Following the policy directions announced last June by Prime Minister Dr. Abiy Ahmed to fully or partially privatize stated-owned companies, the government now, as promised, directs a new order to begin the privatization process, according to Communication Director with the Ministry of Finance, Haji Ibsa.
According to Haji, Ethio Telecom has been initially selected for the best approach for the entire partial privatization process. In addition, that Ethiopian Airlines, the Ethiopian Shipping and Logistics Services, and the power generating projects are also selected for the partial privatization next to the Telecom sector. These four state owned public enterprises are selected for partial privatization on which the government takes the lion’s share.
The Government also eyes on privatizing sugar projects, industrial parks, Railway and other state-owned companies to privatize either fully or partially based on the situations and findings of the companies on the ensuing research process. For proper privatization process, the government is preparing the necessary legal documents and future road map of the companies’ administrative system.
On the other hand, Public Enterprises Holding and Administration Agency says Ethiopia has successfully privatized 371 public enterprises/projects during the past two decades from small retailer shops up to huge manufacturing industries like the National Tobacco Factory. The Agency stated that the country has an experience of privatization and is capable to privatize the big public enterprises, yet privatizing these companies need international experience, additional preparations and collecting well experienced experts since the companies are huge and caring a lot of resource.
According to the Agency, the total
price of the privatized enterprises and companies so far was 49.1 billion Birr and 86 percent of the enterprises/projects were transferred for local investors. But the current enterprises planned for privatization are too huge, and even a company can have equal price value with the total privatized enterprises so far.
Corporate Communication Director with the Agency, Wondafrash Assefa told The Ethiopian Herald that the privatization process in Ethiopia was started in 1995, and the 371 enterprises have been privatized since that time to the recent enterprise, the National Alcohol and Liquor Factory, which is on process that the winners of bid provide their initial payment in this month – February.
The privatization process in all these enterprises was held through bid. And the National Tobacco Enterprise, National Alcohol & Liquor Factory and Metta Brewery are the biggest privatized projects in terms of price valued over 3.5 billion Birr each.
Although the privatization was started in 1995, the process of privatization during that time was very slow and only few small projects were privatized. In 2003, a research was held to evaluate the privatization process, as the finding indicated, the process was weak. Therefore, the government set new policy directions on privatization to solve capital shortage of investors and structural change of the service institutions by merging privatization agency and public holding enterprise.
The system of payment for investors was the turning point on the privatization history in Ethiopia, Wondafrash noted. The new policy set 35 percent initial payment and the remaining 65 percent set to pay in five years based on the banks’ interest calculated for local investors. On the other hand, the system is currently working on 50 percent immediate payment for foreign investors and the remaining 50 percent will be paid in three years’ time limit.
Fully privatization by bid, lease, joint venture and management contract are the privatization modalities which practiced so far in Ethiopia.
On the process of privatization, evaluating the overall capacity and profit of the organization over the last three years’ performance is the main issue for discussions among politicians and scholars. Deciding the asset valuation for non profitable and business valuation for profitable projects, deeply researching the nature of man power to control social crises of the company are the main issues which need series of preparations. Then business proposal of the bidders and the future goal of the enterprise, future expansion and job creation opportunities are also the critical points in the process, Wondafrash underlined.
The big issue and the most time consuming task in the process of privatization is price valuation. But now, since all enterprises have internally and externally audited financial statement, the process of price valuation becomes easy and the process of privatization for one big enterprise can be finalized within a year, he said.
For Wondafrash, full or partial privatization of the big public enterprises like Ethiopian Airlines, Ethio Telecom, railways, sugar projects and others need serious attention, a clearly defined strategy, and strong evaluation.
According to the director, for successful privatization of the current big projects, exploiting local capacity, upgrading internal plus implementing international experiences, collecting internationally licensed professionals of the field, enacting and implementing strong laws on stock market with clearly defined strategy needs strong concern.
Haji on his part stated that the government gives special attention for the preparation of the privatization process and the necessary legal documents are preparing. The privatization process of the big companies will also hold step by step to get experiences from the first ones. Researching the nature, capacity, current status and recent performances, the capital of the companies and the readiness of the enterprises for privatization are the points which demand the concern from the ministry and where the government puts serious directions.
As the telecom sector selected for first partial privatization, evaluating the total current status of the company, financial and physical levels a legal document is preparing. For the overall privatization process, privatization road map is preparing and proclamation on the future administration of the telecommunication sector was prepared. The legal draft of the proclamation was sent to the House of Peoples Representatives for final approval after evaluating by the council of ministers.
For the successful implementation of the privatization process, technical and streaming committees have been established by ministry of finance. Experienced experts of the sector, experts from Ministry of Innovation and Technology are also included in the committees and other advisory experts are also engaged in the process.
The amended draft bill of the telecommunication sector was already on the final process and stakeholders from Ministry of Innovation and Technology, Ethio Telecom, Ethiopian Broadcast Authority, Postal Service, Space Science and media representatives held discussions on the draft and give their suggestions. The legal document is preparing objectives for the successful privatization process and future total administrative system of the sector.
According to Haji, the necessary preconditions for the process of privatization are being held and government puts clear directions on the process.
The experience of the Agency is, so far, increasing local experts in evaluation sector, establishment of the Macro Economic Affairs Advisory Council by government are the available opportunities to transfer the enterprises successfully, yet it needs strong integration with clear government strategy and follow-up, Wondafrrash stated.
The Ethiopian Herald February 23/2011
BY DARGIE KAHSAY
