BY HIZKEL HAILU
Undoubtedly development plans designed by the government in order to achieve sustainable economic growth needs huge financial capacity. It is believed that covering this financial demand with tax revenue and loans and aid from foreign governments and institutions are not as much sustainable and viable alternatives.
Therefore, it will be necessary to create an institutional arrangement to attract private investment through creating a favorable condition for private investment which can create a great opportunity to work jointly with the government in a manner that helps to meet the strategic needs of the Ethiopian economy. In addition to this, it is necessary to create a way to ensure that resources owned by the government can provide full and sustainable economic benefits through carrying out integrated strategic control. This system will improve the management of government resources and to get more financial supply.
It is known that Ethiopian Investment Holdings which is responsible for achieving this plan was recently established as per Regulation No. 1263/2014. Ethiopian Investment Holdings includes 27 institutions engaged in finance, trade, manufacturing, logistics, hospitality, construction and real estate, chemical and communication sectors. It is to be recalled that it has started its function last month. It was also stated that the institution will work to create more wealth and increase financial availability through increasing the capacity and competitiveness of the development companies. In particular, it is expected that it will have a great contribution in increasing investment.
Addressing the gathering on first Ethiopian Investment Holdings (EIH) conference, the Finance Minister, Ahmed Shide said EIH’s mission is to usher in global investment and modern capabilities to usher with the interest of Ethiopians. Ahmed noted EIH’s mandate represents the full ownership rights of the state over public commercial assets, adding that, reliable investment finance is an important resource for the success of the Home grown economic reform introduced by the government.
As to him the EIH will serve as one tool to fulfill this objective. Mentioning that the government is trying to find options to increase the supply of finance from domestic and foreign sources, he announced that Ethiopian Investment Holdings is committed to attract international investment to Ethiopia. As to him, one of the procedures that the government is using to increase the effectiveness of development organizations is the establishment of international corporate governance systems.
Thus, to increase the profit and income of the institutions, it was found to be an appropriate option to gather the companies under Ethiopian Investment Holdings to manage them with modern leadership. This system will play a significant role in achieving sustainable economic growth by alleviating the macroeconomic challenges, he noted.
Ethiopian Investment Holdings works in cooperation with national and international investment partners to increase the efficiency and competitiveness of the companies. Through these collaborations, Ethiopia’s national interests and long-term economic plans will be realized and the government will provide the necessary support.
The CEO of Ethiopian Investment Holdings, Mamo Mehretu, said, “Ethiopian Investment Holdings is established to implement the long-term development plan set by the government and to obtain additional financing, to create more wealth and to create a broad-based foreign investment.
According to him, the company serves as a strategic investment vehicle to the government. It carries out investment activities to meet the development goals of the Ethiopian government. It is also significant to ensure the effectiveness of government’s resources and carrying out investment attraction activities.
Mamo pointed out that the 27 public development organizations have different capacities and profit rates, he also explained that Ethiopian Investment Holding follows strong corporate governance and implements administrative procedures to make all 27 development institutions to be more profitable and effective.
According to Ethiopian Airlines Group Board Chairperson Girma Wake, the public enterprises are managed under one holding company to strengthen their administrative affairs. Ethiopian Investment Holdings should have a strong system to manage. In the process of organizing and managing the companies, it is necessary to be careful so that the companies that record high profits do not become victims and those with relatively low capabilities do not become dependent, he stated.
As to him, it should be noted that the effectiveness of each organization is mainly measured by the profits it has achieved. It is also necessary to manage the communication of the institutions in a clear and efficient way.
Referring to the experience of Singapore and the United Arab Emirates, Girma said that the practice of investment holdings is a good experience that has brought a successful result. He also said that despite the delay in the establishment of investment holdings in Ethiopia, it is a good step for the country.
“When Ethiopian Investment Holdings is established, it should be understood that it will not replace the board of each public enter. Although all 27 development organizations have their own board, it has to be crystal clear that both Ethiopian Investment Holdings and the government will focus on how to improve Ethiopia’s investment.
Ethiopian Investment Holdings works in coordination with the heads and board leaders of the development companies especially in terms of capital utilization, operational performance and management system as well as increasing their international competitiveness. Ethiopian Investment Holdings advises each development organization to strengthen itself according to the plan and performance. This approach helps to strengthen the performance of the country in the investment sector,” he explained.
Mola Alemayheu (P.HD.), a professor of economics at Haramaya University and a senior researcher at “Frontieri” Research and Consulting Firm, said that Ethiopian Investment Holdings will make a positive contribution to the sector in terms of focusing on identifying investment options.
According to him, instead of operating individually, pooling resources and capabilities will help to make investment activities more effective. It also allows paramount importance to build planned investment with fair distribution. Apart from this, it also helps to create a favorable environment for identifying the sectors that should be prioritized for investment.
According to Molla, it is necessary to take experience from the gaps that have been seen in the past while the company started managing institutions together. The government should further establish a strong monitoring and evaluation system, therefore, it is necessary to strengthen the strong performances and correct the gaps. He also recommended that care should be taken to avoid a repeat of past performance deficiencies.
Habtamu Girma, Economics Lecturer at Jigjiga University for his part explained that it is a common practice in other countries to consolidate and manage institutions with huge wealth under one institution. He also mentioned that working together to pool resources helps to reduce the loss of resources, increase the availability of finance and increase the profitability of the companies.
Pointed out that one of the bottlenecks in the investment sector is the problem of financial availability, he underlined that bringing together and managing institutions with large capital capacity will play a positive role in increasing investment finance through expanding and tapping the source.
Ethiopian Investment Holding, which was established to be a strategic development and investment tool that increases the country’s economic growth and competitiveness by gathering many government resources. Henceforth, apart from creating an effective management system it has also a great responsibility.
Among the institutions managed by the Ethiopian Investment Holding are Ethiopian Airlines, Commercial Bank of Ethiopia, Ethio Telecom, Ethiopian Maritime Transport and Logistics Services Corporation, Ethiopian Commercial Works Corporation, Hilton Hotel, Berhanena Selam Printing Enterprise, Ethiopian Insurance Company, National Lottery Administration, Ethiopian Agricultural Works Corporation, Federal Housing Corporation, Ethiopian Electricity Service, Land Bank and Development Corporation and Ethiopian Fuel Supply Company.
THE ETHIOPIAN HERALD FRIDAY 29 JULY 2022
