JURIST - Dateline

Thursday, August 7, 2008

UKRAINE: The Problem of Creating an Enforceable Contract
11:21 AM ET

Carrie Cecil, Pitt Law '10, files from Kiev:

In countries with stable legal systems, it would be nearly unthinkable to choose foreign law for a contract between two parties from the same country, but in Ukraine, this is common practice. Due to corruption in the court system and the instability of Ukrainian laws, attorneys are forced to seek other methods to make transactions secure for their clients. The resulting contracts always have provisions for dispute resolution to occur in the United Kingdom, Switzerland, or any other European country, as long as it is outside of Ukraine. Additionally, if all parties involved have assets located outside of Ukraine, contract will specify that another country’s law will apply to the contract instead of Ukrainian law.

Ukrainian attorneys have to be creative in order to assure their clients that agreements will be enforceable. Using foreign law and including provisions for arbitration to occur in other jurisdictions are two examples of how the Ukrainian legal system is avoided. Unfortunately, these maneuvers are not always possible depending on the characteristics of individual transactions. The Ukrainian Parliament has adopted provisions requiring certain types of transactions or transactions between certain parties to be governed by Ukrainian law. In these transactions, the use of Ukrainian law is then unavoidable, but even in these situations, contracts will include a provision for arbitration in a jurisdiction outside of Ukraine.

A third issue for Ukrainian attorneys when drafting contracts is whether an arbitration decision will be enforceable. If a decision is rendered against a party that only has assets in Ukraine, there may be problems enforcing such a decision in Ukraine. The Ukrainian courts have refused to enforce some arbitration decisions made abroad, effectively making some contracts unenforceable. Additionally, some arbitration decisions end up in the Ukrainian court system for long periods of time awaiting a determination on whether they will be enforced in Ukraine. The best hope for a valid and enforceable contract exists when all parties involved have assets located outside of Ukraine.

The question becomes how to enforce a contract when the breaching party's assets are all located in Ukraine. This question is not yet resolved. For example, during a recent seminar, Ukrainian attorneys were explaining the use of confidentiality clauses in contracts, and they acknowledged that although confidentiality clauses are in contracts made here, they are nearly impossible to enforce. As a result, contracts produced in Ukraine include a plethora of provisions making all parties aware of the potential risks related to limitations on enforceability in Ukraine and limit attorney liability to clients on this issue.

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CROATIA: Joining the European Union
10:01 AM ET

Bill Fisher, Pitt Law '10, files from Croatia:

In a place of such amazing beauty, culture, and history, it is heartbreaking to see the remnants of the war and witness just how fresh the wounds still are. Croatia is in a state of change and conflict, both politically and culturally. I came here to learn about Croatia’s accession to the European Union, but I’ve learned much more already, and mostly outside of the classroom.

I don’t speak Croatian, so I can’t understand the news or read the papers. While Croatians are generally very friendly, politics is a particularly touchy subject here, so it’s not often brought up in any form. However, all of my professors here are Croatian, we’ve had Croatian speakers come to the class, and there are a few Croatian students in the class, so there is an opportunity to get somewhat of a feel for the state of things. From the standpoint of the academics, it seems only a formality that Croatia is not yet a member of the EU. To them, the process has gone a bit slower than expected but is still marching along nicely towards accession. The academics, like government officials, see the benefits of membership – free trade; a single market for the free movement of people, goods, and capital; common representation at the WTO, G8, and United Nations; and a common currency. The people, however, have a slightly different opinion.

