22 June 2018

Ethiopia: Transparency Conduit to Efficient Privatization

Signaling some frauds on previous privatization process, Prime Minister Dr. Abiy Ahmed once again asserted as the government would attach greater care upon transferring shares of major public enterprises which scholars said the move would pave the way for seasoned companies to bring unprecedented expertise and knowledge.

Previous process was marred with some irregularities that the government must avoid this time, Prime Minister Abiy told Parliament on Monday. "In some cases, despite good beginnings, inefficient companies were allowed to take over some public enterprises that run against the objective of the privatization," Zafu Eyesuswork Zafu, a Development Economist seconds the premier's argument.

"Learning form the past, the government, I think, would put much attention and care on the companies to whom it would transfer to. Particularly, it should place painstaking procedures in the bidding and selection aspects to minimize risks"

If the shares go to the right companies or investors, it is inevitable that they inject new expertise, knowledge and technology to the economy, he notes, adding that unless limited by technology, the private sector can create more effective and efficient distribution of goods and services.

There are lucrative opportunities associated with privatization in terms of good quality and competitive prices, he states.

Zafu is confident in that there is nothing wrong with selling the ownership for foreign investors as far as the way they are recruited goes well. "The public enterprises can be more efficiently run if fall in safe pair of hands."

The fact that the foreign investors can have a share on the investment should not be viewed in the negative aspect, they could also bring unprecedented technology and expertise specially when the government is building huge industrial parks and putting attractive incentives.

According to Zafu, however, to avoid risks or inefficiencies, the selection of anchor investors must be emphasized. It behooves well planned procedure to transfer the full or partial ownership of the national asset, he says.

In fact, the government is planning to democratize the capital where it is also intending to the people to have some portion of the ownership, a right thing to do to widen the economic base, he asserts.

"Trading shares in stock market will provide a much broader room for the engagement of the public."

It is possible that the government can sell the share with great wisdom and care that is free from malpractice, he adds.

The public has resented the poorer services of utility providers mainly ascribable to inefficiency, he stressed, and private investors can handle it in a better way.

To him, it helps the government to exert throw its full weight on issues that have far-reaching impacts.

Some loopholes were noticed in the previous privatization process where there had not been an opportunity for the mass to participate in the ownership, Ministry of Public Enterprises Corporate Communication Director Wondafrash Assefa underscores.

The government will look thoroughly in assessing not only the financial capability of investors but also in looking into the operation and administration experiences of the companies, he indicates.

"It is good that the government has decided to transfer some shares to the public which also demands legal grounds and procedures to facilitate same."

A study has been conducted by the Public Service University to identify and assess the merit and demerit of previous privatization works, he reveals. It also requires revision of existing procedures to prepare it on the way that can fit in the current privatization objectives, as to him.

Birhanu Gobeze, Legal Consultant, indicates that there is enabling legal framework where the privatization can go smoothly.

The existing policies and procedures regarding privatization are good enough to trigger the privatization process, he states. Different polices and laws have, at different times, been legislated to pave a way for regulation management and enhancement of the privatization process.

The Ministry of Public Enterprise is mandated to come up with detailed procedures or directives if needed any further revisions. But as far as the government has the majority stake in the companies, it will have its own role in the day to day activates. For this reason, it may not require new legislation. The existing regulatory frameworks can help facilitate the pre and post privation process, he believes.

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