Cronyism and the Future of the Private Sector in Sudan, Algeria, and Ethiopia

This research project looks into the nature of state-business relations (SBRs) in Algeria, Sudan, and Ethiopia, and how these might evolve in light of the changing internal circumstances. The three countries are going through a process of political change, with the possibility of transitioning from an autocratic political regime, to a more democratic and open one. While the economic conditions and performance of the economies of the three countries differ markedly, the relation between state and businesses until the recent events had a close resemblance, and the future challenges in terms of democratic aspirations, as well as private sector development also bear some similarities. The aim of the proposed work is to understand the nature of “cronyism” in the recent past – in the sense of close relation between the state and some privileged firms, and to explore its political role and its economic consequences. An understanding of the mechanisms used to provide privileges to some firms, and impose restrictions on others, can help figure out how state business relations fits within the broader political economy framework in select countries in North Africa and Sub Saharan Africa, and how generated privileges for insiders sustained an anti-competitive business climate, and how this reduce the growth and jobs generating potential of these countries. The goal is to be in a better position to think of how these relations can be changed in the future in ways that support better political as well as economic performance, and to provide a solid evidence-based policy advice on how to move forward.

ERF acknowledges the generous financial contribution of the Carnegie Corporation of New York.