Liberalised Logistics Industry Good for Business

For a landlocked country with ambitions of bolting out of poverty, Ethiopia is critically dependent on an efficient import/export and shipping pipeline that works seamlessly. A sure way to achieve this would be through liberalising its state-owned shipping line.

Ethiopia’s ambitious road-map to a middle-income society was outlined in the Growth & Transformation Plan. In attempting to meet its objectives, the plan includes engineering a faster and equitable Ethiopian economy as well as the creation of a better economic environment to become a preferred destination for private investment.

For Prime Minister Hailemariam Desalegn, this is the result of the “right mix of appropriate policies and strategic leadership” that led the nation to aspire to become a middle-income country by 2025, with double-digit growth. The government is now attempting to achieve an average of 11.2pc to 14.9pc GDP. For this, it has received accolades from the likes of the World Bank and the IMF.

At the beginning of the first generation of GTP, the country was able to achieve an average economic growth of 10.1pc. However, the country’s growth has gone slightly down to 8.1pc in the first year of the second generation of the GTP. There are many factors that are driving the Ethiopian economy to stay competitive, help the private sector strive and make the country a hub for foreign investments.

Industry and service are now more than 60pc of Ethiopia’s GDP. Foreign investment, livestock, and technology are playing profound roles in the transformation of the country. Signature products, beers, wines, mining, and constructions, are now in the hands of the private sector, helping engineer a prosperous private enterprise.

As the beverage and construction industries, privatised and liberalized years ago, take hold and show both profitability and efficiency, many are looking at other areas in need of ingenuity and private entrepreneurship. There is a serious discussion ongoing among private actors to look at the role of private investors to invest in construction, telecommunications, and shipping lines.

Ethiopia continues to invite the world to invest in the country. What was once an aid destination is becoming a magnet for foreign investment. This comes as continues warning of the deficiencies and shortcomings of the Ethiopian foreign investment system in “long lead times for inputs and exports due to the current logistic infrastructure and bureaucratic delays.”

There are a number of options to transform and modernize the Ethiopian logistics system.

The government is advocating for the status quo to remain the same based on the ideals of nationalism and protectionism ideals. It still argues the sector is in need of resources, not a lack of leadership to help improve serious issues on delivery time and cost of transportation.

A monopoly to the government it makes a small profit from its own operation, it has not reached the heights of where the country’s only shipping company should be.

There are many, within and outside the sector, asking it to be liberalized and invite public sector actors to invest in it and make it more efficient. This is also true to a flux of investors who are tempted to invest in the country. The call is out for the liberalization of more important public domains, such as the banking, telecommunications and shipping lines, all products of lackluster performers, to the hands of private investors.

In the liberalisation of the system, it is argued that the many logistical problems are to be curbed and allow the flow of goods efficiently.

Ethiopia still struggles with a slew of challenges, including attracting the right investors. Those that have invested in the country are forced to deal with one monopolized logistics company to transport their investment to the country. The World Bank has ranked Ethiopia at 167th when it comes to trading across borders.

There is a benefit to liberalising this sector. There will be quality and competitive prices driven by the economy and efficiency is expected to be the norm. It will promote entrepreneurship among citizens and investors. Ethiopian shipping lines remains in need of an investment of resources. The country simply does not have those resources, but private investors do.

As Ethiopia is liberalising important sectors to the rules of competition, even those that were barely profitable, it is time to make the monopoly out of the competitive hands of the government and into the hands of the private sector, the engine of one of the world’s fastest economies.

Ethiopia’s ease of doing business is poor, lacking and ranks among the worst. Among 196 countries in the world, it is ranked 159. The country is placed at the bottom in terms of time taken to import for border and document compliance. The cumulative results across different categories indicated that the number of dissatisfied and very dissatisfied customers was higher than the number of satisfied and very satisfied customers. Around 56pc of the clients of the shipping line are not happy with the service that is rendered while close to 20pc are very dissatisfied. The study done for the Swedish University of Agriculture, Science & Energy & Technology indicated of widespread complains of incompetence and fights among members of the company producing poor service to clients.

The country would best be advised if it modernized the shipping industry by liberalizing the system to allow for competition. The government should give up its protected monopoly and make way for other players to be involved. It should be the supply and demand imbalance that should lead its growth, not a government monopoly intent on imposing itself as the lone privileged entity.

In competition the benefit is plenty, be more efficient, create a harmonised business practice, simplify and introduce better technologies to the sector. This can only be done, not by being protective but by the benefits of a liberalized and privatized robust system.

If that was to happen to Ethiopia’s shipping system, then, it can, at last, convince the world, the country is indeed open for business.

Published on Jan 10,2017 [ Vol 17 ,No 871]



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