The government, which launched a three year economic reform program, Homegrown Economic Reform, says the financial sector will never be open to foreign actors in the reform period.
The main target of the reform program is to accelerate the economic growth besides to correcting the economic imbalance that put the country on debt stress, hard currency crunch and inflation.
In the first public discussion about the program, Ahmed Shide, Minister of Finance, said that the capital account and banking business will not be opened for foreign actors. “This issue is not included on this program period. It will consider the national interest and based on the strength of our economy and handling of the vulnerability,” he explained.
The government has been easing the closed economic sector for all interested actors including opening the finance sector for Ethiopian born foreign citizens, which is the first time since free economy was endorsed early 1990s.
Ahmed said that this period will focus on improving the capacity of local financial firms and putting them in the capacity to be on a competitive status before opening to others.
Eyob Tekalign, State Minister of Finance, said that the National Bank of Ethiopia under its reform program is working to improve the financial sector regulation. He said all banks including the two public financial firms would be seen equally by the NBE as per the international banking experience.
The state owned Commercial Bank of Ethiopia (CBE) and Development Bank of Ethiopia (DBE) are in the process of reforming to follow the industry best practice, according to Eyob. “NBE is applying the internationally accepted regulatory framework to improve the banking sector,” he added.
“DBE, which is on high non performing loan rate, has proposed its reform agenda and it is evaluated by NBE board in details. The CBE reform is evaluated under the public enterprises reform jointly,” Eyob said.
Eyob said that to enhance the access to capital and development the finance infrastructure the monetary policy will be improved that will change the T-bill and lifting the NBE bill that private banks buy a 27 percent bond on their every loan approval.
“As per the schedule of the government the secondary bond market will be also introduced regarding to access to finance,” he added.
The homegrown economic reform has three major pillars; macroeconomic, structural and sectoral reforms. “The economic reform should have holistic and comprehensive approaches that the macroeconomic reform will see foreign exchange imbalance, inflation, access to finance and debt stress, and structural reform will also solve the bureaucratic challenges, doing business and sectoral reform looks specific problems on every sector,” Eyob said.
In the first public discussion about the three year program Yinager Dessie, Governor of NBE, said that the local private sector will get more attention since the government reduced its involvement in the economy. “The access to finance for the private sector, local investor, the government will reduce its consumption of finance due to it will focus on the accomplishment of the started projects rather than introduce new investment or public consumption,” he said.
“The manufacturing sector will also be seen on this manner and improve the access to finance and foreign currency,” he added.
The international partners like the International Monetary Fund recommended that the government expand access to finance for the private sector than consuming under public projects, while the government was arguing that it is providing adequate finance for the private sector.
However, in the discussion Eyob said that lack of adequate access to finance for the private sector is one of the reasons for the macroeconomic imbalance in the past.
Last week CBE stated that in the past financial year it has disbursed 129 billion birr loan and advances and of which the private sector secured only 22.2 billion birr, which indicated that how the public borrowing is very high compared with the private sector, according to experts.
Financial sector will not be open to foreign investment
Railway to DMP to start this month
Djibouti Port meets Ethiopian Transporters
The Ethio-Djibouti railway connecting Doraleh Multipurpose Port (DMP) to the main line has been completed and is expected to begin scheduled cargo transportation by the coming month.
Ethiopia and Djibouti concluded the modern electric railway system in 2017 to transport both cargo and travelers, but the railway line connecting the port to transport cargo directly from the recently built state of the art logistics facility in the region DMP, to central Ethiopia was still under construction.
Wahib Daher Aden, CEO of DMP, told Capital that the railway line that connects the port to the main line is now completed and test cargo transport has already been undertaken.
The next step is for the joint corporation Ethio-Djibouti Railway Company to execute the planning to commence regular cargo transportation via railway, which is the only electric heavy railway line that connects two countries in the region.
The currently completed line, which is less than one kilometer from the mainline to inside the port, would allow cargo to get to the train directly whether containerized or bulk. The new achievement is expected to accelerate the cargo fleet to Addis Ababa and back to Djibouti.
DMP officials led by Wahib Daher Aden met transport companies in Ethiopia on Friday August 30 at Elilly Hotel to talk about the logistics activities at the port and the entire route. Wahib Daher said that the transporters are the first clients for the Port and would like to communicate directly with them, to exchange information on the newly introduced systems in the modern port as well as discuss any issues drivers may encounter inside the port.
During the discussion the Ethiopian transporters claimed that the road condition in the Djibouti side is very bad and that not only it takes days to cross but it damages the trucks, besides the accidents.
The DMP head acknowledged the complaint and said that the rehabilitation project to improve the road inside the territory of Djibouti is underway and in fact expected to be finalized in 2020.
The construction of 40km road from the Ethiopian border to inside Djibouti is already under construction and the remaining segment is under tender process and will also be commencing soon,” Wahib told Capital.
He said that the project is being closely followed by high government officials who are very conscious of the situation.
“The Ministry of Transport of Djibouti and Chairman of the Djibouti Ports and Free Zones Authority is involved in the road rehabilitation project,” he added.
The CEO recalled that the road project via Ali Sabieh -Dewalleh to Dire Dawa is open for transport and said that it is a good alternative, until the maintenance of the road via Galafi is done. “The Dire Dawa line is high quality and it’s about three hours of a drive for those who come to Dire Dawa for the weekend from Djibouti,” Wahib explained.
