Ethiopia is unlikely to gain entry to the World Trade Organisation (WTO) without making meaningful commitments to telecommunications liberalisation, according to an assessment of the service sector presented by the United States (U.S.) company, Nathan Associates Inc.

The assessment was made with respect to the General Agreement of Trade and Services (GATS) and presented at a workshop on the impact of Ethiopia's Accession to the World Trade Organization (WTO) on Friday, May 4, 2007.

The study indicates that the government must prepare to respond to demands from WTO Member countries to open its telecommunication sector for competition and develop a strategy to manage this critical aspect of its accession negotiations.

It emphasises that the challenge is building up the regulatory and technical capacity of the country before liberalisation and introducing a regime that meets the technical challenges for allowing competition.

The Ethiopian Telecommunication Agency (ETA) is the regulatory body of the sector, founded in 1996, and accordingly, the paper suggests empowering it with the capacity to license and regulate multiple operators and service providers, to regulate the economic, legal, and technical aspects of interconnection and pass decisions as a government body independent of political interference.

The ETA is financed by the National Bank of Ethiopia (NBE) and the treasury of the country and bound by government rules and procedures on funding and employment. Its policy initiatives come from the Ministry of Transport and Communications (MoTC), who has authority to prepare draft policies and laws concerning the sector and general targets and plans for the Ethiopian Telecommunication Cooperation (ETC). The Agency has high turnover of staff in part due to salary constraints, which are two to three times less than the industry norm, including at ETC.

According to the current modus operandi of the Ethiopian government, investment in the sector is only public, or a joint venture with it. An investment proclamation sets a minimum investment capital of 100,000 dollars for a foreign investor and 60,000 dollars for joint venture investments with domestic investors.

"If foreign private investments were to be permitted in the telecom sector they would focus on areas where there is a high demand for their services," Tadesse Haile, state minister of Trade and Industry told Fortune. "This would mean that the rural population would not get the same benefits, so until a conducive environment exists, the government will stay in the sector."

According to the study paper, Ethiopia's strategy "should be one of drawing some line of acceptance on telecommunications liberalisation, but with the recognition that some form of market opening is necessary in this sector." Ethiopia's goal of joining the WTO will be postponed indefinitely over this sector alone if it is not liberalised.

According to a sector expert, sector liberalisation should not be seen as a prerequisite of WTO accession, but something that should be done autonomously inline with the development objectives of the country to create a competitive environment with or without the WTO. "The liberalisation, if done on an international platform or under the context of WTO guidelines would give confidence to investors," said the expert.

Sources close to the situation disclosed that the study will be an input when preparing the ACC5 document, a document indicating rules used in the service sector and also to answer questions forwarded by WTO member countries and as a starting point for negotiations.

Ethiopia got approval for accession on January 13, 2003 after remaining a WTO observer for some time. On February 10, 2003 the general working party formed a country working party especially for Ethiopia. Once accession was approved, Ethiopia formed a task force responsible for preparing and presenting the Memorandum of the Foreign Trade Regime to its working party.

After a two year delay the Council of Ministers finally Okayed the Memorandum on November 10, 2006. Two months after the document was sent, United States (U.S.) and Canada became the first countries to send clarification questions on the Ethiopian service sector focusing on telecoms and finance.

Addis Fortune