Intervention Economic Policy in Question: The Impact of Privatization of State-Owned Enterprises on Cost-Efficiency in Ethiopia. Insights from the Case of Ethio-Telecom

In general, the paper questions interventionist economic policy approach by emphasizing the privatization policy of State-owned enterprises in the telecommunication sector of Ethiopia. Specifically, it investigates the impact of privatization policy on the cost-efficiency of Ethio-Telecom by comparing it with other telecom operators in liberal markets. Moreover, it also identifies sources of inefficiency and indicates paths for improvement. The study used secondary panel data of three decision-making units (DMU) or Organizations employing cluster sampling techniques for the years between 2007 and 2015. The study employs a Cost efficiency Data Envelopment Analysis to compare the impact of State-Owned Enterprises (SOE) to that of privately-owned enterprises in a competitive market. The results show that Ethio Telecom is inefficient as compared to the benchmark operators selected. Moreover, the main source of inefficiency comes from issues related to resource allocation. Furthermore, slack movements recommended to reduce capital expenditure and employee number while increasing total assets to attain 94% of the cost efficiency realized by a benchmark DMU.