Recently, the Ministry of Finance announced that six sugar projects will be privatized in the next six months. A scholar and top government official say the privatization will have positive outcomes in terms of efficiency and productivity.
State Minister, Eyob Tekalign said that the government is conducting a technical assessment, validation of factories and social impact assessment for all the thirteen sugar projects of which six will be privatized in the stated period.
Useful information has been gathered from potential buyers in order to commence the first phase of privatization. “We will announce open, transparent and competitive bid process for these sugar projects as the government has encouraged the participation of the private sector and inflow of private capital into the economy,” Eyob explained.
Dr. Wendaferaw Mulugeta, Assistant Professor of Economics at Meles Zenawi Leadership Academy tells The Ethiopian Herald that for the privatization process to be successful, it needs the application of sequencing and pacing.
It is fundamental that the privatization process starts from small projects and move to huge ones after evaluating performance and solving constraints. “It is essential that the government starts the privatization process with the six Sugar Projects that are inefficient. It is implementing the process of sequencing and pacing system,” Wendaferaw says.
In economic principle, it is the private sector that supplies sugar. The government does not have the responsibility to supply such goods for its citizens. In the Ethiopian case, it owns sugar projects because the private sector didn’t join the sector, he says. Currently, the private sector is showing the willingness to run sugar production projects.
Studies indicated that privatized companies have registered better performance and productivity and increased their efficiency. “For instance, we can here mention the case of textile factories that previously couldn’t even cover their costs,” he says. “Now they are paying taxes to the government after they were privatized.”
But, privatizing all companies at once will have negative impacts in terms of the economy and corruption. Till now, in comparison with other countries, Ethiopia’s privatization experience is successful as it didn’t privatize all projects at once, he adds.
State-owned projects have caused huge national debt, project delay, grand corruption, and economic burden. It has also limited the growth of the private sector. Encouraging the growth of the private sector is feasible to stimulate a meaningful impact in the economy, Wendaferaw says. It also further opens the door for financial sector development through joint venture investment.
Dr. Alemu Sime, top government official, on his part says that the privatization of six sugar projects will enable the factories to become efficient and register better performance.
By creating a sense of ownership, the privatization will improve the management system and productivity in the sugar factories. It will also bring better efficiency and ease the foreign currency shortage; he adds recalling the delay in the finalization of the projects has put the country in huge debt burden as the constructions have been funded by foreign finance. Besides, the country has also been forced to import sugar to deal with the supply shortage.
The Ethiopian Herald, December 5/2019
BY TSEGAYE TILAHUN
