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Privatization’s emergence

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After the coming of PM Abiy Ahmed bold and new decisions were made to partially privatize the current government owned Telcom and Ethiopian Airlines. Some economists believe the private sector tends to run a business more efficiently because of the profit motive. However, critics argue private firms can exploit their power and ignore wider social costs. For Margarita Dimova, Associate Director at Africa practice, private participation generally tends to improve profitability, although there are of course multiple examples of not-so-favorable outcomes from privatization endeavors. Capital’s reporter talked with Margarita Dimova to get her opinion and advice about the Ethiopian government’s privatization move towards tele. Margarita Dimova obtained her PhD from the School of Oriental and African Studies in London, where she was a senior teaching fellow and a graduate teaching assistant between 2013 and 2015. Excerpts;

Capital: Why is privatization needed?
Margarita Dimova: One main obvious benefits of privatization is increased competition, which helps certain sectors develop, innovate and improve efficiency.

Capital: Currently the Ethiopian government is preparing itself to sell 49 percent of its telecom service, what do you think about this decision and what kind of work needs to be done before selling the shares?
Dimova: The partial privatization of Ethio Telecom and the broader liberalization of the sector will definitely improve the quality of services provided. I’m positive for the average Ethiopian this would mean more affordable and reliable mobile phone services, as well as data access. Improved connectivity and telecommunications development have multiple spillover effects on broader economic growth.
One of the main challenges to post-liberalization will be the elaboration of a fair, comprehensive regulatory framework. Since Ethio Telecom has so far operated as a monopoly, this is a field in which the government has limited experience.

Capital: What should be done to tackle money laundering in the process of privatization?
Dimova: Having a robust anti-financial crime regime is integral for preventing such activities. Money-laundering is a global issue, it is not specific to Ethiopia or to the context of economic liberalization. Government agencies can coordinate, collaborate and receive technical assistance from international partners in tackling this potential problem. Ethiopia is also a member of the Eastern and Southern Africa Anti-Money Laundering Group.

Capital: Like any other business tax evasion and tax fraud are the concerns in privatization business, how can we get the right tax from these firms?
Dimova: Again, this would require the creation of robust institutions and mechanisms to ensure accountability. It is important that the Ethiopian Revenues and Customs Authority is allocated adequate resource, in conjunction with the work of the Tax Policy Directorate at the Ministry of Finance and Economic Development.
Tax evasion is a problem worldwide, but it is not inherent in the operations of the private sector. If the Ethiopian government strikes the right balance between an investor-friendly tax regime and sufficient revenue collection, in the long run avoidance and evasion can both be brought to a minimum.

Capital: Some economists said that private firms discuss about cash flow, govt. firms discuss about growth and development and due to these reasons the experts oppose the privatization plan of the government. What is your stake on this point?
Dimova: Serious players in the private sector are increasingly emphasizing the importance of sustainable growth. I think such a distinction between parastatals and private enterprise is perhaps a bit too binary. If a company is short-term in its strategy, its growth and scalability prospects are limited. There is definitely a recognition of this dynamic within commercial circles.

Capital: Opposition groups say that in privatization the government misses out on dividends, and big money going to wealthy shareholders. What is your opinion regarding this issue?
Dimova: As privatization spurs competition, which in turn spurs growth, the relinquishing of minority shareholding should not have grave consequences for the government. As a sector grows, and if the government retains shareholding in certain flagship enterprises, dividends might even increase. Private participation generally tends to improve profitability, although there are of course multiple examples of not-so-favorable outcomes from privatization endeavors.

Capital: In some countries we see that privatization creates private monopolies and prevents abuse of monopoly power. What is the best way to tackle this kind of problem?
Dimova: The solution is again an institutional one – having a contemporary and well-designed anti-trust regime. With the right legislative framework and adequate access to legal recourse, the repercussions of this could be minimized.

Capital: To please shareholders investors may seek to increase short term profits and avoid investing in long term projects. What kind of regulations will tackle these challenges?
Dimova: The resolution to this probably doesn’t lie in regulation but in shifting the priorities of businesses, as well as commercial cultural context. As I said, the significance of sustainable growth is increasingly coming to the fore. The growth of impact-oriented investment is another contributing factor to moving away from a singular focus on short-term profitability.

Capital: Research indicates that in countries that have privatized through asset sales, the process has frequently been non-transparent and plagued by insider dealing and corruption. What is your comment on this?
Dimova: Yes, this is a tangible risk, and possibly one of the biggest ones the Ethiopian government might face. Fortunately, we live in an era of free-flowing information where opacity is increasingly difficult to defend. Public interest in high-profile privatization deals would make them more visible and subject to scrutiny, thereby deterring potential wrongdoing. Additionally, the Ethiopian government has a relatively good track records when it comes to corruption, especially against the backdrop of other sub-Saharan African jurisdictions. Global corporate responsibility and governance standards have also improved markedly in recent years.

