The Management of Commercial Road Transport in Ethiopia

May 2009

Produced and distributed by the Addis Ababa Chamber of Commerce and Sectoral Associations with �inancial support from the Swedish Agency for International Development Cooperation, Sida Sida © Private Sector Development Hub/Addis Ababa Chamber of Commerce and Sectoral Associations, 2009

P. O. Box 2458, Mexico Square, Addis Ababa, Ethiopia Tel: +251(0) 115 504570/ 542405, Fax: +251 (0) 115 542404, Email: [email protected]

No part of the publication may be produced or transmitted in any form or by any means without the prior permission of the copyright holder. The only exception is for a reviewer, who may quote short excerpts in a review.

Disclaimer:- The views expressed in the study do not necessarily reflect the views of PSDHub or Addis Ababa Chamber of Commerce and Sectoral Associations or Sida. They are solely the responsibilities of the authors. Acknowledgements

he study on The Management of Commercial Road Transport in Ethio- pia was initiated by the Private Sector Development Hub in response to the problems encountered by transport companies, associations, and individual operators with respect to operating environment, costs and margins; and by transport service users in relation to efﬁ ciency, price and reliability with its impact on competitiveness.

W.T Consult Pvt. Ltd. Co. was contracted to undertake the study and produced the draft report. The report was further reviewed, enriched and ﬁ nalized by David Shelly of BKP Development Research and Consulting GMBH.

Throughout the report, “Consultant” refers to W.T Consult, while “Review Team” refers to BKP and David Shelly who have ﬁ nalized the report.

Contents

Acknowledgements Acronyms

Chapter One Introduction 9

Chapter Two Transport Sector and Macroeconomic Background 13 Macroeconomic Scenarios and Development 13 Highways and Roads 16 Road Trafﬁ c and Composition 18 Road Safety 22 Vehicle Fleet and Travel Characteristics 25 Railway Mode 33 Shipping: Need for Choice in Multimodal Transport 34 Air Cargo Mode 37 Development of the Multimodal Transport Industry in Ethiopia 38 Ports of Entry 41 Dry Ports 41

Chapter Three Road Freight Transport 45 Categories of Operation and Capacity 46 International Road Freight Operations (Import and Export Trafﬁ cs) 47 Freight Transport Demand and International Freight Transport Service Delivery 49 Interurban Domestic Road Freight Operations 56 Urban Freight Operations 57 Road Transport Maintenance Planning and Facilities 61 Road Freight Terminals 61 Warehousing 62 Freight Transport Vehicle Productivity and Costs 62 Road User Costs 68 Freight Tariffs 70 Freight Forwarding 73 Vehicle Overloading 74 The Potential for Road-Rail Inter-Modal Transport 76 Current Status of Commercialization 77 Freight Transport Service Forecast (2006-2015) 77

Chapter Four Road Passenger Transport 79 Passenger Transport Fleet Utilisation 81 Urban Transport 81 Level of Service: Intercity and Urban Bus Operations 88 Taxi Fleet and Level of Service: Operations in Addis Ababa 91 Travel Demand/ Patronage 93 Passenger Transport Vehicle Productivity and Costs 94 Competition and Efﬁ ciency 95 Entrance to Market 96 Public Transport Maintenance Facilities 97 Road Passenger Terminals 97 Anbassa Depot Sites 98 Fares and Tariffs 98 Status of Commercialization 102 Passenger Transport Service Forecast 103

Chapter Five Institutional Arrangements in Road Transport 107 Political Context: Institutional Structure Including Allocation of Powers between Jurisdictions 107 Other Relevant Government Institutions 108 Road Freight Transport Industry Structure 110 Road Freight Transport Industry Organizations 112 Road Passenger Transport Industry Structure 115 Road Passenger Transport Industry Organizations 118 Road Safety 119 Access to the Profession 119 Human Resource Development and Management Capacity 120 Some Institutional Issues 121

Chapter Six Legal Framework and Road Transport Regulations 123 Legal Framework 123 Road Transport Regulations 124 Operation and Regulation of Road Passenger Services 126 Operation and Regulation of Road Freight Services 127 Findings of Road Transport Regulations Study 127 Findings of National Transport Master Plan Study 128 Findings of Other Studies 130 Key Legislative Issues 132 Key Regulatory Issues 133

Chapter Seven Banking and Transport Industry Insurance 135 Financial Performance and Sustainability 135 Motor Vehicle Insurance 137 Key Business, Finance and Management Issues 139 Key Banking and Insurance Issues 140

Chapter Eight Analyses of Some of the Principal Road Transport Issues 141 Overview of Road Passenger Transport 141 Overview of Road Freight Transport 142 Some Important Challenges in Road Transport 143 Some Measures to Improve Road Safety in the Road Transport Industry 145 Some Measures to Improve Urban Transport Organisation in Addis Ababa 147 Some Measures to Enhance International Road Freight Business 147 Some Measures to Enhance Dry Port Operations 148 Some Measures to Combat Vehicle Overloading 150

Chapter Nine National Transport Masterplan Study Framework and Strategic Directions 151 Specifi c Action Plan Components: Road Freight (Excluding Import/ Export Corridor Traffi c) 152 Possible Free Trade Zone 157 Specifi c Action Plan Components: Road Freight Import/ Export Corridor Traffi c 158 Specifi c Road Transport Action Plan Components: Intercity and Urban Transport 161

Chapter Ten Synthesis of Study Recommendations 163 Vision Statement 163 Policy Statements 163 Adoption of Speciﬁ c Actions for Road Transport Sub-sector 165 Development of Wider Action Plans by Implementing Institution 166 Possible Follow-up Process 171 Annexes

Annex 1 Minibus Taxi Service Supply Characteristics 175 Annex 2 Competition and Efﬁ ciency – Road Freight 181 Annex 3 Bus Fares and Tariffs 183 Annex 4 Road Freight Industry Structure 188 Annex 5 Public Transport Industry Structure 194 Annex 6 Access to Credit/Loans 199 Annex 7 Free Trade Zone 202 Annex 8 A WTO Accession 204 Annex 8 B Developments in the Freight Industry - World Experiencs 205 Annex 9 National Transport Master Plan 207 Annex 10 Speciﬁ c National Transport: Master Plan Priorities 208 Annex 11 Road Transport: Action Plans for Principal Actors with Timeline 210 List of Tables

Table 2.1 Annual GDP Growth Estimates (2006/07 – 2026/27) 16

Table 2.2 Regional Development Scenarios 16

Table 2.3 Summary of Daily Trafﬁ c on ERA Network (1994–2004) 19

Table 2.4 Growth in Daily Trafﬁ c (in Vehicle-Km) on ERA Network, 1994-2004 19

Table 2.5 Estimated Trafﬁ c Flows on Selected Routes in 2004 19

Table 2.6 Trafﬁ c Growth (2003-04) 20

Table 2.7 Road Network Compositions, Km (2008) 21

Table 2.8 The Magnitude of Road Trafﬁ c Accidents (RTA’s) in Ethiopia 23

Table 2.9 Trafﬁ c Accident Deaths by Road User Type 24

Table 2.10 Accident Involvement of Vehicles in the Year 2004/5 24

Table 2.11 Growth of Ethiopian Road Vehicle Fleet (2000/01 - 2004/05) 26

Table 2.12 Annually Inspected and Registered Vehicles by Type of Services 26

Table 2.13 Road Passenger and Freight Fleet Data-Total Vehicles by Capacity (Year 2007) 27

Table 2.14 Imported Freight Transport Vehicles 28

Table 2.15 Annual Growth of Minibus Taxi Fleet by Seat Capacity (1998/99-2004/05) 29

Table 2.16 Growth of Passenger Fleet by Seat Capacity 29

Table 2.17 Annual Growth of Public Road Passenger Vehicles by Seat Capacity (2005 – 2008) 30

Table 2.18 Occupancy Rates for Passenger Vehicles (2006) 30

Table 2.19 Loading of Goods Vehicles in MT (2006) 31

Table 2.20 Truck Commodities Carried and Average Load Per Truck in Tonnage 31

Table 2.21 Average Truck Journey Times from Survey 32

Table 2.22 Distribution of Vehicles between Regions 33

Table 2.23 Estimate of Transit and Transport Costs of Export 37

Table 2.24 Estimate of Transit and Transport Costs of Import 37

Table 3.1 Growth in Cargo Trafﬁ c (1999-2005) 50

Table 3.2 Growth of Annual Liquid Bulk Cargo Trafﬁ c (1999-2005) 55

Table 3.3 Good Vehicle Access and Loading Objectives in Urban Areas 60

Table 3.4 Cargo Delay Values (2004/05) 65

Table 3.5 Fuel Retail Price Structure, Birr /Cents Per Litre (August 2006) 65

Table 3.6 Countrywide Retail Pump Prices in Birr Per litre (December 2006) 66

Table 3.7 Indicative Truck Financial Operating Costs Per Tonne Km (Birr) 67 Table 3.8 Comet Truck Break-even Operating Costs in Birr (2006) 67

Table 3.9 Import Duties and Excise Taxes on Vehicles 69

Table 3.10 Fuel Retail Price Structure in Birr Per Litre (August 2006) 69

Table 3.11 Freight Transport Tariffs, 2005/06 (Ethiopian ﬁ scal year 1997) 71

Table 3.12 Loading of Goods Vehicles (2006) 74

Table 3.13 The National Transport Master Plan Study Truck Forecasts 78

Table 3.14 Review Study Truck Forecasts 78

Table 4.1 Services of Anbassa City Bus Entrprise (1991-2001) 82

Table 4.2 Annual Growth of Road Transport Passenger Volumes and Pax-kms 2005-2008 93

Table 4.3 Indicative Bus Financial Operating Costs Per Passenger Km (Birr) 94

Table 4.4 Occupancy Rates for Passenger Vehicles (2006) 95

Table 4.5 Long Distance Bus Passenger Tariffs (2005/06) - Ethiopian ﬁ scal year 1997 99

Table 4.6 The National Transport Master Plan Study Passenger Vehicular Fleet Forecasts 103

Table 4.7 Review Study: Passenger Vehicle Fleet Forecasts 104

Table 4.8 Annual Growth of Road Transport Passenger Trafﬁ c & Pax-Kms (2005-2008) 104

Table 4.9 Review Study Passenger Trafﬁ c Forecasts 105

Table 5.1 Commercial Trucks Licensed by Transport Authority (2006) 111

Table 5.2 Comet Haulage Performance, by Year 115

Table 5.3 Intercity Bus Seats (2006) 116

Table 5.4 Organizations and Composition of Staff Per Qualiﬁ cation 121

Table 10.1 National Transport Master Plan Speciﬁ c Actions for Road Transport 165

Table 10.2 Action Plans: Recommendations by Principal Actors 167

List of Figures

Figure 2.1 National Transport Network 2007 17

Figure 2.2 National Road Network After Completion of RSDP-III 18

Figure 2.3 Growth of Road Network and Vehicle - Km (2008) 21

Figure 2.4 Commodities Carried by the Trucks in 2007 32

Figure 4.1 Population Densities in Ethiopia 79

Figure 4.2 Modal Split of Addis Ababa City Passenger Trafﬁ c 84

Figure 8.1 Strategies Proposed for Improving Urban Public Transport in Ethiopian Cities 148 Acronyms

AACRA Addis Ababa City Roads Authority AACTO Addis Ababa City Transport Organisation (proposed) ADLI Agricultural Development-Led Industrialization ADR Agreement on Dangerous Goods by Road AETR Agreement Concerning the Work of Crews of Vehicles Engaged in International Road Transport ASYCUDA Automated System for Customs Data (an UNCTAD computer program for customs) CAA Civil Aviation Authority CCA Customs Clearance Association CDE Ethio-Djibouti Railway (Chemin de fer Djibouto-Ethiopien) CNG Compressed Natural Gas COMESA Common Market for Eastern and Southern Africa CPC Certiﬁ cate of Professional Competence CRA Community Roads Authority (alternative name for RADA) CRMC Community Road Management Committee DGSA Dangerous Goods Safety Adviser (management of depots with ADR drivers operating) DPPB Disaster Prevention and Preparedness Bureau (Regional level) DPPC Disaster Prevention and Preparedness Commission (Federal Government level) DPPD Disaster Prevention and Preparedness Department (Zonal level) EADA Ethiopian Airports Development Authority (proposed) EAE Ethiopian Airports Enterprise EAL Ethiopian Airlines EDF European Development Fund EFFSA Ethiopian Freight Forwarders and Shipping Agents Association EPE Ethiopian Petoleum Enterprise ERA Ethiopian Roads Authority ERTTP Ethiopian Rural Travel and Transport Programme ESL Ethiopian Shipping Lines EU European Union FCL Full Container Load FEU Forty-foot equivalent unit (2 x TEU) FIATA International Federation of Freight Forwarders Associations GDP Gross Domestic Product IATA International Air Transport Association ICC International Chambers of Commerce ICD Inland Container Depot or Inland Clearance Depot ICT Information Communications Technology ILC International Logistics Centre IMT Intermediate Transport IRU International Road Transport Union IU Implementation Unit (proposed) LCL Less than Container Load MoARD Ministry of Agriculture and Rural Development MDG’s Millennium Development Goals MoFED Ministry of Finance and Economic Development MoTC Ministry of Transport and Communications MT Metric Ton MoTI Ministry of Trade and Industry MTSE Maritime Transit Services Enterprise MoWUD Ministry of Works and Urban Development NGO Non-Governmental Organisation NRSC National Road Safety Council (proposed) NTC National Transport Council (proposed) NTMP National Transport Master Plan NTSS National Transport Sector Strategy PASDEP Plan for Accelerated and Sustained Development to End Poverty PPESA Privatization and Public Enterprises Supervising Authority PSO Public Service Obligation RADA Rural Access Development Authority (proposed) RF Road Fund RRA (Regional) Rural Roads Authority RSDP Road Sector Development Programme SAD Single Administrative Document, a combined customs form SNNPRS Southern Nations, Nationalities and Peoples’ Regional State TA Transport Authority TB/L Through Bill of Lading TEU Twenty-foot equivalent unit (standard ISO container, 20’ long) TIR International Transport by Road UNCTAD United Nations Conference on Trade and Development UN-EUE United Nations - Emergencies Unit for Ethiopia VoR Vehicle off the Road WCO World Customs Organisation WFP World Food Programme WTO World Trade Organisation

Chapter One

Introduction Context of the Study The Addis Ababa Chamber of Commerce and Sectoral Associations (AACCSA) is playing an increasing role by way of engaging in dialogue with the relevant Authorities in the Government of Ethiopia for reform to address underlying constraints to competitiveness and building a foundation for sustained development and ending poverty. Key to this is the strengthening of the connection between Government and the private sector, thereby reducing the cost of doing business. Improving the business environment in Ethiopia requires a turn-around in productivity, which together with reduction of the cost of input and the delivery price of outputs strengthens the competitive position of ﬁ rms. Firms operate in a global market and the cost of doing business provides them with the ability to respond effectively to the challenges.

The Addis Ababa Chamber of Commerce and Sectoral Associations (AACCSA) has been aware of the constraints to the reduction of transaction costs, particularly the cost of commercial freight transport. The cost and time associated with the entire logistics chain in international trade along land transport corridors, including the time and cost for cross-border procedures and moving cargo through seaports has received greater attention in view of the implications of the globalization of world trade. Land border crossings, customs operations, transfer and consolidation of cargo, inland transport, insurance or pilferage and damage, documentation and forwarding as well as bank processing for Letter of Credit are some of the most important indicators in freight movement. The competitiveness of Ethiopia's export trade remains vulnerable to high transport costs and the public passenger transport is unable to meet the increasing demand for mobility.

Currency of Reporting All monetary ﬁ gures used in this report are expressed in Ethiopian Birr. At the time of writing in February 2009, the rate of exchange of the Birr to the US Dollar was 11.2 to 1.

Some Important Defi nitions Some pertinent defi nitions are provided below:  Hire and Reward: Vehicles working for other companies for a payment, with the cargo not owned by themselves. These “for hire-carriers” typically include conventional bus, minibus and trucks.  Own-account: Vehicles working to move cargo owned by the company itself. There are usually private carriers that provide their own carriage, in the sense of movement by their own fl eet.  Dry Port: A place for handling containers or conventional bulk cargo; usually connected to a seaport by rail or road. A dry port is an inland inter-modal terminal which has services including storage, consolidation, reloading depot, maintenance of containers and customs clearance.

9  Multimodal Transport: The transport of goods in one and the same loading unit or vehicle by any transport means. It usually implies a deep sea movement with a rail interfaces prior to a road delivery by container or swap body.  Intermodal Transport: Usually understood as the transport of goods in freight units using more than one inland mode. The freight units involved can be maritime containers or swap bodies, or accompanied trucks, or unaccompanied trailers. The modes involved are road and rail or sometimes road and inland waterway.

Study Focus and Direction The subject area covers a great variety and range of salient topics each of which could form the focus of more detailed later investigation. The main study components include a review of urban public transport, international road freight transport and intercity public transport and freight transport. The Consultant focused on these speciﬁ c key areas, in order to be able to further elaborate the pragmatic recommendations made under the National Transport Master Plan Study.

The primary division in the road transport sector in Ethiopia lies between public transport operations and road freight operations. In each of these two main sub-sectors road transport services are provided, ranging from urban services, interurban services and services provided at the local (rural) level. In this report only brief reference is made to services provided at the local (rural) level. For the latter area, the reader is referred to a number of recent studies1. The timeline for the analyses are the short to medium–terms, although due consideration has been made of longer-term policy and infrastructure proposals emanating from the National Transport Master Plan Study.

Urban Public Transport The capital city of Addis Ababa is both a focus for urban bus and taxi operations and for urban goods distribution by road. Because of their substantially smaller size, and their lesser stage of development, only brief references have been made to urban transport development in other cities in Ethiopia. Importantly, because of respected data sources, particularly in Urban Public Transport, the study does not expend substantial study resources on investigating road transport development in this ﬁ eld; rather it has borrowed and built upon past work.

International Road Freight Transport In terms of international road freight service, the Djibouti corridor is currently the main focus of both import and export road freight operations. Therefore developments in this corridor have been investigated in detail, whilst the recommendations made in other main corridors rely to a much greater extent on the ﬁ ndings and data provided by the National Transport Master Plan Study. Ethiopia has a choice of Ports for Import and Export road freight trafﬁ cs and this important aspect has also been investigated.

In terms of future development of road freight services in the Djibouti corridor, a key consideration will be the likelihood and timing of the improvement and upgrading of the existing railway line between Djibouti and Addis Ababa. Though substantial investment plans were earlier underway, it is understood that the Concessionaire has withdrawn and that there is now some uncertainty over short- term railway development prospects in the corridor.

1 The EU funded National Transport Master Plan Study for Ethiopia, in particular Draft Master Plan Appendix 1.4 Community Roads; and The Ethiopian Rural Travel and Transport Programme (ERTTP). 10 It is also understood that other Consultants are investigating this component, under the aegis of the WTO accession agreements.

Intercity Public Transport and Freight Transport In terms of relative balance between road passenger and road freight transport services, the study has expended more time on the latter, due to perceived greater challenges and since the road passenger market is more researched, particularly urban passenger operations in the capital. The National Transport Master Plan Study has further conﬁ rmed the importance of the Capital and the Djibouti corridor as the focus of the long distance Freight Transport component.

Study Data Resources For some of the detailed areas of investigation, there is either a substantial amount of data in the public domain or important studies have been carried out within the past ﬁ ve years. The National Transport Master Plan Study for Ethiopia has already been cited as a major reference study for overall sector policy and for in-depth analysis of some issues of relevance to road transport. In addition, there are several major studies of urban transport operations in Addis Ababa2 which are current, topical and that have contributed considerably to urban passenger transport policy development.

Furthermore comparative analyses are provided with urban passenger transport operations in other African cities and this benchmarking can also be used as a tool in policy formulation. Because of these respected data sources, the study did not expend substantial resources in investigating transport development in these areas. Conversely, there are certain areas for which, although some research has been undertaken, a relative paucity of data and analyses exists. In particular, key aspects of the international road freight industry remain under-researched, although some ongoing work is in process. Thus, in cases where only a partial analysis is presently possible, a limited number of recommendations for further research in speciﬁ c areas have been made.

2 Such as, inter alia, PPIAF, Study of urban public transport conditions in Addis Ababa, Ethiopia IBIS Transport Consultants Ltd March 2005. 11

Chapter Two

Transport Sector and Macroeconomic Background Before a description of the road transport industry in Ethiopia can be elaborated, it is important to understand the developments in the Macroeconomic situation in Ethiopia and in the wider Transport sector.

Macroeconomic Scenarios and Development Introduction The overview of the Macroeconomic Development and Master Plan GDP Forecasts are reproduced from Appendix 1.2 of the National Transport Master Plan Study. Taking Gross Domestic Product as a whole, and in line with the short term projections made by the Ministry of Finance and Economic Development, coupled with recent economic performance over the past decade and a half, estimates of future economic growth (for three cases, and two development scenarios), were compiled.

General Economic Overview The economy of Ethiopia is characterized by the dominance of the agricultural sector, which directly supports the bulk of the country’s estimated 75 million population, 84 percent of whom live outside of urban areas through largely peasant-based subsistence farming. Employment is largely provided by agriculture with 80 percent of the country’s economically active population being employed in the sector. Although it has been declining, intra-rural migration remains the dominant form of in-country movement within Ethiopia (38 percent in 1999) followed by rural-urban migration (at 24 percent).

Industrialization of the economy is relatively low with the industrial sector accounting for less than 15 percent of the total value of domestic production. The services sector expanded rapidly in the 1990s and is steadily growing in importance. The manufacturing sector provided permanent employment for some 78,000 people on the basis of sample survey data for the second quarter of 2005/06. The Ministry of Finance and Economic Development reported a 24:76 formal to informal sector employment ratio from the 1999 Labour Force Survey.

Overall economic performance is therefore generally determined by the performance and productivity of agriculture, which in turn is heavily dependent on the extent and timing of rainfall. Drought has affected the country approximately once in every ten years over the past century, this frequency increasing to as high as once in every three years over the period since 1990.

These climatic shocks underpin the high volatility that has been characteristic of Ethiopia’s macroeconomic environment, noticeably evident in the extreme ﬂ uctuations in agricultural performance in just the recent three year period between 2001/2 and 2003/4 when the sector recorded an 11.9 percent fall in value-added in 2002/3, rebounding with an 18.9 percent rise in 2003/04. This volatility is further induced by ﬂ uctuations in terms of trade and in commodity prices, especially those of coffee, which has long been the country’s major export and key foreign exchange earner. The economy has a high dependence on rain-fed low productivity subsistence agriculture.

13 Investment Opportunities and Short Term Economic Growth Projections Investment opportunities embrace a wide range of agricultural and related activities that extend into agro-processing, horticulture and ﬂ oriculture as well leather, textiles and other sub-sectors of the economy. These are brieﬂ y summarized in the following paragraphs, together with constraints and issues highlighted in the World Bank’s “Ethiopia: Country Economic Memorandum Background Report” on export growth potential in Ethiopia.

Coffee and tea continue to offer potential for production, processing and export opportunities to private investors. In fl oriculture, the combination of relatively low unit production costs, the relative proximity to European markets, an ideal climate of warm temperate days with cool temperate nights and the Ethiopian “summer” coinciding with the European winter, all serve to make this fast growing sub-sector a highly attractive industry for the non-traditional export market. From just three fl ower producers fi ve years ago, the number of producers has now grown to more than 30 and it was estimated that the value of fl ower exports could reach some 100 million USD by 2007.

Similarly, in horticulture, high value fresh produce sold to markets in Europe continues to present signiﬁ cant export earning revenues.

Constraints in the sub-sector, however, relate to relatively low yields and quality and potentially a shortage of water. The lack of post-harvest cold storage facilities (from farm to airport) and an insuffi cient number of refrigerated trucks present important problems for high value perishable produce and fl ower exporters. In addition to these high value exports, chilled meat exporters also used to face major constraints in the form of insuffi cient air cargo space and refrigeration facilities at Bole International Airport. However, liberalization of aviation policy has recently opened up Ethiopian skies to charter cargo companies resulting in increased frequency and reliability of fl ights to Europe. A new cargo terminal has also been opened with adequate facilities.

Apicultural production – around 25,000 tonnes of honey in 2003 – is relatively small but has the potential for commercial exploitation.

In forestry, some 80,000 ha of industrial forest have been established for limited sustainable exploitation, enabling commercial forest-based production of gum, incense, pulpwood, matchwood and structural timber. Around 100,000 ha of the Awash Valley is under cotton, and signiﬁ cant opportunities exist for its production and processing through expansion of cotton cultivation in the various major river basins of the country. Export opportunities also exist in the markets for sugar and spices.

In the livestock sub-sector, besides the export of live animals and high-value animal skins and hides, investment opportunities exist in ostrich, civet cat and crocodile farming. Sheepskins and hides from the Ethiopian highlands provide a strong base for semi-processed leather, fi nished leather and leather products. The strategy for this sub-sector is to raise the level of processing to fi nished – shoe, jacket and bag – products. In fi sheries, estimated annual freshwater fi sh production is of the order of 45,000 tonnes.

Nonetheless, reported constraints in the livestock and meat products sub-sector include poor quality and sanitation, prevalence of disease, delays at border posts in the counting of live animals, insufﬁ cient facilities for the loading and unloading of live animals at the port of Djibouti and lengthy bureaucratic export procedures and high embassy approval costs.

14 The dairy industry suffers from old equipment and machinery, low-producing old dairy breeds and the absence of milk collection, processing and marketing regulations. Low levels of domestic consumption do not justify establishing milk processing plants.

Outside the agricultural and agro-processing sectors, tourism, hydro-electric power and mining all offer potentially signiﬁ cant private sector investment opportunities. Manufacturing opportunities also exist in glass and ceramics, chemicals and chemical products, drugs and pharmaceuticals, plastic products and building materials.

Foreign private sector perceptions of investing in Ethiopia highlight infrastructure, especially telecommunications, as being an area in particular need of improvement. Given the country’s low rate of urbanization, road improvements between main towns – whilst laudable – is considered insufﬁ cient in the absence of accompanying progress in power and telecommunications. State monopolies in shipping and telecommunications, and preferential treatment for non-private sector enterprises, also constitute impediments to a conducive private investor environment in terms of cost and quality effectiveness.

In recent years, economic growth has begun to be more broad-based with the key non-agricultural sectors of the economy - industry, construction and services - registering growth rates of 6.9 - 7.0 percent, 8.2 percent, and 6.2 - 6.3 percent respectively in 2003/4. The Economist Intelligence Unit reported growth in 2004/5 of 12.3 percent in agriculture, 6.3 percent in industry and 5.3 percent in the services sector. Overall real GDP growth was anticipated to be around 7 percent in 2005/6 due to good rains and a third consecutive bumper harvest.

Economic Forecasting and Scenarios Introduction The preparation of a 20-year-investment-plan for the transport sector requires that forecasts be estimated for the future development of the Ethiopian economy. The starting point in the forecasting process is to consider domestic economic activity and output as a whole, as measured by Gross Domestic Product (GDP). Short term GDP forecasting (between 18 and 36 months), provides the basis for estimating economic growth and performance and for guiding the country’s ﬁ scal planning and budgeting in the context of its medium term (three to ﬁ ve year) macroeconomic framework.

GDP Growth Rate Estimates Subject to the boundaries of the overall GDP forecasts, sectoral forecasts are also prepared for the three major sectors of the economy – agriculture, industry and services – together with sub-sectoral forecasts as appropriate. In Ethiopia, the overarching framework for the period 2006/7 to 2010/11 is the Plan for Accelerated and Sustained Development to End Poverty (PASDEP) prepared by the Ministry of Finance and Economic Development (MoFED) in September 2006. This document sets out various targets for economic performance by 2009/10, the last year of the ﬁ ve-year PASDEP programme.

15 Table 2.1 Annual GDP Growth Estimates (2006/7 – 2026/27)

Short term Medium term Long term Economic development scenario 2006/7 –2009/10 2009/10 – 2016/17 2016/17 – 2026/27 A-1 status quo 7.7% 6.8% 6.0%

A-2 regional urbanization 10.1% 8.1% 6.7% Source: Consultant’s estimates.

Regional Development Scenarios Low, medium and high growth estimates were provided for the short, medium and long terms, covering the 20-year horizon of the Transport Master Plan period, to 2027.

Besides estimating economic growth rates for forecasting purposes, a distinction has also been made between two principal scenarios in terms of their likely impact upon future choice and patterns of trade routes and transport modes, as follows:  Scenario A: Regional urbanization (outside of Addis Ababa) Development and growth of towns, cities and urban centres in the regional states  Scenario B: External land access to sea ports In addition to the present-day availability of the ports of Djibouti and Berbera, the availability of the Eritrean ports of Assab and Massawa for exports and imports.

Table 2.2 Regional Development Scenarios

A-1 Status Quo A-2 Regional urbanization Urban development and growth predominantly in Addis Urban growth in regional towns, cities and urban Ababa centres

B-1 Status Quo B-2 External sea ports access International trade all through Djibouti (and Berbera) ports 50% international trade via Djibouti/Berbera and 50% via Assab/Massawa ports

Highways and Roads

Introduction The current standard and condition of the road network is a constraint to the development of an efﬁ cient road transport system. This is being addressed through major road building and rehabilitation projects now underway under the Road Sector Development Programme (RSDP). Unfortunately, this pace of change can lead to other road transport problems if action is not taken now on new enforceable laws and resources to implement them.

Such action is needed to counter the inevitable increase in average road speed as a direct consequence of better roads and vehicles being driven faster that will lead to even more accidents. Road safety, and the need for safer road designs, are discussed in the context of the National Transport Master Plan, but is an important issue for the road transport industry.

16 A feature of the present road network is the substantial number of gravel roads, many of which are in poor condition. The paved road network is very small by world standards. Even the best gravel roads increase vehicle operating costs by a third or more, and reduce the productivity of the ﬂ eet. Over the past few years, the improved condition of the road network through rehabilitation and upgrading, and more intensive maintenance has resulted in the reduction of vehicle wear, consumption of fuel lubricants, spare parts, tires, etc., on the improved routes.

Road Network Development Strategy The Ethiopian Roads Authority (ERA) is responsible for around 19,300 km of federal road. This includes 5,485 km of trunk roads, and associated link roads that generally link two trunk roads with one another. It also includes main access roads that join other important locations to the network. The regional states have their own Rural Roads Authorities (RRA’s), which have a combined network of about 20,300 km of road, and there are also municipal (urban) roads. Community-level roads are presently unclassiﬁ ed and receive only irregular and unplanned maintenance by communities, with occasional assistance from Woreda or NGO funds.

The total classiﬁ ed road network (the ERA and RRA networks) amounts to some 39,500 km. Given the size of Ethiopia and its population, the road network is very small by world standards. Only 5,000 km (13percent) of the classiﬁ ed network is paved. Some 14,300 km (36 percent) consists of main gravel roads and the regional roads are generally graveled. The current road network is shown in Figure 2.1 below.

Figure 2.1 National Transport Network (2007)

17 Only half the paved roads are reported to be in good condition, together with 40 percent of ERA’s gravel roads and one-third of the rural roads. These fi gures show a marked improvement over those of eight years ago, due to the implementation of the ongoing 10-year Road Sector Development Programme (RSDP), which is being extended for another fi ve years to 2012 (RSDP-III). The introduction of the Road Fund has helped greatly in providing fi nance and other resources for road maintenance. After the conclusion of RSDP-III, scheduled for 2012, the main road network is expected to become as shown in Figure 2.2 below.

Figure 2.2 National Road Network After Completion of RSDP-III

The Road Sector Development Program is having important implications for commercial road transport in Ethiopia. First and foremost, the rural population is beneﬁ ting from improved access to transport services increasing mobility. This in turn leads to higher demand for commercial road transport, which in turn results in an increase in the number of commercial road vehicles and vehicle-kilometres travelled. This improved access improves network connectivity and enhances the integration of markets. It is noted that the topography of Ethiopia is challenging and presents especial problems in terms of road construction, maintenance and higher vehicle operating costs. The topography of the country is a major constraint on the development of some modes of transport, such as railways.

Road Traffi c and Composition Road Traffi c Traffi c count data for the main federal roads show fl ows of the order of 10,000 vehicles per day (vpd) on the main road from Addis Ababa to Adama, but much lower levels elsewhere, seldom exceeding 2,000 vpd, and often reaching only a few hundred vpd, even on the main arteries. Over most of the rural network, trucks and buses are the predominant vehicle types. In 2004 trucks and truck-trailers accounted for 57 percent of all traffi c in vehicle-kms, buses (including minibuses) for 23 percent, and cars for only 20 percent. 18 ERA has undertaken regular counts over the country’s federal rural road network since 1993. Total daily traffi c fl ows for this network, in vehicle-km per day, are summarized for the years 1994, 1999 and 2004 in Table 2.3. Derived annual growth rates for the four specifi ed vehicle groups are shown in Table 2.4. It may be seen that in 2004 trucks and truck-trailers accounted for 57 percent of all traffi c in vehicle-kms, buses (including minibuses) for 23 percent, and cars for only 20 percent. Corresponding proportions in 1994 were 60, 17 and 23 percent respectively, with the biggest shift in composition over the following ten years being that for buses from 17 to 23 percent.

Table 2.3 Summary of Daily Trafﬁ c on ERA Network (1994–2004)

Vehicle-km '000 per day 1994 1999 2004 Car 737.0 933.7 1,245.4 Buses 523.3 1,007.4 1,375.5 Trucks 1,397.8 1,832.4 2,596.4 Trucks and Trailers 489.1 726.0 875.4 Total Flows 3,147.2 4,499.5 6,092.7

Table 2.4 Growth in Daily Trafﬁ c (in Vehicle-Km) on ERA Network (1994-2004)

Annual growth rate in % 1994-1999 1999-2004 1994-2004 Car 4.8 5.9 5.4 Buses 14.0 6.4 10.1 Trucks 5.6 7.2 6.4 Trucks and Trailers 8.2 3.8 6.0 All Trafﬁ c 7.4 6.2 6.8 Source: Ethiopian Roads Authority.

Traffi c is concentrated on a few major routes, including many radiating from Addis Ababa, with around 80 percent of traffi c in 2004 moving on half the surveyed network. The all-weather network has a length of 6,593 km, thus comprising 49 percent of the surveyed ERA network for 2004. Over these (15) all-weather roads estimated traffi c movements were 4,717 million vehicle-km per day, or 79 percent of the total surveyed traffi c in 2004.

Table 2.5 gives details for 2004, based on the ERA counts, but with an adjustment to reduce the stated length of 368 km for the Mille-Assab section to 183 km for the distance Mille-Galiﬁ , since most trafﬁ c on this route presently turns off at Dobi to continue to Djibouti rather than Assab.

Table 2.5 Estimated Trafﬁ c Flows on Selected Routes in 2004

(’000 vehicle-km per day) Routes Cars Buses Trucks Truck & All Vehicles Trailers Addis Ababa - Adama (98 km) 252.5 184.9 306.5 110.9 854.9 Adama - Awash (125 km) 31.6 31.8 73.0 72.4 208.8 Awash - Mille - Galifi (491 km) 33.9 17.2 77.0 194.4 322.5 Total: Addis Ababa - Galifi (714 km) 318.0 233.9 456.5 377.7 1,386.2 Other All - Weather Roads (5,879 km) 668.8 914.4 1,462.6 286.5 3,332.2 Total: All - Weather Roads (6,593 km) 986.8 1,148.3 1,919.1 664.2 4,718.4 Other Surveyed Roads (6,945 km) 246.7 224.5 637.1 137.4 1,245.7 All Surveyed Roads (13,538 km) 1,233.5 1,372.8 2,556.2 801.6 5,964.1 Source: Consultant’s analysis, based on ERA Traffi c Report.

19 Trucks and truck-trailers accounted for 55 percent of trafﬁ c on the main all-weather roads and for 62 percent on other roads. Buses, including minibuses, accounted for 24 percent of trafﬁ c on the all- weather roads, but only 18 percent on other roads.

Over most of the main all-weather network of 6,593 km, the truck proportion of total traffi c did not vary greatly, lying between 45 and 65 percent on more than three quarters of the network. The principal exception was along the main truck route to Djibouti, where the truck proportion was much higher at 70 percent between Adama and Awash, and 84 percent from Awash to the Djibouti border at Galifi . The whole 704-km route from Addis Ababa to Galifi accounted for 18 percent of truck movement over the surveyed network, for 47 percent of truck-trailer movement, and for 25 percent of total movement by all trucks.

Bus shares of total trafﬁ c were more variable, lying between 15 and 35 percent on over three quarters of the main all-weather network. Low bus proportions were found along the main route to Djibouti beyond Awash (5 percent), and on some remoter roads in the west. High proportions were recorded over roads close to Addis Ababa and between Dire Dawa and Harar (42 percent).

Road Traffi c Growth The 2004 ERA Traffi c Report also compares 2003 and 2004 ADT fi gures for most of the main all- weather network (excluding the 330 km of the A 9 route between Alemgena and Sodo), and also some other roads. After adjustments to refl ect reduction of the Mille-Galifi section length from 368 to 183 km, a breakdown of traffi c movement for the two years may be made as in Table 2.6. It should be borne in mind that there was a substantial increase in the length of the surveyed network.

Table 2.6 Trafﬁ c Growth (2003-2004)

Road Length (km) Daily Traffi c ('000 veh-km) Roads 2003 2004 2003 2004 All-weather network 6,263.0 6,263.0 4,340.0 4,595.0 Other specifi ed main roads (a) 683.0 683.0 114.0 151.0 Other surveyed roads, 2003 5,721.0 --- 995.0 --- Other surveyed roads, 2004 --- 6,592.0 --- 1,218.0 All surveyed roads 12,667.0 13,538.0 5,449.0 5,964.0 Note: (a) Dodola–Goba, Yabelo–Moyale, Mekenejo–Asosa and Shire–Rama. Source: ERA Traffi c Report, 2004, with Consultant’s adjustments.

The indicated traffi c growth rates are 5.9 percent for the all-weather network, and 32.7 percent for the other four specifi ed roads; this gave an overall increase of 6.6 percent for all the 6,946 km where detailed information was available. For the remainder of the network there was a traffi c increase of 22.4 percent over a total road length which itself increased from 5,721 to 6,592 km, indicating a rise in average traffi c fl ow from 174 to 185 vehicles per day (by 6.3 percent). It seems reasonable to conclude that, in respect of common lengths of road, the average growth of traffi c was about 6.5 percent (as against 9.5 percent for the total surveyed network whose length grew by 6.9 percent).

ERA data can also be used to give growth data for the longer period 2000/4 over a selection of roads from the all-weather network with a total length of 4,101 km. Over these roads total trafﬁ c increased from 2.870 million vehicle-km in 2000 to 3.642 million vehicle-km in 2004, at a rate of 6.1 percent per annum. This again is well below the corresponding rate of 8 percent over the same period for the whole surveyed network, which was inﬂ ated by a continuous increase in network length.

20 Corresponding rates for the vehicle classes between 2000 and 2004 were 6.4 percent for cars, 6.8 percent for buses, and 5.7 percent for trucks and truck-trailers.

Road Development Plans A summary of Ethiopia’s Road Network Composition is provided in Table 2.7.

Table 2.7 Road Network Compositions, Km (2008)

Class of Road Paved Unpaved Total Federal Roads 6,066.0 14,363.0 20,429.0 Regional Roads - 23,930.0 23,930.0 Subtotal (classiﬁ ed roads) 6,066.0 38,293.0 44,359.0 Rural Roads (unclassiﬁ ed roads) - 70,038.0 70,038.0 Total 6,066.0 108,331.0 114,397.0

Details of Growth of Road Network and Vehicle-Km are provided in Figure 2.3.

Figure 2.3 Growth of Road Network and Vehicle-Km (2008) Growth of Classiﬁ ed Road Network & Vehicle-Km

260 240 220 200 Vehicle-Km 180 Classiﬁ ed Roads(km) 160 140 120 100 Growth Index (relative to 1997/98)

1997/981998/991999/002000/012001/022002/032003/042004/052005/062006/072007/08

The total road sector expenditure (including all ﬁ nancing sources) has substantially increased from ETB 3.1 billion to ETB 8.67 billion (nominal) in 2008. The share of the Government in the total road expenditure, especially after 2005, has increased with a spike – which necessitates close monitoring of the macro-economic situation throughout the project implementation.

Road Network Expansion and Improvement The Ethiopian Roads Authority has prepared the Road Sector Development Program Phase III (2008 to 2012), which has the objective of continuing the restoration and expansion of the road network. In spite of the recent growth, the road network is one of the least developed in Africa, with a density of 35.9 kms per 1000 square kilometres and 0.53 km per 1000 population, compared to the African average of over 50 km/1000 square kilometres (Africa Trade Policy Center: September 2000). The Ethiopian National Transport Master Plan proposals for road network development are listed below: (1) Reaching the un-served Woredas is the main priority for most regions and this is the most urgent task. The aim should be for all-season roads, suitable for buses and goods vehicles, to Woreda capitals. For those Woredas that already have all-weather access, the priority task is to go further and ensure the provision of all-season roads to the Kebeles.

21 (2) Sealing or paving the busiest gravel roads helps the economy. International studies show that trade growth is very sensitive to transport cost reduction, and paved roads reduce transport costs by a third or more. Sealed roads are also regarded as important by public transport operators and by many tourists. Roads carrying more than 100 vehicles in a day should be considered for sealing. Gravel roads with suitable low-cost structures will be most appropriate to ensure access between the Kebeles and the Woredas for light buses, pickups, intermediate and animal transport. (3) The need to amend the road design standards. Present-day traffi c conditions give a need for greater room for pedestrians, cyclists and non-motorised or agricultural traffi c. Shoulders should be paved. Another need is the separation of road and rail traffi c by effective protection for road and rail users at level crossings on the busy parts of the road network. (4) Need for clear responsibilities for ownership and maintenance management. The national road network has to reach down to Kebele level. The regional states should be responsible for the non- federal roads down to Kebele level. Further, a nation-wide administrative system should be established that will provide technical assistance to local communities and Woredas for the design, tender and supervision of Woreda– Kebele and community roads. Community access will generally be earth roads or improved tracks and trails built with labour contribution from within the Kebeles, while the Woreda roads will be graveled and fi nanced by the Road Fund. Support for community roads should only be considered once fi rm and binding commitments to regular maintenance are in place. (5) Development of labour-based contractors. Conventional contracts using heavy plant can be used for the roads to Woredas that need to support heavy vehicles, but for the links to the Kebeles there is great scope to develop labour-based contracts using light equipment and newly-developed and trained small local contractors. In both cases the contractor can be given responsibility for maintaining the road during 3-5 years after completion. This ensures a single point of responsibility in the event of a pavement failure, with the contractor responsible for repairs (without extra payment). Where foreign contractors are used on major projects, they may appoint a local contractor for remedial works but under the responsibility of the foreign contractor. (6) Roads to borders. These should continue to have a high priority in the interest of regional economic development. Links with southern Sudan, which is expected to grow rapidly, are particularly weak. Such roads can sometimes take advantage of specifi c fi nancial instruments, as the international community gives great importance to promoting international links within Africa. If linked with a modernisation of the road transport agreements with neighbouring states, this policy will give new opportunities for the development of transit traffi c across Ethiopia by road. Such traffi c will generate revenue for the economy as a whole and for the Road Fund in particular. Road Safety Despite the fact that Ethiopia has a low number of road vehicles, it is almost the fi rst country in Africa in terms of its traffi c accident rate. Historical data for Road Traffi c Accidents (RTA’s) in Ethiopia are presented in Table 2.8 below.

22 Table 2.8 The Magnitude of Road Trafﬁ c Accidents (RTA’s) in Ethiopia

Type of ac- Year of Trafﬁ c Accident Recording cident 1996/7 1997/8 1998/9 1999/00 2000/1 2001/2 2002/3 2003/4 2004/5 Light injury 2080 2444 2173 2120 2134 2196 2365 2705 2731 Heavy injury 1618 1762 1642 1771 1697 1712 1790 2072 2368 Property dam- 6512 7783 6560 6666 6684 7188 8563 10569 10822 age Death (of 1314 1313 1283 1274 1261 1659 1888 2111 2176 fatality) Total 11524 13302 11658 11831 11776 12755 14606 17457 18097 Percentage 11.4% 9.9% 11.0% 10.8% 10.7% 12.1% 12.9% 12.1% 12.0% share of death

The traffi c accident rate in Ethiopia is growing at alarming rate especially since 1996/97. In 1996/97 the number of registered traffi c accidents was 11,524, but this reached 17,457 in year 2003/4. Out of these total registered accidents, fatalities have amounted to 12 percent, on average. In Africa, Ethiopia is second highest, next to the Central African Republic, having 195.1 traffi c accidents per 10,000 vehicles. The prevalence of an extremely alarming number of road traffi c accidents has created large negative socio-economic costs in actual and opportunity costs.

On the other hand, the fatality risk per head of population was one of the lowest, at 3 per 100,000 in 1994/5, due to the low level of motorization. The reasons for this situation include poor driving standards, ineffective enforcement of driving regulations, poor condition of vehicles, and inadequate road design. Pedestrian fatalities are high, partly because adequate sidewalks are often absent. Responsibility for safety is diffused between several bodies, including the Transport Authority, the Ethiopian Roads Authority (ERA), the regional and municipal roads authorities, the trafﬁ c police, and the Road Fund which devote a proportion of their funds to its improvement.

In 2002 ERA commissioned TRL and Ross Silcock to undertake a road safety study leading to an Action Plan. This led to the establishment of an Interim Road Safety Committee and an Interim National Road Safety Co-ordination Ofﬁ ce, while Road Safety Units are also up at federal and regional levels. The recommended National Road Safety Council has yet to be set up.

While these institutional measures will no doubt have some beneﬁ cial effects, it is also clear that some fundamental improvements in road discipline and in police enforcement will also be required. It is encouraging that the Transport Authority is now working on a new driving code, which will represent the ﬁ rst revision of the existing code since 1956.

RTA’s: Road User Incidence The accident rate per vehicle-km in Ethiopia is very high. Most accidents are caused by drivers; most casualties are pedestrians, many of them young ones.

23 Table 2.9 Trafﬁ c Accident Deaths by Road User Type

Drivers Passengers Pedestrians Ethiopian Fiscal Year Number Percent Number Percent Number Percent 2001/2 102 6.3 674 41.4 852 52.3 2002/3 117 6.5 731 40.3 965 53.2 2003/4 153 7.5 838 39.7 1,120 53.1 2004/5 149 6.8 791 36.2 1,248 57.0

Vehicle Safety Record by Type Table 2.10 shows the types of vehicles and their involvement in road trafﬁ c accidents in 2004/5. Without looking into the mileage travelled of the different types of vehicles, it appears clearly that taxis are accident prone, followed by buses, both of which are public transport.

Nearly half the fatal accidents involve trucks, including Isuzu trucks, which are well known for their accident proneness by the public. Taxis and buses again are highly involved in fatal accidents.

Table 2.10 Accident Involvement of Vehicles in the Year 2004/5

Types of No. of inspected & registered Fatal accident Total acci- Risk per 100 Percentage vehicle vehicles dents vehicles involvement

Number Percentage Number Percentage Car 71,672 43 362 20 6,786 9 38 Taxi 14,504 9 259 14 2,707 19 15 Bus 14,152 9 204 11 2,373 17 13 Trucks 61,170 37 869 48 5,363 9 30 Others 4,271 3 117 6 493 12 4 166,309 100 1,801 100 17,722 11 100

Driver Training Driver training in Ethiopia is being improved. There are many new ideas planned that include the desire to reduce the maintenance element of the current driving training scheme, to privatize the implementation of the scheme, and to introduce training in ﬂ eet management. This would be an ideal platform to launch CPC training.

