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Each day TFO Canada publishes a sample of trade news on the Canadian import market along with any new, updated or changed regulations and legislations regarding international trade; countries in which TFO Canada offers services and on the export sectors which it promotes.


Ethiopia: Diversification of Ethiopia's foreign trade corridors is a priority

Tuesday, August 09, 2016 > 09:15:06

(Walta Info)

Although, prior to 1974, 60 per cent of Ethiopia's foreign trade transited via the port of Djibouti (around 300 000 tons per year), the Assab route became Ethiopia's main corridor. Its share of traffic grew from 700 000 tons in 1991 to over 2.7 million tons in 1995, an increase of 400 per cent in five years. By then, Ethiopian traffic accounted for 90 per cent of imports and over 50 per cent of exports transiting the port of Assab. The number of return truck journeys increased from 15 000 in 1991 to 45 000 in 1995. However, the outbreak of hostilities between Ethiopia and Eritrea in May 1998 brought the closure of the Assab-Addis Ababa corridor, and the situation is still unchanged.

Djibouti thus became the main port for Ethiopia. Traffic increased from 1.7 million tons in 1997 to 3.1 million tons in 1998, and 4.2 million in 2002. The latter includes Djiboutian foreign trade (450 000 tons), transit traffic towards Ethiopia (3.2 million tons in 2002, or around 80% of port traffic), and "end of line" transshipment activities between Europe and the Far East and the Arabian Peninsula. Ethiopian transit via Berbera has increased strongly in recent years. A large proportion of the traffic unloaded at Berbera is destined for Ethiopia, either as transit goods or, more often, as "baggage", which is the term used to cover all kinds of consumer products that come and go more or less fraudulently through the Harticek trading area in Ethiopia, a sort of free zone situated 72 km from Jijiga.

For the moment, the Berbera corridor remains less an alternative route than an additional one, especially for Region-V, the so-called Ethiopian-Somalian regional state in the context of Ethiopia's new federal arrangement. The Djibouti corridor is thus the one mainly used by Ethiopia, while hopes remain that the process of sub regional development will start soon. Accordingly, this article will concentrate on the Djibouti-Ethiopia corridor.

The purpose of writing about this corridor is to try to clarify the type of conditions needed to create a corridor that will permit reliable and rapid transport of goods at competitive rates, by means of services that ensure quality and safety. This study also highlights the gap that exists between Ethiopia's current level of imports and the levels it hopes to achieve in the not too distant future. Currently, these stand at around 40 million tons for a population of 70 million. In 1999, the World Bank estimated that, on average, the imports of the landlocked West African countries were equivalent to one tons per inhabitant. The success of the Djibouti-Addis Ababa corridor is primarily the result of the political will shown by the Ethiopian and Djiboutian governments.

This commitment is illustrated by the signing, in April 2002, of an "Agreement on port utilization and the transit of goods towards Ethiopia", which has since been ratified by both parliaments. This agreement, which is based on the major United Nations conventions and the principles of free access (and transit) to the sea for landlocked countries, covers the various aspects of transit transport: port entry, customs, documentation, land transport, security along the corridor, facilities maintenance, approval procedures for public and private operators of both countries that use the corridor, and others. The agreement also provides for the introduction of a consultation procedure/institutional planning framework; a joint expert committee meets every three months and a ministerial committee every six months. This shared political will is explained by the fact that both countries have something to gain from developing the Djibouti-Addis Ababa corridor. For Ethiopia, it was clear that, having lost access to the port of Assab, its survival depended on finding safe and competitive access to the sea. Djibouti offered such a route. In the event, all Ethiopian activity, including food aid, has been diverted to Djibouti.

For Djibouti, one of whose main assets is its geographical situation, the development of transit traffic towards Ethiopia offered a potential source of wealth, as Djibouti recognized even before the outbreak of hostilities between Ethiopia and Eritrea when it attempted to attract traffic in transit to Ethiopia during the period 1993-97. Traffic towards Ethiopia represents 80 per cent of the traffic through Djibouti and 70 per cent of the port's income. Ethiopia is thus in prime position as the logical and favored partner.

This does not mean that misunderstandings between the two countries and operational problems do not arise, but at least the authorities on both sides are aware of the obstacles and have decided to work together to solve them in a spirit of mutual understanding.

To that end, official consultation mechanisms have been set up and are working well. In particular, a joint Djibouto-Ethiopian ministerial committee meets regularly; following discussions, often prepared by a joint follow-up committee, it adopts recommendations, sets guidelines and commissions studies. Moreover, many disputes are settled after being heard at ministerial level.

