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136 Diagnosing Corruption in Ethiopia
on-budget allocations. The state-owned drilling companies have their
origins in an era when external aid gave drilling rigs to government, and
the private sector generally was viewed with suspicion. State drilling
capacity has been retained and increased, continuing to play an important
role in drilling in remote locations and resettlement areas, emergency
situations, and conditions deemed unsuitable for the private sector, as
box 4.1 describes.
Box 4.1
An Uneasy Coexistence of State and Private Drilling?
Ethiopia’s drilling industry is characterized by a mix of state, private, and NGO
actors, significantly increasing financial commitments in the run-up to 2015 and
rapid expansion in private sector activity, both home-grown and international
(Carter et al. 2006).
• State enterprises are often the first choice for regional bureaus contracting out borehole
construction work. They have their roots in the public authorities of the
postimperial early Derg period. Six of Ethiopia’s regions (Tigray, Amhara, Oromia,
SNNPR, Somalia, and Afar) have enterprises engaged in borehole drilling,
while some of the same regions and two others (Benishagul-Gumuz and Gambella)
maintain drilling capacity within their water resource bureaus. In the past,
state enterprises have received considerable support in the form of rigs and
training from a number of donors, including the Japan International Cooperation
Agency and UNICEF.
• The emergence of private drilling companies is a relatively recent phenomenon. The
oldest private contractor, Hydro Construction and Engineering Co. Ltd., commenced
business in Ethiopia in 1991. More recently, a number of international
firms have entered the market, significantly undercutting the indigenous private
sector and prompting claims from established companies that they must
be taking shortcuts. There are currently around 25–30 private operators.
• NGOs also maintain their own drilling capacity. Others (for example, WaterAid
[2008]) subcontract drilling to private or state enterprises but use their own
in-house or consultant expertise for surveys, design, and supervision.
Where are the corruption risks? Although state enterprises are expected to
operate in a financially viable manner without state subsidy—and to compete
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