Since the coming to power of Abiy Ahmed (PhD) there have been many social and political changes, not only in Ethiopia but also in the region. Domestically, political prisoners have been released, opposition figures have returned from abroad, religious leaders have reconciled.
Ethiopia’s international relations have also changed as the PM visited regional countries, first stopping at Djibouti, the major logistical hub for Ethiopia for the past 20 years. He also traveled to Gulf States and other neighbors and restored peace with previous rival Eritrea.
His visit to Asmara, which was the first at this level in two decades, brought new and unexpected options for the country since the two leaders agreed to use ports in Eritrea to import and export cargo from Ethiopia.
Officials at the Ethiopian Maritime Affairs Authority (EMAA) recalled that when he visited Djibouti in April, the PM agreed to partner with the Djibouti government to develop a port dedicated to Ethiopia.
They both agreed to swap mega infrastructure projects which served both nations.
“It may indicate that Ethiopia will get a share of the already developed port or a port planned for development in Djibouti as opposed to establishing a new one,” an expert said.
During his visit to Kenya, Sudan and Somalia the PM also met with leaders of those states and one thing they reflected upon was potentially developing logistical and port facilities via partnerships. “We have been in the process of observing the best way to take advantage of using new logistics facilities in neighboring countries,” an expert at EMAA said, noting that Ethiopia is the most populated nation without sea outlets in the world.
“We are still in the process but now we have a lot of work to handle because the government is interested in working with regional countries on port development including Djibouti, which has been our port ally for the last 20 years,” he added.
Eritrea, the former province of Ethiopia, was the major port for Ethiopia until 1998 when the border conflict erupted. Ethiopia had been using Assab port, which is 887km north east of Addis Ababa, as a major logistics hub, while Massawa is also close to the northern part of the country but it is 1,187km north of Addis Ababa.
According to the information that Capital obtained from EMAA the Eritrean government says Massawa is ready to serve shipments to and from Ethiopia.
“Even though Eritrea has made this offer, it is far from the center so we are mainly interested in using the port at Assab, but we will look what possibilities there are for logistics in northern Ethiopia via Massawa, which is about 400 km from Mekele, the capital of Tigrai,” another expert said.
A source at EMAA said, the government has already formed a taskforce to speak with Eritrean officials about how best to utilize Assab.
Mekonnen Abera, Director General of EMAA, confirmed that a taskforce group would talk about the use of Assab when they travel to Eritrea. He told Capital that this would occur in the near future but declined to give a specific time.
“We don’t know the current condition of Assab in terms of being able to anchor vessels at the berth. It has to be confirmed and there are some other technical issues,” one source added.
In the last twenty years Ethiopia had been using ports at Djibouti which has undertaken massive logistics developments to accommodate Ethiopia’s growing demand.
In the past few years Djibouti has inaugurated new ports and expanded existing ones, making the country’s port capacity the most viable in the region, and it continues to construct new facilities worth billions of USD.
In July, Djibouti launched the Djibouti International Free Trade Zone (DIFTZ) which will be of huge importance for Ethiopian logistics companies. According to a statement Capital obtained from Djibouti’s Ports and Free Zones Authority (DPFZA) regarding the trade zone, this is only the pilot phase of the project and the DIFTZ will continue to be expanded, welcoming more and more Ethiopian businesses. “As the DIFTZ grows, it will foster trade opportunities for the whole region, not only Ethiopia,” it added.
Djibouti still has huge influence on port services, more than Eritrea, said Daniel Zemichael, Chief Executive of Freighters International Plc and veteran shipping and logistics expert with over 41 years of experience.  Djibouti has built a huge and unparalleled efficiency handling containers in the horn. “It may take several years for others to reach the current capacity of Djibouti,” he pointed out.
Experts say that Assab is the closest port to Ethiopia at 887km in distance but they note that the road, which is about 60km from port to the border of Ethiopia, on the Eritrean side, may need significant re-construction.
“When you see the distance from Djibouti ports to Ethiopia via Galafi it is about 910km which is a bit further than Assab but the asphalt road to Djibouti via Dire Dawa will soon open so the distance will become closer than all other ports in the region,” an expert said. The distance from Addis Ababa to Djibouti via Dire Dawa would be about 800km only. Experts said that if road via Mieso to Dire Dawa is functional the distance could be reduced to 780 km.
In addition, because of the new railway network the distance is 750km from ports in Djibouti to Addis Ababa, which is also more feasible, according to experts.
Daniel argues that Assab could be a potential competitor to Djibouti for bulk cargos. “Cargos like fertilizer, wheat and steel can be imported via Assab at a competitive price,” Daniel explained. “But when you come to container cargos Djibouti will continue to be a dominant player for the coming ten years.”
