Privatized Public Enterprises Performance Evaluation: Recent Ethiopian Experience

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Date

2005-06

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A.A.U

Abstract

Ethiopia has been in the process of privatization since the mid 1990s. Attempts were made in this study to assess performance of privatized public enterprises during the last decade in Ethiopia. Percentage share of privatization proceeds to total revenue of the country for the years 1995/96 - 2001/02 were on average below 6 percent which implies that the prime objective of privatization in Ethiopia, revenue generation for financing development activities undertaken by the government, does not realized yet. Privatization process in Ethiopia with regard to employment seems painless. However, the fate of employees in the state farms of the country and other divestitued famer public enterprises had been miserable for those who have no social-security system to fall back on. Since the beginning of privatization, only slightly higher than half billion new investment is made on privatized SOEs. Much effort has to be exerted to attract FDI to the Country. A panel data for 41 privatized large and medium scale manufacturing and agricultural industries covering a period of seven years (1995/96-2003/04) was taken. The hypothesis whether the privatization performance, interms of technical efficiency and profitability, in the public sector is indeed lower that of the post-privatization years of industries in Ethiopia was tested The findings of this study are mixed. Out of the six categories in this study, only in the two cases i.e. ill the cases of food processing and beverage sectors post privatization performance in terms of technical efficiently and profitability exhibit significant improvement. In the rest leather and textile, chemical, metal and wood, and agriculture no improvement is indicated both interims of technical efficiency and financial profitability. On the basis of these findings privatization in Ethiopia doesn't meet its expectations for its outcomes are less satisfactory. In order to improve and sustain the outcomes of privatization, development of capital market and property right legislation, promoting good governance and strengthening the institutional capacity of all the levels of federal units is critical.

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Keywords

Performance Evaluation, Privatized Public Enterprises, Recent Ethiopian Experience

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