The government of Ethiopia announced that it has already finished preparation to privatize state-owned enterprises. Ethiopian Airlines, Ethio Telecom, Ethiopian Electric Power Corporation, and Ethiopian Shipping and Logistics Services Enterprises are among the enterprise that would be privatized and some of the sectors opened for bid.
Ethiopia’s Ministry of Finance announced that the government will give priority to the privatization, in which it is the best approach to the process of liberalizing the nation’s economy.
Dr Tilaye Kassahun General Manager at PRIN International Consultancy and Associate Professor at St. Mary University told The Ethiopian Herald that the government needs to take necessary precaution activity and set preconditions for investors to privatize state-owned companies. The process to privatize state-owned companies needs due caution, he noted.
Privatization will bring lots of benefits for the overall development of the country both in quality and experience sharing. In addition to this, the companies which will come to the country will come with modern technology, service and experience. And through this process, the consumer will get quality service and better price, while the local companies benefit from the competition, he said.
Privatization involves selling state-owned assets to the private sector. Critics argued the private sector tends to run a business more efficiently because of the profit motive. On the other hand, they also argue that private firms may impose their monopoly over public assets ignoring the benefits of the peoples; so that, it is important to set preconditions.
Dr Tilaye said that to provide quality service in the sector, it is important to invite or participate in highly experienced companies which worked in different countries across the continent or globally. The staff workers who come with the company must be qualified and the others must be from local citizens or Ethiopians. Besides, the company must believe in technology transfer and experience sharing, he said.
“Some companies seen as working simply for the sake of profit rather than sharing experience for local citizens and even most of the work were done by themselves. This may difficult for local citizens to acquire the needed experiences. It is important to study the background, work experience, and other related issues of the companies appropriately before allowing it to participate in the sector.”
Since the sector is new to be privatized it needs serious caution and it will be easily exposed to exploitation. Besides that, some sector like Ethio-telecom needs necessary caution regarding the national security of the country and other related issues.
Dr Tilaye stated that price escalation, downsize the size of workers and capital outflow as a challenge. Also, since the company is used by technology it may downsize the size of workers and this lead to unemployment, capital outflow and other related issues.
So that; to control these kinds of challenges, the government must set preconditions or criteria in how to manage to finance-related issues whether re-investing it in domestic through different activities. The company must select key staff officials from domestic citizens and committed to knowledge transfer, he noted.
Approached by The Ethiopian Herald, the Economist Dr Gutu Tesso states that privatization of the sector will facilitate Ethiopia’s push towards the digital economy by closing gaps in digital infrastructure. It will also enable the introduction and expansion of new technologies, experience sharing and technology transfer, he noted.
He also stated that most of the Ethiopian institutions are not supported with modern technological advancements. In this way, the process of privatization opens a playfield for domestic investors to share experience and technology while working together. It is important that providing capacity building for the private sector to participate in privatization through different means weather sending
them abroad to acquire the necessary experience and knowledge.
In line with privatizing state-owned enterprises a lot of issues must be taken into considerations. From the very beginning, the main aim of the government to privatize state-owned enterprise is hope to attract foreign investment and stimulate economic development. The government should take the necessary precaution while privatizing the enterprises, especially on social and national security issues, Dr Gutu says.
Kassahun Mamo Public Relation Director at Addis Ababa Chamber of Commerce and Sectoral Association (ACCSA) said that partly through privatization, there should be a shift from public sector mentality, unwise ideology, and public dominated economy to a genuine free market controlled by the vibrant private sector.
The privatization initiative shouldn’t be a response as a quick fix to tackle challenges, such as, for generating cash to pay for the staggering 27 billion debt burden of the country.
The privatization process shall be a step-by-step process with due cautions supported by concrete thought on the perceived benefits outweigh the cost.
Kassahun stated that ownership transfer of enterprises shall be a smart and intelligent move through a gradual process to ensure efficiency, productivity, competition, and genuine free private entrepreneurship. For instance, if Ethio-Telecom privatized partially without other operators in the sector that possibly brings service quality and efficiency, the benefit will be less, as there is no pressure to compete.
It is important to note that, practically, the road to a market economy system operated by a vibrant private sector is not an overnight job. Until the private sector establishes an efficient and self-operating market system, the government of Ethiopia shall mitigate market imperfection, ensure enabling an environment for the vibrant domestic private sector and provide support and incentives for the companies.
The Ethiopian Herald August 24/2019
BY HAILE DEMEKE