From the port of Djibouti, Ethiopia can be reached by either road or rail. The main road passes through Galafi, which has felt the effects of the greatly increased numbers of trucks, often overloaded, that drive through now that Ethiopian traffic has switched to Djibouti. Although the Galafi-Addis Ababa section on the Ethiopian side has been repaired under the 1997-2007 Road Sector Development Programme, which is intended to rehabilitate 22 000 km, on the Djibouti side the story is different: out of 217 km between the port and the border post at Galafi, half has been repaired at a cost of 18 million dollars, and the remaining half still has to be resurfaced. The funding for the later has been provided by the EU.

By 2005, it is expected that the two main roads will be capable of ensuring rapid and safe truck links between Djibouti and Ethiopia. These two main roads are often saturated, but the regional road network is not capable of siphoning off the traffic safely and effectively towards outlying areas. The new electric rail linking the two countries has also became operational this year, replacing the old rail link between the two.

Berbera-Addis Ababa Corridor

The port of Berbera has one 650 m wharf capable of accepting ships of up to 15 000 tonnes and a line of seven wharves, including one for RO-RO. The "Russian" wharves (400 m) were built in 1960, and the "American" ones (250 m) in 1986. There is also an oil terminal with a capacity of 30 000 tonnes, distributed among 22 tanks currently operated by Total. Storage capacity is 1 200 m3.

The Berbera-Addis Ababa corridor (854 km) is entirely road. It reaches Hargeisa, the Somali capital, after 160 km, and continues to Jijiga in Ethiopia (at 336 km); from there it runs via Harare, Dire Dawa (472 km) and Addis (854 km) to join the road that links Djibouti, Dewenle, Dire Dawa and Addis. Between Berbera and Hrageysa, the road is asphalted but in poor condition. By contrast, its four bridges have just been rebuilt. Between Hrageysa and the Ethiopian border at Togotchale, the road is asphalted for 71 km as far as Kala-Baid (51 km Hrageysa-Gabiley stretch surfaced by the Italians in 1981, 20 km from Gabiley to Kala-Baid built by the Chinese in 1882). A further 20 km of earth road then extends to the border; it is difficult to use during heavy rain.

In October 1999, it was estimated that this road could be repaired at a cost of 20 million dollars if the work commenced promptly, and forty million dollars if the work was delayed. To date, the funding has not been forthcoming. On the Ethiopian side, the Dire Dawa - Jijiga stretch is being rebuilt with money from the EU, which plans to go on to repair the Jijiga-Togotchale stretch. For the moment, the Berbera-Togotchale-Jijiga road is difficult for trucks, especially those with a trailer, as is the case with most trucks coming from Ethiopia.

Ethiopia and Kenya has recently announced they had agreed on the construction of key oil pipelines. One line will link Nakuru-Isiolo-Moyale-Hawassa-Addis, and another Lamu-Isiolo-Moyale-Hawassa. The Lamu Port- South Sudan-Ethiopia Transport (Lapsset) corridor project, launched in 2012, is still on according to Ethiopia and Kenya. The facilities include roads linking the two countries, an international airport in Isiolo and a port in Lamu. The venture has been in limbo after Ethiopia announced a deal to construct its pipeline through Djibouti. Uganda has also opted to use the Tanzanian route, sparkling fears that the Lapsset project had hit a dead end. The project, once completed, is expected to greatly improve trade partnerships between the two nations.

In a revived bid to open up their borders and facilitate investment and trade, Kenya and Ethiopia agreed to remove hurdles that have traditionally limited business. Once an agreement signed by the two countries is implemented, Kenyan and Ethiopian investors and expatriates venturing into the other should expect less restrictions to their business. Therefore, nationals of both countries will enjoy relaxed rules on residence for investors and entrepreneurs, easier application procedures for companies as well as relaxed work permits for expatriates from both sides.

The construction of the Merille-Marsabit-Moyale highway would be completed in September 2016. The construction of the Marsabit-Turbi stretch, along the highway to Moyale town, which borders Ethiopia, was already complete. Ethiopia has already paved its section from Addis Ababa to Moyale. The road is part of a highway from Cape Town in South Africa to Cairo, Egypt.

As Ethiopia’s Prime Minister Hailemariam said recently, “Efforts of connecting Ethiopia to Djibouti, Sudan, Kenya and South Sudan by power, road and railway transport are examples of its commitment to Africa's integration, besides efforts of bolstering its economy, Ethiopia is working to connect with countries in the region”.

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