Privatization of Public Enterprises Proclamation No. 146-1998

 

PROCLAMATION NO. 146/1998

A PROCLAMATION TO PROVIDE FOR THE PRIVATIZATION OF PUBLIC ENTERPRISES

WHEREAS, it has become necessary to change the role and participation of the state in the economy and to encourage the expansion of the private sector and thereby promote the economic development of the Country;

WHEREAS, to achieve this objective it is found necessary to expedite the implementation of the ongoing privatization programme;

NOW, THEREFORE, in accordance with Article 55(1) of the Constitution of the Federal Democratic Republic of Ethiopia, it is hereby proclaimed as follows.

 

PART ONE

GENERAL

 

1 Short Title

This Proclamation may be cited as the "Privatization of Public Enterprises Proclamation No. 146/1998".

2. Definitions

In this Proclamation, unless the context otherwise requires:

1/ "Privatization" means the transfer, through sale, of an enterprise or its unit or asset or government share holdings in a share company to private ownership and includes:

a) the making of an enterprise a government contribution to a share company to be formed with the participation of private investors; and

b) the privatization of the management of an enterprise.

2/ "Sale or Contribution of an Enterprise" means the sale or contribution of the business and assets of an enterprise;

3/ "Enterprise" means a public enterprise governed by the Public Enterprises Proclamation No. 25/1992 or an establishment designated by the Government as a public enterprise for the purpose of the application of this Proclamation;

4/ "Agency" means the Ethiopian Privatization Agency established pursuant to Article 16 of this Proclamation;

5/ "Board" means the Agency’s Board referred to in Article 20(1) of this Proclamation;

6/ "Supervising Authority" means a body designated by the Government to supervise enterprises in accordance with Proclamation No. 25/1992;

7/ "Board of Trustee" means the Board of Trustee for Privatized Public Enterprises established under Proclamation No. 17/1996;

8/ The words "Investor", "Domestic Investor" and "Foreign Investor" shall have the meanings assigned to them under the Investment Proclamation No. 37/1996; provided, however, that "Domestic Investor" shall not include the Government and public enterprises.

 

3. Objectives of Privatization

The Country’s Privatization Programme shall have the following objectives:

1/ to generate revenue required for financing development activities undertaken by the Government;

2/ to change the role and participation of the Government in the economy to enable it exert more effort on activities requiring its attention;

3/ to promote the Country’s economic development through encouraging the expansion of the private sector.

 

PART TWO

PRE-PRIVATIZATION ACTIVITIES

 

4. Enterprises to be Privatized

1/ The list of enterprises to be privatized shall be determined by the Government upon the recommendation of the Supervising Authority.

2/ The management of an enterprise decided to be privatized in accordance with sub-Article (1) of this Article shall have the duty to prepare the enterprise for privatization in accordance with directives given to it by the Agency.

 

5. Conversion of an Enterprise to a Share Company

1/ The Agency may, where it deems it necessary in the course of preparation for privatization, cause the conversion of an enterprise to a share company.

2/ The capital of a share company established pursuant to sub-Article (1) of this Article shall be divided into shares and shall totally be held as Government shares.

3/ The provisions of Article 312(1)(b) and 315 of the Commercial Code shall not be applicable with regard to a share company formed under this Article or by taking an enterprise as government contribution.

4/ Until such time that the Agency start transferring shares of a company formed pursuant to sub-Article (1) of this Article to private ownership:

a) authorities given to share holders meetings under the Commercial Code shall be deemed given to the Supervising Authority;

b) all directors of the company shall be appointed by the Supervising Authority;

c) the provisions of Articles 307(1), 311, 347(1) and 349 of the Commercial Code shall not be applicable; provided, however, that other provisions of the Commercial code shall mutatis mutatndis be applicable.

 

6. Valuation of Enterprises

1/ The Agency shall cause the valuation of an enterprise or a unit or assets of an enterprise or government shares prior to privatizing same.

