Towards a Rwanda Inc: Unleashing the potential of State Ownership

I was left appalled with the ever increasing neoliberal mentality that some Rwandans have embraced wholeheartedly, and in so doing either misunderstood it totally or somehow put it out of context - this was underpinned by a recent article titled “Why it is in everyone’s interest to privatize ONATRACOM”.

I was left appalled with the ever increasing neoliberal mentality that some Rwandans have embraced wholeheartedly, and in so doing either misunderstood it totally or somehow put it out of context - this was underpinned by a recent article titled “Why it is in everyone’s interest to privatize ONATRACOM”.

Please do not get me wrong because I am a firm believer in the market based approach, but I fundamentally trust State Owned enterprises (SOEs) can be as effective, if not better in contexts such as ours. I think the rush to simply begin discussing privatization because of operational glitches is entirely flawed.

Just to contextualize my point with a relevant case; as part of its post-independence industrialization plan, the Singapore government assumed a proactive entrepreneurial role by establishing state owned enterprises (SOEs) in key sectors such as manufacturing, finance, trading, transportation, shipbuilding, and services.

By most accounts, this strategy of “state capitalism” has been quite successful. SOEs have evolved into an important national institution, and the major companies have become well-recognized corporate names regionally and even - in the case of Singapore Airlines - globally.

That mentioned, unlike parastatals in many countries, Singapore’s SOEs bear a close resemblance to private enterprises.

The government subscribes to what has been termed the “managerial view” in the ongoing debate on public versus private ownership, which argues that competition rather than ownership per se is the key to efficiency.

In my opinion, what we are witnessing, in other words, is an experiment in capitalism that could challenge much of the conventional wisdom about state ownership.

Many countries have strong state-owned companies in semi-monopolies such as telecommunications or heavily regulated sectors such as energy and mining.

It is evident that most South-East Asian countries are trying to create a series of leading public companies in industries exposed to cut-throat competition, where technology, design and marketing are crucial features - just the sort in which state-owned companies have typically suffered at the hands of private rivals.

For Rwanda’s case, and ONATRACOM in particular, such companies should be run on a commercial basis, with a focus on bottom-line performance, and they should not be used for social or employment-generation purposes – competition with the private sector is paramount in order to unleash their potential under the State ownership.

Nevertheless, there are criticisms of SOEs and they tend to fall into two broad categories. The first contends that SOEs tend to do better than private sector firms because their institutional relationship with the government gives them special advantages in terms of access to funds, tenders, and opportunities; consequently, they have closed large areas of the economy to the private sector and stifled entrepreneurship.

The second contends that SOEs tend to do worse than private sector firms because their managers are mainly civil servants who lack business acumen, and their investments may be politically, rather than commercially, motivated – both of these criticism are warranted, and especially the latter is the one that we should all be mindful about.

In conclusion, The government can and should do business, as long as they are run on commercial rather than ideological grounds, with limited state interference or favours – bottom line being efficiency and profitability, with flexibility to recruit staff in the open market, both at home and abroad, on competitive terms; and above all they should be allowed to fail if they lose money.

The fact is that State-owned enterprises are making their mark in other parts of the world where there is plenty of competition and companies need both capital and a technological edge – our state owned enterprises should equally thrive because they are no exceptions.

liban.mugabo@gmail.com

Liban Mugabo is a graduate student in Singapore

 

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