Competitiveness of partial privatization of SOE under Ethiopian Law: Comparative Analysis

Abstract

Partial privatization is partial sale of shares refers to cases where the government decides to sell part of its shareholding or a certain percentage of the total outstanding shares, to the public at the large. The remaining shares may be retained in view of controlling or influencing decisions. Since privatized firms with partial ownership must respect the interests of private shareholders, they cannot be pure welfare- maximizes. At the same time they must respect the interests of the government, so they cannot be purely profit- maximizes. Ethiopia, for the past 25 years, witnessed zigzag economic policies ranging from a big bang privatization approach in which the Government had intensified its effort to privatize State- owned enterprises to a developmental State approach by retaining the big enterprises and allowing the flourishment of new ones was the priority. However; the government has decided to retain majority share especially in Telecommunication and also limited the number of telephone operators only to two. Yet, the Ethiopian program of partial privatization runs to be the challenge of operational competitiveness in the form of market dominance, because there may not be competitive companies. The ultimate purpose of this research therefore; is to analyse if the objective of optimal operational efficiency would attain where the government is the decision maker in partially privatized sector of the telecom service and also limited the number of operators in the fully privatized telecom service. The study employed socio-legal research method to analyze the qualitative theoretical data. Some countries like Chinese experience regarding the issues of formation and corporate governance of MOCs comparatively discussed. The research concludes that operational efficiency would be difficult to attain unless the government becomes minority shareholder or gradually change itself into minority shareholder and also allow operators on fully privatized telecom service to be operated solely on the basis of competition and also putting in place effective competition law. Unlike China, the Shareholding Structure of MOCs in Ethiopia doesn’t get proper attention as needed. First of all, the Government neither has the intent to retain a majority of shares in the MOCs to influence the decision making nor does it commits to diversify the shareholding structure. So, the shareholding structure of MOCs shall be diversified. The privatization process should be run by a well-equipped single Governmental institution rather than entrusting the process to different Governmental bodies as well as an advisory council in a dispersed manner