Membership in the EU means membership in an open European community and adopting a policy of more open borders. However, the memories of the war are still vivid in the minds of many here, and the idea that the nations of the former Yugoslavia may eventually also join the EU - thereby allowing for free movement of their citizens across Croatian borders - is a hard pill to swallow for some. An example I can give comes from a day trip we made recently. Only a few hours from Dubrovnik is a town in Bosnia called Mostar. While Dubrovnik mostly represents a Roman influence, Mostar is where the Turkish influence comes into play. We Americans, like many other tourists, see this as an interesting experience and so we planned a trip to visit the Old Bridge and Medugorje. One student that came along, however, was born in Bosnia and lived there until he was about 13 or 14. At his age, that puts his emigration around 1997 or 1998…meaning he was there for the fighting and the bombing and all the horrors that came with the war. All throughout the region, there still stand buildings, here and there, with blast and bullet holes as a reminder of what happened. As we approached Mostar, they became much more prevalent. And my friend became a bit quieter. There was graffiti in many places, but one symbol in particular stood out – my friend explains to us that it means “insurgent.” Generally all is fine though, as we find a café near the Old Bridge to get a beer and watch the divers. Then we decide to explore the Muslim side of town. We oblivious Americans are captivated by the Turkish-esque experience, the cheap shopping, and the call to prayer playing from the speakers of the minaret. My friend however, is tacit and nervous. He has lived in America for about 10 years, and the fighting, for the most part, has been over for many years as well. But he is afraid of what may happen if someone hears his name or catches what bit of an accent he still has when speaking English. It’s just a small example of the fear, distrust and animosity that still lingers in the area and poses a real threat to the successful integration of the Croatia people into the EU. Though Slovenia is already a member, Croatia seems to be the gateway, the bridge between the EU and the former Yugoslavia. It has the strongest economy among the Yugoslav nations and its legal system is most in line with the requirements of the EU. But should they become a member state, the door will be open for the remaining nations to join as well, and the tensions between the peoples of the area may very well heighten to dangerous levels again.

There is optimism, though. A speaker came to our class who had not only been a prominent member of the Croatian government, but a very successful businessman as well. In talking about his position in the government, he mentioned that a particular problem in Croatia involved trade law and his reason for getting out of government was that nothing was being done to “clean up the mess.” He said that since Croatia liberated itself from Yugoslavia, the government has not really exercised any form of self-restraint. For many years, there have been problems with things like kickbacks, “squeeze-outs,” and insider trading. This was part of the reason why initial negotiations with the EU were stalled and why the process is still ongoing. I asked him if he thought about getting back into politics to try to clean up the mess that he had once attempted to take on and what he thought the possible accession into the EU might do to aid that process. He said frankly that he would not be going back into politics, because in all his time there he felt like he was unable to accomplish a single thing. He also said, however, that the EU was like a carrot to Croatia, and that Croatia needed a carrot much more than the stick. The possibility of membership should light a fire under the government to fix many of the problems in Croatian law, many of which were inherited from Yugoslavia or created in sort of a rush to establish the independent nation.

It seems there is a perpetual conflict in this stunningly beautiful county in one form or another. While the bombings have ceased, there is still the internal conflict between the desires of some – particularly the government and the academics – to join the EU, and the reluctance of the people to open themselves up not only potentially to the peoples of Serbia and Bosnia in time, but also to the possibility of what some see as another Yugoslavia…only on a much grander scale. As a tourist who spends much of his time on the beach among Germans, Italians, and Australians, it’s hard to see beyond the tourist bureau’s idea of Croatia. But as a law student, it’s easier (and somewhat more painful) to see the other side – the side of fear and doubt and even a degree of jingoism among some. But that seems to be the nature of this place, a constant balancing act. One can only hope that as time goes on and the wounds start to heal, those wounds will not be aggravated by policies of a supranational government. A place of such natural splendor, filled with such wonderful people, deserves peace. Peace as opposed to war. Peace as opposed to internal conflicts and problems. Peace of mind for its citizens.

As a final note, it appears that the opposition to the European Union does not only lie in potential member states, but in some long-time member states as well. I was at dinner a few nights ago and happened to overhear bits and pieces of a conversation at a table near mine. In that I’m here to learn about the EU, it caught my attention to hear the words “European Union” being spoken in English. It turns out it was an older British couple on vacation speaking with a Croatian couple sitting at the next table. In the lulls in my own conversation, and while trying NOT to eavesdrop, I only heard a few words and phrases, but I caught a very specific “do not join” and a recurring utterance of the phrase “bleed you dry.” So it seems that for all of the supporters the EU has, there appears to be dissatisfaction in even some of the more well-off countries. The potential developments of passing comments like those certainly make my current studies a bit more interesting.