2/ Valuation shall be done in accordance with guidelines issued by the Board.

3/ The floor or indicative price determined as the result of the valuation shall be subject to the approval of the Board.

 

PART THREE

MODALITIES OF PRIVATIZATION AND ISSUES INCIDENTAL TO PRIVATIZATION

 

7. Modalities of Privatization

1/ The Agency shall undertake studies to adopt detailed procedures enabling the use of various appropriate modalities of privatization.

2/ Any modality selected for the privatization of an enterprise shall be subject to the approval of the Board.

3/ The procedures to be followed in the use of any modality of privatization shall be based on the principles of transparency.

4/ Where the Agency is unable to privatize an enterprise that could be dissolved on grounds specified under Article 39(1)-(5) of the Public Enterprises Proclamation No.25/1992 using modalities other than liquidation, it is hereby authorized to exercise the powers given to the Supervising Authority with regard to the dissolution and winding-up of enterprises under Articles 41-45 of said Proclamation.

 

8. Currency of Payment

1/ The Agency may agree that the price of an enterprise be paid in Birr or in convertible foreign currency.

2/ Notwithstanding the provisions of Article 1750 of the Civil Code, the price of an enterprise shall be paid in the currency specified in the contract.

 

9. Depreciation of Assets

1/ For the purpose of determining taxable income, the calculation of depreciation of assets shall be based on their valuation done in accordance with article 6 of this Proclamation; provided, however, that it shall be based on the actual amount paid by the buyer where the tender price is lower.

2/ The Agency shall send to the concerned tax authority the breakdown of asset values determined in accordance with sub-Article(1) of this Article.

10. Stamp duties

1/ The Agency shall send to the concerned tax authority the breakdown of values of assets transferred to the buyer and which are subject to the payment of stamp duty in relation to documents of tittle to property.

2/ The provisions of Article 5(6) of the Stamp Duty Proclamation No. 110/1998 shall not be applicable with regard to the values of assets transmitted by the Agency in accordance with sub-Article (1) of this Article.

 

11. Applicability of the Investment Laws

The Provisions of the relevant investment laws governing the granting of incentives for expansion and upgrading of existing enterprises as well as entry requirements and guarantees applicable to foreign nationals and foreign investors shall also be applicable to investors participating in the privatization of enterprises.

 

12. Continuity of Employees’ Pension Coverage

1/ Employees’ Pension coverage existing before the privatization of any enterprise shall continue without any interruption.

2/ The new owner of the enterprise shall respect employers’ obligations imposed by the appropriate laws with regard to employees’ pension.

 

13. Transfer of Rights and Obligations of Enterprises

1/ The rights and obligations of an enterprise shall, upon privatization, be transferred to the buyer; provided, however, that the transfer of debts shall require the consent of creditors.

2/ Notwithstanding the provisions of sub-Article (1) of this Article, rights and obligations pertaining to receivables and payables shall be transferred to the Board of Trustee where the sales contract provides for the non-transferability of such receivables and payables to the buyer.

 

 

 

14. Post Privatization Monitoring

1/ An investor who has bought an enterprise shall have the obligation to implement, within the time limit specified in the sales contract, his investment plans on the basis of which he was awarded the contract in addition to this purchase price.

2/ The investor shall have the obligation to periodically submit to the Agency information that is necessary for monitoring the implementation of the investment plans and to allow the representatives of the Agency to enter and inspect the enterprise at any time and to make assessments.

3/ The sales contract shall prescribe penalties applicable to the investor in case of failure to meet his obligations under this Article.

 

15. Settlement of Disputes

1/ Disputes arising between the Agency and an investor who has participated in privatization shall be referred to the appropriate federal court unless the parties have agreed in their contract to submit such disputes to an arbitration tribunal.

2/ Where the parties have agreed to submit their disputes to an arbitration tribunal, the proceedings thereof shall be conducted in accordance with the provisions of their contract and that of the Civil and Civil Procedure Codes.

