It is the primary and chief objective of this report to provide a critical view of the political and legal environment of Ethiopia. More specifically, this paper takes an in-depth review and analysis of the Ethiopian political structure and system, the political parties and the political risk respectively. Equally important, this document delves into the Ethiopian legal environment by analyzing the legal system, legal issues in international business as well as the legal risk. The main purpose of this detailed analysis is to gain a better and deeper understanding of the entire Ethiopian business environment before considering the entry into the Ethiopian hotel and hospitality sector. Therefore the analysis is aimed at providing a clearer and in-depth insight into of the micro and macro business environment before introducing the new hotel into the Ethiopian hotel and hospitality market.

Unlike the rest of African nations, Ethiopia stands out as the only African nation that was never colonized, other than the Italian invasion that led to the five-year occupation (1936- 1941). The fascist-ruled Italy occupied Ethiopia during the reign of Emperor Haile Selassie, only for the Ethiopia Resistance army to drive out the Italians. Haile Selassie is known to have played a significant role in establishing the Ethiopian legal system (Aneme, 2010). However, following civil unrest, Haile Selassie was deposed by Colonel Mengistu Haile Mariam. Today, Ethiopia’s government is formed as a federal democratic republic. The federal democratic republic system was established with the promulgation of the new constitution in 1995. Before the introduction of the new constitution, Ethiopia went through a coup replacing Colonel Mengistu Mariam’s government with a transitional government in 1991 (Gudina, 2011). As such, in the current constitution dispensation, the state structure is in the form of a parliamentarian form of government.

The Ethiopian federal assembly is made of the lower house, the House People’s Representatives (547 members) and the upper house, Council of the Federation (108 members), and the regional state councils. The president is the head of state and is elected by parliament, while the prime minister and his cabinet head the national government. The Ethiopian People’s Revolutionary Democratic Front (EPRDF) is Ethiopia’s ruling party (Haile, 1997). The (EPRDF) is a coalition party comprised of four regional parties. The coalition partners of the EPRDF include Tigrayan Peoples Liberation Front (TPLF) of the Tigray region, Oromo Peoples Democratic Organization (OPDO) of the Oromo region, Amhara National Democratic Movement (ANDM) of the Amhara region and SNNDM of the southern region (Gudina, 2011).

The Forum for Democratic Dialogue (FDD) is the opposition party of Ethiopia. The FDD coalition includes the Oromo Federalist Congress (a formation of The Oromo People’s Congress and Federalist Democratic Movement), the Unity for Democracy and Justice (UDJ) and the Coalition of Somali Democratic Forces (Gudina, 2011). Politically, the country enjoys relatively stable political stability but even so, there are also several political risks. The political risks are occasioned by violent political protests, demonstration and clashes, agitating for inclusion in the government, in addition to the concerns of commitment to human rights protection in the country.

Aneme (2010) states that other issues associated with political risks are entrenched corruption and bribery culture. There are also heightened border tensions with neighboring countries. It is also worth taking into account that state-owned enterprises dominate the economic sphere and the ruling political party- owned business entities, suffocates and stifles the private sector from growth, Haile (1997) asserts. As such, entry into the market by foreign companies is encouraged through joint ventures and equity partnerships.

Ethiopia entered into a new legal and judicial dispensation by ushering in the adoption of the new constitution of 1995. The new constitution objectives include the creation of a legal environment that recognizes and appreciates ethnic and religious diversity. As such, the constitution facilitated the creation of laws and judicial systems that reflect the ethnic and religious customs of every region. It is equally important to take into account that the current legal framework of Ethiopia can be traced back to the 1940s, 1950s, and 1960s when Emperor Haile Selassie adopted features of the French legal framework and integrated them into the Ethiopian legal framework (Aneme, 2010). The subsequent changes in Ethiopia’s legal system featured substantive changes in the facets of commercial law through the adoption and incorporation of aspects of the Anglophone common law systems.

The sources of Ethiopian laws include the constitution, international treaties, codes and statutes, decrees, regulations, directives, precedents, customary laws. State proclamations, state decrees, regulations, and directives and the state constitution are also sources of Ethiopian law. The agencies mandated with the duty and responsibilities of law enforcement in Ethiopia include the Ministry of Justice, the Federal Police Commission as well as the Federal Prison commission (Haile, 1997).

According to Gudina (2011), among the main legal issues of concern in international business pertains to intellectual property rights. While the country has a robust legal and institutional framework to safeguard intellectual Property (IP) rights, the country has a poor record on the implementation and enforcement of the IP regulations. There is also widespread piracy, and other intellectual property rights infringement. Gudina (2011) also adds that, while the legal dispensation guarantees judicial independence, the reality is judicial officers are extremely vulnerable to corruption and bribery in addition to working as subjects of high government officials. As such, these issues leave foreign companies highly vulnerable to facing a high risk of corruption when seeking judicial services from the legal agencies. Similarly, companies are the risk of not getting free, fair and just resolutions when resolving business regulations disputes and challenges.