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GREECE: The Right to Use the Name ‘Lesbian’
8:14 AM ET

Elisa Mari, Pitt Law '10, files from Athens:

The term lesbian comes from the Greek name of the Aegean Island of Lesvos. The island, known for its beautiful beaches and unspoiled landscapes, is also famous for being the island of the Ancient Greek female poet Sappho. Many scholars believe that Sappho’s work was about the sexual love between women, and based on this history, most modern-day homosexual women use the name of Lesvos to describe their orientation.

This is all well and good, except for the fact that there are many other ‘Lesbians’, i.e. current inhabitants of the Island of Lesvos, who object to the fact that their name is also one used by homosexual women.

In June, three islanders brought a case against the Homosexual and Lesbian Community of Greece (OLKE), saying that the use of the word was insulting to their homeland and petitioning the court to ban the use of the term "lesbian" as applied to homosexual women. Islanders appeared on television decrying their fate. One man in particular was very upset saying that it was a disgrace that his sister could no longer call herself a Lesbian due to the current double meaning of the word. In addition to the patriotic claim, many islanders are also upset that the resort of Eresos (the birthplace of Sappho) is an increasingly popular tourist destination for homosexual women. In general, many fear that their island will become known as a resort for homosexuals and are unhappy about that.

On July 22nd, an Athens court rejected these islanders' appeal. In so ruling, the court held that the term "lesbian" did not define the identity of the island's residents, and therefore it could be used by homosexual organizations both in Greece and abroad. One can only wonder what Sappho would think of all this!

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IRAQ: Women’s Rights and the Iraqi Constitution in Practice
7:16 AM ET

Sara Hamoudi, Pitt Law LLM '08, files from Sulaimaniya:

A recent incident showed me that while the Iraqi Constitution has a great deal of material from which a society based on equality of the sexes can be built, there are significant legal and cultural obstacles to obtaining that goal. I left Iraq to go to the US three years ago, so when I arrived in Sulaimaniya on July 13, many of my friends and relatives wanted to come and visit me. One day, some of my friends from law school came to welcome me, and we started talking about the legal and political situation in Iraq. I asked them how difficult it would be to get a passport without going to Baghdad, because my husband and I are helping to organize a project in the United States that we hoped Iraqis could attend.

One of my female friends complained that her father has to grant her permission in order for her to get a passport, while this is not the case for males. Although her father was happy to do it, she understandably found this notion of parental consent offensive and insulting, given that she is not a child but an attorney with a flourishing legal practice who represents dozens of men and travels around the Kurdish region of Iraq to assist them in their cases.

More importantly, this requirement is a clear violation of the Iraqi Constitution. Article 14 makes clear that all Iraqis are equal under the law without respect to gender. The process of obtaining a passport under relevant Ministry regulations is precisely the same for both genders, except for this additional burden of parental consent imposed on females. This situation seems to be a classic case of legal inequality between men and women.

Shockingly, however, my friends and other colleagues, all lawyers, insisted that the Iraqi Constitution requires paternal consent for women. They based their assertion on statements made by a Ministry employee to the female lawyer I mentioned. They were so certain as to cause me to question my own understanding of the Constitution, but I referred to the text of the Constitution and showed my colleagues the gender equality requirement.

Once they were satisfied, I started encouraging my friends to challenge the law. I raised the possibility of a suit in the federal supreme court of Iraq, but I was surprised when my friends said that in their view, challenging the constitutionality of a law or a regulation is not truly practicable in Iraq. Though it has been done, examples are few and it is seen as a waste of time to even try, since the chances of success are so remote. In the end, I could not convince any of them to consider such an opportunity.

