| Home | Politics | Human Rights | Water | Economy | Education | Sci & Tech | Culture | Sport |
Increases of up to 25pc and suddenness of the announcement stunned Ethiopian authorities Fortune
08 July, 2008
There will be a new set of tariff rates to be applied to all services at the Port of Djibouti, beginning mid-August 2008, DP World Djibouti announced. Communicated to the Ethiopian authorities through the Ministry of Foreign Affairs, who were caught off guard, and so completely taken aback by this development, various sources revealed.
The new rates would introduce increases of up to 25pc in marine charges; an average of 2,000 ships dock at the Port of Djibouti every year. Other increases include cargo port dues, storage charges (25pc), and a 15pc rise in the cost of container stevedoring by the latter for the first time since 1984, disclosed a letter signed by Aboubaker Omar Hadi, commercial director of DP World Djibouti, on June 25, 2008.
This will be the first comprehensive adjustment of tariff on port operations since Ethiopia and Djibouti signed a port utilization agreement in May 2004. The port’s management was given to DP World in 2000, under a 20-year contract. The current increase in various forms of port dues is attributed to a global escalation of prices on fuel, which increased by 350pc, and a headline inflation of 19.2pc in Djibouti, the letter stated.
The letter also argued that the management had invested in the acquisition of new equipment, such as four reachstakers, and ordered an additional six at a cost of six million dollars. This is meant to improve services by providing port operations 24 hours a day, seven days a week.
This is all in its bid to “deliver world class port and marine services.”
But increasing the tariff amount is only a part of what was in the letter. The management decided to reduce the free storage period for local cargo from 10 to three days and on that of transit cargo (mostly to Ethiopia) from two weeks to eight days. The management has also introduced a new fee of one dollar whenever a gate pass is issued.
“Every port in the world has increased its tariffs,” said a Djiboutian businessman. “It shouldn’t be surprising that the management did this. Every thing seems to be increasing these days”
The increase of port dues is a very sensitive issue for Ethiopia, a country that depends almost entirely on the Port of Djibouti for its international trade.
The Port is not only used as a gateway for Ethiopian transit cargo, but also as a point of destination, according to a study conducted by the Ministry in November 2004.
The volume of its import and export cargoes has been on the rise: from 3.9 million tonnes in 2006/07 to 4.6 million tonnes in 2007/08. Projected to grow by 20pc, the volume is anticipated to exceed five million tonnes this year.
Last time, the port attempted to increase its tariff in January 2001 by 30pc, Ethiopian authorities protested vehemently, for it would have had subjected the country to an additional cost of nearly 170 million dollars.
How much the latest increase will cost Ethiopia is a question that trade and transport experts were pondering last week. A technical committee under the auspices of the Ministry of Trade and Industry (MoTI) was formed last week. It comprises members from four federal agencies: the Ministry, Customs Authority, Maritime Transit Enterprise (MTS) and the Ethiopian Shipping Lines (ESL).
“We have been informed through a letter issued by the port,” Ephraim Tufa, head of Port Department under the Ministry and chairman of the intra-agency committee, told Fortune. “It is too early to determine the extent of the impact on our economy. But I can tell you it will affect us a lot.”
The committee is analysing the impact of the tariff increase on all four areas. A particular concern for Ethiopian authorities, however, is the reduction of free storage period from 15 days to eight days. Ethiopian cargoes are often laid inside the port and free zone areas without being cleared for months. A glimpse along the road that passes through free zone and vehicles depot located behind the airport would have exposed a pile up of goods destined to Ethiopia; inside the container depot is a mountain of containers. The shorter the free storage grass period is the higher the cost for Ethiopian importers, both private and public.
The cost benefit analysis is expected to be completed next week, and the finding will be submitted to Girma Birru, minister of Trade and Industry, and Ethiopia’s led trade negotiator on bilateral and multilateral fronts.
He signed the port utilization agreement four years ago in Djibouti; it is an agreement that compels Djibouti to conduct consultation with Ethiopia prior to the introduction of tariff adjustment.
“I’m surprised they did this before talking to us,” said a prominent negotiator on port related issues with Djibouti.
Other sources knowledgeable of the agreement between the two countries say Djibouti’s commitment it to inform Ethiopian authorities two months ahead of an intended increase, providing sufficient time for the first to start engagement.
“They [Djibouti authorities] have informed their counterpart their intention of adjusting the tariffs long ago,” said another businessman in Djibouti. “What you may see now the start of discussions between the two parties.”
It was not the government of Djibouti that informed its counterpart in Ethiopia about the increases planned to be effective beginning August 15, but the management of the port, according Ephraim.
“The committee is also looking at the issue to determine whether we need to work this out with the Port’s management or the government,” Ephraim said.