Vehicle Testing A key to improving safety standards, as well as effi ciency, is to ensure that commercial vehicle fl eets are safe and well managed. At present, vehicles are required to be licensed and tested annually, although the tests are not effective. The overall technical condition of vehicles is very poor, and contributes to traffi c accidents.

The annual road vehicle test is not effective. A more realistic test is needed, covering general condition, proper brake and steering testing, mechanical condition and the condition of tyres. The lack of a law specifying the legal tread depth on a tyre is noteworthy.

The Transport Authority is considering importing new testing equipment that would demonstrate the required service level required from the now privatized testing stations and a new law that would enforce the change. Failure to pass the new test until repairs are done would remove some of the 24 more dangerous taxis, goods vehicles and buses and would also help to improve the availability of the vehicle ﬂ eet. There are agreed international standards for testing vehicles under UN/ECE rules.

There is no real second-hand market for vehicles, with older vehicles used on short runs, for local trafﬁ c, shunting, etc. Vehicles tend to be run “into the ground” and safety is a big issue when such old and poorly maintained vehicles are involved.

Legislation and Institutions Legislation and enforcement is weak in road trafﬁ c management and road safety and it needs the formation of the National Road Safety Council to provide a focus for action. Road transport must be safe and cause minimum damage to health.

Commercial Focus Commercial operators are registered in the same way as other businesses but there is no speciﬁ c extra requirement for those involved in the transport business. The road trucking associations are not seen as effective and do not aid road safety.

The proposed National Road Safety Council (NRSC), intended to lead to a systematic and coordinated approach to the problem, remains to be created after several years. There is an interim Road Safety Coordinating Ofﬁ ce, which is trying to move forward some of the recommendations of a road safety study made some years ago, but implementation cannot be fully effective until the permanent body is formed.

The trafﬁ c police are very weak. Their status and budgets need to be upgraded urgently. They are generally placed within the crime investigation and prevention function and focus primarily on whether or not to prosecute offenders, rather than leading an effort to reduce the number and severity of accidents.

Each region has road safety committee. This includes stakeholders such as the trafﬁ c police, the transport authority, the rural roads authority, etc. Most regions report that it is not very effective and they await the formation of the NRSC and its associated regional structure. One problem at present is that ERA is seldom an active member of the regional committees, as its district maintenance organisation is based at 10 sites across the country which often does not coincide with regional capitals.

The proposals of the road safety study need to be implemented and are included in the master plan. The formation of the NRSC is a needed early step. At the same time the Transport Authority could start implementing the measures aimed at commercial road transport operators, as recommended above, and preparing draft new road transport regulations to be considered by the NRSC, when it is set up, as well as the National Transport Council and other bodies.

Vehicle Fleet and Travel Characteristics Introduction There has been a steady growth of the road vehicle fl eet using the Ethiopian road network over the last 15 years. Table 2.11 gives the latest available data from the Transport Authority, indicating growth in the total vehicle fl eet from 118,732 in 2000/01 to 166,309 in 2004/05, at an average growth rate of 8.8 percent per annum. This rate falls slightly to 8.6 percent, if motor cycles are excluded, and to 25 8.3 percent if trailers are also excluded. It may be inferred that the vehicle fl eet has been growing at around 9 percent per annum for nearly 15 years, thus more than tripling in size over that period.

Table 2.11 Growth of Ethiopian Road Vehicle Fleet (2000/01- 2004/05)

Annual Average Growth 2000/1 2004/5 Rate (%) Private cars 42,586 59,785 8.9 Station wagons 6,984 11,887 14.2 Taxi 10,311 14,504 8.9 Sub-total Light Vehicles (LV's) 59,881 86,176 9.5 Buses 11,967 14,152 4.3 Trucks 37,587 50,444 7.6 Truck-tractors 1,278 1,736 8.0 Tankers 1,453 1,936 7.4 Sub-total, Trucks 40,318 54,116 7.6 Total: LV’s buses and trucks 112,166 154,444 8.3 Trailers and semi-trailers 4,396 7,594 14.6 Motor cycles and special vehicles 2,170 4,271 18.4 Total Vehicle Fleet 118,732 166,309 8.8 Source: Transport Authority.

The ﬂ eet total of 166,309 for 2004/5 indicates an overall vehicle ownership rate of only some 2.25 per thousand people. Since a high proportion of these vehicles are owned and operated in the Addis Ababa area, vehicle ownership rates in rural areas are very low indeed. If the country’s economic development goals are achieved on a sustained basis, however, rapid growth of the ﬂ eet from this low base may be expected to continue for many years to come.

A breakdown of annually inspected and registered vehicles by types of services for 2007 is provided in Table 2.12 below.

Table 2.12 Annually Inspected and Registered Vehicles by Types of Services

Year Government Commercial Taxi Private Others Total 1997 14,239 30,315 6,524 39.001 6,423 96,502

1998 12,983 34,033 9,847 40,608 5,409 102,880

1999 15,356 34,615 9,598 40,611 5,670 105,850

2000 15,573 39,122 9,858 41,985 5,684 112,222

2001 15,750 42,724 10,325 43,770 6,163 118,732

2002 16,165 44,647 11,571 47,362 6,154 125,899

2003 17,070 43,176 12,506 53,540 6,646 132,938

2004 17,424 50,211 12,,395 58,696 7,081 145,807

2005 20,013 65,034 14,523 58,221 8,528 166,309

2006 18,588 64,177 18,625 61,342 9,325 172,057

2007 23,013 73,066 20,040 65,118 9,130 190,367

Source: MoTC

26 A disaggregation of Fleet by Types of Services for 2007 is provided in Table 2.13 below.

Table 2.13 Road Passenger and Freight Fleet Data-Total Vehicles by Capacity (Year 2007)

Non Rental For Rental Service Grand Govern- UN , AU Private Total Types of Vehicles Public Org. Private Total Commercial Taxi Total ment & C.D. Comm.

Passenger Transport 5 seats 2982 609 1380 4444 48031 57446 4541 8222 12763 70209 6-8 seats 1025 174 91 826 2446 4562 1259 906 2165 6727 Station Wagon 3396 471 3395 1799 6241 15302 1999 - 1999 17301 Double purpose (5 men, 5 4877 345 950 2478 3195 11845 2811 - 2811 14656 qnt) 9-12 seat ( minibus) 493 123 152 965 833 2566 4183 8724 12907 15473 13-29 seat (midi-bus ) 331 88 49 439 140 921 2782 2 2784 3705 30-45 seat (midi-bus) 191 53 2 64 - 310 1857 - 1857 2167 Above 45 seats (maxi-bus) 89 121 2 1 - 213 1030 - 1030 1245 Subtotal 13384 1984 6021 11016 60760 93165 20462 17854 38316 131481

Freight Transport (quintals) Dry cargo Pickup/<15/ 2241 111 414 1786 3159 7711 3419 - 3419 11130 Trucks/15-35/ 763 9 25 2927 111 3835 8874 - 8874 12709 Trucks /36-70/ 688 8 128 1012 40 1876 3588 - 3588 5464 Trucks /71-120/ 840 46 112 155 8 1161 5780 - 5780 6941 Truck Trailers /121-180/ 369 5 12 15 45 446 4074 - 4074 4520 >180 6 - - 1 - 7 99 - 99 106 Trailer 131 16 43 35 16 241 4902 - 4902 5143 Road tractor 117 3 17 23 2 162 1023 - 1023 1185 Semi-trailer 3 - - 17 5 25 435 - 435 460 Subtotal 5158 198 751 5971 3386 15464 32194 - 32194 47658

Liquid cargo (liter) <10,000 58 1 7 19 11 96 517 - 517 613 10,001-13,000 286 15 16 135 19 471 613 - 613 1084 13,001-14,000 46 - - - - 46 35 - 35 81 >14,000 53 - 1 - - 54 665 - 665 719 Trailer 1 - - - - 1 424 - 424 425 Semi-trailer ------103 - 103 103 Subtotal 444 16 24 154 30 668 2357 - 2357 3025

Other Motor cycles 3851 58 67 370 896 1391 357 2186 2543 7785 Agricultural tools 61 - - 16 16 32 39 - 39 132 Others (spec. equip.) 115 7 4 50 30 91 80 - 80 286 Subtotal 4027 65 71 436 942 1514 476 2186 2662 8203

Grand total 23013 2263 6867 17577 65118 91825 55489 20040 75529 190367

Source: MoTC

27 Truck Fleet Size and Capacity Commercial for-hire trucks registered in 1999 were 18,010. In 2005, the total number of freight transport ﬂ eet reached 23,724, at an average annual growth rate of 4.5 percent. From the total number of dry cargo vehicles, about 22 percent were in the range of 30-40 ton load capacity and operate on the Addis Ababa-Djibouti corridor. The remaining vehicles are below 18-ton load capacity, and operate on medium and short distance routes, outside the major corridor. In 2007 the number of trucks had risen to 47,658, including trailer and semi-trailers, hence growth rates have increased in recent years.

Data for imported freight vehicles are provided in Table 2.14 below.

Table 2.14 Imported Freight Transport Vehicles

Year Less than 19 quin- 20-90 Qts More than 91 Liquid cargo TOTAL tals (Qts) with trailer and vehicles without trailer 1987/88 0 74 71 86 231

1988/89 2 33 73 71 179 1989/90 24 146 17 16 203 1990/91 199 425 32 7 663 1991/92 423 716 283 23 1,145 1992/93 217 985 270 32 1,504 1993/94 243 969 621 138 1,971 1994/95 416 1,327 1,078 184 3,005 1995/96 651 1,791 1,286 139 3,867 1996/97 308 1,205 844 144 2,501 1997/98 254 600 366 39 1,259 1998/99 197 616 476 312 1,601 1999/00 309 941 1,379 544 3,173 2000/01 528 2,070 2,633 91 5,322 2001/02 381 2,040 1,181 46 3,648 2002/03 316 3,277 1,608 46 4,931 Average annual 279 1,076 764 120 2,219 new vehicle % share since 1992 13% 48% 34% 5% 100% Note: Ethiopia, compared to many countries, has a low proportion of multiple-axle trucks in its ﬂ eet.

Bus Fleet Size In 1999, all categories of public passenger commercial vehicles registered by the Transport Authority were 8,923, which increased to 14,577 in 2005 with an annual growth rate of 9.4 percent.

Out of the total ﬂ eet of public passenger transport vehicles registered in 1999, conventional buses over 45-seat capacity were 751. This increased to 1,381 in 2005 and about 1,500 in 2006/07. In 2007 the number of large buses had dropped to 1245, which seems a notable decrease.

The total fl eet of conventional buses included among others, over 520 Anbassa city buses and 114 over-aged Walia intercity buses. These two organizations alone accounted for over 44 percent of conventional bus fl eet. No fl eet replacement and expansion has been made in recent years. Hence availability and utilization of Anbassa buses has dropped markedly. Recent information shows that the number of daily operational vehicles was hardly 400, indicating that over 25 percent of the fl eet is perpetually under maintenance. 28 Table 2.15 Annual Growth of Minibus Taxi Fleet by Seat Capacity (1998/99-2004/5)

Seat Capacity Growth Growth Growth Year <9 9 ~ 12 >9 TOTAL in % in % in % 1999 3163 - - - - 9598 - 2000 4364 38.0 6435 -14.8 12 9858 2.7 2001 4815 10.3 5482 0.3 10 10325 4.7 2002 5192 7.8 5500 15.8 11 11571 12.1 2003 5845 12.6 6368 4.4 13 12506 8.1 2004 6963 19.1 6648 -18.5 13 12395 -0.9 2005 6893 -1.0 5419 43.3 12 14673 18.4 Average annual 12.4 7768 4.4 7.0 growth

Source: Transport Authority.

The minibus taxi ﬂ eet grew from about 9,600 vehicles in 1999 to some 5,419 vehicles in 2005. In 2007 the total number of minibus taxis had risen to 15,473, an increase of some 800 vehicles.

In East Africa, the most popular minibus models are Japanese, imported second-hand through traders in the Gulf. In Nairobi and Kampala most are now diesel powered because of their relative economy of operation, but altitude and terrain mean that gasoline engines are preferred in Addis Ababa. Vehicle age varies widely, but 10 to 15 years is typical. Body corrosion is the main determinant for scrapping.

The city fl eet in Addis Ababa has received regular investment over the past ten years, mostly supported by bilateral assistance from the Netherlands and Belgium. Truck-based passenger chassis (made by DAF) are employed, but with imported European bodywork, despite the presence of local manufacturing capability. There has been entry of technically inappropriate vehicles, such as rear engine vehicles, into Ethiopia’s commercial road transport service market. There has also been a lack of fl exibility concerning the introduction of new categories of services at higher prices, which has resulted in the modifi cation of old trucks into buses.

Bus Fleet Capacity Details of the road passenger ﬂ eet, by type of bus are provided in Table 2.16.

Table 2.16 Growth of Passenger Fleet by Seat Capacity

Seat Capacity Year Growth Growth Growth Growth 9< Growth in % 9~12 13~29 Growth in % 30~45 >45 TOTAL in % in % in % in % 1999 2396 - - 4765 1011 751 8923 - 2000 3738 56 2290 - 1252 -73.7 1102 9.0 713 -5.1 9095 1.9 2001 4486 20 4665 103.7 1680 34.2 1388 26 876 22.9 13095 44.0 2002 2352 -47.57 3615 -26.51 1838 9.4 1390 0.01 788 -10.0 9983 23.0 2003 2909 23.7 3190 -11.8 1622 -11.8 1250 -11.1 920 16.8 9891 -0.9 2004 6430 121 3526 10.5 1687 4.0 1296 3.7 531 -42.3 13470 36.2 2005 5873 -8.7 3450 -2.2 2230 32.2 1643 26.8 1381 160.1 14577 8.2 A v e r a g e a n n u a l 23.5 10.5 -5.7 7.8 20.3 9.4 growth Source: Federal Transport Authority. 29 More up-to-date Public Road Transport Commercial Vehicle Data (for 2007) are provided in Table 2.17 below.

Table 2.17 Annual Growth of Public Road Passenger Vehicles by Seat Capacity (2005–2008)

Seat Capacity Year 9< 9-12 13-29 30-45 >45 Total 2005 17975 9739 1849 562 1748 31873 2006 19840 10556 2196 597 1800 24989 2007 22357 11558 2417 627 1874 38833 2008 25195 12009 2960 724 1940 42828 2009 25791 12471 2997 733 1955 43947 Source: Compiled from Road Transport Authority data.

Vehicle Age Trucks below fi ve years of service are only 17 percent of the fl eet; while over 43 percent are 16 and above fi ve years. Similarly, tankers below the age of 5 years are only 7.5 percent and those with 16 and above fi ve years of service are 32 percent. In both cases the number of old fl eet is quite signifi cant.

Signifi cantly, more than 50 percent of the public passenger commercial vehicle fl eet is more than 20 years old and now need replacement. Since there is no vehicle replacement policy there is a slow pace towards modernization. Many of the buses currently in service are either imported used vehicles that have completed their useful life in the country of origin or old trucks modifi ed into buses.

Passenger Loading The results from the project trafﬁ c surveys (National Transport Master Plan Study) showed that passenger vehicles indicated generally high occupancy rates of 80 to 90 percent. Some results from the project trafﬁ c surveys are reproduced from the Master Plan Study. Firstly, occupancy data for passenger vehicles may be summarized as in Table 2.18, indicating generally high occupancy rates of 80 to 90 percent for commercial passenger vehicles.

Table 2.18 Occupancy Rates for Passenger Vehicles (2006)

Vehicle Type Average No. of Pas- Average No. of Seats Occupancy Rate (%) sengers Motor-cycle rickshaws 3.0 3.5 86 Private cars 3.7 5.9 63 Minibuses (up to 15 seats) 9.2 11.2 82 Small buses (16-30 seats) 21.6 24.3 89 Large buses (over 30 seats) 44.2 49.0 90 Source: Consultant’s survey.

The survey also conﬁ rmed that short passenger journeys are made by smaller vehicles, with longer journeys being made in larger buses. Average journey times reported by passengers were one hour for motorised rickshaws, 4.6 hours for private cars, 1.6 hours for minibuses, 3.4 hours for small buses, and 9.2 hours for large buses.

Since passenger transport vehicles in general, short and medium distance buses in particular, do not depart from terminals or stations unless all seats of the vehicles are occupied, road passenger transport vehicles load factor until very recently has been assumed to be 100 percent.

30 However, as passenger trafﬁ c shifts from scheduled long distance cross-country buses to short distance minibuses, latest surveys show that the average load factor of passenger transport vehicles has declined possibly to 70 percent, or less.

Truck Loading Reported loading data for goods vehicles was captured. The high rate of empty running was notable, especially for larger vehicles, refl ecting traffi c imbalances and seasonal variations, especially on the main import and export route to Djibouti. Reported loading data for goods vehicles are summarized in Table 2.19. The high rate of empty running is to be noted, especially for larger vehicles, refl ecting traffi c imbalances and seasonal variations, especially on the main import and export route to Djibouti. The effect is to reduce average load factors to around 50 per cent, with consequent increase in operating costs. These problems have also been widely reported by truck operators.

Table 2.19 Loading of Goods Vehicles in Metric Ton (t) in 2006

Trucks, Trucks, Trucks (2-axles) (3-axles) (4+axles) Average carrying capacity (t) 5.9 16.4 28.4 Average load, loaded vehicles (t) 5.0 14.3 25.5 Proportion of vehicles loaded (%) 68.3 57.1 56.3 Average load, all vehicles (t) 3.4 8.2 14.4 Load factor, loaded vehicles (%) 85 87 90 Load factor, all vehicles (%) 58 50 51 Source: Consultant’s survey.

The effect is to reduce average load factors to around 50 percent. The average load of Loaded 2 axle trucks was 5t, that of 3-axle trucks 14.3t, and of 4+ axle trucks 25.5 t. Agricultural products, foodstuffs, fuel, construction materials and machinery accounted for nearly 79 percent of all trafﬁ c being carried in the surveyed trucks. The high proportion of nearly 18 percent for perishable foodstuffs is notable, since it is essential that these products be carried to their destinations without delay. Of the total cargo being transported in surveyed trucks, 65 percent was carried in vehicles of four or more axles, 12 percent in 3-axle trucks, and 25 percent in 4-axle trucks.

Commodities Carried Information was also sought on commodities being carried by trucks, with the following percentage breakdown being found by tonnage. Reported commodities being carried by goods vehicles are summarized in Table 2.20.

Table 2.20 Truck Commodities Carried and Average Load Per Truck in Tonnage

Agricultural products, inc. coffee and tea 22.3 Perishable foodstuffs 17.8 Construction materials 16.7 Machinery and equipment 8.5 Oil products 6.8 Processed food and drink 6.7 Other commodities 21.2 Total 100.0

31 Agricultural products, foodstuffs, fuel, construction materials and machinery accounted for nearly 79 percent of trafﬁ c being carried in surveyed trucks. The high proportion of nearly 18 percent for perishable foodstuffs is notable, since it is essential that these products be carried to their destinations without delay (See Figure 2.4 below).

Figure 2.4 Commodities Carried by Trucks in 2007

Goods Transported by trucks on the Ethiopian Network

8 % 3 %

2 % 0% 4% 19 %

18 %

17 %

1 % 1 % 1 % 3 % 9 % 7 %

Coffee or Tea Other Agri. Prod. Pershable food Livestock Fuelwood or Charcoal Water (Plain) Processed food or drink Machinery, equipment Logs or Lumber Construction Materials Oil Chemicals, fertilizer Medicine Misc-Household Unknown

Of the total cargo being transported in surveyed trucks, 65 percent was carried in vehicles of four or more axles, 12 percent in 3-axle trucks, and 25 percent in 4-axle trucks. Two-axle trucks are most often used for transporting agricultural products.

Journey Times During the course of the extensive Transport Master plan Roadside Interview Surveys, truck drivers were asked about the total average journey time of their trips. The answers were as follows:

Table 2.21 Average Truck Journey Times from Survey

Vehicle Journey Time(in Hours) 2 X T 9.82 3 XT 12.23 4 X T Others 33.88

32 These times include the rest periods of the truck drivers, as well as the time spent waiting at each customs point along the roads. The average journey time of 2 axle trucks was 9.8 hours, that of 3-axle trucks 12.23 hours, and of 4+ axle trucks 33.9 hours.

Average journey times reported by passengers were 1.6 hours for minibuses, 3.4 hours for small buses, and 9.2 hours for large buses.

Distribution of Vehicles between Regions Partial data for the passenger ﬂ eet, provided by the Transport Authority, indicated that for a total of 46,897 passenger vehicles, comprising around 40 percent of the passenger vehicle ﬂ eet in 2006, the distribution of vehicles between regions was as follows (in percentage terms).

Table 2.22 Distribution of Vehicles between Regions

Addis Ababa 56.1 Oromia 10.3 Amhara 4.4 SNNP 3.4 Tigray 2.9 Dire Dawa 2.3 Carried forward 79.3 Other regions 2.6 Ethiopian Govt. 10.4 Other organizations (UN, AU, Aid, etc) 7.7 Total 100.0

Trends in Vehicle-Kms When performance is compared with countries like Tanzania, Pakistan and Indonesia, whose average annual performance of a truck are 60,000, 110,000 and 80,000 kilometres respectively, a truck in Ethiopia covers circa 60,000 kilometres p.a.. Generally, the annual veh-kms traveled by high capacity vehicles should be higher than that of small and medium capacity vehicles, since the former operate on relatively longer but low terminal time routes, whilst the latter operate on short distance high terminal time routes.

In Ethiopia there is a generally low average level of vehicle utilization for the long distance high seat capacity cross-country scheduled buses (45-62). Although the medium range regional buses of 44 upper limit seat capacity also have higher, but still relatively low, average vehicle utilization, both categories of medium and large bus travel considerably less distance per annum than the smaller capacity vehicles (minibuses).

Railway Mode Introduction The Ethio-Djibouti Railway (CDE) owns the 781-km rail route, of which 681 km is in Ethiopia, and has signed an agreement with INECO Sp (Spain) for supervision and administration of 114 km of rehabilitation which includes all bridge work between Addis Ababa and Djibouti and various lengths of replacement track.

33 The Ethio-Djibouti Railway Authority gives its transport services twice a week from Dire Dawa to Djibouti, while it transports people and goods to Kaliti, the industrial town found 25 km from Addis Ababa, only once a week ever since the work on Gotera Road Inter Exchange project began.

The Ethio-Djibouti railway rehabilitation project was expected to get completed by June 2009. The project includes the changing of old and damaged tracks and bridges of the 114 km of line. On this project, nine concrete bridges will be replaced and another forty metal bridges will be strengthened. The line that is to be replaced and strengthened is from Hurso to Lassarat. When this rehabilitation project is completed, the speed of the trains will increase and the derailment reduced. Currently the strength of this 114 km railway line is 20 kg/m and this will increase to 40 kg/m, increasing the carrying capacity and speed of trains.

What will be of critical importance for the short to medium term development plans for the international road freight industry in Ethiopia will be the timing of the investments in rail sector multimodal operations to and from Djibouti Port. These proposals are currently on hold.

Rail is very cost effective for transport of products in bulk and also of high value container cargo in dry freight containers and ISO tank containers, where it is also a very secure means of transport. Fuel oil by rail would normally be handled by 60-tonne capacity rail tanks (cisterns). This is not possible in Ethiopia. Dry freight containers need to remain unstuffed in the condition in which they were loaded at the point of origin for as long as possible and ideally right up to the customer’s door. True multimodal transport is dependent on rail for efﬁ ciency on journeys of more than about 600 km. A higher carrying capacity with greater motive power would have resulted in a more ﬂ exible freight operation, with a capacity to handle 1.8 million tonnes a year, with heavier trains. The plan under the previously planned concessionaire agreement was to import 46 new locomotives and 600 wagons.

The lack of such a service between Djibouti and Addis Ababa remains a severe constraint on the cost effectiveness of multimodal transport in Ethiopia.

New port developments in Berbera in Somaliland are being evaluated by the private sector (although there are no fi rm detail fi ndings to date) and rail links to the port could be considered for future development, once the main line is operating effi ciently. In the meantime the development and improvement of road access to alternative ports would be necessary. Because of topography, the international railway network in this part of Africa remains relatively undeveloped, in contrast to neighbouring Sudan where the terrain is fl atter and more amenable to railway construction.

Shipping: Need for Choice in Multimodal Transport Shipping Ethiopian Shipping Lines (ESL) is state-owned and is seen as a strategic transport asset of Ethiopia. Government requires that it, and the state-owned Maritime and Transit Services Enterprise (MTSE), provide government-controlled services to the transport industry and in particular are the sole conduit for all Government contracts. In this situation any inherent inefﬁ ciency in the operation by either Company limits the ability of the industry to seek the best commercial route and rates. The two organizations have been proposed as the sole conduit for the operation of the proposed new Through Bill of Lading. Recent debate is understood to have led to a modiﬁ cation of this idea, but the details are not yet known.

34 In 1977 the Government liberalized freight forwarding and shipping agency with 36 companies including the state owned Maritime and Transit Services Enterprise (MTSE) involved. Ethiopian Shipping Lines and MTSE are considered as strategic enterprises and still in the hands of government.

The Ethiopian Shipping Lines (ESL) owns 8 ships with total lifting capacity of 79,000 Gross Registered Tons (GRT). It has placed a ﬁ rm order for acquiring two new ships. The total tonnage lifted by the ESL was 1,154,703 ton in 2004/5 accounting for one third of seaborne trade, thus it plays an important role in the development of Ethiopia’s external sector. The Government has negotiated with the Government of Djibouti to implement Through Bill of Lading Procedures that will allow Ethiopian Shipping Lines to handle the land transportation of imports up to the dry port in Ethiopia as from 2007.

Freight Forwarding Freight forwarders act as intermediary between the shipper and the operator on a commission basis. Freight forwarders could play a critical role in improving logistics for a more efﬁ cient delivery of cargo. Of particular signiﬁ cance, they can serve in strengthening the partnership of businesses and truck operators for creating distribution networks that consolidate loads. This achieves economy in the transportation of goods, with implications for enhancement of competitiveness in the global environment. In general, the role of freight forwarders is related to business logistics. Business logistics planning activities address carrier selection, pricing (freight rates), and the level of service to be provided, vehicle routing and the problem of allocation.

The freight forwarding businesses have not been well developed to have a major impact on performance in terms of consolidating shipments and transfer in order to maximize efﬁ ciency. In Ethiopia, where shippers move irregular consignments, freight forwarders could promote commercial road transport efﬁ ciency and enhance the competitiveness of Ethiopia's export trade.

Logistic improvements that increase freight delivery effi ciently can provide fi nancial savings for shippers. All in all, transport-intensive manufacturing plants, exporters, shipping fi rms, for-hire carriers have interest in the improvement of freight management. Central to freight management is the focus on minimizing shipper’s costs, which involves not only inland movements but also intermodal transfers.

Ethiopian Freight Forwarders and Shipping Agents Association (EFFSA) The Ethiopian Freight Forwarders and Shipping Agents Association (EFFSA) is recognized as an international organisation by the International Federation of Freight Forwarders Associations (FIATA) and the International Air Transport Association (IATA). It has 33 full members in an industry where it is thought some 44 companies operate. Precise numbers are not recorded as there is no active legislation at present.

There used to be legislation to require prospective freight forwarders to receive training from both Customs and the previous transport ministry, and to have a minimum bank account of 1.5 million Birr, but this has been discontinued. It is recommended that EFFSA offer the International Federation of Freight Forwarders Associations (FIATA) training. The training should be available in the country. Re-establishment of a training requirement before a license to operate is issued may be premature as many European countries still have no such requirement. In addition EFFSA has expressed interest in offering CPC training and they would be well placed to represent the road haulage industry to Government. EFFSA is the only internationally recognized association in the industry and should 35 be seen by MoTC as a voice worth listening to. With their wide daily contact with the international freight industry they could assist in proposing and reviewing transport legislation that would promote trade facilitation.

The freight forwarding industry is represented well by the Ethiopian Freight Forwarders and Shipping Agents Association (EFFSA) who have FIATA and International Air Transport Association (IATA) recognition. A decision on the Through Bills of Lading is said to have been made by MoTC and passed on to EFFSA. The agreement details and response from EFFSA were not known at the time of writing. Until the decision is implemented and the consequences are known, the limitation on the choice of shipping line to be used by Ethiopian import and export companies will have a direct effect on the use of multimodal transport, the Through Bills of Lading and the ability of EFFSA to secure the best sea freight rates for its customers. Unconﬁ rmed reports suggest that given more freedom to operate, ocean shipping rates could be 10-40 percent lower to Djibouti, providing much needed assistance for the objectives of growth and poverty reduction.

Customs Brokers Customs clearance is the procedure of complying with customs rules and regulations and the payment of customs levy, as well as the securing of clearance for cross border transport using one or more modes of transport.

The Customs Clearance Association (CCA) has an ofﬁ ce but no direct access to Automated System for Customs Data (ASYCUDA ++) as the telephone system cannot provide the dedicated line where they are. They may relocate to a new location to access the system. They represent 300 members who used to be licensed by Customs (operating under MoTI) and who had to be trained on a three- month course, have access to funds of Birr 1 million and operate from a regular ofﬁ ce. It is unclear if this system still operates, but if not it should be re-established.

EFFSA, which represents the freight forwarding industry, can also operate as customs broker. Due to the overlap in activities the Customs Clearance Association (CCA) is said to be approaching EFFSA to join with them. CCA is strongly in favor of Ethiopia joining the World Trade Organisation (WTO) and also the World Customs Organisation (WCO). It then expects to be able to operate to internationally agreed standards.

Freight Agents or Freight Brokers Freight brokers or consolidation agents operate in Ethiopia to seek return loads for hire and reward road transport operators, but are reported to generally have no ofﬁ ce and work from a mobile phone. The system is formalized and has little impact on the industry. In this it is little different from anywhere else in the world. Effective back-haul trafﬁ c can only be gathered by a well run transport scheduling desk within a well run transport operation. It is not a job to delegate, and certainly not a job that can be successfully accomplished by amateurs.

Cargo Loss and Damage One serious problem shipper's face in freight transport operation is cargo loss and damage. For this reason, users constantly look for the improvement of logistics management and reduce the extent of damage as a result of improper handling and disappearance of goods in transit. In order to overcome the situation, the demand for quality freight transport service that ensures safe and reliable movement of goods is increasing through time even if the cost share of these logistics expenses in the value of commodity is quite signiﬁ cant. 36 Various studies reveal that logistics cost (transport, warehousing and administration) in the European Union (EU) had been 14.3 percent of the total manufacturing cost of goods in 1987, which declined to 10.1 percent in 1992, with further drop to 9.1 percent in 1997. In North America it ranges between 5-20 percent, while the ﬁ gure for countries like China is between 30 and 40 percent. Since there is no such data for Ethiopia, comparative analysis has not been possible, except the magnitude of share of inland road freight transport cost for import and export goods as indicated below.

Table 2.23 Estimate of Transit and Transport costs of Export (as % of export value)

Export Volume Export Transit and Total cost Year (ton) Value Transport (Birr ’000) % (Birr ’000) Cost (Birr ’000) 2001 306,522 2,685,358 105,454 2,790,812 3.78 2002 524,535 3,170,176 180,440 3,350,616 5.39 2003 413,195 3,573,706 142,139 3,715,845 3.83 2004 518,805 4,206,767 178,469 4,385,236 4.07 2005 690,938 6,645,199 237,682 6,882,882 3.45 2006 311,811 3,585,364 107,287 3,692,651 2.91 Note: At constant transit and transport cost of Birr 344.00/ton.

Table 2.24 Estimate of Transit and Transport Costs of Import (as % of import value)

Transit and Year Import Volume Import value Total costs % Transport costs 2001 3,373,380 13,713,210 3,234,397 16,947,607 19.08 2002 2,565,303 11,998,112 2,459,613 14,457,725 17.01 2003 5,074,223 20,905,219 4,865,165 25,770,384 18.88 2004 3,823,023 23,287,828 3,665,515 26,953,344 13.60 2005 4,532,492 31,277,444 4,345,753 35,623,198 12.20 Note: At constant transit and transport costs for 20' container Birr 958.00.

Air Cargo Mode General For the development of the road freight industry the most important connection is with the Addis Ababa’s Bole International Airport cargo terminal.

Customs use the ASYCUDA++ and cause no real delay. There is no pre-clearance, all goods being cleared on arrival.

The main imports by air are chilled medicines, frozen sea ﬁ sh, textiles and personal effects. The main exports by air are ﬂ owers, frozen meat, gold, chat, textiles and vegetables. Flowers are checked by Customs and phyto-sanitary services on farms and loaded to chilled trucks. Some trucks are provided by the growers but there is an expanding privately run collection service using special refrigerated vehicles.

The airport receiving warehouse is also chilled and roses (mostly) are sent to Dubai and Amsterdam (sometimes through Brussels by road). The volume has risen from 2,800 tons in 2004/5 to a projected 10,000 tonnes in 2007/8.

37 Growers are generally within 2-3 hours of the airport so cargo delays are not a big problem and freight forwarding services are not yet used. In future the special needs of this growing industry will demand more specialist customs clearance services, more chilled storage and more transport, all of which can be provided by the private sector.

The freight forwarding industry is aware of this potential business. The support for this industry by Government is a positive example where the industry has been helped by allowing such specialized private vehicles to be imported duty free. This policy by the government has increased employment in the industry assisting growth of the economy and helping to reduce poverty. A number of growers have relocated from Kenya and Uganda.

Addis Ababa’s Bole International Airport cargo terminal has a modern multi-level storage racking system for rapid load transfer to aircraft. There is much room for improvement to increase capacity and although a good racking system is in place it is limited by the old-style fork lift trucks that are used. It has been reported that freight dwell times have been up to six days or more at Bole, but customers report that improvements are being made all the time.

Development of the Multimodal Transport Industry in Ethiopia Introduction Multimodal transport is an important part of the dynamic transport industry and new issues are addressed and new solutions to problems are found all the time. The developments in the multimodal transport industry are regarded as of critical interest to the future development of the freight road transport industry in Ethiopia. Without a full understanding of these multimodal developments, it would be difﬁ cult to make a detailed programme for the development of the international road freight transport industry.

International multimodal transport covers the door-to-door movement of goods under the responsibility of a single transport operator. The concept of multimodal transport was developed with the container revolution initiated in the late 1950s. The coming of the container technology and the multimodal transport concept facilitated international trade. Trade and transport are inextricably linked i.e., efﬁ cient transport services are a pre-requisite to successful trading. International transport generally implies the use of various modes of transport and interfaces, each mode and interface corresponding to a transfer, storage or transport operation either in the country of origin, in a transit country or in the country of the ﬁ nal destination. This situation has created a number of problems over the years, as more and more shippers realize that this new concept involves the effective participation of various modes of transport operators, but it does not always make clear as to who is responsible for delivering cargo at destinations in a safe condition, according to agreed schedules.

Considering the variety of cultures, languages and commercial practices at both ends of a trade and the resulting complexities of assembling such an international transport operation, it would appear reasonable to a trader to let one qualifi ed operator organize and be responsible and accountable for the entire chain of transport. Multimodal transport implies the safe and effi cient movement of goods where the multimodal operator accepts the corresponding responsibility from door to door. With technological development of transport operations, as well as communications, coupled with liberalization in the provision of services, more and more transport operators are now able to provide safe and effi cient transport. Against this background and as proposed by a study made by the Ministry

38 of Transport and Communications, moving towards this advance system of operation is considered imperative.

Main Issues Ethiopia’s main transport route is between Addis Ababa and Djibouti via Adama and Awash. There are also secondary goods ﬂ ows from Djibouti to other main centres such as Kombolcha and Mekele, and between Addis Ababa and other main towns.

The Addis Ababa - Djibouti Corridor is a transport corridor where sea and road modes of transport operation are carried out. Imports and exports from and to Djibouti are transported using long haul trucks. The entry of Ethiopian Shipping Lines (ESL) and Maritime and Transit Services Enterprise (MTSE) into the business will make the activity a multimodal operation with ESL and MTSE as multimodal transport operators. The ESL will transport commodities from their point of origin by sea and then unload them at an intermediate transshipment point before delivery at the ﬁ nal destination. The intermediate transshipment point in this case will be the port of Djibouti. The ﬁ nal destination will be the Comet- bonded warehouse. The document for taking delivery of the cargo will be the Bill of Lading issued by ESL at the port of loading. In this example, customs formalities at the intermediate points of transshipment could perhaps be avoided, thereby saving time for the inland carrier.

Truck delays are experienced during loading and unloading of goods, particularly at the port of Djibouti, where the truck parking area is inconveniently located away from the cargo stacking port area. The source of the problem is administrative. It is poor cargo trafﬁ c management and the low level of the shippers' awareness of the carriers' problem which affects truck productivity.

In general, trucks and tankers operate at low load factors (60 percent for trucks and 50 percent for tankers) due to the foreign trade structure (for dry cargo trucks) and due to the nature of the activity (for tankers). In the case of dry cargo trucks, the fact that the volume of import largely exceeds the volume of export, forces vehicles to travel empty in most of their out bound trips to the port. In the case of tankers, the special nature of the activity makes one-way empty haulage unavoidable.

Transport Policy Governments seldom inﬂ uence choice when a decision is made on the route to be used by the customer, but transit income and easy access to neighbouring countries can provide a useful source of revenue, so it is in their best interest to ensure that trade can be facilitated easily.

Unfortunately Ethiopia has yet to realize this “vision” fully and although the country has agreed many good rules and regulations they have not been implemented to make them work.

Some international bilateral and multilateral agreements have been accepted by Ethiopia but there is also a need to accept a series of international conventions for the development of trade in order not to re-invent legislation but to adopt widely accepted conventions for trade facilitation. There is a need to ensure that such international agreements are passed into practical use by their adoption into domestic law.

There exists a growing understanding between governments that any strategic transport plan they develop meets not only their own transport needs, but also considers the aspirations of their neighbors, an essential ingredient for long term sustainability.

39 Ethiopia has only recently emerged from a command economy and is now in the process of establishing its transport needs under a demand economy where the wishes of the customer are paramount. This transition is not easy and many policies and practices have to be changed, both in law and in application at “grass roots” level.

Multimodal transport should be seen as an integral part of this process to make sure that the very best use is made of all the transport resources and that mistakes made by other countries are not repeated. An efﬁ cient multimodal transport policy is not just a matter of bringing together separate transport modes; it is a new way of thinking about transport policy to enable the government of a country to facilitate trade. As international trade is often the lifeblood of the economy of any country, it deserves a lot of attention to be given to the detail on how this is to be achieved.

Legal Considerations Laws regarding transit and multimodal transport have been concluded between Djibouti and Sudan. A separate component of the National Transport Master Plan (NTMP) study has been to propose a General Transport Law, details of which are located on the Master Plan Study website.

A transit agreement of the sort proposed by UNCTAD would assist in future to establish a corridor from many deep sea ports to landlocked countries in the region with access through Ethiopia.

Such action would lead to the harmonization of regulations for different transport modes, including the feasibility of developing a single intermodal framework covering such issues as insurance liability rules, the use of modern techniques for data provision, payments and invoicing methods, together with measures for cargo tracking and tracing across the different modes.

Customs Authorities Procedural and Administrative Obstacles and Delays Customs authorities can be a signifi cant factor in the unreliability of rail services and therefore have a marked impact on the effi ciency of intermodal rail services. This is of particular concern for a number of reasons: • As a general rule any port or cross border operation is a potential bottleneck to future rail intermodal growth, and therefore the action of customs in the port or border can signifi cantly impact on the effi ciency of the service. • Where possible pre-clearance of containers arriving at a port or border crossing should be sought (as is becoming common practice in many deep sea ports such a Singapore where over 80 percent is pre-cleared). In Ethiopia, no pre-clearance is currently available. • Once a container is loaded onto a train any subsequent customs requirement to investigate that container is bound to delay other containers on the same wagon and in many cases the whole train. For containers by road where one lorry load is checked it has no impact on the others. • In many cases Customs staffs do not offer a 24-hour service whereas terminals are open from as early as 0700. This means that regardless of how much earlier than 0900 a container is ordered by a customer to be forwarded inland, and regardless of how much earlier than 0900 it can actually be loaded and depart the port gate, the process of fi nding out whether it will be called for customs examination is unlikely to start until that time. This is a potential problem to be avoided in future.

40 • Although road and rail modes can be equally affected by the actions of customs, rail trafﬁ c has the greater delay for the reasons explained. For customers this can generate an image of greater unreliability by rail which is an image difﬁ cult to dispel.

Multimodal Transport Industry in Ethiopia covers issues of the sea ports of entry where the concentration of container activity normally takes place, moves on to the inland clearance depots (ICD’s), sometimes called dry ports, where detail is known and then considers the impact of border crossings by rail and road on the multimodal transport mode.

Ports of Entry Development in the neighbouring ports is of critical importance to the development of Ethiopia’s international road freight industry and ancillary industries such as freight-forwarding, etc. Ethiopia has a choice of Ports for Import and Export road freight trafﬁ cs. The dependence on one port, in a foreign country, makes Ethiopia very vulnerable to any unexpected interruptions in supply. The heavy dependence on Djibouti for foreign trade and fuel distribution is disturbing.

The choice of ports includes Djibouti Port, Port Sudan, Berbera Port, Ports of Assab and Massawa. A detailed appraisal of the different port options is provided in Chapter 9 of the report under the title “Dependence on one country and port”. The Eritrean ports of Assab and Massawa are needed by Ethiopia, but so long as they are inaccessible alternative ports must be sought. Development in the neighbouring ports is of critical importance to the development of Ethiopia’s international road freight industry and ancillary industries such as freight-forwarding, etc.

Dry Ports The establishment of the dry ports will facilitate the export/import transaction more and more and help ease the congestion at the port of Djibouti. Two dry ports under construction in Ethiopia are at Modjo in Oromia Regional State and another at Semera town of Afar Regional State. The two projects involve the construction of warehouses, inland roads, container depots, customs ofﬁ ces, insurance companies and maritime transit.

It is difﬁ cult to estimate exactly by how much the dry ports will help reduce costs. However, one can estimate that the price paid per container at the dry ports would be about half of that at Djibouti Port. This will help exports and imports to be more competitive. The signiﬁ cance is not only the reduction of cost since it will also help reduce the foreign currency being paid at the port of Djibouti, as payment is made in local currency (birr) for services provided at the dry ports.

Imported goods are, sometimes, conﬁ scated at the port of Djibouti with the importer failing to pick the goods in time. The establishment of the dry ports will curb such a problem. It will also help avoid or reduce the extra payment for such delays at the port. Nonetheless, the main signiﬁ cance of the dry ports will be facilitating the logistics associated with export/import shipments.

The economy is growing, meaning that the volume of exports and imports is increasing. The port of Djibouti, the major outlet for the country's export/import shipment, is not expanding at the rate that the export/import transactions are growing. This leads to the congestion of import/export goods at the port. The dry ports will reduce that challenge by allowing a timely inland shipment of imports from the port of Djibouti and by facilitating direct shipment of exports at the port, since the containerization of export items will be completed at the dry ports. Currently, a truck carrying exports stays at the port of Djibouti up to nine days until a container is found and the export is containerized. 41 Demurrage and opportunity costs incurred by Ethiopia due to delay in clearance of goods is partly attributed to the congestion of the port of Djibouti as a result of the increase in the volume of goods imported and exported by Ethiopians, the largest users of the port. Therefore, the construction of these dry ports is expected to alleviate this problem.

A study the Ministry of Transport and Communications (MoTC) conducted in 2006/2007 proposed the establishment of dry ports in the country to facilitate Ethiopia’s foreign trade. Eventually the Council of Ministers endorsed the establishment of a state agency responsible for administering the dry ports. Most of Ethiopia’s trade volume, which is growing at a rate of eight to nine percent annually, is based on the Djibouti corridor. The volume of its import and export cargoes has been on the rise, moving from three to ﬁ ve million tonnes in 2007-2008.

Modjo Dry Port Currently the dry port at Modjo, some 75 km east of Addis Ababa is nearly completed. The Modjo Dry Port, which spans 61 hectares of land is about to go operational, gearing up to start operations in 2009, by fi rstly serving public enterprises. State-owned fi rms with high import volumes, such as the Ethiopian Telecommunications Corporations (ETC), the Ethiopian Electric and Power Corporation (EEPCo) and public enterprises under the supervision of the Privatization and Public Enterprises Supervisory Agency (PPESA) have been given due directives. The customs protocol and pertinent agreements which should be put in place in order to allow the commencement of the operation of the dry ports were being fi nalized.

The new site at Modjo seems a little far from customer demand and would add to the transport costs and the number of vehicles on the Modjo-Addis Ababa road3. A site at Modjo would be good for the south of Ethiopia, but at present only 1.1 percent of imports go to the south.

A future customer requirement is bound to be for customs clearance at their own premises when volume dictates, as customers will increasingly want delivery of their goods from sealed containers within their own premises. At present it is possible for this to happen but it does not happen often. All multimodal transport documentation and agreements are in place waiting for the start date to be announced by Government.

Semera Dry Port The ﬁ rst phase of the construction of the Semera Dry port was expected to get ﬁ nalized this year. The Ethiopian Dry Ports Enterprise is being built at Semera town of the Afar Regional State, 558 km to the east of Addis Ababa and some 100 km from Djibouti.

The construction of the dry port is carried out by the state-owned Water Works Construction Enterprise (WWCE) at a cost of 26 million Birr. The dry port, which is being erected on a 100 hectare plot, is designed to serve as a depot for incoming goods from the northern part of the country. On top of this, the proximity of the area to the port of Djibouti is expected to facilitate the import-export business. The project includes construction of fences, warehouses, inland roads, container depots and customs ofﬁ ces, insurance companies and maritime transit, and its construction was planned to get completed in January 2009. It is hoped that Semera Dry Port will serve as a clearance site for commodities coming from the north.

3 This is because inbound and outbound containers may be stripped and stuffed at the site, for distribution among different customers in Addis Ababa. The trunk haul in the container is the most economic operation. 42 Other Dry Port Location Proposals The two ports at Modjo and Semera will accommodate up to 20,000 containers per year during their initial phase. The country's annual imports alone stand at 113,000 containers. In order to fully accommodate imports and exports, additional dry ports will be constructed along the major export/ import corridors. There is a proposal for a dry port at Mille. An additional site to serve the north of the country (which takes 1.5 percent of imports) could be considered. This however would have the same disadvantage of remoteness from the customer.

Mekele, which has an expanding industrial base, may be a good choice when the Eritrean border is open and Massawa port can be used, as well as Djibouti or Port Sudan. In the meantime a drop-trailer operation in the Mille area could be envisaged to increase the rate at which cargo for the north can be evacuated from Djibouti.

Chapter Three

Road Freight Transport In the road freight transport sub-sector services are provided ranging from urban services, interurban services and services provided at the local (rural) level. In this report only brief reference is made to services provided at the local (rural) level. For the purposes of focusing the study of the road freight industry in Ethiopia it is helpful to identify three main areas, namely:  International road freight operations (import and export trafﬁ cs);  Interurban domestic road freight operations; and  Urban freight operations.

