Regulation Afoot to Partially Liberalize Logistics Sector

Logistics

Ten private companies will be selected to participate in a multi modal system at Hawassa Industrial Park. Private freight forwarders will be allowed to engage in a multi modal transportation system for cargo shipped in and out of Hawassa Industrial Park (HIP), according to a new regulation drafted by the Maritime Affairs Authority.

This will enable freight forwarders to transport cargo by accepting full liability under a contract of carriage for the whole journey and two modes of transportation.

It will first be implemented as a pilot project to allow the private companies to fully participate in the multimodal transportation system, according to the Authority.

“If the piloting becomes successful, the system will be executed nation-wide,” Yeshi Fekade, director of communication affairs at the Authority, told Fortune.

The monopoly of the Ethiopian Shipping Lines & Logistics Service Enterprise (ESLSE) in the industry has been blamed for stagnant export earnings of the country.  Industry insiders have also criticized it for being expensive and weak.

Over the past three years, the country’s export earnings have been stagnant around three billion dollars. Conversely, import has been growing substantially, reaching 17 billion dollars in the past fiscal year. This has resulted in a trade deficit of 14 billion dollars.

The cost to transport a single container in Ethiopia is 1,000 and 2,000 dollars higher than the average price in Tanzania and Kenya, respectively, a study by World Bank revealed.

The current action of the government is applauded by the industry insider who has over a decade of experience.

“It will help the industry to revive,” he said.

The regulation surfaced just four months after Arkebe Oquabay, special advisor to the Prime Minister, signaled a significant reform in the logistics industry during a press briefing held at Sheraton Addis Hotel for the grand opening of the Hawassa Industrial Park.

“The government believes that a radical transformation in the logistics sector is crucial to make a change in export and industrialization,” he told Fortune four months ago.

Realizing the problem, the Authority drafted the regulation to allow the private sector take part in multimodal transportation specifically to handle cargo intended for the use in industrial parks.

The draft has been completed and was sent to the Ethiopian Freight Forwarders & Shipping Agents Association (EFFSAA), National Bank of Ethiopia (NBE), Ethiopia Revenues & Customs Authority (ERCA), Ethiopian Shipping & Logistics Services Enterprises (ESLSE) and Industrial Parks Development Corporation (IPDC) a month ago.

To introduce the system, 10 companies will be selected based on the criteria put in the draft. A private freight forwarder who wants to be a part of it must have a working capital of at least 10 million Br, according to the precondition.

This, however, seems to be unconvincing for the member of the Association that forwarded its concern three weeks ago.

“If it is implemented, it should not be limited to specific companies only,” said the board members of the Association. “Anyone who has the capacity and fulfils the criteria must be allowed to participate in the system.”

The Park, where the new system will be applied, hosts 18 international companies such as Arvind, PVH, CK and Raymond. All of the government offices have a bureau inside the Park to deliver services in the aspects of logistics, telecommunications, labor and employment, customs and taxation, and trade licensing as well as finance.

“The system will play a pivotal role in boosting export trade,” Yeshi, the communication director, noted.

The new directive is rooted 17 years after the monopolization of the logistics industry.

[addisfortune.net]