the challenges facing landlocked developing countries: a case study ...

Recognizing the dramatic effects that the poor domestic infrastructure system has on the
economy, the Ethiopian government has recently exhibited significant political commitment
to improving the domestic road system. Matching its professed commitment to improving
road infrastructure, as emphasized in the Poverty Reduction Strategy Paper, the Ethiopian
government now allocates over 20% of its capital budget to improvements in the road
system. It has launched the second Road Sector Development Project (RSDPII 2002-2007)
hoping to improve upon the moderate successes of RSDPI. While RSDPI did not achieve
many of its targets, significant improvements were made: the percentage of federal roads in
good condition improved from 14% to 30% (the target was 60%), the percentage of regional
roads in fair condition improved from 15% to 30%, and the road system witnessed a 30%
increase in total length. Underscoring the importance of reliable coastal access, Ethiopia has
granted priority, under the RSDPs, to those roads that provide access to ports.
Rail
Ethiopia is connected by railway to the port of Djibouti. The poor performance of this
railway is one of the primary factors limiting growth on this corridor. The railway is more
than 100 years old, has limited capacity, and is subject to excessive delays and inefficiencies.
Since the closure of the Eritrean transit corridor, these inefficiencies have had a more
pronounced effect on Ethiopia’s trade costs. Ethiopia has recently announced plans to
revitalize the railway and reduce the number of checkpoints along its route. The EU has
provided funding for the design and documentation phase of upgrading the line. Ethiopia
plans to complete the rehabilitation project by 2004 (Africon 2002).
Ports
Shortly after losing its coastline, Ethiopia signed a transit services agreement with Eritrea in
1992 that provided for the expeditious movement of international freight between the two
countries. This agreement and the cooperative spirit between Ethiopia and Eritrea helped
maintain Assab as the primary port for Ethiopian trade, accounting for over 75% of
Ethiopia’s international cargo flow. The start of the Ethiopia-Eritrea conflict in 1998,
however, shifted the majority of Ethiopian trade toward the port of Djibouti.
Today, approximately 98% of Ethiopia’s international trade passes through the port of
Djibouti, amounting to 70% of all traffic passing through the port (World Bank 2001;
Africon 2002). This dominance has yielded significant bargaining leverage for Ethiopia.
Ethiopia benefits from the 1993 Djibouti Port Utilization Agreement, passed well-before the
Ethiopia-Eritrea conflict began, which allows Ethiopia the permanent right to use the port.
The agreement also ensures that any preferential tariffs on services offered by the port of
Djibouti are enjoyed by Ethiopia and that Ethiopia can obtain plots of land in the duty-free
area (Giorgis 1995). Given the increased traffic though the port of Djibouti, port authorities
have now formulated a $15 million expansion of the port's terminal, including $2 million to
pay for the computerization of the port facilities.
The only other proximate ports to Ethiopia are those in Somalia. These suffer from problems
of domestic disorder and are not significantly used by Ethiopia.
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