37089305

resolution mechanism requires careful consideration of the nature of the dispute and the desired
outcomes.

2.4 The rights and obligation of employer and employees

According to the Ethiopian Labor Proclamation No. 1156/2019, here are the key rights and
obligations of both employers and employees:

2.4.1. Rights and Obligations of Employers

• Recruitment and Employment: Employers have the right to select and hire employees based
on their qualifications and suitability for the job. They also have the obligation to provide fair
employment opportunities and not discriminate against employees based on race, gender,
religion, etc.
• Employment Contracts: Employers have the right to enter into employment contracts with
their employees, outlining the terms and conditions of employment. They must also provide
written employment contracts for employees working for more than one month.
• Wages and Benefits: Employers have the obligation to provide employees with fair and
competitive wages, in accordance with the provisions of the proclamation. They must also
provide benefits such as annual leave, sick leave, maternity leave, etc., as stipulated by the law.
• Working Hours and Overtime: Employers must establish reasonable working hours and
overtime policies that comply with the labor laws. They have the obligation to ensure that
employees are compensated for any overtime work in accordance with the provisions of the
law.
• Workplace Safety and Health: Employers are responsible for providing a safe and healthy
working environment for their employees. They must take necessary measures to prevent
accidents, provide safety equipment, and comply with relevant safety and health regulations.
2.4.2. Rights and Obligations of Employees
• Fair Treatment: Employees have the right to be treated fairly and with respect by their
employers. They should not be subjected to any form of discrimination or harassment based
on their race, gender, religion, etc.

11
 lOMoAR cPSD| 37089305

• Remuneration: Employees have the right to receive fair and timely remuneration for their
work, in accordance with the provisions of the proclamation. They must also fulfill their
obligation to work diligently and honestly to earn their wages.
• Working Hours and Rest: Employees have the right to reasonable working hours, rest
periods, and breaks as prescribed by the law. They must adhere to the working hours set by the
employer and comply with any reasonable requests related to their work.
• Leave and Benefits: Employees have the right to annual leave, sick leave, maternity leave,
and other benefits as provided by the labor laws. They must follow the procedures and
requirements for applying and taking leave, as well as fulfill any obligations associated with
the leave.
• Safety and Health: Employees have the right to work in a safe and healthy environment. They
should follow the safety guidelines provided by the employer and report any unsafe conditions
or accidents promptly.

2.5 Distinguish legal and illegal dismissal and discuss their respective consequences briefly.
Legal dismissal refers to the termination of an employee's contract in accordance with the terms and
conditions specified in the employment contract or as per the relevant labor laws. This could include
reasons such as poor performance, misconduct, redundancy, or mutual agreement between the employer
and employee. The consequences of legal dismissal may include severance pay, notice period, and any
other entitlements as per the employment contract or labor laws.
On the other hand, illegal dismissal occurs when an employer terminates an employee's contract without
a valid reason or without following the proper procedures as outlined in the employment contract or
labor laws. This could include termination based on discriminatory reasons, retaliation for
whistleblowing, or without providing the required notice period or severance pay. The consequences of
illegal dismissal can vary depending on the jurisdiction but may include reinstatement of the employee,
payment of compensation or damages, and potential legal action against the employer.

3. Banking Business
3.1. The Meaning Banking and Banking Services in the Types of Ethiopia.
Banking is the process of providing financial services to individuals, businesses, and other
organizations. It involves accepting deposits, making loans, facilitating transactions, and managing

12
 lOMoAR cPSD| 37089305

financial risks. Banks are institutions that provide these services and are licensed and regulated by
central banks and other regulatory authorities.

Banking services in Ethiopia are crucial to the country's economic growth and development. They
provide access to capital for individuals and businesses, facilitate international trade, and promote
financial inclusion. However, access to banking services remains limited in many areas of the
country, particularly in rural areas. To address this, the government has been implementing policies
to promote financial inclusion and encourage the growth of microfinance institutions and other
alternative financial service providers.

3.2The Evolution and development of banking services Ethiopia

Banking services in Ethiopia have undergone significant evolution and development over the past
several decades. The country's banking industry has been heavily influenced by government
policies and initiatives, which have aimed to modernize and expand the financial sector in order
to support economic growth and development.

In the early years of Ethiopian banking, the industry was dominated by a few state-owned banks,
such as the Commercial Bank of Ethiopia, which provided basic financial services such as savings
and loans. These banks were largely geared towards supporting the needs of the government and
state-owned enterprises, rather than serving the broader population.

