Logistics actors mock impractical draft directive

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Logistics sector actors mock the draft Multimodal Transport Operators Qualification and Licensing Directive which they claim is not properly crafted. However, the Logistics Office argued that it is under the draft stage and is more or less trying to accommodate the recommendation of the private sector.
On Thursday April 8, the sector actors and representatives of the Ministry of Transport (MoT), responsible for developing the directive had discussed the draft directive that targets to ease the multimodal monopoly for selected five players.
On the discussion, the sector actors heard that the proposal never took account details of the implantation process. They said that the directive was supposed to consider the coordination of other public offices for the realization of the government strategy.
The directive seems impractical without the coordination of other offices like customs, central bank, investment commission and others.
“The opening up of the multimodal sector is crucial for the sector in general and particularly for all over the economy since logistics is the backbone of any development in order to make it competitive and cost effective,” one of the private sector representative who attended the discussion told Capital. But he expressed his frustration that it seems that it is still never getting proper attention from the regulatory body, he states, “The draft directive shows me that the preparation process was very weak, which may directly align with the interest of the regulatory body.”
According to participants, for instance the draft directive stated the insurance coverage, whereas the National Bank of Ethiopia (NBE) has suspended insurers to give such directive.
“NBE does not allow insurers to provide unconditional guarantee, due to that companies are expected to deposit massive amount of money for guarantee. But the private sector does not have such kind of capacity or similarly for bank guarantee they have to have property for collateral, which is also difficult,” one of the logistics sector actors told Capital, adding, “In this two decades, the private sector does not own such kind of property for collateral.”
They said that the Investment Commission should have also a say on the directive to avail plots on lease or for free and also duty free scheme for import of machinery like other strategic sectors.
“For instance, the draft directive stated the ownership of five hectare of plot, a dry port, 3,000 meter square warehouse and other equipments including 30 owned trucks. To secure such mandatory facilities and equipments support is crucial that shall come from Investment Commission, while the directive does not mention about it,” one of the participants told Capital.
Similar issues have been in one way or another mentioned by participants to whom the regulatory body responded that it may revisit the draft document.
Despite participants criticizing the limitation of participants to five, the government has still shown a firm stands to restrict to 5 operators at the early stage.
However, if representatives do not give satisfactory response for the question for the selection of five companies more than the stated number of logistics actors with similar qualification may come. They said that it will be looked into and revised.
“Generally, I fill that one entity is only trying to show its effort for the sector, while it is dynamic,” a participant expressed his view.
One of the major freight forwarders appreciated the initiative that the government is considering to comprise the private sector on this, multimodal, valuable scheme, but argued that NBE should be part as well and consider the access to foreign currency to handle the business, “Otherwise it would not be applicable,” he emphasized.
“Leave alone the multimodal scheme that needs foreign currency for payment starting from loading port to Djibouti, but even at the current normal transit we are not able to settle the payment at Djibouti on time,” he told Capital.
“Not only the private sector but ESLSE is not paying its foreign currency accrued on time due to the shortened hard currency availability that is supposed to get prior attention by the central bank even before opening the multimodal,” he explained showing the other side of possible difficulty when the multimodal system becomes open.
According to the freight forwarder, who demands anonymity, the NBE commitment should be higher for the sector, besides incentives, which he said is crucial to ensure competition. “ESLSE is accessing plots for free or lease that the private sector should get too,” he explained.
He said it is heavy investment that would create massive jobs and ease of doing business in the country due to that it needs tax and other incentives like some strategic sectors.
“The draft directive has locked the service price which is not also feasible in this devaluation trend,” he added.
Experts on the sector added that standard operating procedure shall also be identified. A freight forwarder has also recommended the government to commence the arrangement of bonded warehouse to ease the insurance issue.
The draft proclamation indicated that the investor who would be selected to operate on the multimodal must have a capital of 350 million birr of which 10 percent is on cash.
It also said that different machineries related with loading and unloading must be availed by the investor.
“We are trying to do our best to include the recommendation of the private sector,” Ewnetu Taye, Ethiopian Logistics Transformation Office Deputy Managing Director stated. He reminded that four deliberations had been conducted with the private sector besides receiving written comments, three times from them.
Regarding the comments on availability of foreign currency, he said that the investors should have understood the condition in the country. He reminded that although there is a delay on payment, still the government is committed to make available hard currency for ESLSE. “It is difficult to give full guarantee regarding the hard currency,” Ewnetu, who chaired Thursday’s meeting, said, adding “Besides that we are preparing a proposal to table for the government that finds ways to ease the hard currency issue. it would be implemented in relation with the implementation of the new directive.”
He added that the multimodal scheme by itself is saving the hard currency, which indirectly shall manage the issue of the hard currency.
According to the information from Ministry of Transport, the country enabled to save USD 20 million every year because of the multimodal operation, which is so far controlled by ESLSE.
“The insurance issue is related with customs but the experience of Ethiopian Shipping and Logistics Service Enterprise (ESLSE) different than the claim from the private sector,” Ewnetu told Capital.
He said that Ethiopian Insurance Corporation, a state owned enterprise, is providing the coverage with attractive premium. “ESLSE is working on insurance bond and we believe that it will continue as per the current status,” he added.
On the other hand, since the sector is newly opened there have been several initiatives by different stakeholders to encourage the private sector role with different mechanism. Ewnetu underlined that the incentive may not directly be related with the duty free and other approaches, while there are programs designed by the government regarding the sector.
According to Ewnetu, the directive will be finalized and ratified in this budget year.
Multimodal scheme is the operation that handling cargos on coordinated manner with a single documents and different mode of transports from initial port to the final destination.
The first logistics policy that was recently issued indicated that one of the main benefits of a multimodal transport system is its great significance in saving foreign currency. Therefore, it is important to enhance the multimodal transport system.
“Multi-modal transport systems are mainly operated using sea shipping thus integrating other modes of transport such as sea transport, seaport and air transport is important. Making these modes of transport become multimodal transport operators increases service coverage and eventually benefits our country. Thus, the government has a belief to create additional multimodal operators,” the policy stated expressing its commitment for the sector development.
ESLSE is the sole operator of multimodal that was introduced about a decade ago.