DiretubeLandlocked Ethiopia and the Port of Assab
The negative impact of landlockedness on the trade and economic development of Ethiopia is highly pronounced because the country does not have a solid economic base, lacks well-developed transportation facilities, and doesn’t have strong neighboring trading partners. Even advocates of the Ethiopian government concur that physical isolation and lack of access to sea-based trade and marine world are among the factors that are obstacles to eradicate poverty in developing countries (see, e.g., Sachs 2007). The position of the ruling party in Ethiopia that denies the existence of such a problem and advocates the continued use other alternative ports has no theoretical or empirical merit. A policy that denies the negative consequences of landlockedness can only condemn the country and its people to perpetual economic deprivation and suffering for generations to come.
Table- Per Capita Income and Consumer Price Index in Ethiopia (2005-2012)
The data in the above table further demonstrates that the Ethiopian people are increasingly impoverished, and that their buying power is diminishing relentlessly. Because of inflationary prices, the real goods and services people can afford to buy are annually decreasing, and the economic conditions and the standard of living of the population at large have distressingly declined. The income disparity among the rich, who are mostly affiliated with the ruling minority elite, and the poor, constituting the vast majority, has widened unbridled. The bogus increases in the GDP, which are more driven by the ever increasing foreign aid and inflationary prices than by true increases in actual output of goods and services, have not been at par with the ever-growing population. Incidentally, the dismal economic reality of the country notwithstanding, the ruling party has chosen to pursue a policy that disregards the importance of access to the sea and its role in boosting the economy through favorable trade flow and international commerce.
Ethiopia had enjoyed legitimate access to the sea through the ports of Assab and Massawa until the effective separation of Eritrea from the mainland in 1991. The country, one of the most populous in the league of landlocked countries, with a population size fast approaching 90 million, was officially rendered landlocked by a dubious and ignominious decision of the government in power and its international backers. Predictably, the legality and legitimacy of this decision to strangulate Ethiopia by denying it access to the sea have since been challenged by many scholars on the basis historical, national security and humanitarian grounds, as well as on accounts of the economic viability of the nation. Most notably, the historical perspectives of the illegal decision have been extensively studied by Kindie (2005) and Larebo (2001) The legal and national security issues surrounding the separation of Eritrea and the loss of Assab were addressed by Hailemariam (2007, 2011), Kahsay (2007) and Abay and Kihishen (2000).
Since most of the country's import-export trade is conducted through sea transport, and because Massawa and Assab are no longer viable options, Ethiopia is forced to rely on the ports of neighboring countries, especially Kenya, Sudan and Djibouti, and occasionally, Somalia. However, the costs of transportation to most of the destination ports are very prohibitive in view of the long distances and poor land transport facilities. Therefore, about 90% of the country’s import-export trade is now conducted through the port of Djibouti. As reported in the May 3, 2009, issue of the African Press Agency, even the Ethiopian Ministry of Transport and Communication is on the record acknowledging that relying on a single port has become a bottleneck for the development of import-export trade.
The cost of using the port of Djibouti has been on the rise in recent years. Until the 2008 fee increase, Ethiopia used to pay more than $850 million to DP World Djibouti annually in port fees. The port is administered by DP World Djibouti, a part of DP World that was formed in September of 2005 with the integration of the terminal operations of the Dubai Ports Authority (DPA). In a July 6, 2008 note in the Sudan Tribune, it was reported that effective mid-August 2008, there would be a new set of tariff rates that would be applied to all services at the port of Djibouti. The sudden and unexpected new rates involved an increase of up to 25% in marine charges, cargo port dues and storage charges, and a 15% increase in the cost of container stevedoring. This would add an additional cost of at least $210 million for the use of the port by Ethiopia.
According to the aforementioned Sudan Tribune report, the Port of Djibouti is used not only as a gateway for Ethiopian transit cargo, but also as a point of destination. The volume of Ethiopia’s import and export cargo has risen from 3.9 million tons in 2006/07 to 4.6 million tons in 2007/08. The volume of this import-export was projected to grow by 20% in 2009, to exceed 5.0 million tons3. The total annual fee would then be in excess of $1.2 billion a very huge and unsustainable expense for a resource-constrained country like Ethiopia!
It is thus clear that Ethiopia’s trade flow, as a function of both the cost of using alternative sea ports of other countries and distance traveled, would stifle any genuine policy of economic development. The huge fees paid out annually to the coastal countries for port services are a drain in the economy of the country, which is a net importer. This is, of course, money that could instead be invested internally for port service improvement, infrastructure development and other related transportation projects. The latter in turn could immensely improve the trade balance and flow of the country by reducing the cost of exports and imports, and could increase the aggregate demand for domestic goods and services related to the infrastructure development and port services.