However, in the 1990s, Ethiopia began to open up its economy and encourage private sector
development, leading to the emergence of several new private banks. These banks were initially
small and focused on serving the needs of urban elites, but over time they grew and expanded their
services to include a wider range of customers.
In recent years, the Ethiopian government has taken steps to modernize and regulate the banking
sector, with a focus on expanding access to financial services and improving the efficiency and
stability of the industry. This has included the introduction of new regulations and supervisory
mechanisms, as well as the licensing of several new banks and microfinance institutions.

As a result of these developments, banking services in Ethiopia have become more widely
available and accessible, with a greater variety of products and services on offer. However, there

13
 lOMoAR cPSD| 37089305

are still significant challenges facing the industry, including limited access to finance in rural areas
and a lack of financial literacy among many Ethiopians. Nonetheless, the banking sector is
expected to continue to evolve and develop in the coming years, as the country seeks to harness
the potential of its growing economy.
3.3 Types of banks in Ethiopia and their respective roles
In Ethiopia, there are various types of banks that serve different purposes and functions. These
banks are classified into three main categories:
• Commercial Banks
Commercial banks in Ethiopia are the most common type of banks and play a significant role in
the country's economy. These banks provide financial services to businesses and individuals,
including deposit-taking, lending, and other financial services. They also offer a range of products
and services, such as current accounts, savings accounts, loans, and credit facilities. Some of the
leading commercial banks in Ethiopia include the Commercial Bank of Ethiopia, Dashen Bank,
and Awash Bank.
• Development Banks
Development banks in Ethiopia are specialized institutions that focus on providing long-term
financing to support economic development. They provide loans, equity, and guarantees to support
the development of specific sectors, such as agriculture, industry, and infrastructure. Some of the
notable development banks in Ethiopia include the Development Bank of Ethiopia, Ethiopian
Agricultural Transformation Agency, and Ethiopian Industrial Development Corporation.
• Microfinance Institutions
Microfinance institutions in Ethiopia are specialized banks that offer financial services to
lowincome individuals and micro-enterprises. They provide small loans, savings accounts, and
other financial products to help people who do not have access to traditional banking services.
Some of the prominent microfinance institutions in Ethiopia include Oromia Credit and Saving
Share Company, Addis Credit and Saving Institution, and Dedebit Credit and Saving Institution.

Each of these banks plays a critical role in Ethiopia's economy. Commercial banks provide
essential financial services to businesses and individuals, helping to support economic growth and
development. Development banks support the country's long-term economic development by

14
 lOMoAR cPSD| 37089305

financing specific sectors, while microfinance institutions provide financial services to lowincome
individuals and micro-enterprises, helping to alleviate poverty and support small businesses.

4. Public Enterprises

4.1 Meaning of Public Enterprise

A public enterprise, also known as a state-owned enterprise or government-owned corporation, is
a business or organization that is owned, managed, and operated by the government at the local,
state, or national level. These enterprises may operate in a variety of industries, including energy,
transportation, telecommunications, and healthcare. The main purpose of public enterprises is
often to provide essential goods and services to the public, promote economic development, and
create jobs. They may be established through legislation, executive order, or other forms of
government action

Public enterprises are funded by the government and may receive subsidies or other forms of
financial assistance. They are also subject to government oversight and accountability, and their
operations and performance may be subject to public scrutiny.

4.2 Historical Development of Public Enterprise

The historical development of public enterprises can be traced back to the late 19th and early 20th
centuries, when many governments began to establish state-owned enterprises to provide essential
services such as transportation, electricity, and water to their citizens

One of the earliest examples of a public enterprise was the British Post Office, which was
established in 1660 and eventually became a state-owned enterprise in 1969. In the United States,
the federal government began to establish public enterprises in the early 20th century, including
the Tennessee Valley Authority (TVA) in 1933, which was created to provide electricity and
economic development to the southeastern United States.

During the post-World War II period, many countries around the world embraced public ownership
and established state-owned enterprises in a wide range of industries, including energy,
transportation, telecommunications, and manufacturing. The goal of many of these enterprises was
to promote economic development, reduce dependence on foreign companies, and provide
essential services to the public.

15
 lOMoAR cPSD| 37089305

However, beginning in the 1980s, many countries began to shift away from public ownership and
toward privatization and deregulation. This trend was fueled by the belief that private companies
could provide goods and services more efficiently and effectively than state-owned enterprises.
Today, while public enterprises still exist in many countries around the world, they are often subject
to intense political debate and scrutiny.

