By Aschalew Aberra – My take on the executive committee’s decision to liberalize the Ethiopian economy.
There are several school of (economic) thoughts that discuss the pros and cons of liberalization of the economy by privatizing government owned companies, commonly known as parastatals.
There are mixed experiences (both good and bad) as a result of privatizing the economy in eastern Europe after the collapse of the then Soviet Union.
Even if it is not considered as a panacea to improve the economy of any nation, there is a general belief among many economists that private economy provides better services and garner more profits as a result of effective management and operational efficiency.
More than anything else private economy plays a huge role in advancing and sustaining democracy. In a private economy people will have a better participation in politics without fear of retribution.
When it comes to the Ethiopian situation, all of the utility companies such as power, water, communication, are currently owned by the government, which resulted into weak or in some cases non-existent services. It is high time that these companies should be transferred into private hands. But they should be regulated by the state. Even in USA utility companies are regulated.
I don’t think there is too much opposition in the very principle of liberalizing the economy.
The bone of contention is not the liberalization per se, as some people try to spin it.
It is an open secret that currently, next to the government the majority of the economy is controlled either by the party affiliated EFFORT company or by the government affiliated Saudi tycoon, Mohammed Al Amoudi.
EFFORT, not only better suited to make the local money available for purchasing the parastatals, but they also have a well established relationship with potential buyers from China or other foreign owned companies due to the goodwill they have established in dealing with these foreign companies in various transactions in their capacity as government officials.
The bone of contention is associated with the high probability that these two government affiliated entities will eventually control the economy under the guise of liberalizing the economy.
There won’t be any guarantee that the South African situation won’t be repeated in Ethiopia. After the collapse of the apartheid system in South Africa, the white minorities and the Indians still control the majority of the economy, hence they indirectly control the political situations behind the scenes.
By the same token, the transfer of these state parastatals into the hands of EFFORT, will result in enabling the tigrean minority junta to control the Ethiopian economy hence indirectly control the politics for the foreseeable future.
The other concern is: as officially admitted by the PM himself there is an organized and systemic corruption in the nation at large. The question is how could the public be expected to trust these corrupted politicians to conduct a fair transaction of these huge companies such as the Ethiopian Airlines?
One more concern would be, most of the government officials are appointed not because of their merits, but because their ethnic backgrounds and their political affiliations. The question is: even if we assume that these officials have the will to do the job, will they have the academic potential and the experience to strike a good deal for the nation without being outsmarted by the multinational companies who are equipped with high caliber professionals with international experiences in handling major transactions?
More importantly, it is an open secret that the incumbent government didn’t come to power thru free and fair election, hence the people didn’t afford them the mandate to sell publicly owned companies.
In my opinion prior to the commencement of thevprivatization process, the following major actions should be taken:
1. Political reform should take place before any major economic reform is carried out.
Meaning, democratic institutions should be established first followed by free and fair elections meant to form a government of the people by the people to the people.
Let the economic reform be one of the agendas for a debate among political parties during the next election.
2. All companies owned by EFFORT should be properly audited and they should be transferred to their rightful owners – the Ethiopian people. They should also be forced to pay all their public debts or face confiscations.
These companies should be legally barred from participating in the procurement of the parastatals.
3. A group of highly educated Ethiopian professionals (devoid of their ethnicity or political affiliations) having a vast international experience in major financial transactions should be recruited in order to oversee the transaction process.
4. A share market system should be established in order to allow the general public to buy and sell shares of these companies.
5. In addition to the privatization option, leaving the parastatals under the ownership of the state while letting them operate with pure market principles (without the involvement of state officials) should be considered as another viable option.
Even in USA, there are several state owned universities and hospitals that are efficiently run with the same market principles as the privately owned companies are functioning.
to be continued…