 

 

 

 

 

 

 

 

 

PART FOUR

RE-ESTABLISHMENT OF THE PRIVATIZATION AGENCY

 

16. Re-establishment

1/ The Ethiopian Privatization Agency is hereby re-established as an autonomous federal institution having its own juridical personality.

2/ The Agency shall be accountable to the Prime Minister.

 

17. Head Office

The Agency shall have its head office in Addis Ababa and may have branch offices elsewhere as may be necessary.

 

18. Objectives

The objectives of the Agency shall be to implement the privatization programme efficiently and in accordance with this Proclamation.

19. Powers and Duties

1.     Without prejudice to other provisions of this Proclamation, the Agency shall have the powers and duties to:

a.      implement the privatization programme in accordance with the provisions of this Proclamation:

b.     determine privatization sequence plan for all enterprises included in the privatization programme;

c.      cause the undertaking of all necessary preparatory works for the privatization of enterprises;

d.     determine bid evaluation criteria for the selection of investors participating in privatization;

e.      prepare necessary documents to be used in the privatization process;

f.       design ways and means of encouraging domestic investors to participate in the privatization of enterprises;

g.     take all necessary measures to publicize the privatization programme and its implementation;

h.     through post privatization monitoring, ensure compliance of investors’ obligations, and undertake impact assessment of the privatization in general;

i.       establish close relations with relevant institutions in the implementation of the privatization programme with a view to coordinating their actions;

j.       own property, enter into contracts, sue and be sued in its own name;

k.     carry out other activities necessary for the fulfillment of its objectives.

1.     The Agency may, where it finds it necessary for the efficient implementation of the privatization programme, delegate the execution of specific tasks to appropriate institutions and may employ the services of qualified consultants.

 

20. Organization of the Agency

The Agency shall have:

1/ a Board of Management;

2/ a General Manager to be appointed by the Government; and

3/ the necessary staff.

 

21. Members of the Board

Members of the Board including the chairperson shall be designated by the Government; and their number shall be determined as may be necessary.

 

22. Powers and Duties of the Board

Without prejudice to other provisions of this Proclamation, the Board shall have the powers and duties to:

1/ Oversee and supervise the implementation of the privatization programme;

2/ issue directives necessary for the proper implementation of this Proclamation;

3/ decide or submit recommendations to the Government, as may be appropriate, on policy issues relating to the implementation of the Privatization Programme;

4/ ensure the systematic execution, the legality, transparency and efficiency of the privatization process;

5/ approve the organizational structure and work programme of the Agency as well as the annual budget to be submitted to the Government;

6/ issue the Agency’s staff regulations following the basic principles of the federal civil service laws; approve the employment and placement of officials of the Agency accountable to the General Manager;

7/ examine complaints submitted to it in relation to the execution of the privatization programme and give administrative decisions thereon;

8/ take all other measures necessary to expedite the privatization process.

 

23. Meetings of the Board

1/ The board shall meet once in a month; provided, however, that it shall meet at any time at the request of the chairperson.

2/ There shall be a quorum where more than half of the members are present at a meeting of the Board.

3/ Decisions of the Board shall be passed by majority vote and, in case of a tie, the chairperson shall have a casting vote.

4/ Without prejudice to the provisions of this Article, the Board may determine its own rules of procedure.

 

24. Powers and Duties of the General Manager

1/ The General Manager shall be the chief executive officer of the Agency and shall, subject to the general directives of the Board, direct and administer the activities of the Agency.

2/ Without limiting the generality stated in sub-Article (1) of this Article the General Manager shall:

a) participate in the meetings of the Board as a member;

b) exercise the powers and duties of the Agency specified under Article 10 of this Proclamation;

c) employ and administer employees of the Agency in accordance with the staff regulations approved by the Board;

d) prepare and submit to the Board the budget and work programme of the Agency; and implement same upon approval;

e) effect expenditure in accordance with the approved budget and work programme of the Agency;

f) represent the Agency in all its dealings with third parties;

g) prepare and submit to the Board the operational and financial reports of the Agency.

