BY ABEBE WOLDEGIORGIS
It is believed that the government is still playing a dominant role in the economy. In fact, as agriculture is the mainstay of the nation’s economy, in which 80 percent of the population relies on it in one way or another, the private sector’s role is insignificant.
Experience indicated that due to various reasons most public enterprises are in efficient and ineffective. During the Derg era when command economy was prevailed private sector was barred even engaging in cottage industries.
At that time, many enterprises were managed by politically appointed personnel who had no a passion to the required profession. As the result, many of them produced below their capacity and others faced bankruptcy. The absence of sense of ownership also further aggravated the situation. Such and other situations forced the government to restructure and privatize public enterprises.
For the last 27 years though the EPRDF regime used to announce that it had intended to privatize public institutions, but the pace was not as it had been expected and some of the privatization activities were carried out in a none transparent manner and even favored politically affiliated business tycoons.
Recently, however, the Minister of Transport Dagmawit Moges announced that the government showed green light to the foreign investors to involve in selected sectors through joint venture with local investors.
Among the sectors opened for the joint venture are transiting goods, agents of shipping lines, local air transport services and trans-regional land transportation services which utilize vehicles with a capacity to carry more than 45 people.
Reacting to this announcement, the renowned economist and business man Kebour Ghenna said that the joint venture can bring new working culture along with technology and innovation; develop capacity of local companies; creates job opportunities and transfer knowledge vital to the nation’s economic growth.
However, Kebour said that the joint venture should define the percentage of the money that shareholders entitled by local and foreign investors contribute. In some countries, the percentage of share disproportionately set up to 1 percent to local and 99 percent to foreign companies which in turn make local investors vulnerable to be removed from the playing field.
On the other hand, in some countries foreign investors start business with local investors in joint venture with 50 percent of each shareholder and later when renovating the business, foreign investors ask local investors to rise up to 500 million
Dollars and when they fail to inject such amount the foreigners monopolize 100 percent of the company and such practice leaves local investors bankrupted.
To his view Kebour said that, for the initial phase, it is better giving local investors 30 percent share and the rest to the foreigners. Hence, each activity should be conducted cautiously.
With regard to the opening of the domestic air transport to the joint venture Kebour said that the measure is rather taken lately.
For long, the air transport was monopolized by the Ethiopian airlines. Hence, introducing Joint venture with the participation of foreign companies make the industry relied on competition.
Currently, there are many foreign companies which already have invested in various sectors such as modern farming, manufacturing and trade and created job opportunities for thousands.
In addition to these, by exporting their products they enable the nation to obtain significant amount of foreign exchange and the introduction of joint venture further stimulates the nation’s economy.
Dr. Atlaw Alemu, an economist and a researcher, for his part said that Ethiopia aspires to transform its economy from agriculture led to industry led economy.
But the nation still exports agricultural products which can be used as input for industries. The raw form of the exported products made it incompetent in the international market hence instead of exporting the products in the raw form, exporting by adding value give them advantageous position in the market.
For example, exporting packed meat, processed animals’ skin and hide, leather and leather products and shoes instead of exporting live animals will enable the nation to gain significant amount of hard currency.
There are also other examples. Instead of exporting coffee in its raw form, it would rather better for traders to export fried coffee which has a high demand in foreign markets.
But to do the job, local investors have various limitations such as lack of better knowhow and skills, capital, technology and experience among others. Hence, opening the mentioned sectors for joint venture would help the nation to gain a lot.
Currently, Ethiopia imports agricultural products unnecessarily. For example, edible oil is imported from abroad. But there are sufficient agricultural products which can be used as inputs for producing cooking oil such as sesame and nigger.
Most local investors engaged in export and import trade do not dare to engage in manufacturing of producing cooking oil because of the threat it might bring its own risk which lead to financially unpredictable. But such skepticism is groundless therefore opening the door for joint venture can be a remedy in this regard.
As mentioned above working with foreign companies helps to transfer knowledge and skills to local entrepreneurs and in the long run it will help local investors to build confidence to do the job by their own.
As to Kebour, to strengthen the involvement of local companies in air transport, government should provide tax holidays, subsidy and access to loan. Unless they are supported, they may not withstand the pressure from foreign shareholders and ultimately might be swallowed by foreign companies as mentioned above.
Asked whether there is sufficient capacity in enforcing contracts Kebour said that courts are inefficient in enforcing contracts. Particularly when dispute arises between the public and private entities, justice will be delayed or even denied.
In this digital era making swift decision is a decisive factor to run business effectively and efficiently. When decision is delayed, business might be stagnated. If a warehouse is closed for a year and stayed with no function, it incurs heavy loss on the disputing parties.
In some countries enforcing contracts and dispute settlements are carried out within 24 hours. Therefore, to redress the ill performance, courts should be reinvigorated.
The Ethiopian Herald March 30/2021
