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Ethiopia Refuses to Liberalise the State Telecoms Monopoly

Ethiopia’s Prime Minister has rejected calls for the state-monopoly in telecoms services to be broken, saying that the government needs the revenues to fund an unrelated railway project.

Liberalisation of the telecoms market is a requirement for accession to the World Trade Organisation, which has been stalled for a decade by the telecoms monopoly held by Ethio Telecom.

Ethiopia’s Prime Minister, Hailemariam Desalegn said that the government currently earns US$323 million a year from the telecoms monopoly and its revenues would be hurt if the monopoly was broken.

Much of that money is not reinvested back in the telecoms industry though — it is being used to finance the construction of the Ethiopia- Djibouti railway.

“You may think that the government can get money from taxation; but there is no way that we can generate this much from taxation,” the Prime Minister said. “Therefore, the sector remains with us for the years to come.”

It has however been argued, largely by the GSMA that boosting telecoms participation through lower prices thanks to competition can grow the overall economy and taxes from that more than offset any losses a government suffers from lack of a state-monopoly.

Recent studies by the World Bank and others, it was shown that there is a direct relationship between mobile penetration and GDP. In developing countries, for every 10 per cent increase in mobile penetration there is a 0.81 per cent point increase in a country’s GDP.

Across the African continent, the mobile industry contributes US$15 billion in government revenues.

For example, the Kenyan government’s abolition of the 16 percent general sales tax on mobile handsets in 2009 resulted in handset purchases increasing by more than 200 percent. With mobile operators contributing a third more in taxes in 2011 than in 2009, mobile generated around 8 percent of Kenya’s GDP.

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