4.3 Major Function of Public Enterprise

Public enterprises, also known as state-owned enterprises (SOEs) or government-owned
corporations (GOCs), perform various functions depending on their specific mandate and
objectives. Here are some major functions typically associated with public enterprises:

• Public Service Provision: Public enterprises often play a crucial role in delivering essential
services to the public, such as electricity, water supply, transportation, healthcare, education,
postal services, and telecommunications. They ensure that these services are accessible and
affordable, particularly in areas where private sector participation may be limited.
• Economic Development: Public enterprises can contribute to economic development by
promoting industrialization, supporting key sectors, and investing in infrastructure projects.
They may establish and manage strategic industries, stimulate employment, and foster regional
development.
• Regulatory and Policy Implementation: Public enterprises are sometimes responsible for
implementing government policies, regulations, and initiatives within specific sectors. They
ensure compliance, enforce standards, and monitor industry practices to safeguard public
interests.
• Public Investment and Asset Management: Public enterprises often manage significant
assets, such as natural resources, public land, infrastructure, and financial investments. They
may generate revenue by monetizing these assets, which can be reinvested in public projects
or used to fund public services.
• Market Stabilization and Competition Promotion: Public enterprises may be involved in
stabilizing markets and ensuring fair competition. They can act as market regulators,
preventing monopolistic practices, promoting competition, and maintaining market
equilibrium.

16
 lOMoAR cPSD| 37089305

4.4 Types, governance, and grounds of dissolution in light of Proclamation No.25/1992

4.4.1. Types of Public Enterprise
Public enterprises can be categorized into different types based on their functions and sectors of
operation. Here are some common types of public enterprises:

• Infrastructure and Utility Enterprise

Examples: State-owned power companies, water and sewage authorities, transportation agencies
(airports, seaports and railways), telecommunications companies.

Purpose: These enterprises provide essential infrastructure and utility services to the public,
ensuring reliable access to electricity, water, transportation, and communication.

• Financial Enterprises

Examples: State-owned banks, development banks, insurance companies.

Purpose: Public financial institutions aim to promote financial stability, facilitate economic
development, provide access to financial services in underserved areas, and support specific
sectors such as agriculture, housing, and small businesses.

• Natural Resource Enterprises

Examples: National oil companies, mining corporations, forestry enterprises.

Purpose: Public enterprises in the natural resource sector are involved in the extraction,
processing, and management of natural resources. Their objectives can include maximizing
revenue, ensuring resource sustainability, and promoting domestic industrial development.

• Manufacturing and Industrial Enterprises:

Examples: State-owned manufacturing companies, industrial parks, defense industries.

Purpose: These enterprises are engaged in manufacturing and industrial activities, often focusing
on strategic sectors such as defense, aerospace, heavy machinery, or promoting domestic
industrialization and employment.

• Cultural and Creative Enterprises:

17
 lOMoAR cPSD| 37089305

Examples: Public broadcasting corporations, national theaters, museums.

Purpose: These enterprises support cultural and creative industries, promote cultural heritage, provide
public access to arts and entertainment, and contribute to national identity and social cohesion.

• Social Service Enterprises:

Examples: Public hospitals, educational institutions, social housing agencies.

Purpose: Public enterprises in the social service sector provide essential services like health care,
education, and housing, with a focus on ensuring accessibility, affordability, and quality for the
public.

Governance of Pubic Enterprise

The bodies that govern public enterprises can vary depending on the country and its political and
economic system. In the context of Ethiopia, public enterprises are typically governed by the
following bodies:

• Ministry of Public Enterprises: The Ministry of Public Enterprises is responsible for the
overall supervision and management of public enterprises in Ethiopia. It formulates policies,
provides strategic direction, and ensures the effective functioning of public enterprises.
• Public Enterprises Holding and Administration Agency (PEHAA): The PEHAA is an
agency under the Ministry of Public Enterprises. It is tasked with overseeing and managing
the state-owned enterprises (SOEs) in Ethiopia. PEHAA plays a significant role in appointing
board members, monitoring performance, and providing support to SOEs.
• Boards of Directors: Public enterprises in Ethiopia have boards of directors appointed by the
government. The boards are responsible for setting the strategic direction, monitoring
performance, and ensuring compliance with regulations. The board members are appointed
based on their expertise and experience.
• Ethiopian Parliament: The Ethiopian Parliament plays a role in overseeing and monitoring
public enterprises. It may establish committees or commissions to review the operations,
financial performance, and policies of public enterprises. The Parliament may also pass
legislation or regulations related to the governance and functioning of public enterprises.