On the next day, I decided to meet with some women’s organizations and governmental officials to find out whether there are any efforts to challenge the regulation. I visited four different organizations to discuss the matter. Although I could not meet with all of the people I wished, I did get to meet some lawyers, who turned out to be my former classmates from law school. They provided me with documents written by the Kurdish regional government asking Baghdad to revise the regulations because they are in violation of the Constitution. To date, no reply has been received, more than one year after the request was sent. The Kurdish government seems reluctant to pursue the issue, saying it has other priorities. In addition, more than 42 women’s organizations have tried to lobby Kurdish and central government officials in Baghdad to change the regulations. By and large, they have been entirely ignored.

This seemed then the perfect time to raise a test case in the courts. The government was in violation of the Constitution, after all, and therefore if persuasion would not work, then it was time for judicial compulsion. This met stiff resistance. I received a series of rather weak excuses from the women’s organizations that I visited. Among these were that nobody had time or money to make such a case (even though I promised to work on outside funding), that no test case could be found (impossible to believe) and that the prosecutor’s office would have to be involved (not true as a matter of Iraqi law). To date, after extensive efforts, I have been unable to convince anyone to even try to make a case to challenge this patently unconstitutional regulation, though I continue to make efforts in this regard.

It seems that the influence of the former government is still noticeable. No one would have ever thought to challenge laws or to question a Ministry employee about the application of those laws, because someone who did so would never have been seen again. Thus, my friends simply trusted the government official, far less trained in Iraqi law than they as Iraqi lawyers, and assumed he knew something about the Constitution that they did not. They never even thought to check the text. When told that this was a violation, even after complaining about it, they did not think there was any point in pushing the matter.

This sad incident reflects the gap between Iraq’s laws and its practice. Much attention has been paid to the the Constitution, and to the fact that regulations can technically be challenged on the basis of it, but this example tends to show that in practice, the culture of the rule of law which is necessary to sustain such challenges is largely absent. Lobbying the government and asking it for assistance are seen as acceptable, but fighting it in court due to violations of its own Constitution is not. I can only hope that this will change and a new generation of Iraqis who have courage to challenge the government will rise from our law schools.

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Saturday, July 5, 2008

ETHIOPIA: Joining the WTO? The Challenge of Customs Valuation
1:51 PM ET

JURIST Staff files from Addis Ababa...

Joining the WTO is not easy. Especially for a country like Ethiopia that has a history of communism to unwind, reams of technical laws have to be rewritten to be WTO compliant. But before legislators even sit down to rewrite laws, there is much apprehension. The WTO promises change to a nation’s import export balance sheet, and this promise scares politicians and business owners alike. An Ethiopian hotel owner told me that if the tourism sector were further liberalized, surely foreign hotel chains like Holiday Inn would enter the market and crush locals like him.

In Ethiopia there is a general lack of knowledge about the nuts and bolts of membership among business owners and politicians alike. The WTO is most famous – and its goal as an organization – is to facilitate international trade by reducing barriers to trade: tariffs, subsidies, import quotas, et cetera. To many Ethiopian business owners and politicians, any change is scary. But an oft-cited reason for the fear – and it may be just a convenient reason – is that WTO membership will force uncompetitive Ethiopian business to compete with foreign businesses.

But what these politicians and business owners neglect in their apprehension are the benefits to anybody already doing business in Ethiopia. WTO member countries are required to implement and maintain an international standard of transparency, predictability, and consistency in their commercial legal regime. Even if an LDC (least developed country) like Ethiopia did not immediately benefit from increased trade revenue as a WTO member, implementing international commercial law standards could make business owners more likely to reinvest profits in their businesses and could inspire foreigners to invest. This, even if their were no further easing to the current restrictions on foreign investors. Citizens may also find themselves cursing the government less frequently.

For instance tariff rates must be bound at an upper limit. This means that an importer would not discover one day that his normal tariff rate had recently been raised 100 percent.

