Why Play with Fire!!! (By Kebour Ghenna)

I don’t care if I sound an old fart for saying that privatization of Ethio-Telecom is not a necessary and indispensable for the broader economic liberalization reforms that’s taking place in Ethiopia today. Indeed, privatization of Ethio-Telecom goes against the interest of the nation.

Watch out, Dear Reader, unless you question, confront, and civilly resist this bad deal, we will all lose, and lose big!

In a recent press release of the Ministry of Finance of Ethiopia you will read the following simplistic statement to justify the privatization of Ethio-Telecom:

<<<“Partial privatization of Ethio-Telecom and private investment in the expanded telecommunications market will also contribute to attracting foreign direct investment, support the country’s effort to improve ease of doing business and its wider economic reform agenda. Furthermore, it will generate revenues through license fees, taxes and dividends that will contribute to overall economic restructuring.”>>>

I don’t know about you, but me I don’t see Mr. Market attracting foreign direct investment because of Ethio-Telecom partial privatization. I don’t see how this privatization will improve business or enhance reforms, or even bring more revenue than the state owned Ethio-Telecom. In any case if the above are the most compelling argument the Ministry can come up with for justifying the partial divestiture of Ethio-Telecom, then we’re in trouble. Really heartbreaking that this government failed to put together the official rationale for the privatization policy, and chose instead to favor privatization in a vacuum.

Anyway me, I stick with my initial advice. I say, don’t sell 20%, 30% or 49% of Ethio-Telecom. Don’t sell Ethio-Telecom, until the government builds its capacity to manage markets and move beyond the direct government monopoly of the past. In other words I argue for a government that invests in bringing speed, flexibility, and responsibility in its public enterprises but also in engaging citizens in the public service delivery process. This balance between markets and deliberation recognizes citizens are more than consumers, and government is more than a market player. Indeed, in the political space Ethiopia finds itself today, it’s critical for the government to create the space for collective deliberation to occur and through this process a sense of the social is built.

Because the privatization of Ethio-Telecom at this stage  is a capital-killing move.

And yet today Ethiopia needs real capital – and Ethio-Telecom is that cash cow that can help the state with ready money. But the geniuses at the Ministry of Finance want to sell the cow and buy its milk, instead of making Ethio-Telecom efficient and get more money to work with, to build upon, or to create more output (this is hard work), they (the geniuses) choose to get rid of its major asset in return for crumbs (easy work). Sad!

Yes, the role of government is not simply to just make money, but also to serve citizens. Governments must have the capacity to help citizens come together to identify problems and to debate choices. Learning to solve collective problems, to engage the citizens and to practice deliberation – these are the foundations for a democratic society. This is what Ethiopia needs.

Remember the private sector would only be interested to acquire profitable or potentially profitable enterprises and activities, leaving loss-making SOEs in public hands, thus exacerbating the public sector’s fiscal burden. So I say to our leaders, don’t accept privatization as a condition for support from the World Bank. To the contrary, remain actively engaged as a market player directly providing services and contracting out certain activities, when necessary, to ensure competition, efficiency, service quality, ownership and broader public objectives.

So, okay, yes, Ethio-Telecom needs to do more to improve its services, so why not fix this problem now? Why is this government afraid to turn bold, and start rebuilding its internal service delivery capacity. Why is it too apprehensive to adopt a new approach that transforms state owned enterprises into efficiently run companies, as has been demonstrated by, say, our own Ethiopian Airlines. Why doesn’t it realize, privatized companies will not guarantee that the public interest will effectively be served? It would have been laudable if this government concentrated in streamlining business procedures, encouraged operational transparency, increased competition, and developed efficient tax and customs processes to attract investors. In fact, the key question here is whether the ostensible efficiency and welfare gains from partial privatization could have been achieved without such recourse. For example, could such gains have been achieved through other means of ensuring greater autonomy, flexibility or managerial reform, such as through corporatization and commercialization?

Today governments across the world are moving beyond the dichotomy of markets or planning, and instead embrace a mixed position which complements the advantages of markets with the benefits of public engagement. We are increasingly seeing such shifts away from competitive tendering among the early privatizers: the UK, Australia, New Zealand, and the US.

Let’s be perfectly clear, the World Bank and IMF’s ‘neo-liberal’ policy prescriptions involving liberalization, deregulation and privatization have not, and will not bring prosperity to Ethiopia. And privatizing Ethio-Telecom will neither contribute to the development of the telecom and related sectors nor reduce the government’s debt obligations. I don’t know the amount of money the government expects from the partial sale of Ethio-Telecom, but whatever that figure (which will hover around USD 300-400 million), this privatization may only postpone a fiscal crisis by temporarily reducing the government’s fiscal deficits, but it would certainly not resolve the underlying problem because the government would in the end lose income, and would be stuck with financing requirements.

By the way, once the government signs over part or all of Ethio-Telecom to a private company, withdrawing from the agreement borders on the impossible.