 

3/ The General Manager may delegate part of his powers and duties to the officials and other employees of the Agency to the extent necessary for the efficient performance of the activities of the Agency; provided, however, that in the case of an official who acts on behalf of the General Manager for more than thirty days, prior approval by the Board shall be required.

 

25. Budget

The budget of the Agency shall be allocated by the Government.

 

26. Books of Accounts

1/ The Agency shall keep complete and accurate books of accounts.

2/ The books of accounts and financial documents of the Agency shall be audited by the Auditor General or by an auditor designated by him.

 

 

 

 

 

 

 

 

PART FIVE

MISCELLANEOUS PROVISIONS

 

27. Duty to Cooperate

1/ Any federal or regional government organ or official shall have the duty to cooperate in furnishing any information or rendering any assistance requested in the course of implementing the privatization programme.

2/ Without limiting the generality stated in sub-Article (1) of this Article, the time limit for furnishing information to the Agency and providing services to buyers shall be as shown in the Schedule attached to this Proclamation.

3/ Time spent waiting the buyer to comply with formalities in relation to the transfer of title deeds, utility contracts and licenses shall not be considered for the purpose of calculating the time limit shown in the Schedule.

 

28. Eviction of Ilegal Occupants

1/ A court to which an application of suit is lodged for the eviction of a person alleged to illegally occupy the building or premises of a privatized enterprise and impede the handover thereof, shall, unless a statement of defence showing the legality of the occupation is submitted to it, issue and enforce an eviction order within thirty days.

2/ The provisions of sub-Article (1) of this Article shall also be applicable with respect to the restitution of properties by the decision of the Agency pursuant to Proclamation No. 110/1995; provided, however, that any defence regarding the legality of the occupation shall not be entertained.

 

29. Repealed and Inapplicable Laws

1/ The Ethiopian Privatization Agency Establishment Proclamation No. 87/1994 (as amended) is hereby repealed.

2/ No law, regulation, directive or practice shall, in so far as it is inconsistent with this Proclamation, have force or effect in respect of matters provided for by this Proclamation.

 

30. Transitory Provisions

1/ The provisions of Articles 12 and 14 of this Proclamation shall also be applicable in relation to employees’ pension coverage and the monitoring of the implementation of investment plans, upon which agreements are concluded with the Agency prior to the coming into force of the Proclamation.

2/ The provisions of Articles 8, 10, 11, 13, 15, 27 and 28 of this Proclamation shall also be applicable to pending issues relating to privatization transactions executed in accordance with Proclamation No. 87/1994.

3/ The provisions of this Article shall not affect the validity of contractual provisions regulating issues to which the Agency agreed otherwise prior to the coming into force of this Proclamation.

 

31. Effective Date

This Proclamation shall come into force as of the 29th day of December, 1998.

Done at Addis Ababa, this 29th day of December, 1998.

NEGASO GIDADA (DR.)

PRESIDENT OF THE FEDERAL DEMOCRATIC

REPUBLIC OF ETHIOPIA

 

 

 

 

SCHEDULE

TIME LIMIT FOR PROVIDING INFORMATION AND SERVICES IN COMMECTION WITH THE PRIVATIZATION OF PUBLIC ENTERPRISES

No.

Type of Information/Service

Time Limit

1

Ascertaining land holdings and issuance of land holding certificate

3 months

2

Notification of land lease/rent price and the maximum duration of lease contract

1 month

3

Notification of rates of water charges

15 days

4

Issuance of transfer documents of title to vehicles

15 days

5

Issuance of transfer documents of ownership of buildings and land holdings

1 month

6

Transfer/issuance of trade/operating licence

15 days

7

Transfer of contracts of lease of premises or supply of electricity, water or telecommunication services

15 days

8

Notification of duties required on items imported without payment of customs duty.

1 month

 

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