Liberalization Of The Banking Sector In View Of Ethiopias Accession To The World Trade Organization

Similar to the two complaining sides of banking liberalization in the world, there are argumentsrnfor and/ or against liberalization of the Ethiopian baking sector to the outside world. Proponentsrnargue that opening the Ethiopian banking sector to foreigners has the benefits of efficiency,rnincreased employment opportunity ,improve NBE Regulatory and supervision capacity throughrnregulatory spillover, foreign banks may brought new skill and quality services and newrncapacitate of the banking sector technological know-how. On the other hand, opponents fearrnliberalization for its risks of financial instability, weakening the domestic banking institutions andrnthe possibility of leaving out the poorest section of the society.rnThus, this paper attempts to analyzes the Current Ethiopia’s banking sector policy, regulationrnand market situation in order to know the Potential Effects of Ethiopia’s Accession to the WTOrnon its Banking Sector Liberalization and recommend whether Ethiopia should liberalize thernbanking sector in view of its accession to the WTO or not. The methodology followed inrnundertaking the study involves review of both primary and secondary data and information. Thernreview of the WTO accession rule, acceding countries’ WTO accession and banking sectorrnLiberalization experiences and interview of key informants has been involved for evidence andrnbenchmarking.rnThe finding of the study shows that, the WTO accession process and Banking sector liberalizationrncommitment requires well informed and understanding of (the WTO, the WTO system andrncomplexity of the accession process), capacity building and technical support of internationalrncommunity as well as adoption of best accession model practice. On behave of Ethiopia, alongrnwith different studies, interviews, and reports of Ethiopia banking sector shows that even thoughrnEthiopia’s gradual liberalization policy and a lot of improvements over time in banking sectorsrnare encouraging; however, compared to international giant banking sectors, the sector isrngenerally still found at infant, relatively undeveloped, heavy dominant role of state-owned NBE’srnregulation, and a non-competitive market environment.rnBased on these, to benefit from the WTO accession and Banking sector liberalizationrncommitment, and to save from the risk, the researcher recommends the country three things:rnFirst, before the country start bilateral negotiation as preparation to the WTO, the countryrnshould invest on capacity building relating to banking sectors (human, institutional and financial)rnby continuous further demanding capacity building and technical support of internationalrncommunity. Second, the country should invest on strengthen country’s banking sector policy,rnrelax heavy dominant role of NBE’s regulation and make Ethiopia baking sector market situationrnenvironment competitive. Lastly, during bilateral accession negotiation in offering the fourrnmodes of trade supply in Ethiopian banking sector, the country should negotiate to commit inrnoffering full liberalization of mode 2 for its risk-free and offering the temporary movement ofrnnatural persons in mode 4 for its intra-corporate knowledge transfer in banking sector. However,rnthe country should negotiate on maintaining capital controls and cautious approach in openingrnmode 1, and the country should negotiate to stay at the current level of gradually liberalizationrncommitment until it builds domestic capacity of Ethiopian banking sector in Mode 3.rnKey Words: WTO, Accession, Liberalization of the Banking Sector, Ethiopia

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