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166 Diagnosing Corruption in Ethiopia
competition and to increase confidence in tendering and procurement
more generally—the federal government should clarify the circumstances
and procedures for contracting SOEs. In a competitive market with many
different drilling companies, the role of an SOE should be as a “driller of
last resort.”
Concerns about licensing focus on generating healthy competition and
competitive pricing in the drilling sector. An argument by some stakeholders
was that the current (onerous) licensing requirements are prohibitive
for new entrants to the market, in effect creating a smallish,
closed shop in which SOEs inflate the costs.
Recommendation 2: Lower the entry barriers for private contractors.
A relaxation in current licensing requirements would encourage new
entrants into the market (particularly from within Ethiopia) and encourage
greater competition. Measures could include accepting leasing
arrangements (rather than outright ownership) for rigs and trucks and
facilitating credit for start-up enterprises.
Recommendation 3: Commission an independent study of the efficiency and
effectiveness of state-owned drilling companies.
The study should include a detailed breakdown and analysis of drilling
costs for both shallow and deep boreholes under different contracts and
in different areas.
Planning, Budgeting, and Transfers
There have been major changes in sector planning, budgeting, and transfers
in Ethiopia over recent years, but both evidence and perceptions
suggest that the corruption risk in these areas is generally low. With
respect to planning, for example, low-cost technologies that can be partfinanced
and maintained by local communities are favored under the
UAP, recognizing the need to adapt service delivery choices to the circumstances
of the poor instead of to, say, the “big-project, high-tech”
wishes of contractors.
In terms of sector budgeting and fiscal transfers, the shift toward general
budget support and decentralization does not appear to have created
new or significant forms of corruption. For example, the allocation of
block grants is transparent and formula-based; the growing multidonor
pooled fund is similarly disbursed (and in this case ring-fenced) according
to strict criteria; and the remaining off-budget, project-based investment
appears to be tightly controlled, albeit through a variety of different
organizations and accounting procedures.