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Customs and the logistics service issues were emphasised as major problems at the consultative meeting with investors engaged in the manufacturing industry, chaired by the newly appointed PM.
On the first consultative meeting since the new PM Hailemariam Desalegn came to power, local and foreign industrialists from different sectors complained about long term problems, especially with government offices tasked with managing trade.
At the discussion held on Wednesday, at the Sheraton Addis Hotel, investors repeatedly complained about drawn out customs clearance procedures and complicated transportation and logistics services managed by the recently amalgamated Ethiopian Shipping and Logistics Services Enterprise (ESLSE).
In the two-part discussion with the PM, local and foreign investors expressed their concern about issues related to land, access to finance, infrastructure, security, and transport facilities, but the primary complaint was about the aforementioned customs and logistics problems.
According to participants who spoke to Capital, most of the points raised at this consultative meeting have been raised on various other occasions in past meetings with government officials.
In the morning session of the consultative meeting, which was attended by local industrialists, several problems have been pointed out by investors who came from different sectors, while the afternoon discussion gave more time for foreign investors to address theirs.
In the morning session, speakers from the leather, textile, agro-processing, chemical, pharmaceutical, horticulture, commercial farming, and metal and engineering industries were given time to describe the various challenges they faced in their respective sectors. Like a broken record the issue that kept coming up was that of logistics and delays in customs.
Most of the problems described at the consultative meeting were not new. At the second Ethiopian Public Private Sector Dialogue Forum held in February 2012, the issues that arose this week, especially the logistics and customs issues were raised by the private sector. These problems were clearly not addressed in the intervening months.
At the discussion the new PM conceded that most of the problems needed to be addressed. He said that his government aims to boost the private manufacturing sector’s involvement in the Growth and Transformation Plan.
He said that some of the customs regulations related to the industry sector will be revised by the government, and that some regulations related to investment will also be revised to make the private sector more comfortable.
During the discussion Hailemariam admitted that there are problems with the multimodal (land, sea, or road) transportation service, which has been operational since January 2012, operated solely by the state owned ESLSE. “While there was a lack of preparation when we began the system, we should not see the multimodal scheme as structurally wrong,” he explained.
The multimodal arrangement is a scheme whereby the transportation of goods is under a single contract but performed by three different means of transportation. The transporter is accountable for the entire journey, including the shipment’s delivery at the final destination.
According to sector professionals involved in the freight forwarding and shipping agent business, the problem is due to the government giving the new scheme to state-owned enterprises exclusively, creating a virtual monopoly. On different occasions the freight forwarders complained about the government’s decision, and asked the government to allow the private sector to be part of the new arrangement, but the system has yet to open up to the private sector.
At the Wednesday meeting Hailemariam said that the government will solve the problem with the private sector. “Some of the processes have already begun,” he said, but no further details were added.
Gizeshwork Tessema, general manager of Gize PLC, came representing the Ethiopian Freight Forwarders and Shipping Agents Association, she said that the government has to make room for the private sector to be part of the new arrangement.
In the preceding months the association had been saying that the government must provide opportunities for private firms to compete in the sector. Members of the association wrote several letters to the late PM Meles Zenawi, urging the government to allow the private sector to be part of the multimodal business.
The Multimodal Transportation Implementation Directive that was started at the beginning of this year made it compulsory that all shipments that belong to the government use multimodal transport through ESLSE. The aim was to increase activity in the import export business, but the new system started showing signs of trouble, and while some problems were solved from time to time others remained.
During the discussions shortage of financial instruments from banks that support businesses was the other main complaint. Most of the sector investors complained about the shortage of working capital, loan processing, and the hard currency shortage. The investors raised the issue of the National Bank directive, that requires private banks to buy 27 percent in bonds on every loan they provide to their customers.
PM Hailemariam promised that the government will work closely with the private sector associations to identify the problems and solve them from a grassroots level.
High level government officials from different sectors were present at the discussion, but most of the speakers at the two part session were the private sector representatives. The PM said that the main aim of the consultative meeting is to give the industrialists space to express their concerns and problems, and to give assurance that the government is committed to working with them to meet the objectives of the five year plan.
The PM said that through dialogue with local and foreign investors, the government could address bottlenecks step by step, including those linked to taxes, customs, transportation, logistics, power supply, and land and port services.
He further acknowledged some foreign investors for their work in the country including Diageo that recently bought Meta Abo Brewery. Commenting on it Francis Agbonlahor, Managing Director of Diageo Meta Abo Brewery told Capital “We at Diageo Meta were truly honored and proud to have Prime Minister Hailemariam Dessalegne acknowledge the positive impact we are making in our communities in Ethiopia as well as our enviable corporate social responsibly agenda. In the over 180 countries where Diageo operates, we are committed to doing good business and being a force for good for the wider society. In Ethiopia, we have been focused on the health and safety of our people at Meta, supporting small holder farmers in the Oromo highlands, and incorporating high standards of compliance and ethics in everything we do.”
The PM also gave his assurance to the private sector that the public-private dialogue would be held at least twice a year.