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Djibouti Freight Monopoly Raises Tension With Ethiopia


A new chapter has opened in the ongoing dispute between Ethiopia and the government of Djibouti over Ethiopia’s access to Djibouti’s sea port. BMI still holds the view that Ethiopia is in a weak position because of its reliance on Djibouti’s port sector, and that with major international shipping players operating at the port the onus is on the port making money. We believe that all players need to work together, as creating disharmony with Ethiopia, which is the port’s main customer, will cause the country to strengthen its resolve to find another route for its trade. If this were to happen, it would negatively affect Djibouti and the international companies that operate at the port.

The Djibouti government, according to news source Afrik, has implemented a directive that ‘establishes a monopoly, in favour of the Maersk Djibouti Freight Station, over operations involving the stuffing and unstuffing of containers at the Djibouti port’. The previous arrangement had meant that all forwarding companies could stuff or unstuff containers at the port. Ethiopia’s first gripe has been that Djibouti is meant to give Ethiopia 60 days notice of price changes under a 2002 bilateral agreement, with Mekonnen Abera, the director general of Ethiopian Port Affairs Authority, stating ‘it is a huge decision. We need to talk and want the case to remain pending in the meantime,’ as quoted by Afrik.

Water, Water All AroundMap Of Ethiopia And Neighbouring Countries Source: BMI
BMI believes that Ethiopia has a right to be worried, as a monopoly over stuffing and unstuffing could see the price of Ethiopia’s imports and exports rise, with Maersk reported to be charging US$100 for a container at its Djibouti Freight Station. It is estimated that the change could cost Ethiopia US$9mn a year. Afrik reports that about 100,000 containers to and from Ethiopia need to be stuffed or unstuffed at the port of Djibouti each year.

Ethiopia is, however, in a poor bargaining position as the country is reliant on Djibouti for port access as Ethiopia has been landlocked since Eritrea declared independence in the 1990s. Ethiopia is heavily dependent on foreign trade. Its top export partners are Germany, Saudi Arabia and the US. The country receives the majority of its imports from Saudi Arabia, China, India and Italy, and is therefore reliant on shipping to meet its trade needs.

BMI has been tracking developments in the region and notes that this is not the first time that Ethiopia has disagreed with Djibouti and the foreign companies operating at the port. In December 2008, Ethiopian shippers protested against a hike in port tariffs at Djibouti, while in July 2009 a row erupted between Ethiopian Shipping Lines (ESL) and the port of Djibouti’s operator, DP World, over the carrier’s use of specific facilities at the port.

BMI sympathises with Djibouti’s position; the country has attracted some of the major shipping lines and port operators and investment is being ploughed into the facility. Understandably, international companies want a return on this investment, so changes to pricing and operating structures at the port are to be expected. Unfortunately, the country that is being hit by these changes has little say in them -approximately 85% of the 5mn tonnes that pass through the port of Djibouti are Ethiopian imports and exports.
BMI notes that with Ethiopia accounting for the majority of cargo through the port, this may in the long term place the country in a stronger bargaining position, but first the country must find a way to lessen its reliance on Djibouti. BMI notes that few options are open to Ethiopia in terms of using another port. Ethiopia’s northern neighbour Eritrea boasts the ports of Massawa and Assab, but poor relations between the two nations over a border dispute that requires a security zone to be patrolled by UN forces puts Eritrea’s ports out of Ethiopia’s reach. Another option is Ethiopia’s eastern neighbour Somalia, but instability in the country means that this option could prove to be a logistical nightmare.

This, however, has not put off Bollore Afrika Logistics (BAL), which in December 2009 proposed a strategy to develop a logistics corridor from the Ethiopian capital of Addis Ababa to the Somaliland port of Berbera. At the time BMI highlighted the many obstacles that the project will face, such as the issue of finding funding, as the level of risk could put off investors and development agencies might not be able to participate in the project as Somaliland is an autonomous region that is not recognised internationally.

BMI has no update on the progress of BAL’s logistics corridor strategy, but notes that the continuing disagreements between Ethiopia and Djibouti over the port will only strengthen Ethiopia’s desire to find alternative routes for its trade, which will ultimately hurt Djibouti and the international companies that have invested in the port. BMI therefore asserts that more open dialogue needs to take place with all major parties at the table (Ethiopia, Djibouti and international companies investing and working at the port), as all parties are reliant on one another and discord could end up hurting them all.

BMI sympathises with Djibouti’s position; the country has attracted some of the major shipping lines and port operators and investment is being ploughed into the facility. Understandably, international companies want a return on this investment, so changes to pricing and operating structures at the port are to be expected. Unfortunately, the country that is being hit by these changes has little say in them -approximately 85% of the 5mn tonnes that pass through the port of Djibouti are Ethiopian imports and exports.
BMI notes that with Ethiopia accounting for the majority of cargo through the port, this may in the long term place the country in a stronger bargaining position, but first the country must find a way to lessen its reliance on Djibouti. BMI notes that few options are open to Ethiopia in terms of using another port. Ethiopia’s northern neighbour Eritrea boasts the ports of Massawa and Assab, but poor relations between the two nations over a border dispute that requires a security zone to be patrolled by UN forces puts Eritrea’s ports out of Ethiopia’s reach. Another option is Ethiopia’s eastern neighbour Somalia, but instability in the country means that this option could prove to be a logistical nightmare.

This, however, has not put off Bollore Afrika Logistics (BAL), which in December 2009 proposed a strategy to develop a logistics corridor from the Ethiopian capital of Addis Ababa to the Somaliland port of Berbera. At the time BMI highlighted the many obstacles that the project will face, such as the issue of finding funding, as the level of risk could put off investors and development agencies might not be able to participate in the project as Somaliland is an autonomous region that is not recognised internationally.

BMI has no update on the progress of BAL’s logistics corridor strategy, but notes that the continuing disagreements between Ethiopia and Djibouti over the port will only strengthen Ethiopia’s desire to find alternative routes for its trade, which will ultimately hurt Djibouti and the international companies that have invested in the port. BMI therefore asserts that more open dialogue needs to take place with all major parties at the table (Ethiopia, Djibouti and international companies investing and working at the port), as all parties are reliant on one another and discord could end up hurting them all.

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About labo22

Hi, this is Labaale your average concerned citizen of Horn of Africa, we’re really worried about the stability of this war torn region, we have the worst dictators from around the world, ironically supported by the Western Countries supposedly the advocators of democracy, transparency, good governance and human Right, If regime change is really needed this is the place to start, we have no short of rootless dictators from MELES Zenawi of Ethiopia,ISMAIL Guelleh of Djibouti,RAYAALE Kahin of self-declared Somaliland and ISAIAS Afwerk of Eritrea.

Discussion

2 thoughts on “Djibouti Freight Monopoly Raises Tension With Ethiopia

  1. What the fuck is BMI?

    Posted by Grosso | August 21, 2010, 9:19 am
  2. I found the news up here very interesting and sensible as a citizen and a concerned person to Ethiopia,However i would like to throw my comment on the news which seems almost all paragraphs are repeatedly printed out … it seems deliberately happened as to fill the spaces …if it is the case …BIG NO.. otherwise check out the text whenever you are about to launch for public.

    Thanks
    mesfin

    Posted by mesfin | August 21, 2010, 8:11 pm

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