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Doing Business in Ethiopia 2012: Competition from State Owned Enterprises


Doing Business in Ethiopia:  2012 Country Commercial Guide for U.S. Companies

US Department of Commerce

April 30, 2012

State-owned enterprises and ruling party-owned entities dominate major sectors of the economy.  There is a state monopoly or state-run dominance in sectors such as telecommunications, power, banking, insurance, air transport, shipping, and sugar.  In addition, the government controls importation of staple foods such as grains and oil.  Ruling party affiliated "endowment" companies have a strong presence in the ground transport, fertilizer, and textile sectors.  Both state-owned enterprises and "endowment" companies dominate the cement sector.

State-owned enterprises have considerable advantages over private firms, particularly in the realm of Ethiopia's regulatory and bureaucratic environment, including ease of access to credit and speedier customs clearance.  Local business owners as well as foreign investors complain of the lack of a level playing field when it comes to state-owned and party-owned businesses.  While there is no report of credit advancement to these entities, there are indications that they receive incentives such as priority foreign exchange allocation, preferences in government tenders, and marketing assistance.  Ethiopia publishes aggregate financial data of state-owned enterprises, but detailed information is not included in the national budget.

Corporate governance of state-owned enterprises is structured and monitored by a board of directors composed of senior government officials and politically-affiliated individuals.  In 2010, the Ethiopian Government "corporatized" state-owned enterprise Ethiopian Telecommunications Corporation (ETC) by turning over its management to France-Telecom per a two-year contract.  As part of this process, a new company, Ethio Telecom (ET), was formed to replace ETC.  Similar to the ―corporatization‖ of ETC, a tender for the management of Ethiopian Electric Power Company (EEPCO) was advertised in 2011, though no winner had been announced as of January 2012.

Read full report here: Doing Business in Ethiopia:  2012 Country Commercial Guide for U.S. Companies
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