The government of Ethiopia has launched homegrown economic reform where the private sector needs to actively engage in. The homegrown economic reform has given an uplifted place for the private sector, unlike the previous model which seemed to have been emanated from the amalgam of developmental state, an outfit of revolutionary democracy.
While the public sector has played a key role in stimulating the rapid economic growth, nonetheless its efficiency is in question. The experience of the country over the three decades witnessed that state-owned enterprises failed to bring about desired outcomes in terms of improved efficiency. This mainly manifested in the delay of mega projects like the Grand Ethiopian Renaissance Dams and sugar factories coupled with inefficient utilization of financial resources and corruption.
This is why the government seemed to have refrained from its stubborn stance and is aiming to give an uplifted role to the private sector. Ethiopia unveiled what it described as a “Homegrown Economic Reform” agenda aimed to unlock the country’s development potential and address the macroeconomic imbalance the nation has faced for some time.
The economic reform gives focus on promoting the private sector participation in the economic development of the country by creating enabling environment and opening public-owned enterprises for private investors through reviewing macro-economic policies.
Accordingly, the Ethiopian government has devised different strategies to rescue the country from the nose dive economic situation it has been in. Ever since the start of the reform, efforts have been underway to partially and fully privatize state-owned factories and service sector enterprises. Thus, sugar plants, industrial parks, hotels, maritime transport, and other enterprises will be transferred to the private sector fully or partially.
Recently, the Ethiopian government has set to privatize six sugar factories over the coming six months. This is a great stride in the history of the country’s privatization after the command economy and developmental state economy adopted for over nearly half a century.
The decision to privatize the sugar industries is one of the manifestations how the Ethiopian government yearns to work closely with elements having varied interests and the homegrown economic reform is expected to tap the huge opportunity in the economic package. Solving finance and foreign currency issues, creating market linkages and effective incentive mechanisms to promote the private sector are prioritized issues of the reform.
The involvement of the private sector in the economic reform first and foremost benefits a wide range of societies and the state as it has key impact in relation to attracting investment and reducing the ever-increasing unemployment rate.
Studies indicated that privatized companies have registered better performance and productivity and increased their efficiency. For instance, textile factories that previously couldn’t even afford to cover their costs have started to pay large amounts of taxes after they were privatized.
By creating a sense of ownership, the privatization of the sugar projects will improve the management system and productivity in the sugar factories. It will also bring better efficiency and ease the foreign currency and sugar supply shortages.
The Ethiopian Herald, December 5/2019