Interurban road freight transport in Ethiopia is dominated by Import and Export trafﬁ cs. In 2004, the whole 704-km route from Addis Ababa to Galiﬁ accounted for 18 percent of truck movement over the surveyed network, for 47 percent of truck-trailer movement, and for 25 percent of total movement by all trucks4. It is expected that this proportion will have increased in 2008, when much higher import and export volumes (c. 8.5 MT) were transported (up for 6.5 MT, in 2005).

In terms of international road freight services, the Djibouti corridor continues to be the main focus of import and export freight operations. Logistics developments in this corridor therefore have needed to be investigated in detail. A key consideration in the main import/export corridor is the likelihood and timing of the improvement and upgrading of the existing railway line between Djibouti and Addis Ababa which would affect modal split.

A profound understanding of the nature of Ethiopian Import and Export Traffi c is required. For instance, international Import and Export Traffi c is heavily imbalanced, with Import traffi c forming 90 percent of total international Import and Export traffi cs in 2008. This fact has major implications for the development of the Ethiopian Road Freight Industry, for instance inter alia accounting for low load factors, due to empty haulage to ports. Most international Liquid Bulk road traffi c is carried within this corridor. Furthermore, not only are the main international traffi c fl ows highly imbalanced, they are also affected by several other important factors.

Amongst infl uencing factors, there is the dominance of bulk imports and exports by a few commodities with very specifi c distribution patterns and handling requirements, such as grain and fertilizer. Also international Import and Export Traffi c is seasonal, which further complicates the requirements of the industry. Each of these key aspects is elaborated in turn below.

In each Master Plan development scenario there is a mooted transfer some 17 percent of present heavy truck trafﬁ c from road to rail mode, by 2017. However, in the short to medium terms it seems that the pace of rail freight development/ line concessioning might be slower than was anticipated a few years ago, when the Transport Master Plan was formulated. In the short term, in particular, there is no reason to suggest an early loss of heavy truck trafﬁ c in this corridor to rail.

4 Working Paper 15 Road Transport, COWI/ GOPA, September 2006

45 Ethiopia has a choice of Ports for international road freight trafﬁ c. Any change in preference of Port for Import and Export trafﬁ c could have some effects on present and future international road freight operations. Ethiopia’s terrain remains something of an obstacle, particularly for freight transport in rural areas. Average altitude is high and the terrain is mountainous in parts.

The recommendations made in respect of interurban road freight operations in the other main corridors in Ethiopia rely, to a great extent, upon the ﬁ ndings and data provided by the Transport Master Plan Study. However, since volumes of movement are much lower, lesser focus has been adopted in the present study.

The capital city, Addis Ababa, is a focus for urban goods distribution by road. Because of their substantially smaller size, and their lesser stage of development, only brief references are made to road freight transport developments in each of the other cities in Ethiopia. Urban road freight transport operations in Addis Ababa, whilst important, are not regarded as a priority area for this study.

Even though the road freight transport has a number of advantages, it also has many disadvantages, some of which include: • The size of the load is restricted by legislation which limits on vehicle size and weight, not by the prevailing technology and economics as with other modes; • The distance travelled in one day is a function of the driver’s working hours limitations which are also controlled by legislation (maximum permitted road speeds) ;and • Roads are not used exclusively by one form of transport and congestion can occur which interfaces with schedule planning and time keeping.

Categories of Operation and Capacity Ownership in Ethiopia is generally mixed between the private and public sector, as well as "regional development associations." There needs to be a clearer and separate consideration of “own-account” operators, government aid organizations and those that operate for “hire and reward”.

Soft drinks and beer companies and some dedicated cement vehicle ﬂ eets, to name just a few, are working to a different standard than transport companies working for third parties only. The bottle companies run full both ways (although with empty bottles on the back-haul) and dedicated cement vehicles are limited in their ﬂ exibility. There is no published data on “own-account” operations. Some examples of different operations follow.

Previous reviews of the transport industry in Ethiopia have sometimes assessed all the different types of road transport as a single entity, leading to a lack of clarity regarding differing situations that affect each separate part of the industry. This leads to misunderstanding that can result in the conclusion that nothing is good within the industry, which is not the case.

The main international “hire and reward” (vehicles carrying only other companies’ traffi c, with no transport on own-account) professional hauliers5, such as those conveying container and bulk transport from Djibouti to Addis Ababa, have costs per tonne-km that are not much greater than those of other East African countries with direct sea access6. Such international comparisons are diffi cult as 5 Such operations are generally referred to in the text as “commercial road haulage”. This is distinct from the “own- account” operations of manufacturers or traders who have their own vehicles to carry their own goods. These are generally not allowed to carry goods for others for payment. 6 The average cost between Djibouti and Addis Ababa is some US cents 9.5 per ton-km (Master Plan Appendix 1.2), while from Tanzania a fi gure of US cents 8.6 per ton-km is quoted (Commercial Road Freight Transport, Review of Freight Haulage Costs in Ethiopia, MoTC, February 2007). The 46 Tanzanian data is undated. load factors, the amount of empty running, etc., vary between countries. In Ethiopia there is a major imbalance of import tonnage over export tonnage, which means that load factors are low through no fault of the operators. On the other hand the Ethiopian labour laws appear to be widely fl outed, with drivers driving excessively long hours.

Domestic “hire and reward” transport (local trucks doing local movements for payment) will have low vehicle utilization due to the seasonal nature of the work they do and the fact that many vehicles are operating beyond any reasonable life expectancy, and operations are poorly regulated and often seemingly unsafe. A safe operator with a modern vehicle would not be able to compete and would go out of business fast.

Tightening the legislation and its enforcement so that modernisation is possible may be counter to the desire for poverty reduction. A more in-depth study of comparative costs between old and new vehicles would be desirable but could not be attempted here. There needs to be a carefully phased transition where unsafe vehicles and operations are eliminated.

Reasonably new vehicles operated on own-account, such as by beer and soft drinks companies that are loaded both ways (full bottles out, empty ones returned), may be regarded as part of the product cost and appear to operate efﬁ ciently. There are no published ﬁ gures to check this but it can be assumed.

International Road Freight Operations (Import and Export Trafﬁ cs) In terms of international road freight services, the Djibouti corridor continues to be the main focus of import and export freight operations. Logistics developments in this corridor therefore needed to be investigated in detail. A key consideration in the main import/export corridor is the likelihood and timing of the improvement and upgrading of the existing railway line between Djibouti and Addis Ababa which would affect modal split.

Competition and Efﬁ ciency There is no doubt that the industry has undergone considerable change. It has evolved from a heavily regulated environment with restrictions inhibiting productivity and efﬁ ciency.

For the market economy to work effectively, competition needs to be on an equal basis so that the most efﬁ cient can survive and the least efﬁ cient go out of business.

Some Government and aid organizations associated with grain marketing or disaster relief seem to follow no clear pattern of use and cross over from “own account” to “hire and reward” as demand dictates, confusing an already confused market, while operating with vehicles donated free from many sources. When they do this they have an unfair advantage in the market and in effect “steal” trafﬁ c from the haulage industry.

As a general rule current government policies and the tax regime do not create an incentive for private companies to invest in new vehicles that would lead to greater transport efﬁ ciency. Today there is competition for freight trafﬁ c, at least in the Djibouti corridor.

The efﬁ cient management of road transport throughout the world can be summarized with the key words availability and utilization. Vehicles are very costly and ideally should be available for 95 percent of the time and used for paid work over 80 percent of this available time. Delays through bad roads, border delays, weighbridge checks, customs delays at roadside and at destination, poor 47 scheduling for loading and unloading, road accidents, single driver operation and congestion all reduce utilization. Availability is reduced through heavy maintenance (time and cost) required on old vehicles being used beyond a reasonable working life (15 to 20 years) and unscheduled breakdowns for the same reason. In addition old vehicles cost more in fuel and maintenance, as modern vehicles are more efﬁ cient.

For truck operations in Ethiopia overall, on average only some 55,000 km/year of paid-for transport is achieved, compared with 62,500 average from Comet, 80,000 in other African countries, 120,000 in Asia and over 200,000 in Europe. As stated, Comet claim 62,500 km/year average utilization and for the main Addis Ababa to Djibouti run they should be able to achieve more than this.

Low vehicle utilization is costly as vehicles wear out more through lack of use (e.g. from condensation and rust) than they do when working hard. In addition “pure” road transport from “A” to “B” is diffi cult to make profi table. This is why many transport companies in developed economies offer additional services such as repacking, warehousing, servicing vehicles for others and specialized transport, such as controlled temperature transport. This added value makes more profi t than simple road movements for “hire and reward”.

Reasons for the low utilization in Ethiopia are many and varied with a ﬁ gure of 30 percent vehicle off-the-road (VoR) time often stated. This will have had an adverse effect as will delays from slow customs clearance. The new multimodal Through Bill of Lading (TB/L) should help speed up the process on international trafﬁ c as will the introduction of the Single Administrative Document (SAD), but customs and police checkpoints on the road may continue to cause delays.

In addition, weighbridge delays can be long and although checks are necessary they could be better managed. Idle time at checkpoints also means that drivers and other crew members are being paid to wait around. The rather porous Somali border seems a major problem for Customs but may be international trucks can be trusted to have a special pass – Customs having perhaps gained some liability assurance from the truck owners.

It is alleged (e.g., by a regional transport bureau) that drivers may work for 16 hours a day and that some of the driving is done by other crew members who are not licensed to drive. We have no direct evidence of this but the possibility of this happening cannot be ignored. With qualifi ed relief drivers either in the sleeper cab, where provided, or at a “relay” station en route, better utilization could be achieved legally and more safely. With one driver it now takes fi ve days for the journey from Djibouti to Addis Ababa. Assuming a constant supply of work it should be possible in 240 days work in a year to achieve 96,000 km/year. Better management of the fl eet to improve utilization is essential and this could be addressed by training within the CPC.

In the absence of speciﬁ c legislation on drivers’ hours, which is badly needed, strict enforcement of the labour law would be possible now, and this should be done for bus and truck drivers. This would be an incentive for operators to ﬁ nd legal ways to increase vehicle utilization, by a relay system or by having vehicles with sleeper cabs and two drivers.

It is understood that the introduction of a Through Bill of Lading, which the Ethiopians have requested as the complement to the establishment of an ICD (inland customs depot) has been refused by Djibouti. The latter wishes to prevent Ethiopian Shipping Lines, which already monopolizes goods transport to Ethiopia, from issuing the bill of lading and becoming the only multimodal operator able to function in the corridor, thus also gaining sole control of the land route in addition to the sea routes. 48 For Djibouti, the Through Bill of Lading and multimodal transport can only function, and are only acceptable, in the context of open competition.

In these areas, it will be important to ensure that the rules applied in Ethiopia and in Djibouti are compatible, and that the international rules and standards on information processing and exchange are a constant feature of the practical solutions taken.

Design of a single customs document covering the transit of goods through the corridor would allow both countries' road hauliers to operate under conditions of equality.

The road transport sector continues to make progress with the privatization and deregulation process. It is recommended that privatization of the remaining state trucking enterprises, including Comet, should go ahead as soon as possible.

Entrance to Market Although domestic costs are somewhat competitive, weak contestability of the market is a limit for higher efﬁ ciency gains.

Presently there are also government policies in place that restrict investment in transport by foreign investors which inhibits the free market principles found to be effective in many other countries, in Africa and elsewhere.

Due to the sensitivity of the oil sector, a monopoly on oil production and refi ning is frequently associated with a monopoly on transport. For liquid goods, mainly gasoline, the Government of Ethiopia (GoE) imports gasoline, jet fuel diesel and gas. It is understood that GoE then sells this gas to the major oil companies in Ethiopia such as Shell, Mobil and Total. The purchase price is fi xed as well as the selling price. As a result, the profi t margin is determined by GoE. The oil companies have the option of choosing their transport companies. The contract lasts for 3-5 years and is indirectly regulated by the Government. For oil from Sudan only companies belonging to a government approved association may move gasoline.

Freight Transport Demand and International Freight Transport Service Delivery

Introduction Since international trade is the major source of freight transport demand, it is necessary to have a closer look at some of the major import commodities and their characteristics.

Although 60-70 percent of dry cargo imports are containerized for the sea journey, land transport in the Djibouti corridor is mainly break bulk. As the Ethiopian economy develops further, the demand for road freight services increases with the extension and interaction of activities, and hence, the efﬁ cient provision of transport services would be an important determinant of competitiveness in the domestic and global economy.

This section also investigates road freight operations of speciﬁ c commodity movements.

49 Overall Trends In 1999 the volume of dry cargo hauled was 4.8 million tons. It rose to 8.5 million tons in 2005, at an average annual growth rate of 9.5 percent. The ton-kms performed in 1999 and 2005 were 1,529.5 million and 3098.9 million, respectively (See Table 3.1). Both in terms of volume and performed ton kilometres, the share of import and export trafﬁ cs was well over 60 percent.

Table 3.1 Growth in Cargo Trafﬁ c (1999-2005)

Dry Cargo Foreign Trade Year In '000 tons Growth Ton Km in Growth Import in Export in Total in % Million in % '000 ton '000 ton 1999 4810.6 1529.5 - 2000 4913.1 2.1 1785.7 16.8 2001 4890.2 -0.5 1866.2 4.5 4258.9 306.5 4565.4 2002 5232.5 7 2090.1 12 3539.4 524.5 4063.9 2003 5272.3 0.8 2058.0 -1.5 6037.0 413.2 6450.2 2004 6104.3 15.8 2913.0 41.5 4999.4 518.8 5518.2 2005 8540.3 39.9 3098.9 6.4 5812.3 690.9 6503.2 2006 4321 710 5031 2007 5087 832 5919 20008 7643 835 8478 Average Annual Growth 9.3 11.4 Rate (%): Source: Transport Authority.

Historical data on the volume of the country's foreign trade between 1991/92 and 2005/06 showed that the annual volume of exports, which was 126,338 tons in 1991/92, had grown to 694,599 metric tons in 2005/6. During the same period, the annual volume of imports (excluding petroleum and petroleum products: liquid bulk) increased from 95,347 tons in 1991/92 to 3,465,350 in 2005/6. When liquid bulk or fuel oil, which require their own specialized trucks (tankers), is included, the volume of imports rose from 544,369 tons in 1991/92 to 4,694,428 tons in 2005/6.

Although the year 1991/92 was one of the few years characterized by a negligible inﬂ ow of grain and fertilizer (dry bulk cargo) imports, due to the economic and political difﬁ culties at that time, in the preceding years and in the period since 1991/92, import volumes have generally been 4 to 11 times those of exports.

According to 2005/6 Annual Report of the National Bank of Ethiopia, fertilizer and food aid shipment are the two main bulk commodities that make a signiﬁ cant contribution to the volume of dry cargo.

In certain years (for instance in 1990/91, 1992/93, and 1994/95) the share of these two commodities combined exceeded 70 percent of total annual import volume. The persistence of this trend over the past three decades has shown the heavy reliance of the Ethiopian road freight transport industry on relief goods (grain) and fertilizer imports.

The slight downturn observed over the years 2004 and 2005 (46 percent and 35 percent of the total respectively) is not due to the share of these goods having declined, but is associated with the rising volume of imported metal products and the unusually large sized road motor vehicle imports.

50 The signiﬁ cant increase in road motor vehicle imports, from 47,555 tons in 2004 to 1,130,445 tons in 2005 is an important development.

Load Factors The prevalence of a structural imbalance (with low volume of exports on one hand and the fast growing nature of the economy on the other) tends to exacerbate the gap between import and export volumes. The outcome of this trend is a further decline or little improvement in truck load factors. The increase in the share of commodities that will require specialized heavy trucks will generally affect the demand for commercial for-hire common carrier trucks.

The widening gap between volume of exports and imports has increased the vulnerability of the dry cargo transport industry, contributing to lower average load factors, due to the need to make empty haulage in the direction of the ports.

Interviews held with transport operators in Addis Ababa, Adama, Awash, Dire Dawa, Gondar, Dessie and Kombolcha showed that outgoing empty trips or low load factors are prevalent due to the imbalance of freight ﬂ ows, and in order to avoid long waiting times for cargo. This operational inefﬁ ciency, primarily attributable to the structure of the economy, which is heavily import dependent and the pace in the growth of exports, continues in a situation when the Addis Ababa-Djibouti railway is not yet able to participate effectively in freight movement.

The Ethiopian economy is predominantly agricultural. The seasonal nature of demand for freight movement also has an inﬂ uence on transport efﬁ ciency. There is high underutilization of capacity outside the peak season, during which time there is a downward trend in freight rates.

This is exacerbated by the higher increase in imports compared with exports, which generally reduce the load factor of trucks, particularly on the major international trade corridors due to imbalance between front haul and back haul movements. In recent years, the respective ratios of quantity of exports to quantity of imports have been between 1 to 4 and 1 to 11 (Central Statistical Agency: January 2006). The lag in Ethiopia's exports compared to imports reﬂ ects greater prominence of intermediate and capital goods in imports.

The lack of back-loads is caused by the heavy imbalance between imports and exports, which is unlikely to change quickly, but may be ameliorated in time as results are achieved from export expansion and diversifi cation efforts. Traffi c is reported to peak in the early months of the year, especially January to April, when there are typically heavy import fl ows of both relief cargoes and fertilizers. Any measures which can be taken to spread imports of these key cargoes into other months will have benefi ts in terms of improving utilization of available trucks and reducing overall transport costs.

51 Dry Cargo Principal Dry Cargoes The main dry cargoes consist of grain and fertilizer.

Road Freight for Humanitarian Aid Introduction The following section refers to: 2008 Ethiopia Food Crisis Logistics Planning Part I of II: Information Collection, Analysis and Supply Recommendations November 2008 Ian Heigh & Luc Dumoulin.

Long Haul Transport The major transport contracting hubs are around Shashemene and Adama in the centre of the country. Long haul vehicles (Truck/ Trailers and articulated) carry between 22 and 40 MT. Transportation of food aid cargo is generally one way trafﬁ c between Djibouti and Ethiopia with the return leg usually empty.

There is no reported capacity problem. Information from Ethiopian Roads Authority indicates that total number of overland trucks that work at Djibouti corridor is 5,000 with average capacity of 35 MT each. This is however, contested by most contracting agencies as too high. The WFP has contract with 44 overland transport companies with committed ﬂ eet of 2,177 trucks and a lifting capacity of 80,775 MT.

The only possible complication is the export of the coffee harvest in November, December and January which takes up around 20-30 percent of available trucks. Companies should be carefully selected for overland transport between Djibouti and Ethiopia. Providers used by ICRC are Comad, Tana, Tesco “Trans”.

Secondary Transport There is a large variation of short-haul trucks in terms of pay-load capacities (e.g.,between 0.5-12 MT capacity). The most commonly used truck is the Isuzu 7 tons capacity. There may be some capacity issues dependent on location of operation. The selection of short-haul trucks needs to be based on regional availability and road conditions. [In 2003 ICRC used Emergency Relief Transport Enterprise (ERTE) for 10 MT 4x4 trucks. This is a semi-government company using ex-GTZ trucks with a joint management from DPPA].

Food Aid Supply Chains There are three main food supply chains in operation, namely: (i) The Ministry responsible for disaster preparedness holds a 400,000 MT strategic cereal reserve for emergencies. (ii) A food safety net programme is operated by the Ministry of Agriculture and Rural Development (MoARD). This programme aims to supplement the coping mechanisms of vulnerable populations with marginal livelihoods with food and cash. This programme is intended to operate for three months between harvests. It is largely supported by the Government, World Bank and NGOs.

52 (iii) MoARD is also responsible for the emergency relief food supply targets assisting 6.4 million beneﬁ ciaries in 2008 and an estimated 5.4 million in 2009. At the end of each harvest year (around November) a joint Government / Interagency team carries out a countrywide nutritional and harvest survey. The number and locations of people who will require food aid in the following year is analysed. The difference between the requirements and the Government capacity is then the subject of various appeals. The consolidated pipeline of Government plus donated food is managed through the Ministry of Agriculture and Rural Development, and priorities, food ration quantities are set, with input from a committee made up of humanitarian actors and donors.

The activities of the main contributors to the relief supply chain are outlined below.

Government Pipeline Government supply for relief is largely supplied through the World Food Pogramme (WFP). The Government is currently importing food itself to be used in its strategic buffer. In addition it is currently importing food to be released at a subsidized cost onto markets in urban areas as a price control measure. A 200,000 MT shipment for this purpose is expected early next year.

WFP Pipeline The WFP food pipeline enters Ethiopia via Djibouti Port in bulk vessels and currently provides around 80 percent of relief food. Cargo is then transported to a network of central warehouses in Ethiopia with long haul transport. Depending on the partner, government or non-governmental organization, WFP will provide the food from the central warehouses for collection or deliver to the distribution point. The capacity of the WFP supply chain is around 90,000 MT per month. This equates to around 18 days of the ports handling capacity, when all handling equipment is focused on food. There are a number of challenges with the supply chain. (i) At the port, vessels with bulk food is offl oaded on a fi rst come, fi rst served base. Waiting time for the vessels can go up to two to three weeks. (ii) Demurrage cost for vessel immobilisation needs to be considered for calculation of total logistics cost. (iii) Containerized cargo is also problematic; WFP has had backlogs of up to 600 containers in Djibouti container port. However, containerized cargo is marginal for a food pipeline.

Other Actors The other key player is USAID. They have set a parallel supply chain and were also expecting shipments of more than 200,000 MT at the start of 2009. The food would be distributed using a consortium of NGOs as distributing partners, in cooperation with the Government.

Grain imports are not suitable for multimodal transport dry port operations. Bulk ships deliver grain to bulk port facilities and can operate to a number of ports. Grain is taken from bulk stock and loaded in bags for direct delivery to the place of need. This can be anywhere in Ethiopia and will usually be required at short notice. There are sixty three 5,000 ton storage facilities throughout Ethiopia, from where grain can be distributed.

53 Few storage sites are located near the existing railway between Djibouti and Addis Ababa and none of the bags are needed to be loaded into containers, since there is no mechanical handling equipment at the warehouses. All loading and unloading is done by manual labour and due to the sporadic nature of the movement depending on grain harvest volumes, drought or ﬂ oods, transport planning for grain transport is problematic and forecasting becomes almost impossible.

As Ethiopian agricultural production grows, and more grain and staple products are produced in future, the role of aid agencies is expected to diminish. It is anticipated that aid organizations such as the World Food Programme (WFP) could wind down their operations in years to come, but at present Ethiopia continues to import between 400,000 and 1.8 million tonnes of grain p.a. for direct delivery to areas identiﬁ ed as having the greatest need. WFP has also bought some grain locally, in anticipation of future need, in order to reduce the size of grain imports. Grain was once held in a strategic store in Addis Ababa (500,000 tonnes at Gotera junction) but this facility is now said to be beyond repair. There is thus no available bulk storage on the railway line in Addis Ababa.

Road Freight for Fertilizers Fertilizer imports are also unsuitable for multimodal dry port operation. Bulk ships deliver to bulk ports where bagging silos can be positioned. Such silos are mobile, so they can be moved to any port where they are needed. The bulk fertilizer is bagged directly to 50 kg bags and direct delivery seems the only way to strategic stores in farming areas, since the fertilizer is purchased just ahead of the planting season to save inventory cost and to achieve the best bulk price.

As Ethiopian demand for fertilizer increases each year, this could be met by some local production from a wide variety of local raw materials, or through an increase in the quantity of 400,000 tonnes of fertilizer currently imported annually. Due to the wide distribution of the fertilizer to small farmers, bulk or intermediate bulk container systems are not viable so all bag handling is done by direct labour.

Transit Cargo Transit across Ethiopia, between Djibouti and southern Sudan, would seem to be an important future trade ﬂ ow which could bring economic beneﬁ ts to all parties.

Road Freight for Other Imports The dry port operation in Addis Ababa therefore would have little or no relevance for the import and distribution of fuel, fertilizer or food grain. For this trafﬁ c, drop-trailer operations based in the Mille and/or Dire Dawa areas may be more suitable, once customs approval is obtained.

Liquid Cargo Historical Trends In the case of liquid bulk trafﬁ c, the annual movements observed in 1999 and 2005 were 790,300 ton and 1,279,800 ton respectively. Performed ton/ kilometre had also risen from 560 million in 1999 to 661.6 million in 2005 (Table 3.2).

54 Table 3.2 Growth of Annual Liquid Bulk Cargo Trafﬁ c (1999-2005)

Liquid Bulk Cargo Year In '000 tons Growth in % Ton km in million Growth in % 1999 790.3 560.0 2000 865.1 9.5 577.4 3.1 2001 885.5 2.4 589.5 2.1 2002 974.1 10 600.0 1.8 2003 962.8 -1.2 614.8 2.5 2004 1176.4 22.2 635.0 3.3 2005 1279.8 8.8 661.6 4.2 2006 1,108 372 Average Annual Growth Rate (%) 7.4 2.4 Source: Ministry of Transport & Communications and Annual Statistical Bulletin 2004/2005.

Operations Fuel imports are unsuited to multimodal transport dry port operations. Road fuel tankers now collect some 10 percent of fuel imports from Sudan and the remainder from Djibouti. From Sudan gasoline is brought by road direct from the reﬁ nery at Al-Gaili, near Khartoum.

The remaining fuel import is by sea, and bulk fuel tankers deliver to specially designed portside storage facilities, loading to quayside storage tanks in Djibouti (Doraleh) and from there road tankers are used for direct delivery to ﬁ lling stations all over Ethiopia, as well as to some strategic storage locations in Ethiopia. There is a limited stock in strategic storage, and essential supplies are delivered as near to the consumption centres as possible.

Fuel oil tankers operate in accordance with shippers dispatch schedule. This has prohibited them from making not more than two monthly trips to Djibouti and not more than one to Sudan. This shows that there is underutilization of capacity, reﬂ ecting imbalances between supply and actual scheduling for dispatch of vehicles.

There is an absence of a weighbridge at the port of Djibouti and the loading patterns of containerized cargoes has exposed truck operators to hinterland excess load penalties and associated delays in the processing of documents. Furthermore, the truck maintenance centres are inadequate, which is attributable to low level of infrastructure development.

The recent decision by Tana to withdraw from liquid bulk transport suggests that the industry has become vulnerable to unsustainable ﬁ nancial performance, necessitating reorientation of activities away from rapidly increasing cost without any return on capital employed.

Some Other Future Options for Liquid Cargo Transport Rail Fuel by rail tanker may be possible in future to Awash, where an existing bulk store is available as part of the strategic stock for Ethiopia. This store is situated close to the railway and could later be connected to it by a pipe distribution system.

55 Pipeline A direct pipeline may be possible in future for fuel to Awash, but annual tonnage between Djibouti and Awash alone would need to exceed 1 million tonnes to justify the expense of building such a pipeline. At present some of the import comes from Sudan and the Eritrean port of Assab may be used again in the future. Unless the strategic store is used and replenished frequently, it would be difﬁ cult to justify a pipeline in this case.

Urban Cargo Urban cargo or goods movement refers to the transportation of goods, generally by trucks, but also by vans, pick ups and automobiles. The circulation of humans and pack animals carrying goods also constitutes urban goods movement. Urban goods movement, which involves the internal distribution of goods is a neglected area of service, as shippers also provide their own carriage. Although trucks account for lower share of total trafﬁ c in an urban area (Addis Ababa is a case in point), the haulage size is too signiﬁ cant to be neglected.

Unfortunately, there is lack of data on the needs of individual merchants, such as numbers and sizes of deliveries. The mix of urban and inter-urban functions, generally driven by complex business oriented economic, trade and logistical considerations are not well understood. There are also shortcomings in developing a perspective on the future of the movement of goods by road, air and rail. It seems that land use decisions do not adequately consider direct and indirect impact on the ability of businesses to move goods.

Information would be required on the physical distribution pattern of freight, so that the role of government and private industry could be deﬁ ned more clearly.

The complexity inherent in the logistics associated with the movement of goods in all economic sectors, which in turn are linked to complex systems of local, regional and federal government decisions regarding facility location, modal choice, etc., remain a major challenge.

Additionally, the transportation of high-value, low-weight goods by air via Addis Ababa Bole International Airport is an important aspect of freight movement, and should be considered in detail.

Urban goods movement is considered as central to Addis Ababa's economic vitality and should therefore be included in the transport planning process in a comprehensive manner.

Interurban Domestic Road Freight Operations The dominant activity in Ethiopia is agriculture and it is the major user of transport. Ethiopia’s terrain remains something of an obstacle, particularly for freight transport in highland and rural areas. The average altitude is high in the central part of Ethiopia and the terrain is mountainous in parts. There is seasonal unbalanced demand and supply of freight.

Domestic road transport, as distinct from international transport, also needs to have segregated thinking and data collection in future.

Competition and Effi ciency The current dualist structure of the industry, in which 70 percent of the industry fl eet is old and poorly managed, may impede the effi ciency of the road transport industry in Ethiopia and subsequently 56 export competitiveness. In particular poorly maintained vehicles are often assigned onto rougher routes and vehicle operating costs are high.

Associations and PLCs account for 87 percent of the truck fl eet. Associations provide a legal umbrella for small yet independent trucking operators. Most associations have been formed from former “Ketena” members. The Associations are allowed to operate countrywide; however, many tend to specialize in a particular area or on particular routes. One of the key weaknesses of associations is the loose structure that binds membership and the in general weak human capital among members. Every member is independent minded which make them diffi cult to run on a commercial basis. They provide limited services for their mindbenders and customers are restrictive and have monopolistic tendencies. They hinder the development of independent operators and most probably limit the profi tability of the more effi cient members. The implication is that there are no economies of scale or operational advantages in belonging to an association.

Freight Transport Demand and Interurban Freight Transport Service Delivery Transport demand is a derived demand depending upon the demand for the commodities carried or for the beneﬁ t of personal travel. Likewise, the elasticity of demand for transport is determined mainly by the elasticity of demand of the goods being transported and by the proportion of transport costs in the value of the delivered product. This is particularly important in Ethiopia where a large proportion of the freight movements are generally of low-value agricultural products.

Dry goods account for the majority of cargo moved in Ethiopia. This includes food aid, fertilizers, commodities and manufactured goods. Not all goods transported from the port are consumed in Addis Ababa. There is often a further re-distribution of goods such as grain and fertilizer to various regions of the country. Industry is also another important user of transport. For instance, most factories owned by the GoE, such as cement and sugar plants have their own internal ﬂ eets.

There have been signiﬁ cant tariff increases on routes to Gondar and Mekele. On a per ton-km basis inland road transport does not seem to be a serious constraint to the movement of goods. Prices seem to be a function of the quality of the road and this increases only when triggered by external factors such as the movement of fertilizers, food aid or a shortage of transportation trucks.

Urban Freight Operations The capital city, Addis Ababa, is a focus for urban goods distribution by road. In most cases goods movements within an urban area are likely to be made by road because the trip distance will be relatively short and for reasons of connectivity. For shipments into and out of the urban area there is more scope for some degree of modal choice but road is still by far the dominant mode. Road freight vehicles clearly play an important role in the functioning of cities, distributing goods to numerous locations that are vital to urban life. These vehicles undertake a number of types of urban movement, including shipments of goods into an urban area for consumption, shipments out of an urban area of goods produced and waste materials, and collection and delivery operations within the urban area. Many goods are also temporarily stored in warehouses and storerooms within the urban area prior to use or sale.

57 Competition and Efﬁ ciency There are no reasons to suggest that the urban freight market is restrictive or the business for small truck owners is prohibited. In general the urban freight market in the capital works rather efﬁ ciently.

Urban Freight Transport Service Delivery In Addis Ababa mobility is low and traffi c congestion is increasing rapidly. Despite the large size of the city, which has close to three million people, most journeys are made on foot. Car ownership is very small and 80 percent of the low numbers of motorised trips are made by public transport. Yet traffi c congestion is becoming a signifi cant problem. As congestion builds, the problems of goods vehicle access and loading/ unloading in urban areas worsen and more attention will need to be paid in order to maintain service delivery levels.

An Urban Consolidation Centre (UCC) offers freight transport companies the opportunity to deliver goods destined for urban area to a specialist centre for ﬁ nal delivery rather than having to make the delivery to the ﬁ nal customer in a busy part of the city. The concept of UCC could be developed in Addis Ababa.

UCCs have the potential to improve delivery reliability and to improve the utilization of goods vehicles. In addition, it is possible for a specialist ﬂ eet of environmentally-friendly goods vehicle to be used for the ﬁ nal delivery from the urban consolidation centre to the customer. Given the environmental credentials of such vehicles in terms of pollutant emissions, noise and other factors, it can be possible to allow them to access and make deliveries in the urban area at times when delivery vehicles are usually prohibited, including during the night.

The European Co-ordination Action on “BEST Urban Freight Solutions” (BESTUFS7) was funded by the European Commission (DG Transport and Energy) and was active from 2000 until 2008. The main objective was to identify, describe and disseminate best practices, success criteria and bottlenecks of urban freight transport solutions. Although the research has been undertaken in European cities, the ﬁ ndings are clearly applicable also to large urban areas/cities in Africa, such as Addis Ababa in particular.

The Urban Freight Transport Problem Until the mid-1990s, researchers and policymakers paid relatively little attention to the increasingly severe freight transport problems facing urban areas. More recently this has changed, and there is growing interest in the logistics of collection and delivery services in town and city centres in particular.

On the one hand, urban areas must be attractive places to live, work, shop and spend leisure time. In these respects they face increasingly severe competition, notably from out-of-town retail parks. If retailers and other employers and income generators are to retain conﬁ dence in town and city centres, efﬁ cient logistics systems must be provided so that commercial premises can be serviced in a cost effective manner.

Why Is Urban Freight Transport Important? In most cases goods movements within an urban area are likely to be made by road because the trip distance will be relatively short and for reasons of connectivity. For shipments into and out of the 7 BESTUFS Good Practice Guide on Urban Freight Transport Main authors: Allen, J., Thorne, G. and Browne, M. (University of Westminster) 58 urban area there is more scope for some degree of modal choice but road is still by far the dominant mode. Road freight vehicles clearly play an important role in the functioning of cities, distributing goods to numerous locations that are vital to urban life. These vehicles undertake a number of types of urban movement including shipments of goods into an urban area for consumption, shipments out of an urban area of goods produced and waste materials, and collection and delivery operations within the urban area. Many goods are also temporarily stored in warehouses and storerooms within the urban area prior to use or sale.

Goods vehicle operators and drivers face a range of diffi culties when carrying out freight operations in urban areas. These include: Traffi c fl ow/congestion issues caused by traffi c levels, traffi c incidents, inadequate road infrastructure, and poor driver behavior

Agencies Which Can Introduce Change in the Urban Freight System It is important to distinguish between the two different groups who are capable of implementing changes to the urban freight system, namely; urban authorities and fright transport companies.

Urban Authorities Changes occur through the introduction of policy measures that force or encourage companies to change their actions. Strategies available include improvements in signage and information provision, vehicle access and loading/unloading regulations, trafﬁ c management schemes, infrastructure developments, and road pricing.

Freight Transport Companies They tend to implement initiatives that will reduce the impact of their freight operations, because they will derive some internal benefi t from this change in behavior. These benefi ts can be internal economic advantages from operating in a more environmentally or socially effi cient manner, either through improved economic effi ciency or through being able to enhance market share as a result of their environmental stance. Instances of company-led initiatives include increasing the vehicle load factor through the consolidation of urban freight, making deliveries before or after normal freight delivery hours, the use of routing and scheduling software, improvements in the fuel effi ciency of vehicles, in-cab communications systems, and improvements in collection and delivery systems. Some of these initiatives are technology-related, some are concerned with freight transport companies reorganizing their operations, and some involve change in the supply chain organisation.

Main Research Findings Introduction There are three focal areas in urban freight operations namely: • Goods vehicle access and loading/unloading in urban areas; • Last mile solutions; and • Urban Consolidation Centres.

Goods Vehicles Access and Loading in Urban Areas The following table shows approaches to bring about different goods vehicle access and loading objectives in urban areas.

59 Table 3.3 Good Vehicle Access and Loading Objectives in Urban Areas

Objectives Approaches available Gaining freight industry support for freight strategies and initiatives  Freight transport partnerships

Improving journey time reliability of goods vehicles  Telematics for urban goods transport  Signing  Urban freight information and maps  Road pricing  Allowing night deliveries  Lorry lanes or no car lanes Assisting the journey of goods vehicle drivers and reducing goods  Telematics for urban goods transport vehicle trips and kilometres  Signing  Lorry routes  Simpliﬁ cation & harmonization of vehicle weight, size and construction regulations  Urban freight information and maps  Urban Consolidation Centres Assisting freight transport companies at the point of delivering and  Providing on-street loading bays collection  Nearby Delivery Area (ELP)  Urban consolidation centres

Reducing environmental impacts and the risk of accidents involving  Vehicle weight, size and emissions standards regula- goods vehicles tions  Time regulations for goods vehicle access and loading  Allowing night deliveries  Environmental zones  Lorry lanes  Infrastructure improvements  Encourage use of environmentally-friendly vehicles  Enforcement

Last Mile Solutions “Last mile solutions” (also often referred to “home deliveries”) are the logistics element of the fulﬁ llment process within consumer e-commerce transactions (both business-to-consumer and consumer-to-consumer – B2C and C2C), other remote purchases from mail order, direct selling and television shopping companies, and deliveries from retail outlets. 1. Deliveries may be made to: • The customer’s home • The customer’s place of employment • Reception/delivery boxes • Collection points • Locker banks 2. Most deliveries are of: • Parcels and small packages (e.g., books, CDs, clothing and footwear, jewelry etc) • Large items (e.g., furniture, white goods, other large electrical appliances) • Food

60 Compared to “traditional” distribution channels there are two fundamental characteristics of “last mile” approaches: most approaches cut out the middleman and instead rely on direct business contact with consumers; but, more importantly, involve developing a supply chain that allows each consumer to order a personalized product. Shortening the supply chain and providing value added services to the customer can have a substantial impact on product quality and price.

Urban Consolidation Centres Many people are unaware of the potential beneﬁ ts of a carefully researched and implemented Urban Consolidation Centre (UCC). Retailers and logistics companies often think that UCCs will increase their costs and reduce their control of their supply chains.

Although much thinking on UCCs focuses on retail activities, they also have a potential role in other sectors including construction, ofﬁ ces, hotels and restaurants.

An Urban Consolidation Centre offers freight transport companies the opportunity to deliver goods destined for urban area to a specialist centre for ﬁ nal delivery rather than having to make the delivery to the ﬁ nal customer in a busy part of the city.

UCCs have the potential to improve delivery reliability and to improve the utilization of goods vehicles. In addition, it is possible for a specialist ﬂ eet of environmentally-friendly goods vehicle to be used for the ﬁ nal delivery from the urban consolidation centre to the customer. Given the environmental credentials of such vehicles in terms of pollutant emissions, noise and other factors it can be possible to allow them to access and make deliveries in the urban area at times when delivery vehicles are usually prohibited, including during the night.

Road Transport Maintenance Planning and Facilities The planning of commercial road transport operations should consider fl eet maintenance. Unfortunately, vehicle maintenance has not received the priority it has deserved, and maintenance standards and procedures are not specifi ed through regulation. The transport fl eet must be well maintained if it is to perform properly over its service lives.

Structured interviews administered with freight transport operators evidenced that maintenance facilities are inadequate, not well organized in manpower, tools, space and management. There are also problems of genuine spare parts. Preventive maintenance, in which vehicles are serviced in order to prevent failure while in use, is not widely practiced. In general, maintenance is undertaken only when failures are observed. Inspections are not conveniently scheduled or on a regular basis. The regulations with respect to safety considerations are not effectively enforced, and deferred preventive maintenance has become costly, with rapidly escalating expenditures. Facilities for heavy maintenance are lacking, and the existing ones are limited to established dealers, public enterprises and regional development associations owned for-hire operators.

Additionally, there is high concentration of maintenance facilities in Addis Ababa and its environs, while such facilities are lacking in the rest of the country, particularly in the small towns and rural parts of major transport corridors.

Road Freight Terminals Concerning urban freight movement and cargo terminals, centres equipped with loading and unloading facilities and adequate stacking area hardly exist, except at the Kaliti customs clearing station. The 61 absence of well-established cargo terminals has compelled truck operators to load and discharge goods at individual warehouses. Most of these warehouses are not easily accessible and lack equipment and trained labour. Besides these problems, vehicles operating within the city of Addis Ababa have established certain locations within the city where clearing and distribution activities are carried out. Legehar, Abune Petros, Mercato (Sidamo Terra), and Amanuel are among such centres where extremely old local city trucks of less than 4-ton capacity create much trafﬁ c congestion. The Urban Transport Study and Preparation of Pilot Project for Addis Ababa have recommended the location of Freight Handling Complexes at strategic locations.

In general there is an absence of and unbalanced distribution of terminals and facilities especially standardized garages, temporary parking areas, warehouses, etc. There are a few concentrations of garages and warehouses in Addis Ababa and Adama.

Currently there are no road freight transport terminals available for truck operators. The lack of these facilities at strategic production and distribution centres is another area of activity for private sector participation. Depending on the volume and type of cargo trafﬁ c, terminals having adequate warehousing and stacking areas, equipped with loading and unloading facilities are needed for cargo booking, consolidation and effective handling, thereby leading to an increase in truck productivity. Besides increasing truck performance and efﬁ ciency, the availability of terminals managed and regulated by pre-set standards can contribute to an improved quality of service and can reduce cargo damage, pilferage and loss. Modern terminal operations that make effective use of Information Technology (including consignment tracking and tracing systems) have additional advantages. This evolution, from a simple trucking business to a full logistics service provider, involving a chain of activities such as customs clearance, inspection, documentation, consolidation, transport, inter-modal transshipment, storage, packaging and door-to-door product distribution by a third party can ease the shippers burden. As conditions become favorable and the economy grows, logistics management services could further encourage private operators to organize their own container freight stations and transport depots. The effective and successful realization of such services would depend upon the necessary regulatory provisions.

Warehousing There is a well established and long standing food distribution warehouse infrastructure in Ethiopia. These have historically belonged to the Government and been used by distributing agencies free of charge. Recently with the onset of privatization, these facilities are still generally available but for a fee. A warehouse capacity assessment in 2006 estimated at 2,027,991.4 MT warehousing capacity all over Ethiopia. Private companies account for 200,234 MT, NGOs for 243,974 MT and the rest is with government agencies.

Freight Transport Vehicle Productivity and Costs Introduction The different transport cost components derived from the National Transport Master Plan Final Report are presented here. Comparative Road and Rail transport costs are also presented. The level of analyses is detailed and for reasons of time constraints the Master Plan ﬁ ndings are presented on “as is” basis, with some further clariﬁ cation based on data received in February 2009.

62 Road Vehicle Operating Costs Vehicle operating costs are one of the key components in road project appraisal or evaluation at the pre-feasibility and feasibility study stages. Application of Vehicle Operating Costs (VOC) to the projected traffi c fl ows over a 20 to 25 year project evaluation period, in both the with and without project situations, provides the principal basis for determining each road scheme’s net benefi ts, in terms of the VOC savings between the with and without project cases.

As part of the development of computer programs to model the interaction of trafﬁ c and road deterioration, various vehicles operating cost relationships have been derived from extensive research carried out over the past 30 years. This research effort resulted in the development of detailed mechanistic relationships for both the prediction of road deterioration as a function of trafﬁ c (in particular heavy vehicle truck loads), and the prediction of vehicle operating costs as a function of road and vehicle characteristics. In general, the World Bank’s HDM and RED software tools are commonly used in donor funded road feasibility studies.

The principal vehicle operating cost elements in the HDM model distinguish between three distinct data components, these being: • Basic vehicle characteristics; • Vehicle utilization; and • Economic and ﬁ nancial unit costs.

In respect of vehicle and tyre prices and vehicle utilization and related cost elements, data have been collected through survey work undertaken within Addis Ababa, together with reference to various studies carried out for ERA in recent years. The survey work entailed interviews with the major vehicle and tyre dealers as well as with the larger bus and freight haulage companies and enterprises. The survey results have been analysed, collated and in cases where multiple information for any one vehicle type was obtained, averaged for each of the vehicle types as appropriate.

Ethiopian customs tariffs, in the form of duties on imported goods, are: • 35 percent of the CIF value for motor cars, minibuses and pick-ups/utility vehicles; • 10 percent of the CIF value for buses (having 15 or more seats) and trucks (having a gross vehicle weight of more than ﬁ ve tonnes); • Vehicle spare parts attract an import duty of 20 percent and chassis with engine 10 percent.

For labour - maintenance labour, driver and crew costs - the MoFED ﬁ nancial to economic conversion factors for skilled and unskilled labour have been applied.

Besides the information on vehicle and tyre prices and vehicle utilization, other VOC related information that is required relates to the value of time for passenger travel and for cargo transport. The price of fuel is also required.

Value of Passenger Travel Time In the case of travel time values, several approaches are possible. The approach using a countrywide value gives an average hourly income of Birr 0.81 (USD 0.09). This may be construed as an “equity” value without distinguishing between income groups. This countrywide value is based on the average expenditure per person as a proxy for income, calculated from the Household, Income, Consumption and Expenditure (HICE) survey carried out in 1999/2000 factored up to 2005/6 using general price

63 inﬂ ation indices (Birr 1,676), together with the assumed average number of hours worked in one year (2,080).

Alternatively, if the Central Statistical Agency (CSA) employment data – 31.4 million people from the Labour Force Survey (LFS) of March 2005 – are referred to, which include unpaid family workers, then the average hourly income is Birr 1.04 (USD 0.12). This is calculated with reference to CSA data on national private consumption expenditure for 2003/4 (Birr 68 billion). 2005/6 hourly income

would be Birr 1.22 (USD 0.14).

Excluding unpaid family workers, that is, taking only those persons designated as being employed in the private and public sectors or as self-employed (14.7 million), then the average hourly income is Birr 2.21 (USD 0.25).

The differentials between the average equity-based expenditure per person and total employment (including unpaid workers) measures and the paid employment measure are of the order of between 2.1 and 2.7 which appear to be on the low side. The diffi culty lies in defi ning “formal paid” employment. Of the 15 million or so employed persons identifi ed in the LFS, nearly 13 million were classed as being self-employed. Within this class, there very likely exist wide differentials in earning power between small-scale, informal stall keepers on the one hand and larger-scale entrepreneurs on the other.

From the HICE data, expenditure on transport was extremely low in rural households (0.9 percent of total household income) compared with 4.2 percent in urban households. Using expenditure as the proxy for income, average per capita income in 2000 was Birr 2,401 in urban households and Birr 1,244 in rural households, indicating a minimum differential of 1.93. National per capita average expenditure was Birr 1,412 (equivalent to Birr 1,676 in 2006).

Estimating the magnitude of income differentials is necessary in order to apply different values of time between users of public passenger transport and users of private cars. Whilst the HICE data gives the distribution of households by domestic expenditure group, the issue is where to apply the income distinction for this purpose. Given that medium to longer distance bus services generally operate between towns and the larger cities, it is reasonable to assume that such users are largely urban dwellers and are already higher up the income scale. The reference average per capita income level is then based on formal sector employment (excluding unpaid family workers). Using average expenditure as the proxy for income, average per capita expenditure is estimated to be Birr 4,587 in 2006.

Examination of the data used in recent studies indicates that the car: bus value of time differential ranges from around 2.9 to 3.2 up to 7.7 and as much as in excess of 13.