Capital: The study by Chong and Lopez-de-Silanes (2002) based on a survey of 308 privatized firms (covering 84 countries) over the period 1982 to 2000 showed that employment was reduced in 78% post-privatization, likely worsening income distribution. What can be done to reduce the job cut s?
Dimova: It is difficult and potentially misleading to transpose the findings of a 2002 study onto the Ethiopian context. As far as I understand, these two authors focus on privatization processes in Latin America, so again it is difficult to compare. Within the academic field, there is a broad consensus that privatization increases profitability and productivity.

Capital: Price increases are common following privatization in network or infrastructure industries and private owners may decrease their engagement in specific, low-return market segments, which may disproportionately affect the poor. Do you have any solution for this?
Dimova: This reflects a real concern regarding the aftermath of privatization. One set of mitigates could revolve around regulation. Additionally, reforms need to be designed with social impact assessment in mind, as well as a consultative process with various strata of the populace.

Gender and nutrition

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Population groups vulnerable to malnutrition are central to strategies aiming to improving their nutrition status. Women and girls are more likely to live in poor households and bear a disproportionate share of the burden of under- and over-nutrition, at least among adults. When malnutrition occurs during pregnancy and breastfeeding, it has adverse consequences for not only the women but also for their children, perpetuating an inter-generational cycle of malnutrition.
In addition, gender inequality is a root cause of malnutrition for all, always important and sometimes overshadowing all other causes. In both South Asia and sub-Saharan Africa, women’s status has a large and significant positive impact on children’s nutritional status. Gender roles and relationships determine the distribution of resources and responsibilities between men and women, and thus both reflect and determine power rela¬tions between them—this is true within households, communities, workplaces, and markets. Within each of these spheres, women may lack the decision-making power and access to resources to make optimal nutrition choices for themselves and their families. A recent trial in Burkina Faso has provided direct evidence that improving women’s empowerment (in the context of a nutrition-sensitive agriculture programme) can reduce rates of wasting in young children.
Chandini’s story. Chandini is a seventeen-year old girl who lives in a small village in Rajasthan, India. She has been married for two years and has a baby girl of eighteen months. She is now pregnant for the second time. Like many other women in Rajasthan, Chandini is thin and suffers from anaemia. Even though she is six months pregnant, she has been working in the fields helping to harvest the family’s small plot of wheat and has to prepare the meals for the whole family. She is always the last one to eat, after her husband, mother-in-law, and child. She is also avoiding eating fat (‘ghee’) and chickpea flour because her family believe that these are risky for pregnant women. She is hungry before she goes to bed but does not like to complain. Chandini’s young husband Abhijeet wants to do the right thing by his wife and young family but is unsure of the best way to contribute—last month he used a little extra cash to buy her a traditional adornment for her face. All the family unwittingly contribute to the perpetuation of malnutrition in Rajasthan.
Moreover, women are present at every stage of the food system, but differ from men in roles, resources, and rights. They often lack equal access to the inputs, services, and information needed to optimise their contribution. Markets tend to exacerbate existing power inequalities, rather than lessen them. Given the major role that women play in food production, processing, and sale, not to mention their almost complete dominance of food preparation, this underinvestment equates to considerable lost potential. Greater equity can thus help to increase the food system’s ability to efficiently deliver safe and nutritious food for all.
Cathy’s story. Cathy is a young entrepreneur from Tanzania. Ten years ago, she started selling a tasty snack made from dried vegetables in the Central Business District of Dar es Salaam. Her product was attractive to office workers in the area, who also appreciated her customer orientation and attention to hygiene. For the last three years, she has been trying to grow her business by packaging her product and transporting it to other outlets for sale. But she needs credit and technical assistance to expand her operations. When she visits banks to enquire about her eligibility to receive credit, she feels that she is not taken seriously by the male staff. While other business people in the area get invited to trainings and join associations, it seems to Cathy that she has been mostly ignored.
At the macro level, where women do not have equal access to resources or equal opportunities to take part in decision-making, there are direct economic as well as social costs. Gender equity is thus a means to economic growth, which is itself a powerful force to help end undernutrition. For all of these reasons, gender is a “centrality issue” for malnutrition, and to ensure impact, gender must be taken into account throughout all programming for nutrition.
From: GAIN’s Programmatic Gender Strategy, July 2019.

