Ethiopia is the second most populous country in Africa, with more than 130 million. Its economy is one of the fastest growing in the world and the largest in the Horn of Africa. To keep on the economic growth momentum, more investment is needed. In addition, diversifying and increasing the volume of export is essential.
Economic growth increases the nation’s importing demand such as capital goods and inputs to enhance production and distribution. Ethiopia needs very vital inputs used for agriculture, such as fertilizer, herb and pesticides and selected seeds. In addition, it has to import chemicals used in industries and iron and still, finishing materials and others for construction, and to realize this, possessing a viable port is vital.
The growing volume of production and export also requires a viable logistics system, transportation and easy access to ports because they determine the export products competitive capacity in the world market.
Currently, most landlocked countries use railways and truck transportation systems for their import and export trade. Ethiopia also rendered great efforts to improve its logistics system to facilitate its import and export trade. The stretching of new electric-powered rail transport from Addis Ababa to Djibouti can be mentioned as the case in point.
Ethiopia transacts 90 percent of its import and export business through port of Djibouti and when congestion occurs in the port loading and unloading work, the Ethiopian trade transaction will be delayed and this brings negative consequences on the trade and the economy at large. As a sovereign country, Djibouti incurs additional port service price and when this happen Ethiopia’s ability to compete in the world market face hardship.
The delay of the imported or exported goods due to congestion on the port incurs additional cost to the country and such circumstances have their own demerit on the nation’s aspiration of tackling poverty.
Other exporting countries which have their own ports have an advantage in the world market competition because they do not pay any port service charges. The port-owning countries also can impose additional tariffs on import goods by imposing additional port service charges. This again forces the landlocked countries, such as Ethiopia, to import inflation, which destabilizes the local economy.
Ethiopia has experienced such economic havoc several times and paid a heavy price to that end. It also has its own impact on the purchasing power of the Birr because of the price hike of the imported commodities.
According to some sources, due to the port congestion some exporters are hampered to export their products in the neighboring countries which inhibited them not to penetrate to the international market. Ethiopia’s exported products are mainly obtained from agriculture and among others crops such as fruits and vegetables should reach to the importing countries timely but it is reported that the congestion in the port many times hampered the supply and some perished fruits were thrown away and such circumstances harmed the nation’s economy.
Because of repeated port congestion, some exporters have been forced to use other trade routes by engaging in illegal trade for the sake of obtaining hard currency badly needed for their import business. It is imperative that landlocked countries are economically disadvantaged as compared to the port owner’s countries and have 20 percent less growth potential than the port-owning countries.
Land locked countries pay additional tax and port services and these make them incompetent in the world market. In addition, they are less capable to attract foreign investment because of the heavy transaction cost when they are doing their import and export business. We can understand from this reality that one country’s economic growth and development depends on the nations import and export volume. Whenever the country is integrated to the world economy obviously its imports and export volume will be increased which again push the nation in to economic shake vulnerability because of landlocked ness.
The ongoing war between Ukraine and Russia has critically shaken the world’s economy and poor African countries which are dependent on the importation of Ukraine wheat, fertilizer and edible oil suffer from the brunt of the economic shake. One of the factors which contribute for the price hike of the Ukraine products is the blockade of the ports due to the war and the transporting of goods with ships in a lengthy sea roots from other ports located in far places. Land locked African countries suffered more than the countries which owned their own ports. Because the land locked countries pay additional port fee to their fellow African countries ports.
On the other hand, due to the outbreak of war between Israel and Hamas in Gaza is threatening vessels transporting oil from the Gulf countries towards Europe on the Red Sea route. Importing goods from Europe via the Red Sea route is interrupted.
The Yemen-based Houthi rebels, in order to take revenge on the western countries which back Israel, attack ships transporting goods on the Red Sea route. It is proved that the poor African nations, including Ethiopia, felt the economic pain which occurs due to the vessel transport disruption on the Red Sea route because when the price of the transportation increases, the price of the port services too increases. The increment of fertilizer years ago attributed to this incident.
In fact, there are landlocked countries in Europe and Asia that have reached the level of economic advancement. Unlike Ethiopia and some other landlocked developing countries, they are industrialized and have huge and sophisticated air service, which enabled them to conduct their export-import business smoothly.
Austria and Switzerland though they are land locked but their being landlocked did not hamper them to reach to the level of economic development they own at this moment. As an affluent country, they have disposable income to pay for any air transport fee. For the poor country such as Ethiopia doing import –export business through air transportation is expensive and unaffordable.
In fact, it is undeniable that the Ethiopian airline plays a pivotal role in exporting flower, fruit and vegetables through its cargo and contributes to the nation’s foreign currency earning but it is impossible to export the bulk of the nation’s export and import products through air transport. Therefore, it is a better option for Ethiopia that, in addition to using the neighboring countries ports, resorts to its own port through dialogue.
Now time is changed all the neighboring countries are attained sovereign status but they live as neighboring countries. They have cultural, religious and ethnic ties with Ethiopia. People move from one country to the other neighboring countries without visa.
They have also developed economic relations through trade. Their trade relation is manifested by supply of energy and basic commodities. The supply of electric power and piped water to Djibouti from Ethiopia can be cited here. They have also created political bonds through regional organizations such as IGAD. Ethiopia also deployed its forces for peace keeping mission in Somalia and Sudan and pay sacrifice for ensuring stability of these countries. The neighboring countries such as Eritrea and Somalia have thousands kilometer of sea territories which Ethiopia is 60 kilometer away from red sea still did not get access to sea.
Therefore, cognizant of the established good relation, demanding sea outlet based on the win-win game is legitimate to Ethiopia. Recently the Ministry of Foreign Affairs said that Ethiopia’s request for access to the sea is based on a win-win approach and mutual economic benefit.
In an exclusive interview with the local media the official from the Ministry noted that the economic perspective should weigh much more than its political perspective in Ethiopia’s legitimate demand for access to the sea.
The neighboring countries with access to sea should consider the country’s request as economic benefit, not a threat. Ethiopia will of course benefit from access to sea to further accelerate its economic growth; but this will not only develop Ethiopia. Certainly, the per capita income of the other countries will also increase as a result.
The direction set is on a win-win basis and through mutual economic benefit of all the countries. This option should be taken as a priority rather than a threat. Access to the sea is important for Ethiopia not only for now but also for the future, and these countries can benefit economically more than Ethiopia.
According to Economists, Ethiopia’s GDP has been doubling within a short time, and countries that provide port services (for the country) should consider it as a blessing because the countries can get economic benefits which they cannot achieve by their own.
Possessing a port also advances peace and sustainable economic development based on fair mutual benefit. The maritime experts refuted that the Red Sea coastline has the potential to adequately accommodate ports for 40 countries, and the issue then should be taken as ensuring mutual benefit through a win-win game. Therefore, countries of the Horn should consider Ethiopia’s demand for a sea outlet, which brings mutual benefit.
BY ABEBE WOLDEGIORGIS
THE ETHIOPIAN HERALD FRIDAY 3 JANUARY 2025