Customs valuation in Ethiopia demonstrates the frustrating lack of predictability to many laws in Ethiopia. With a small manufacturing base, Ethiopia is a country heavily reliant on imports, and customs duties must be paid on these imports. Generally, the customs duty is a percentage of the total value of the good being imported, and this is what the WTO requires, save for some fallback valuation methods. However, the WTO requires the duty to be paid on a good’s “actually value,” and Ethiopian valuations methods are infrequently reflective of “actual value.”

Ethiopia’s valuation method on used vehicles (and used vehicles are imported much more than new) is unique and would not be compliant with any of the WTO valuation methods. The customs value is based at what a database says the value was when the vehicle was new. A depreciation allowance of 10 percent per year with a maximum allowance of 30 percent is then deducted to arrive at the customs value. This means that for all vehicles more than 3 years old, the customs value will never fall below 70 percent. Never mind that vehicles by their nature depreciate rapidly. This leads to the overpricing of used vehicles in Ethiopian markets, and the valuation method appears to have no purpose other than to earn extra revenue for the government.

Most other goods are valued at their listing in a published valuation database separate from the vehicle database, and often these values do not reflect a good’s actual value. This published valuation database sometimes contains multiple listings for the same good with different prices for each listing, and customs officers have been known to use versions of the database outdated for years. In other words, an importer does not always know for sure what he will pay.

In sum, there is a lack of predictability in customs valuations, and this is just a snapshot of one area that must be reformed in order to meet the international standards mandated by the WTO.

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Wednesday, July 2, 2008

UKRAINE: Visiting the 'Unofficial Market'
1:49 PM ET

Aleksandra (Sasha) Williams, Pitt Law '10, files from Kiev:

The whole is often greater than the sum of its parts, especially if some of those parts do not make it into a suitcase during a 20 minute frantic packing effort with the airport taxi already waiting outside. Thus, a digital camera missing a battery charger is far less useful than one might imagine. I hate to admit it, but once my battery finally died, I fondly thought of Wal-Mart. Unfortunately, Kiev does not have one. Neither does it have the kind of battery or the charger I need anywhere outside of the few and far away official Sony distributor stores. But Kiev has Petrivka - one of several “unofficial markets” located in the heart of Kiev. Quite a few people suggested I look there for anything I may need. So I did.

Although Petrivka has some legitimate vendors, it can aptly be described as a massive intellectual property rights violation with occasional counterfeit and stolen property booths. Despite the official legislative and executive efforts to crack down on production and distribution of pirated and unlicensed goods, this particular “black market” continues to thrive. To be fair, it used to do a lot better a decade ago, when no enforceable laws hindered any of its operations. Then in 2000, the Verkhovna Rada (Ukraine's parliament) made the first substantial step towards protecting intellectual property rights by revising its Criminal Code to introduce criminal liability for manufacture, distribution, sale and purchase of pirated goods. However, enforcement of this law against large-scale manufacturers and distributors proved to be difficult, and by 2002 the United States imposed trade sanctions on Ukraine. The sanctions were eventually lifted in 2005 after the Verkhovna Rada, closely advised and supervised by the US, passed legislation that gave more teeth to law enforcement and lowered the threshold for criminal and civil liability. In turn, the US government managed to convince Microsoft and several other companies to use “dynamic pricing” which allowed Ukrainian consumers to buy licensed products for a fraction of their “western” cost. Together with frequent inspections, seizures and legal actions against offenders this significantly slowed down the black market bustle.

However, Petrivka stoically endured these difficulties and emerged relatively unscathed. It had to scale down and start camouflaging its illegal operations. Most vendors also now offer a choice between a much more expensive “licensed” item and its “unlicensed” version. Nonetheless, Petrivka is far from going under. For example, Sex in the City DVDs were available here well before the movie came out in the Kiev theaters on June 19. Also, after seeing most of Kievans dressed head to toe in Gucci and Dior, it becomes abundantly clear that most of their designer threads did not come from the obscenely overpriced boutiques, especially considering that Petrivka offers knockoffs for $5-$50. Finally, according to several polls, about 90% of all computers within Kiev ran pirated software as recently as a year ago.

