In a blog post last week, the World Bank’s Country Director in Ethiopia, expressed the bank’s opposition to Ethiopia’s handling of the liberalization process of the country’s telecom sector. The bank, like many other foreign-based companies and institutions, specifically took issue with Ethiopia’s prohibition of digital banking services for foreign companies and the requirement for entrants into the market to use Ethio Telecom’s cell towers.
The country director wrote in his blog post that Ethio Telecom stands to lose out on innovations and investments given the discouraging environment that such regulations create. An example of this is seen in Safaricom’s bid for one of the telecom licenses that the country is planning on giving out.
The Kenyan giant is known for its digital banking service, M-PESA, but due to the stringent regulations, has been discouraged from investing as much as it was planning to.
It is not only foreign companies and institutions that have expressed concern over the prohibition of digital banking services. Commercial banks believe the directive, which was issued by the National Bank of Ethiopia, only further Ethio Telecom’s monopoly on telecom infrastructure and does not give the banks the freedom to choose their service providers.
Despite the opposition to its policies, the government maintains that there are no tangible issues given that the government is liberalizing the telecom sector and not the financial sector.
Brook Taye, a Senior Advisor to the Ministry of Finance says that there is really no issue with the policy being implemented by the government since the financial sector is not yet up to the task of sustaining the kind of competition that would become a reality if foreign competitors were allowed to enter the market.
Nevertheless, the continued monopoly on telecom infrastructure and the tightly controlled, even during liberalization, environment of the telecom sector allowing Ethio Telecom to benefit the most is expected to backfire on the country as it prevents Ethio Telecom facing open competition and stepping up its services.