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Conclusions and recommendations The strength and performance of the financial system is an indicator of the strength and performance of the nation‘s economy. Financial markets, being an element of the financial system play a pivotal role in expediting the nation‘s economic growth through mobilization of domestic resources and attracting foreign direct investment. Existence of the financial markets encourages the private sector involvement in the economy which is usually described as ―the engine of the national economic growth‖. Besides, financial markets help to mobilize local savings, enhance competition among financial institutions, increases remittances, lead to improved
JBAS Vol. 4 No. 1 June 2012 37 corporate governance, reward sound economic policies, provide for sources of project financing on short and long term bases, allow deconcentration of ownership, improve accounting and auditing standard and help privatization efforts. Because of these tangible benefits, it is possible to recommend that financial markets need to be established in Ethiopia to further speed up the growth of the Ethiopian economy. A well-functioning financial system requires strong institutions and a sound legal framework. Among others consumer and property rights protection, contract enforcement laws and corporate governance can be considered as the key elements for creating deep and vibrant financial markets and creating an enabling business environment. Establishing financial markets is not an easy task for the Ethiopian government. It is affected by several environmental factors emanating from different sources. For instance, the legal regime is the bedrock of robust securities markets. In Ethiopia, there is no institutional, legal and policy framework for any secondary financial market activity in the country. Regarding security issues, Ethiopia fares better compared to regional countries, implying conducive security situation to establish financial markets. Ethiopia has taken important steps to combat corruption such as ratifying convention Against Corruption and the African Union Convention on the Prevention and Combating of Corruption, and recently arrested and prosecuted key government officials as part of the corruption eradication campaign but still Ethiopia is known for popular corruption. Pertaining to the adequacy of the judiciary system, the 1960 commercial code is outdated and there is no system of civil courts where securities cases can be prosecuted by a dedicated governmental authority. Therefore, through adequate judiciary system and regulatory power, the government can reduce uncertainty, control unethical practices and enhance
38 Tiruneh Legesse investors‘confidence in the financial markets. The missing laws, such as The Securities Laws can be enacted and used.