The prudent investment of the money paid as port fees could also necessitate increased employment of labor and other resources to meet the accompanying increased demand. With a very conservative estimate of 95% increased consumption spending (i.e., 0.95 marginal propensities to consume) for any amount of additional income Ethiopians get on the average, one would have a corresponding large spending multiplier of 20. This implies that the total fees lost in the form of direct payment for the use of the port of Djibouti could add billions of dollars to the GDP of Ethiopia annually.
Evidently, the unnecessary leakage in the national revenue reduces the value of export, and increases the cost of imports, thereby shrinking the volume of the GDP and depressing the economic growth and development prospects of Ethiopia for years to come. In addition, the landlockedness imposed on the country has deprived the people of other economic opportunities. Most notably, the loss of access to the sea was accompanied by the loss of maritime resources, including fisheries, as means of food security, and revenues from tourism. In a country like Ethiopia that has experienced vicious cycles of famine and drought, it is hard to overestimate the significance of healthy fish stock as a critical alternative for food security and for sustaining economic prosperity and social and cultural well-being.
In the backdrop of these unfavorable economic realities, to a degree resulting from the land lockedness of the country, the ruling party in Ethiopia does not appear to be poised to seek a framework that will address effectively the loss of the country’s legitimate access to the sea. Since the ruling party has confounded the issue with a policy of divide-and-rule that is central to its obsession with ethnic ideology, such a framework may not, however, be at the forefront of its priorities without due pressure from donor countries and organizations, whose munificent support has been the primary driver of hose fanciful growth figures.
In summary, the prevailing status quo with Ethiopia, one of the most populous and impoverished countries in Africa, remaining landlocked is an unsustainable proposition. There is mounting evidence that the bogus international treaties that the people of Ethiopia have been forced to accept have no binding force from a legal, historical or economic standpoint. It is, therefore, incumbent upon the international community and the peoples of the concerned countries to seek a lasting solution to the problem that has been an impediment to peace and prosperity in that part of Africa.
In the search for a viable solution, it is critical that the pros and cons of all available options be explored, taking into account the historical, socioeconomic and national security imperatives in the region. Such a methodical and unbiased approach to the issue is guaranteed to lead to an incontrovertible solution that will affirm the unconditional and rightful return of the port of Assab to Ethiopia, thereby heralding a new era of peace, stability and prosperity for the brotherly peoples of Ethiopia and Eritrea whose common heritage is much more deep-rooted than the shortsighted machinations of politicians that purport to divide them.
Guest Writer
The negative impact of landlockedness on the trade and economic development of Ethiopia is highly pronounced because the country does not have a solid economic base, lacks well-developed transportation facilities, and doesn’t have strong neighboring trading partners. Even advocates of the Ethiopian government concur that physical isolation and lack of access to sea-based trade and marine world are among the factors that are obstacles to eradicate poverty in developing countries (see, e.g., Sachs 2007). The position of the ruling party in Ethiopia that denies the existence of such a problem and advocates the continued use other alternative ports has no theoretical or empirical merit. A policy that denies the negative consequences of landlockedness can only condemn the country and its people to perpetual economic deprivation and suffering for generations to come.
Table- Per Capita Income and Consumer Price Index in Ethiopia (2005-2012)
The data in the above table further demonstrates that the Ethiopian people are increasingly impoverished, and that their buying power is diminishing relentlessly. Because of inflationary prices, the real goods and services people can afford to buy are annually decreasing, and the economic conditions and the standard of living of the population at large have distressingly declined. The income disparity among the rich, who are mostly affiliated with the ruling minority elite, and the poor, constituting the vast majority, has widened unbridled. The bogus increases in the GDP, which are more driven by the ever increasing foreign aid and inflationary prices than by true increases in actual output of goods and services, have not been at par with the ever-growing population. Incidentally, the dismal economic reality of the country notwithstanding, the ruling party has chosen to pursue a policy that disregards the importance of access to the sea and its role in boosting the economy through favorable trade flow and international commerce.
Ethiopia had enjoyed legitimate access to the sea through the ports of Assab and Massawa until the effective separation of Eritrea from the mainland in 1991. The country, one of the most populous in the league of landlocked countries, with a population size fast approaching 90 million, was officially rendered landlocked by a dubious and ignominious decision of the government in power and its international backers. Predictably, the legality and legitimacy of this decision to strangulate Ethiopia by denying it access to the sea have since been challenged by many scholars on the basis historical, national security and humanitarian grounds, as well as on accounts of the economic viability of the nation. Most notably, the historical perspectives of the illegal decision have been extensively studied by Kindie (2005) and Larebo (2001) The legal and national security issues surrounding the separation of Eritrea and the loss of Assab were addressed by Hailemariam (2007, 2011), Kahsay (2007) and Abay and Kihishen (2000).
