interference in the market; there is no mechanism in place to solicit input from the business community as a cause for the challenges stated above. In addition to this Abebe (2006) stated that the current state of affairs does not make the country ready for a full-fledged stock market. In addition the absence of accounting and auditing standards may become a challenge for the establishment of stock exchange. Ruecker (2011) has also identified that lack of adequate legal, regulatory, accounting, tax, supervisory systems, lack of awareness and willingness among Ethiopian policymakers, low implementation capacity on the part of the government as the major direct challenges in establishing financial markets in Ethiopia. On the other side Asrat (2003) states that many prospects (opportunities) for developing securities markets exist in Ethiopia. The prospects are Ethiopia has considerable unexploited resources; one of the largest potential markets in Africa; the economic liberalization which has taking place in Ethiopia are quite encouraging; the privatization efforts going on would help with the supply problems (government is withdrawing from profit making activities and is transferring state owned enterprises into private ownership) particularly if a public offering of shares is used as the method of privatization; the existence of many profitable companies, which can potentially benefit from floating shares to the public; the existence of institutions like the country‘s Pension Fund, insurance companies, credit unions, etc., with large sums of money. If allowed to invest, they would

36 Tiruneh Legesse boost the demand for securities; the gradual improvements of the incentive packages in the successive investment proclamations help attract new investors including Ethiopians with foreign passports; the debate going on in academics, the business community at large and the government circle is encouraging. Similarly Abebe (2006) identified such prospects including the current scenario in share buying is a testimony of the existence of demand and supply sufficient to begin the long journey: the government has consistently maintained that the macroeconomic situation is reasonably stable and there are already some legal pronouncements, which can be reinforced a little more for a start. Such initiatives to develop accounting and auditing standards, enhancing the governance institutions, etc can also be considered as encouraging steps to launch financial markets in Ethiopia. Ruecker (2011) added that five years national growth and transformation plan (GTP), the double digit macro economic development and the ongoing and future privatization of state owned enterprises are opportunities for the establishment of stock markets in Ethiopia.