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Federal Negarit Gazeta

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 inverstors; and


    (b) the privatization of the management of an enterprise.


2) "Sale or contribution of an Enterprise" means the sale or contribution of the busineses 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 enter- prises.

3. Objectives of Privatization

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

1) to generate revenue required for financing develop- ment activities undertaken by the Government;


2) to change the role and participation of the Govern- ment 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 recommen- dation 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 con tribution.


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 enter prise 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 rsult 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 de tailed procedures enabling the use of various ap propriate 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 enter prise that could be dissolved on grounds specifed 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 enter prises under Articles 41-45 of said Proclamtion.

8. Currency of payment

1) The Agency may agree that the price o~ an enter prise be paid in Birr or in ~onvertible foreign currency.


2) Notwithstanding the provisions of Article 1750 of the Civil Code, the price of an enterprise shal 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 accor- dance 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 docmuments of title 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 accordnace with sub-Article (1) of this Article.

11. Applicability of the investment Laws

The Provisions of the relevant investment laws gover- ning the granting of incentives for expansion and upgrading of existing enterprises as well as entry requirements and guarantees applicable to forign national 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 exisiting 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 tranferred 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, rigthts 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 ap- plicabale to the investor in case of failure to meet his obligations under this Article.

15. Settlement of Disputes

1. Disputes arising between the Agncey and an investor who has particpated 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 sumbit 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-Establishement 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 elswehere