SOE Management In Ethiopia Case Study

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As discussed above, Ethiopia’s SOEs are under the administration of various organs. The State Owned Enterprises Supervising Agency and other regulatory bodies such as the Ministry of Industry and Ministry of Defense administer state enterprises. The aim of the paper is not giving a detailed look in to or providing a prototype of SOE management, which is a distinct study. Rather it reflects on the experience of similarly situated countries in preventing and addressing conflict of interest.
The three approaches in the organization and administration of SOEs are the Centralized model, decentralized model, and the dualist model. The Centralized model envisages a situation where the government’s stalk in companies is controlled by one government organ. This model is followed by Denmark, Netherlands, Spain, and China. The decentralized model vests administration of different enterprises with the respective line ministry. This model is considered to risk conflation of the ownership and regulatory interests of the state. The third one is a dualist model where the enterprises are placed under a sector ministry and the central state owned enterprises administration agency. The model is advantageous as it allows the enterprise get technical and financial oversight from the different government organs. Ethiopia cannot be placed under any of the models. As explained above, the State Owned Enterprises Supervising Agency has a role in the administration of state owned enterprises. In addition different line ministries such as the Ministry of Defense and the Ministry of Industry have state owned enterprises under their control. Hence, it is clear that the country does not follow the centralized approach. It does not as well follow the decentralized approach as the enterprises are not placed under the most pertinent or related sector ministry. If that was the case one would expect the Defense Construction Enterprise that is in charge of construction of roads, dams’ irrigation facilities etc. to be under the supervision of the pertinent Ministries such as the Ministry of Road Construction, and the Ministry of Water and Irrigation, etc. instead of the Ministry of Defense. Similarly, it is not explicit on whether it follows the dualist model, as the law that defines the role of the State Owned Enterprises Supervising Agency does not indicate the role of the agency regarding the enterprises that are under the supervision of sector ministries e.g. the role of the Agency in relation to the Defense Construction Enterprise. Thus, Ethiopia follows all the above-discussed approaches in the administration of state owned enterprises. This calls for a variety of conflict of interests’ rules or a regular system of accountability mechanism that takes the context of each company in to account. For instance, in the enterprises supervised by the Ministry of Industry there is a risk of conflict of policy making and business interest of the Ministry. Similarly, in enterprises administered by the Supervising Agency, the risk of conflict of interest emanates from the fact that most of the board members are functionaries in other government organs. In all cases the double appointment of officials and the post-employment
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This multi-layer monitoring system is criticized to hinder effective administration in China. To the contrary, scholars recommend for allocation of real power to the different supervisory organs discussed above instead of reducing their number. In Ethiopia to the contrary, the enterprises are controlled by their board, the board is accountable to the Supervising Agency or the ministry, and the Agency or the ministry is under the Council of Ministers. In China workers of state owned enterprises have a board that represent their interest and that can initiate demotion of a director for misappropriation or any other administrative vice. The board of supervisors in china does not have a parallel in Ethiopia. Instead, the workers of the SOEs have only one representative in the Board of Directors that otherwise consists of a pool of high government officials. In China the independent directors are professionals with certain academic and professional background. This board as well does not have a parallel in Ethiopia. In China the Board of Directors has the committees discussed above with power to ensure the smooth functioning of the enterprise, in Ethiopia even though it is not impossible it is unclear whether the seven members’ board is disintegrated in to various specialized committees for specialized functions. Therefore, compared to China, in terms of structure and not capacity, the possibility of administrative vice is higher in

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