Taking into account all of the above, and for purposes of the NTMP modal split and economic appraisal analyses, an income differential of 6.57 has been adopted and the following values of time have therefore been assumed: • Public passenger transport (bus) users: Birr 0.81 per hour ; • Private passenger vehicle (car, four wheel drive) users: Birr 5.34 per hour.

Value of Cargo Delay Time In the case of freight transport, the value of time refers to the value of the goods in transit on a per tonne basis. For the principal goods carried, as identiﬁ ed in the Origin and Destination (OD) surveys, 64 the value per tonne hour was determined with reference to the annual export, import and industry values of each commodity using 2004/5 data. This is shown in Table 3.4.

In terms of expressing the value of cargo delay time per vehicle hour, this would be given by the value of the main cargo carried multiplied by the average load carried, as recorded in the OD surveys. For economic evaluation purposes, the average cargo delay value (of Birr 0.3037 per tonne work hour, or USD 0.0349) is used in conjunction with the average payload for each truck type.

Table 3.4 Cargo Delay Values in Million Birr (2004/5)

Industry Export Import Value/ Delay value/tonne value value value tonne work hour Commodity Tonnes Coffee, tea 161,343 2,922 18,110 0.58 Other agricultural products 1,202,793 3,146 2,616 0.08 Perishable food 611,707 138 226 1.88 * Livestock 103,908 114 1,097 0.04 Processed food/drink 751,828 3,996 5,315 0.17 Machinery/equipment 156,558 5,236 33,444 1.07 Construction materials 1,521,954 2,531 1,663 0.05 Oil (fuel products) 1,700,819 5,283 3,106 0.10 Household consumables 170,215 1,351 7,937 0.25 Notes: * This value represents an assumed average ﬁ ve-day life of perishable produce. 10 percent interest rate applied to all cargo values (excepting perishable food) to obtain the delay value per tonne work hour (12 working hours assumed for 260 work days per year). Sources: Central Statistical Authority, Statistical Bulletins 331 (Agricultural Sample Survey 2004/05) and 349 (Large and Medium Scale Manufacturing Industries Survey 2004); Ethiopian Customs Authority; Ethiopian Foreign Trade 2004/05 & 2005/06 and Consultant’s estimates.

Fuel Prices The structural composition of vehicle fuel retail prices is given in Table 3.5 for regular gasoline (benzene or petrol) and for diesel fuel.

Table 3.5 Fuel Retail Price Structure, Birr/ Cents Per Litre (August 2006)

Motor Gasoline Regular Component (Benzene / Petrol ) (MGR) Automotive Diesel Oil Ex-Sudan Ex-Djibouti (ADO) 1. Price at Metema / Djibouti port 484.89 519.70 507.53 2. Transport from Sudan / Djibouti 29.60 7.66 7.66 3. CIF value (Addis Ababa / Dire Dawa) 514.49 527.36 515.19 4. Excise tax (30% on CIF value) 154.35 158.21 0.00 5. VAT (15% on CIF value + excise tax) 100.33 102.84 77.28 6. Municipality tax (transfer to Road Fund) 2.00 2.00 2.00 7. Road Fund (levy) 9.50 9.50 8.00 8. Stabilization Fund (MoFED) 15.52 (25.46) (99.90) 9. Ethiopian Petroleum Enterprise margin 5.00 5.00 4.94 10. EPE invoice price (subtotal 1 + 4 – 9) 771.59 771.79 499.85 11. Distributor margin 45.41 24.21 44.15 12. Addis Ababa / Dire Dawa retail price 817.00 796.00 544.00 Notes: VAT (value added tax) is allocated in toto to the Road Fund. 80% of MGR (gasoline) is imported from Sudan – the prevailing petrol pump prices reﬂ ect the ex-Sudan price structure; all diesel is imported through Djibouti Port. Source: Ethiopian Petroleum Enterprise (EPE).

65 Comparative retail pump prices for gasoline and diesel fuel for selected cities and towns around Ethiopia are shown in Table 3.6.

Table 3.6 Countrywide Retail Pump Prices in Birr Per Litre (December 2006)

City / Town Region Gasoline Diesel Nekemte Oromia (western) 8.32 6.70 5.58 4.90 Asosa Benishangul-Gumuz 8.90 7.17 6.11 5.37 Semera Afar - 5.21 Alamata Tigray - 5.34 Mekele Tigray 8.13 5.41 Endaselassie (Shire) Tigray 8.27 5.55 Gondar Amhara 8.24 5.52 Bahir Dar Amhara 8.22 5.50 Addis Ababa 8.17 6.58 5.44 4.78 Addis Ababa (February 2009) 7.47 7.13

Note: Italicized ﬁ gures show previous prices for Nekemte, Asosa and Addis Ababa prior to the effective price change in the month of August. They have been adjusted upward on the basis of the percentage increase for Addis Ababa. Source: Consultant’s ﬁ eld survey.

The ﬁ nancial to economic conversion factors for gasoline and diesel fuel, after removing the various taxes and subsidies, are therefore 0.69 and 1.04 respectively. For lubricants, the prevailing retail price is Birr 27 per litre. The SCF ﬁ nancial to economic conversion factor is 0.60. The interest rate has been taken to be 10 percent (as per the Ministry of Finance and Economic Development’s Appraisal Guidelines for Public Sector Projects).

Fuel prices are now being adjusted every month by MoTI, depending on import prices. The current (February 2009) prices are birr 7.47 and 7.13/ litre for regular benzene and diesel respectively at Addis Ababa gas stations and January 2009 prices were birr 8.37 and birr 7.91/ litre respectively.

There has therefore been a signiﬁ cant downward recent trend in gas prices, and 2009 prices at Addis Ababa gas stations are nearly 10 percent lower than 2006 prices at same gas stations. It appears that the diesel /gas differential has however disappeared since, even with the current lower price of a barrel of oil, diesel prices are signiﬁ cantly higher (30 percent) than they were in December 2006.

The price of diesel at the pump in Addis Ababa has notably declined by 10 percent between February and January 2009. It is not clear whether the full impact of the dramatic decline in oil prices, from USD 150-USD 35 per barrel, is still being worked through and is progressively being passed back to the consumer in Ethiopia, or whether there is some lag, or perhaps the tax-take on diesel fuel has been adjusted upwards. More research is therefore suggested in this area and the pump price of diesel in Addis Ababa should in particular be closely monitored since this element is critical to the performance of the road transport industry.

Financial Vehicle Operating Costs – Trucks The Transport Master Plan study derived Truck Transport Operating Costs as indicated in Table 3.7.

66 Table 3.7 Indicative Truck Financial Operating Costs Per Tonne, Km (Birr)

2-axle medium 2-axle medium to Multi-axle truck- Terrain / road type and condition truck heavy truck 3-axle truck trailer (Isuzu NPR) (Isuzu FSR) Flat terrain, good paved road 0.93 0.67 0.81 0.83 Flat terrain, fair gravel road 1.20 0.94 1.14 1.19 Mountainous terrain, good paved road 1.00 0.80 1.00 1.09 Mountainous terrain, fair gravel road 1.46 1.23 1.53 1.66

Note: Average loads observed from the origin-destination (OD) surveys, carried out in May-June 2006, and were 3.5 tonnes for all 2-axle trucks, 9.2 tonnes for 3-axle trucks and 14.0 tonnes for truck-trailers (both loaded and empty trucks). Source: Consultant’s estimates.

The Comet truck ﬂ eet had an average annual productivity (Average annual km) in 2006 of 62,400 kms. The Transport Master Plan assumed an average annual productivity of 72,000-75,000 kms p.a. for Medium to Heavy trucks.

Data was separately obtained from the parastatal Comet freight handling organization’s operations department for a ﬁ ve axle articulated truck unit operating on the long-haul Addis Ababa- Djibouti port route. Their estimate of ﬁ nancial break-even costs are shown in Table 3.8 and are less than half the estimates derived from the vehicle operating cost calculations, which is very likely due to under- calculation of overheads and the application of historic rather than replacement cost depreciation.

Table 3.8 Comet Truck Break-even Operating Costs*, Birr 2006

Fixed costs Birr Variable costs Birr Salary per driver per month 996 Spare parts per km per truck 0.91 Salary per driver per year 11,450 Average annual km 62,400 Vehicle registration fee 500 Spare parts cost per truck per year 56,784 Insurance premium 7,350 Fuel consumption (km per litre) 2.1 Depreciation 57,084 Pump price per litre 5.44 Subtotal Fixed costs 76,384 Fuel cost per truck per year 161,646 Tyre cost (per km per set of types) 0.89 Tyre costs per truck per year 55,536 Fixed and variable costs 389,050 Driver per diem 90 Administration costs, estimate 3% Work days per month 21 Administration costs 11,671 Driver per diem per truck per year 22,680 Total operating costs per truck 400,721 Driver assistant salary per trip 245 Round trips per month 3 Average load factor 60% Driver assistant per truck per year 8,820 Average payload (tonnes) 30 Djibouti port entrance fee 10 Tonne km 1,123,200 Port entrance cost per truck per year 360 Djibouti Road Fund per trip 190 Break-even cost per tonne-km, Birr 0.357 Road Fund cost per truck per year 6,840 Break-even cost per tonne-km, USD 0.041 Subtotal variable costs 312,666

Note: * For one Mack (5-axle) articulated truck. Source: Comet freight transport organisation: Operations Department.

67 Road User Costs Introduction Past studies have shown that heavy vehicles cause more wear and tear on the roads, and hence cause higher marginal road maintenance costs than they pay in taxation and user charges. Thus they are subsidized.

Situation in 2006 In 2006 the retail price of diesel oil was 6.44 birr/litre in Addis Ababa whereas it was 5.44 birr/litre, including distributor margins. VAT is payable on diesel fuel, as is the road fund levy and a municipal tax. These are passed to the Road Fund. But a subsidy of 1 birr/litre is paid from a stabilization fund that is designed to even out ﬂ uctuations in prices. The accounts of this fund have not been examined but it is likely that its resources will be depleted before long. Thus diesel-powered vehicles and heavy trucks in particular, as they cause the highest road maintenance costs, are being subsidized for each km being travelled. The axle load management study attributed 96 percent of variable road maintenance costs to heavy trucks, and this type of vehicle accounted for 68 percent of road maintenance costs overall. The study proposed a vehicle circulation license fee of USD 55/axle for this type of vehicle.

In economic terms, if a heavy vehicle creates a cost for the rest of society (a road maintenance cost, in this case), it should be asked to pay for this. Otherwise it is being subsidized. There may, of course, be social or developmental reasons for a subsidy. But in such cases the subsidy should be transparent so that value for money can be assessed. At about 20 Ethiopian cents/litre (stabilization fund of 1 birr minus value-added tax of 77 cents), and at the current annual import of some 1 billion litres, the subsidy to diesel fuel is costing the country some 22 million USD/year.

Another issue is that over 90 percent of the Road Fund income comes from the value-added tax on fuel, and not from the road fund levy (which is small by comparison) or the other annual vehicle fees and overloading fees as envisaged when the Road Fund was set up. This is effectively another subsidy to vehicle users, as VAT is paid on other goods and services and would normally go to the general Government budget. Non-road-users of fuel do, of course, also pay VAT, which goes into the Road Fund. The Road Fund has in fact not generated very much additional income for road maintenance purposes, over and above the VAT which would be collected anyway.

Present Road User Charges This section describes the current taxes that road users pay. These taxes also include general taxation, such as VAT and import duties, as some of these contribute directly to the revenue of the Road Fund.

Import Duties Motor vehicles for transport of persons are subject to a duty rate of 35 percent, with the exception of vehicles carrying 15 or more persons, which are subject to a reduced duty rate of 10 percent. Motor vehicles for transport of goods are subject to a duty rate of 35 percent if the carrying capacity does not exceed 1,500 kg and 10 percent if it exceeds 1,500 kg. Motorcycles are subject to a 30 percent duty, and bicycles to a 20 percent duty.

The duty rates for specialist motor vehicles are in general higher than the above rates if the vehicle is considered luxurious, and lower if it serves a special purpose (for instance, concrete lorries are only subject to a 5 percent duty).

68 Excise Taxes The excise tax is an additional tax on luxury items. Currently, it applies to motor vehicles designed for the transport of persons, with exemption for buses (deﬁ ned as vehicles carrying more than 10 persons including the driver). The tax is based on the cylindrical capacity of the vehicle. If it is below 1,300 cm3 the tax is 30 percent, if over 1,300-1,800 cm3 the tax is 60 percent, and if above 1,800 cm3 the tax is 100 percent. These import and excise taxes may be summarized as in Table 3.9 below.

Table 3.9 Import Duties and Excise Taxes on Vehicles

Cars Motorcycles Bicycles <1,300 cm3 1,300-1,800 cm3 >1,800 cm3 Import duty 35% 35% 35% 30% 20% Excise tax 30% 60% 100% 0% 0% Buses Small trucks Large trucks Import duty 10% 35% 10% Excise tax 0% 100% 0%

For vehicles driven by electric accumulators, as well as other vehicles designed for the transport of persons (except buses), excise tax is set at 30 percent.

Fuel Taxes Taxes on fuel currently consist of excise duty, VAT, municipality tax, a levy for the Road Fund, and a charge for the Stabilization Fund. Table 3.10 shows the different steps in the calculation of the taxes for regular petrol (gasoline) and diesel oil. For gasoline the main tax component is the excise tax of 30 percent on the CIF (cost, insurance and freight) value, followed by the 15 percent VAT which is levied on the total of the CIF value and the excise tax. Diesel oil is subject to considerably lower taxation as there is no excise tax on diesel fuel (and a slightly lower Road Fund levy). All these taxes, except for the Stabilization Fund tax, are transferred to the Road Fund.

Table 3.10 Fuel Retail Price Structure in Birr Per Litre (August 2006)

Motor Gasoline Regular (MGR) (Benzene/ Automotive Diesel Oil Components Petrol) (ADO) Ex-Sudan Ex-Djibouti 1. Price at Metema / Djibouti Port 484.89 519.70 507.53 2. Transport from Sudan / Djibouti 29.60 7.66 7.66 3. CIF value (Addis Ababa / Dire Dawa) 514.49 527.36 515.19 4. Excise tax (30% on CIF value) 154.35 158.21 0.00 5. VAT (15% on CIF value + excise tax) 100.33 102.84 77.28 6. Municipality tax (transfer to Road Fund) 2.00 2.00 2.00 7. Road Fund (levy) 9.50 9.50 8.00 8. Stabilization Fund (MoFED) 15.52 (25.46) (99.90) 9. Ethiopian Petroleum Enterprise margin 5.00 5.00 4.94 10. EPE invoice price (subtotal 1. + 4. – 9.) 771.59 771.79 499.85 11. Distributor margin 45.41 24.21 44.15 12. Addis Ababa / Dire Dawa retail price 817.00 796.00 544.00

Notes: VAT = Value Vdded Tax (This is allocated in toto to the Road Fund). 80% of MGR (gasoline) is imported from Sudan – the prevailing petrol pump prices refl ect the ex-Sudan price structure; all diesel is imported through Djibouti Port. Source: Ethiopian Petroleum Enterprise (EPE). 69 Master Plan Comments on Road User Charges The following comments were made: • Introduction of a vehicle circulation tax or license fee is recommended by all the previous studies on road taxation, and there is a good case for it to be introduced as an appropriate source of funding for fi xed maintenance costs; • The primary sourcing of Road Fund revenues from value added tax gives cause for concern, since VAT is a central instrument of general taxation. As long as the present arrangement continues, Government will in theory at least have the prerogative to redirect some or all of the VAT receipts to the general exchequer, thus starving the Road Fund of its prime source of revenue. It would be preferable for this funding to come from the specifi cally named road maintenance levy. Even if the Government decided on other grounds that VAT on motor fuels should be charged at a lower rate, or even zero-rated, it would be better for the Road Fund’s revenue source to be clearly designated as a maintenance levy. There is no reason why the Ethiopian Petroleum Enterprise (EPE) should not continue to collect the tax at source and transfer it direct to the Road Fund as at present; • The question of cross-subsidization of fuel taxes by non-road users should also be addressed. The previous studies estimate that roughly one-third of the fuel levies are imposed on non-road users. It may therefore be appropriate for a percentage of the designated tax on petrol and diesel fuel (whether VAT or the road maintenance levy) to be remitted to the general exchequer, with the Road Fund being compensated by the addition of revenues from vehicle license fees, and also from overloading fi nes, as foreseen by the proclamation establishing the Fund. Alternatively it may be possible for EPE to stock diesel as a motor fuel and for other purposes separately, possibly coloring one or the other to distinguish between them; in this case EPE could collect and remit to the Road Fund the fuel levy for road motor diesel only; • There is a good economic case for charging higher rates of duty on diesel fuel, in order to better refl ect the much greater damage infl icted on the roads by heavier vehicles. At the same time steps should be taken to impose effective controls, with heavy fi nes for transgression, on the overloading of goods vehicles, such funds also to be passed to the Road Fund; • Road tolls are unlikely to be a realistic option for most of the road network for years to come, being constrained both by generally modest traffi c levels and by limited capacity to pay.

Freight Tariffs Tariff rates are fi xed in relation to operating revenues and expenses. The process may be either regulated or market determined. Export rates to Djibouti were signifi cantly below import rates, as might be expected from the traffi c imbalance. On all three routes to Dire Dawa, Gondar and Mekele, rates were signifi cantly higher for traffi c from Addis Ababa than in the opposite direction.

The current tariffs for import traffi cs being approximately double than those for export traffi cs, rates for the carriage of road freight are no longer controlled in the dry cargo sector, although on key routes they are still monitored by TA. Operators have commented that their operations are not profi table for three reasons, including the traffi c imbalance on the Djibouti route, the seasonality of traffi c, and an infl ux of new trucks into the country over the past few years.

70 Freight Tariffs: Dry Bulk Trafﬁ c (2005/2006) Tariff rates for road freight transport are shown in Table 3.11.

Table 3.11 Freight Transport Tariffs, 2005/6 (Ethiopian ﬁ scal year 1997)

Origin Destination Birr/tonne km Addis Ababa Hawasa 0.37 Bale Robe 0.46 Debre Markos 0.62 Dessie 0.52 Djibouti 0.18 Dire Dawa 0.41 Gonder 0.66 Jimma 0.64 Mekele 0.53 Metu 0.58 Nekemte 0.53 Hawasa Addis Ababa 0.34 Bale Robe 0.31 Debre Markos 0.48 Dessie 0.30 Djibouti 0.46 Dire Dawa 0.39 Gonder 0.47 Jimma 0.49 Mekele 0.43 Metu 0.42 Nekemte 0.38 Note: Freight tariff data from TA surveys.

Freight Tariffs: Dry Bulk Trafﬁ c (2009) Some representative tariffs for 2009 freight from Comet are as follows:  Djibouti- Addis Ababa: Birr 65/ quintal or Birr 0.70 per ton-km  Addis Ababa – Djibouti: Birr 35 /quintal or Birr 0.38 per ton km

Current minimum price charged as per private freight transport operators are as follows:  Addis Ababa –Dire Dawa: Birr 35/quintal (0.67/ton km)  Dire Dawa –Addis Ababa: Birr 40/quintal (0.77/ton km)

These freight rates have risen considerably over the past three years. For instance the rate per tonne- km has risen from 0.42- 0.46 per tonne-km in 2005/2006 to 0.70 per tonne-km in 2009.

Long Haul Routes The rate per tonne-km from Djibouti to Addis Ababa has risen from 0.42-0.46 per tonne-km in 2005/2006 to 0.70 Birr per tonne-km today. In the reverse direction (exports), the rate per tonne-km from Addis Ababa to Djibouti has risen from 0.14-0.18 per tonne-km in 2005/2006 to 0.38 Birr per tonne-km in 2009.

71 Short Haul Routes The rate per tonne-km from Dire Dawa to Addis Ababa has risen from 0.36-0.39 per tonne-km in 2005/2006 to 0.77 Birr per tonne-km in 2009. In the reverse direction, the rate per tonne-km from Addis Ababa to Dire Dawa has risen from 0.388- 0.41 per tonne-km in 2005/2006 to 0.67 Birr per tonne-km in 2009.

A common practice followed by many, if not all commercial road transport operators, is over-loading or over-charging or both above the legal limit. Such illicit behavior of regional truck operators in areas and times of weak control is a major source of maximizing revenue at the expense of user comfort and convenience. Operators generally state that the market cannot serve as a means to allocate resources efﬁ ciently.

Freight Tariffs: Liquid Bulk Traffi c (2005/2006) A fi xed allowance is still paid for the carriage of fuel imports, determined by the Ministry of Trade and Industry as a component of the controlled price of fuel. Fuel transporters are normally directly engaged by the oil companies. There is, for instance, a designated transport allowance of Birr 0.33 per litre for transport of gasoline between Djibouti and Addis Ababa; on the basis of a specifi c gravity for gasoline of 0.82 and a distance of 927 km, this may be equated to a rate of Birr 0.43 per tonne-km. It is thus very similar to the dry cargo import rate quoted by TA for 2005, though this may mean in practice that the rate is less favorable than the corresponding dry cargo rate, since there is no prospect of a back-load for fuel.

Freight Tariffs: Liquid Bulk Trafﬁ c (2009) The Association of Ethiopian Petroleum Transporters recently submitted a letter to the Ministry of Trade and Industry urging a three-fold rate adjustment in rates, from 0.25 birr to 0.75 birr per tonne- km. At the same time the Petroleum Dealers Association wrote a letter to Oil Companies, the Ministry of Trade and Industry, and the Ethiopian Quality and Standards Authority to look into the currently introduced E-95 ethanol blended fuel distribution and take appropriate measures.

Structural Issues Affecting Transport Prices Introduction For freight haulage, the tariffs set out by the Transport Authority suggest that, in general, operating costs are not being fully recovered. This may be due to insufﬁ cient allowance for vehicle depreciation and replacement. There are consequent issues of quality of service (convenience, frequency, etc) and vehicle roadworthiness standards.

As a land-locked country with a large and relatively sparsely populated land area, Ethiopia faces considerable difﬁ culties and high costs in reaching regional and international markets, importing key imports and delivering services to ﬁ rms. Transport can form a very high proportion of Export Value. For instance, in a study of the garment trade in 2004 it was found that transport costs formed some 28 percent of the Value Added. When handling and Port Fees were excluded this dropped to 18 percent,but this remains a high proportion. In a study of the coffee trade in 2004 it was found that transport costs formed some 10 percent of the value of one ton of coffee.

However in the main corridor, the competition and the availability of transport is well suffi cient to support the needs of exporters. Since Ethiopia imports so much more than it exports, there is plenty of back haul capacity and most trucks travel empty to the port. 72 Major Pricing Issues: The Impact of Food Aid and Fertilizer Imports on Transport Costs Food Aid and fertilizer imports have a considerable impact on transport costs. The large items have a signifi cant infl uence on the functioning of the road freight transport sub-sector. Firstly, Ethiopia often faces massive food shortages and is forced to depend upon imports of food aid. Secondly, the import of fertilizer which is driven by GoE’s policy on the agricultural sector can also have a big effect on road haulage.

The transport industry is affected by the price peak periods caused by bunched arrival of imports which have different priorities for the GoE and donor’s view. In such situations all available truck capacity has failed to cope, as traditionally direct delivery of food aid and fertilizers from ships to waiting trucks is systematically preferred by the truckers. The import peak also often coincides with the harvest periods when crops need to be transported from the ﬁ elds. During peak times, transport prices have jumped from over two to three times average prices, whilst in non-peak time prices have dropped by a third. The WFP is a price market maker, since it is by far one of the largest importers in Ethiopia.

A ﬁ xed allowance is still paid for the carriage of fuel imports, determined by the Ministry of Trade and Industry as a component of the controlled price of fuel. Fuel transporters are normally directly engaged by the oil companies.

There is some evidence to suggest that road freight companies may also effectively cross-subsidize their non-peak operations by price rises during peak delivery times. It is clear that better coordination of information in terms of food aid and fertilizer transport could beneﬁ t the non-GoE trucking organizations and AACCSA could assist in this direction. Further research is suggested.

Present Relationship between Fares and Operating Costs The detailed work on Vehicle Operating costs elaborated by the Transport Master Plan Team estimated the ﬁ nancial per tonne-km (Birr, in 2006) for a range of typical terrain types found in Ethiopia.

The Association of Ethiopian Petroleum Transporters has applied to the Ministry of Trade and Industry (MoTI) requesting a three-fold rate adjustment in freight rates, from 0.25 birr to 0.75 birr per tonne- km.

The current freight rate assumes fuel costs at market rates (with oil prices around USD 35/barrel). At current freight rates and estimates of Vehicle Operating Costs, this Review Team re-conﬁ rms the conclusion made by the Transport Master Plan Consultant that: For freight haulage, the tariffs set out by the Transport Authority suggest that, in general, operating costs are not being fully recovered on the basis of the estimates of VOC. This may be due to insufﬁ cient allowance for vehicle depreciation and replacement.

73 In Ethiopia, where shippers move irregular consignments, freight forwarders could promote commercial road transport efﬁ ciency and enhance the competitiveness of the export trade.

Vehicle Overloading Introduction For improved road safety, fair competition, lower transport operating cost and lower road maintenance cost reasons it is essential to ensure that gross weight and axle weight overloading of all commercial vehicles is eliminated as far as possible. The current control system where such vehicles have to visit all weigh stations on route causes excessive delays, as all commercial vehicles have to form a queue on the access road and main road, waiting to get into the weigh station and on to the weighbridge. A notional 100 percent of vehicles are checked but incidences of reported overloading are few and ﬁ nes are small, so in practice the exercise has little value.

Better control can be established by a better understanding between Government and industry by issuing a certiﬁ cate after an initial check at a weighbridge on route, plus a self regulating “pact” between the TA and major operators, and random testing by the introduction of addition mobile weighbridge equipment operated by trusted inspectors in the Transport Authority. This would work on the main route to and from Djibouti but not be as effective on domestic short movements. There is also the problem of illiteracy with some drivers, but this is most likely in local domestic movements. Control will be more effective if we treat the different types of vehicle operation as separate entities as discussed in the main document.

The primary aim is to control 80 percent of the trafﬁ c in a regulated way, leaving time for the authorities to concentrate more on the troublesome 20 percent, assuming the 80:20 rules applies, as is usually the case.

Average load factors appear low. The larger vehicles of 4+ axles experience lower load factors, caused mainly by the export/ import imbalance.

Table 3.12 Loading of Goods Vehicles (2006) Trucks, Trucks, Trucks (2-axles) (3-axles) (4+axles) Average carrying capacity (t) 5.9 16.4 28.4 Average load, loaded vehicles (t) 5.0 14.3 25.5 Proportion of vehicles loaded (%) 68.3 57.1 56.3 Average load, all vehicles (t) 3.4 8.2 14.4 Load factor, loaded vehicles (%) 85 87 90 Load factor, all vehicles (%) 58 50 51 Source: Consultant’s survey.

Overloading of vehicles is a problem area to which insuffi cient attention may have been paid in the past. The issue has indeed been addressed, with ERA having been supplied with a number of fi xed and mobile weighbridges, but it is stated in the Eight-Year Review of the Road Sector Development Programme (RSDP) that only partial reduction of overloading has so far been achieved. Effective control of overloading is of importance for at least two reasons: fi rstly because overloaded vehicles can have an adverse impact on road safety, and secondly because excessive loads can cause great premature damage to roads designed and constructed under the assumption that there will be adequate control of the problem.

74 Extent of Overloading The overall extent of overloading decreased from 2003 to 2004 after the introduction of the penalty of ofﬂ oading of the excess loads in mid-March 2004. This demonstrates that creating delay is probably more effective than a ﬁ ne.

The highest overloading of rear axles have been recorded at Sululta 71 percent; 65 percent at Alemgena and 62 percent at Jimma station. On the other hand the least overloading are recorded at Kombolcha 20 percent, Awash 35 percent and Modjo 43 percent.

Most of the vehicles recorded as overloaded at Sululta, Alemgena and Jimma stations are two-axle rigid vehicles (known as 4 x 2, i.e. 2-axle vehicles with one axle powered and one steering axle) while most of the vehicles recorded at Kombolcha, Awash and Modjo are with multiple axles (often 6 x 4 or 6 x 2 articulated tractors pulling a tri-axle trailer).

The degree of overloading on multi-axle vehicles is much lower than on two-axle vehicles (4 x 2), as the number of axles and the distance between them make it more difﬁ cult to overload. Records at different stations show that the fewer the number of axles, the higher the chance of individual axles being overloaded. This is to be expected.

Loads can cause great premature damage to roads designed and constructed under the assumption that there will be adequate control of the problem. As an example it was observed that signiﬁ cant scouring and distortion of the road surface has already occurred on uphill sections of the Awash– Adama section of the Djibouti–Addis Ababa road, even though this road was rehabilitated only a few years ago. This may be attributed to the passage of heavy trucks at low speed on the steep gradients. There is a clear warning here for the sustainability of Ethiopia’s ambitious plans for continuation of the Road Sector Development Programme (RSDP), and note should be taken of the many instances of premature road failure, attributable largely to overloading of trucks, which have occurred at great cost to the community and to the economy in most other countries of eastern and southern Africa. As Ethiopia moves to rehabilitate and expand its main road network, it simply cannot afford to allow avoidable cases of premature road failure to occur.

The Impact of the Planned Increase of Containerization of Cargo to the Axle Load The increasing movement of goods in containers will have implications for axle-load management. Average gross container weights are in the region of 16 tonnes and 29 tonnes for 20 ft and 40 ft boxes respectively. Containers at these weights can be carried without overloading. 20 ft boxes can be carried on rigid trucks and drawbar trailers but legally only on the larger vehicles which have twin rear axles.

In practice there are wide variations with weights of a 20 ft box exceeding 20 tonnes and a 40 ft box perhaps exceeding 40 tonnes. At these extremes there will be overloading implications and the transporters will need to recognize that such containers can only be taken on certain multi-axle vehicles.

With the re-establishment of rail transport for containers from Djibouti some freight forwarders will recognize the potential of rail transit for such overweight containers.

75 Summary Several issues must be borne in mind, including the following: i) Although Ethiopia is a member of COMESA, it has not yet formally adopted the COMESA norms for axle loads and gross vehicle weights. This should not prove a problem as far as axle loads are concerned, since both Ethiopia and COMESA have already adopted a standard trailing axle load of 10 tonnes; however, some other vehicle specifi cations are different. It should be noted also that, on economic grounds, the axle load study performed by WSP and TRL in 2000 recommended raising of the permissible axle load to 11.5 tonnes (which accords with EU norms); for a number of reasons, however, this proposal has not been implemented. Full harmonization with COMESA neighbors should be achieved as soon as possible, so as to prepare for the time when vehicles from these countries will more regularly cross borders and travel over the Ethiopian road network;8 ii) Once any revision of vehicle loading norms is effected in Ethiopia, road and bridge design standards must also be amended if necessary so that roads will be constructed to accommodate these norms (including some margin for unplanned loading excesses); iii) The highest priority must be given to effective enforcement of vehicle weight and axle load restrictions. This will mean education of truck operators, drivers, weighbridge operators and traffi c police, and also establishment of effective measures to discourage attempts at evasion by any of these parties. Where evasion is detected, it must be punished by fi nes or other penalties which truly refl ect the cost to the country, and to other road users, of excessive road deterioration caused by overloading.

The Potential for Road-Rail Intermodal Transport Road and rail are the two transport modes that can compliment, and at the same time compete with each other. To establish framework for efﬁ cient intermodal operations, it is necessary to look at the following features that distinguish rail from road transport:-  The infrastructure cost of railway is much higher than road. But rail operating costs are relatively low.  The minimum volume of cargo required to justify railway transport investment is high, and a signiﬁ cant portion of the rail capacity may be underutilized.  Rail is preferable for long haul freight operations and the carriage of low-value bulk goods.  Road is suitable for break-bulk goods and for relatively short-haul operations. Since railways only serve the main production and distribution centres, door-to-door service in railway transport necessarily involves truck and intermediate handling costs. Thus, depending on the route distance, a shipper can decide upon the modal choice. If the route is relatively short and the shipper feels the cost of extra handling exceeds the differential between road and rail freight rates, movement of cargo from origin to destination entirely by road is advantageous. For long-haul routes, in which case the cost of handling is lower than the difference in the freights rate, rail is an appropriate mode of transport.

Usually a detailed analysis of the nature of demand and of the structure of costs is required to determine the comparative advantages of road and rail transport for any particular freight movement. From the perspective of the Ethio-Djibouti route, the steady increase of Ethiopia’s foreign trade over the past decade has raised the demand for freight transport, especially for imports. There is no apparent trucking supply constraint. In the longer-term however, as the business becomes less 8 Both Ethiopia and COMESA have already adopted a standard trailing axle load of 10 tonnes. 76 attractive for hire-commercial trucks and capacity of the Ethio-Djibouti railway remains insigniﬁ cant, the prevailing situation will not be expected to continue indeﬁ nitely.

Under the prevailing circumstances, in which the potential for the corridor’s transport demand is high and where the structural problems of foreign trade may not change its current pattern in the short-run, an improved rail system is justifi able. Among the range of benefi ts that an effi cient railway system could offer is an inter-modal piggyback service; a system in which a truck with its trailer or a semi trailer with tractor can be transported on a railway wagon. One advantage of such a system on the Djibouti route or for any sea port having reliable road and rail links is to enable trucks to save part of their variable cost while travelling empty for the return load; at the same time it can reduce empty haulage for the railway in a one-way cargo traffi c dominated market. Secondly, the capacity that the two modes jointly provide for the import trade can enable direct delivery of goods from ship to rail wagons or trucks thereby reducing handling and quay rent costs. The benefi t of such a system is to the truck operator, the railway company, the importer and the economy as a whole.

Current Status of Commercialization Comet is considered as an important enterprise and privatization is not foreseen in the near future (at least not within the next ﬁ ve years). Other enterprises (such as Bekelcha and Shebele) may, however, be slated for privatisation. Current actions taken include the disbanding of bulk fuel transport associations that operate in a way that has hampered widespread distribution of fuel throughout the country.

Freight Transport Service Forecast (2006-2015) Introduction The future patterns of economic performance and population must generally be derived before future travel patterns can be estimated. In order to avoid bottlenecks or other difﬁ culties, estimates for freight transport must be made well in advance of the actual provision of supply.

What is required for the Review Study is to give some idea of the magnitude of the likely evolution of demand. The information on the trend of past demand is used as far as possible to give a fi rst indication of the future. There is some diffi culty in compiling a good database on the current passenger traffi c and its trends, let alone in forecasting. An alternative is also to compare simple estimates of traffi c growth with estimates produced by other similar and recent studies.

In order to keep pace with the growing economic activity, replacement of old fl eet, upgrading of trucking technology and expansion, is required to match with the pattern of change in the nature of demand. Furthermore, measures to restrict import of used vehicles and replacement with obsolete trucks will tend to reverse the present distribution of old trucks. It is expected that there will be a shift towards modern multi-axle trucks, which currently account for a relatively low proportion of the trucking fl eet. In order to have suffi cient number of modern multi-axle long haul age trucks, there has to be sustainable increase in economic activity.

Considering the strong positive performance of the Ethiopian economy in recent years and taking into account that it is in the earlier stages of transition to a full market economy, the increase in road freight transport ﬂ eet will be at a high rate.

77 Fleet Forecasts The truck ﬂ eet in 2008 was about 54,000 vehicles of which “for hire” made up some 60 percent of the total [c. 37, 000 vehicles], with “own account” vehicles making up the remainder.

The National Transport Master Plan Study (Status Quo Scenario) assumed the following in Table 3.13.

Table 3.13 The National Transport Master Plan Study Truck Forecasts

Transport Master Plan Study Truck Fleet Growth p.a. Up to 2012 2013- 2027 Status Quo Scenario 7.0% 6.5% Urban Development Scenario 9.0% 8.5%

This Review Study’s truck forecast includes the following assumptions (some of which are relatively crude): 1) Forecast total truck fl eet for medium term e.g., from 2008 to 2017 is considered more accurate; 2) Long range forecasting remains much less scientifi c; 3) Adopt a Traffi c Growth Rate (TGR) for all truck types (liquid and bulk) over each period; 4) Assume the proportion of own account and for hire vehicles in the total fl eet stays approximately constant over time; 5) Freight transport forecasts by type of cargo and growth rate by type of ownership and appropriate categories is not recommended; and 6) The freight transport forecasts assume no change in the import/export imbalance or the ratio of import and export traffi c to other domestic traffi c.

Table 3.14 Review Study Truck Forecasts

Review Study Truck Fleet Growth p.a. Up to 2012 2013- 2027 Base Case Scenario 7.0% 6.0%

It is therefore assumed that the truck ﬂ eet would grow by between 6-7 percent p.a. over the period 2009 to 2027.

The overall fl eet size in 2017 is estimated at 100, 000 vehicles, of which “for hire” would form some 60 percent of the total [c. 68, 000 vehicles]. In other words, the truck fl eet will have roughly tripled over the next ten years. The overall fl eet size in 2027 is estimated at 180,000 vehicles, of which “for hire” would form some 60 percent of the total [c. 120,000 vehicles]. In other words, the truck fl eet will thereafter have almost doubled between 2017 and 2027.

It is noted that unfortunately a direct comparison with the National Transport Master Plan truck fl eet forecasts does not appear possible. Traffi c load, distance travelled data is not considered accurate enough to forecast tonnages and ton-kms for 2017. One of the key anomalies that skews the result is that the grain import requirements does not follow time series data, they are driven by weather conditions (particularly rainfall) patterns, which vary from year to year, on a random basis. However, for the purpose of the recommendations, such details are most probably not required. In addition, if a concessionaire invests substantially in the Djibouti- Addis Ababa Railway line, there could be some lessening of truck growth rates in the period 2015 +, when a proportion of the forecast corridor truck traffi c might be carried by rail.

78 Chapter Four

Road Passenger Transport In the road passenger transport sub-sector services are provided ranging from urban services, interurban services to the local (rural) level. In this study only brief reference is made to services provided at the local (rural) level.

Many of Ethiopia's rural villages are not yet connected with all - weather roads to market centres and other basic facilities and services. Most public transit technologies are uneconomical to operate in a rural environment, where the demand for mobility is generally quite low. Demand there would not normally justify public passenger services such as conventional or even minibuses. In addition, in such areas there are no well engineered roads so that the operation of conventional buses, minibuses and similar other types of public commercial transport systems could take place.

The option of using more appropriate means of transport such as Intermediate Means of Transport (IMT’s), and sturdy and low capacity motor vehicles have to be considered to respond to varying needs in rural Ethiopia. The rural transportation problems and needs are closely correlated with income. The class of options centres on the question of how to serve efﬁ ciently low-density rural areas characterized by dispersed trips, while meeting the overriding objective of affordability. The Ethiopian Rural Travel and Transport Program (ERTTP) developed under the management of the ERA speciﬁ cally addresses transport problems of rural communities as a component of the Woreda Integrated Development Study (WIDP). In appraising passenger road transport one need to carefully consider the population density.

At present the main population appears to inhabit the main corridors which, in theory, should be well suited to intercity bus operations.

Modiﬁ ed taxis tend to operate on poorer and unmade roads, and serve market areas where the carriage of produce as well as people is important. Their seating is much more cramped than for the minibuses, and the carriage of produce often affects odor and cleanliness. They are also generally older than the minibuses, having been developed locally to meet emerging demand at a time when minibus imports were not possible.

For the purposes of focusing on the study of the road passenger industry in Ethiopia it is helpful to concentrate on two main areas, namely:  Interurban (domestic) road passenger operations; and  Urban passenger operations.

79 This study includes an appraisal of both Interurban and Urban passenger transport services. The latter includes conventional bus services, minibus services and taxi services. The former is restricted to the transport services in all sizes of bus, including minibus.

Addis Ababa is a focus for urban bus and taxi operations. Urban Passenger Transport in Addis Ababa is very important. Because of their substantially smaller size and their lesser stage of development, only brief reference is made below to road passenger transport developments in one other city in Ethiopia. In Dire Dawa an “Urban Scope Transportation Study”, performed for Dire Dawa Council by the Physical and Spatial Planning Team, reports that a municipal bus company operates three buses along a single route, carrying around 800 passengers per day. Most passenger transport within the municipality is provided by 700 minibuses, small taxis and three-wheeler motor rickshaws, carrying a total of 130,000 passengers per day.

There are several current, topical and major studies of urban transport operations in Addis Ababa9 that contribute considerably to urban passenger transport policy development. Importantly, because of these respected data sources, the present study does not expend substantial study resources to investigating road transport development in these areas; rather it borrows and builds upon past work. (Furthermore comparative analyses are provided with urban passenger transport operations in other African cities and this benchmarking can also be used as a tool in policy formulation).

Ethiopia is a large country. At 1.1 million sq. km it is nearly the size of France, Germany and the United Kingdom combined. It consists of rugged terrain and the fourth highest mountain peak, Ras Dashen (4,620 m), in Africa. The central plateau has an average altitude of 2,000 m and includes 20 peaks of 4,000 m or higher. Thus ﬂ ying domestic services in the country present special conditions. However for high value passengers, particular on longer trips to the Northern, Eastern, and Western/ Southern regions of Ethiopia, domestic air travel remains the only realistic means of travel, due to considerable time savings versus road travel. It is expected that intercity bus passengers represent some of the relatively poorer sections of society (having lower values of time) and for whom air travel would not be an option. Ethiopia’s terrain remains something of an obstacle, particularly for passenger transport in rural areas.

Passenger Transport Fleet Utilisation One of the performance measures in commercial road transportation is vehicle productivity, in terms of kilometres covered in a year, month and week. Kilometres covered by a vehicle or in aggregate for a ﬂ eet depend on a number of factors such as technology, age, maintenance schedule/standard, level and distribution of demand.

Throughout Africa, the limited evidence available indicates that average distances of around 190 kilometers per day are typical for large buses and minibuses alike. In some cities, however, the average distances covered by large buses and minibus differ widely. In Addis Ababa, for example, minibuses cover distances of 180 km/day compared to 138 km/ day for large buses.

9 Such as, inter alia, PPIAF, Study of Urban Public Transport Conditions in Addis Ababa, Ethiopia IBIS Transport Consultants Ltd., March 2005.

80 One strategy to increase vehicle utilization and productivity of short distance route buses is to reduce terminal time and increase frequency of trips. In the case of interregional conventional buses, the determinant of utilization rate is the frequency of trips in a given time. Usually, minimization of terminal time on short distance routes is difﬁ cult.

As the schedule of interregional conventional bus service is controlled, their operating time is restricted to 15 days a month, on average round trip distance of 1,250 kms. On the other hand, regional buses of up to 44 seat capacity have 20 average operating days in a month. As a result, cost per seat of a 44-seater bus is estimated to be lower than that for conventional buses.

The average annual performance for 11-seat minibuses is about 36,600 kms/year and 60,000 kms/ year for 24 to 62 seat capacity buses. This productivity is generally low when compared with estimated average utilization of about 100,000 km in India and about 70,000 in Tanzania.

Constraints on efﬁ cient bus utilization include control of schedules with departures determined by regulatory bodies. Increased bus utilization could reduce ﬂ eet requirements, with impact on a reduction of vehicle operating costs and improvements in revenue-kilometres. It should be stressed that not only low vehicle productivity, but low average load factor for scheduled long distance conventional buses has contributed to low revenue-kilometres.

Urban Transport Introduction The main cities of Ethiopia are Addis Ababa, with some 3 million inhabitants, and Dire Dawa, with nearly 300,000. Urban mobility is very low. Even in Addis Ababa, most journeys are made on foot. Public transport carries 80 percent of the remainder.

The capital and primary city of Ethiopia, with a population of over 2.7 million (2007), Addis Ababa extends over 540 square kms, at an altitude of 2,500 meters a.s.l. The city government holds greater power than do most other cities in Africa. The urban areas need city transport at an appropriate scale for the transport demand. It is very clear that Addis Ababa should be the focus of improvement in urban public transport services.

Addis Ababa - Background Situation Buses Addis Ababa has a city bus ﬂ eet of over 350 vehicles, operated by the state-owned Anbassa Company. This is unable to meet the demand and is supplemented by private minibus services. There are also some medium-sized buses on certain routes.

Data showing the services of Anbassa City Bus Enterprise from 1991 to 2001/2 is provided in Table 4.1.

81 Table 4.1 Serivce of Anbassa City Bus Enterprise (1991-2001/2)

Addis Ababa Jimma Year Passenger in (’000) Distance traveled in Passenger in Distance traveled in (million) kms (’000) (million) kms 1991/92 108,479 8,598 2,091 290 1992/93 102,816 8,743 1,674 313 1993/94 98,233 8,390 1,807 355 1994/95 74,587 5,847 1,761 320 1995/96 53,890 4,646 1,384 262 1996/97 100,936 8,855 1,265 306 1997/98 162,764 15,337 1,396 322 1998/99 190,394 18,387 1,312 305 1999/0 208,243 19,642 1,230 311 2000/1 200,384 18,853 1,108 250 2001/2 186,065 18,911 1,407 232

The government decided to import 2,000 medium sized buses on credit in 2006 in a bid to alleviate the shortages of public transport in the city. The responsibility was subsequently given to the Ministry of Transport and Communications (MoTC), which instructed the Federal Transport Authority (FTA) to ﬁ nd a credit supplier.

Accordingly, Anbassa City Bus Enterprise signed an agreement with the HIGER in June 2006 on behalf of the Authority for the procurement of the 500 buses. Only 90 of the buses have arrived in Ethiopia thus far. Part of the Anbassa City Buses Enterprise’s efforts to alleviate transport shortages in the city has been to purchase 90 mid-sized buses from China.

The government, through Anbassa City Bus Enterprise, has procured the 25-seat capacity buses at a cost of 13.2 million US dollar from HIGER Bus Company Ltd. The agreement also obliges the company to provide maintenance services. Anbassa Buses decided to sub-contract it to a local company instead of setting up a new maintenance facility from scratch. According to the accord, HIGER is also required to supply eight million US dollar worth of spare parts with the buses.

With its large bus ﬂ eet, Anbassa City Bus Enterprise dominates conventional bus service in Addis Ababa. Anbassa is legally bound to operate in a commercial manner, but it lacks the freedom to set fares. These have effectively been frozen since 1992 in the interests of keeping transit affordable for citizens, a priority of the city government. As a consequence of the fare freeze, the municipal and national governments have provided ﬁ nancial support for operations and expansion.

Minibus Taxis In addition to Anbassa’s bus ﬂ eet, Addis Ababa is served by more than 10,000 minibus taxis that provide service of far higher quality. Minibus taxis are not restricted in terms of the routes or areas in which they may operate. Indeed, operators are free to choose their routes. The fares are, however, controlled by the city government, but are two to three times those of city buses. The absence of restrictions on entry has led over the past decade to sharp increases (11percent p.a.) in the number of minibuses. Operators have converted Toyota pickups into minibuses or obtained second-hand buses from Europe and the Middle East. Discipline in the terminals is maintained by self-styled regulators known as “marshals” who collect, on average, 3 to 4 birr per trip from each vehicle.

82 Urban Planning An Addis Ababa Urban Master Plan was prepared in 1988 and updated in 2002. Urban land-use plans need to be respected in all transport sector interventions in Addis Ababa and other towns, and similarly transport sector interests and users must be consulted in plan preparation.

An urban transport study recommended development of some of the main Addis Ababa transport corridors for rapid transport, by bus or light rail. Bus priorities were proposed for particular localities as and when needed for the free ﬂ ow of the buses. Measures to achieve greater co-ordination of transport planning, management and operations in the city were also recommended.

