Tuesday, August 17

Information De-Evolution II

What is happening now

Phone shop. Source.

The Ethiopian Privitization Authority (EPA) seems to have the ETC (Ethiopian Telecommunications Corporation) up for at least a partial sale
Government of Ethiopia wishes to engage a strategic partner to support ETC’s development of the fixed and mobile telephony market ... (it is) offering a 30% stake together with management control to a potential strategic investor.

(There were) approx 351,600 customer connections as at June 2002. In addition to public fixed telephony, ETC offers other telecommunications services including mobile, internet, public data service, analogue and digital leased lines and telex services.

Ethiopia has a teledensity of 0.36 lines per 100 population, which is one of the lowest in Africa. The need and unmet demand for telephony services is substantial. To meet this demand, Government intends that ETC will continue to remain the sole provider of major telecommunications services for the foreseeable future.
The data, mobile and internet services are described as 'nascent' in the report.

This informative site about the status of IT in Africa says of Ethiopia that by July 2002 there had been strong growth in the mobile sector under a contract with Ericsson resulting in 45,000 subscribers and coverage of several towns in the vicinity of the capital city. Waiting time for a phone line was 7.8 years in 2000. The site also has other facts and links on the subject.

The February 2002 article from The Independent Magazine on Information and Communications Technology (ICT) "The Evolutionary Development of ICT in Ethiopia" elaborates
The level of growth of the Internet is not also heartening. One can discern from various reports that the number of subscribers does not presently exceed 4,073. If we assign five individuals per Internet account the number of users could not surpass 20,365 persons.

It could be argued as to whether telecommunication promote economic development or vice versa, but the link between the two is becoming stronger.
The strategic partner sought by the ETC may be a source of capital and technical expertise but no genuine opening for business and competition is in the offing. Foreign investment is tightly controlled indeed according to the U.S. Country Commercial Guide (CCG) for Ethiopia
Foreign investors find Ethiopia a difficult environment in which to operate. Many sectors, particularly in services and trade, are off-limits to foreigners. The government retains rigid control over the utilities sector and prohibits foreign participation in banking and insurance. Land cannot be purchased or sold, but can be leased. Government procedures and paperwork are usually complicated and time-consuming. The commercial code is antiquated and the under-staffed judicial system is inadequate. The transportation and telecommunications systems, especially internet service, are fair to poor.

The ETC's monopoly of these services has resulted in new customers waiting years for access to the services as well as long delays and slow service for those who have obtained an account.
The government will retain total control of this vital national sector whose underperformance has its roots in government inertia to begin with.

Sadly, privitization when it has occured has seen elements of a state dominated economy sold cheaply to companies often owned by the ruling party. The U.S. Embassy report of 2002 'Creating Pitfalls to Privitization' states that
The EPA (Ethiopian Privitization Authority) Board of Directors is made up of government officials and cannot be considered neutral. The decision of what enterprises to schedule for privatization, or whether to remove an enterprise from the schedule, rests with people who have vested interests and manipulate the system to benefit themselves, friends and/or family.

Observers speculate that people with connections benefit from re-tenders as they are able to buy viable enterprises at rock-bottom prices. Meanwhile, the government appoints managers to run state-owned enterprises until privatization, creating the opportunity to skim profits, overstate expenses, etc.

The privatization process functions, but could garner more revenues for the government if it were more efficiently, and more importantly, independently managed. A proper system of sealed-bid auctions, for example, might eliminate some of the opportunities for collusion, and would speed up the process.
Over the past century the Ethiopian church has adapted to the modern world in many ways as the telephone blessing priest did in Menelik's palace in 1894. The economic and social potential of telecommunications has, of course, exploded.

However, the fear of the new and of the consequences of uncontrolled information has found a very secure home in the Ethiopian government - at great cost to the national interest.

The Country Commercial Guide describes the political structure
The EPRDF (the ruling party) officially favors democracy and private enterprise, but has yet to rid itself of residual control-oriented tendencies rooted in its past as a Marxist organization.
Thus Ethiopia has a curious mix of statist Communism and crony capitalism managing the economy of a society desperate for economic growth.

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