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The Ethiopian Corporate Governance Institute (ECGI), which will be in charge of governing business ethics and codes of conduct of private companies in the country,
was launched on Saturday October 26 at the African Union Commission Headquarters after six years in the making. So far, 70 public and private businesses have signed up for membership.
Though the country’s economic growth is on the fast track, businesses and business practices remain underdeveloped.
Tadesse Haile, State minister of Industry (MoI), said at the launching ceremony that most businesses in the country are still operating under traditional norms of business management and practices that place more value on short-term objectives and disregard variables that determine sustainable and long-term competitiveness.
He said that the consequences of disregarding corporate governance are quite detrimental in the industrial sector because it makes businesses less flexible in dealing with variables and changes when compared to others which utilize such practices. “Companies that employ corporate governance do have a better chance of establishing sustainable and mutually beneficial business relations with buyers, suppliers and creditors,” said the State minister.
This demonstrates the need to institute major change in the structure and management of businesses if the country’s economic development is to be sustained. Private companies, state-owned enterprises and community-based business organizations need a correspondent institutional environment in order to drive the economic development of the country, as clearly stated in the country’s Growth and Transformation Plan (GTP).
Tadesse said that in this age of competitiveness, partnering with other companies in joint-venture arrangements is vital for pooling capital, technology, know-how and market linkages, especially in developing countries like Ethiopia.
Yohannes Kinfu (Prof.), a keynote speaker at the “Pan African Consultative Forum on Corporate Governance” held in 2001 in South Africa by the World Bank (WB), also agrees with the significance of working with foreign companies to bring in capital, technology and expertise, believes that local companies need to implement corporate governance to earn the trust of foreign companies and get them interested in working with them.
“Corporate governance is also an instrument that governs the relationship of companies with external stakeholders, such as public institutions and the society at large,” Yohannes said. “The trust that businesses attain from government agencies and the public therefore depends largely upon their subscription to the ideals of corporate governance,” he added.
The newly-established Institute will play a vital role in regulating volunteer business entities based on a set of code-of-conducts.
ECGI also aims to contribute its share towards the evolution of a dynamic, ethical and responsible business community which complies with both local and international corporate governance standards, like accountability, fairness and transparency, which will play a significant role in the economic and social transformation of the country.
The Institute will provide, publish and maintain an Ethiopian corporate governance code to guide all private, state and community-owned corporate businesses in the country.
Its objectives include creating awareness and promoting good corporate governance practices in the business community in line with the Ethiopian Corporate Governance Code. Furthermore, it will provide its members and affiliates with up-to-date knowledge on the framework, best practices for governance and management of corporate businesses, among other things.
“I am convinced that EICG will provide important support to increase competitiveness in the private sector through the introduction and implementation of improved rules and standards for responsible business entities,” said Jan Sadik, Swedish Ambassador to Ethiopia, at the launching ceremony.
The inception of the idea of establishing the Institute first occurred during the “Pan African Consultative Forum on Corporate Governance” held in 2001 in South Africa by the World Bank (WB), according to Yohannes Kinfu (Prof.).
It will be tasked to conduct advocacy through awareness-creation activities, provide membership-development services, undertake corporate-governance trainings, provide the required information, conduct researches and development, and also provide academic cooperation and support for members.
Ayalew Zegeye, President of the Addis Ababa Chamber of Commerce and Sectoral Associations (AACCSA), has been appointed as the Director for the Institute