1. Title : Understanding the role and contribution of freight logistics as an engine of growth under the Ethiopian Scenario Presenter : Dr. Kassahun Abberu PHD Transport Economics May 20, 2016 Addis Ababa FIATA/RAME 2016 CONFERENCE

2. Out line of presentation Introduction growth & development in Ethiopia Logistics Freight Forwarder The role of freight forwarding in the functioning and growth of an economy The evolvement of Freight forwarding in Ethiopia From regulating the sector to monopolizing Market shares Effects of the monopoly Current status of the private forwarding sector Conclusion

3. Growth & development in Ethiopia Growth of the Economy Infrastructure : rail, road, air ports, air transport,road transport,shipping Agriculture Industry Education Truism Provision of health services

4. Logistics Logistics is generally the detailed organization and implementation of a complex operation. Dealing with the smooth flow of cargo from point a to point b. From a producer to the user. Can use air, sea, inland, pipe lines rail etc by effectively using means on direct route, with the shortest time and in a less expensive ways.

5. Freight Forwarder An agency that receives freight from a shipper and then arrange for transportation. Uses one or more carriers for transport to consignee. A freight forwarder can have own vessels, trucks, pickups, planes, handling equipment for the transport and delivery of goods. It can also provide packaging, storage and customs clearing services.

6. The role of f reight forwarding in the functioning and growth of an economy The contribution of freight forwarding in the functioning and growth of any economy is universally recognized. No sector can develop with out the direct involvement of the logistics sector. An active and vibrant logistics sector, is vital in developing an economy.

7. The evolvement of Freight forwarding in the Ethiopian scenario In the past decades our logistics sector has been going through different transformation stages. Depending on the ideologies and political interests of the subsequent governments.

8. Freight forwarding In the Ethiopian scenario cont….. Before 1974, during the Emperor’s time freight forwarding as a business was basically left to the private sector. Between 1974 – 1983 the Socialist government nationalized the then private businesses to establish one monopolized entity. After 1983 private forwarding companies were being established again. Along with the new change from a socialist regimes ideology to a relatively free market economy, a private logistics sectors growth was an accepted concept.

9. The evolvement of Freight forwarding in the Ethiopian scenario cont….. By 1998, a new proclamation was put in place to accommodate the change. A regulation was issued to license freight forwarding and shipping agencies. Under this proclamation, Freight forwarding and inland transport business was protected to nationals.

10. Freight forwarding :From regulating the sector to monopolizing Year 2012 a new picture emerged : from regulating the sector to monopolizing it. As a result one government owned shipping and forwarding company was established by amalgamating shipping,transit and dry ports in to one enterprise. Currently there are 45 private forwarding companies and one government enterprise

11. Market shares between the Ethiopian shipping and logistics service enterprise and the private sector The Ethiopian shipping and logistics services enterprise handles: 60% of import sea freight 60% of multimodal container cargoes 40% of bulk import 35-40 % of export cargo The Private sector 40 % of import sea freight, 40% multimodal containers 60 % of bulk import and 60-65% of exports cargo.

12. Market shares cont… This market share did not come through competition but by decree and regulations. All government cargo, all LC cargo except a few where the enterprise fails to handle. Exceptions are project and humanitarian cargoes. Though by law, private forwarders have the same license with the ESLSE, the handling of multimodal shipments is solely allowed to ESLSE.

13. Effects of the monopoly Inefficiency, Cost escalation, Inflation, High storage costs both at the port of Djibouti and in the internal dry ports. Lose of the competitive edge in our exports. Due to the inefficiency in imports of agricultural and industrial imputes. Slowing of projects,deficiency in timely delivery of agricultural inputs etc..

14. Effects of the monopoly cont… Djibouti port is congested with transit cargo to Ethiopia (around 15,000 containers and thousands of tons of Iron and steel) are stranded in Djibouti. Our dry ports are also filled with containers. Storage and demurrage of containers is incalculable. Not to mention all other related collateral damages. As a direct result of this monopoly practice, Djibouti port is congested with transit cargo to Ethiopia (around 15,000 containers and thousands of tons of Iron and steel) are stranded in Djibouti. Our dry ports are also filled with containers. Storage and demurrage of containers in incalculable. Not to mention all other related collateral damages.

15. The current status of the private forwarding sector From all observations, the private forwarding sector does not seem to have the recognition of its role as an engine of growth to the economy. Time and again, it has been labeled by different government bodies as a weak sector and rent seeker A sector which does not add value but collects “commission”, In short it is neither accepted for its role nor understood as such!

16. The current status of the private forwarding sector cont… This is reflected in the lack of : Availability of investment. Incentives and privileges e.g. Tax free privileges Subsidies Availability o finance Treatment of the sector as a priority

17. Conclusion Fright forwarding by is very nature is planned and excited by the coordination of forwarders transporters port handlers different government entities using the existing infrastructure. Forwarding is about cargo flow and supply chain thus all players need to be facilitators first and regulators second. In our case there are more of barriers against the smooth flow than facilitation. Need to use the capacity of the sector more effectively and efficiently to meet the demand of our growing economy.

18. Thank you!