ton.haverkort@gmail.com

Yonatan Solomon

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Name: Yonatan Solomon

Education: BA in computer science

Company name: Afritech Software Development plc

Title: Cofounder

Founded in: 2018

What it does: Software & website development

Start up capital: 30,000 Birr

Current capital: Growing

HQ: Around Bole Michael

Number of employees: 10

Reason for starting the business: Financial freedom

Biggest perk of ownership: Creating technological advantages

Biggest strength: Working together as a team

Biggest challenge: Internet connection

Plan: To be competitive in the market

Most interesting in meeting: Elon Musk

Most admired people: My parents

Stress reducing: Hiking

Favorite past time: Working

Favorite book: Not really a book person

Favorite destination: Gonder

Favorite Automobile: Vintage cars

 

The history of Chinese and Hispanics immigration in the United States

Continued from last week
Jean Pfaelzer, Professor of English and Asian Studies at the University of Delaware stated that the migration history Chinese American can be an example for today’s Latinos. According to the United States immigration history, by 1892, thousands of Chinese had escaped from enslaved labor in the Caribbean and from the violence of the roundups in the western United States. Seeking respite in New England, New York and the South, Chinese immigrants now lived outside the frontier states. The Geary Act unified Chinese across the country, building a Chinese American identity that crossed generations of immigrants who rallied quickly to put pressure on the leadership in Washington, organize petition drives and coordinate diplomatic intervention from New York, Washington and San Francisco.
Jean Pfaelzer indicated that in New York and Brooklyn, the Chinese Equal Rights League soon enrolled 150 English-speaking Chinese merchants and professionals, most of whom had lived in the United States for more than ten years, some since their childhood. Its leaders pleaded “to the people of this great Republic to deliver their fellow countrymen from this outrageous persecution.” Coming in the early years of the Age of Reform, the Geary Act’s assault on Chinese civil liberties prompted white support for the Chinese. On September 22, 1892, more than 1,000 United States citizens joined with 200 Chinese merchants and laborers at Cooper Union in Manhattan to protest the Geary Act.
Mae Ngai, a Chinese American Author noted that the Chinese Equal Rights League declared that by making the Chinese pay the “illegal costs and expenses” of enforcing the law, the bill imposed taxation without representation. Even more un-American, they said, was its provision that a person arrested under the law “shall be adjudged guilty until he shall affirmatively prove his innocence.”The Chinese offensive against the Geary Act drew together strategies of resistance that had been evolving since the gold rush. “As residents of the United States,” the league declared, “we claim a common manhood with all other nationalities” that should be recognized according to the principles of American freedom.
Natalia Molina, American Historian and Author stated that by claiming a “common manhood” with other American immigrants, the Chinese Equal Rights League sought to dissolve images of difference, in body, religion, dress, food, that saturated American editorials, broadsheets, advertisements and cartoons and shaped the unequal treatment of the Chinese under immigration law. The league also attacked the idea that the Chinese were sojourners in the United Stares. It appealed for an “equal chance in the race of life in this, our adopted home… Our interest is here, because our homes, our families and our all are here. America is our home through long residence. Why, then, should we not consider your welfare ours?”
Margaret Salazar-Porzio, high level official of Smithsonian’s National Museum of American History argued that the purpose of the Geary Act was to pressure “more than 100,000 honest and respectable Chinese residents” to leave the country by forcing them “to wear the badge of disgrace like men in your penitentiaries” or to “tag and brand them as a whole lot of cattle for the slaughter.”Nonetheless, the league members wanted to distinguish themselves from refugees from the West Coast or enslaved laborers fleeing Cuba, Mexico and Peru. “We do not want any more Chinese here any more than you do,” they asserted. “The scarcer the Chinese here, the better would be our conditions among you.”
Up and down the Pacific coast, Chinese laborers and merchants demanded help from China and pressured the Chinese legation to lobby Congress and the president. It complained to Secretary of State James G. Blaine that the Geary Act violated the promise in the 1880 immigration treaty that Chinese immigrants would have the right to “go and come of their own free will and accord.”
Jean Pfaelzer noted that the provision forcing every Chinese resident in the United States to wear an identifying photograph likened the Chinese to convicts and violated “every principle of justice, equality, reason and fair dealing between two friendly powers.” It demanded that the secretary of state personally guarantee that Chinese in the United States never again be “abused, beaten, wounded and murdered.” The Chinese Exclusion Act of 1882 was due to expire. To revive it, many white Americans promoted the toxic myth of a “yellow peril.” Popularized by politicians, preachers and the press, the myth predicted that the Chinese would “swarm” the country and form a dictatorship, of greedy, dirty, dishonest and fertile yellow men.
