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NewsFed spurns fierce SOE objections to pending procurement regulations

Fed spurns fierce SOE objections to pending procurement regulations

The Ministry of Finance has rejected appeals from the heads of some of the largest state-owned enterprises (SOEs) for exclusion from upcoming legislation that would oblige them to follow the same procurement procedures as federal institutions.

Dozens of SOEs represented by their executives and the heads of the Ethiopian Investment Holdings (EIH) expressed fierce objections to the procurement proclamation under amendment during a public Parliamentary hearing on December 27, 2023.

Led by Desalegn Wodaje, chair of Parliament’s standing committee for Budget and Finance Affairs, the hearing saw heads of the Finance Ministry and Federal Public Procurement and Property Authority listen to the protests from SOE execs only to respond that SOEs are “public property and, therefore, should be governed accordingly.”

The heads of the SOEs each presented their arguments against the changes in procurement procedure, decrying “unnecessary control” would hinder their operations.

“We are competing with private businesses, which can make decisions instantly. We aren’t able to compete now due to our drawn-out internal procedures, let alone with the introduction of additional rules,” said Nega Dufisa, head of legal services at the Ethiopian Tourist Trading Enterprise.

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Representatives from Ethio telecom, Ethiopian Airlines, Electric Power and Utility, the Ethiopian Construction Works Corporation, the Commercial Bank of Ethiopia, and several others, voiced opinions similar to Nega’s.

Dubbed the Federal Government Procurement and Property Administration Proclamation, the contentious law was tabled to Parliament by the Council of Ministers in March 2023.

At the time, the Council cited the need to modernize the procurement system in light of new technologies; to provide better opportunities to local suppliers; and to ensure greater accountability as the reasons behind the amendment.

Heads of the Procurement Authority and the Finance Ministry echoed the arguments during the hearing last week.

Eyob Tekalign (PhD), a state minister of Finance, stressed the need to have a legal framework that harmonizes all public procurements in the country with accountability as the major principle.

The SOEs, according to Eyob, are administering publically-owned properties, and should therefore be administered with all possible accountability and clarity.

He argued the amendment is meant to make all public procurement in Ethiopia transparent, competitive and equitable.

“This proclamation is a progressive one and will solve problems at government institutions,” said Eyob.

The State Minister claims the new rules will not affect SOE operations. He argues it will only strengthen them and “address issues of accountability at the same time.”

“SOEs were established with taxpayer funds. It’s not right that they don’t provide equal opportunities to all taxpayers. The heads of enterprises must internalize this fact,” said Eyob.

Haji Ibsa, director-general of the Procurement Authority, had similar words for SOE representatives. He assured them his office would work “without limiting their capacity, profitability, and quality.”

Haji pointed out that the federal government often takes responsibility in the case of SOE default or bankruptcy.

“It is the Ministry of Finance paying off their debts when they go bankrupt, like it happened with the 13 sugar factories,” he said.

The Director-General also hinted that SOEs may be allowed to make direct procurements if circumstances call for it.

Yasmin Wohabrebbi, deputy CEO of Ethiopian Investment Holdings, observed that the objective of the sovereign wealth fund she helps lead was established with the goal of introducing international corporate governance to SOEs and modernizing corporate financial systems to improve profitability.

She argues the amendment would force SOEs to abide by standards set by the Procurement Authority, and undermine the power vested in the Investment Holdings as well as the enterprises themselves.

“The draft proclamation clearly explains the amendment is needed to include SOEs in procurement law,” she said. “How can we reconcile this with the main objectives behind the establishment of Ethiopian Investment Holdings?”

Yasmin, a former state minister for Finance, also argues the amendment would further lengthen and complicate procurement procedures for SOEs.

Chair Desalegn concluded the hearing with assurances that the complaints would be subject to further discussions between the Committee and the experts behind the amendment.

He pointed out that one of the major reasons for the amendment is that it is often an issue with international creditors and development partners, who want to see improvements in the procurement procedures.

“We will amend it accordingly and prepare it for approval,” said Desalegn.

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