Little separates these seemingly benign scams from others with grave consequences. The same "black markets" that, like Petrivka, offer bootleg books and fake Chanel bags also sell contaminated or expired medications and substandard equipment that can cause industrial accidents. Besides, “unofficial trade” violates numerous laws, tax codes, licenses, embargos and other regulations used by nations to organize and enforce rules. As for my battery charger, I sincerely hope that I at least gathered some good professional ethics karma by not buying it at Petrivka, because the one I ended up purchasing cost twice as much.

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Tuesday, June 24, 2008

GREECE: New Land Registry System Implemented
12:56 PM ET

Elisa Mari, Pitt Law '10, files from Athens:

Lately it has been more of a hassle and more crowded than usual at the Land Registry Office (Ypothikofilakeio). A title search in Greece consists of going through the old hand written volumes of the registries to check for title, mortgages, liens, etc. all listed under the owner’s last name. All that is going to change though, as a whole new land registry system (Ktimatologeio) is being implemented. The property will now be registered under lot number and address, rather than by the owner’s name. Everyone who owns property must register it under the new system. That is why the Land Registry Office has suddenly become packed daily with lines out the door.

Property owners have until September 30th to declare their property to the Ktimatologeio, while Greeks living abroad or foreign residents who own property in Greece have until December 30th to register their property. It is calculated that 3.1 million stremma (one stremma is 1,000 square meters) will be recorded and this will include the property of 2/3 of the population.

While a land registry system where the information is organized under lot number and address rather than owner’s name is beneficial everywhere, it is especially crucial in Greece. Much of the property here is jointly owned by multiple family members. In fact when it comes to inheritance rights and the division of property, the Greek Civil Code stipulates that all children (with only some extreme exceptions) have a forced share of an estate. Therefore, regardless of what a parent decides in his/her will, a child cannot be disinherited and a portion of the property or money is theirs by law.

Even if it were not the law, the Greek mentality is to keep everything in the family and have everyone own everything together. It is not uncommon therefore to find a small house in a village or a plot of land that is owned by five siblings, some of whom might not even live in Greece anymore. It rarely seems to cross anyone’s mind that this is a recipe for disaster. Houses are left abandoned and fall into disrepair because none of the siblings can agree with the others on how to manage the property, and the loving family that wanted to own everything together ends up in bitter feuds over property ownership. In fact, the majority of the property cases that the office I’m working at deals with concern cleaning up title between relatives who each claim a percentage of the total ownership of a property. It is a refreshing, but rare, occurrence when one of our clients actually has full title in fee simple absolute. In addition, ownership by adverse possession is common. The typical case arises when the actual title holder is living abroad and has left the property in the hands of relatives who assure him that they are “taking care” of the property until the owner’s return.

While the new land registry system won’t solve these problems, it will certainly make tracking down title easier and clarify who owns what. As for the rest, that’s a social issue and from the way it seems it is not likely to change anytime soon.

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Wednesday, June 18, 2008

UKRAINE: A Legal System in Development
1:26 PM ET

Carrie Cecil, Pitt Law '10, files from Kiev:

Ukraine is a democracy still in its infancy. Independence from the former Soviet Union was declared in 1991, and the Constitution was adopted in 1996. After declaring independence, Ukraine struggled to decide whether legally the country would adopt policies bringing it closer to the rest of Europe or policies tying it to Russia. This struggle to find a unified approach led - and continues to lead - to the adoption of often inadequate and continually changing legislation. Today, many laws adopted prior to independence are still at work, albeit in amended versions. The Verkhovna Rada (the Ukrainian Parliament) is still working to pass foundational laws, such as the new labor code, which is currently under debate (the current code was passed in 1971).

The lingering Soviet influence on Ukraine’s legal system manifests itself in several ways. Most prominent are the laws in use that were passed prior to independence. These laws in large part have been amended to “patch holes,” but there remain differing philosophies between the laws passed prior to 1991 and those since passed. As time passes and the Verkhovna Rada adopts new laws, the influence will decrease, resulting in increasing effectiveness of the legal system.

