Provision of infrastructure service like roads and electrification to the public is widely carried out by private sector in developed countries. But in developing countries like Ethiopia, it is common to make accessible these services with government’seffort. The other option which is underway in some countries is the way government and the private sectors partake cooperatively.
Cognizant to the viability of cooperation with private sector, Ethiopian government engaged in the service provision process earlier by endorsing proclamation No. 1076/2018. The board established following the endorsement of the proclamation is moving forward identifying roads and power projects worth 7.7 billion Dollars making open for the private sector.
Acknowledging the appropriateness and timeliness of government’s initiation to participate private investors to infrastructure development, economic experts suggest that it should be handled thoughtfully.
Lemessa Bayssa (PhD), instructor and college dean of finance management at Ethiopian Civil Service University, said that though mega infrastructures were conducted by government’s own budget and public support, most of them were not successful.
Some projects which had begun with many millions of budget allocation could not be finalized in the planned time because of various reasons. They acquire additional
cost only for their delay. Even if they are finalized with extended time and additional cost, many are seen substandard.
As per this, the public lacks proper service and the government shoulders high cost. Therefore, the necessity of opening up nationally and publicly beneficial mega projects for foreign investors is unquestionable.
However, according to Dr. Lemessa, the projects to be given to foreign investors should predominantly fulfill two basic prerequisites. The first one is they should be beyond the capacity of the government and local investors in terms of experience. The second one is there should be coercing legal agreements that enable Ethiopians acquire knowledge and technical competency from the sector.
Currently, a single foreign company is seen undertaking similar projects repeatedly. This is not only because of capital deficiency; rather, it is because of failure in sufficient knowledge transfer at all levels. “Thus, as a nation, we have to gain knowledge and experience from every sector and enhance the participation capacity of government and local investors,” he suggested.
If foreign investors have constructed three roads, for instance, knowledge and experience transfer must be expected to construct the fourth one by local investor. Continuing looking for foreign investors for each project and funding them with limited resource, with no doubt it is shrinking the economy, he added.
Recommending his probable solution, Dr. Lemessa said that while agreement deal is underway with government, legal situation has to be set. This deed, as to him, enables higher education institutions, students studying in the sector and government organizations that have connection with the project get information.
Project overseers also have to check whether the knowledge transfer is underway properly in line with their inspection activity, he urged.
Kiburgena Desta, head, Pan African Trade Council, on his part said that dealing with foreign investors needs caution. Reasoning his comment, he explained that projects available for the cooperation of government and private sector are carried out only by foreign investors as they need high knowledge, technology and capital. The major target of these investors thus, is their own benefit so that the deal should be conducted carefully, he noted.
As per Kiburgena’s explanatory, the need for access of infrastructure is increasing day- to- day because of population growth and the country’s development. On the contrary, government is unable to address the questions in time due to limited capacity in finance and knowledge.
So far as this, projects that serve the public but couldn’t be conducted by government should be opened for the private investors, he suggested.
However, examining the situation that local investor uses the opportunity to some extent aiming at sustainable development is expected.Foreign investors are effective enough to finalize the projects rapidly with the allocated budget and intended time.
Though the accomplishment of the projects in time and quality should be taken into consideration, the impact they impose on the nation’s economy and individuals life must be recognized, he stressed.
On one side, the payment for foreign investors is in foreign exchange. On the other side, accomplishing the work; they take away their money.And at the end of the day, the country gains no financial asset. On the contrary, if the construction is conducted by local investor,the payment is in Birr and this is the first benefit.
The second one is local investor reinvests his capital inland and this in turn enables reduce capital deficiency and unemployment. Therefore, Ethiopian investors should be given the opportunity at least in the projects could be run by them,he said.
Regarding knowledge transfer, Kiburgena said that yielding experienced and skilled human capital takes longer time than accumulating financial capital. Financial capital can be gained in shorter time through various means including aid whereas, capacitating own performance can’t be achieved overnight.
Growth of many Asian countries is based on copying and expanding experiences quickly. There are some indicators that Ethiopia too has accustomed such kinds of experience.
The transferring of Ethiopian Air Lines from Americans to Ethiopians, for instance, was successful and continued up to now without vicissitudes since there were capable workers from managerial to technical level at the time. Knowledge transfer without discipline is valueless by itself so that inheriting the discipline should be considered equally, he noted.
The threats being raised are appropriate, as of Ashenafi Abera, director, capacity building and ken management, Government and Private Cooperation Directorate General at the Ministry of Finance and Economic Cooperation. Necessary cautious preparations therefore, are carried out from the government side, he said.
The director explains that government and private cooperation has not only advantages but also disadvantages and threats. Countries went on this development track earlier to Ethiopia have entertained both the advantage and the disadvantage.
Among the major challenges occurred is lack of making potential and national benefit safeguarding deal. As the contract deal made between government and private sector lasts for 15 – 30 years, it should consider situations happen during this period and safeguard benefits.
The bid and the competition are carried out globally and most of the competitors are well experienced foreign investors. Therefore, well trained and experienced professionals in international law are needed while making the agreements. If not, the agreement gives upper hand to the investor instead of benefiting the nation and the public, he emphasized.
According to the director, the main goal of government for the future is upgrading performing capacity of local investors. To this end, opportunities are available to engage local investors in some projects without competition but with regard of competency.
In addition, there is legal framework to what extent foreign investors engage local ones in their contract and the way they use the country’s potential while establishing managerial staff, hiring workers and input supply. Regarding knowledge transfer, government has given prior attention so that Knowledge Management Directorate that inspects the process is established under MOFEC, he said.
Government of every state has priority issues and Ethiopia’s priority issue is infrastructure, the basic need of the public. Projects prioritized to be opened for foreign investors by the board are road constructions and power generations. As the dealing and controlling capacity of the government built up, extending to other sectors is expected, he added.
Herald April23/2019
BY BACHA ZEWDIE