The House Committee on Immigration and Naturalization reported that after 1892, “there will be no law to prevent the Chinese hordes from invading our country in numbers so vast as soon to outnumber the present population of our flourishing states on the Pacific slope…to make this country their temporary home, where in a few years they can accumulate enough to live the balance of their days in China in comparative ease.”
Having spent four decades demanding Chinese expulsion, many in California were suddenly threatened by its possibility. In the 1890s, California agriculture was enjoying spectacular growth. Farmers leased small plots of land to hundreds of Chinese tenants for vineyards, orange and lemon groves, and orchards. The cultivation, harvesting and packing of California’s crops depended on Chinese labor. Without the Chinese, the new fruit industry would wither. Farmers also knew that the Chinese were building the long routes and short-haul tracks of the new railroads.
Francisco Balderrama, a Latino American historian stated that under the land grants, the railroads still controlled hundreds of thousands of acres of arable land, as well as the power of transportation itself – the refrigerated railroad cars, the location of terminals, the grain towers – indeed, the entire nexus on which the sales of the fruit of the land depended. Who else would build and fire this iron web? Some farmers thought that only an “influx” of blacks could replace Chinese labor.
The Geary Act fractured rural political coalitions. While railroad investors, fruit growers and missionary groups opposed the act, others were determined to enforce it. The Geary Act came at a moment of intense labor unrest and industrial violence. In July 1892, President Harrison sent 8,000 militia to break the steelworkers’ strike against the Homestead plant, part of Carnegie Steel and Utah Copper, seven miles east of Pittsburgh. The strike ended brutally when guards opened fire on the employees and seven guards and nine steelworkers died. Many in the labor movement believed that Chinese immigrants would provide a permanent supply of scabs.
Francisco Balderrama noted that in 1893, a series of business failures and bank closings shook the nation. The Panic of 1893, caused by the completion of the nation’s basic steel and railroad requirements, marked the end of an era of easy investment and massive profit and the beginning of six years of crippling unemployment.
Millions of Americans were out of work, and those who still had jobs took repeated cuts in already-low wages. The Chinese field-workers’ wage of one dollar per day was in fact higher than the 60 cents earned by many white textile workers. As growing economic disparities provoked new racial tensions, the national government had to tread lightly on California farmers’ demands for cheap labor.
The nation was divided. Fifteen states and territories sent petitions to Congress and to President Harrison urging them to deport the Chinese, prompting the Los Angeles Times to comment, “If we can keep out the Chinese, there is no reason why we cannot exclude the lower classes of Poles, Hungarians, Italians and some other European nations, which people possess most of the vices of the Chinese and few of their good qualities, besides having a leaning towards bloodshed and anarchy which is peculiarly their own.”
The Geary Act embodied the dilemma of the Chinese as a racial problem and a racial solution. By April 1893, Chinese leaders and the Chinese legation had let it be known that they would contest the act. The Chinese vice consul in San Francisco, Qing Ow Yang, begged his government, “Do you know what the Geary bill means to the laboring Chinese in this country? It means, sir, that they are placed on the level with your dogs. If you have a dog, a black and tan, a Llewellyn setter, a pointer, you buy a license tag for it and fasten it to the dog’s collar, and the number in the dog’s tag is its immunity from arrest by the pound man. Under the Geary bill the laboring Chinese carry their number in their pocket and any man who so desires may stop them and demand to see their ‘tag’… We ask that our Government protect its children.”
Protests also arose within Congress. Illinois representative Robert R. Hitt had tried to stop the Geary Act’s passage and now denounced the act as a return to the days of slavery: “It is proposed to have 100,000…men in our country ticketed, tagged, almost branded, the old slavery days returned. Never before in a free country was there such a system of tagging a man like a dog to be caught by the police and examined, and if his tag or collar is not all right, taken to the pound or drowned or shot… Never before was it applied by a free people to a human being with the exception (which we can never refer to with pride) of the sad days of slavery.”
Margaret Salazar-Porzio indicated that at first, most Chinese men found ways to avoid registering for the identity cards. With rising threats of racial violence, many Chinese purchased revolvers, ammunition and knives. When the California Jute Mill threatened to fire any Chinese employee who refused to obtain a certificate and helped the Bureau of Internal Revenue set up secret offices, the Six Companies ordered the jute workers to strike. Chinese laborers let it be known that if they were seized and deported, they would join mounting efforts to drive American missionaries and businessmen out of China.
The Six Companies foiled other Bureau of Internal Revenue plans for secret registration. Registrars, paid one dollar per certificate, offered to visit homes so domestic servants could sign in private. Many Chinese residents, fearing that the identity cards exposed their homes, refused to register at any site. Some declared that only the “Christianized Chinese” registered. Those who believed that the only way to remain in the United States was to register rightly feared retaliation from their brethren.