Addis Fortune (Addis Ababa)
Wudineh Zenebe
19 August 2008
The government of Djibouti has suspended planned tariff increases on port services, a day before it was due to come into effect on August 15, 2008.
The board of Djibouti Port Authority, chaired by powerful businessman Abdourahiman Boreh, decided to suspend the average 15pc hike. DP World Djibouti said it was forced to raise tariffs due to high oil prices on the global market and inflationary pressures in Djibouti.
The board's decision came following an executive instruction from the country's President, Ismael Omar Guelleh, sources in Djibouti told Fortune.
Authorities in Addis Abeba are pleased with the decision, as the increase would have cost the Ethiopian economy an additional 22.5 million dollars annually. For some, the latest news from Djibouti showcases a diplomatic victory. The Government put the move down to direct negotiations with President Ismael Omar Guelleh.
"It is a great relief to Ethiopia," said an official at the Ministry of Foreign Affairs (MoFA).
DP World Djibouti, a management company in charge of running the port's operations since 2000, had said that it would apply a new set of tariff rates to all services. In effect, this would have meant an increase of 15pc on container handling and stevedoring, as well as the reduction of the free storage period from 15 to eight days, two of the most critical issues for Ethiopia's import and export businesses.
Last time the port attempted to increase its tariff in January 2001 by 30pc, Ethiopia successfully protested at the proposal that would have cost 170 million dollars.
This latest move would have been the first comprehensive adjustment of tariffs on port operations since Ethiopia and Djibouti signed a port utilization agreement in May 2004. As part of that agreement, tariff changes were supposed to be discussed in advance, so Ethiopian authorities were disappointed not to have been informed before the floating of the new tariffs. There is, however, a difference of opinion over what exactly prior notification means; Djiboutians understand this deal as a responsibility to inform their Ethiopian counterparts two-month in advance from their planned date of enforcement, while the understanding on the Ethiopian side is of an opportunity to negotiate the amount and nature of any proposed tariff adjustment.
Prime Minister Meles Zenawi sent Girma Birru, his minister of Trade and Industry (MoTI), to talk to President Ismael immediately after DP World-Djibouti announced the increase back in July. Girma had returned with an assurance that the proposed increase would be suspended pending deals with Ethiopia.
"The result shows the quality of our diplomacy," said the official from the foreign office.
The port's management company had attributed the tariff rise to the soaring cost of fuel, which has increased by 350pc, a headline inflation rate of 19.2pc in Djibouti and a need to fund new equipment.
The port is not only used as a gateway for Ethiopian transit cargo, but also as a point of its destination, according to a study conducted by the MoTI in 2004. The volume of import and export cargo rose from 3.9 million tonnes in 2006/07 to 4.6 million tonnes in 2007/08. It is projected to grow by 20pc this year, indicating this volume will exceed five million tonnes.
Stessed port managers who were preparing to adjust their computer system for the new tarrifs will have to wait until a bilateral meeting to find out about any future increases. However, no date has yet been set.
The trouble is we don't know when this meeting will happen," a senior official from Djibouti side said.
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