In the case of Addis Ababa, there is a need to match modes to service requirements, depending on the level of density of travel corridors. The Urban Transport Study and Preparation of Pilot Project for Addis Ababa explored options, and formulated a Multi-Year plan, comprising short-range plan (0-5 years), a mid-range plan (5 to 10 years) and a long-range plan (10 to 20 years). The Addis Ababa Transport Plan has a Public Mass Transport (PMT) System Development Component that includes the rejuvenation of Anbassa City Bus Enterprise, introduction of medium capacity PMT Technology comprising Bus Rapid Transit /Light Rail Transit System along major corridors, and promotion of Minibus Taxi Services. In Addis Ababa mobility is low and traffi c congestion is increasing rapidly. Despite the large size of the city, which has close to three million people, most journeys are made on foot. Car ownership is very small and 80 percent of the low numbers of motorised trips are made by public transport. Yet traffi c congestion is becoming a signifi cant problem. Escalating operating defi cits with Anbassa's services have greatly constrained bus system expansions and the introduction of new bus services in Addis Ababa. Authorities are now questioning whether they should expand Anbassa's operation when it is diffi cult to support ongoing bus services.

Experience with demand-responsive minibus services over the past decade has indicated that this is not a panacea for Addis Ababa's urban transportation problems. Improvements have to be made so that operational reliability and cost effectiveness of more traditional urban bus operations can improve.

The city has reached a stage where light rail transit (LRT) service on major routes has become a requirement. Anbassa, the sole conventional bus operator can hardly respond to Addis Ababa’s public transport demand. It handles not more than 11 percent of the daily passenger trafﬁ c. Its service is characterized by long waiting time at stops and overloaded and aged vehicles are operating mostly along hilly terrain. This has given the opportunity for unrestricted growth of minibus taxis which have low capacity and are inefﬁ cient from view point of road space, and hence contribute to congestion.

Modal Share in Addis Ababa In terms of modal split and trafﬁ c share, Anbassa as the sole Conventional City Bus operator and minibuses have respective shares of 10.9 percent and 20.6 percent, whilst the share of private cars is only 5 percent. The highest share (of 60.5 percent) consists of walk mode, with 3 percent listed as others, as shown in Figure 4.2.

As the economy grows and the currently urban paved road network (about 400 kilometres) increases, the current pattern of movement will change.

83 Figure 4.2 Modal Split of Addis Ababa City Passenger Trafﬁ c

3% 5%

11%

Walking Taxi Anbassa City Bus Private Others

21%

60%

The Strategic Plan prepared by the Transport Authority-Addis Ababa Branch estimated the average daily number of travelers in the City to be 3.4 million. Out of the total number of daily passenger trafﬁ c, the movement for commercial activity and services accounts for about 16.7 percent and 4.9 percent respectively. It is estimated that the highest share of travel is related to school trips by students (about 30.2 percent).

A recent study on Improving Urban Transport "Through Private Partnership in Addis Ababa" indicated that the urban public passenger transport system is characterized by market share of conventional bus operation /Anbassa city bus service (35 percent), minibuses (20 percent), private vehicles (7 percent), small taxis (5 percent), company transport (3 percent) and walking (30 percent) (N. D. Lea and Unicone: 2004).

Regulation of Urban Transport The market for passenger transport services in Addis Ababa was deregulated by the Transitional Government in 1992 through the Proclamation to Provide for the Regulation of Road Transport. Before that date, minibus taxi services in the city were regulated on a zone (Ketena) basis. A license had to be obtained to operate in one of the ﬁ ve designated areas, and the number of such licenses was determined by administrative control. Only Anbassa, a federal enterprise, had the right to operate large buses. Since deregulation, entry conditions have been limited to the roadworthiness of the vehicle and the qualiﬁ cation of the driver. An intending operator must secure a business permit from the city—a formality as long as the other conditions are met. For administrative convenience the Bureau for Trade and Industry Development has delegated responsibility for issuing business permits to the Transport Authority. The current cost of a permit is 110 birr (USD 11) for initial documentation, plus an annual renewal fee of 60 birr (USD 6). The permit is valid throughout the city, with no restrictions with regard to routes or areas of operation. 84 The proclamation encourages, but does not require, the taxi sector to organize itself by area. However, a limit has been set on the number of vehicles (originally 500, now 750) that can belong to any one taxi association so as to prevent the emergence of monopolies, as in some other jurisdictions (Ghana, Uganda). Three associations are registered with the Transport Authority, but their total membership represents only a relatively small proportion of the industry. Nevertheless, it is with these bodies that the Authority negotiates all regulatory matters, particularly the fare structure.

In theory, the proclamation that liberalized the urban passenger transport market also applied to conventional bus services as well. Thus the government-owned Anbassa can no longer be considered to hold an exclusive franchise in the city, but no competitor has emerged to challenge it.

The company’s preferential access to public investment and subsidies acts as a barrier to new market entry. However, liberalization has allowed long-distance bus companies to provide supplementary services when their vehicles are between scheduled departures; these provide useful additional capacity at peak times. This increment of supply is purely opportunistic, however, and cannot be considered as part of the formal network.

Future Plans In Addis Ababa, this means an enhanced city bus service will be required using more large vehicles – even double-deckers – which can provide services that are economical in terms of cost and road space, and allow the existing street network to be used more effectively. The expansion of the bus network, together with greater consideration of pedestrian needs, would seem to be the measures that would have most immediate beneﬁ cial effect on urban mobility. Buses are cheaper per passenger to operate than minibuses, and can offer lower fares, as well as causing less congestion.

The city should be encouraged to develop urban bus services. In the absence of private investors in fl eets of full-size buses, public investment may be necessary in the fi rst instance, but the management can be contracted out to the private sector, to develop skills that can later be harnessed in the development of private sector enterprises and investment. Such city bus services will need sustainable fi nancing. Affordability will be critical. A new, more effi cient, subsidy system is needed that protects passengers, operators and the fi nancing body.

An additional fuel levy on petrol and diesel for sales in Addis Ababa (and later, for other cities, when needed) should be considered as a means of increasing the available funds for this purpose. As public transport use also beneﬁ ts other road users (because of its lesser use of road space), a 50:50 share of the cost between passengers and others may be regarded as equitable and efﬁ cient, as in many other countries.

The Urban Transport Study and Preparation of Pilot Project for Addis Ababa estimated patronage in the scenario of normal load based Public Transport Services for the year 2020 to be composed of some 58 percent of minibus taxis and about 42 percent of conventional city buses. The share of walking in modal split is estimated to be 45 percent at that time.

Integrated Public Mass Transportation System for Addis Ababa For most cities, mass transit can adequately be served by local fi xed-route conventional bus service, minibus and taxi services operating on streets, mixed with other traffi c, and constrained by frequency of stops and delays from traffi c congestion. An effi cient and rational public passenger transportation system would be necessary to sustain economic activity. One of the major problems of public passenger 85 transportation system in Addis Ababa has been its inability to keep pace with the population growth. To cater to the rising demand, the existing transport system will have to be improved along with the road infrastructure, traffi c management and associated amenities.

Several corridors in Addis Ababa would require in the medium to the long term, transit services which operate at higher speeds and with higher capacity than conventional buses can provide. Bus Rapid Transit, a system utilizing conventional buses operating exclusive right-of-ways with stops generally at least 0.8 km apart, permitting high-speed operation can provide high-level service where lanes/ ways can be reserved for the buses. Light Rail System offers ﬂ exibility of operating mixed with other trafﬁ c for segments of a lane and loading may take place from low or medium-height platforms. Under these conditions, electric power must be obtained from overhead wires instead of a low-level third rail.

The guiding principle for public passenger transportation in Addis Ababa is system integration, which is based on the matching of modes/means to service requirements. In this regard, high capacity, long- haul modes such as Bus Rapid Transit (BRT) and Light Rail Transit could be utilized on major high- density corridors, while conventional buses and minibuses can be used in a complimentary manner on other corridors. Support facilities such as bus stops, interchanges, terminals, transit shelters, parking, etc., should be implemented simultaneously. As Addis Ababa and its environs expand, its population increases and the economic activity system intensify, it is imperative that planning for urban transport has to start.

Some Specifi c Measures for Addis Ababa As Addis Ababa expands further, to perhaps double in size within 20 years, a high number of foot journeys will become unsupportable for a greater and greater number of people. The strategy for the City thus contains the following elements: 1) A commitment to give priority to the improvement of public transport to meet the needs of the majority of the population and keep traffi c congestion to a minimum. The interim target should be to keep at least 60 percent of motorised trips on public transport throughout the plan period (up to 2027). When Addis Ababa City Transport Organisation (AACTO) is formed and integrated urban transport plans are progressed, measures must be proposed to ensure that this target continues to be exceeded and if possible raised; 2) A relaxation of the size limits on urban minibuses is proposed to allow increased capacity and other designs of vehicle better suited to urban mass transport; 3) As a priority project, it is suggested to adapt the underused railway Right-of-Way (RoW) within Addis Ababa to become an electrifi ed bus way (usable also by conventional and double-deck full-sized buses) as the fi rst step in the gradual electrifi cation of the urban public transport system (using hydro-electric power resources). This would be a more economic and benefi cial solution than a railway, which would have a much higher initial capital cost and less fl exibility. A busway could be opened in stages; 4) The establishment of AACTO and the implementation of improved traffi c management and planning measures; 5) Transfer of ownership of the Anbassa bus company from PPESA (under the Ministry of Trade and Industry) to Addis Ababa city, to facilitate the application of city transport policy under AACTO; 6) A continuing city roads programme to meet the development needs of the city and a 86 major programme to expand the urban bus fl eet and urban bus services.

Electric trolleybuses would be well suited to Addis Ababa, once Ethiopia has a larger electrical generating capacity (which is expected by 2011). They are well suited to the hilly terrain. Where trafﬁ c levels on corridors and routes do not warrant electriﬁ cation, conventional buses can be used [with diesel fuel, or Compressed Network Gas (CNG)] later. Modern diesel double-deck buses have good acceleration and are more economical in cost and use of road space than articulated single- deckers. Trolleybuses may also be double-deck.

According to forecasts made as part of the planning study, in 2015 a total of 338 conventional buses and 2268 minibuses would be needed. In 2020, about 446 conventional buses and 2268 minibuses would be needed. In broad terms, conventional and minibus services shall be part of an Integrated Public Mass Transportation System (PMTS), consisting of Bus Rapid Transit (BRT), along East-West Corridor up to 2015 to be converted into Light Rail Transit System (LRTS), up to 2015; Bus Rail Transit with Bus Lanes along North West Corridor; Bus Rail Transit with bus lanes along Southern Loop Corridor; Light Rail Transit Mono Rail system along Central Business District Link Corridor; and Light Rail Transit/Mono Rail system between Leghar and Bole airport.

Developing a programme to improve the effi ciency of the bus operations This programme should include the following: 1) Transfer the ownership of the Anbassa company to the Addis Ababa city administration (the company should divest itself of its Jimma operation); 2) Create the recommended Addis Ababa City Transport Organisation (AACTO) to take overall responsibility for mobility in the city; 3) Privatize10 the Walia intercity operations and retain its depot and other facilities for future use for urban bus operations; 4) Convert the completed or incomplete/proposed outer bus terminal sites to sites for bus depot construction, so that the urban bus fl eet can be greatly expanded; 5) Create new bus companies at each of these available urban depots, including Anbassa’s secondary depots; 6) Invest in new fl eets of buses for Anbassa and the other depots; 7) Private investors may be invited to buy or lease these new buses (except those for Anbassa) or public-private partnerships may be proposed to form new bus companies. The ban on foreign investors in commercial road transport should be lifted. 8) AACTO to franchise routes based on the most advantageous tenders from Anbassa or other companies. Competition for the franchises should be the main spur to improved urban bus effi ciency.

Additional Proposal for Funding of City Buses and Bus Depots The Master Plan proposed the purchase of city buses and the construction of new bus depots in Addis Ababa should be fi nanced through a specifi c fuel surcharge, to be applied to vehicles in Addis Ababa only. That proposal is briefl y investigated below. The estimated cost of buses and bus depots over the plan period 2007-27 was estimated as USD 670 million or an average of USD 33.5 million per annum. Total sales of petrol (gasoline) and diesel in the fi nancial year 2007/8 are estimated to reach

10 It is understood that this will take place in 2009. 87 approximately 200 million litres of petrol and 1,050 million litres of diesel. It is estimated that around 65 percent of petrol sales and 20 percent of diesel sales are made in Addis Ababa, indicating annual Addis Ababa sales for 2007/8 of 130 million litres of petrol and 210 million litres of diesel. If a surcharge of say 0.50 birr per litre was to be imposed on these sales in Addis Ababa, then the potential yield would be as follows: • From petrol sales 65 million Birr; • From diesel sales 105 million Birr.

The total of 170 million birr is equivalent, at an exchange rate of 9 Birr to the US dollar, to USD 18.9 million. Assuming an overall growth of 6 percent p.a. in fuel sales, the surcharge take would increase to USD 31.9 million by 2016/17 and to USD 57.2 million by 2026/27. Total yield of the surcharge over 20 years would reach USD 695 million, thus giving a total tax take slightly exceeding the estimated cost of the depots, though with a different distribution over time.

This example is illustrative only, as the potential size of surcharge will be limited by the possibility for drivers, especially truck and long-distance bus drivers, of transferring at least some of their reﬁ lling operations to a neighbouring region where the surcharge would not be in force. An alternative strategy could be to extend the range of the tax nationwide, so as to lower the impact of the tax on the fuel price, remove the opportunity for evasion of the tax by the transfer of fuel sales to other regions, and allow similar funding of buses and bus depots in other growing cities, such as Dire Dawa, Bahir Dar and Mekele. The tax could be designated as a municipal public transport tax. A reduced overall rate of 0.20 Birr per litre on all fuel sales would then produce the following take in 2007/8: • Petrol sales 0.20 Birr on 200 million litres = 40.0 million Birr; • Diesel sales 0.20 Birr on 1,050 million litres = 210.0 million Birr.

In this case the total yield of the tax would be 250 million Birr in 2007/8, giving the equivalent of USD 27.8 million in that year and of USD 1,022 million over the 20-year plan. Approximately 30 percent of the total take could be available for ﬁ nancing developing bus networks in the main regional cities other than Addis Ababa. The additional tax would be equivalent to some 2.5 to 3.5 percent of pump prices.

Level of Service: Intercity and Urban Bus Operations There are three main parameters measuring Public Transport Service Delivery, namely Access, Affordability and Quality11. Each parameter is reviewed in turn below. Although the main reference document refers primarily to urban transport within Africa (with a focus on large buses, midibuses and minibuses), the same basis of comparison may be applied to intercity bus services.

From passenger perspective, the public transport changes are viewed differently in urban public and interurban public transport service provision. If one looks at the situation over the period 1992-2003, the service coverage of interurban public transport has shown signiﬁ cant progress.

In terms of urban public transport, the expansion of service is very limited only to Addis Ababa and with some efforts in Bahir Dar, Adama and Dire Dawa. In broad terms, the structure and organization of urban public transport in Addis Ababa12 is characterized by the dominance of Anbassa City Bus Enterprise and minibus services.

11 Stuck in Trafﬁ c: Urban transport in Africa, Ajay Kumar and Fanny Barrett, World Bank, January 2008. 12 The capital and the centre are by far the most important urban bus operation in Ethiopia. 88 Access For urban bus services, one may consider the extent to which any particular user is within easy geographic reach of a bus line. While direct evidence was scarce in the sample cities, the low density of paved roads, coupled with unplanned growth, poor road surfaces, and narrow streets, suggests that the geographic reach of bus services is seriously circumscribed in most African capitals.

Second, there is the issue of seating capacity relative to demand. Data on ﬂ eet sizes and bus capacities can be converted into an indicator of seat availability per thousand urban residents. Most of African cities have 30-60 bus seats per thousand residents. In Addis Ababa, the indicator falls to no more than 10 seats per thousand. The average number of large-bus seats in the city sample is only 6 per thousand. As a point of comparison, the average number of large-bus seats per thousand urban residents in the middle income countries of Latin America, Asia, the Middle East, and Eastern Europe is in the range of 30-40, according to the World Bank’s Urban Transport Indicators database.

While data limitations do not allow for ﬁ rm conclusions, the numbers presented suggest that access to bus service is very low in the cities surveyed — critically so in cases such as that of Addis Ababa. The numbers also suggest that access to intercity bus services in Ethiopia remains very low.

Affordability The concept of affordability is difﬁ cult to apply to urban and intercity passenger transport. Affordability varies widely with income and the distance to be travelled. For most people, moreover, transport is essential rather than discretionary, so the necessary funds need to be found in the household budget. Anecdotal evidence from limited surveys demonstrates that rising transport fares can isolate some people from employment opportunities, but this effect does not appear to be widespread. However, the fact that budgets are tightly balanced is often illustrated by the sharp drop in ridership following fare increases, although ridership often rebounds after a few months.

Most low-income households live on the outskirts of developing cities, often in shanty townships, and make an implicit trade-off between the costs of housing and travel. Comparing bus fares across cities is rendered difﬁ cult by the wide variation in fare structures and by the tendency of private sector operators to effectively raise fares by shortening route segments, thus requiring customers to pay multiple fares to reach a given destination.

The affordability of the fares needs to be gauged in relation to household income. Data were collected from the most recent budget surveys available for each country and analyzed at the city level wherever possible. The ﬁ rst point to note is that although most households reported some degree of positive transport expenditure, a signiﬁ cant minority do not spend anything on transport, meaning that they meet all their transport needs by walking. The share of household budgets spent on transport averages 6.5 percent across the cities of the sample — but with considerable variation. The share of the household budget spent on transport is just 3 percent in Addis Ababa. When expressed in absolute terms, the amount that households in African capitals spend on transport is much more consistent across cities, at about USD 12 - 16 per month. The exceptions are Addis Ababa and Kinshasa where spending is about a third of that level.

There is evidence to suggest that average household budgets would be lower in provincial cities than in Addis Ababa. There is a paucity of detailed information or research available to draw any ﬁ rm conclusions. A general conclusion however, in line with the ﬁ ndings for Addis Ababa, is that intercity bus fares would be prohibitive for many rural dwellers.

89 Effective from January 26, 2008 for travel by cross-country bus, the new tariff on asphalted roads was 0.12325 Birr per pax-km (up from 0.11 Birr per pax-km, and that on gravel roads 0.14966 Birr per pax-km (up from 0.14 Birr per pax-km). The tariffs were made in consideration of average incomes of commuters and in line with the subsidy the government continues to make on fuel imports.

Quality of Service No formal quality-of-service statistics are available for urban transport in Africa, but formal and informal surveys of users undertaken in 14 sample cities suggest widespread customer dissatisfaction with bus services. Frequent complaints include poor quality of roads, overcrowding of buses, unpredictable and irregular service, and inadequate terminal facilities. On average, passengers report walking for around 10 minutes to reach a bus, and typically waiting around 30 minutes at the bus stop before being able to start their trip. Trip times are in the 30-45 minute range.

Overcrowding on large buses is worse than for minibuses — and routine. Performance data from Anbassa in Addis Ababa suggests peak load factors as high as 150 percent of rated capacity. Three in four passengers interviewed rated overloading as their primary concern.

To a greater or lesser extent in each of the cities surveyed, the networks of paved roads and associated traffi c control facilities (such as signals, well-designed intersections, dedicated bus lanes, and parking enforcement) are defi cient. In all cases, funding appears to be the major constraint. The poor condition of the road network reduces vehicle speeds, sapping the productivity of the bus fl eet and increasing the cost of vehicle maintenance, owing to additional wear and tear. The condition of many roads is so poor that it would be impossible to reintroduce conventional bus service until the roads have been made serviceable once again. Although private cars are ineffi cient users of scarce road space, none of the cities studied tried to promote public transport over the use of private cars by creating dedicated bus lanes or tightening controls on parking.

In all the cities reviewed, trafﬁ c behavior and vehicle condition are largely unregulated. Commercial activities (such as street vendors) and vehicle parking force pedestrians off the sidewalks into the roadway, reducing the capacity of the roadway and posing safety hazards. Competition at bus stops causes localized congestion that can spill over into adjoining trafﬁ c lanes.

Mass transit systems in Addis Ababa are non-existent or are unable to cater to demand imposed on them. The carrying capacity of roads has not kept up with the increase in personalized vehicles. This has led to congestion and parking problems which further adversely affect urban public transport operations.

The Addis Ababa City Administration has embarked on a program to increase the capacities of high– travel corridors. While this is considered important, a more radical approach might be required to improve fl eet productivity, to reduce operating costs, improve service standards, leading to enhanced fi nancial sustainability and patronage. Recently, new services in the form of medium capacity buses (midi-buses) have been introduced in Addis Ababa to fi ll the widening gap between demand and supply.

No formal quality-of-service statistics are available on intercity bus services. There is no reason to doubt however that the quality of service levels pertaining in Addis Ababa would be better than those generally pertaining on intercity bus services in Ethiopia.

90 The Transport Authority is planning to subcontract or franchise some long-distance routes to operators who will become responsible, acting within TA guidelines, for the regular scheduling activities currently performed by TA. This will relieve the Authority of some of its routine workload. The designated operators will be permitted both to operate the routes themselves, and to subcontract them to others.

Taxi Fleet and Level of Service: Operations in Addis Ababa In addition to Anbassa’s bus ﬂ eet, Addis Ababa is served by some 15,000 minibus taxis that provide service of variable quality. Minibus taxis are not restricted in terms of the routes or areas in which they may operate. Indeed, operators are free to choose their routes. The fares are controlled by the city government but are two to three times those of city buses. The absence of restrictions on entry has led over the past decade to sharp increases (11 percent per year) in the number of minibuses.

The 15,000+ minibus taxis have about 105 operational routes. Not all the registered taxis are on the road at any given time. A number of them left the trade, due to old age, rising running costs and the absence of proper regulations governing the sector.

Minibus taxis that approximately move over 600,000 passengers daily are characterized by low vehicle utilization (100 to 200 kilometres per day and 80 to 200 passengers per day), long waiting time at terminals. They are inappropriate for high-density travel corridors and their services are fragmented and of low quality. Minibuses have inadequate returns so that re-ﬁ nancing of quality ﬂ eet is impossible. They also have excess capacity during off-pick hours, which creates congestion in the city.

The informal sector in Addis Ababa provides minibus and “modiﬁ ed taxi” services throughout the city. The latter vehicles are pick-ups converted to passenger carriage by the addition of a canopy over their load bed, ﬁ tted with bench seats and windows on each side. Their passenger capacity is the same as for the minibuses, being restricted to 11 persons other than the driver by regulation, but space and access are considerably more restricted.

The sector carries over half the urban passengers but meets slightly less than half of travel demand when the shorter average boardings compared to buses is taken into account. These shorter average boardings arise from manipulation of the fare structure, particularly at peak times, so that longer trips are broken into shorter stages at intermediate stations. Any passenger wishing to continue with the vehicle then has to pay an additional fare.

Minibus services can be regarded as high quality in comparison with conventional buses, as their interior layout is spacious (9 seats in the main saloon, compared to a minimum of 12 in most other jurisdictions) and over-loading is rare over most of the network. However the condition of the seats and cleanliness of the interior often leave much to be desired. The informal sector as deﬁ ned above can be seen as a premium peak service supplement to the core all-day passenger services provided by the city bus operator. However their aggregate volume of supply is in the same order as the core service. Overall network efﬁ ciency would suggest that these two functions should be differentiated, and each then optimized to its task.

Average load factors on the minibuses and modiﬁ ed taxis follow very much the same pattern as for Anbassa. The study on improving urban transport identiﬁ ed an average occupancy of 10.8 in the peak, dropping only to 10 in the off-peak. These represent load factors of 90 percent and 83 percent

91 respectively against the registered capacity of 12 persons (including the driver) for these classes of vehicle, with the passenger load factor being slightly lower when the crew is taken into account.

Access Currently, some 14 to 20,000 taxis serve the over 2.7 million inhabitants of the metropolis, where more than one million people are transported in 105 lines each day. The taxi sector has created 25,000 direct and 12,500 indirect job opportunities. However, the plate number of the taxis in the streets of the metropolis has already gone beyond 20,000.

Ten individuals organized Sheger City Meter Taxi S.C., a recently established urban transport private company, which launched new and modern business meter taxi cabs to operate on a system using distance metres instead of the embattled zone system.

The new taxi service is expected to operate in an organized way. Promoters claim that the 150 vehicles, expected to be delivered in a couple of months, will have "state-of-the-art" features. Apart from the taximeter for pricing and receipting, they would have a radio communicator. Customers can also call the central dispatcher to get door-to-door service.

Affordability The average fare for minibuses was some 0.12 USD per trip. However minibus fares ﬂ uctuate with demand and can be more than this, especially when taxi line interchanging is considered. One of the reasons why minibuses are so popular in Addis Ababa is that household spending is limited and the average fare for minibuses are quite low.

Quality of Service As to the operation of minibus taxis in Addis Ababa, studies have found that service capacity available during peak periods is insuffi cient to meet demand. It was also stated that a lack of economic regulation has further resulted in destructive competition and low levels of profi tability. Further, the studies and fi ndings highlighted that existing fare levels have resulted in low levels of profi tability, which affects an operator's ability to replace vehicles.

Operators have a clear commercial interest in squeezing as many passengers as possible into their vehicles, as long as fares can still be collected under such circumstances. Overloading in minibuses is somewhat controlled in most cities, through the terminal management practices, although standards in some cities fall away once the vehicles leave the terminal, especially after dark. Some of these problems can be traced to the institutional regime governing minibus operations. Minibus services are often self-regulated by operators’ unions. Drivers pay ﬁ xed daily rental fees for the vehicles they operate and have strong incentives to maximize fare collections. This incentive structure has adverse consequences for the quality of service. One consequence is the rigidity of the route network. Routes run between terminals controlled by the operators’ unions, which limits the degree to which they can be adjusted to meet passenger demand. The result is that a high proportion of passengers must change buses at least once to reach their destination, increasing the duration and cost of their trip. Even with several changes, the point at which passengers alight is often some distance from the desired destination, particularly in the central business district.

Quality suffers from other union-imposed operating practices that work against passenger interests. Chief among these is the practice of waiting for the assembly of a full load before setting out, which often forces passengers to sit in the vehicle under the sun in order to retain their place. Waiting times 92 at terminals can exceed an hour off peak, extending waiting times along the route and making it difﬁ cult for intending passengers to access the service, particularly at early stages on the route. To secure a seat, many passengers walk to the terminal.

By loading vehicles in strict rotation, the unions also prevent intending passengers from rejecting vehicles that fail to meet expected standards of cleanliness or physical condition. This, in turn, lowers the incentive for vehicle owners to improve their performance. Investment in a premium-quality vehicle also becomes impractical under these circumstances.

Additional details of minibus operations are provided in Annex 1: Minibus Taxi Service Supply Characteristics.

Travel Demand/ Patronage Growth rates of minibus and midi-bus passengers and pax-kms have been particularly impressive over the last three years.

The study on improving urban transport in Addis Ababa carried out detailed loading surveys at a limited number of sites, from which it concluded that carryings on minibuses and modiﬁ ed taxis were roughly at three-quarters of the level of those on the large buses. However the average trip length on the smaller vehicles is considered to be signiﬁ cantly less than for the buses, and might therefore result in passenger numbers being up to 50 percent more than on Anbassa.

The urban transport study attempted to estimate passenger numbers carried by the minibuses and modiﬁ ed taxis, and came up with widely varying estimates for the number carried by each vehicle ranging from 132 to 312. The situation in Addis Ababa is complicated by the authorised fares structure. In effect, this provides an incentive for drivers to break their trips at peak hours so as to charge an extra fare even if a passenger continues to ride in the same vehicle. If such artiﬁ cial breaks are discounted, then the true number of passengers is likely to be nearer to the average of these estimates and would be consistent with international experience for this type of transport.

Analyses of the data showing commercial road transport passenger trafﬁ c from 2005 to 2007 inclusive, as shown in Table 4.2, indicates a more rapidly changing commercial road passenger transport market. From 2005 to 2007, passenger volumes increased by some 25 percent per annum, and pax-kms by some 32 percent p.a. There were particularly large increases in minibus and midi-bus passengers and pax-kms.

Table 4.2 Annual Growth of Road Transport Passenger Volumes and Pax-Kms (2005- 2008)

MiniBus Midi-Bus Maxi-Bus* Total Year Passengers in Passenger Passengers Passenger Passengers in Passenger Passengers in Passenger ’000 Km in Mil- in ’000 Km in Mil- ’000 Km in Mil- ’000 Km in lion lion lion million 2005 46,008 2,070 28,753 1,869 5,565 2,504 80,326 6,444 2006 48,025 2,161 48,650 3,162 4,921 2,214 101,595 7,538 2007 80,446 4,022 46,425 3,250 5,580 2,567 132,451 9,839 * A maxi-bus has 45 or more seats. Source: MoTC

93 Passenger Transport Vehicle Productivity and Costs The National Transport Master Plan study derived Passenger Transport Operating Costs as indicated in Table 4.3.

Table 4.3 Indicative Bus Financial Operating Costs Per Passenger Km (Birr)

Terrain / road type and condition Minibus Small bus Large bus Flat terrain, good paved road 0.21 0.09 0.09 Flat terrain, fair gravel road 0.28 0.12 0.12 Mountainous terrain, good paved road 0.22 0.10 0.11 Mountainous terrain, fair gravel road 0.34 0.15 0.17 Note: Average occupancy observed from the origin-destination (OD) surveys, carried out in May – June 2006. Source: Consultant’s estimates.

Constraints on efﬁ cient bus utilization include control of schedules with departures determined by regulatory bodies. Increased bus utilization could reduce ﬂ eet requirements, with impact on a reduction of vehicle operating costs and improvements in revenue-kilometres. Low vehicle productivity plus sometimes low average load factors for scheduled long distance conventional buses, has contributed to low revenue-kms.

In Addis Ababa, for example, minibuses cover some substantially longer daily distances of 180 km/ day compared to 138 km/ day for large buses.

No fl eet replacement and expansion has been made in recent years. Hence availability and utilization of large Anbassa buses has dropped markedly. Recent information shows that the numbers of daily operational vehicles was hardly 400, indicating that over 25 percent of the fl eet is perpetually under maintenance. The situation will further deteriorate as the age of the fl eet continues to rise, unless structural measures such as transforming Anbassa to a business entity operating along commercial principles, and the establishment of a strategic plan for the replacement of old fl eet expansion to meet increasing demand and rationalization of the labour force are introduced.

Private limited companies and share companies that operate reasonably with a large ﬂ eet of conventional buses have resources and organizational strength to provide services for a network of routes in a given area. They have the capacity to gather information necessary to plan service demand and to constantly monitor and adjust their service to changing circumstances. Under such circumstances, a signiﬁ cant portion of vehicle capacity will be well-utilized. They may also effectively schedule and coordinate networks. In addition to these features, which are beyond the capacity of individual operators and associations, one major advantage of such establishments is the potential economics of scale that could be exploited in the use of workshop facilities in terms of optimum utilization and the bulk purchase of input, etc.

In the case of intensifi ed competition where several operators on the same route are involved, the degree of competition, especially when there are excess vehicles compared to demand, will lead the operator to manage fl eet at irregular intervals competing for passengers at stops and stations. Under such circumstances, a signifi cant portion of vehicle capacity could be underutilized. The ultimate increase in cost due to underutilized capacity, with rates remaining the same or possibly declining, 94 will expose such operators to an unavoidable risk of losses. Unreliable service on such routes will increase passengers' inconvenience, reduce comfort and passenger safety concerns.

Average vehicle occupancy rates seem high. In practice in urban areas the crush factor is considerable and in peak time occupancy rates are considerably higher.

Table 4.4 Occupancy Rates for Passenger Vehicles (2006)

Vehicle Type Average No. of Passengers Average No. of Seats Occupancy Rate (%) Minibuses (up to 15 seats) 9.2 11.2 82 Small buses (16-30 seats) 21.6 24.3 89 Large buses (over 30 seats) 44.2 49.0 90 Source: Consultant’s survey.

The increasing urbanization and concentration of population in towns and cities, particularly in Addis Ababa has put a heavy pressure on the already constrained urban transport network, thus adversely affecting productivity.

Competition and Effi ciency Introduction For the market economy to work effectively, competition needs to be on an equal basis so that the most effi cient can survive and the least effi cient go out of business. Bankruptcies are not a loss to the economy, as the assets remain and will be used by others. The threat or reality of bankruptcy is an essential part of the economic mechanism that leads to effi ciency.

If effi cient organizations cannot survive and grow because of unequal competition from protected ineffi cient operators, or from hidden subsidies to others, then effi ciency will not be achieved.

The Government does not yet insist on realistic standards of vehicle condition that would eliminate some of the older less efﬁ cient and more polluting vehicles, as well as those that are dangerous for the driver, pedestrians or other road users.

As a general rule current government policies and the tax regime do not create an incentive for private companies to invest in new vehicles that would lead to greater transport efﬁ ciency. There are some exceptions to this rule (the ﬂ ower industry is one) but the evidence for these exceptions is not transparent.

Restrictions on Foreign Investment Presently there are also government policies in place that restrict investment in transport by foreign investors, which inhibits the free market principles found to be effective in many other countries, in Africa and elsewhere, in boosting the economy through joint ventures.

The following areas of activity are exclusively reserved for domestic investors: • Car hire and taxi-cabs; and • Commercial road transport.

95 It is natural for the government to want to protect local transport industries but by doing so they protect a road transport industry which cannot progress, for the reasons already given, to the detriment of the economy as a whole.

Commercialization Public ownership is not the real issue; but if they have privileges denied to the private sector they reduce overall efﬁ ciency and add to costs. The present policy runs counter to the objectives of poverty reduction and growth as transport efﬁ ciency is impeded by such state intervention.

The longer term policy of the government seems to be to proceed with privatization of the industry and this should be proceeded with as quickly as possible. Government policy on transport should additionally be to introduce internationally acceptable rules and regulations and then to enforce them.

Additional details of competition and efﬁ ciency are provided in Annex 2: Competition and Efﬁ ciency – General Issues.

Entrance to Market The governing legislation for urban passenger transport is the 1992 Proclamation to Provide for the Regulation of Road Transport. Subsequent legislation allows each Regional administration (including the City of Addis Ababa) to develop its own regulatory framework, but this opportunity has not yet been availed. In effect, this proclamation deregulated the supply of such transport in line with the prevailing orthodoxy of the time.

It was anticipated that new market entrants would be attracted to the business opportunity so created, and this would both improve service quality and reduce the ﬁ nancial burden on the public sector in its provision. However, public administrators had regarded the monopoly franchise held by Anbassa as not having been affected by the proclamation, and so spurned approaches by potential investors.

Any intending operator can readily procure a business permit from the City administration (the Transport Authority acting on behalf of the Bureau of Trade and Industry). The only provisos are that he must have a vehicle with a valid certifi cate of roadworthiness, and must employ a driver with the appropriate category of license. This permit covers the whole of the conurbation, and is not confi ned to a specifi c route or area. Although the 1992 proclamation encouraged the self-regulation of the sector on an area basis, this was not made a condition of the license. The three owners associations that have since emerged draw their membership from across the city.

It should be noted that existing legislation only places requirements on the driver and the vehicle providing transport services, and not on the owner. In order to raise standards in the industry, there is a case for the introduction of a specifi c license to operate a passenger-carrying vehicle for hire or reward. Such a license would be applied to the person keeping or using the vehicle, and not to the driver who is acting as his agent. Specifi c conditions could be placed on the license holder in respect of maintaining the vehicle in a roadworthy condition appropriate to passenger services. Ideally the private sector should provide both a commercial bus service complementing the subsidized network of Anbassa, and a range of premium products designed to segment the public transport market and proving capable of attracting car users. Existing minibuses are too small for the former role, and may not be suffi ciently comfortable for the second.

96 No information is available for market entrance in the intercity bus market. Fleet ownership is more common in the intercity passenger transport services sector, since it is seen as being more lucrative. There is no reason to doubt that the conditions for market entrance are similar in intercity bus services as in urban bus services.

Private investment could be attracted to the sector if the appropriate regulatory and enabling framework were put in place. Unfortunately, though, this has not been encouraged so far.

Public Transport Maintenance Facilities The planning of commercial road transport operations should consider fl eet maintenance. Unfortunately, vehicle maintenance has not received the priority it has deserved, and maintenance standards and procedures are not specifi ed through regulation. The transport fl eet must be well maintained if it is to perform properly over its service lives.

Maintenance facilities are inadequate, not well organized in manpower, tools, space and management. There are also problems of genuine spare parts. Preventive maintenance in which vehicles are serviced in order to prevent failure while in use is not widely practiced. In general, maintenance is undertaken only when failures are observed. Inspections are not conveniently scheduled or on a regular basis. The regulations with respect to safety considerations are not effectively enforced, and deferred preventive maintenance has become costly, with rapidly escalating expenditures. Facilities for heavy maintenance are lacking, and the existing ones are limited to established dealers, public enterprises, etc.

Road Passenger Terminals Regardless of size and standard, practically all regional centres and towns have terminals serving as points of passengers’ departure, arrival and transfer. Several of these terminals, including the central station located at Mercato, were constructed by the Transport Authority and have facilities for ticketing and dispatching of vehicles. The Mercato station has two parts designed to serve long distance cross- country buses and those operating on four of the ﬁ ve major corridors radiating from Addis Ababa. This station, which is already over 30 years old, is unable to meet the increasing demand of passenger and vehicle movements.

Uncontrolled entry of individuals, lack of central information service to guide the passengers, and poor lighting system have exposed travelers to different types of risks. Terminal projects at Gurd Shola and those at their ﬁ nal stage of completion at various locations will reduce over-crowding at the central station.

Distribution of interurban bus terminals at the fi ve gates of Addis Ababa with adequate facilities both for passengers and vehicles are necessary to increase convenience and safety. From the pattern of the city’s traffi c fl ow, Legehar is ideally located at the intersection of the two main high traffi c densities Kaliti-Legehar and Hayat Old Airport routes. Hence, as proposed by the Urban Transport Study and Preparation of Pilot Project for Addis Ababa, developing the station to multimodal city transport passengers’ terminal is considered feasible. In addition to Legehar, the main terminal accommodating rail and road transport services, the study also identifi ed rail based passenger terminal at Akaki and

97 road based terminals at Mercato, Piassa, Ayertena, Megenanga, Kaliti, Ambo Road, Entoto Road, Ayat, Bole and Mekanissa.

Practically all regional centres and towns have terminals serving as points of passengers’ departure, arrival and transfer. These terminals were constructed by the Transport Authority and have facilities for ticketing and dispatch of vehicles.

Anbassa Depot Sites Anbassa operates out of three sites; its headquarters complex at Yeka to the east of the city, a second depot at Shegole to the northwest, and a newer depot at Mekanisa to the south.

The Yeka depot is seven hectares in area, excluding the bus-building workshops complex of Abay Technical Services that is immediately adjoining. The operating depot has facilities for 300 buses to be based there, but currently less are deployed. The site also includes the central workshops for the enterprise (developed with Dutch technical assistance), and the main spare parts warehouse. The headquarters offi ce provides both for central administrative and depot control functions. This depot is sited immediately adjacent to the recently completed city ring road, providing for effective vehicle positioning on routes. The depot yard is surfaced, and well laid out for effi cient operation. The workshops are well equipped, and housekeeping standards are high. The fuel station has adequate capacity for the fl eet based on the site. No signifi cant near term investment is required.

The second depot at Shegole is 5.4 hectares in area, but the yard is not surfaced. This facility has its own fuel station, and light maintenance and running repair facilities as well as a spare parts store operated on a satellite basis from Yeka. 300 buses could be based here, but at present less are deployed. This depot is self-sufﬁ cient apart from heavy maintenance that is still carried out at Yeka, leading to some loss of control. Operating standards would be improved by surfacing the yard, but it is understood that the necessary ﬁ nance has not been made available. Otherwise no major near term investment is required.

The third depot at Mekanisa is more recent. It has a site area of 7.3 hectares, which would be more than sufﬁ cient for a further 300 buses; however very few were deployed there in 2005. Facilities are still being developed, but it is intended that this site is made increasingly self-sufﬁ cient. The major outstanding investment need is for the yard to be surfaced.

Fares and Tariffs Introduction Bus fares have now been deregulated for small and medium buses in the intercity sector. For long- distance they remain controlled by the Transport Authority, though TA will duly consider requests made by the associations for an increase.

98 In January 2004 these rates were revised upwards by just over 10 percent to Birr 0.1095 and Birr 0.1265 respectively. They have been revised again in September 2006 by between 9 and 10 percent, to Birr 0.1200 and Birr 0.1380 on asphalt and unpaved surfaces respectively. According to operators in (2007) this increase was insufﬁ cient to compensate for the rises in the price of fuel in that period.

Prices for premium services are not controlled and may be set by the operator. This applies for instance to the premium long-distance bus services recently introduced by Selam Bus Line, where the fare must be agreed between operator and passenger.

Table 4.5 Long Distance Bus Passenger Tariffs (2005/6)/ Ethiopian ﬁ scal year 1997

Road Surface Birr/passenger – km

Asphalt 0.11 Gravel 0.14

Note: Passenger tariff data set by the Transport Authority (TA). Source: Transport Authority.

Anbassa Bus Fares Fares on Anbassa buses range from 0.25 Birr for up to 9 km to 2.25 birr for 32-47 km. Almost 95 percent of passengers pay between 0.25 Birr and 0.50 Birr. Some exceptions apply to recently introduced routes. For example, one new 40 km route has a fare of 3.00 birr.

As noted, Anbassa fares are subsidized by the city government, although the level of subsidy has dropped in recent years. The subsidy is presently 0.10 Birr per trip; the total amount paid is based on records of numbers of tickets sold. Fares on Anbassa buses are collected by conductors. Paper tickets are used, with different colors for inward and outward journeys. Ten-trip tickets are also issued. Because tickets are not sold to passengers before the bus’s arrival, at busy times buses may wait several minutes as passengers’ board and buy their tickets. And because many passengers must stand it is common practice for conductors to collect fares from passengers through the bus window before they board the bus.

The company estimates that 5 to 10 percent of revenue is lost through fare evasion and conductor malpractice, despite the presence of ticket inspectors. The fares charged for express services are normally 0.10 Birr more than the standard fare. Schoolchildren and students are charged a ﬂ at fare of 0.15 Birr. In 2006 the trip over 45 km from Addis Ababa to Debre Zeit cost Birr 2.25, at a cost of Birr 0.05 per km.

Tariff systems vary between buses and taxis. For the former there is an approved fare for each route irrespective of the length of the individual boarding made on it. This fare is correlated to, but not directly dependent on, the length of the route. Variances will occur depending on how recently the route has been introduced or revised, or whether the services are nominally limited-stop. Previous studies have estimated that, taking a weighted average of fares applicable to the core network, fare rates approximate to Birr 0.046 per kilometre for those riding the full length of the route and proportionately more for those making shorter boardings. At current exchange rates, this fare rate equates to 0.53 US cents per kilometre representing some of the cheapest travel in the world. Fares are low both because of the subsidy provided to users (roughly 25 percent of the fare actually paid, but declining), and the extremely high average load factor (over 100 percent) representing tolerance of crush conditions in the peak.

99 Calculating transport costs is problematic. The offi cial accounts for Anbassa do not refl ect the full true costs of its operation, but do include a depreciation charge relating largely to capital expenditures not actually made by the enterprise at a rate set by tax legislation and not economic life considerations. Notwithstanding these reservations, recorded costs are some Birr 5.3 per kilometre, or Birr 0.053 per pax-km at an average load factor of 100. The latter fi gure represented 0.61 US cents at the then exchange rates. Even though these historical cost/tariff estimations are a little dated they clearly illustrate the poor fi nancial health of Anbassa.

The tariff in force from 2004 showed rates for individual city routes varying from Birr 0.25 up to Birr 3.00. The Company has traditionally received subsidy from the municipality, but due to ﬁ scal pressures these have fallen over time from Birr 0.26 per passenger in 1999 to only Birr 0.08 in 2007.

Bus Fares: Recent Changes Intercity Bus Fares The Transport Authority under the Auspices of the Ministry of Transport and Communications of Ethiopia has announced new tariffs on cross-country bus transport services a day after announcement by the Trade and Industry Ministry of fuel retail price readjustment amidst ever-rising cost of petroleum products in the global market.

Accordingly, the Authority said, effective January 26, 2008 on travels by cross-country buses, the new tariff on asphalted roads is 0.12325 Birr per pax-km (up from 0.11 Birr per pax-km, and that on gravel roads 0.14966 Birr per pax-km (up from 0.14 Birr per pax-km). The new tariffs were made in consideration of average incomes of commuters and in line with the subsidy the government continues to make on fuel imports.

Anbassa Bus Fares In 2009 the Anbassa bus fare from Addis to Debre Zeit cost Birr 3.80 per passenger at a cost of Birr 0.085 per km. Anbassa bus fares are ﬁ xed by the company, but kept as low as possible to make bus transport available to all.

Historical Minibus and Taxi Fares The fares for minibus taxis ranged from 0.60 birr for up to 2.5 km to 3.00 birr for 25 km. The minimum fares for minibus journey are shown as follows: • Up to 2.5 km Birr 0.65 • Up to 5.0 km Birr 1.25 • Up to 7.0 km Birr 1.65 • Up to 9.0 km Birr 2.25

In Addis Ababa, minibus and taxi fares are proposed by the operating associations and subject to approval by AATB and MoTC. The minimum fare for a minibus journey up to 2.5 km has been Birr 0.65, while a 5-km journey has cost Birr 1.30.

Previous studies have estimated that, approved fares for taxis are directly related to the length of the trip being fi xed within bands of kilometres run. However the setting of the band limits has resulted in certain anomalies with regard to fare rates, with these being far higher for trips up to 4 kilometres in comparison with those of 6 kilometres or more. As a result, most operators artifi cially break their routes (especially at peak times) so as to force passengers to pay two higher rated fares. Taking that 100 higher rate as being applicable to the large majority of journeys, taxi fare rates work out at about Birr 0.26 per kilometre. At current exchange rates, this fare rate equates to some 3 US cents per kilometre. This fi gure is somewhat higher than that generally typical in sub-Saharan Africa, and refl ects the small authorised capacity of the vehicles being used and greater control of overloading.

For taxis, operating margins are hard to determine in such a dispersed ownership system. However attempts have been made to estimate these, leading to fi gures of an 8 percent return on sales for the driver and an 8 percent to 15 percent return on sales for the owner. Taking a mid fi gure for the owner, total operating costs then represent some Birr 0.21 per pax-km. This fi gure equates to 2.4 US cents per kilometre. Even though these historical cost/tariff estimations are a little dated they illustrate the better fi nancial health of the taxi operations. Prices for premium services are not controlled and may be set by the operator. This applies for instance to the private taxis in Addis Ababa, where the fare must be agreed between operator and passenger.

Minibus and Taxi Fares: Recent Changes The Transport Authority under the auspices of the Ministry of Transport and Communications of Ethiopia has announced new tariffs on taxi services effective from January 26, 2008.

The taxi fare on a 2.5 km distance rises by 5 to 70 cents. The fare on a 7-km taxi trip rises to 1.35 Birr from 1.20 Birr, on a 10-km distance to 1.80 Birr from 1.60 Birr, on a 12-km distance to 2.00 Birr from 1.75 Birr and on a 15-km distance to 2.50 Birr, from 2.20 Birr per passenger.

Further details of International Urban Bus Fares in African Cities and Affordability Indices are provided in Annex 3: Bus Fares and Tariffs.

