There is no better example of the self  destructive policies of the Ethiopian government than the one it has on telecommunications.
 

The fundamental importance of telecommunications to a modem economy hardly needs to be elaborated. The highly reputable The Economist magazine estimates that there is a measurable link of proportion of mobile phone coverage and GDP growth in developing countries.
 

Ethiopia has the lowest penetration of mobile phone coverage in Africa - lower than the Democratic Republic of Congo which is a jungle clogged transport nightmare wracked by civil wars. It is lower than Somalia - which does not have a government. How could it possibly be so bad?
 

Ethiopia boasts the first independent African telephone company, the Ethiopian Telecommunications Corporation (ETC) that is over 100 years old. To their boast that "We were the first," should be added "Now we are the worst".
 

The problem is that the government insists on a public monopoly in telecommunications. This is despite the constant demonstration that private sector involvement increases the coverage massively - including and even especially in rural areas - and that the private sector can relieve the investment burden in telecommunications from the state. Obvious examples of the success of telecommunications even in neighboring countries have not had any impact on Ethiopian policy.
 

Why do they not listen?
 

There are several interwoven factors why this does not change. In summary they are: an ideological attachment to government service delivery to 'protect the poor', as the private sector would be uninterested in delivery systems to the poor and rural areas; a belief that telecommunications are lucrative and the proceeds should go to the government rather than 'rent seeking' private sector; related to this is a belief in government efficiency that with the right investment government can deliver better than the private sector; and perhaps the real underlying reason; that is control of communications for security and political reasons.
 

Much of it is also historical. There is a hard negative view of the private sector, forged in the Marxist Leninist ideology of the early years of the TPLF. The successor, the EPRDF, is overtly 'anti-imperialist' in their program, which means that foreign corporations are evil, capitalism as a whole is evil, and relations with the capitalist world must be carefully controlled. This ideology easily survived the collapse of the Soviet Union, because the TPLF had already rejected Soviet Marxism, which supported their enemy, the Derg. Soviet 'Social Imperialism' had been defeated, but the true Marxist beliefs survived and grew in the brave breasts of the TPLF fighters.
 

This sounds like a joke but it is not. It explains Ethiopian government policy in many areas. There are careful controls on capitalism, especially foreign capitalism. Foreigners are consciously excluded from 'critical' sectors of the economy, a very long list itemized in the Ethiopia investment code. The key sectors of banking and telecommunications, which could benefit most from international expertise, are strictly forbidden territory for foreigners.
 

The domestic private sector is also constrained by a three part strategy of the ruling EPRDF: maintain critical sectors in government hands (while divesting hotels and other peripheral government enterprises); the ruling party controlled companies own a huge part of the economy, with concentration in strategic areas such as transport, manufacturing and fertilizer distribution; private sector companies are kept on a short leash with heavy administrative and taxation demands, and are hard pressed to survive.
 

Thus a form of 'crony capitalism' is in place, with a huge state component to the economy. This meets both the ideological framework of the ruling party, as well as their extraordinary need to have strangling control in every corner of the economy.
 

The telecommunications sector, which requires ongoing international expertise to even begin to catch up to the rest of the world, falls further and further behind under such a regime. The government is prepared to spend millions to hire foreign companies to install this, or advise on that, but all of this is dependent on a creaky and insufficient government machinery that simply cannot rise to the task.
 

The two public justifications given for the maintenance of a government monopoly are the need to deliver services to the poor, and the fact that the government should be making the windfall profits from telecommunications. Kassa Illalu (PhD), when he was a minister of Infrastructure, boldly stated that telecommunications were a cash cow, and it should be the government that milks it.
 

Of course, the net result is that the poor do not receive services (hardly anyone does), and the government makes no money on their huge investment in telecommunications infrastructure.
 

There are many examples of successful rural connectivity to the poorest parts of African countries through the private sector. In some countries incentives have been provided by making rates of payment in high density areas higher, so that extra funds can be put into subsidizing low density remote areas. All of this is through private sector operators.
 

