Promoting Investment through State-Owned Enterprises and Endowment Companies in Ethiopia’s Pastoral Areas: Legal and Policy Analysis

Abstract

The current investment trends in Ethiopia indicate that the private sector is not willing to invest in remote areas. This is due to the fact that the central objective of the private companies is profit maximization in any business activity. Hence, anticipating merely the private sector’s investments doesn’t work for Ethiopia’s pastoral areas. State-owned enterprises (SOEs) and endowment companies should be taken as alternative means to promote investments in those remote pastoral areas. Obviously, the SOEs can be established by the federal and regional governments of Ethiopia, whereas the endowment companies can be established by charitable endowments which need to be non-political party-affiliated. The constitutional basis for establishing those entities may be challenged due to the existence of some concerns over the operation of the existing ones. The writer of this article is of the opinion that there are adequate legal and policy justifications as well as practical necessities for promoting SOEs and endowment companies. The need for promoting investment through those business entities is uncontestable as the private sector is reluctant to invest in the remote pastoral areas. The main objective of this article is to investigate the policy and legal justifications for promoting investment through SOEs and endowment companies in Ethiopia’s pastoral areas. Moreover, the article suggests the compatible political economy model to strengthen a government-led investment, for the purpose of this article, in pastoral areas.