Ethiopia is in the process of privatising the telecoms monopoly, Ethio Telecom. There’s a certain amount of licking of lips at the money that can be brought into central government by doing this. This not actually being he point of privatisation at all, and as someone from the Adam Smith Institute I will insist upon this.
Think on it. Ethio makes some sort of profit, or at least there’s an income to government from it. There is s capital value to Ethio. That capital value is closely related to the amount of profit that currently flows to the government and will, in future, flow to the new owners. It’s all rather one hand washing the other here. That capital value is, necessarily, the net present value of those profits that would be received in the future anyway.
Sure, we can argue that private owners will run the company more efficiently so that’s good. But the idea here about the money that’s going to come in isn’t the point at all:
After much speculation surrounding the privatization of Ethio-telecom, a telecom monopoly in Ethiopia, the Ethiopian Telecommunications Authority (ECA) has invited potential bidders to express their interest in acquiring a stake in the state-owned giant, which is projected to fetch billions of dollars to the cash strapped Ethiopian economy.
That’s not the reason to do it, that’s a way of selling it. For it means that this generation of politicians get to spend decades worth of those future profits. What fun, and who goes into politics for any other reason than having fun spending other peoples’ money?
The actual reason to do this privatisation thing is this:
The ECA is managing the license issuance process marking a major step in the liberalization of the telecommunications market. “The issuance of the two new licenses to telecommunications companies, in addition to the existing license held by Ethio Telecom, is part of the Ethiopia’s Homegrown Economic Reform Agenda to introduce competition into the sector,” ECA said in a press release.
Monopolies don’t perform well. We’ve seen this directly in mobile telecoms, countries with competing airtime providers have greater penetration into the population of mobile usage than places with a monopoly supplier. This is true even before we think about the joys of government running a monopoly.
Competing suppliers in a market place is a good thing. The good thing that comes from the new telecoms laws is the competition, not the privatisation. Even with the privatisation the good thing that comes from that is not the capital influx but rather than as the state is no longer directly running the company it’s possible that competition between the now three companies will be free and fair.
It always was true in the UK as elsewhere – the advantage of privatisation is nothing to do with the cash that comes in from doing it. It’s about not having government run something plus the at least possibility of gaining a competitive marketplace. Either or both of which are vastly more valuable than the cash anyway.