Transformative issues in privatizing public sector undertakings: a case study of Ethiopia

Article type: Research Article

Authors: Selvam, Jesiah

Affiliations: Professor and Director, Indian Academy School of Management Studies, Hennur Cross, Hennur Main Road, Kalyan Nagar, Bangalore - 560 043

Note: [] E-mail: [email protected]

Abstract: This article examines the transformative issues involved in privatizing public sector undertakings in Ethiopia. The transformative issues comprise of pre-privatization issues, that is, business environment and legal framework for the country in general and for the privatization agency in particular, and implementation issues, that is, identification and sequencing, restructuring and valuation, bidding and tendering, and buyer's response and modalities. The study covers a period of 10 years, ranging between 1990/91 and 2003/04, and analyses the data with simple statistical tools. It reveals that the privatization programme was a small-scale programme with lots of ups and downs, and there were multiple flaws in the transformative procedures. The dominant modality in privatizing was the direct asset sale since the choice of public offerings of shares cannot be exercised in the context of having a weak capital and zero stock market. The mixed result shown by the analysis of performance of the privatized enterprises was not much in favour of such enterprises, putting under the scanner the effectiveness of the transformative mechanisms and processes involved in the privatization. It is suggested that the government should ensure a competitive market and business environment, soothing tax system, appropriate and obstacles-free legal framework, an independent agency for implementing privatization, and systematic and transparent procedures, particularly for the valuation and accurate modalities so as to maximize the advantages of privatization.

DOI: 10.3233/IJR-120072

Journal: International Journal of Regulation and Governance, vol. 8, no. 1, pp. 1-30, 2008