The meeting that was chaired by the CEO and Habon Abdourahman Cher, Commercial Director of DMP, also received several comments from the transporters and shared opinions about the operation of the port.
Tadele Assefa, representative of Get As International, said when accidents occur in Djibouti the cost of crane service, he estimated at around 100,000 birr, is very high. Others insisted the need for the port facility to allow drivers’ assistants and representatives of the freight forwarding company to have access inside the port in addition to the truck drivers.
Wahib explained that all incidents requiring crane services inside the port or nearby is offered by the port freely. But for crane service costs for incidents happening far from the port, he will address the issue with the relevant body at the Ministry of Transport of Djibouti upon his return.
“Regarding restricted access to the port, the rule complies with international standards in relation to ensuring security,” but he said he understands the need and would allow drivers’ assistants to get in the port provided they get an entrance badge,” the CEO said.
Seyoum Bemelaku, head of Tikur Abay Transport, said the day to day port activity should be available on the Internet to get clear information.
Habon responded that the DMP new website that will show the port activity on a daily basis will commence the service by the coming month. “There will be a hotline to accelerate the port activity and help the drivers resolve any problem that may occur in the port,” she added.
Wahib Daher explained that all the rules and regulations in place is according to international safety standard and that it will actually allow the transporters to trace and track on a real time basis their trucks and cargoes and immediately act if there is any issues that may delay the transport.
The CEO invited the transporters to visit the facility to better understand the operation and activities at the port.
He told Capital that the port plans to invite Ethiopian transporters to visit the facility in the coming year and organize such kind of meetings at least once a year.
“Our meeting is very fruitful and enabled us to clarify some operations and also understand the challenges they face in the logistics business in general,” Wahib said.
Banks target the diaspora for share sales
Ethiopian banks are expected to begin fresh share sales in the current fiscal year in connection with the opening up of the financial sector for Ethiopian born foreign citizens.
Some of them have already started lobbying the Diaspora to be shareholders in their banks.
According to the information Capital obtained, private banks are in preparation to hunt for potential big shareholders from places such as North America, Europe, and the Middle East. On the other had some of the biggest banks like Awash Bank and United Bank are already aggressively working on it to attract potential hard currency holders to get a stake in their banks.
The parliament recently has ratified a law that would allow Ethiopian born foreign citizens to invest in the financial sector.
However experts said that the Diaspora might be attracted in the well-established financial firms to join the sector.
Capital sources confirmed that private banks are working to include non-Ethiopians into their business.
“We have toured North America to attract the Diaspora in our bank,’ Taye Dibekulu, President of United Bank, told Capital.
He said, in May they were on tour in North America, which is the major destination for the Diaspora community, and even lobbing the potential Diaspora community to work with the bank.
“During our tour we have introduced our businesses associated with the Ethiopian community,” Taye said.
“Currently the Diaspora has more interest in the country compared with the previous period and we considered that it is fertile ground,” he added.
“It is early to talk about the share sales since the proclamation should be published on Negarit Gazette even though it is ratified by the parliament and that should be also followed by issuing additional directives by the regulatory body, to implement the share sales,” Taye explained.
Experts said in the coming general assemblies of banks that mainly focus on the performance report of the past financial year might include an extraordinary meeting to expand their banks shares with the aim of including the Diaspora.
However some of the banks might not need the extra ordinary meeting since they have decided to expand their capital in the previous meetings and still open to fill the amended gaps.
Experts in the banking industry said that effort of banks to sell share to the Diaspora is the recourse mobilization strategy.
“It has three major benefits,” one of the bank experts, who preferred to be anonymous, told Capital.
“Initially it is mobilizing more hard currency, secondly the Diaspora shareholders will come directly or in another way come with inward investment, and the scheme will create contacts like the remittance and other businesses besides handling capable Diaspora,” he added.
New tech reduces takeoff, landing time
The installation of modern technology reduces time of landing and takeoff of airplanes at Ethiopian airports slashing fuel costs for aircraft operators.
The information obtained from Ethiopian Civil Aviation Authority (ECAA) indicated that due to the new technology and improvement of the capacity of experts the time of landing and takeoff of aircraft has been reduced on average to three minutes and 2.5 minutes respectively.
“Due to the time reduction in the past budget year 277.2 million birr worth of jet fuel was saved,” the information that Capital obtained from ECAA states.
According to the information, in the past during the process of takeoff it had taken 10 minutes, while landing time consumed 15 minutes and when a VIP aircraft comes the time can extend up to 45 minutes on average. This consumes a significant amount of fuel for the aircraft.
The authority said that 90 percent of aircraft that lands or takeoff are Ethiopian Airlines aircrafts.
According to the sector experts, an aircraft consumes a gallon (four liters) of fuel per minute. On the estimation of 350 aircraft landing or take off on a daily basis in the aviation industry in the country, mainly at Bole International Airport, the saving of fuel is very high due to the reduction of the time.
Experts said this makes the cost for airplane operators lower than the past. ECAA stated that it is using the modern communication equipment that boosts its services. The annual report of ECAA added it has been working to improve the capacity of its experts.
The regulatory body in the aviation industry in the country is considered an instrument for the good safety record of the aviation industry for Ethiopia. It was established in 1944 at the same year Ethiopia signed the convention of the International Civil Aviation Organization as one of the very few African nations.
