954true numbers bottomright 320true true 1500https://agathoninternational.com/wp-content/plugins/thethe-image-slider/style/skins/frame-white
  • 5000 fade true 30 bottom 30
    Welcome
    Agathon is a research and consultancy firm, focused on East Africa, Eastern Europe and Central Asia
  • 5000 fade true 60 bottom 30
    East Africa
    We operate in East Africa with Ethiopia as our regional hub
  • 5000 fade true 60 bottom 30
    Eastern Europe
    We operate in Eastern Europe through our Budapest hub
  • 5000 fade true 60 bottom 30
    Central Asia
    We operate in Central Asia, with a hub in Bishkek, Kyrgyzstan
  • 5000 fade true 30 bottom 30
    Extractives
    Policy and social issues in the extractive industries are a key focus area for us
  • 5000 fade true 60 bottom 30
    Open Road
    Through our work we hope to do good, both for our clients and for the societies in which they operate
1
2
3
4
5
6

Ethiopia: Banking and Telecoms Liberalisation, and WTO Accession

 

 

“Sorry. The network is busy now. Please try later.”

 

It is a phrase familiar to all who live and work in Ethiopia. The cadence is mesmerising, like a haiku. The phone rises to your ear, the line hums a little, and then the recorded poetry peals off:

 

Sorry

 

The network

 

is busy-now

 

Please try la-ter

 

Telecommunications infrastructure in Ethiopia is shaky. According to 2013 figures, less than 2.5% of Ethiopians have access to the internet, compared with 40% in Kenya.[1] Calls which stubbornly refuse to connect are a part of daily life.

 

Ethiopia Telecom is Africa’s last remaining big state telecoms monopoly. Many feel that connectivity, so vital for economic development, would be markedly improved by privatization and deregulation of the sector. The same goes for the other pillar of the economy which remains firmly under state control, banking.

 

However, Ethiopia has had an uneasy relationship with the free market since the fall of its communist government in 1991. Unlike other post-communist countries, Ethiopia did not open the floodgates of capitalism. The leader of the incoming government, Meles Zenawi, was himself strongly influenced by Marxist socio-economic theory and largely rejected Western ideals of economic liberalisation.  Instead, he charted a course for Ethiopia through which he sought to emulate countries such as South Korea; strongly developmental, with a powerful central state.

 

Enter onto the scene the World Trade Organisation (WTO) and Ethiopia’s accession bid, started in 2003. The Ethiopian government knows well that it must deregulate in order to accede to the WTO, but is determined to conduct the process its own way, and in its own time. As with most things, Ethiopia does not like to feel pushed around by the internationals, as the country’s then-Trade Minister Girma Birru relayed in 2009: “Primarily we will join the WTO not to make others happy, but to make our economy work. So to the extent it helps our economy we will liberalize things, but if it’s not going to assist our goals in trade and development we will not liberalize. Why do we have to?”[2]

 

In practical terms this refusal to liberalize means shielding banking and telecoms, among other sectors, from foreigners. Speaking in 2013, Meles Zenawi’s successor, Hailemariam Desalegn, relayed that  “This sector [telecoms] is a cash cow, and that’s why the private sector wants to get in there … We want to use that money for infrastructure development,”[3] and, in 2012, “We will not allow in foreign banks. We will continue with this policy in coming years.”[4]

 

The United States has other ideas. Speaking on the side-lines of the 2013 Bali WTO Ministerial Conference, Michael Punke, the permanent representative of the United States to the WTO, had this to say about Ethiopia’s bid for membership:

 

“We do believe that part of the accession process that is enormously beneficial to acceding countries is this focus … on domestic reform. And from that standpoint, we think that some of the most critical infrastructure for successful integration into the international economy includes areas like state of the art financial services and state of the art telecom.”[5]

 

As the vintage of the above quotes attests, the battle lines were drawn on this issue by 2013, if not earlier. The Ethiopian Ministry of Trade began to formulate its Market Access Offer on Services for negotiation with the WTO in September of that year, and then … nothing happened. Two years of silence ensued. The Market Access Offer on Services has yet to materialise.

 

To observers without inside knowledge of the delicate process currently underway in Ethiopia and elsewhere, events could appear to be in stalemate. Will the Ethiopian government accede to Punke’s point of view, as it accedes to membership of the World Trade Organisation? Or will the country find a way to preserve state ownership and state control of its most prized industries, which WTO negotiators might find acceptable? Or will Ethiopia simply keep its accession bid frozen for years to come?

 

That’s the big question. But, whilst investors could be tempted to sit back and await the outcome, doing so would put them several steps behind their competition. Many large telecoms and finance organisations are eagerly awaiting Ethiopia’s liberalisation, and are planning in earnest for it. Any growth-minded firm in these sectors would be wise to do the same.

 

 


[2] “Ethiopia Won’t Free Telecoms, Banking for WTO, Minister Says”, Bloomberg, 19 February 2009. http://www.bloomberg.com/apps/news?pid=newsarchive&sid=adot_hJ.1pyc

 

[3] “Ethiopia’s Leader Aims to Maintain Tight Rein on Key Businesses”, Financial Times, 27th May 2013. http://www.ft.com/cms/s/0/c0985378-c5ef-11e2-99d1-00144feab7de.html#axzz3jkfK1rrs

 

[4] “Ethiopia Locks Out Kenyan Banks as it Opens Up Market”, Kenya Business Daily, 22nd November 2012.  http://www.businessdailyafrica.com/Corporate-News/Ethiopia-locks-out-Kenyan-banks-as-it-opens-up-market-/-/539550/1627020/-/12y02cpz/-/index.html

 

[5] “Global Trade: A Search for Agreeable Landing Zones”, Addis Fortune, 8 December 2013. http://addisfortune.net/interviews/global-tradea-search-for-agreeable-landing-zones/