18
 lOMoAR cPSD| 37089305

• Ethiopian Public Enterprises Supervising Authority (EPESA): EPESA is a regulatory

body responsible for supervising and regulating public enterprises in Ethiopia. It ensures
compliance with laws, regulations, and standards, and monitors the performance of public
enterprises.
• Auditor General: The Office of the Auditor General of Ethiopia is responsible for auditing
the financial statements and operations of public enterprises to ensure transparency and
accountability.
These bodies collectively work to govern and oversee the operations of public enterprises in
Ethiopia, ensuring that they operate efficiently, adhere to regulations, and contribute to the
country's development goals. It's important to note that the specific structure and composition of
governance bodies may evolve over time as per the government's policies and priorities.
According to public Enterprise Law proclamation NO.25/1992 Grounds for Dissolution.
An enterprise may be dissolved for any one of the following reasons:

• The expiry of the life of the enterprise as xed in its establishment regulations;
• Completion of the venture for which the enterprise was established;
• Failure of the purpose or impossibility of performance;
• Loss of 75% of the paid up capital of the enterprise;
• A decision of the Council of Ministers a acting the exist enc
4.5. Are They Paying Taxes?
The tax obligations of public enterprises can vary depending on the jurisdiction and the specific
legal framework governing these entities.

In many cases, public enterprises are subject to taxation on their commercial activities, similar to
private businesses. They are required to pay corporate income taxes on their profits, just like
private companies. These taxes are typically based on the applicable tax laws and rates in the
country where the public enterprise operates.

However, there are some instances where public enterprises may enjoy certain tax advantages or
exemptions due to their government ownership or public service nature. For example, they may
be exempt from certain taxes or eligible for preferential tax treatment in specific areas, such as
property taxes or value-added taxes

19
 lOMoAR cPSD| 37089305

It's important to note that the specific tax obligations of public enterprises can vary significantly
from country to country and even within different regions or states. The laws and regulations
governing public enterprises and their tax liabilities are determined by each respective government.
Therefore, it is crucial to consult the applicable laws and regulations in a specific jurisdiction to
determine the tax obligations of public enterprises in that particular context.

Conclusions
In summary, we covered various topics related to negotiable instruments, labor law, banking
business, and public enterprises in Ethiopia.

Regarding negotiable instruments, we discussed the three main types: promissory notes, bills of
exchange, and checks. We examined their functions in facilitating commercial transactions but also
highlighted potential problems such as forgery, fraud, and disputes over ownership or transfer.

Next, we explored the Ethiopian Labor Proclamation No.1156/2019, which defines the conditions
of work between workers and employers. It covers areas such as working hours, wages, leave,
dismissal, health and safety, grievance procedures, and more. We also touched on the role of trade
unions in maintaining industrial peace and productivity through collective bargaining and dispute
resolution.

In the context of banking business, we provided the meaning and definition of banking and
discussed the various types of banking services in Ethiopia, including commercial banking,
microfinance, cooperative banking, and development banking. Additionally, we highlighted the
evolution and development of banking services in Ethiopia, which have seen advancements in
technology, expanded services, and regulatory reforms to promote financial inclusion and stability.

Finally, we touched on public enterprises, which are government-owned entities providing goods
or services to the public. We explained the meaning of public enterprises, their governance, and

20
 lOMoAR cPSD| 37089305

the grounds for their dissolution according to Proclamation No.25/1992. Additionally, we briefly
discussed the tax obligations of public enterprises, noting that they generally pay corporate income
taxes but may enjoy certain exemptions or advantages based on their government ownership or
public service nature.

Overall, these topics provide valuable insights into legal and financial aspects relevant to
individuals and businesses operating in Ethiopia. Understanding negotiable instruments, labor
laws, banking services, and public enterprises helps ensure compliance with regulations, promotes
fair working conditions, and facilitates economic growth and stability.

References
- "The Law of Negotiable Instruments: Including Promissory Notes, Bills of Exchange,
Bank Checks and Other Commercial Paper" by John James Crawford

- Law of banking, negotiable instrument and insurance teaching material developed by

Fasil Alemayehu and merhatbeb teklemedhin Ethiopian

- Labor Proclamation NO.1156/2019:

- "Ethiopian Labor Law" by Birhanu Mesfin.

- The official website of the Federal Democratic Republic of Ethiopia, specifically the
Ministry of Labor and Social Affairs (http://www.molsa.gov.et/)

- Banking Law and Practice in Ethiopia" by Assafa Endeshaw.

- National Bank of Ethiopia (https://www.nbe.gov.et/)

- Public Enterprises in Ethiopia: Governance, Performance, and Challenges" by Getnet

Tamene.

- Ethiopian Public Enterprises Supervising Agency (https://www.pesa.gov.et/)

21
 lOMoAR cPSD| 37089305

- Federal negarit gazette

- Reinventing banking and financing ;frameworks to navigate global finteck innovation by
Helene panzario and alessandro.

22