As state-owned enterprises in Ethiopia continue expanding in the economy with huge investments, the World Bank advised the government to improve transparency and credibility of information.

“As the country plans to become a middle income country, consistency, transparency and credible information about state owned enterprises are very, very important,” said Sri Mulyani Indrawati, managing director and chief operating office of the World Bank.
“State enterprises are contingent liability for any government. Credibility is very important on how they use public money. Strengthening supervision of state-owned enterprises is very important to build public confidence,” she said Wednesday. She is on a three day official visit to Ethiopia.

Huge state spending

After holding discussions with government officials including Prime Minister Hailemariam Desalegn, she indicated that the government recognizes the risk. She further noted that though the country’s debt ratio to GDP is not that big at the moment, the higher the volume of debt, the exposure to the risk is higher.

Assisted by foreign and local borrowing, Ethiopia is currently undertaking huge infrastructure investments ranging from a $6 billion hydro dam on the Blue Nile River to national and transnational railway and road networks as well as many other investments including manufacturing and whole sale businesses, among others.

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“Ethiopia can learn from many other countries. The World Bank is ready to provide necessary knowledge, loan and technical capacity,” she said.

Out crowding private sector?

In Ethiopia, the government retains control over the utilities sector, as well as telecoms, and prohibits foreign ownership of banking, insurance, and financial services companies.

According to the United States government economic data and reports, state-owned enterprises in Ethiopia and political ruling-party owned entities dominate the economic landscape, reducing room for the private sector to flourish, although many of the subsidiaries of these entities themselves seek joint venture and equity partners.

“The state-owned telecommunications company, Ethio Telecom, offers slow, expensive, and unreliable phone and Internet services,” the report states.

However, government officials often argue that the state is engaged in the areas where the private sector has less interest to invest in such as state infrastructure.