16 December 2012

Ethiopia: Consultants Seek Solution for Transportation Issues

The government is evaluating the technical proposals of six international consultants on how to best regulate the recently implemented Multi-Modal Transportation System (MTS).

The companies that have submitted proposals include the Spanish-based, Advanced Logistics Group, which has conducted over a thousand projects in 35 countries, and twoUnited Statesbased companies, McKinsey & Co Inc and Nathan Associates. McKinsey, founded in 1929, is a management-consulting firm that has approximately 9,000 consultants, working in 55 countries. Nathan, which was founded in 1946, have worked in 139 countries, advising governments and businesses on transport solutions.

The government is seeking the proposals because the implementation of the MTS has been troublesome for the country's trade. The MTS offers the transportation of goods from one country to another, under a single contract, whilst using different modes of transport.

Since the usage of the system was made mandatory for all imports, in January 2011, the shipment of goods has been choked. This is because the Ethiopian Shipping & Logistic Service Enterprise (ELSE), the sole multimodal operator, has failed to handle all of the country's imports by itself. Thousands of containers were congested at the port inDjibouti, with the number stranded said to have reached 22,000, in May 2012.

This is still a bone of contention between the government and traders. The traders have displayed their concerns and dissatisfaction to various senior officials of the government, including Prime Minister Hailemariam Desalegn. Many of the traders and industry observers argued that the system was implemented without strengthening the capacity of theEnterprise. Senior managers of the enterprise have also admitted that the system failed because of mismanagement.

The Enterprise thus called international consultancy companies In to come up with recommendations that could best implement the MTS, in order to reduce transportation costs.

The company that comes up with the best recommendation, during the evaluation, will conduct a fully fledged study that will assist the government in reaching a conclusive decision on how to regulate the MTS, according to Dirba Kuma, Minister for Transport.

The Ministry, on the other hand, has also established a committee, dubbed as 'a transformation national team', composed of officials from theEnterprise, Ethiopian Maritime Affairs Authority (EMAA) and the Ministry of Transport, to discuss the matter.

This committee, which is led by Minister Driba, made its table discussion at the Ministry's headquarters, on Thursday December 14, 2012. The meeting was attended by Ahmed Tusa, CEO of the ELSE, Desalegn Tefera, the new deputy CEO of theEnterprise, Yusuf Ahmed, a consultant, and two representatives from the private sector, sources say.

In addition, another committee, also led by Driba, has been considering three options that are said to solve the logistics problem within the country, for the past few months.

The options being considered were; making the usage of the system optional for importers, opening the door for the private sector to operate, and making theEnterprisehandle imports in line with its capacity. The committee, however, did not vote for any one of the above options.

"It is because the implementation and regulation of the MTS needed to be studied in detail by professionals in order to have a viable solution," Driba told Fortune.

The whole study will be finalized within a six-month period and hence the government will make its final decision based on the findings of the consultants.

The Addis Abeba Chamber of Commerce & Sectoral Associations (AACCSA), on the other hand, urged that the government should liberalise the logistics sector, in order to ensure efficient use of the multimodal transportation system.

Their recommendation includes opening up the sector to foreign investors. This is a bold policy change that the chamber has never before demanded of the government. This change was made in a meeting that the chamber called to discuss the MTS, last Thursday, December 13, 2012, in which around 40 business people, engaged in the logistics sector, including freight forwarders, attended.

The chamber also argued that forcing importers to use the MTS was illegal, as it conflicted with the multimodal transport proclamation.

The Enterprise currently also allows importers to use the uni-modal system, in a bid to reduce the port congestion, in Djibouti.

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