Since most of the country's import-export trade is conducted through sea transport, and because Massawa and Assab are no longer viable options, Ethiopia is forced to rely on the ports of neighboring countries, especially Kenya, Sudan and Djibouti, and occasionally, Somalia. However, the costs of transportation to most of the destination ports are very prohibitive in view of the long distances and poor land transport facilities. Therefore, about 90% of the country’s import-export trade is now conducted through the port of Djibouti. As reported in the May 3, 2009, issue of the African Press Agency, even the Ethiopian Ministry of Transport and Communication is on the record acknowledging that relying on a single port has become a bottleneck for the development of import-export trade.
The cost of using the port of Djibouti has been on the rise in recent years. Until the 2008 fee increase, Ethiopia used to pay more than $850 million to DP World Djibouti annually in port fees. The port is administered by DP World Djibouti, a part of DP World that was formed in September of 2005 with the integration of the terminal operations of the Dubai Ports Authority (DPA). In a July 6, 2008 note in the Sudan Tribune, it was reported that effective mid-August 2008, there would be a new set of tariff rates that would be applied to all services at the port of Djibouti. The sudden and unexpected new rates involved an increase of up to 25% in marine charges, cargo port dues and storage charges, and a 15% increase in the cost of container stevedoring. This would add an additional cost of at least $210 million for the use of the port by Ethiopia.
According to the aforementioned Sudan Tribune report, the Port of Djibouti is used not only as a gateway for Ethiopian transit cargo, but also as a point of destination. The volume of Ethiopia’s import and export cargo has risen from 3.9 million tons in 2006/07 to 4.6 million tons in 2007/08. The volume of this import-export was projected to grow by 20% in 2009, to exceed 5.0 million tons3. The total annual fee would then be in excess of $1.2 billion a very huge and unsustainable expense for a resource-constrained country like Ethiopia!
It is thus clear that Ethiopia’s trade flow, as a function of both the cost of using alternative sea ports of other countries and distance traveled, would stifle any genuine policy of economic development. The huge fees paid out annually to the coastal countries for port services are a drain in the economy of the country, which is a net importer. This is, of course, money that could instead be invested internally for port service improvement, infrastructure development and other related transportation projects. The latter in turn could immensely improve the trade balance and flow of the country by reducing the cost of exports and imports, and could increase the aggregate demand for domestic goods and services related to the infrastructure development and port services.
The prudent investment of the money paid as port fees could also necessitate increased employment of labor and other resources to meet the accompanying increased demand. With a very conservative estimate of 95% increased consumption spending (i.e., 0.95 marginal propensities to consume) for any amount of additional income Ethiopians get on the average, one would have a corresponding large spending multiplier of 20. This implies that the total fees lost in the form of direct payment for the use of the port of Djibouti could add billions of dollars to the GDP of Ethiopia annually.
Evidently, the unnecessary leakage in the national revenue reduces the value of export, and increases the cost of imports, thereby shrinking the volume of the GDP and depressing the economic growth and development prospects of Ethiopia for years to come. In addition, the landlockedness imposed on the country has deprived the people of other economic opportunities. Most notably, the loss of access to the sea was accompanied by the loss of maritime resources, including fisheries, as means of food security, and revenues from tourism. In a country like Ethiopia that has experienced vicious cycles of famine and drought, it is hard to overestimate the significance of healthy fish stock as a critical alternative for food security and for sustaining economic prosperity and social and cultural well-being.
In the backdrop of these unfavorable economic realities, to a degree resulting from the land lockedness of the country, the ruling party in Ethiopia does not appear to be poised to seek a framework that will address effectively the loss of the country’s legitimate access to the sea. Since the ruling party has confounded the issue with a policy of divide-and-rule that is central to its obsession with ethnic ideology, such a framework may not, however, be at the forefront of its priorities without due pressure from donor countries and organizations, whose munificent support has been the primary driver of hose fanciful growth figures.
In summary, the prevailing status quo with Ethiopia, one of the most populous and impoverished countries in Africa, remaining landlocked is an unsustainable proposition. There is mounting evidence that the bogus international treaties that the people of Ethiopia have been forced to accept have no binding force from a legal, historical or economic standpoint. It is, therefore, incumbent upon the international community and the peoples of the concerned countries to seek a lasting solution to the problem that has been an impediment to peace and prosperity in that part of Africa.
In the search for a viable solution, it is critical that the pros and cons of all available options be explored, taking into account the historical, socioeconomic and national security imperatives in the region. Such a methodical and unbiased approach to the issue is guaranteed to lead to an incontrovertible solution that will affirm the unconditional and rightful return of the port of Assab to Ethiopia, thereby heralding a new era of peace, stability and prosperity for the brotherly peoples of Ethiopia and Eritrea whose common heritage is much more deep-rooted than the shortsighted machinations of politicians that purport to divide them.
Guest Writer
No comments:
Post a Comment