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Construction Sector Corruption in Ethiopia 267
contribution to the broader challenge of tackling both the perception and
the reality of corruption within Ethiopia’s construction sector.
Perceived Lack of Effective Competition in Parts
of Ethiopia’s Road Sector
In view of the reported perceptions of hidden barriers to entry to some
markets within Ethiopia’s construction sector, this section attempts to
assess in more detail whether the market is functioning in a manner
consistent with true competition. Because of its high spending, available
data, and concerns about rising costs, this analysis will focus on the road
sector, specifically on ERA (responsible for federal roads) and RRAs
(responsible for rural roads).
Indicators of Competition
If engineers’ estimates are accurate, and market forces working well, then
competitive tenders should result in lower prices. The level of competition
is normally measured based on (a) the number of bidders and (b) the
spread and pattern of bids received.
Such an analysis is beyond the scope of this study and is of little value
if conducted superficially because both the number of bidders and the
pattern of bids can readily be manipulated through collusive practices.
However, based on monitoring of such indicators, ERA, some RRAs, and
the World Bank have each in recent years expressed concern about a possible
lack of effective competition in the sector.
An alternative approach to studying the issue is to focus on
• the process of preparing engineers’ estimates; and
• the degree to which any changes in unit costs can be attributed to the
cost of inputs, capacity constraints at times of increased spending, or
increased margins due to restricted competition in the sector.
It is recommended that such a study be undertaken in the context of
the Ethiopian road sector. Meanwhile, using data readily available from
secondary sources, a preliminary analysis of such issues follows.
Growth in Road Sector Spending
The rapid growth in spending in Ethiopia’s road sector has been particularly
marked since 2004. 9 The bulk of this spending is on federal roads,
managed by ERA. In a constrained market, such a pattern of high and