Taxi Fares The Transport Authority under the auspices of the Ministry of Transport and Communications of Ethiopia has announced new tariffs on taxi services effective from January 26, 2008.

The taxi fare on a 2.5 km. distance rises by 5 to 70 cents. The fare on a 7-km taxi trip rises to 1.35 Birr from 1.20 Birr, on a 10-km distance to 1.80 Birr from 1.60 Birr, on a 12-km distance to 2.00 Birr from 1.75 Birr and on a 15-km distance to 2.50 Birr from 2.20 Birr per passenger. Prices for premium services are not controlled and may be set by the operator. This applies for instance to the private taxis in Addis Ababa, where the fare must be agreed between driver and passenger.

Present Relationship between Fares and Operating Costs The detailed work on Vehicle Operating costs elaborated by the Transport Master Plan Team estimated the ﬁ nancial per pax-km (Birr, in 2006) for a range of typical terrain types found in Ethiopia. The current bus passenger tariffs for road transport are provided in Annex 3: Bus Fares and Tariffs.

Intercity routes In 2009 the new passenger tariff on asphalted roads is 0.12325 Birr per pax-km (up from 0.11 Birr per pax-km), and that on gravel roads 0.14966 Birr per pax-km (up from 0.14 Birr per pax-km). This compares with an estimated ﬁ nancial VOC of Birr 0.09-0.11 per pax-km on asphalted roads and VOC of Birr 0.12-0.17 per pax-km on gravel roads.

101 Anbassa: Addis Ababa – Debre Zeit Route In 2009 the Anbassa bus fare from Addis to Debre Zeit cost Birr 3.80 per passenger at a cost of Birr 0.085 per km. This compares with an estimated ﬁ nancial VOC of Birr 0.09 per pax-km. No detailed information is available for urban operations however the ﬁ nancial position of Anbassa has been well documented elsewhere.

Minibus Routes The tariff for a 5 to 7 km trip has risen from 1.25 Birr in 2005/2006 to 1.35 Birr in 2009.

Therefore, at current fares and estimates of Vehicle Operating Costs, this Review Team re-conﬁ rms the conclusion made by the Transport Master Plan Consultant that: For bus passenger transport, the tariffs accord very closely with the ﬁ nancial operating costs for minibuses and replacement.

Status of Commercialization The Walia Public Transport Enterprise is expected to get privatized within 2009 since the documents for privatization purpose were under preparation.

In 2000 the Ethiopian Privatization Agency earmarked Anbassa for divestiture, but the only likely buyer of the business as it is presently conﬁ gured is the City. In preparation for the divestiture, ﬁ nancial due diligence was carried by external auditors who made several recommendations. These have been carried out only partially, with the result that the enterprise remains encumbered by debts that no prospective purchaser would be prepared to accept.

The Anbassa City Bus Enterprise is considered important and privatization is not foreseen in the near future (at least not in the next 5 years). This refl ects the fact that the provision of good public transport in a capital city is a national priority, and that it is incumbent on the Government to ensure that it is effi ciently provided. Nevertheless, there is an evident shortage of large buses in Addis Ababa, and there is great need to increase their supply, and thereby reduce both overall transport costs and the level of traffi c congestion in the streets. At the very least it will be necessary to restructure Anbassa and equip it to achieve effective operational and fi nancial performance. The promotion of competition with other operators should also be considered, as should the potential benefi ts from franchising of routes, and the likely future need for subsidies (which have been declining in the last few years). An effi cient and reliable urban bus service must in any event be a central policy aim for Addis Ababa. An adequate supply of effi cient bus services, able both to make profi ts for operators and to reduce overall transport costs, while also reducing congestion, would offer great benefi ts to inhabitants of the capital.

At present the transport sector, both for passengers and goods, is reserved only for Ethiopian investors. There could be benefi ts in also permitting foreign participation in the passenger sector, so as to improve the potential availability of fi nancial and technical resources. This would be most appropriate for the large bus companies operating long-distance services, and perhaps also in a liberalized municipal market for Addis Ababa, where substantial investments will be required in replacement and expansion of bus fl eets. The longer term policy of the government seems to be to proceed with privatization of the industry and this should be proceeded with as quickly as possible. Government policy on transport should additionally be to introduce internationally acceptable rules and regulations and then to enforce them.

102 Passenger Transport Service Forecast The future patterns of economic performance and population must generally be derived before future travel patterns can be estimated. In order to avoid bottlenecks or other diffi culties, estimates for public passenger transport must be made well in advance of the actual provision of supply. What is required for this study is to give some idea of the magnitude of the likely evolution of demand. The information on the trend of past demand is used as far as possible to give a fi rst indication of the future. There is some diffi culty in compiling a good database on the current passenger traffi c and its trends, let alone in forecasting.

An alternative is also to compare simple estimates of trafﬁ c growth with the estimates produced by other similar and recent studies.

In order to keep pace with the growing economic activity, replacement of old fl eet, upgrading of bus technology and expansion, is required to match with the pattern of change in the nature of demand. Furthermore, measures to restrict import of used vehicles and replacement with obsolete buses will tend to reverse the present distribution of old buses. It is expected that there will be a shift towards more modern buses and coaches, which currently account for a relatively low proportion of the fl eet. Considering the strong positive performance of the Ethiopian economy in recent years and taking into account that it is in the earlier stages of transition to a full market economy, the increase in road passenger transport fl eet will be at a high rate.

Fleet Forecasts The 2008 Passenger Vehicle Fleet was some 142,000 vehicles of which “own account” formed some 70 percent of the total [c. 100, 000 vehicles], with “for hire” vehicles making up the remainder. This total includes station wagons, dual purpose vehicles, and 5-8 seaters, of which there are many. The minibus, maxi-bus and large bus ﬂ eet is some 23,000, or 17 percent, of this total.

The National Transport Master Plan Study (Status Quo Scenario) assumed the following in Table 4.6.

Table 4.6 The National Transport Master Plan Study Passenger Vehicular Fleet Forecasts

Passenger Fleet Growth p.a. Up to 2012 2013- 2027 Small Bus 7.0% 5.0% Large Bus 7.0% 5.0%

The Review Study truck forecast includes the following assumptions (some of which are relatively crude): 1) The forecast total bus fl eet for the medium-term, e.g., from 2008 to 2017 is considered most accurate; 2) Long range forecasting remains much less scientifi c; 3) Assume the proportion of “Own Account” and “for hire” vehicles in the total fl eet stays approximately constant over time; and 4) Assume the (combined) proportion of minibus, midi-bus and large bus in the total fl eet stays approximately constant over time.

The forecast total passenger ﬂ eet for the medium-term, e.g., from 2008 to 2017 is as indicated in Table 4.7.

103 Table 4.7 Review Study: Passenger Vehicle Fleet Forecasts

Review Study Passenger Fleet Growth p.a. Up to 2012 2013- 2027 Base Case Scenario 8.0% 3.5%

It is therefore assumed that the Passenger Vehicle Fleet would grow by between 8.0 percent p.a., over the short to medium term with a substantial slackening of growth rates thereafter.

The overall ﬂ eet size in 2017 is estimated as some 280,000 vehicles, of which “own account” would form some 70 percent of the total [some 200,000 vehicles]. In other words, the Passenger Vehicle Fleet will have roughly doubled over the next ten years. The minibus, maxi-bus and large bus ﬂ eet would be some 50,000, or 17 percent, of the total.

The overall fl eet size in 2027 is estimated as some 400,000 vehicles, of which “Own Account” would form some 70 percent of the total [some 280, 000 vehicles]. In other words, the fl eet shall increase by some 40 percent between 2017 and 2027. The minibus, maxi-bus and large bus fl eet would be some 70,000, or 17 percent, of the total.

The public commercial vehicle population maintains a strong growth pattern, with some fl uctuations in the bus fl eet mix over some of the past few years. This kind of vehicle population mix fl uctuation could be partly due to the removal of over-aged vehicles from service, either for conversion to suit other market needs, or due to a lack of spare parts.

It is noted that unfortunately a direct comparison with the National Transport Master Plan truck ﬂ eet forecasts does not appear possible.

Public Transport Passenger Forecasts The pax-km data is not considered accurate enough to make a very detailed passenger forecast up to the year 2017.

The recent annual growth of public transport passengers and pax-kms, from 2005 to 2008 is as indicated in Table 4.8.

Table 4.8 Annual Growth of Road Transport Passenger Trafﬁ c and Pax-Kms (2005-2008)

Minibus Midi-Bus Maxi-Bus Total Passenger Passenger Year Passengers in Passenger Km Passengers Passengers Passenger Km Passengers Km in Km in mil- ’000 in million in ’ 000 in ’ 000 in million in ’000 million lion 2005 46,008 2070 28,753 1,869 5,565 2,504 80,326 6,444 2006 48,025 2,161 48,650 3,162 4,921 2,214 101,595 7538 2007 80,446 4,022 46,425 3,250 5,580 2.567 132,451 9,839 Source: MoTC

The number of total passengers follows a clearly rising trend, especially since 2002. In particular, minibus passengers grew from c. 50,000 in 2006 to c. 80,000 in 2007, a rise of 30,000 passengers in a single year (!) and over the same period minibus pax-kms doubled. Information is not available to assess whether this growth in minibus passengers has mainly been conﬁ ned to Addis Ababa, or not.

104 It is observed that the recent passenger growth rates have been exceptionally high; an average increase in total bus passengers of 26 percent p.a. over the past three years. The average annual growth in total bus pax-kms is also very high, at 21 percent p.a., over the past three years.

Clearly such high growth rates cannot be projected into the medium term with a great degree of accuracy. More likely they reﬂ ect the strong rates of growth in the early transition phase to full market economy and a level of pent-up demand for public transport in the major cities.

Over the past ﬁ fteen years bus transport passengers have grown at an average annual rate of 15.8 percent. Over the past ﬁ fteen years bus transport passenger-kms has grown at an average annual rate of 10.6 percent.

The bus passenger forecast of this study includes the following assumptions (some of which are relatively crude): 1) The bus passenger forecast for the medium-term, e.g., from 2008 to 2017 is considered most accurate; 2) Long range forecasting remains much less scientifi c (indicative only); 3) Assume the proportion of “Own Account” and “For Hire” vehicles in the total fl eet stays approximately constant over time; and 4) Assume the (combined) proportion of Minibus, Midibus and Large Bus in the total fl eet stays approximately constant over time.

The forecast total passenger ﬂ eet for the medium-term, e.g., from 2008 to 2017 is as indicated in Table 4.9.

Table 4.9 Review Study Passenger Trafﬁ c Forecasts

Review Study Passenger Growth Up to 2012 2013-2017 2018-2027 All Passengers Annual Growth Rate 12.0% 8.0% 4.0% Passenger Numbers in 2012, 2027 233,424 342,976 507,689

The overall passenger numbers in 2012 is estimated as some 223,000 pax., up from 132,000 in 2007. The overall passenger numbers in 2017 is estimated as some 342,000 pax. The passengers carried will have more than doubled over the next ten years.

The overall passenger numbers in 2027 is estimated as some 500,000 pax. In other words, the passengers carried shall increase by some 1.5 time between 2017 and 2027.

105

Chapter Five

Institutional Arrangements in Road Transport Introduction In recent years, a myriad of issues have beset all forms of commercial road transportation services. These issues have to be resolved through greater emphasis on improvement of management of the industry in general. The administrative framework in which the industry is operating and facilities are provided and maintained is a critical issue.

If there is failure to address these issues, there will be far reaching implications for satisfying the demands posed by increasing population and rising expectations regarding Ethiopia’s international competitiveness. One of the sectoral measures recommended for developing exports to promote growth was to improve the business environment and facilitate global integration. In the sections below, a description and analysis of the main organizational structures of the road transport industry is presented.

Political Context: Institutional Structure Including Allocation of Powers Between Jurisdictions The present institutional structure of the Federal Democratic Republic of Ethiopia (FDRE) is of relatively short provenance. In 1991 was formed the Transitional Government that laid the basis for the current constitutional arrangements which were ratiﬁ ed by a Constitutional Assembly in late 1994, and took effect in 1995.

The federal arrangement, established under the Constitution, has guaranteed the rights of the Regional States to administer their own affairs. They are empowered to formulate policies that are appropriate for their respective development; to lay the foundation for economic and social infrastructures; to participate directly in sectors that are critical for their economic development; and to safeguard law and order in their own areas.

The Federal Government and the Regional States have legislative, executive and judicial powers. The FDRE has two houses – the House of People’s Representatives and the House of Federation – and nine Regional States who have powers to formulate policies and administer their respective states. The House of People’s Representatives is the highest authority in the Federal Government while the Regional State Councils have powers to legislate and act upon issues that are under their jurisdictions.

The President of FDRE is the head of the republic and is elected by a joint session of both houses for a term of six years. The highest executive powers of the federal government are vested in the Prime Minister and the Council of Ministers who are accountable to the House of People’s Representatives.

The Constitution requires the establishment of independent judiciary, and supreme federal judicial authority is vested on the Federal Supreme Court. The judicial powers for the federal and state levels are vested in the courts. Elections are held in the country through the guidance and execution of a National Election Board that is accountable to the House of People’s Representatives.

107 The Federal Democratic Republic of Ethiopia (FDRE) comprises the Federal Government and the governments of the Regional States. The republic consists of nine regional states that were established on the basis of settlement patterns, language, identity and the consent of the people concerned. In addition there are two city administrations, of which Addis Ababa is by far the most signiﬁ cant.

Addis Ababa is divided into 10 sub-cities for administrative purposes, and these are each further subdivided into Kebele (ward) as the lowest administrative tier; there are currently 99 Kebeles following some recent consolidation. The Transport Authority plans to use the sub-city as its basic unit for organisation of the public transport sector.

Other Relevant Government Institutions The highest level relating to commercial road transport is the Federal Government of Ethiopia, responsible for determining national policies and strategies, as well as developing regulatory framework in the form of basic laws. To this effect, special organs of the federal government have been established. These authorities are discussed below.

The second level (type of function) relates to Regional level authorities and the third level (type of function) to City administrations/municipalities which are similarly dwelt upon in the following paragraphs.

Ministry of Transport and Communications (MoTC) The Ministry of Transport and Communications (MoTC) was established with responsibilities for the overall national transport policy and the preparation of basic laws and directives governing commercial road transport.

Transport Authority The organisation with prime responsibility for control and regulation of road transport is the Transport Authority (TA), formerly named the Road Transport Authority until its remit was widened in 2005 to also include rail and maritime transport activities. Despite this widening of the TA scope, regulation of road transport has remained the dominant function. In fact some maritime functions which were transferred to the TA have now been re-assumed by the parent Ministry of Transport and Communications (MoTC).

The core role of the TA is to promote an effi cient and equitable transport system. Functions and responsibilities are fully set out in Proclamation No 468/2005. The Authority’s functions are essentially regulatory, and thus distinct from the overall policy and planning functions of MoTC. Within TA’s general remit, key specifi c activities include the following:  Ensuring provision of an effi cient and economical transport system;  Ensuring that passenger transport services are safe and reliable;  Ensuring that vehicles comply with government specifi cations, and are roadworthy;  Performing or overseeing the issue of operators’ and drivers’ licenses, and of vehicle inspection certifi cates;  Monitoring passenger and freight tariffs on major routes;  Maintaining vehicle fl eet data; and  Maintaining relations with neighbouring states, and in particular implementing agreements with Djibouti. 108 Strategic medium-term aims include promoting effi ciency and encouraging private investment in the passenger transport sector, and increasing competition and hence effi ciency in the goods transport sector.

The Transport Authority performs the above functions at a federal level. Each region has its own Road Transport Bureau (RTB), or often a section within a combined Transport, Trade and Industry Bureau, performing similar functions within the region. There are no direct functional relations between TA and the regional bureau, although there is an internet network through which vehicle registration data are transmitted directly from regional or zone level to the national TA database.

The road-related activities of the Authority are performed by ﬁ ve functional departments, including:  Planning, Research and Information Department;  Technical and Vehicle Procurement Department;  Drivers and Mechanics Training Centre;  Driver and Vehicle Affairs Department; and  Road Safety Department.

Since 2005 the Addis Ababa Transport Authority and the Dire Dawa Transport Agency have been administered on a federal level, as branch ofﬁ ces of TA (now known as AATA and DDTA).

The total number of staff employed by the Transport Authority is about 550. As was elaborated in the 2002 “Study on Transport Regulations” by SPT and Central Assessors, there is a need for greater clariﬁ cation on the roles of the regional and federal road authorities. Unfortunate problems sometimes occur under present arrangements, for instance presenting obstacles for an operator wishing to run bus services between two towns in adjacent regions, or even between two towns in the same region where the route between them must pass through another region. In this case the regions concerned cannot issue inter-regional licenses, while it may be difﬁ cult for the local operator to apply for and obtain a federal license from Addis Ababa. The result may be that travel between the two towns will only be possible using several different services over an indirect route, or that a direct service will not be able to pick up or set down passengers over a section of the route.

Problems mentioned by the Transport Authority as being presently of particular concern included:  Ethiopia’s poor road safety record;  The poor condition of many old vehicles; and  Lack of capacity for effective enforcement of driving codes and road laws by the trafﬁ c police.

Ethiopian Roads Authority (ERA) The Ethiopian Roads Authority is a federal government institution with responsibilities for providing, improving and maintaining the major roads (trunk, link and main access roads).

The Federal Police Commission The Federal Police Commission is entrusted, among other functions, with the management of road trafﬁ c and enforcement. The Regional Police Commissions share these functions.

109 Regional Bureaus of Transport and Communications The Regional Bureaus of Transport and Communications have been empowered to administer the regulations of road transport, including registration and technical inspections of motor vehicles and regulating commercial road transport services within their geographic jurisdictions.

This came into effect in accordance with Proclamation No. 7/1992 (Transitional Government of Ethiopia: 1992), and the Regulation for the Deﬁ nition of Powers and Duties of the Central and Regional Executive Organs of the Transitional Government of Ethiopia (Transitional Government of Ethiopia: 1993). They also have powers to establish and operate public road terminals.

Regional Rural Road Authorities The Regional Rural Road Authorities have responsibilities for providing roads that are functionally classiﬁ ed as collectors and feeders, or what are more commonly called rural roads.

City Administrations/Municipalities The third level/type of governmental commercial road transport functions relate to city administrations/ municipalities. City administrations, particularly Addis Ababa, have substantial commercial road transport responsibilities, including roads, parking, transit systems, terminals and trafﬁ c management. However, city transport authorities with comprehensive roles have not yet begun to appear.

Road Freight Transport Industry Structure Ethiopia’s trucking industry has been deregulated and, as in so many other African countries, it is highly fragmented. Good statistical data is therefore somewhat difﬁ cult to collect and care must be taken, in particular, with analysis and forecasting.

The following sections include data on organisational structure as obtained from the survey.

Formerly all goods transport was provided by the Ethiopian Freight Transport Corporation (EFTC), operating a ﬂ eet of over 1,000 trucks. In the early 1990s EFTC was split into the following ﬁ ve companies:  Comet Transport;  Bekelcha Transport;  Shebele Transport;  Woyra Transport; and  Addis Mechanical Enterprise.

Of these companies the fi rst three are general goods transporters, while Woyra is a specialist fuel transporter, and Addis Mechanical Enterprise a specialist provider of spare parts and maintenance services. All these companies now come under PPESA, with all except Comet having been included in the current privatization list. Comet is considered important and privatization is not foreseen in the near future (e.g., not within the coming fi ve years). Others companies (such as Bekelcha Transport and Shebele Transport) were slated for privatization during the next fi ve years. Comet, Bekelcha and Shebele are still state enterprises, to which affi liate operators are also attached. Trucks are also operated by a number of commercial companies still in the state-owned sector.

As in the passenger sector, there are now also many private operators, acting either as members of associations, individual commercial truckers, or private companies. 110 The existing forms of organizations are Private Limited Companies, Share Companies, Publicly Owned Enterprises, Associations ("Cooperatives" of individuals or owner operators) and For-Hire transport business entities of Regional Development Associations. The Industry structure is characterized by fragmentation with associations (groupings of many small operators) providing services with low- capacity technology/ﬂ eet and with low payload/capacity ratio.

The number of trucks registered with the Transport Authority in 2006 was 10,567, classiﬁ ed by type and ownership as summarized in Table 5.1.

Table 5.1 Commercial Trucks Licensed by Transport Authority (2006)

Number of Trucks Classiﬁ ed by Type Trucks Trail- Operator Group Trucks Semi trailers Others Total ers Associations (66) 4,729 1,231 310 1,323 7,593 Individual commercial (124) 123 80 30 20 253 Private companies (66) 56 885 239 87 1,267 Enterprises (3) 3 32 131 --- 166 Enterprise afﬁ liates (3) 740 25 8 73 846 Government organizations 197 198 46 1 442 Total (334 groups) 5,848 2,451 764 1504 10,567 Source: Transport Authority.

The data cover both “private” and “public” commercial operators, licensed respectively to carry their own goods and goods owned by others. Trucks operated by government organizations are mostly on own account.

In 2006, from the total number of 10,567 registered cargo vehicles, 7,593 (72 percent) were operated by associations, and 1,691 (12 percent) by private companies.

Fuel trucks are not included in the table, since supervision of fuel transport operations is not currently within the domain of TA. At present this activity is directly organised by the oil companies, using sub-contracted tankers; there is, however, a proposal that ﬂ eet management should now be transferred to the Authority.

Intercity/International Road Freight Market The three enterprises (Comet, Bekelcha and Shebele) operate a total of 166 trucks on their own behalf, but both Bekelcha and Shebele have affi liates operating 300 or more. The 72 government organizations have on average six trucks in their fl eets. Comet is the largest of the three general goods transporters formed from the former EFTC, currently operating a fl eet of 225 trucks.

Today there is competition for freight trafﬁ c, at least in the Djibouti corridor. However there are some complaints for the private sector with regards to the public enterprises and endowment companies. The public enterprises are expected to be converted to share limited companies and then privatized, but this process is slow.

However, there are signs of increasing market share by companies (Share, Private Limited and Ownership of Regional Development Associations) on the major import-export corridor. The companies have been able to modernize their ﬂ eet, and as their supply increases, prices (freight rates) 111 come under pressure. The associations make up for great share of intercity freight transport and they are particularly dominant outside the major import-export corridor.

Road Freight Transport Industry Organizations Introduction Data from the Transport Authority show that in 2000 there were 17 associations, 8 companies, 3 parastatals and 80 individual operators having some 9,893 vehicles. The share of associations at that time was 3,831 vehicles or about 39 percent.

The one-time lifting capacity of associations in 2000 was 46,373 tons, while companies and parastatals accounted some 48,525 tons, e.g., some 45 percent of the total lifting capacity.

In 2005, from the total number of 10,880 registered dry cargo vehicles 7,724 (71 percent) were operated by associations and 1,691 (15.5 percent) by private companies. Individual operators and parastatals had ﬂ eets consisting of 991 and 474 trucks respectively. Hence, the trend between 2000 and 2005 shows a rapidly increasing share of the total dry cargo ﬂ eet by the associations.

Transport Associations The largest freight transport associations may have 200 to 300 members, operating 300 to 400 trucks, but many are much smaller; on average, however, there are over 100 trucks per association. Eighteen associations operate more than 100 trucks.

One of the largest associations stated that most individual members owned no more than three trucks, with single trucks sometimes even being shared between two or more members. Most individual commercial operators also own only one to three trucks.

Associations provide a legal umbrella for small yet independent trucking operators. Most associations have been formed from former “Ketena” members. The associations are allowed to operate countrywide, however many tend to specialize in a particular area or on particular routes. One of the key weaknesses of associations is the loose structure that binds membership, and the general weak human capital among members. Each member is often independent-minded, which make them diffi cult to run on a commercial basis. They provide limited services to their owners and customers are restrictive and have monopolistic tendencies. They hinder the development of independent operators and most probably limit the profi tability of the more effi cient members. The implication is that there are no economies of scale, or operational advantages, in belonging to an association.

Freight transport is generally uncontrolled. Licenses are needed for the business and for the vehicle. Operators are encouraged to join associations, but these have only a small role to play as operators are free to conduct their business as they wish. Despite the proliferation of local transport associations there are no national bodies that represent the operators, other than the Ethiopian Freight Forwarders and Shipping Agents Association (EFFSA).

Nationwide trade associations for road hauliers are needed to act as communication chains, to inﬂ uence policy-making, and to represent the interest of the operators to Government at all levels. They would contribute to the growth in professionalism within the industries.

Associations are merely gatherings of owner-operators acting together for securing cargo in the form of "cooperatives". The market condition of the industry is characterized by no dominant group of 112 operators, and there are many operators who hunt for available cargo, in most cases inefﬁ ciently. Freight transport has a very high proportion of small-operators, organized into associations.

The characteristics of the sampled transport associations/operators (public and dry cargo freight) are summarized as follows: • Associations are groupings of in general a small number of vehicle owners; • Associations act as brokers facilitating prompt loading to their members and collecting commissions for the services they render; • As associations are not registered companies, but are groups of independent operators, the sizes of their combined capital could not be estimated; • There are defi ciencies in data management: in recording, organizing, retrieving operational and fi nancial data for management purposes; • Some of the associations do not have proper offi ce facilities and personnel. Offi ces of most associations are not well organized, there is insuffi cient space and they serve other purposes aside from transport. Conversely, some have organized offi ces with the necessary human resources; very few associations have small and clean offi ces with reasonably skilled personnel; • In general associations are fragmented, uncoordinated and unorganized; • Associations are preoccupied with day-to-day management of operations; • They do not engage in business planning, study of costs, revenues, tonnages and other operational and fi nancial performance indicators. There are no organized consultations on problems of common interest; • In general, a shortage of skilled staff, a lack of proper facilities and ineffective management, an absence of rationale for pricing, the instability of demand, poor asset management and weak fi nancial position characterize a large share of the associations that were sampled; • Some associations have simple structure and some functional structures, which are replicated from both the parastatals and private limited companies. On the contrary, most associations have no formal organization structures and staffi ng plans prepared on purpose; • Associations have no organizational resources–e.g., own maintenance facilities (workshops), terminals or spare parts and other supplies stores which are required to serve the association members. The form of organization of associations is an innovative one, but changes have not been forthcoming to shift from just "grouping" of individual operators to companies managed on the basis of business lines. There may be other possible forms of organizations that should be considered. Generally, the thrust to corporatize the associations is consistent with the objective of promoting productivity and effi ciency. Although this is the most desirable approach, during an interim period many steps could be taken to improve the management and performance of Associations.

Private Companies The Private Limited Companies are better organized in having better organizational designs with the required job descriptions, position classiﬁ cation and pay systems, facilities - workshop, terminals, and

113 stores, than the associations. They have better data management systems, although most companies were not willing to provide access to records for commercial reasons.

The private transport carriers should enhance their organizational capacity, so that they can effectively carry out business planning, fl eet scheduling, cost analysis and tariff setting, fi nancial management and control in order to be sustainable within a competitive environment. In order to adopt a competitive environment and improve service quality, it may be necessary to determine optimum fl eet size for effi cient management and adjust association membership accordingly. Of particular signifi cance is for private transport carriers to establish their business objectives in terms of vehicle productivity, market share and profi tability for sustainability. As the technology of commercial road transport continues to change, the dependence of passengers and shippers on a limited number of common carriers (generally for-hire carriers) will change. Some operators can even afford to operate their own truck fl eets. As the regulatory environment is becoming more competitive, the hire-carriers, particularly the associations have to be much more responsive to the needs of shippers.

Private companies operate on average nearly 20 trucks, and the largest, such as Tana Transport and Trans-Ethiopia, have up to 200. Endowment companies are owned and operated by different EPRDF organizations. Examples are Trans Ethiopia (TESCO), Blue Nile Transport Company and Dinsho Transport. TESCO, founded in 1993, is regarded as the most efﬁ cient transport company in Ethiopia. It is involved in dry and liquid bulk transport, engineering workshops and garaging services, import and selling of vehicles, spare parts, tyres etc.

New private companies have entered the bulk oil transport market, increasing supply in response to increasing demand for petroleum products.

Private sector participation and owner-operator businesses have grown, which have resulted in increased competition, thus ensuring that some of the savings in vehicle operating costs from better roads will be passed on to customers.

Details of the historical development of the Road Freight Transport industry are provided in Annex 4: Road Freight Industry Structure.

Parastatals: Comet and Industrial Fleets The parastatals have started with better organizational resources - mix of professionals with background in transport, relatively modern fl eet, maintenance facilities and experience. They have: • Proper organization structure which lay down the authority and reporting line of operational and functional units; • Management job descriptions that describe the role, responsibility and accountability of management members; • Job descriptions for the staff to serve as basis for personnel actions; to fi x responsibility and accountability, to investigate disciplinary offences and arrive at judicious conclusions, etc; • A classifi cation and pay system to determine salary and benefi ts, to rate performance, etc.; • Better data management systems - computerized fi nancial management and maintenance management system; and • Their own facilities - workshops equipped with basic maintenance equipment, 114 terminals, parts and supplies stores, fuel depots and other required property at their premises for the smooth operation of the business.

Comet has 225 trucks of its own (115 with 40 tons capacity and 110 with 30 tons capacity each) and has 8 closed warehouses with a total of 3,735 tons storage capacity, an open warehouse to handle 2,000 vehicles and 18,000 sq m. space to handle 540 containers. Over the last ﬁ ve years Comet has handled the following trafﬁ c shown in Table 5.2.

Table 5.2 Comet Haulage Performance by Year

Year Throughput (tons) 2004 1,042,260 2005 982,180 2006 1,169,187 2007 1,129,968 2008 1,240,169

Government owned and Government managed associations include SOE’s such as Comet, Bekelcha Transport Enterprise, Shebele Transport Enterprise, Comet etc. These public enterprises are very active in the movement of fertilizer imported by the GoE. They partner with private companies to form and manage associations thus expanding their inﬂ uence in the market.

For most of the enterprises, the existing facilities have become supplementary income generating sources by rendering interrelated services to customers engaged in the commercial road transport industry.

Most factories owned by the GoE, such as cement and sugar plants have their own internal ﬂ eets. The import of a large quantity of road motor vehicles has had an impact on the capacity and operational performance of for–hire carriers. The shift from hired trucks to own private commercial vehicles might not have necessarily been intended to reduce cost of transport, but primarily was to avoid the risk of high quay rent at the port of Djibouti in case a shortage of supply of trucks develops. Some of these importers, who may not fully utilize their ﬂ eet of private commercial trucks for their own goods alone, might also get involved in moving other shipper’s cargo by competing for it with for- hire commercial trucks.

Road Passenger Transport Industry Structure Introduction There are ﬁ ve types of for-hire carriers in intercity public passenger road transport, excluding private carriers who provide their own carriage. These include private limited companies, share companies, publicly owned enterprises, associations ("cooperatives" of individuals or owner operators) and for-hire transport business entities of Regional Development Associations. Because of the diversity among share companies, private limited companies and associations, it is not possible to establish a single structure to represent the commercial road transport industry in Ethiopia.

In the past bus transport was operated by the state-owned Public Transport Corporation. This was then split in 1994 into three components, namely:  Walia Public Transport Enterprise (for intercity bus services);  Anbassa City Bus Enterprise (for Addis Ababa municipal bus services); and  Abay Technical Service Enterprise (for mechanical and maintenance services). 115 Anbassa City Bus Service is predominantly conﬁ ned to Addis Ababa and its 114 DAF cross-country buses were transferred to Walia intercity bus services.

Abay was formed with the function of providing heavy maintenance for both Anbassa and Walia, and to supply parts to all operators.

Commercialization Of these three enterprises, Walia and Abay are now administered under the Privatization and Public Enterprise Supervisory Agency (PPESA) and included in the current privatization list. Anbassa also answers to PPESA, but is to remain Government-owned for the time being.

Since Walia is expected to be privatized in 2009, it is currently being restructured to equip it for its new competitive role. It suffers now from serious fi nancial problems, giving rise to a situation where less than half its fl eet is on the road, and there are diffi culties in acquiring spare parts. A privatization study performed by Ernst and Young in 2005 recommended substantial downsizing of its present labour force of nearly 900.

Intercity Bus Market The Transport Authority supplied details of buses operating on interurban routes for 28 associations, one enterprise (Walia), afﬁ liates of Walia, and two private companies (Selam Bus Line, and GTS Commercial and Transport Company). The total number of licensed buses is 6,587, including 4,198 buses with capacity up to 43 passengers, 1,296 with capacity of 44-47 seats, 793 with capacity of 48- 60 seats, and 300 with capacity of 61 or more seats.

The recent decision by Walia Public Transport Service to sell most of the aged vehicles in its ﬂ eet suggests that the industry has become vulnerable to unsustainable ﬁ nancial performance, necessitating reorientation of activities away from rapidly increasing cost without any return on capital employed. The state-owned Walia Intercity Bus Service Enterprise has been selected to carry out after sales maintenance of the 500 mid-sized buses procured from China. Walia Bus will also offer spare parts for sale in addition to rendering maintenance services in its workshop off the Smuts Street. Walia Bus opened the LC at the Commercial Bank of Ethiopia (CBE). The company’s workshop repairs only Mercedes vehicles. For the maintenance of the new buses, HIGER will also send six mechanics from China.

Some 15 of the above stated operators are engaged primarily in long-distance bus transport, including 11 associations, two private companies, one state enterprise (Walia), and afﬁ liates of Walia. The numbers of buses with seating capacities of 44 or more, operated by these organizations, may be summarized as follows.

Table 5.3 Intercity Bus Seats (2006)

44-47 seats 393 48-60 seats 779 61 seats and over 300 Total 1,472

The other buses, including around 4,200 buses with up to 43 seats and 900 buses with 44 to 47 seats, are primarily engaged in short-and-medium distance interurban transport.

116 The intercity bus market has been progressively opened up and liberalized since 1994, being now operated largely by associations of small operators. While most individual operators own only one to three buses, the combined membership of an association may together own 200 or more. More recently private companies have also started operating on some long-distance routes. Private companies operating large buses include Selam Bus Line, based in Mekele, and GTS Commercial and Transport Company, based in Addis Ababa. A group of businessmen associated with one of the larger associations is also reported as planning to acquire buses to operate a private company. Selam are now operating luxury air-conditioned buses within an expanded ﬂ eet of 34 buses operating all over the country.

Urban Bus Market Urban transport services in Addis Ababa and Dire Dawa are regulated by the respective transport authorities (AATA and DDTA), which are now branches of TA. In Addis Ababa, bus services are operated by Anbassa, with public transport also being provided by numerous minibuses and taxis, organised into associations.

Anbassa was ﬁ rst established in 1952, but became part of the Public Transport Corporation(PTC) after 1974. It was re-established as a separate entity when PTC was broken up in 1994 and now runs 89 urban routes, carrying over 600,000 passengers per day with a ﬂ eet of 530 buses. Due to maintenance problems, only 345 of these are currently operational.

Originally a private enterprise that held an exclusive franchise for passenger transport services in the city, Anbassa was nationalized in 1974 and made a part of the Passenger Transport Corporation (PTC). Two other PTC divisions were responsible for long-distance bus services and bus materials (spare parts and bodies). In 1996 PTC was broken into its three component parts, restoring Anbassa to its previous status as a freestanding commercial enterprise. Since then the workshop component of Abay Technical Services (the bus materials supply division of PTC) has merged with Anbassa, with which it shares a depot in Yeka.

Besides personal taxis at the higher-cost end of the market, the main competition, catering now for a substantial majority of passengers, comes from minibuses. These buses provide ﬂ exibility, but cost more per passenger trip than the large buses, and also cause signiﬁ cant congestion problems in some areas, especially around main minibus stops. Although not always popular with passengers, they provide faster and more frequent services than the buses.

In Dire Dawa a recent “Urban Scope Transport Study”, performed for Dire Dawa Council by the Physical and Spatial Planning Team, reports that a municipal bus company operates three buses along a single route, carrying around 800 passengers per day. Most passenger transport within the municipality is provided by 700 minibuses, small taxis and three-wheeler motor rickshaws, carrying a total of 130,000 passengers per day.

Road Passenger Transport Industry Organizations Introduction Following change in the regulatory environment during the transition period, the role of Ketena's was transferred to private regional associations. One of the aims of reorganization was to facilitate future privatization and for the public sector to withdraw from the delivery of commercial transport services. As a result of this restructuring, Ketena’s were replaced by private associations.

117 Associations Passenger transport associations generally specialize either in short-and-medium distance transport (up to 100-200 km), operated by minibuses and medium-size buses, or in longer-distance transport, operated by larger buses. The Transport Authority licenses and supervises operators on inter-regional routes throughout the country. For operators working on routes within regions, the corresponding functions are performed by the regional transport bureaus.

Some characteristics of the sample public transport associations/operators are as follows: 1) Associations are grouping of small number of vehicle owners; 2) Associations are not registered companies, but groups of independent operators; and 3) Associations are fragmented, uncoordinated and unorganized.

In passenger transport, although companies are allowed, individual operators are expected by the Transport Authority, and the regional transport bureaus, to join a passenger transport association. The associations set the schedules and the fares. This is anticompetitive as it generally means that operators take turns on a rotating schedule, so that over a certain period the income is shared equally. There is no incentive to improve the service or the vehicle with such kind of operation, and there is no effective competition on price, quality or frequency. (A draft General Transport Law proposes to end these restrictive practices).

The fragmentation and overlapping of responsibilities obscure accountability which in turn leads to operational inefﬁ ciencies. The transport associations do relieve the Government authorities of some of the regulatory burden, as they act as a kind of enforcement and control mechanism. There will need to be more training and staff in the TA and the trafﬁ c police to ensure that the change works smoothly in the interests of the passengers and to maintain safety.

Nationwide trade associations for bus operators are needed to act as communication chains and represent the interest of the operators to Government at all levels. They would contribute to the growth in professionalism within the industries.

A few associations negotiate with insurance companies and secure better premium for their members. For instance, an association operating over 130 medium and small buses has an agreement with one of the private insurance companies to pay an annual premium of Birr 750 for an 11-seat capacity minibus for third party motor insurance coverage. The premium for a 44-seat capacity bus is Birr 1,350. If the policy is to cover passengers, the driver and his assistant, the annual payments go up to 900 Birr and 1,750 Birr for 11 and 44-seater buses, respectively. Details of the historical development of the bus passenger transport industry are provided in Annex 5: Public Transport Industry Structure.

Taxi Service The Addis Ababa Taxi Service, formerly under the control of the Public Road Transport Corporation was transformed to three poorly organized associations. Despite the liberalization of entry to taxi business, passenger fares were controlled. The ﬂ eet expansion of the minibuses has increased capacity for passenger movement. However, although customers have beneﬁ ted from the expanded supply through reduced waiting times, without drastic improvements to allow the market to determine the number of minibuses with the introduction of other types of services, it would not be possible to achieve a well-functioning Demand-Responsive System.

118 Most imported used buses are of a small capacity (minibuses) since the price of high capacity buses of the same condition lies beyond the ﬁ nancial capacity of importing individuals. For these reasons, regional short distance services and Addis Ababa city taxi services are dominated by this category of vehicle.

Metered Taxi Service Ten individuals organized Sheger City Meter Taxi S.C., a recently established urban transport private company, which launched new and modern business meter taxi cabs to operate on a system using distance metres instead of the embattled zone system.

The share company, which has a seven-member board, ﬂ oated the public sale of shares with par value of 1,000 Birr each with a 9 percent premium, to expand its capital base to 50 million Birr. The sale of shares started on October 16, 2008, and continued until February 12, 2009, with possibility of extension.

Road Safety Road safety constitutes a serious problem area in Ethiopia, as the accident rate per vehicle-kilometre is one of the highest in the world. The prevalence of an extremely alarming number of road trafﬁ c accidents has created large negative socio-economic costs in actual and opportunity costs.

The situation is likely to be even more severe than shown in the statistics due to the possible signiﬁ cant under-reporting. Not only are these rates high, with the average vehicle evidently having a more than 10 percent chance of accident involvement each year, but they appear to be also rising faster than the growth of the vehicle ﬂ eet. On the other hand, the fatality risk per head of population was one of the lowest, at 3 per 100,000 people in 1994/5, due to the low level of motorization.

A system of operators’ licenses is proposed, coupled with the introduction of certiﬁ cates in professional competence (CPC's) for truck and bus transport operators, to ensure that the law and good practice in the transport industry is known and respected.

Access to the Profession Introduction When the Master Plan Team met with representatives of the industry it was apparent that the level of transport knowledge in even the large government-owned companies is not as high as it should be. This is not only an Ethiopian problem and a way of introducing more formal training would be to introduce a Certiﬁ cate of Professional Competence (CPC) separately for domestic and international operations. The CPC training would be tailored for domestic and international trucks and domestic buses with a section on international bus operations for the future.

The lack of detailed knowledge exists at every level of transport where local truck operators working even within an association may well have simply purchased or been given a family-owned truck without any formal understanding of how to operate it. Then, working on the principle that they can charge less than a competitor, they gain work at an uneconomic level – but are not aware of it. If application of existing road trafﬁ c law on vehicle maintenance was stronger many such companies would go out of business. Instead they continue to operate unsafe vehicles. It was clear to the Master Plan Team that access to the profession is not properly regulated and as a result there are many enthusiastic amateurs operating in Ethiopia as there are few restrictions. 119 Access to the Profession in 2007 To operate a commercial road vehicle in 2007 one needed the following:  A business license from the Ministry of Trade and Industry (MoTI), with annual renewal;  A vehicle license obtained annually from the Transport Authority (TA);  A driving license of the correct grade from the TA;  An annual vehicle inspection certiﬁ cate from the TA; and  (For an association) An annual license to operate the association.

All are obtained on payment of a small fee with the exception of the driving license which requires a test (allegedly payment of a larger fee). None of the above requires evidence of ability to operate; of having a site to operate from; of “honesty as a trader”; or of having sufﬁ cient funds to ensure good maintenance practice.

In practice anyone can be a bus or truck operator with little knowledge of what they are doing, or of the law. The lack of effective legislation leads to unsafe practices that may be a factor in Ethiopia having one of the worst road accident and death records per vehicle in the world. Therefore urgent action is needed.

Human Resource Development and Management Capacity In general there are weaknesses in data management in all sector organizations and an absence of transport professionals association and gaps in professional and managerial skills.

A large number of association personnel are unskilled, whilst the professional attainment of the labour force as a whole is weak. There are gaps in skills for enhancing efﬁ ciency and productivity of the commercial road transport industry. Educational institutions and the transport profession have not come up with training programs that are tailored to the needs of the industry.

To ensure effi cient, safe and reliable public commercial road transport service, the following measures are recommended:  The Ministry of Transport and Communications takes the lead in the establishment of the Ethiopian Transport Professionals Association;  The Ministry of Transport and Communications, Transport Authority and Regional Transport Offi ces develop human resources in transport management through an effective capacity building program, so as to develop skills required to improve industry performance; and  AACCSA to chair a Forum for discussion of issues and for making proposals for possible solutions to improve the effi ciency and capacity of the industry. Potential representatives of the Forum could be drawn from the Ministry of Transport and Communications, Ministry of Trade and Industry, Transport Authority, Regional Transport Offi ces, Transport Operators, Freight Forwarders and major shippers, etc.

Another possible area of intervention of AACCSA is capacity building, which is central to improving the management of commercial road transport, through upgrading human resources of the industry,

120 with particular emphasis on business planning, ﬁ nancial management, tariff setting, data management, operations (scheduling of ﬂ eet and productivity), and marketing, costing and monitoring performances.

The Addis Ababa Chamber of Commerce and Sectoral Associations (AACCSA), in consultation with the Transport Authority and the Ministry of Trade and Industry, could also organize training programs and workshops on the Management of Logistics Chains to improve the efﬁ ciency and effectiveness of the delivery of goods.

The enterprises and private limited companies are better equipped with professional staff than the associations. Out of 1,355 employees working in three enterprises, 40 are graduates, while out of 973 staff employed in three private limited companies, 32 are graduates. Rather, as revealed in Table 5.4, each of the enterprises or private limited companies on the average, have 10 to 13 graduates, which could serve at supervisory and upper management levels.

Table 5.4 Organizations and Composition of Their Staff Per Qualiﬁ cation

O rganizations Respondents Graduates Nongraduates Total Employees Parastatals 3 40 1315 1355 Private Limited Co. 3 32 941 973 Associations 20 25 584 609 Total 25 97 2840 2937 Source: Responding Parastatals, Private Limited Companies and Associations.

As shown in Table 5.4, out of 609 employees working in 20 different associations, only 25 have ﬁ rst degree and that each association barely has one employee with specialized training in transportation management. Most associations have redundant unskilled personnel, which is a major factor for high labour cost, a constraint to enhancing the competitiveness of transport operation, with implications for transaction costs, particularly in domestic and external trade.

A professional road transport industry is needed. A plan includes measures to introduce a system of operators’ (O) licenses. Grant of a license would depend on the operator demonstrating that he has the capital and skills to run a safe operation. Training for a new “Certiﬁ cate of Professional Competence” (CPC) would be introduced, and holding such a certiﬁ cate would become a requirement for obtaining an O license.

Apart from the increase in skills and professionalism that would result, one big advantage of the O license concept is that the license could be suspended or withdrawn for persistent infringement of the rules and trafﬁ c regulations. It is thus a sanction available to the authorities that does not exist today.

Some Institutional Issues Although the institutional arrangements emanate from constitutional provisions and diversity can be healthy, there is a situation of fragmentation of commercial road transport responsibilities, and lack of clarity concerning the roles of the Ministry of Transport and Communication, the Transport Authority, Regional Bureau Transport Ofﬁ ces (unclear and conﬂ icting responsibilities of licensing, insurance, driver and driver safety measures, quality of service, controls of fares, etc).

There is an absence of framework in support of energy efﬁ ciency. There is also a lack of a monitoring and evaluation framework to analyze changes in the industry, as a basis for policy orientation and regulatory framework.

121 It would seem sensible for the Transport Authority, in consultation with associations, to initiate an institutional reform program to improve the operations of associations. Associations could then start to address their organizational, operational and ﬁ nancial shortcomings and also organize themselves along conventional corporate lines.

122 Chapter Six

Legal Framework and Road Transport Regulations

An improvement of the policy and regulatory environment in which the road transport industry is operating and in which transport facilities are provided and maintained is paramount.

This chapter refers in detail to three pertinent studies, namely: • The “Study on Road Transport Regulations” completed by the Italian consultants SPT, working in association with Central Assessors of Ethiopia, in June 2002; • The Study entitled “Management of Commercial Road Transport (Passenger and Freight operations): Current Situation, Issues and Problems, and Measures to be taken”; completed by W.T Consult Pvt. Ltd. Co. in 2008; and • The “Transport Master Plan for Ethiopia”; completed by the Danish/German consultants COWI/GOPA in 2008.

Legal Framework Currently, the basic law that governs commercial road transport is Proclamation No. 468/2005, which put an end to Proclamation 14/1992. The new proclamation deﬁ nes basic terms in commercial road, rail and maritime transport services as well as the objectives, powers and duties of the Transport Authority.

In principle, deregulation consists of the withdrawal of government's restraining hand and opening commercial road transport to competition. In Ethiopia, the process of deregulation began with the Road Transport Regulation. The proclamation has resulted in a dramatic rise in entry to commercial road transport industry.

In general, the provisions of Proclamation No. 468/2005, currently in use, could be categorized into three: • Those that aim to protect public interest from the safety viewpoint; • Those that have the purpose of promoting industry efﬁ ciency and efﬁ cacy; and • Those that relate to ensuring reasonableness of rates, as well as the continuity, regularity and reliability of services.

