The Imperatives of Diversifying Port Access for Ethiopia – Ethiopian Business Review

One of the occurrences of the final decade of the 20th Century that has profoundly impacted the Ethiopian economy and politics is arguably Eritrea’s independence from the country in 1993. It made Ethiopia a landlocked country, forcing it to depend on the ports of its neighbors to import and export goods, to say the least. Ethiopia currently relies on ports in Djibouti for 95 Pct of its international trade, while the Ports of Sudan and Berbera (mostly for aid) and Ethiopian Airlines (mostly for perishable goods, such as flowers) cover most of the remainder.

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The economic and developmental challenges that landlocked countries face are well documented. For instance, in their 2004 study, Michael L. Faye et al. pinpointed four main causes for the problems of landlocked countries. These are s’ dependence on their transit countries’ infrastructure (underdeveloped infrastructure would inhibit efficient trade), peace and stability (instabilities in transit countries could delay the transportation of goods), and administrative processes (borders and customs procedures and costs). The other factor the study identified is the political relations between landlocked and transit countries, which could result in the blockage of goods by the latter from crossing into the former when the relations between them are severed. As a result, landlocked countries typically have high trade costs and limited exports, which naturally limit their competitiveness compared to maritime countries.

Consequently, the unique challenges of landlocked countries have been recognized at the international level. Most importantly, the 2030 Agenda for Sustainable Development emphasizes the need to take into account the difficulties these countries face in their efforts to achieve Sustainable Development Goals.

Ethiopia, being one of the largest landlocked countries in the world, is no exception in grappling with the aforementioned problems. According to the World Bank’s Logistics Performance Index (LPI), which measures the trade logistics systems of countries (including their access to ports), Ethiopia has been ranked 131/167 countries in the Aggregated LPI 2012-2018. This shows that it has one of the weakest trade logistics in the world, a status caused by various factors, including its landlocked status, excessive dependence on one port, and the associated high costs of trade.

Thus, it is necessary for Ethiopia to diversify its outlets to the sea to mitigate the adverse impacts of being landlocked. The need to address or mitigate these problems has motivated the Ten Years Development Plan (2021-2030), which states that the federal government will partner with neighboring countries to use different ports to reduce transportation and other trade costs for Ethiopia and bring about shared prosperity to the wider region.

In fact, the Ethiopian Government has been making some efforts, particularly over the last decade, that aim at expanding the menu of outlets to the sea for the country. During the previous administration, Ethiopia agreed in 2017 to buy a 19 Pct stake in the Berbera Port of Somaliland, although it was recently reported by different outlets to have lost this right. Following the signing of the Joint Declaration of Peace and Friendship between Eritrea and Ethiopia in 2018, there were also plans and preparations for Ethiopia to make use of the Ports of Assab and Massawa, which have not yet materialized mainly due to the outbreak of the war in northern Ethiopia. Furthermore, the ongoing Lamu Port-South Sudan-Ethiopia-Transport Corridor project is intended to link the Ethiopian, Kenyan, and South Sudanese economies through various transport and port infrastructures. There have also been some efforts by the Ethiopian government to meaningfully use the Ports of Tadjoura in Djibouti and Mombasa in Kenya.

These measures and efforts to diversify Ethiopia’s access to ports are commendable, but it is now more indispensable to actually and considerably use regional ports other than Djibouti owing to different reasons. Diversification of ports will create options for importers and exporters, enabling them to choose among the options based on the locations of their investments, costs, and other factors. For instance, to reduce transportation and related costs, importers and exporters in the eastern part of Ethiopia may prefer the Djibouti and Berbera Ports, while those in the northern part of the country, once stability is fully restored, can utilize the Ports of Assab and/or Sudan. In this regard, Ethiopia’s membership in the African Continental Free Trade Area (AfCFTA) makes it even more imperative to diversify its outlets to scale up its trade with other African countries.

The use of different ports will also help Ethiopia reduce its excessive reliance on one port and the associated vagaries, including those caused by domestic instability, and facilitate the timely importation and exportation of goods. This is particularly important in the current context in which, after the signing of the Agreement for Lasting Peace through a Permanent Cessation of Hostilities to end the costly war in the north and the adverse impact of Covid-19, full attention must be given to rehabilitating the affected communities and rebuild the economy.

Furthermore, the diversification of Ethiopia’s outlets to the sea chimes with the recent decision to (partially) liberalize the logistics and transport markets and the National Logistics Strategy (2018 – 2028). The expected entry of new foreign and domestic investors into the logistics and transport markets would likely boost the demand for time- and cost-efficient ports and other infrastructure.

Ethiopia would also geopolitically gain from using the various ports of its neighbors. It can further cement its economic and political ties with them. It will also help it continue to play its role as a major actor in the continent, particularly in the Horn of Africa. Its utilization of the various ports in the Horn can also positively contribute to regional stabilization because of the economic interdependence it will create among the countries of the region.

It is, therefore, imperative for Ethiopia to significantly diversify access to its neighbors’ ports by entering into the necessary arrangements with them and building infrastructure. This would help it, among others, enhance its economic competitiveness, support its development and consolidate its influence in the region.