22 August 2018

Ethiopia: Boost Efforts to Strengthen Private Sector

The role that the private sector plays in a country's economic growth is not simply a presupposition. Rather, it is a reality attested time and again and proved to be a viable means and a necessary condition to support development.

It is clear that private enterprise facilitates the economic transformation and long-term prosperity through its potential to generate massive employment opportunities to citizens, technology transformation, improve efficiencies, expanding trade opportunities and competitiveness as well as bringing in foreign exchange reserves.

Furthermore, being a major contributor to tax revenues, which will be used to develop and maintain infrastructure and services (such as, electricity, water, roads, transport, telecommunications, hospitals, schools, sanitation and waste management among others), it plays substantial role in financing for development and to national income.

In recognition of these pivotal roles and because public enterprises by themselves could not alone extend the required goods and services at the desired level, governments are endeavoring to appeal the private sector both local and foreign investors to take part in their development agendas.

The public sector has been engaged actively to strengthen the country's economy. In line with this, it has created an enabling environment by offering incentives, such as income tax holiday, and exemption for import and export items to further enhance the private sector's involvement and increase capital inflows. As a result, during the past two decades investment has flourished, and remarkable success stories are registered.

However, when the success is evaluated from the context of competitiveness at regional and global markets, it is underwhelming. This has been reflected in various global trade initiatives where the country has been taking part.

The African Growth and Opportunity Act (AGOA) is the best indicator for this saying. As it is repeatedly uttered, the nation could not fully take the advantage and benefited from the opportunity.

A key part of this bottleneck associated with limitations in meeting the competitiveness standards' of the global market in terms of quality and quantity, shortage of hard currency, skills and capabilities gaps, low market intelligence. Delay or unresponsiveness to immediate demand and unable to diversify the range of export products are also the other drawbacks challenging the private sector.

As a country, to further strengthen its economy, penetrate to the global and regional markets, and curb the aforementioned blockages, enhancing competitiveness is not an issue to be either ignored or neglected. To such effect, hence, increasing the involvement of the private sector is critical.

Particularly, these days while the country has signed various trade agreements, like the African Continental Free Trade Area, a free trade agreement that aims to create a single market for goods and services in Africa, and it is in the process of accession to the World Trade Organization, strengthening the private sector, boosting up the extent of its competitiveness and enlarging market opportunities is a wise move to achieve greater national economic development objectives.

To this effect, the country has to invest on its human capital and technological capabilities.

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