Djibouti Grants Monopoly on Part of Port Operation
A crisis is looming between Ethiopian authorities and their counterparts in Djibouti, following a new directive that is deemed to have given a monopolistic position to an alliance of private companies on the operation of stripping, stuffing, and unstuffing of containers.
Unlike the traditional practice, forwarders are no longer allowed to handle this operation on their clients’ behalf. An alliance of companies, under Maersk Djibouti Container Freight Station (MDCFS), has been given the exclusive rights over the operation in a specially designated location known in Djibouti as PK 12. This is an area on the outskirt of Djibouti Town, a couple of kilometres from the Doraleh Port, where there is a brand new container terminal.
The designation of a special area for this particular operation “under the management of the customs” is a decision made by the Djibouti government, Hans de Jong, chief executive officer (CEO) of DP World Djibouti, told industry leaders in his email message.
The new directive was communicated to the maritime community on Monday, April 12, 2010, by Warsama Hassan Ali, commercial manager of DP World Djibouti. The reaction both in Djibouti and Ethiopia has been one of strong rejection of the new procedure.
There was a strike early last week in Djibouti, which has led to a meeting on Wednesday between leaders of the forwarding community there and Prime Minister Dileita Mohamed Dileita, according to reliable sources.
Ethiopian forwarding agents described the new procedure an “unprofessional practice” imposed contrary to “international standards and norms”; they have also demanded for the directive’s immediate suspension.
The Ethiopian Freight Forwarders and Shipping Agents Association (EFFSA), an industry advocate with a membership of 32 forwarding and shipping agents in Ethiopia, protested the new directive in a letter it wrote to the Jong on Wednesday.
The association fears that the new procedure will eliminate competition; encourage monopolistic tendencies; lead to escalation of prices; result in port congestion; and create uncertainties on the regime of liabilities.
This is also a view reinforced by Alemayehu Kebede, branch manager of MTS, in Djibouti.
Granting exclusive rights over the operation of container stuffing and unstuffing to a third party would confuse the responsible party in cases of damage, shortage or mixing of cargo, Alemayehu argued in his letter addressed to Aden Ahmed Doualeh, board chairman of Ports Authority and Djibouti, on the same day the directive was announced.
For Ethiopian authorities in Addis Abeba, this is in direct violation of a bilateral agreement signed between the two countries in 2002; this agreement dictates that Djibouti authorities should notify Ethiopia on any change of price or rules that affect the port’s operation 60 days ahead of implementation, said Mekonnen Abera, director general of Ethiopian Ports Affairs Authority.
“It is a huge decision,” Mekonnen told Fortune. “We need to talk, and we want the case to remain pending in the meantime.”
Mekonnen will be traveling to Djibouti next week, hoping to persuade Djibouti authorities to reconsider their decision, he told Fortune.
There is, however, a ministerial level discussion going on between Ethiopian and Djibouti authorities, according to reliable sources. The issue has been presented to President Ismael Omer Guelleh last week; his decision is awaited by leaders of the industry here and in Djibouti.
Meanwhile, containers under the operation on Inchcap, a forwarding and shipping company in Djibouti, which allegedly is a partner to Maersk in operating the new premises, have been transported to PK 12, according to eye witnesses in Djibouti.
Managers of Ethiopian forwarding companies have refused to transport their containers from Doraleh Port to the new area; thus over 130 trucks, including 90 carrying state owned imports under the operation of Maritime and Transit Services (MTS) and 42 under the operation of the private AKAKAS Logistics Plc, have remained stranded since Tuesday, according to sources.
“Sadly, they [Djiboutians] do all this because they believe we have no other choice or port to go to,” said a senior manager at a company where trucks under whose operation are stranded.
This is hardly an isolated feeling; it rather resonates among managers of Ethiopian companies active on the Ethio-Djibouti corridor. Many fear that Djibouti may continue to escalate prices on port services whenever it chooses to the great expense of consumers in Ethiopia. They cite the additional charge of 100 dollars per container imposed last week on containers that enter the stuffing and unstuffing premises at PK 12.
Ethiopia has an average of 100,000 in-bound containers a year; close to half of them get unstuffed inside the container terminal upon the request of the importers. Its out-bound containers are estimated to reach between 30,000 and 40,000 units annually; close to 90pc of this is stuffed in Djibouti.
The additional burden on Ethiopia’s economy as a result of the new procedure is estimated to reach 8.6 million dollars, according to industry experts.
“This additional cost is carried by the Ethiopian consumer, while it affects Ethiopia’s export competitiveness,” said a senior expert in the marine industry, who demands to remain anonymous.
That is a kind of message implicitly implied in the letter the forwarding association sent to the CEO of DP World Djibouti.
“We shall hold you fully responsible for all consequential financial and contractual implications,” said the letter signed by Daniel Zemichael, president of the Association.
Daniel, who is a major shareholder and general manager of Freighters International, is also Ethiopia’s agent for Maersk.
“I put Ethiopia’s national interest above the gains my company may benefit from its association with Maersk,” Daniel told Fortune.
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