Ethiopia: Govt Setting Solid Foundation for Structural Transformation

Addis Ababa — Ethiopia is setting a solid foundation to be able to undertake structural transformation in the economy, according to economic experts.

The experts approached by ENA pinpointed in the advent of sweeping reforms that were introduced a year ago, is aimed at laying the foundation for a sustained economic growth.

However, the experts said capable regulatory institutions are needed to streamline the economic reform particularly the privatization process.

Costantinos Berhutesfa, a former senior policy adviser at the United Nations said the economic reform and measures aimed at enhancing engagement of the private sector are commendable and timely for sustainable economic growth.

According to Costantinos, activities towards enhancing the role of the private sector in the economy will benefit the country in reducing unemployment and building capital.

"There are massive opportunities in Ethiopian economy particularly, in its private sector followed by the government's actions in partially privatizing the major sectors of the economy including the telecom sector, railway, maritime and logistics services energy and among other sectors that would allow the government to acquire capital and financial resources," he indicated.

Appreciating the government's achievements so far in the development of infrastructure and industrial parks, Costantinos noted that, the current initiative taken by the government is crucial for the development of capital market.

"What Prime Minister Abiy is trying to do right now is to set a solid foundation for the promotion of a structural transformation of the economy. By structural economic transformation what we mean is the economy will be transformed from an agrarian economy into an agro-industry economy that could possibility develop credit and capital market in Ethiopia in which the private sector could have easy access." he said.

Noting on the importance of the private sector in generating finance and employment as well as realize a functional market, Costantinos emphasized the need for strong regulatory institutions and adequate finance to improve the involvement of the private sector.

"When we talk about the current announcement of Ethiopia's privatization, we notice that it is really attracting number of global cross-border firms. However, we need capable regulatory institutions to streamline the privatization process effectively,"he noted.

Saying that limited access to finance particularly for startups as a major challenge for the private sector, Costantinos emphasized the need to reform the banking system.

"The Ethiopian banks we have today can't support the major development projects that the country is undertaking or for private sector to come and invest here," he said.

Edward B. Sennoga, Chief Country Economist at African Development Bank Group thinks that Ethiopia's decision to promote the engagement of the private sector is commendable.

He said Ethiopia's economic growth has limitations as it is driven by government investments and the private sector engagement could address that limitation.

"We agree that Ethiopia has achieved a lot of progress in terms of growth. However, that growth is only driven by public investment which has its own limits. I think the current move by the new Ethiopia's leadership in reforming the private sector and the competition is very good" he said.

"The private sector is expected to be further expanded and supported by the new reform that has heralded a strong synergy," said the economist emphasizing that the country needs strong private sector to sustain the economy that it is building.

However, Sennoga, said some fundamental things should be given due attention as they are critical to make the reforms successful.

According to him, putting a regulatory framework is one of the fundamental issues that the government needs to consider in the efforts towards privatizing state-owned enterprises.

"You need to put in place a right regulatory framework to allow you. I know some progress has been made with the legalization of privatizing the telecom and very soon the country will proceed to the logistics sector and improvement of a lot of sectors," he added

Benchmarking best practices is another fundamental area that the economist recommended to be undertaken by the government to manage the reform.

Sennoga said AfDB is providing support in this regard. He said "Right now, in logistic sector we are providing technical assistance to the authorities to define the options and look at best practices."

"AfDB is working with the government of Ethiopia to support the institutional, legal and regulatory framework that will underpin the liberalization reforms," he stated.

The government well aware of the fact that strong institutions are needed to support the reform has been working on institutional capacity building parallel with the sweeping reforms.

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