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Clarifying issues relating to containerization

Dear Editor,

This is in reference to an article, which appeared on the January 6, 2017 issue of The Reporter under the title, “Unnecessary containerization cost undercuts Ethiopian exports”.

First of all, we appreciate the interest you have taken in reporting on the very vital, yet neglected, logistics and shipping sector. Meanwhile, we have found certain misrepresentation of facts that no doubt would give a wrong picture to the piblic at large and policymakers in particular. In what follows, therefore, we would like to set the record straight by reproducing first parts of the article we take issues with:

The Reporter: Lack of coordination hampers timely supply of containers.

EFFSAA: True, there is a serious lack of coordination among concerned government agencies and authorities, which contributes to the shortage of empty containers locally.

The Reporter: Indicating the gradual markup of containerization costs at the Port of Djibouti, experts of the shipping and logistics sector have called on the government to closely monitor and regulate the role of local shipping agents, and help create favorable conditions for the movement of locally containerized and staffed goods to eliminate this unnecessary cost.

EFSAA: Indeed, government intervention is necessary, but not to control local shipping agents who play no part in terms of negatively impacting the process. It is rather to avoid obstacles that are faced mainly and largely because of policies and regulations set by government agencies/authorities themselves.

The Reporter: According to experts The Reporter approached, exporters are apparently incurring unnecessary staffing costs of up to USD 110 per container just because shipping agents insist that export commodities be packed in Djibouti.

EFFSAA: This is contrary to the reality, and is a very misleading and damaging allegation. Shipping agents should rather have been commended for their contribution to facilitate local packing in spite of the huge challenges on the ground, viz. negligence and lack of support from concerned government bodies. We are operating in an invironment where the government’s input to encourage the logistic service is very minimal.

Furthermore, whether cargo is packed locally or in Djibouti, there is no difference on sea freight charges. Hence, no special financial gain is to be made by the shipping lines, nor by shipping agents that could be viewed as if they were compromising the nation’s interest.

In fact, the reality shows otherwise. There are several reasons why cargo is not packed locally:

  1. Regulations dictating that empty containers be kept in Ethiopia related to customs bonds.
  2. Resistance from transporters to drop containers locally and go empty to Djibouti.
  3. Regulations on road capacity limitation that restrict maximum allowable load in containers.
  4. Lack of facilities like Inland Container Depots (ICDs).

The advantage of local packing is not manifested only by the said saving of packing charges. It rather has far reaching advantages to the country in terms of job creation, foreign currency saving, shortening truck waiting time in Djibouti and increasing turnaround time, avoiding pilferage of export items, and so on. But the nation failed to fully enjoy the benefits because of major reasons stated above, and inability to make decisions by authorities. It is ridiculous to witness shortage of empty containers for local packing for a country with colossasl trade imbalance where annual import volume is over 200,000 Twenty-foot Equivalent Unit (TEUs) and requirement for export does not exceed 40,000 TEUs.

Given the rate of rapid economic growth and subsequent increase on cargo volumes and demand for project cargo handling, the sector has reached a point when it badly needs intervention. We believe now is the time to seriously examine and give due attention to the logistics service anc logistics professionals.

Thee Reporter: Mulugeta plainly downplayed one of the claims experts have echoed. According to the experts, most of the shipping lines do not have a direct “agency agreement”, referring local agents as “third party agents” or “agents of agents”. Hence, they insist on firm regulation in order to address the existing holdups the export sector is facing. The government has to monitor and regulate the agents, they contend.

EFFSAA: As stated well, sub agency is an international practie. Even the national carrier Ethiopian Shipping & Logistics Services Enterprise follows a similar practice. Ports in Indonesia, Vietnam, Hong Kong, the Philippines, Bangladesh and elsewhere are handled under agency agreement with Singapore. Thus, the allegation is totally misleading and lacks expert knowledge and exposure.

Mulugeta Assefa

EFFSAA President