Ewnetu Haile 06-20-18
The proverb goes: “When in Rome, do as the Romans do.” The meaning of the expression is that it is advantageous to abide by the customs of a society when one is a visitor. Not abiding by the customs could mean alienating oneself and constantly clashing with the majority of the new group of people one has moved into. It could also mean doing things differently without having an expected favorable reaction from the people around. When things work out, such a move could make someone a hit. The problem is when it does not. In the latest scenario, the visitor would exhibit anti-social behavior. Anti-social behavior, on the other hand, is bound to attract more reprimand from the society as it tries to discourage that behavior and ensure that norms are obeyed. Although one might not agree with all the societal norms, it is important to keep a working accord with society in getting one’s stand recognized and accepted.
The proverb might apply to Ethiopia’s current condition as it has become one of those countries that fail to service their debts. That is a new territory for Ethiopia. So now that it is already there, it has resorted to doing as the Romans do – privatize its major State Owned Enterprises (SOEs).
It is such a pity that the country did not have a responsible set of leaders who could prevent this from happening. The system of international aid and loans is designed by the richest few to indebt and subsequently rob the resources and sovereignty of their fateful victims. There have been numerous instances of this system driving sovereign states into chaos and subservience. Yet Ethiopian political leaders were naïve enough to lead the country into the same swamp that drowned the sovereignties of many states.
Despite the rapid economic growth of the past fifteen years, a large amount of money has been siphoned off state funds into the pockets of Ethiopian politicians and business people. It is high time that these people are held accountable for their breaches of national trust. The new Prime Minister, Abiy Ahmed (Ph.D.), announced recently that the government is looking into the international financial accounts of government officials. Those moves should be wide and swift to recover at least some of the money that has been stolen off of the Ethiopian people. If Ethiopia has to pay its national debt, it is those who have misused public funds to support their schemes towards individual prosperity that should be made to contribute the most.
Despite my best efforts to draw emotion out of my outlook while using such a respected medium, my anger and cry for justice still find a way to portray themselves. It would, however, be dishonest for me to write about this issue without addressing the issue of the billions of dollars stolen from us by our own politicians and business people.
Now that I get that off my chest, let’s look into the advantages and disadvantages of privatization along with a few dos and don’ts. Accordingly, economics help states that the potential benefits of privatization include: improved efficiency, lack of political interference, offsetting the short term view of governments (during elections for instance), pressure from shareholders to perform efficiently, increased competition in a relatively deregulated sector and governmental revenue from the sale.
Economic help identifies the disadvantages as: monopoly, may harm public interest in favor of profit motive, government loses out on potential dividends, there is still need for government regulation of private monopolies, fragmentation of industries (vague responsibility and less coordination when an industry is privatized into numerous smaller private companies) and short-termism of firms (avoiding in long term projects to increase short term profits).
With the current acute shortage of foreign currency in the country to service debt and import key commodities such as fuel and pharmaceuticals, selling up SOEs would provide the government with instant capital to tend to those problems. The government will also shrug off expenses related with the SOEs such as wages, maintenance, budgetary subsidies, etc. Therefore, the sale of the service providers would not only raise instant capital but also slash some governmental expenses going forward. Especially for a poorly performing service provider, the government would also avoid spending tax payer’s money to save the business.
On the other hand, privatization also comes with new expenses for the government. After selling a service provider, a government may end up buying that same service for a higher price. The government may also end up setting a regulatory body to prevent monopoly and social interests, generating a new kind of expense for the government. Privatization may also mean that a profit making entity can no longer provide annual profits to the government, thus decreasing its sources of revenue. The unquantifiable pride, sense of belonging and public interest behind some governmental service providers would also be lost with the transfer of the institution to private hands.
There are also analysts who argue that the success of privatization depends on the kind of service the organization to be sold provides. Those with this opinion argue that a telecom service provider is more likely to benefit from privatization as the incentive for profit would raise its efficiency. On the other hand, claim the analysts, privatizing health care and public transport may not be as successful as the profit motive is less important than public interest. For Ethiopia though, the time has already passed to deliberate on the issue as the sectors up for sale have already been identified. What is left for the government to do in this regard is design methods to keep a sense of public interest along with the profit motive in some of the service providers to be sold.
The Ethiopian government has had a huge problem of regulation over the years. Implementing regulatory laws has been a major problem in the country. However, that needs to change radically with the privatization of some of the biggest service providers in the country as there are public interests and national resources to protect.
Another issue related with privatizing huge SOEs that have monopoly over sectors such as energy and telecom is deregulating the sectors to invite more companies engaged in those sectors. Unless there is enough competition in these sectors or there is a mechanism in place to balance public interests and profit motives in the new ownership scheme, the results of a private monopoly could be devastating.