Making privatisation work for Ethiopia

Policy brief Firms

  • Ethiopia has embarked on a major programme to privatise some of its key state-owned enterprises (SOEs) as part of a broader effort to reform the economy and expand the role of the private sector. The country is attracting large volumes of foreign direct investment, being one of the top 10 recipients in the African continent (UNCTAD, 2019).
  • This brief is based on a review of the international and regional experience of privatisation in Ethiopia and highlights some of the key policy lessons.
  • A prudent approach to privatisation usually starts with setting clear, measurable, transparent, and predictable criteria to select SOEs for privatisation at the beginning of the process.
  • Recommendations also include carefully managing the pace of privatisation to allow enough space for experimentation without dampening investor confidence and interest by trying to retain too much control.
  • Privatisation should be used as an instrument to catalyse broader private sector development that can generate jobs and reduce poverty instead of helping create foreign-owned enclaves with little linkages to the rest of the economy.
  • Large-scale privatisation might have adverse political economy consequences by shifting the distribution of wealth and power.