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Summary
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1. Ethiopian shipping lines (ESL), a government-owned but semi-autonomous entity, is fast recovering from its relocation to Djibouti following the outbreak of war with Eritrea. The company recently added a modern, multi-purpose cargo ship to help it compete with other carriers. ESL runs regular routes to Europe, the Middle East, India, and Asia. It handles 46 percent of all Ethiopian imports because of the need to pay freight charges in local currency but must compete for export business. The volume of business and company profits continues to climb. Although ESL focuses on profits, it is prepared to meet country needs in time of crisis. The maritime and transit services enterprise (MTSE) also seeks profits in a deregulated environment but is prepared to overlook security concerns to meet freight forwarding needs. Instead of protecting its former near-monopoly, MTSE is helping to train private agents to develop the sector. End Summary.

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Shipping a competitive business
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2. The Ethiopian shipping lines (ESL) general manager (GM) told econ/comm officer on May 4 that ESL is a shipping line, not a "tramp," because it operates only on a published schedule. ESL has four primary routes -- northwest Europe, the Gulf states, the Mediterranean, and India and the Far East. ESL handles 46 percent of Ethiopia's shipping business. Ethiopian importers usually request ESL for their purchases because the freight charge is payable in local currency. In contrast, outgoing products are free on board; buyers choose the vessel.

3. Although registered and established under Ethiopian law and wholly owned by the government, GM eschewed the idea that ESL has a monopoly. "the government has told us that we must compete," he noted. ESL is conducted on a purely commercial basis with full management and operational autonomy. GM said the company is actively seeking more export business. At present, ESL must carry empty containers back to Europe for re-use. "the shipping business is highly competitive," he complained.

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Expanded ship strength
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4. ESL started operations in 1966 with three newly built ships. Now the company owns 13 ships: six multi-purpose sister ships, two general cargo ships, one oil tanker, and three "roll-on, roll-off" ships. The newest vessel in the ESL fleet is a modern, twin-decker ship purchased from a shipping company in Montenegro for $7.8 million. The ship is called "Tekeze" after one of Ethiopia's important rivers. It has a dead weight capacity of 18,000 tons, 254 percent more than the second largest ship in the fleet. GM said the price was right and the timing was perfect. ESL needed a modern ship that could handle containers but retain the flexibility for all kinds of cargo traffic. In addition, he admitted that ESL's fleet is "getting a little old." The "Tekeze" is intended for the northern European run because it can handle so many more containers. Gm noted that none of the ships in Ethiopia's fleet are purely container vessels. The level of sophistication of the shipping fleet must keep pace with the level of Ethiopian development, he commented.

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World business requires global presence
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5. Ethiopian shipping lines moved into a new seven-story office building in Addis Ababa last year. In addition, ESL has its own building in Rotterdam, a supply division with five employees. ESL has other offices in Djibouti, for cargo entering and leaving Ethiopia; Trieste, to oversee its Mediterranean operations and engineering needs; and Dubai, to handle business with the Gulf states, India, and the Far East. Altogether, ESL employs 430 workers, including managerial staff at its headquarters in Addis, support staff at its outlying offices, and sea-going personnel on board ships of various ranks and positions. The shipboard officers in both the engine and deck departments are all graduates with internationally recognized class certificates.

6. ESL's traffic volume has increased over the years despite stiff competition and depressed freight rates. ESL operations have also become more profitable year after year. Shipping tonnage grew from 220,000 tons in 1991/92 to 310,000 tons in 1995/96. Total income over this time tripled from 100 million birr to over 300 million birr ($45 million). Net profit has grown every year from 1992/93 (23 million birr) to 1995/96 (32 million birr, or $4.5 million).

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Recovering from war disruptions
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7. The company lost a lot of money when conflict with Eritrea forced the diversion of shipping services to Djibouti. GM complimented the Ethiopian government for acting quickly in making the adjustment. As a free port, Djibouti is conducive for open competition, he noted. At first, Djibouti was unprepared to handle the additional business. Everything was stored too long before distribution. Efficient shipping operations rely on the availability of trucking companies, the storage and docking facilities, and the road and rail network. Things are working much better now, he commented.

8. Even though ESL is an autonomous entity, it still must be ready to serve the country in time of crisis, GM said. If the war prevents other companies from shipping to Ethiopia, ESL will ensure that all the necessary provisions are delivered.

9. Although Berbera is a potential entrepot for Ethiopia in the future, current insurance premiums are too high for reputable international carriers, GM said. Somaliland is not considered an independent country and is deemed a war zone as part of Somalia. A logical terminus, however, is Dire Dawa, he said. If Djibouti starts issuing "through bills of lading" then the dry port of Dire Dawa can take off. Eventually, shipping companies should deliver goods all the way through to bonded warehouses in Addis Ababa.

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Freight forwarder for the nation
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10. The general manager of the maritime and transit services enterprise (MTSE) complained to econ/commercial officer on May 5 that his company, also a government-owned but autonomous entity, has to use Djibouti port as a foreigner. Even so, MTSE has expanded its operations to include stevedoring and transit services from Djibouti as well as freight forwarding warehousing, and transportation. The company had only a few cranes and forklifts in Djibouti before the conflict with Eritrea. Since then, MTSE has increased its manpower in Djibouti ten-fold and invested over 40 million birr ($55 million) in facilities and equipment.

11. Disavowing its monopoly status, the GM said the Ethiopian government wanted to deregulate this sector long ago. Eritrea refused, preferring government to government relations in all sectors. Eritrea required Ethiopian traders to use its own transit service (ERTS), especially at the port of Assab. "Now that the sector is deregulated, it is in MTSE's best interests to see the sector developed," he said. Private firms now control 40-45 percent of the freight forwarding business, he said, but with some difficulty. As a result, MTSE provided training for over 300 private agents and forwarders. MTSE still has the greater expertise, bigger and better facilities, cheaper rates and more reliable service than any of the private firms, he remarked.

12. As with Ethiopian shipping lines, MTSE is prepared to assist the country in wartime. GM said the company must consider the security implications for Ethiopia as well as the profit motive in doing business. MTSE will take financial and political risks for all consignments, not just on behalf of the government but for the private sector as well. "it is a question of national interest," he concluded.