According to procurement and purchase procedures that should be followed by government institutions, there must be allowances and margins given to local companies. In contract evaluation process, evaluators are supposed to give 10 to 25 percentage points as a margin to local companies so that they could compete on an equal basis.
The state minister too admits to the preferential treatment that must be provided to local firms. The local companies have to look into ways to form suitable joint ventures to circumvent these challenges, Frehiwot stated. “The companies have to be wise and try to collaborate to overcome these hurdles and gain experience. Not only in terms of capital but also in terms of human resources they could have better strength if they merge and join forces.”
However, Frehiwot also assured the sector operators that the ministry would raise the issue with implementation agencies if there are indeed unnecessary requirements in the contracts. Yet gain, sector operators downplayed the fact that even when these projects are taken by foreign firms, the chances of subcontracting opportunities to local firms is quite slim. For both Bereket and Yeneneh, the behavior of foreign contractors is also another deterministic factor for technology transfer. According to their perspectives, Chinese contractors are not that open for knowledge sharing, technology transfer and working with local firms in sub-contractual basis.
“You have to understand that when we talk about a foreign contractor there’s a big difference between Chinese companies and other European ones,” Bereket elucidates. According to him, his company has worked in the building and commissioning of many electric substations in the past. In that time, he argues, the main contractors were mainly European and they do subcontract to local companies. “Now, since the Chinese took over there is no trickle down of contracts and jobs for local companies,” he concluded.
The association’s chairman believes that Chinese involvement in infrastructure in Ethiopia is squeezing out local capacity altogether. He staunchly argues that Chinese contractors have the tendency to subcontract to another Chinese firms and states that awarding more projects to the Chinese is worrisome to the subsector.
Nevertheless, the association is strong on the need to install stringent requirements on foreign contractors to either operate on the basis of joint-ventures or subcontract to local firms to salvage this dying subsector.