There is a certain degree of consensus that a “reasonable” degree of regulation of safety and operating aspects certainly is called for, but economic control for the most part is better exercised through the mechanism of the market.

Road Transport Regulations Historical Developments: Deregulation and Regulation Before the establishment of the Road Transport Administration by Proclamation No. 256/1967 to control and regulate travel and transport on the Road, driver and vehicle licensing, annual inspection

123 and registration and issuance of route permit for long distance public passenger transport vehicles were carried out by Land Transport Division of the Imperial Ministry of Transport and Communications.

There were about 14 private crosscountry bus operators, each having its own ﬂ eet of over 45 seat capacity vehicles, maintenance facilities and ofﬁ ces.

Anbassa was one of these private companies providing long distance interurban service. Individuals with a limited number of buses could be registered with any one of the enterprises as associates, mainly to get scheduling and dispatching services. During this period, the public road transport fare for all types of services (urban, regional, and interurban) was determined by the market. At this early stage of development, there were no other barriers to entry to the industry aside from ﬁ nancial capacity to buy a vehicle and obtaining a route operating permit.

In an environment where there were a large number of operators (supply) compared to the demand, there was a ceiling on fares, since there were no controls on pricing. As a result, the passenger fare, which was initially more than two cents per pax-km, had declined to 1.5 cents per pax-km. However, the intense competitive pressure had adversely affected passenger convenience and safety.

In an attempt to overcome the problems associated with weaknesses in control over prices charged, quantity and quality of services, the Road Transport Administration was established in 1967, as an autonomous agency. Its main functions were to control public road transport fares and reduce barriers affecting an expansion of services.

Later, the establishment of the Road Transport Authority (during the Derg regime) was accompanied by extensive regulation of commercial road transport involving entry to and exit control from the business, control over passenger fares and freight rates and the establishment of zones of operations (the Ketena’s). The signiﬁ cance of an extensively regulated commercial road transport industry is that it had resulted in the distortion of the normal market mechanism, and forced carriers to charge rates below what was commercially sensible. This led to serious consequences in the long-run, since many private operators were not ﬁ nancially sustainable, nor could they adopt technological innovations and maintain the quality of services at a satisfactory level.

As a consequence, the vehicle ﬂ eet of the private operators became very old (on average as high as 15 years), compared to the age of the publicly owned ﬂ eet (which was about 8 years on average). One of the issues raised by private operators following commercial public passenger transport industry liberalization is that some regional associations propose tariffs and get approval from Regional Transport Bureaus, whilst others are obliged to comply with the rates set by the Transport Authority.

In contrast to commercial freight transport, fares for public passenger services have not been deregulated. There are limitations to the availability of more ﬂ exible and customer oriented services. More importantly, there has been technological stagnation in the area of passenger transport.

Freight Transport Regulations and Existing Rules In 1992, the Transitional Government of Ethiopia (TGE) deregulated for-hire commercial dry cargo transport. Under Proclamation No. 14/1992, operators were allowed to join a trucking association, form a company or register as an independent operator. Initially, freight rates had risen, for instance from Birr 0.22/ton-km to Birr 0.26 and from 0.26 to 0.40/ton-km on the Addis-Assab corridor.

124 In recent years, freight rates have generally shown a declining trend, particularly on the Addis- Djibouti corridor and on the improved trunk roads. Tariffs continue to be regulated for bulk oil transport, through the ﬁ xed price structure for oil products. There has been an erratic pattern in the level of average fares levied on export routes, trunk roads, major link and regional roads. There has been an upward trend in vehicle operating costs, primarily due to increases in the prices of input such as vehicles, fuel, spare parts, etc.

TIR is an international Convention devised under the Economic Commission for Europe of the United Nations (UN/ECE). The underlying purpose of the system is to allow goods carrying vehicles to be sealed at their ofﬁ ce of departure and to travel generally unhindered, other than for checks on seals and documentation, to the ofﬁ ce of destination. This is required when goods pass through a transit country to ensure customs duty will be paid.

The TIR Convention is in two parts. One deals with the approval of vehicles and containers for use under TIR and the other with the operation of the system and documentary rules governing the issue of the TIR Carnet.

A Contracting Party to the TIR Convention is a country that has acceded to or ratiﬁ ed the Convention and agreed to abide by the TIR Convention 1995 rules. However for TIR to operate in any country it has to have a National Association of Road Hauliers (or National Carriers Association) to administer the system and an international guarantee system. Ethiopia has no such system at present.

The International Guarantee System was devised to ensure that Customs duties and taxes at risk during a transit operation are protected at any moment by a national guaranteeing association, if for any reason, the TIR transport operator cannot be held accountable.

The operation of the guarantee system only works through a National Carriers Association and is usually backed up by the national insurance market.

Once established the association representing carriers, which is recognized by the Customs administration of that country, guarantees payment within that country of any duties and taxes that may become due in the event of any irregularity occurring during the TIR transport operation. This includes lost cargo, missing vehicles and the risk that goods have entered into free circulation without duty being paid.

In effect there is a national partner to which the customs authorities can address themselves in case of any irregularity. The system can be considered as a succession of national transit movements that rely on internationally valid guarantees, rather than on national guarantees.

In the event of an irregularity and a need to claim, the Customs authorities should seek payment from the person directly liable. Failing that, they will approach the guaranteeing association in the country where the irregularity took place in order to resolve the issue within the country. That guaranteeing association will, in turn, apply through the International Road Transport Union (IRU) for repayment through the international insurer pool.

Such insurance has a limit of 50,000 USD per TIR carnet (higher in special cases) and a time limit of up to one year in which to make a claim.

125 Without an international guaranteeing system in place goods cannot legally be discharged in that country.

The issuing of TIR Carnets is done by the IRU to the national guaranteeing associations under conditions set out in the contractual commitment signed with the IRU. Each guaranteeing association in turn issues the TIR carnets to carriers in its country in accordance with the conditions set out in the declaration of commitment signed by the carrier with the association.

Without an international guaranteeing system in place no TIR carnets can be issued. The above system is a simple paper driven one with a set of documents carried by the driver from which sections are torn out /removed at each border.

Operation and Regulation of Road Passenger Services Services are regulated either by the Transport Authority, the regional transport bureaus, or the municipal transport authorities, according to the routes operated. Associations organize many smaller bus operations, and a high proportion of larger buses with 44 or more seats. Associations are basically responsible for allocating routes and services to their members, for preparing schedules, and for providing services to their members. These services are performed in exchange for a small commission on fares. If an individual owner wishes to operate a bus in public service, he must ﬁ rst apply to the Ministry of Trade and Industry (MoTI) for a business license.

Then, in order to obtain a bus operating license, he must apply to the Transport Authority for a letter introducing him to an association. Normally he will be able to secure an introduction to his chosen association, though sometimes this may not be possible (for instance one large association already has the stipulated maximum number of 200 members, and is therefore not permitted to acquire new members). Once the introduction letter to the association is written, the prospective member will apply for membership, which is normally duly granted. The association will then apply on the member’s behalf to TA for an operating license for his bus or buses.

An ownership booklet (log-book) must be obtained for each vehicle operated. The member is also responsible for licensing his vehicles, and for obtaining annual vehicle inspection certiﬁ cates through testing stations designated by TA. Dispatch schedules are prepared on a monthly basis by members delegated from the various associations, which are agreed with Transport Authority representatives stationed in the main bus stations and thereafter enforced by the Authority.

Intercity routes are generally divided into long-distance routes (over 350-400 km), medium- distance routes (over 150-200 km), and short-distance routes (under 150-200 km). Timings are also speciﬁ ed, taking due account of the government prohibition on overnight long-distance bus transport. Individual associations then follow established procedures for fair allocation of schedules between their members. If additional demand is evident, then the schedules may be augmented by agreement with the TA representative. Conversely a bus service with only few passengers can be cancelled, but this is not permitted if 30 or more passengers wish to travel.

As was evident from the project trafﬁ c surveys, high load factors are in practice being achieved on the main long-distance routes. Other operators, including private companies and enterprises, are also expected to run services to a schedule approved by the relevant licensing authority. In the case of Anbassa, the shortage of buses can make it difﬁ cult to adhere reliably to the schedule. Hence passengers in Addis Ababa often prefer to use minibuses, even if fares are higher.

126 The Transport Authority is planning to subcontract or franchise some long-distance routes to operators who will become responsible, acting within TA guidelines, for the regular scheduling activities currently performed by TA. This will relieve the Authority of some of its routine workload. The designated operators will be permitted both to operate the routes themselves, and to subcontract them to others.

Operation and Regulation of Road Freight Services In order to operate a goods transport service, an operator must obtain a business license from the Ministry of Trade and Industry (MoTI), and also truck operating licenses, drivers’ licenses and vehicle inspection certiﬁ cates from the Transport Authority. TA issues operating licenses for both “own account” operations where the carrier transports his own goods and for “public carrier” operations where he transports on behalf of another shipper. As with passenger transport, regional road authorities can also issue licenses for operation of goods services, but only for routes within their regions.

The functions of the associations are similar to those in the passenger sector, and include the obtaining of business, allocation of trips to members, and provision of services to members. The allocations of jobs to members follow association procedures which should be in accordance with TA guidelines. The associations also collect revenues from customers, and distribute them to members. Commissions are deducted from the revenues paid out to members to cover the costs of services provided.

TA has now outsourced vehicle inspections and the issuance of certiﬁ cates to 19 private companies around the country, while retaining overall responsibility for this important requirement. Inspections must be carried out annually for all vehicles. The Transport Authority is also responsible for setting standards for new vehicles, which must be met by importers. In recent years many new vehicles of different makes have been imported, as long as they have conformed to the speciﬁ cations.

The importance of the Addis Ababa–Djibouti route for the country’s import and export trade has already been noted. Operators report a number of problems on this route, including a lack of backloads from Addis Ababa, a marked seasonality on trafﬁ c, and the delays which are often incurred in the release of cargo from Djibouti Port.

Findings of Road Transport Regulations Study The “Study on Road Transport Regulations” was completed by the Italian consultants SPT, working in association with Central Assessors of Ethiopia, in June 2002. This study has in principle been accepted by the Transport Authority, and several items of legislation are currently being ﬁ nalized for prospective implementation.

One major issue frequently encountered is how the Ministry of Transport and Communications (MoTC) can obtain reliable information about road transport on which to base its policies. The

127 problem is particularly serious in countries where the police have the responsibility for activities such as vehicle inspection and registration, and driver licensing. In these cases it is not uncommon for MoTC to be unable to obtain basic statistics about the vehicle ﬂ eet and licensed drivers, and about the degree to which technical standards in road transport are being adhered to, even though the ministry has clear responsibility for setting these standards.

Ideally in most cases the responsibilities for routine activities such as vehicle inspection and registration should be carried out by agencies reporting to the Ministry of Transport and Communications - this could even be assigned to private companies who are contracted or licensed to carry out these functions. Separating responsibilities for vehicle inspection and on-the-road enforcement is also desirable, because it increases the accountability of the vehicle inspectors: enabling the police to enforce trafﬁ c standards on a completely independent basis. Attention has to be paid to the lines of responsibility between the police and MoTC in the area of road transport. Possible ways are through inter-ministerial protocols and agreed management information system procedures implemented at local level. A summary of the main ﬁ ndings of the study in this area is set out below.

1) Relationship between Transport Authority and Regional Transport Bureaus A clear functional relationship should be established between the federal and regional transport authorities, clearly deﬁ ning respective responsibilities in accordance with the Constitution. There should be clariﬁ cation in particular of their roles in facilitating inter-regional and international transport services in both passenger and goods sectors. 2) Road Safety Road safety must be improved by implementing recommendations of the Road Safety Study (TRL/ Ross Silcock, 2002). These covered improved driving discipline, better road signage, improved roadworthiness of vehicles, implementation of procedures for transport of dangerous goods, and better enforcement of all road safety and vehicle inspection requirements. Establishment of a National Road Safety Council was also recommended. 3) Regulation of Road Goods Transport The process of developing a fully liberalized and competitive goods transport market should continue, with the privatization of the remaining state-owned companies, and with the creation of a truly open market both between larger trucking companies and within the road transport associations. It will also be important to implement measures to standardize weight and axle load limits, to improve enforcement, and to increase penalties to effective deterrent levels. 4) Regulation of Road Passenger Transport Measures must be taken to ensure affordable availability of essential bus services in rural areas, with provision of dedicated subsidies for franchised operators on remote routes. Better advertisement of schedules should result from improved co-operation between the federal and regional transport authorities.

Findings of the National Transport Master Plan Study The National Transport Master Plan for Ethiopia was completed by the Danish/German consultants COWI/GOPA in 2008. The ﬁ ndings of the study have in principle been accepted. A summary of the main ﬁ ndings of the study in this area is set out below. The regulations are old, some of them going back to 1942. Proposals for change are being implemented only slowly.

128 1) General Regulations There is a lack of clarity as to the speed limits for different vehicle types on different classes of road. The regulations go back to 1968, but as road classifi cation has been changed since then, reference to different proclamations is needed to understand the regulations. In any case the road classifi cation will not be known by most drivers. There seems to be a general ignorance on the subject which means that speed limits are very diffi cult to apply and enforce, even if the traffi c police had the equipment to make the attempt, which they only have in very few places.

There is the lack of a law or regulation on the condition of tyres. This is needed urgently. The weak knowledge of the law seemingly extends to the traffi c police, on such matters as the use of international driving permits, as an example known to the consultants, and no doubt other matters too. Another problem that each regional state is empowered to make its own regulations and this causes confusion to operators who serve more than one state. A complete new codifi cation of the traffi c law is needed, rather than piecemeal reform.

There is high preponderance of over-aged vehicles that has resulted in low availability and high spare parts requirements, resulting in high vehicle operating costs. The tax regime is still prohibitive for private vehicle ownership in Ethiopia, encouraging many to buy old vehicles. Recently, in order to match the transport supply with demand, the private sector has received assistance from the government through credits and other incentives that include tax exemptions to enable the expansion of the capacity of both the freight and passenger transport ﬂ eets. The Transport Authority revealed that a new regulation restricting the importation of old vehicles has been tabled for the Government’s approval.

2) Logbooks and TachographsThere are no driver’s hours regulations and these are badly needed for professional operations using heavy vehicles. There are reports of drivers driving long hours, up to 16 hours a day, and trying to keep awake by using the stimulant chat. This is banned in many countries and can interfere with driving ability.

3) Road Safety A system of operators’ licenses is proposed, coupled with the introduction of certiﬁ cates in professional competence (CPCs) for truck and bus transport operators, to ensure that the law and good practice in the transport industry is known and respected. NRSCO has produced a map of black spot areas along some major road corridors. The Road Fund Administration Ofﬁ ce (RFAO) has exclusively dedicated 3 percent of the fund revenue to road safety and related activities.

4) Regulation of Road Goods Transport Although there is no law yet to control drivers’ hours in particular, and one is needed, the general labour law in Ethiopia limits the working day to 8 hours and 48 hours a week, with some ﬂ exibility so that on some days 10 hours can be worked. The Transport Authority and the police should begin immediately to implement the labour law strictly for bus and truck drivers.

5) Regulation of Road Passenger Transport In Addis Ababa, Anbassa should be restructured or privatized, and tariffs should be deregulated to promote entry of other bus operators. Trafﬁ c management in the capital must also be improved.

Findings of Other Studies The Study entitled “Management of Commercial Road Transport (Passenger & Freight operations): Current Situation, Issues and Problems, and Measures to be taken” was completed by W.T Consult Pvt. Ltd. Co. in 2008. [Subsequently BKP Consultants of Germany undertook a Review to improve

129 and update the Study, in 2009]. A summary of the main ﬁ ndings of the two studies in this area is set out below.

1) General Regulations In transport service management, there is a need for a certain degree of state involvement to ensure smooth and efﬁ cient performance of the system, open competition and to remove any restrictions on market entry. But the effectiveness and enforcement of procedures depends heavily upon the level of awareness and acceptability of rules and regulations by users, operators and the public combined.

When a regulatory system provides the operator with little economic incentive and leaves the service to uncontrolled and unfair competition, acceptance of regulations by the operator and better service seeking users will be low. Similarly, if rules and procedures properly address the interest of concerned bodies and give economic incentive to the main actors, the problem of enforcement is reduced, unless inhibited by own internal problems of the regulating authorities.

There should be effective enforcement of existing road transport rules and regulations. The Transport Authority and the Regional Transport Ofﬁ ces should also harmonize standards and performance orientation of industry (technical standards, quality of services, etc.) based upon lessons learned from other countries and service bench-marking.

The Ministry of Transport and Communications should, in consultation with the relevant public sector organizations and private industry, formulate policy for passenger and freight transport. The MoTC, the Transport Authority and Regional Transport ofﬁ ces should evaluate their respective roles to address operational impediments related to the fragmentation of responsibilities and the overlapping of regulatory functions.

A systematic classifi cation of public passenger transport services by type of operation and usage, private for-hire and public or common carrier is the fi rst step for improving supply. Services can be classifi ed into three characteristics on the basis of types of routes and trips served, stopping schedule and time of operation. Public passenger transport (commercial) services can be classifi ed in term of broad categories, from taxis to long-distance conventional buses. A systematic overview of the categories on types of characteristics of services is fundamental for improving quality and comprehensiveness.

The capacity of the regulatory bodies (Ministry of Transport and Communications, Transport Authority and Regional Transport Offi ces) should be strengthened for sound formulation of policy and regulations; development and implementation of a capacity building program for Monitoring and Evaluation. The Authorities should also develop a set of performance indicators to measure the effi ciency of the industry and to defi ne the baseline and targets with a time-frame. Some possible indicators might be: • Vehicle utilization (vehicle-km per year); • Cost and quality services; and • Revenue and expenditure, etc. The Monitoring and Evaluation process shall provide input to the policy formulation and regulatory reform. Effi cient, reliable and safe commercial road transport service is critical to timely movement of people and goods. AACCSA (as one of the representatives of the private sector operators) should work in collaboration with the regulatory bodies and become involved in the study, formulation and monitoring of commercial road transport policy.

130 2) Environmental Protection The Transport Authority should develop criteria, standards and guidelines to protect the environment from pollution relating to vehicle emissions.

3) Regulation of Road Goods Transport The regulatory authorities should introduce measures to encourage dry cargo transport operators to address the issue of undesirable and unsustainable competition, particularly on the major import-export corridor.

The Transport Authority should explore the viability of the option that deﬁ ne the structure and commercial arrangement in the transport of bulk oil products be set by competitive market forces, thereby ensuring that reasonable proﬁ t margins could be obtained by operators.

There should be more ﬂ exibility of long distance bus service scheduling to give passengers sufﬁ cient opportunity of choice, by putting the emphasis on safety, convenience and comfort. A sensible approach would be to develop a strategy to guide the delivery of public passenger transports on the basis of nature and level of demand, capacity, user cost, level of service and other considerations. The costs of services have to be kept as low as possible and therefore conventional bus and minibus and other services have to be tailored to serve only desired trip purposes, users and geographic areas. Addis Ababa Chamber of Commerce and Sectoral Associations (AACCSA) should bring carriers and shippers together by creating a forum to identity management, operational and technical problems and search for solutions.

The main role of the freight transport actors (carriers and shippers) need to be clearly defi ned. Providing a vehicle ready for loading at the point of origin on time is the duty of the carrier; whilst the shipper (user) is required to load and unload his shipment within or before the agreed time. In this process, if one of the two parties fails to comply with his commitments, the adverse effect is not solely confi ned to the other party. For instance, after on-time loading of goods an inability of the carrier to arrive and affect the timely delivery of goods at the destination would cost the shipper, as well as the carrier himself. Similarly, delays created during loading and unloading should cost both sides, even if the shipper is the source of the delay. The slow-loading of shipments increases the time required for the entire operation and reduces truck productivity; whilst delay of the shipment affects the shipper. This issue needs a common understanding and joint efforts by the shipper, the carrier, the regulator and stakeholders to improve the current situation and to increase effi ciency.

4) Regulation of Road Passenger Transport Essentially, the low level of vehicle utilization, particularly for long-distance conventional buses should be investigated. One important aspect of “over regulation”of conventional bus services (long-distance) relates to the form of the restrictive scheduling which impedes efﬁ cient provision of services or prevents innovative or integrated service. The regulatory authorities have the responsibility to facilitate the coordination of services in order to promote efﬁ cient utilization of all resources (minibuses, medium distance and long-distance buses), and at the same time ensure that a range of additional service alternatives be provided.

The regulatory framework should be used to inﬂ uence the provision, nature and availability of services. In the case of long-distance conventional bus services, it could aim at encouraging desirable characteristics through incentives and regulatory ﬂ exibility (scheduling and fares). The regulations need to encourage the integration of services (short, medium, and long-distance) as well as developing other prospective systems. In this manner, capital and other costs can be kept low. The challenge that regulatory authorities face is to develop combination of services that are compatible with respect

131 to service quality and complementarities with respect to system utilization. The current available and potentially attractive services should be integrated in a balanced manner that satisﬁ es customer demands, provides for customer choice of different service levels and different costs, and result in much more efﬁ cient utilization of existing resources.

An important objective in public commercial passenger transport is to improve the structure of minibus services, which are fragmented, uncoordinated and unorganized. As the minibus operators have limited capital resources and management expertise, and they are preoccupied with their own operations, they are not able to undertake lobbying efforts to improve the industry's performance. As conventional transit (conventional buses) operate on ﬁ xed schedules in both interurban and urban markets, the regulatory environment should allow greater overall efﬁ ciency and increase transit (public passenger transport) by enabling each type of service to do what it does best.

Urban Ethiopia, particularly Addis Ababa, faces an enormous un-met demand, principally basic access to transport, which is partly the result of the structure of the industry characterized by a single parastatal providing conventional bus services and the fragmented minibus services.

There is no clearly articulated policy to guide the regulatory framework and investment in road transport in Addis Ababa, or elsewhere. There are no provisions concerning subsidized services for thin routes.

The Transport Authority, Regional Transport Ofﬁ ces and Trafﬁ c Police should strengthen the enforcement of regulations for the provision of safe, reliable services and for improvement of passenger security. The Ministry of Transport and Communications should explore the possibility for providing subsidized bus services (explicit subsidy) in low density rural areas. The TA should investigate full public transport tariff deregulation and should help form subsidy policy.

Addis Ababa Chamber of Commerce and Sectoral Associations (AACCSA), on behalf of the private sector, should play a leading role in raising the level of awareness of the concept of free market, to make activities fully competitive and efﬁ cient and to remove regulatory barriers such as the rigid control of inter-regional bus service scheduling, which inhibits new entrants to the market.

Key Legislative Issues The legislation for ERA and the RRAs needs to require them to consider road safety. The trafﬁ c police function needs to be separated from the crime prevention and investigation function, and given the authority, training, resources and equipment to do their job properly. The resources of the Road Fund could be used to greater effect in this respect, but the national budget must also take the needs of trafﬁ c policing fully into account.

Another key to improving safety standards, as well as effi ciency, is to ensure that commercial vehicle fl eets are safe and well managed. A system of operators’ licenses is proposed, coupled with the introduction of certifi cates in professional competence (CPCs) for truck and bus transport operators, to ensure that the law and good practice in the transport industry are known and respected.

There should be a simultaneous updating of the speciﬁ c road transport laws, and the ratiﬁ cation of international agreements on road transport, the transport of dangerous goods, etc., for safety reasons and to ensure that Ethiopia plays its full part in the development of transport in the wider East African region.

132 There is a problem of overloading that is not conﬁ ned to heavy vehicles. The maximum permissible gross vehicle weight should be marked on the outside of the vehicle (as already prescribed by law), to allow easy checking. Vehicle weighing should not be limited to the heaviest vehicles but should include any goods vehicle to ensure their safety in terms of acceleration and braking capacity, etc., in respect of the vehicle load. A greater use of mobile weighing equipment is required.

Key Regulatory Issues Relevant sector organizations are not well equipped with adequate institutional capacity for formulating and implementing policy regulations, commercial road transport coordination, and there are capacity limitations to give systematic thought to the longer-range interrelationships among energy, environment, socio-economic development, poverty reduction and commercial road transport.

There is a general lack of clarity in the harmonization of regulations between regulatory bodies. There are weaknesses in the uniform and effective enforcement of commercial road transport regulations (vehicle inspection, driver licensing, licensing of commercial operators, etc).

There is weak enforcement of existing regulations in “Ensuring Road Safety, Security and Reliable Services and protecting the Environment“. Vehicle condition and the overall quality of service are unsatisfactory.

There appears to be insufﬁ cient cooperation between transport service providers and users for promoting efﬁ ciency. There is a lack of mechanism (forum) for discussion of key issues involving federal and regional authorities, transport operators, transport users, non-governmental organizations and other interested parties.

The private sector should be encouraged by the regulatory authorities to develop terminal facilities, modern vehicle maintenance workshops, warehouses and other related facilities.

133

Chapter Seven

Banking and Transport Industry Insurance Overview The road, rail, air, inland water and maritime transport industry in Ethiopia is a complex structure made up of many diverse parts, and in the road transport industry in particular, some of the parts seem well run. However, as no company accounts are published and private companies are a recent phenomenon in the country and can have complex structures, it is difﬁ cult to judge their performance openly and evenly.

Much of the evidence gathered is anecdotal and this could lead to confusion and misunderstanding. Information in this report has been checked from more than one source but reliability cannot always be assured.

This chapter refers in detail to two pertinent studies, namely: • The Study entitled “Management of Commercial Road Transport (Passenger & Freight operations): Current Situation, Issues and Problems, and Measures to be taken”; completed by W.T Consult Pvt. Ltd. Co. in 2008; and • The “Transport Master Plan for Ethiopia”, completed by the Danish/German consultants COWI/GOPA in 2008.

Financial Performance and Sustainability Access to Credit/Loan Access to credit/ loan from ﬁ nancial institutions is critical for modernization and sustainability of the commercial road transport industry. An inability of most transport operators to generate surplus from their activities for reinvestment is one of the major inhibiting factors in the improvement and modernization of the commercial road transport industry in Ethiopia.

As part of the process of evaluating the level of access to credit fi nancial institutions (banks and insurances) provide to the Commercial Road Transport sector, and to examine the operational results of the operators engaged in the business, questionnaires were distributed to ten banks, nine insurance companies and fi fty-fi ve transport organizations. Almost all of the contacted organizations responded to the questionnaires.

Data collected from the commercial banking system showed that loans to the commercial road transport industry have been increasing, reaching cumulative amount of Birr 976 million. The interest rate falls in the range of 7.5 to 11 percent p.a., whilst the maximum loan tenure is 5 years.

The fi nancial needs of the commercial road transport industry should be evaluated so that a range of fl exible and affordable solutions (at competitive interest rates and affordable monthly payments) could be tailored to meet business requirements for modernization in a globalized and competitive economy. 135 All of the banks surveyed, except the Development Bank of Ethiopia, provide credit facility for partial fi nancing of purchases of commercial vehicles (freight and public). Some of the fi nanciers have only 3 or 4 years of experience in granting loans to the sector. The Commercial Bank of Ethiopia (CBE), which has several years of experience in providing loans for the industry had suspended the credit facility for the past six years due to the diffi culties it faced in recovering both principal and interest payments. However, CBE reinstated the credit facility at the beginning of 2006 and provided loans totaling about Birr 190 million during that fi scal year. Most of the data obtained from the banks was not detailed enough to provide a basis for meaningful analysis.

Since CBE reinstated the credit facility in 2006, the magnitude of the loan balance in 2006 was much higher than for the preceding years. Although banks consider trucking as a high-risk business, the non-performing loans (NPL) of the industry are minimal or negligible, and for some of the banks the NPL is almost zero. It is striking that the Non-Performing Loan (NPL) from the total amount provided by commercial banks for transport companies is less than 7 percent. This ﬁ gure is far lower than the aggregated maximum of 15 percent (set by the National Bank) or than an internationally accepted NPL hurdle of 10 percent.

Even those loans reported as “Non Performing Loans” by some banks, have been settled through the process of negotiation and rescheduling. This signiﬁ es that borrowers are meeting their commitments accordingly or are credit worthy. This is a fundamental issue when considering the future upgrading of the technology of the vehicle ﬂ eet to enhance competitiveness, through the reduction of unit vehicle operating costs.

Most banks have the same terms and conditions for both urban and rural transport commercial vehicles. • Most banks require a clearance from all fi nanciers, which show that the applicants have non-default status; no record of any mal-operational practice of checking account in the banking industry; • Applicants are expected to have: - Suffi cient experience and be licensed to operate in the business, and - Tax Identifi cation Number; • There are no banks that fi nance 100 percent of the value of vehicles to be purchased by creditors. • Different banks have different criteria on the kind of vehicle they fi nance. - Some banks fi nance truck with loading capacity of up to 10 tons; buses less than 45 seats. - Others fi nance a truck with trailer up 300 quintals loading capacity, a fuel tanker with 40000 litres loading capacity and a bus with at least 30 seats. - Some banks require that the motor vehicle to be purchased meets the standard specifi cation of the Transport Authority; • The maximum tenure of the loan is 4-5 years; and • If the loan is sought for the procurement of tanker, some banks require a tripartite agreement, involving the borrower, the oil company and the bank.

A more detailed discussion of some of the main issues in the Bank Survey in 2008 is provided in Annex 6: Access to Credit/Loans. 136 Financial Constraints The transport industry suffers from a lack of sources of ﬁ nance both for capital investment and for working capital. Few truck and bus companies invest sufﬁ ciently in training.

Cash fl ow is a problem for all transport companies as they seek to retain their position or expand. There is an urgent need for more banking services and the establishment of leasing services. Cash fl ow problems are also a refl ection of a lack of business management experience in the industry. It is usual that cash income from transport activities exceeds direct cash expenses (particularly in the fi rst few years of operation), as an excess of revenue over direct expenses is needed for vehicle depreciation purposes.

The excess cash generated will often be spent on peripheral activities and not re-invested, leading to cash ﬂ ow problems later. A clear example of this is where depreciation is ignored altogether or at best not accounted for in saving (or investing elsewhere) to replace the vehicle at due time.

In this situation vehicles have to literally last the lifetime of the owner. Performance in the industry could be improved with new training in management skills. This could be done through aid funding at low cost and quite quickly.

Increasing costs of operation (particularly the rise in the price of fuel and oil) vis-à-vis regulated tariff and market rate for the services provided has resulted in some cases in poor ﬁ nancial performance. This has major implications for the future replacement of trucks and buses, and the modernization of the industry for greater competitiveness and sustainability. The future prognosis for the ﬁ nancing of replacement buses and trucks remains uncertain.

The loan tenure is very short (4-5 years) and not really suitable for ﬂ eet replacement which typically requires medium term ﬁ nance (8-10 years).

From the point of view of access to credit, commercial road transport is not yet generally recognized as an industry. There are serious weaknesses in the development of databases and their management which could generate valuable business information.

Motor Vehicle Insurance An effective insurance industry has a critical role in improving the safety of the commercial road transport system. The Ethiopian Insurance business, when compared with other neighbouring countries like Kenya, can be classifi ed as an infant industry. A review of what insurance products the insurance industry in Ethiopia offers, specifi cally tailored for the commercial road transport industry, including heavy motor fl eet liability and road freight has been carried out as part of the study of the Consultant.

The Ethiopian insurance industry is not yet well developed, with relatively limited offerings and coverage. According to data collected from most of the private insurance companies, about 60 percent of the revenue generated by the industry is from "Motor Policy Insurance". One of the key issues raised by transport operators is that there is no sound rationale for the valuation of property. It has also been stated that the premium is insuffi cient to cover loss or damage to property. Although data management capacity is weak, it has been confi rmed by most of the insurance companies that the total number of commercial road transport vehicles with motor insurance policies is about 69,531, or about 40 percent of the total registered and inspected fl eet of approximately 157,189 in 2004/5. 137 In general, the insurance industry has to expand its services with insurance products specifi cally tailored for the commercial road transport industry, including heavy motor, fl eet, liability and road freight. Some of the observations made include the lack of a clearly defi ned framework for motor insurance policy, the absence of statute of limitations, the lack of thresholds for making claims, the lack of any provision to expand choices of services, and weaknesses in the development of databases.

About 60 percent of the revenue generated by the insurance industry in Ethiopia emanates from the “Motor Insurance Policy”. Even then, according to the survey, most insurance companies do not provide specifi c insurance coverage for urban and rural commercial road transport activities. However, they do have “Comprehensive Motor Policy” account, whereby records of every insured motor vehicle are kept. On the other hand, they exclusively have an extension cover for corridor transport for third party liability insurance for vehicles crossing the territory, which emanates from the agreement between the COMESA member countries. COMESA has introduced the third party motor insurance scheme (Yellow Card) that provides for third party insurance cover valid in all the transit and destination states including medical bills for crew. The rationale for such a scheme relates to benefi ts, including the use of local currency; a simplifi ed claims regime and quicker border crossings (Africa Trade Policy Center: September 2000).

The premium structure of comprehensive motor insurance cover of the commercial road transport vehicle differs from company to company and generally depends on the following factors: • Age of the vehicle; • Use of the vehicle; • Value of the vehicle; and • Carrying capacity of the vehicle.

Since there is no minimum premium rate ﬁ xed by the regulatory body, the premium rate for commercial vehicle varies among the insurance companies. There are few insurance companies who have established their own ﬁ xed minimum premium rate; whereas most of the insurance companies have ranges of minimum and maximum rates for each category of commercial road transport vehicles (cargo, public and tankers).

Most of the insurance companies could not provide complete statistical data on commercial road transport vehicles insured on “individual organization” basis as they haven’t organized their database in such manner. According to information collected from some insurance companies, the total number of commercial road transport vehicle that are insured over the last 5 years is to be about 69,531 or about 40 percent of the total registered and inspected vehicles ﬂ eet of about 157,189 in 2004/2005. This shows that 60 percent of the vehicles on the road are without any type of insurance cover.

Almost all insurance companies have taken some underwriting measures by the form of premium loading and increase compulsory excess on some highly risky (ISUZU trucks) and expensive vehicles due to repetitive accidents by the drivers, which resulted in substantial increase in compensations settled. Some insurance companies have even ceased to insure ISUZU vehicles at all.

Third party insurance in commercial road transport industry is long overdue. According to Proclamation No. 14/1992 (The Road Transport Regulation, FDRE, August 2005), the Authority is empowered among others to “ensure that all motor vehicles have third party insurance coverage; and in consultation with the appropriate organs, issue and enforce directives relating to the provision of insurance policy coverage for passengers and cargo”.

138 According to the information derived from the survey, all insurance companies support the implementation of compulsory third party motor insurance policy in the sector. Draft legislation for compulsory third party motor insurance has been submitted to the Council of Ministers, reviewed and passed by the House of People’s Representatives of the Federal Democratic Republic of Ethiopia.

Key Business, Finance and Management Issues To promote efﬁ cient, safe and reliable public commercial road transport service, the following measures are recommended:

• The freight forwarding business has not yet been developed to improve the efﬁ ciency of the commercial freight transport industry, by consolidating many movements between origins and destinations, after performing their own pick-up and delivery services, and then shipment of the entire collection of freight, via another for-hire carrier.

• The associations are not organized on sound corporate lines to promote ﬁ nancial sustainability, reliability and safety. They are unable to modernize their ﬂ eets and cannot offer a wide variety of services. The commercial freight industry is not yet effectively responsive to logistical requirements for new export products, for example. There is no evidence of a tendency towards market concentration, although the average size of a number of transport companies has risen, with an increase in capacity brought about by the introduction of multiple-axle trucks.

• The associations have insuffi cient resources or input such as strong capital base, modern fl eet, skilled manpower and basic facilities for vehicle storage and maintenance workshops. The form of organization of associations is an innovative one, but changes have not been forthcoming, except a few, to shift from just "grouping" of individual operators to companies managed on the basis of business lines. There may be other possible forms of organizations, which should be considered. Generally, the thrust to corporatize the associations is consistent with the objective of promoting productivity, effi ciency and sustainability. Although this is the most desirable approach, during an interim period many steps could be taken to improve the management and performance of associations.

• It would be necessary to organize and assist in the restructuring of fragmented commercial road transport associations, which will include assessment and determination of optimum fl eet size of each association for effi cient service management in order to create a competitive environment and improve service quality. AACCSA could support the associations in the enhancement of their capacity, in improving their use of resources to enable them to effectively and effi ciently carry out their operational activities, in order to achieve sustainability in a competitive environment.

• There should be a programme developed to assist Transport Companies, Associations and Enterprises, in introducing modern management techniques in the areas of business planning, ﬂ eet scheduling, vehicle maintenance and cost control. The Ministry of Transport and Communications (MoTC) and the Transport Authority (TA) should organize an Information Centre to guide investment decisions by the private sector, and to provide input for the regulatory authorities on the operating efﬁ ciency of the industry for designing a more conducive policy and regulatory environment.

139 • The Transport Authority, in partnership with the Addis Ababa Chamber of Commerce and Sectoral Associations, should encourage the private sector to participate in the development of cargo consolidation centres and terminals, as an essential component of the transport system, to accommodate vehicle storage, maintenance and assignment, and the myriad of processing functions involved in weighing, packaging, collecting proper charge for freight movements, physical loading and unloading, routing, determining of special handling as required, preparing billing and documents to travel with shipments, etc.

Key Banking and Insurance Issues Banking The banking system should evaluate the requirements of the commercial road transport industry for access to credit, in order to make it responsive in a more open operating environment. The basic objectives of improvements in access to credit are to make the industry more commercially viable. The introduction of efﬁ cient charging rate for fund provided by banks for the purchase of vehicles and the development of competitive market structures within the sector are areas that should be investigated further.

In addition, banks need to explore possibilities for relaxing tenure period of the loans to the commercial road transport industry as they do for the other industrial establishments.

Insurance Generally, the insurance business has to expand its service with insurance products, which have to be tailored to the needs of the commercial road transport industry. Stricter requirements (a Comprehensive Policy and Legal Framework) have to be developed and implemented by the Transport Authority to improve road safety. The insurance industry should adopt its offerings to meet the changing needs of commercial road transport (e.g., statutes of limitations, efﬁ cient pricing of industrial products, more offerings, etc).

The Addis Ababa Chamber of Commerce and Sectoral Associations (AACCSA) should take the initiative to develop a proposal for improvements of the tenure period and interest rates, and to establish a forum whereby government (policy makers), ﬁ nanciers (banks and insurances) and transport operators could meet, discuss and jointly resolve important industry issues through mutual consent.

140 Chapter Eight

Analysis of Some of the Principal Road Transport Issues In this chapter some of the issues raised in preceding chapters are analysed further and conclusions drawn. This is not exhaustive. Chapter Eight refers in detail to pertinent studies, namely:  “ The National Transport Master Plan for Ethiopia”, completed by the Danish/ German consultants COWI/GOPA in 2008; and  “ Stuck in Trafﬁ c: Urban transport in Africa”, Ajay Kumar and Fanny Barrett, World Bank January 2008.

Overview of Road Passenger Transport The bus sector has made substantial progress in the last few years in deregulation and privatization, though much remains to be done to achieve a truly effi cient and competitive sector. In the long- distance sector, the existing price controls should be removed as soon as possible; otherwise there is danger that operators will be unable to make timely renewals of their fl eet, with eventual consequences on effi ciency and unit costs.

The privatization of Walia should go ahead as soon as possible, since the company has been incurring heavy losses which must ultimately be met by Government. It is understood that this is set for 2009.

The position of Anbassa must be evaluated with some care. Like Walia it is suffering from serious fi nancial, maintenance and operating problems, which must ultimately be a drain on government fi nances. The “Study on Road Transport Regulation”, prepared by SPT and Central Assessors in 2002, recommended that the company should be restructured or privatized, and the market deregulated to promote competition. Although it is administered by PPESA, the Government stated in 2005 that Anbassa should not at present be privatized. This refl ected the fact that the provision of good public transport in a capital city is a national priority, and that it is incumbent on the Government to ensure that it is effi ciently provided.

Nevertheless, there is an evident shortage of large buses in Addis Ababa, and there is great need to increase their supply, and thereby reduce both overall transport costs and the level of traffi c congestion in the streets. At the very least it will be necessary to restructure Anbassa and equip it to achieve effective operational and fi nancial performance. The promotion of competition with other operators should also be considered, as should the potential benefi ts from franchising of routes, and the likely future need for subsidies (which have been declining in the last few years). An effi cient and reliable urban bus service must in any event be a central policy aim for Addis Ababa. An adequate supply of effi cient bus services, able both to make profi ts for operators and to reduce overall transport costs, while also reducing congestion, would offer great benefi ts to inhabitants of the capital.

The role of the Transport Authority in allocating routes and in determining schedules may require review. It is appropriate for the Government to ensure that adequate services are offered on all routes in terms of capacity and frequency, but scarcely necessary to be involved in detailed scheduling. The aim should be for the Government to provide overall guidelines to which operators must adhere,

141 while organizing their own detailed operations. The proposed franchising or subcontracting of routes appears to be a step in the right direction.

At present the transport sector, both for passengers and goods, is reserved only for Ethiopian investors. There could be benefi ts in also permitting foreign participation in the passenger sector, so as to improve the potential availability of fi nancial and technical resources. This would be most appropriate for the large bus companies operating long-distance services, and perhaps also in a liberalized municipal market for Addis Ababa, where substantial investments will be required in replacement and expansion of bus fl eets. It is expected that there will be continued high growth of the passenger vehicle fl eet and passenger carried, in line with a steadily improving economic situation.

Road passenger transport is almost entirely private. Exceptions include Anbassa, which operates the city bus services in Addis Ababa, and Walia, which operates long-distance bus services around the country, in competition with the private sector. Road passenger companies appear able to make proﬁ t at current tariffs and the most proﬁ table and well managed companies should continue to be encouraged.

The road passenger industry prognosis is a very positive one. Some developments are foreseeable, such a major population increase from about 75 million now to perhaps 130 million people in 2030. Urgent action is required in terms of urban transport operational improvements in Addis Ababa. Efﬁ cient urban and interurban transport will be essential since the need for passenger transport will increase dramatically due to population growth – both within urban centres and between them.

Overview of Road Freight Transport General Issues in Road Transport There were only 172,057 registered vehicles in 2005/6. In the fi ve years from 2000/1 the fl eet has grown at an average of 7.7 percent a year. All motor fuel is imported, some 950,000 tons in 2005/6. The fl eet is old. Most vehicles are imported second-hand. The average age of the fl eet is 19–20 years and about one-third of the fl eet is more than 25 years old. It is sometimes argued that importation of second-hand vehicles should be minimized or prohibited. This argument should be resisted. Ethiopia is a poor country and incomes are low. The effect would be to reduce vehicle imports and this could tend to increase the average age of the vehicle fl eet, since the existing vehicles would have to be kept for longer.

The average age of the imported vehicles appears to be much less than the average age of the current ﬂ eet. It may be that banning imports of vehicles over 12 years old would have the desired effect of allowing ﬂ eet modernisation and expansion while eliminating imports of obsolete vehicle types near the end of their economic life.

The privatization of road goods transport is incomplete, with many vehicles still owned by the state sector. There are also endowment funds linked to regional states. The privatization process should continue. For greater efﬁ ciency and to encourage private sector investment and development, the remaining state-owned hauliers should be privatized. It is expected that there will be continued high growth of truck vehicle ﬂ eets, in line with a steadily improving economic situation.

The road freight industry prognosis is also a positive one; however the immediate challenges are far greater than for passenger transport. Some wider developments are foreseeable and/or essential for Ethiopia's development, and these have been referenced, such as a major population increase from 142 about 75 million now to perhaps 130 million people in 2030, the increased exploitation of natural resources leading to more industrialization based on these resources, stronger integration in the world economy with membership of WTO and the strengthening of economic links with neighbouring countries and strong stimulus to the agricultural sector from these developments.

Some Important Challenges in Road Transport There is no visible preparedness, in view of Ethiopia’s possible World Trade Organization Accession Agreement (in terms of freight transport, maintenance and repair services, storage and warehousing, etc.); and there is an absence of, or inadequate, freight forwarding and cargo consolidation services at strategically located centres. Some important challenges have been identiﬁ ed in the recently completed studies as follows:

Lack of motorised transport Some 80 percent of the ﬂ eet is in Addis Ababa. Elsewhere in the country predominate non-motorised transport. Transport of goods by pack animal is widespread. Most urban journeys are made on foot, and mobility in Addis Ababa is particularly low, given the size of the city. There is not enough rural transport, especially on unpaved roads. Measures are needed to encourage public transport services and intermediate transport.

Poor Vehicle Productivity Poor vehicle productivity, which is reduced by the poor road system, enforced trafﬁ c delays for customs and other purposes, and the age of the ﬂ eet. The system of transport associations reduces competition and vehicle utilization.

Poor Safety The road safety situation is serious and will become more so. Ethiopia has one of the highest accident rates, per vehicle-km, in the world. More than half of those killed in roads accidents each year are pedestrians. This is further discussed below.

Increasing Air Pollution Since the Brundtland13 Commission report the central importance and inter-connected dimensions of sustainability have become understood. Not only is this a necessary national goal, it has become an urgent global imperative. Controlling green-house gases [GHGs] by greater energy efﬁ ciency and changing the energy mix have particular implications for the transport sector that remains heavily dependent on CO2-intensive fuels. Solutions require a holistic approach to land use development and accessibility and energy efﬁ ciency.

Pollution is a growing problem in Addis Ababa. Reducing the sulphur content in diesel fuel would follow world trends and is needed to beneﬁ t from the more modern and cleaner engine technology in the recently imported vehicles. A project is needed to ensure such change goes smoothly. Looking further ahead, the use of domestic electricity, biomass or natural gas for transport needs to be investigated and implemented over time as opportunities arise.

13 Brundtland (1987), Our Common Future. Report of the Brundtland Commission, Oxford University Press.

143 Need to Consider Transport Fuels for the Future Petrol (gasoline) and diesel fuel are imported. Ethiopia has no reﬁ nery and imports petroleum products from Sudan and from the Middle East through Djibouti. In the next 20 years the price of such products can be expected to continue to rise, either steadily or in step changes.

Ethiopia has three opportunities to reduce dependence on oil for transport: (i) Use the electricity that should become available after 2011 to electrify the main transport corridors, e.g., trolleybuses, light rail or metro systems in Addis Ababa and other towns, railway electrifi cation when suffi cient traffi c is being carried to justify this, an urban metro system in the future, etc. (ii) Use biomass from (for example) the bagasse that is a by-product of sugar production to produce ethanol. This could substitute for up to perhaps 20 percent of petroleum fuels without requiring expensive vehicle modifi cations. (iii) Use natural gas, if produced later in the Ogaden (Somali Region) or other regions. Gas could be piped to Addis Ababa and compressed there for use as a transport fuel. Ethanol and CNG production would require expensive plant and distribution systems that would be hard to justify at the present low level of motorization, although the potential should be explored. Electrifi cation of main urban transport corridors, however, should be feasible by 2011 as the national generating capacity expands. A fi rst step could be the introduction of trolleybuses, trams or light rail transit in Addis Ababa.

Worsening Urban Transport Organisation and Operations in Addis Ababa Government attempts to promote the use of larger buses, often with bilateral assistance from supplier countries, have often run into numerous problems—among them non-competitive procurement of over-priced or inappropriate vehicles and insuffi cient local technical support. At the same time, artifi cial suppression of fares on large public buses has led operators to defer maintenance and the replacement of aging buses. Few private operators are able to raise the capital needed to acquire larger buses. Under current conditions, it is doubtful that even those who could raise the required sums would choose to do so. However profi table and well managed companies should be encouraged to invest in urban bus operations, given the removal of the suppression of fares on large public buses. It is noted that important changes are being proposed in respect to Road User Charges.