The effects of Soviet influence are just as apparent in the practice of law in Ukraine as it is in the formation of law. At independence, a bar association and law firms did not exist because they were not necessary under the Soviet system. Although it is somewhat amusing that one Ukrainian law firm posts “One of the Oldest Law Firms in Ukraine since 1991” on its website, it is certainly true. At this point, attorneys in Ukraine are concerned with discovering the law currently on the books and predicting the likelihood that the law will remain unchanged as opposed to providing an analysis of what the law actually means.

As Ukrainian legislation develops and moves further away from laws passed before independence, the practice of law will develop as well. Until then, attorneys will be evaluating which laws are enforced, which laws are not, and which laws are likely to remain unchanged. They will also make sure to include repeated cautions to clients that their analysis is merely a prediction and other possibilities can occur due to how quickly the law can change.

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Wednesday, June 11, 2008

ETHIOPIA: Economic Growth from a Lawyer's Perspective
6:30 AM ET

JURIST Staff files from Addis Ababa...

The Economics of Ethiopian Growth – from a legal professional’s perspective

Do you have an addiction? Do you even know you have an addiction? As American lawyers, we’re addicted to easy and fast Internet, and our relied-upon webpages are our enablers: Westlaw, Wall Street Journal, New York Times, and every PDF document you want to read. These pages pop up quickly when clicked in the U.S., but in Ethiopia – even at a government ministry with some of the fastest Internet in the country – a lawyer might as well be back to the days of 28.8 Kbps. With all their graphics and frames, these relied-upon webpages are not designed for such slow connections.

With an IMF projected growth rate of 8.4% for 2008, Ethiopia is supposedly the fastest-growing non-oil economy in Africa. But when I’m sitting at my desk, waiting for pages to load and documents to download, I am unable to produce as much in a day as I could in the U.S. And it’s not just me, it’s law students, lawyers, judges, and the entire legal profession, who cannot fully utilize the wealth of legal information held online. And because the government censors webpages that could portray it in a negative light, many local news sites and blogs are unavailable.
Also hampering a day’s work are blackouts. The capital, Addis Ababa, is on a schedule of rolling blackouts where each building has power only four days a week – though government buildings always have power.

The government adamantly maintains a monopoly on the telecommunications sector, which includes all Internet services. Ethiopia’s accession to the WTO could potentially stall as the government refuses to liberalize telecoms. Of course the WTO would argue that liberalizing the sector would improve its service; webpages would load faster. Liberalizing telecoms, however, could see the government forfeiting its ability to censor the Web.

With these impediments to workers’ productivity, can Ethiopia maintain its fast rate of growth? Robert Solow won the 1987 Nobel Prize in economics for his work toward developing the Solow Growth Model, which broadly (and arguably, too simplistically) explains countries’ economic growth by three independent variables: size of labor force, amount of capital invested (into the means of production), and productivity (technology or other factors that aid each worker to produce more output with his or her time).

Eventually a country mobilizes its entire labor force – all able-bodied men and women are working. And eventually so much capital has been invested that to invest more would no longer increase output. In other words, a state of diminishing returns has been reached. So the only variable left to drive economic growth in the long run is productivity.

Witness in the 1990s the United States, a mature economy with a fully mobilized labor force and thoroughly developed means of production. The economy grew at remarkably high rates for a remarkably sustained period of time. Amazing and repeated breakthroughs in information technology allowed each U.S. worker to produce more in his day than he could before he had the technology.

Ethiopia is not a mature economy. It is a least-developed country. It has a large number of able-bodied men and women who are available and anxious to work. It has few factories, and there is capacity and desire for more capital investment. Yet its ineffective Internet connections and rolling blackouts hamper its productivity growth. Ethiopia will continue to grow economically, but as productivity is hampered, so will be its rate of growth.

Productivity could also be improved through the strengthening of contract law. Enforcement and completion of contracts is uneven for Ethiopians and foreign investors alike. But perhaps this is the topic for another Dateline entry.

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