Storage capacity at Assab may not be as competitive as the facility in Djibouti.
The depth of the water at Assab is not like Djibouti, which has a natural depth for the berthing of huge deadweight (DWT) vessels. According to Mekonnen, the vessels that Ethiopia has are medium size vessels that can berth at Assab. However, cargo that comes via other vessels with huge DWT should berth at Djibouti.
Experts say that the current move of the PM and his decision to develop a sea port jointly with the given countries will have a positive impact on Ethiopia’s logistical services.
According to Daniel, Abiy’s strategy is different. “His attitude is that Ethiopia must have a say on the partnership, investment and decisions of the regional logistics development, which is a proper move.” “Even though you may not have full rights and control, you have a say,” he added.
“Using ports of sovereign states always comes with challenges since it is not like the European trading community. Countries have their own local rules and regulations that may challenge the operation of Ethiopia, but expanding market options will contribute to competitive services and prices for Ethiopia,” Daniel said.
Capital asked DPFZA if the current move of Ethiopia is good for business.
Mohamed Aref Mohamed, Head of the Marketing Department of DPFZA, told Capital that Djibouti welcomes free and fair competition. He said that for the last three decades, Djibouti has been a trans- shipment hub for the Red Sea and East African ports, and continues to be more than ever. “We are linking countries to one of the busiest maritime trade routes in the world,” he said.
“Indeed, our infrastructure capacity is far larger than Djibouti and Ethiopia’s external trade. Our relationship with Ethiopia is of vital importance but Djibouti’s facilities are strategic for the whole region. Our ports are designed to be a transshipment hub and have sufficient capacity volume to service Mombasa, Dar es Salaam, Durban, Sudan, Aden, Berbera and Massawa, which have served for many decades (is not a new business),” he added in his emailed response.
He argued that as the economic potential of the region becomes unleashed, demand for additional ports would be expected to increase; therefore, Djibouti actually needs to continue with its program of world class logistics infrastructure building.
“It is worth noting that our relationship with other countries also continues to flourish; following recent developments, South Sudan will once again be using our ports,” he wrote.
EMAA asserts that Djibouti will continue coming up with better services and resolving challenges.
When asked about the possibility of Djibouti applying a tariff adjustment in order to be a dominant actor in the region’s logistics sector, Aref Mohamed stated that Djibouti’s port infrastructures are world class standard and very competitive. “Tariffs for general cargo have not increased in Djibouti since 1981, and container tariffs since 2008; and we have even decreased the tariffs applied by the logistics companies.”
“However, our focus is not on tariffs but delivering the most efficient service. It is well known that costs generated by inefficiency are higher than port service charges. It is for this reason that we have focused our competition strategy on efficiency, not on tariffs,” Mr. Mohamed added.
Recently at a presentation in Djibouti, the Djiboutian Minister of Economy and Finance Ilyas Moussa Dawaleh said that his country is working to take the major share of the regional logistics sector with better services and competitive prices.
In December 2017 Dawaleh reckoned that Ethiopia may start using Assab port in the near future. “It is not worrying to Djibouti, which is working to expand its logistics facilities aggressively, since the country is targeting not only Ethiopia but other land locked countries in the region and the western part of African states,” he said.
The DPFZA’s marketing head also stated that his authority is not worried about Ethiopia using Eritrean ports. “We are more than happy that Ethiopia has alternative seaports at its disposition. International port services charges are applied across the board and will become more competitive with the expansion of the number of ports in the region. This is beneficial to everyone – ports operators and customers alike,” he said.
Aref Mohamed said the recent dispute concerning DP World and the Doraleh Container Terminal (DCT) would not have any negative impact on the logistics sector or Ethiopia and Djibouti. He said that Djibouti has six world class ports and DCT is one of them. “DP World was a minority shareholder of DCT, with 33% of the shares and on February 22nd 2018, the management of the port changed, and DP World is not in charge anymore. Since then, the operations have significantly improved – berth productivity has increased from 70 moves/berth per hour to 110 moves/berth per hour and the traffic volume has increased by 32 percent,” he added.
“This is good news for Ethiopia and for Djibouti; the foreign trade of both countries will benefit from the new high levels of productivity that will cut down costs. Our bilateral trade relationship will also be strengthened by Ethiopia’s ability to use the deep-sea port to accommodate large vessels, carrying cargo for the fast growing economy,” he explained.
“In truth, our main focus is developing world class infrastructure to serve some of the most dynamic economies of the world. We continue to focus on this and will not allow this dispute to impede progress in this respect,” he concluded.