Economist’s advice government to put forth strong institutional set up and expertise to avoid the risks of privatization as the country prepares to privatize some of its major public enterprises and open up its economy.
There has been strong commitment from the government side in pushing for more open and investment-led economy while the experts question the capacity of local investors. However, privatization and economic liberalization in general have largely been seen as means towards vibrant private sector.
Prime Minister Dr. Abiy Ahmed who sits on backlogs of economic challenges is pushing forward for a more open economy though the process is at an early stage with concrete works are yet to be undertaken.
An independent council was set up several months ago as an oversight body to provide expert inputs as state owned enterprises open up to private investments.
Telecom, Sugar Factories, Airlines and other Ethiopian utility providers are among the companies set to be privatized partially or entirely. But sugar factories whose construction largely seen as mess, according to experts, are the one that should be put on auction shortly.
Since Abiy’s announcement to sell state-owned firms, either partially or entirely, as part of economic reforms designed to unleash the potential of the private sector, there have been increasing interest from the private sector to have stake on the asset transfer.
Sugar Corporation recently announced that a number of international and local companies have shown interests to have share on sugar factories set to be privatized.
Last month, Prime Minister Abiy Ahmed met with the privatization advisory council to evaluate updates on the privatization process. The planned privatization is a timely move to improve services and rejuvenate the companies. Partial privatization is needed.
Sugar is one of the basic commercial products and the country faces huge market deficit with local factories only meeting less than half of the demand. With the construction of sugar factories lagging behind, sugar remains one of the scarce products with soaring prices, says Dr. Wendaferahu Mulugeta, Associate professor in economics.
The government should exhaustively focus on providing quality public goods. Provision of private goods should be the priority of private investors. Private sectors have relatively better management and operation advantages. With growing and spending consumer, sugar investment would be profitable business for the private sector, he says.
The construction capital of the factories is ever increasing and the repayment periods of loans are approaching. This puts onus on the government to partially put the factories on sale, he argues.
But it would be also advantages for private sectors to overtake the ownership since it requires less cost and time to complete the construction. “It is better when the government invests in its regulatory capacity by devising sound regulatory frameworks.”
“Sugar factories can be put on sale in very short time period due to the external debt distress and foreign currency shortage, however, the privatization process of huge enterprise such as sugar factories should be undertaken sequentially and go through in long term process.”
Dr. Abdiyuya Ahmed is an Economist. He says it is up to the government to find efficient local and foreign investors who can run the companies effectively. People who can elevate it not deplete the business should own them. Privatization process requires strong institutional set up and seasoned experts.
Unless there is strong preparation from the government’s side, privatization sometimes could appear to be risky and murky. To avoid such occurrences mainly economic shocks and corruption, the privatization process should be undertaken step by step, he says.
Given the growing demands of the people for quality private goods, the planned privatization is a timely and right decision. “But the crux of the matter rests on how the country effectively transfers the public wealth.”
A new directive is being prepared to manage the privatization process of sugar factories and determine how the factories would be run after the privatization, Sugar Corporation General Manager Weyu Roba tells the BBC Amharic.
He states that the distribution and others aspects will be settled in future and the price of sugar will be determined by the market, he adds.
Presenting the Ministry’s ninemonth performance report to the Revenue, Budget and Finance Standing Committee of Parliament, Minister of Finance Ahmed Shide said the government has been taking time to conduct the privatization process in a transparent and accountable manner.
For instance, regarding telecommunications, the Council of Ministers has prepared a new proclamation establishing a federal authority to regulate telecommunication services. The proclamation has been referred to the HPR for approval said Ahamed Shide.
To fully ensure the attainment of goals of transferring state-owned public enterprises to private ownership, the experts in general have stressed the need for more vigil from the government’s side, strong institutional set up being at the heart.
The Ethiopian Herald June 7/2019
BY DESTA GEBREHIWOT
