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Who has a Legal Mandate to Privatize Ethio Telecom, Ethiopian Airlines and other Public Enterprises? The Parliament or the Executive?

It has been recently reported that Ethio Telecom, Ethiopian Airlines and Ethiopian Electricity Corporation will be partially privatized with the government maintaining a controlling share, and other Public Enterprises (henceforth “PE”) such as Sugar Corporation and Rail Way Corporation will be fully privatized. Following the news, there are a number of debates going on regarding partial and total privatization of these PEs. Among the debates are: whether the privatization is good or bad for Ethiopia? Whether the privatization would be equitable? And, whether the privatization should be approved by FDRE House of Peoples Representatives (henceforth “the Parliament”).

Leaving the political and economic analysis of the debates to the respective professionals, this piece makes a legal analysis about who can establish, run, dissolve and/or privatize PEs in Ethiopia.

My take on the issue is that the legal mandate to establish, run, dissolve and/or privatize PEs under the jurisdiction of federal government belongs to the executive branch of the government. The Parliament has established a legal framework for the constitution, operation, supervision and privatization of PEs under the Federal Government. (For example see Proclamation No. 25/1992, 87/1994, 146/1998, 277/2002 & 412/2004). These and other proclamations enacted by the parliament have authorized the executive branch of the government to establish, run, dissolve and privatize PEs in accordance with the framework set by the parliament. In doing so, the executive is not required to seek the approval of the parliament in its attempts to establish, run and privatize PEs as long as the executive complies with the legal framework set by the parliament.

To properly address our issue, we need to address both the institutional and legal framework for privatization for privatization of PEs owned by the Federal Government. Historically, the institution responsible for the privatization process was the Ethiopian Privatization Agency, which was established in 1994 by Proc. No. 87/1994 (as amended by Proc. No. 52/1996) and was later re-established in 1998 by Proc. No. 146/1998 (as amended by Proc. No. 182/1999). Public Enterprises Supervising Authority was later established by Proclamation No. 277/2002. A close reading of the proclamation; however, shows that the Authority was not given a legal mandate to initiate and implement privatization of PEs. (esp. see article 5 & 6 of the Proclamation) The Authority was only mandated to handle the formation and operation of PEs. Both the laws establishing the Agency and the Authority were later repealed and Ethiopian Privatization and Public Enterprises Authority was established in 2004 in accordance with article 3 & 15(1b) of Proc. No. 412/2004. Then, this Authority is legally dissolved and the Ministry of Public Enterprises was established in 2015 with a power and duty to submit proposals to the Council of Ministers regarding the dissolution, amalgamation, division or sale of PEs per article 31 (1B9) & 40(1c) of Proclamation No. 916/2015. The Ministry of Public Enterprises is empowered by the parliament to set up new PEs, supervise them and handle their privatization. The Ministry is specifically vested with the power and duty: (1) to implement a privatization programme in accordance with the privatization of PEs legislation (which is Proclamation No. 146/1 998); (2) to handle the privatization process in a transparent and efficient manner; (3) to cause the establishment of new PEs in sectors where private investors could not participate for various reasons and which will be bottlenecks for the overall economic development; and (4) to supervise the management of PEs. In conclusion, the institution responsible for handling the privatization process is the Ministry of Public Enterprises and a proposal of privatization of PEs made by the Ministry would be effective upon the approval of the Council of Ministers.

In relation to the legal framework for privatization, the Council of Ministers has a legal mandate since it has a power to formulate and implement economic, social and development policies and strategies of Ethiopia pursuant to article 77(6) of the FDRE constitution. Besides, the council and the Ministry of Public Enterprises are the institutions responsible for initiating and implementing the privatization process within the legal framework set for privatization by the parliament.

Then what is the legal framework? An answer to this question should relate to the objectives of privatization and the process of deciding on which PE to privatize and the process of the privatization. In chord with article 3 of Proc. No. 146/1998, Ethiopia’s Privatization Programme is required to have the objective: (1) to generate revenue required for financing development activities undertaken by the Government; (2) to change the role and participation of the Government in the economy to enable it exert more effort on activities requiring its attention; or 3) to promote the Country's economic development through encouraging the expansion of the private sector.” As long as the decision to partially privatize Ethio Telecom, Ethiopian Airlines Enterprise and Ethiopian electric Power Corporation and fully privatize Ethiopian Railway, Sugar Corporations and other PEs strikes chord with one or more of the above objectives or the constitutional framework that Ethiopia follows a free market system, the decision would be a valid one rendered by a competent authority to do so. For that matter they were originally established by the council of ministers and they should also be lawfully privatized by the council itself. ( see Reg. no. 10/1996, 93/2003 & 99/2004 for Ethio Telecom; Reg. No. 81/2003, 92/2003 &147/2008 for Ethiopian Airlines Enterprise; Reg. No.18/1997, 90/2003, 94/2003, 140/2007 & 170/2009 for Ethiopian electric Power Corporation; and Reg. No. 141/2007 for Ethiopian Railway Corporation)

In terms of the legal framework for the process of privatization, The Ministry of Public Enterprises has a legal mandate to handle the process in line with its duty to prepare list of PEs and government shareholdings to be privatized; to cause the undertaking of all necessary preparatory works for the privatization of PEs; to determine bid evaluation criteria for the selection of investors participating in privatization; and design ways and means of encouraging domestic investors to participate in the privatization of the PEs; and to prepare necessary documents to be used in the privatization process; and to take all necessary measures to publicize the privatization process and its implementation. (Cumulatively see article 31 (2) of Proclamation No. 916/2015 with articles 5 & 6 of Proclamation No. 412/2004)

To sum up, the parliament has a mandate to set the legal and institutional framework within which PEs could be privatized. Once that is done the executive organ (the council of ministers and the Ministry of Public Enterprises) are the organs responsible for initiating and implementing privatization of PEs is within the framework without a need for seeking the approval of the parliament. Accordingly, the recent executive decision to partially privatize (Ethio Telecom, Ethiopian Airlines Enterprise and Ethiopian electric Power Corporation) and totally privatize some PEs (such as Ethiopian Railway and Sugar Corporation) is in line with Ethiopian legal framework and does not amount to usurpation of the powers of the parliament.

Comments

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