Ethiopia has secured a 150 million dollars loan from the World Bank (WB) to expand the Modjo Dry Port, where congestion and inefficiencies have been hampering ambitions to transform the logistic sector. This will be the first ever logistics project that the Bank has provided loans to.
Modjo Dry Port, the first dry port in the country, handles over 70pc of the container traffic in the country and has a capacity of holding 14,500 containers.
The new project, known as a trade logistic project, aims to give the Modjo Dry Port a new edge to improve the Ethio-Djibouti corridor and boost the operational capacity, efficiency, and range of logistics services.
The project will focus on reducing the time and costs to trade as well as increase coordination to encourage better flow of commerce along the main corridor, a gateway for 95pc of the country’s trade.
“The success of Ethiopia’s large-scale investment in industrial parks and the new rail line to Djibouti will depend on its connectivity to different logistics nodes along trade corridors,” said Carolyn Turk, World Bank’s Country Director to Ethiopia.
Despite the promise, the logistic sector remains a problem in several complexities which could hold it back. These include significant inefficiencies in transport, poor condition of storage infrastructure, a complex customs clearance system and a low rate of technology adoption.
The situation became more of a concern when Ethiopia’s logistic performance, ranked 126, was evaluated against other landlocked countries such as Uganda, which ranked 58th out of 160 countries.
The WB, in its latest report, also disclosed that inefficiencies in the logistics sector have resulted from higher clearance and transportation costs.
The logistical cost to transport a twenty-foot container of garment exports from Ethiopia to Germany is close to two times the cost of transportation from Vietnam and 72pc higher than costs from Bangladesh.
“The sector should be addressed otherwise it will undermine the competitiveness of the country,” said Mamo Mihretu, program leader for Ethiopia Trade Logistic project. “The new program will bring a positive impact on improving cost and speed in the country.”
Recognizing the logistics problem, in the next three years, the government targeted a reduction in transit time by half and a reduction in the time that imported goods spend in dry docks to two days from 40 days.
As part of the new project, the World Bank has identified various areas within the dry port where there is a need for reforms – physical infrastructure, ICT systems, regulatory frameworks and incomes of producers and traders.
Besides the expected reforms, after the implementation of the new project, Mamo believes that non-infrastructural problems also demand attention as Ethiopia is a disadvantaged nation geographically.
“Access to finance and foreign currency, and the complexity of customs clearance must be improved to bring the logistic sector to life,” he said.
In Ethiopia, businesses are required to obtain more documents for the logistics process as compared with other nations. There are up to 103 procedures, and about 21 documents that are needed at different stages of the process to obtain customs clearance, according to the WB Doing Business Report released last year.
The trade logistic project primarily aims to benefit private sector exporters, importers, manufacturers, and farmers as well as private logistic companies.
“Boosting the role of the private logistic companies is one of the priorities in the project,” Mamo added.
The logistic sector in Ethiopia is monopolized by the state-owned Ethiopian Shipping Lines & Logistics Services Enterprises (ESLSE), to the exclusion of the private sector in the logistics industry.
The Ethiopia Logistic Strategy, adopted in 2015, envisioned Modjo Dry Port to be a multi-purpose facility instead of a single-user dock.
The transport logistic project will involve the construction of facilities such as an intermodal transfer facility, a bulk storage and bagging facility, a container yard, and equipment, bonded and general warehousing, and a center for consolidation/deconsolidation of containers.
Currently, the ESLSE is undertaking an expansion project at Modjo Dry Port, aiming to raise its current holding capacity of 14,500 containers to 22,000, with a cost of 1.6 billion Br.
The Ethiopian Maritime Affairs Authority has been tasked with the assignment of controlling the new project.
Besides the transport logistic project, the Bank has also signed a 495 million dollars loan agreement last week, of which about 90pc will be used for the implementation of the second water supply and sanitation project.
The rest of the loan will be used to attain national quality infrastructure project, which aims to contribute the improvement of the delivery of quality assurance services to enterprises in the targeted sector.
The first loan from the WB to Ethiopia dates back half a century ago. It amounted five million dollars and was used to develop a highway. Last year, Ethiopia’s loans secured from the World Bank reached an all-time high of 1.8 billion dollars.
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