The Economist goes even further by questioning the assumption that profits cannot be made in telecommunications in poor areas. Poor people from Bangladesh to Mali have shown that when they have telecommunications available, they pool their funds and get access. It is far cheaper to telephone the capital to check in with relatives than to take a bus there.
 

In Somalia, major transactions, most notably remittances from overseas relatives, are conducted by cell phone, from the back of a camel.
 

The Ethiopian government has invested more than one billion dollars in telecommunications infrastructure. Prime Minister Meles Zenawi has been feted by international companies, notably those with big contracts from the government, as a visionary leader in telecommunications in the African continent due to these investments. Unfortunately, these investments look set to become money losers because of the predictable inefficiency of telecommunications delivery by the government.
 

This does not mean that governments everywhere are incapable of delivering services. But, this government has a particularly large gap between its perception of its ability to deliver, and the harsh reality of the lack of capacity, commitment and motivation to do so by the common employee.
 

The net result is the worst of both worlds. The government could have used the private sector to provide the investment capital - Nigeria has had more than six billion dollars in foreign investment in telecommunications - instead of using scarce Ethiopian capital. Then the private sector would have had responsibility for recouping that investment through good delivery of services, as well as paying license fees and taxes to government.

Instead the government has invested a vast sum of money which it seems incapable of recouping. The inexorably short time frame for the rapidly changing telecommunications technology sets a short limit to the time for recouping investments, which the slow moving government bureaucracy cannot keep up with. The one billion dollars (and growing) in investment must be returned in three to five years, before the technology becomes obsolete.
 

With private investment, as in most other African countries (not to mention the rest of the world), the government can obtain higher income with low risk, and have the best service provided to the rural poor as well as urban areas.
 

Clearly, one of the major concerns of the government is security and monitoring of communications. Examples include the cutting off of SMS messaging during the demonstrations in 2005, yet to be restored.

Putting aside the moral concerns of privacy for a moment - the government again could do as well or better with security issues in private sector telecommunications than in government. Government regulations provide for tapping of lines and other security interventions when required by the state. Witness the recent exposure of the massive phone tapping underway in the United States since 9/11 - with government using private telecom providers to cooperate in collecting the desired information.
 

Ironically, even in terms of security, the private sector is probably the best option.
 

There is no doubt that the government realizes there is a problem with telecommunications in Ethiopia, despite bragging to the contrary. Announcements in government and ruling party media advertise the successes in expanding telecommunications, and progress is being made. The problem is that Ethiopia is moving forward at five kilometer per hour, while the rest of Africa is moving at 100km/hr and the rest of the world even faster in development of telecommunications; Ethiopia is falling further and further behind.
 

Propaganda aside, the low returns on the telecommunications investment, and the pervasive problems in telecommunications services are recognized at some level by the government. The best indicator of this is the frequent firings in the ETC. In the last year, there have been three major sets of firings: one which affected all the department heads, then the Director of ETC was replaced, and then more senior managers were recently dismissed over the fiasco in the billing system.
 

As the ETC fails to perform, and returns on the government's vast investment do not live up to expectations, the government answer is not to change. Their approach is to fire the people who are trying to implement the unrealistic policy. Replacing one set of managers with another does not solve structural problems; it just passes the buck onto the hapless staff from the government policy makers.
 

The government has to realize that changing staff will not solve the problem - only a drastic new approach will do so. The government must follow its own often repeated slogan of "doing business differently", through a major re-think of its approach. At this point, the huge investment in the telecommunications infrastructure is a big hindrance to the change in approach.
 

Would any private company want to have to pay for the infrastructure retroactively?

However, it is time for the government to cut its losses. If it continues on the same path, it will continue to make vast investments in telecommunications which will be obsolete long before they are paid for.
 

In the meantime, Ethiopia remains a laughing stock amongst African countries for its telecommunications; and Kenya, Tanzania, and Uganda all charge ahead in services and the related businesses telecommunications attracts. Many companies have already rejected locating regional offices in Addis Abeba because of the appalling telecommunications.

How much more does Ethiopia have to lose before the government comes to its senses?