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Ethiopia: No Liberalisation of the State Telecoms Monopoly

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Hailemariam Desalegn, Ethiopia’s Prime Minister has rejected the breaking calls of for the state-monopoly in telecoms services. He said that their governmetn needs the funding of revenue for unrelated railway project.

In order to access the World Trade Organisation (WTO) the liberalisation of the telecoms market in the country is required. WTO has been stalled for a decade by the telecoms monopoly held by Ethio Telecom.

The prime minister believed that the government currently earns US$323 million a year from the telecoms monopoly and its revenues would be injured if the monopoly was broken.

He added that the money was not reinvested back in the telcoms industry, much of it was used to finance the construction of the Ethiopia- Djibouti railway.

Hailemariam Desalegn, also said that one may think that the Ethiopian government can get money from taxation but there was no way to get as much money from taxation and the sector therefore remains with them for years to come.

This has so far been argued, mainly by GSMA that boosting telecoms participation through lower prices thanks to competition can grow the overall economy and taxes from that more than offset any losses a government suffers from lack of a state-monopoly.

In recent studies, done by many institutions including the world bank, shows that there is a direct relationship between mobile penetration and GDP. It further shows that in developing countries, for every 10 per cent increase in mobile penetration there is a 0.81 per cent point increase in a country’s GDP.

Across the African continent, the mobile industry contributes US$15 billion in government revenues. Kenya is a good example, when the government abolished 16 percent general sales tax on mobile handsets in 2009, this resulted in handset purchases increasing by more than 200 percent. With mobile operators contributing a third more in taxes in 2011 than in 2009, mobile generated around 8 percent of Kenya’s GDP.

 

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