Introduction and Rationale
The existence of over 18 government-owned institutes engaged in commercial consultancy and Business Development Services (BDS) across various sectors in Ethiopia presents a significant structural challenge to the development of a competitive, professional, and market-driven private sector in this field. As highlighted in the research, Legal and Regulatory Landscape Impacting Business Development Service (BDS) & Business Advisory Service Providers (BDSPs) Across all Sectors in Ethiopia, implemented by MG Consultancy and funded by GIZ through EBASPA, these government institutions operate under a dual mandate. While they ostensibly provide consultancy services, their primary orientation is often to align with Government policy priorities, leading to an inherent bias and a potential lack of focus on purely market-driven professional excellence. This duality stifles fair competition and hinders the maturation of the private consultancy market.
Core Policy Argument
This document advocates for a phased and strategic withdrawal of government-owned institutions from commercial consultancy and Business Advisory Service (BAS) provision, transferring these services to the private sector. This recommendation is grounded in the principles of market liberalization, equitable competition, and specialization of institutional roles.
Justification for Phased Withdrawal
- Addressing Conflict of Interest and Bias: Government institutes, by their nature, are tasked with implementing and advancing state policy. When they also operate as consultants, a conflict of interest is created. Their advice may be fundamentally geared towards validating or facilitating government agendas rather than providing clients with unbiased, sectorally optimal, and professionally neutral solutions, which is the core value proposition of private consultancy.
- Fostering Fair Competition and Market Growth: The state-owned institutes benefit from non-commercial privileges, including easier access to public contracts, subsidized operating costs, and perceived institutional authority. This creates an uneven playing field that unfairly disadvantages emerging and existing private Business Advisory Service Providers (BASPs), preventing them from achieving the scale and specialization necessary for national and international competitiveness.
- Encouraging Professional Specialization and Quality: Private firms, motivated by market survival and profit, must prioritize professionalism, efficiency, and innovative service delivery. Removing the quasi-monopolistic or preferential position of public institutes will force all players to compete on merit and quality, thereby elevating the overall standards and specializations within the Ethiopian consultancy sector.
- Enabling Government to Focus on Core Functions: The government’s core function is regulation, policy-making, and market enablement. By stepping back from commercial service provision, the government can better focus its resources and attention on strengthening the regulatory framework for the consultancy sector, improving the ease of doing business, and ensuring that private BASPs adhere to high ethical and professional standards (e.g., through EBASPA).
Policy Recommendation: Implementation Strategy
The transition should be managed through a structured, multi-year process:
| PHASE | DURATION | RECOMMENDED ACTIONS |
| Phase I: Assessment and Legal Framework | Year 1 | 1. Classification: Officially categorize the 18+ institutes and their specific consultancy services as commercial, non-core activities. 2. Legislation: Amend relevant proclamations and regulations to restrict government institutions from competing in sectors where viable private capacity exists. 3. Transparency: Mandate that government institutes fully disclose their subsidy levels and operational costs to ensure fair market price comparison. |
| Phase II: Gradual Commercialization and Downscaling | Years 2-3 | 1. Full-Cost Pricing: Require government institutes to adopt full-cost accounting and market-rate pricing for all commercial consultancy services. 2. Client Restriction: Restrict government institutes from bidding on public sector consultancy tenders that could be competently handled by private firms. 3. Capacity Transfer: Develop and fund Capacity Transfer Programs (in partnership with EBASPA) to support private firms in acquiring the expertise and data currently held by the government institutes. |
| Phase III: Complete Withdrawal and Privatization/Restructuring | Year 4+ | 1. Privatization/Restructuring: Convert the commercial consultancy wings of the government institutes into independent public enterprises with a clear mandate for eventual partial or full privatization, or restructure them solely as regulatory/research bodies with no commercial activity. 2. Market Promotion: Establish a Public-Private Dialogue Forum to continually monitor and resolve any remaining market-entry barriers for private BASPs. |
By systematically implementing this withdrawal, the Ethiopian government can unlock the full potential of its private consultancy sector, foster genuine competition, and ensure that businesses across all sectors receive advice that is purely professional and optimally aligned with their commercial success.