Underdeveloped International Road Freight Business The need to implement COMESA loading standards has been mentioned elsewhere. As the African road network develops, and as trading links also develop with neighbouring states, there will be an increasing need to plan for regular trips by Ethiopian vehicles into neighbouring countries, and by foreign vehicles into Ethiopia. At present there are only two or three restricted bilateral agreements with the neighbors, with for instance vehicles from Djibouti and Kenya only rarely entering Ethiopia.

A more liberal outlook on the admission of foreign vehicles to Ethiopia (with reciprocal facilities for Ethiopian vehicles outside Ethiopia) can only help boost the development of trading links, and of transit routes across Ethiopia to other landlocked countries such as southern Sudan, the north of Kenya, and possibly parts of Uganda.

144 Underdeveloped Dry Port Concept Dry Port Ownership and Management: Effective management of a multimodal dry port requires knowledge of international shipping and forwarding practice as well as a clear focus on customer requirements.

Through Bills of Lading: The dry port concept requires the use of through international shipping bills of lading, so that international trafﬁ c can be consigned directly to and from the port. This will beneﬁ t the economy by reducing handling, delays and clearance costs in Djibouti or other external port or border crossing. The necessary agreements and legislation are currently being put in place.

Vehicle Overloading For improved road safety, fair competition, lower transport operating cost and lower road maintenance cost reasons it is essential to ensure that gross weight and axle weight overloading of all commercial vehicles is eliminated as far as is possible. The current control system where such vehicles have to visit all weigh stations on route causes excessive delays, as all commercial vehicles have to form a queue on the access road and main road, waiting to get into the weigh station and on to the weighbridge.

Some Measures to Improve Road Safety in the Road Transport Industry Logbooks and Tachographs Safety is a paramount issue for the driver and all other road users and although eight hours could be considered as a nominal maximum working time, driving time needs also to be controlled as there needs to be a series of speciﬁ ed rest breaks.

For reasons of public safety, many jurisdictions have limits on the working hours of drivers of certain vehicles, such as buses and trucks. A tachograph can be used to monitor this to ensure that an appropriate number of speciﬁ c breaks are taken.

The introduction of logbooks for drivers would be a low-cost initiative for all commercial vehicles, until other devices are available. There are already in existence. International United Nations rules and the use of logbooks and tachographs could be phased in.

Tachographs are installed on all new trucks imported. In Europe electronic tachographs are to be introduced, and it may be possible for Ethiopia to move directly to such a system after some years of experience in enforcing the legislation by inspection of logbooks. Logbooks could be introduced into Ethiopia within weeks of the driver’s hours laws being made law. By use of the labour law as an interim measure, they would not have to wait even for that.

A logbook is personal to the driver and records the vehicle driven (license plate number), the time of start and fi nish and the journey start and fi nish points and they are recorded for each journey and each day and should include the journey distance and the time between rest breaks. They are verifi ed at the loading and delivery points by a certifi ed stamp from a supervisor or other offi cial. For buses the offi cial is a bus terminus inspector. The record can be checked at any time by traffi c police and the records when completed have to be retained by the vehicle owner for six years during which time they could be checked for infringement of the driving laws. In future logbooks could be phased out as tachographs (which do the same job automatically) are phased in.

145 Hazardous Materials Movement To improve safety of the movement of all hazardous goods (petrol, chemicals, radioactive materials and explosives) it is necessary to have legislation and the simplest solution would be to adopt international standards.

The Agreement on Dangerous Goods by Road (ADR) is a system now widely adopted internationally. It is updated every two years by publication of two massive volumes of text, so the law and the detail are only available in English and Russian.

Annex A of the ADR concerns classiﬁ cation, packaging, marking, labeling and documentation (i.e. the manufacturers, suppliers and shippers responsibilities).

Annex B of the ADR is concerned with types of vehicles and the form of transport, vehicle marking, loading, stowing and unloading, driver training, emergency procedures and the use of Transport Emergency Cards (Tremcards).

Dangerous goods are divided into classes according to the hazardous properties of the goods, from Class 1: Explosives, through Class 3: Flammable Liquids, to Class 9: Miscellaneous dangerous substances.

The Tremcard system, developed by the European Council of Chemical Manufacturers’ Federation (CEFIX), provides a trained driver with written detail of the substances, class, hazard and the actions to be taken in an emergency. These have to be written in the language of each of the countries through which the vehicle travels on its journey and copies retained in the cab of the vehicle.

Diamond-shape hazard warning labels, for external display on vehicles, are also used under ADR regulations. ADR works well for all hazardous vehicle operations and driver training, inspection and control. Shell and Total operate (in effect) to this level and legislation in Ethiopia needs to catch up to ensure that carriage of all dangerous goods is properly managed. Dangerous Goods Safety Adviser (DGSA) is training for the managers who operate hazardous materials depots. It is more detailed than the information required for drivers (ADR).

The government has established a fi xed price for the sale of fuel and also controls the road transport price for moving this fuel by road tankers. This government control limits the profi tability of fuel companies and has resulted in some international companies closing their operation in Ethiopia. Some distribution companies claim that fuel makes no profi t for them and they rely on profi t from lubricant sales only. The practice of government control at this level clearly leads to unsafe practice – it leads to short cuts being taken in safety and on road routes that has led to accidents. It is recommended not to continue in this manner. There needs to be more freedom from such restrictive practices to improve safety.

Livestock Movements Livestock transport is important in Ethiopia and strict rules should be in place for animal welfare in transit. This is important not only on compassionate grounds but also to keep the livestock in good condition and ensure that there is no resistance in overseas markets towards buying Ethiopian animal products.

146 Some Measures to Improve Urban Transport Organisation in Addis Ababa Controlled competition in the form of government concessions for the right to operate bus services along speciﬁ ed routes may provide a way to address the investment barrier. Controlled competition can be introduced by consolidating the informal sector into larger units or associations, thereby enabling them to participate in the competition for concessions. The exclusion from the corridor of wasteful competition should serve to reduce congestion and raise speeds of operation, so that larger buses become commercially attractive. This approach is premised on a franchise duration that is commensurate with the investment payback period, and on a system of tariff regulation that ensures recovery of reasonable costs over time and provides some insulation from political pressures. The current urban bus system is quite deﬁ cient in terms of customer service.

Access to public transport—both in terms of geographic reach and seating capacity—remains very low by global standards. At the same time, fares are too high as a share of typical household incomes to permit more than very limited motorized mobility. Even those who can pay have trouble boarding buses along the route and must wait long periods for buses to leave their terminals. Once on board, riders must tolerate severe overcrowding during peak periods.

A strategy is proposed for improving urban public transport in Ethiopian cities. The strategy consists of stepped measures to improve infrastructure, trafﬁ c management, service quality, and network reach. Short-term steps include increasing road funding, enforcing existing regulations, controlling overcrowding, and strengthening vehicle inspections.

Medium-term measures include rehabilitating roads, improving trafﬁ c management, setting and enforcing service standards (fares, schedules), developing a new route structure, and rationalizing service along those routes through controlled competition, as discussed above.

The long-term goal is to consolidate gains in all these areas through the creation of a metropolitan transport authority with jurisdiction over roadways and vehicles. The proposed strategy is illustrated in Figure 8.1 below.

Some Measures to Enhance International Road Freight Business Measures should be taken to establish regional agreements with neighbouring countries in accordance with COMESA norms on vehicle speciﬁ cations, axle load limits, road codes, and access for foreign operators. Agreements should also be implemented to open up new port corridors besides the main existing one to Djibouti. Steps should be taken to adopt the UNCTAD trade and transport facilitation programme.

These detailed proposals can in general be endorsed, as important steps in the establishment of a free and competitive transport market for Ethiopia. They have been largely accepted by Government, and a number of new proclamations and regulations are reported to be due to come into force during the next twelve months. It is important that the envisaged measures should in fact be implemented as now intended, since four years have already passed since submission of the report on which they are based.

Many of the operators on the Addis Ababa–Djibouti route report that they are suffering high costs because of imbalances and seasonality in trafﬁ c ﬂ ows. Management of transport demand to address these problems will not in general be feasible, but there may be a series of limited actions that can be taken, for instance to spread the import of fertilizer into the country. Transporters’ costs are also raised by clearance delays in Djibouti port, and measures should be taken to minimize these. 147 Figure 8.1 Strategies Proposed for Improving Urban Public Transport in Ethiopian Cities

POLICY STREAMS Infrastructure Trafﬁ c Service Quality Network Management Development Short Term Measures

Increase Enforce Road Existing Funding Regulations

Improve Control Improve Road Over Vehicle Maintenance Loading Inspection

Medium Term Measures

Trafﬁ c Road Develop New Management Rehabilitation Routes Structure Measures Set Minimum Service Standards Issue Route Licences

Formation of Route Assoc. Cooperatives Set Frequency, Fare & Other Service Conditions Put Route Franchises out to Tender

Long - Term Institutional Change

Metropolitan Roads Metropolitan Public Authority Transport Authority

Metropolitan Transport Authority

Source: SSATP 2005. Some Measures to Enhance Dry Port Operations While the public sector may be involved in the terminal planning process, mainly for infrastructure and planning reasons, it is not ideally suited for taking part in the day-to-day operations. In the case of Addis Ababa, the dry port is being developed by an Agency under MoTC. The state-owned Comet Company is primarily engaged in road transport to and from Djibouti Port.

148 The Comet container handling station (depot) in the eastern outskirts of Addis on the road to Djibouti was established some ﬁ ve years ago to provide: • Open and closed warehouse service; and • Container handling service (machinery).

It closely works with Customs Authority which has a facility in the centre. The Ministry of Trade and Industry (MoTI) decided to spend USD 6.6 million and built a 30,000 square meters concrete base within the main operating yard of the state-owned Comet Company in Addis Ababa, close to the Southern Ring Road. It will be equipped with additional modern container handling equipment to supplement what it already has. It was planned to be fully operational from mid 2007. This is in addition to the existing dry standing on the remainder of this 500,000 square meters freight yard where many freight operations have been conducted for many years.

Within the Comet site will be customs personnel able to operate the proposed new Single Administrative Document (SAD) agreed with COMESA and the proposed new through bills of lading (TB/L) that will enable containerized cargo to transit Djibouti unhindered by customs other than the checking of seals. Banking facilities, freight forwarding ofﬁ ces, bonded warehousing, general cargo warehousing and repair and maintenance facilities will also be available. In fact, all the services formally located at a port – and much more besides.

The Comet yard has an estimated capacity of over 9 million tonnes of dry freight a year, well in excess of the 3 million tonnes currently imported in containers. The trafﬁ c forecasts over the longer term still show Addis Ababa as the centre for imports and for coffee exports (the most suitable containerized export) from the sorting, cleaning and grading facilities of the Coffee Growers’ Association based near the Comet yard, in Addis Ababa. No other one area of the country accounts for more than 2 percent of imports (the dominant trade ﬂ ow).

Comet’s yard is the main point for customs clearance for this trafﬁ c. It is well-located for Addis Ababa city, the main trafﬁ c objective, and a rail connection can be installed for less than 2 million USD, as the railway is close by.

Having made the investment and given its experience, it is logical that Comet should remain the owner of the port. It may be that Comet’s road transport operations will be privatized (as proposed in the plan), but the ownership of the port may remain in the public sector, for possible separate privatization at a later date. In this case a joint venture or similar association with a private sector partner who can bring international experience into the operation is recommended. This is Ethiopia’s ﬁ rst dry port, and private sector operators are increasingly used worldwide to enhance the efﬁ ciency of state-owned ports.

Through Bills of Lading. The dry port concept requires the use of through international shipping bills of lading, so that international trafﬁ c can be consigned directly to and from the port. This will beneﬁ t the economy by reducing handling, delays and clearance costs in Djibouti or other external port or border crossing. The necessary agreements and legislation are currently being put in place.

For this to be successful the international shipping lines must have confi dence in the land portion of the journey. Expensive delays or problems of loss or damage need to be avoided. For this reason, shipping lines often prefer rail for the inland leg of multimodal movements. The Master Plan provides for rail access to the dry port. Another requirement is for Ethiopian customers to have free choice of shipping line and not be burdened with extra costs imposed by ESL. Many of the international shipping lines are now greatly experienced in multimodal operations. 149 Some Measures to Combat Vehicle Overloading The Transport Authority ensures that weigh-bridge facilities are provided at Djibouti so that the problem of overloading of cargo could be handled at port of entry. Better control can be established by a better understanding between Government and industry by issuing a certifi cate after an initial check at a weighbridge on route, plus a self regulating “pact” between the TA and major operators, and random testing by the introduction of addition mobile weighbridge equipment operated by trusted inspectors in the Transport Authority. This would work on the main route to and from Djibouti but not be as effective on domestic short movements. There is also the problem of illiteracy with some drivers, but this is most likely in local domestic movements.  Declaration of integrity (integrity pact) - All transport companies operating on this route would be advised of this simple scheme in order for them to sign a commitment to conform to the axle and gross weight limits. As the owners would have signed such a pact the penalties for failing to conform to the pact would be set initially at a modest level rising to a high penalty for persistent offenders. Drivers caught with forged documents or attempting to bribe offi cials would be prosecuted in a court of law. Owners found to be encouraging overloading would face severe penalties leading to removal of their Operator’s License (under the new proposed scheme) and/or confi scation of vehicles.  Marking of maximum weights on vehicles To aid inspection it will be required that the maximum axle load allowed for each axle or group of axles will be clearly marked in painted letters on the vehicle, above the axle concerned.

In addition the maximum gross weight permitted on the vehicle would be displayed on the driver door. The transport law may need to be revised to make this possible. In no case should the maximum permitted gross vehicle weight exceed that recommended by the manufacturer.

Local domestic cargo (likely to constitute the 20 percent of the problem), moving on local vehicles which are known to the Trafﬁ c Police and seen to be loaded in a “normal manner” can pass without checking. Those that appear overloaded, or are unknown to the police and a random sample of all vehicles will be directed into the weighbridge station to be checked. Attention will be focused on vehicles with two axles (4 x 2) as these are prone to overloading. The law may need to be revised to clarify that the gross vehicle weight on the driver door is the maximum permitted weight and not the 8 or 10-tonne axle weight. This gap in the existing law allows the 4 x 2s to load to 18 tonnes when the payload should be no more than about 8 tons (gross 16 tonnes).

There is also a need to control the gross vehicle weight, however, and only the lower of these two values should be acceptable: 1) The sum of the permitted axle weights; and 2) The maximum GVW as rated by the manufacturer. Vehicles are designed with acceleration and braking characteristics to match this weight. Ignoring this fact in Ethiopia would appear to be a frequent cause of accidents on older vehicles and light trucks.

150 Chapter Nine

National Transport Master Plan Study Framework and Strategic Directions General Improvements Need for Fresh Thinking This Chapter refers in detail to much of the analyses and outcomes of a current pertinent study: ● The “National Transport Master plan for Ethiopia”, completed by the Danish/German consultants COWI/GOPA in 2008.

The main priorities for road transport aspects of the “National Transport Master Plan for Ethiopia”, bearing in mind Ethiopia’s landlocked status, were stipulated as follows: • Effi ciency measures and continued road and rail network development to complete and upgrade the national network, reduce freight transport costs, enhance national competitiveness, improve safety, and give greater opportunities for mobility and development of natural resources and industry; • Reduction in shipping costs by the development of dry ports and multimodal transport to facilitate transits and retain as much as possible of the value added from port activities within the national economy. There is also a need to diversify shipping routes and review the status and fi nancing of ESL to ensure that the benefi ts of competition in shipping can be obtained. Opening up new roads to borders and facilitating international road transport have an important role to play in the diversifi cation of shipping routes.

Further details of the strategy and priorities for the Road Transport established by the “National Transport Master Plan for Ethiopia” are provided in Annex 9: National Transport Master Plan: Stratagic Directions for Road Transport.

The Coordinating Committee for the National Transport Master Plan project, and others, requested new or reﬁ ned ideas and suggested solutions for the identiﬁ ed problems. It is understood that some of the ideas listed below were not fully discussed. Many of these ideas are not new but some sensible ideas have not yet been implemented to date. At least, initially there are opportunities to pick and choose those interventions that are most likely to lead to quick success, so-called “quick wins”.

A notable feature of many of these ideas is that they could be carried out by private investors, with a little facilitation by Government14. Therefore, the Addis Ababa Chamber of Commerce and Sectoral Associations, through the Private Sector Development (PSD) Hub could take a leading role, in a facilitating and dissemination of information role.

14 Although wide consultation is of course suggested.

151 Tax Breaks for New Vehicle Imports The government could introduce tax incentives and reduce import tax for new vehicles (import tax up to 40 percent plus VAT) to help recover from the excess number of old vehicles still operating. In addition soft loans could be provided.

Improvement of Overall Maintenance Standards of All Vehicles By tightening overall maintenance standards of all vehicles – not just the annual test but also spot checks – road safety would be improved and unsafe vehicles that fail the test would be removed from the roads. It seems that certain vehicles are given this treatment with new minibuses and taxis imported duty free and tougher annual tests for all vehicles may be proposed. No timescale is available yet and vehicle speciﬁ cation not yet clariﬁ ed.

Specifi c Action Plan Components: Road Freight (Excluding Import/ Export Corridor Traffi c) Introduction In order to keep pace with the growing economic activity, replacement of old fl eet and upgrading of truck technology is required to keep up with the increased demand. Furthermore, measures to restrict the importation of used vehicles and replacement with obsolete trucks could help to improve the present distribution of trucks. It is expected that there will be a shift towards modern multi-axle trucks, which currently account for a relatively low proportion of the truck fl eet. In order to have suffi cient number of modern multi-axle long haulage trucks, there should be an increase in economic activity together with the encouragement for investment in terminals and parking depots.

A critical mass or volume of trafﬁ c is necessary to support multi-axle long haulage trucks, which has low transport service costs but require heavier investments in infrastructure and logistical support. By consolidating cargo ﬂ ows to achieve the volume or critical mass required for economies of scale, it would be possible to achieve reduction of shipping costs of goods with the ultimate objective of enhancing Ethiopia's competitive position in the global economy.

It is recommended that EFFSA should offer FIATA training. EFFSA are the only internationally recognized association in the industry and should be seen by MoTC as a voice worth listening to. With their wide daily contact with the international freight industry they could assist in proposing and reviewing transport legislation that would promote trade facilitation.

The Customs Clearance Association (CCA) has an ofﬁ ce but no direct access to ASYCUDA ++ as the telephone system cannot provide the dedicated line where they are. They represent 300 members who used to be licensed by Customs (operating under the MoTI). EFFSA who represent the freight forwarding industry can also operate as customs brokers. Due to the overlap in activities the Customs Clearance Association are said to be approaching EFFSA to join with them. CCA are strongly in favor of Ethiopia joining the World Trade Organisation (WTO) and also the World Customs Organisation (WCO). They then expect to be able to operate to internationally agreed standards.

152 Privatization For greater efﬁ ciency and to encourage private sector investment and development, the remaining state-owned hauliers should be privatized.

The trucking industry in Ethiopia is complex. A few private and Government owned enterprises are reported to dominate the market in certain areas like food aid and fertilizer movements. The majority of the business for small truck owners comes from what they call “leftovers” from the large companies. The role of Comet needs to be re-thought. Comet (and MTSE) should be privatized. These measures should ensure that the private sector is able to compete on an equal footing and foreign investment can be encouraged for the beneﬁ t of the national economy.

Need to Control Overloading of Goods Vehicles There is a problem of overloading that is not conﬁ ned to heavy vehicles. Light trucks, designed to carry 3 ton loads, are said to be often loaded up to 5 tons or more, and frequent accidents with this type of vehicle are said to occur. Thus there is a need to check loads against the rated gross weight of the vehicle, as speciﬁ ed by the manufacturer, not only against the maximum permitted axle loads. This also applies where in tractor-trailer operations the tractor is not designed for the amount of load being hauled.

The maximum permissible gross vehicle weight should be marked on the outside of the vehicle (as already prescribed by law), to allow easy checking. This could be applied immediately by requiring such markings on all goods vehicles when they are subjected to their annual test. Vehicle weighing should not be limited to the heaviest vehicles but should include any goods vehicle to ensure their safety in terms of acceleration and braking capacity, etc., in respect of the vehicle load. A greater use of mobile weighing equipment is required.

Road transport plays a key role in the conveyance of imports and exports to and from the seaports. At present it faces many obstacles through interference in the allocation of loads, Customs checks, unnecessarily frequent weighing of vehicles on some routes, and other checks by the roadside. These add to costs and reduce the effi ciency of the fl eet, causing build up of traffi c at peak periods. A trade and transport facilitation sub-committee should be created to report to each meeting of the National Transport Council. This should aim at eliminating all unnecessary non-physical barriers to the free movement of import and export traffi c. The National Transport Council, which will include the major Government agencies and other stakeholders, can then institute action as necessary.

Regulatory Improvements Commercial transport has clearly shifted from central control of partial competition. Regulatory measures are proposed by the Road Transport Authority; however the transport regulatory function in the regional states is weak. It often comes under the Regional Trade, Transport and Industry Bureaus, or similar. Yet vehicle safety and operating regulations should apply nationwide as vehicles may cross state boundaries at any time. This is different from regulating other commercial activity. There needs to be a formal and strong link between the Transport Authority and its counterparts in the regional states.

153 Under the Constitution the development, administration and regulation of road transport is a function reserved to the states. This appears to be an oversight in Article 51 (9), as other forms of transport are regulated at federal level. Article 51 (13) refers to federally funded institutions that provide service for two or more states. Presumably the Transport Authority is such a service. Under Article 51 (3) the Federal Government is also entitled to establish national standards for public health and technology, among other things.

Unless the Constitution is to be changed it seems that two measures are needed to make transport regulation more effective nationwide:  The Transport Authority should become a service agency to help the States develop their capacity for the regulation and control of vehicle safety and operations. It should also set national standards that must be adhered to;  At the same time the States should raise the status of the Regional Transport Bureaus so that they become fully independent from the trade and industry ministry or other functions. They will also need more resources as tasks are devolved from federal level, and as they develop branch ofﬁ ces in the zonal capitals.

Training will be needed for the Transport Authority and the regional transport bureaus to ensure an effective implementation of this new policy.

Future Access to the Profession in Ethiopia One solution could be to introduce and phase in the concept of the CPC in both bus and truck operations for key members of staff. Then, within the framework of the proposed new operator (O) licensing system, a minimum requirement for any O license renewal would be that the owner/operator must have a CPC obtained from an approved training school. This will provide evidence of detailed knowledge of the requirements of the profession.

This was a practical solution to similar problems facing Europe 40 years ago. The CPC system has helped to improve safety and instill a sense of professionalism into the industry. It now forms the base from which all O license applications are made. Thus the CPC could herald the introduction of a new O licensing system for Ethiopia. This would be a start in removing some of the unskilled operators and dangerous practices now experienced in both passenger and freight transport.

Access to the profession is not regulated and as a result there are many “enthusiastic untrained drivers” operating in Ethiopia with few restrictions. Greater professionalism is needed in the industry, and professional operators, and the general public, need protection against those who operate illegally in an unsafe manner.

It is recommended to introduce a speciﬁ c Operator’s (O) License for commercial road transport and for own-account operators in order to prevent these entities from providing services for hire and reward without the correct license. A major virtue of such a system is that the license can be withdrawn from operators who persistently ﬂ out rules and regulations and thus create for themselves an unfair advantage over responsible operators.

The awareness of internationally accepted rules on access to the profession and the need to strengthen the domestic legislation is clearly understood.

154 The key features of improving access to the profession are: • Good repute — to establish and manage what happens in practice after the license is issued. • Financial standing — to increase the minimum level of funds for operating international and domestic transport and involve third parties in the application procedure. • Examination — to establish independent examination bodies, based on an examination system through approved with quality course providers.

“Intermediate” Multimodal Transport For short distance transport in remote areas where some mechanical equipment is currently operating, a trial drop-trailer operation using agricultural tractors could be established. This has been proven to work in Malawi. A 275 hp tractor can pull a 10-ton rigid chassis-braked semi-trailer following local tracks or footpaths, where few roads exist. Provided that an automatic braking system is used (a simple valve on top of tractor brake operating a hydraulic ram through a short ﬂ exible hose linked to mechanical brakes on the trailer) the vehicle can operate to 10 tonnes in an environment where even pick-up trucks cannot operate with 2 tons over shallow hills and through mud and deep water.

The semi-trailer for the tractor has twin close-coupled axles ﬁ tted with twin cross-country tyres on each axle, with swinging-arm suspension and swivel-eye coupling for the tractor’s hydraulic hook to engage. This means the tractor can pick up a fully loaded trailer and should there be a mechanical failure the trailer will “fail safe”.

For remote collection the tractor takes an empty trailer and drops it for loading. It returns to base and collects another empty trailer. By the time it returns the ﬁ rst trailer is loaded so it drops the empty, picks up the full trailer and returns. Unloading is much quicker than loading. The system could also work in the reverse direction with a loaded trailer leaving a depot and returning to pick up a second loaded trailer.

This system is effective for 10 tons to a distance of about 40 km. Its main use is in clearing or delivering cargo from/to remote areas to a main road storage site or railway station yard for later collection by conventional road vehicles or rail wagons. Possible trial areas are wherever tractors now operate to provide mechanical support. With experience the locations can be extended. When not used to harvest crops or for fertilizer input they provide people, animal, water and all other goods transport – in addition to ploughing, harrowing as well as saw bench, pump, etc., from the power takeoff. Further details of the scheme are available on request.

The Nazareth Tractor Assembly Plant would be the ideal place to trial such a scheme as they can produce over 100 tractors a year. In time they could rehabilitate old tractors to save foreign exchange and produce the trailers, all made and serviced in Ethiopia.

Drop-Trailer Operations and Logistics Centres A secure, level, compacted gravel surface parking site of about 30,000 square meters could be established at either Mille or Dire Dawa or possibly both, close to the main trunk road. Secure it with a 3 m high strong wire fence with razor-wire top, security lighting and a secure gate with gatehouse. Line the outside with concrete blocks at axle height to deter ram-raiders. Provide security and perhaps Customs personnel to deter smuggling but not to provide customs clearance here. Facilities provided

155 on the site could extend to customs bonded areas for storage on trailers, but the idea would not be to unload goods here.

The purpose would be to establish an articulated truck and semi-trailer “drop trailer” operation so that goods can be taken by trailer to this location and the trailer dropped for collection by another articulated truck for delivery. One or more articulated trucks could take empty trailers from here to the port and shuttle goods to this secure site for onward delivery. The number of trailers, drivers and vehicles would be determined by the transport requirement.

Customs ofﬁ cers could accompany loads to ﬁ nal delivery if required and clear at customer premises, if not going to Addis Ababa. This would eliminate the “12-km syndrome” where vehicles queue 12 km from Djibouti waiting for their turn to load fertilizer and grain at certain times of the year.

A name for the new location could be “Logistics Centre”. The plan would be to gradually extend the services available on site or close by (toilets, refreshments, maintenance, and hotel) and link to IT systems to act as coordination centre between Djibouti Port, Dry Port 1 at Comet yard in Addis Ababa, Customs, etc., as required. Customer interface would also be provided at a later stage along with ASYCUDA. The facility is to be run by private enterprise and possibly managed through the freight forwarders association.

Allow Change of Driver at Remote Depots Drivers are an expensive item in transport costing but not as expensive as an idle truck. Remote depots could be established where relief drivers could be based and used to create 24-hour truck operations. Possible locations include Mille and Dire Dawa.

This has been tried in Ethiopia before and called “Relay” but it was based in a location central between Addis Ababa and Djibouti and on a nationalized transport fl eet. An issue to be resolved is that present customs rules require the driver, vehicle and trailer to be identifi ed in Djibouti to enable fi nal customs clearance to be made in Addis Ababa. A change in this rule would be needed.

Interim Arrangements for Customs Clearance Prior to Dry Port Operations Further dry ports at Dukem, Modjo, Mille and Dire Dawa have been proposed by various parties. With the high cost of such installations, and the unlikely provision of an effective and cost-effi cient rail operation for some years, it is proposed that drop-trailer operations should be considered for specifi c sites for full container loads (FCL), from where a Customs offi cer could accompany the load to its fi nal destination. For less than full container loads (LCL) they should fi rst go to Dry Port 1 in Comet yard for de-stuffi ng. This process could then be reviewed after experience.

Urban Freight Operational Improvements There are three focal areas in urban freight operations. Some examples from Cities in Europe, namely: • Goods vehicle access and loading/ unloading in urban areas; • Last mile solutions; and • Urban consolidation centres.

It is recommended that urban planners, representatives of the urban road transport authorities in Addis Ababa, and private sector representatives, large businesses start to consider and map out some of the delivery and distribution /logistical options available. PSD Hub could take a leading role in this.

156 Possible Free Trade Zone The National Transport Master Plan Study investigated the various Types of Free Trade Zone that could be considered. The Legal options include the following:

Free-Trade/Export Processing Zone The traditional free-trade zone (FTZ) or export processing zone (EPZ) is deﬁ ned as a secure piece of land which contains production, display or storage units, importation to which is free of domestic taxes and duties. Taxes and duties would be applied to goods released from the zone to the domestic market, but may be exempted for exports.

Free Port/Free Zone The free port, or free zone, describes an area that can range in size from a few hundred square meters, to a few hundred hectares. Here goods of any description can be imported and stored under customs control, free of customs duties and tax.

Production or processing of the goods is generally not permitted, although the goods can be repackaged prior to re-export. Such facilities are hard to “control”, and widespread liberalization of the domestic economy is a preferable alternative.

Local Free Trade Zone A further option is the local free trade zones, or border markets. These tend to be informal affairs, which have generated a momentum of their own, and which can be formalized in due course. The best known international examples, albeit now historical examples, might be those border towns and villages, such as Andorra and Cervigno, on the borders of France and Spain, and France and Italy respectively, which offer, or offered in the latter case, duty-free shopping to visitors, and which developed from border free trade zones.

Bonded/Customs Warehouse The more traditional bonded, or customs warehouse. This type of facility usually has customs ofﬁ cers on site, and offers the opportunity for importation free of duty and taxes, under certain tightly speciﬁ ed conditions. This type of facility can also allow some limited re-labeling, or processing, of consignments for re-export.

Distribution Centre Finally, there is the pure distribution centre, which is, generally, located in a particular place to maximize the logistical advantages of a particular location. These centres represent the optimal point, within a given geographical, institutional and supply chain framework, for the distribution, or importation and distribution, of a particular commodity, or commodities. Whilst, they can have a bonded warehouse on site, dependent on whether the intended market is national or international, although the standard distribution centre serves a domestic market.

157 It is recommended that a customer survey be conducted to obtain more concrete data on precise requirements. A fuller description of the options is given in Annex 7: Free Trade Zone. Such a zone would normally be operated by the private sector with full customs participation.

Specifi c Action Plan Components: Road Freight Import/ Export Corridor Traffi c Introduction Most (up to 90 percent) of Ethiopia’s international trade is conducted through Djibouti Port. There is also international trade by road with Sudan, including gasoline imports from a refi nery near Khartoum and agricultural exports via Port Sudan. There is little trade by road with Kenya or other countries, although smuggling of goods, from Somalia in particular, is thought to be quite signifi cant, though not often detected.

The needs of Addis Ababa dominate at present. This is where 92 percent of Ethiopia's imports clear Customs, and where 76 percent of exports, including coffee, start their export journey. Other towns are developing but the Addis Ababa area itself is a proposed growth zone, so it is unlikely to lose its dominance anytime soon.

Issues needing to be considered are: 1) The dependence on one country and one port, Djibouti; 2) The location and connectivity of inland clearance facilities; 3) The role and ﬁ nancing of Ethiopian Shipping Lines (ESL); and 4) The need to facilitate international road transport and eliminate Customs delays.

1. Dependence on One Country and Port The dependence on one port, in a foreign country, makes Ethiopia very vulnerable to any unexpected interruptions in supply. The heavy dependence on Djibouti for foreign trade and fuel distribution is disturbing.

The Eritrean ports of Assab and Massawa are needed by the country, but so long as they are inaccessible alternative ports must be sought. Berbera and Port Sudan have the next most convenient locations – perhaps Lamu in Kenya also in the future, if this is developed. The Master Plan included measures to increase the viability of alternative ports for Ethiopia. Development in the neighbouring ports is of critical importance to the development of Ethiopia’s international road freight industry and ancillary industries such as freight-forwarding, etc.

Djibouti Port: Shared political will is explained by the fact that both Ethiopia and Djibouti have something to gain from developing the Djibouti-Addis Ababa corridor. Trafﬁ c towards Ethiopia represents 80 percent of the trafﬁ c through Djibouti and 70 percent of the port's income. Ethiopia is thus in prime position as the logical and favored partner. A favorable commercial climate has existed at Djibouti for decades.

Port Sudan: Only the transport of fuel from the Al-Gaili reﬁ nery, near Khartoum, in road tankers, makes any economic sense.

Berbera Port: A study in September 2003 concluded that much work remained to be done there for

158 the Port to compete with Djibouti Port. Attempts to use the port for project cargo and containers in the last few years have not been a success.

Port of Assab: The Port would need a lot of rehabilitation and access is uncertain in the near future. The port is said to be in poor repair and the oil reﬁ nery there was apparently never efﬁ cient. The oil storage tanks, however, are still there and could be used in the future. For both Assab and Berbera Port in the recent past, the containers consigned to each port were transshipped through the Djibouti hub.

Mombasa Port: The route to Ethiopia is through Moyale border crossing. The distance to Addis Ababa by road is around 2,000 km, making for a costly supply operation. (As an indication the trucking cost is equivalent to 4 weeks demurrage costs for a vessel at Djibouti Port).

2. Location and Connectivity of the Inland Clearance Facilities Some 70 percent of Ethiopia’s cargo is containerized. Most containers are presently stripped or stuffed in Djibouti. ESL has been considering a plan to develop an inland clearance depot (ICD “dry port”) near Addis Ababa. At present Comet, another state-owned enterprise, provides such a depot, and has invested in a major development.

The establishment of through bills of lading and adoption of a multimodal transport law are pending, after which the methods of operation can be streamlined to take advantage of the new facilities. The Comet yard has sufﬁ cient capacity for about the next 10 years, has room for expansion and is well located by the ring road. It lacks a rail connection, and proposals for this were included in the National Transport Master Plan.

Additional dry ports elsewhere are being considered at the present time. MoTC has proposed dry ports at Modjo and Mille.

As over 90 percent of imports are cleared in Addis Ababa, the viability and purpose of additional dry ports needs to be carefully evaluated. The core of dry port infrastructure is a good concrete base on which rubber-tyred vehicles operate. This gives some operational ﬂ exibility as it allows for the interchange of handling equipment between sites should trafﬁ c demand change.

3. The Role and Financing of Ethiopian Shipping Lines Djibouti is an international port served by several shipping lines. These include Ethiopian Shipping Lines (ESL), a state enterprise wholly owned by the Ethiopian Government.

There is a Government requirement that imports must be shipped on an ESL bill of lading, which effectively gives the line a semi-monopoly of Ethiopian trade. At ports of origin where there is no ESL service, shipment has still to be arranged by the ESL agent, where there is one. Otherwise a waiver certiﬁ cate allowing the sea voyage to be made by another carrier must be obtained by the importer, at a cost of USD 600-800 per container.

As transaction costs need to be reduced, a re-think of the role and ﬁ nancing of ESL is required. A priority need – other than the railway improvement project – is to diversify the import/export routes and to liberalize the marketplace so that all shippers can use the shipping line and forwarder of their choice, without any penalty in time or cost. This will reduce costs and allow improved services to develop. The key issue to be dealt with is the present system and the privileged position of ESL and MTSE, which adds directly to transport costs. It also reduces the opportunities for international 159 shipping lines and port operators to invest in improvements that would beneﬁ t Ethiopia, such as in dry port facilities and multimodal transport through the operation of international through bills of lading.

The role of ESL needs to be re-thought. If ESL is to continue as a national carrier, particularly for Government cargo, its policies and planning need to be more closely attuned to the needs of the transport sector as a whole. ESL needs to be transferred to MoTC, which could seek joint-venture partners for it in the medium term. These measures should ensure that the private sector is able to compete on an equal footing and foreign investment can be encouraged for the beneﬁ t of the national economy.

4. The Need to Facilitate International Road Transport and Eliminate Customs Delays International road transport is hardly developed and Ethiopia is not yet a signatory of several useful international conventions on road transport. A less restrictive policy is needed. For diversiﬁ cation of port links (and while the only one railway exists) the facilitation of international road transport must be taken as an important objective.

Customs delays are commonplace at present, with vehicles waiting between one and ﬁ ve days for clearance at the Comet depot. This is sometimes due to incomplete documentation and lack of funds to complete the clearance, but mostly it is an issue of Customs procedures and resources. Simpliﬁ ed documentation in the form of the COMESA single administrative document has been agreed but not implemented. There are also Customs checks along the roads which add to costs and delays.

The concept for the future is for imports to pass through Djibouti (or other port) under customs seal on a through bill of lading and be Customs cleared only in Ethiopia. This would reduce delays at the port and have advantages for the Ethiopian economy as clearance and cargo handling (stripping and stufﬁ ng of containers) would be carried out within the country at a convenient site for local distribution and consolidation.

There would thus be more container movements in and out of the country than is the case today. Using the multimodal through bill of lading shipping companies would take responsibility for the multimodal transport between the overseas point of origin/destination and the dry port within Ethiopia. This will give opportunities for more transport by rail in future.

One reason that most containers need to be stripped or stuffed is that consignment sizes tend to be less than a container load. Cost savings and economic beneﬁ ts would accrue from handling these goods in Ethiopia rather than in Djibouti.

In addition the concept of a “drop-trailer” operation could be considered to maximize the use of the Ethiopian vehicle ﬂ eet. Customs procedures would need to be modiﬁ ed to allow for these operations to be based at perhaps Mille and Dire Dawa.

At present road transport faces many obstacles through interference in the allocation of loads, Customs checks, unnecessarily frequent weighing of vehicles on some routes, and other checks by the roadside. These add to costs and reduce the effi ciency of the fl eet, causing build up of traffi c at peak periods. A trade and transport facilitation committee should be created as a sub-committee of the National Transport Council. This should aim at eliminating all unnecessary non-physical barriers to the free movement of import and export traffi c.

160 The WTO is a member driven organization with 153 member countries, and 29 observer countries, including Ethiopia. The WTO’s Main Agreements cover: • Multilateral agreements on trade in goods – includes 13 agreements covering different areas of trade in goods; • The General Agreement on Trade in Services (GATS) – agreement covering services trade divided into 12 main sectors; and • The Agreement on Trade Related Intellectual Property Rights (TRIPS) - agreement covering 7 intellectual property rights.

On May 16, 2008, the First Working Party meeting on Ethiopia’s accession was held at the WTO. Among the potential beneﬁ ts of Ethiopia’s WTO Accession are: • It serves as a tool to lock in reforms; • It ensures market access for Ethiopian exports; • It provides for a transparent and predictable regulatory framework; • It prohibits arbitrary and discriminatory restrictions on foreign trade; • It increases Ethiopia’s opportunity to attract foreign Investment; • Ethiopia can utilize the WTO’s dispute settlement mechanism to settle trade disputes with other WTO members; and • It provides a platform to integrate Ethiopia in the multilateral trading system.

Details of the WTO [Developments in the Freight Industry - World Experiences] are provided in Annex 8A and 8B: WTO Accession.

Speciﬁ c Road Transport Action Plan Components: Intercity and Urban Transport Passenger transport outside the cities is provided by private bus and minibus operators, organised into passenger transport associations. The associations decide the routes, the schedules, and propose the fares for state approval. They normally rotate the schedules to share the work and income equally among all the members.

Possible issues for discussion include the following: • The continuing deregulation and privatization of interurban passenger transport; and • Allocation of bus routes to operators.

Urban Transport Improvements in Addis Ababa In Addis Ababa mobility is low and traffi c congestion is increasing rapidly. Despite the large size of the city, which has close to three million people, most journeys are made on foot. Car ownership is very small and 80 percent of the low numbers of motorised trips are made by public transport. Yet traffi c congestion is becoming a signifi cant problem.

Escalating operating deﬁ cits with Anbassa's services have greatly constrained bus system expansions and the introduction of new bus services in Addis Ababa. Authorities are now questioning whether they should expand Anbassa's operation when it is difﬁ cult to support ongoing bus services. Experience with demand-responsive minibus services over the past decade has indicated that this is not a panacea for Addis Ababa's urban transportation problems. Improvements have to be made so that operational reliability and cost effectiveness of more traditional urban bus operations can improve.

161 In Addis Ababa, this means an enhanced city bus service will be required using more large vehicles – even double-deckers – which can provide services that are economical in terms of cost and road space, and allow the existing street network to be used more effectively. The expansion of the bus network, together with greater consideration of pedestrian needs, would seem to be the measures that would have most immediate benefi cial effect on urban mobility. Buses are cheaper, per passenger, to operate than minibuses, and can offer lower fares, as well as causing less congestion. The city should be encouraged to develop urban bus services. In the absence of private investors in fl eets of full-size buses, public investment may be necessary in the fi rst instance, but the management can be contracted out to the private sector, to develop skills that can later be harnessed in the development of private sector enterprises and investment. Such city bus services will need sustainable fi nancing. Affordability will be critical. A new, more effi cient, subsidy system is needed that protects passengers, operators and the fi nancing body.

A proposal has been made for the purchase of city buses and the construction of new bus depots in Addis Ababa to be ﬁ nanced through a speciﬁ c fuel surcharge, to be applied to vehicles in Addis Ababa only. (The estimated cost of buses and bus depots over the plan period 2007–27 is estimated as USD 670 million or an average of USD 33.5 million per annum).

Reform of Associations The system of sharing the work among transport association members leads to a perpetuation of low levels of vehicle productivity and service standards. The system has no inherent mechanism that will lead to service improvements and/or lower costs through greater productivity. No one individual operator can gain any beneﬁ t from having a better or larger vehicle, or from running at different times or fares if he or she thinks that passengers would beneﬁ t from this.

If all operators have the same revenue and operate the same schedules, doing the same job, the incentive is simply to do this job cheaply, and never mind the state of the vehicle. Idle time between trips becomes simply a fact of life. Investments in improvements simply cannot pay for themselves, and the overall standard remains that of the lowest. The system of sharing the work in transport associations is thus anticompetitive and needs to be phased out, so that the market economy can be allowed to work and success in the business can be rewarded, and failure punished. Vehicle productivity can be improved, standards raised and a cadre of professional transport managers can develop, helped by the training for the proposed certiﬁ cates of professional competence, which will become mandatory.

The passenger transport associations should still have a role to play in providing services for their members, but they should not be allowed to decide routes or schedules. These should be prepared by the individual operators for approval by the Transport Authority.

Addis Ababa City Transport Organisation A second main institutional change is proposed for Addis Ababa, where the many tasks are divided between agencies and there is no overall responsibility for making and implementing integrated transport plans and the trafﬁ c and transport management for the city. To meet this need a new combined Addis Ababa City transport planning and management authority is proposed. It is named here the Addis Ababa City Transport Organisation (AACTO) to avoid confusion with the Transport Authority, which would of course retain its regulatory role.

162 Chapter Ten

Synthesis of Study Recommendations The approach adopted has been to focus on an appraisal and inventory of the pertinent ﬁ ndings of other recent studies, many of which have been focused on Road transport sub-sector in Ethiopia. This approach relies, to a certain extent, upon the relevance and the accuracy of the research and analyses that has been conducted by recent past studies. Where speciﬁ c additional areas of intervention or research are suggested, these have been added to the proposed Action Plans and Timelines.

Vision Statement Ethiopia’s transport system is characterized by limited size and quality of the transport network, resulting in high transport costs and a low level of accessibility to services and markets. The transport needs of Ethiopia are huge and growing. The transport sector (road, air, rail and inland water transport) will contribute to the overall national objectives by creating development opportunities (by expanding the coverage and quality of the national and local networks) and by reducing transaction costs (by greater efﬁ ciency of operations and appropriate investments) in a safe and sustainable manner while protecting the environment.

It is considered important to deﬁ ne a Vision Statement, to set the frame and direction for the improvement of road transport operations in Ethiopia. A possible initial frame could be along the lines of the following:

The strategy aims to: Develop strategic options for the road transport system to promote an integrated inter-modal transport system based upon comparative economic advantages, and to enable the release of the full potential for private sector involvement in the sub-sector.

Policy Statements There is no formally declared transport policy, aside from the statements in the Economic Policy during the Transition Period in November 1991 and proclamations governing Road Transportation. In principle, however, the Economic Policy signaled a major departure in the role of the state as regulator and operator to a regulator only, with key role played by the market.

A Policy Paper (a white paper) for Urban Transport was prepared by Consulting Engineering Services India. COWI/GOPA Consultants engaged in developing policies and strategies for the different modes of transport, as part of the National Transport Master Plan Study. This framework permits the Government to design policy for commercial road transport, based on diagnosis of the situation in relation to likely trends in macroeconomic performance, international trade prospects, domestic trade, agricultural output, market integration, the overriding focus on poverty reduction, and other factors such as the elasticity of demand as well as the price of petroleum in the international market.

Once policy on road transport is declared by the Government, it would be possible to more effectively address the role of the private industry in providing passenger and freight transport services. The

163 primary objective of the policy should be to guide well-deﬁ ned sectoral and cross-sectoral interventions and investments to remove constraints to the efﬁ cient, effective and sustainable development of commercial road transport.

The objectives of a well-elaborated commercial road transport policy (elaborated in more detail in Annex 9: National Transport Master Plan: Strategic Direction for Road Transport, is expected to include the following: • Provide effi cient, safe and convenient road transport services to meet the mobility needs of both the rural and urban population; • Improve the reliability, timeliness and effi ciency of commercial transportation with the purpose of enhancing competitiveness; • Make public passenger transportation services affordable to the population; • Compliment the sectoral objectives of agriculture and rural development, food security, road development, water resources development, urban development and environmental protection etc; • Ensure that the role of private sector is enhanced by matching demand and supply, and improving the utilization of existing commercial road transport vehicle fl eet; • Adapt vehicles to modern traffi c needs, particularly on the major import-export corridors; • Give particular attention to the development of conventional bus and mass transit services as well as improvement of urban roads, traffi c control systems, and terminal facilities to meet the transport needs of urban centres, of which Addis Ababa is the most important. Also, determine the most appropriate means of transport and service levels for all urban centres and introduce measures to provide effi cient services; • Enhance the capacity of private transport industry by improving its organizational resources to enable it to carry out business planning, fl eet scheduling, cost analysis and tariff setting, fi nancial management and control more effectively; • Improve road safety by further promoting driver related, user related, vehicle based, environment related, road related and traffi c related measures as required; • Introduce measures to reduce fuel consumption by encouraging the use of better technology vehicles so as to address the burden of increasing the import bill; • Strengthen enforcement of axle load regulation to reduce the overloading of commercial transport vehicles and avoid premature distress on road pavements and further increases in road maintenance and vehicles operating costs; • Improve ambient air quality by reducing the level of emissions of oxide of Nitrogen, Sulphur Dioxide and Carbon Monoxide to address respiratory health problems associated with air pollution. This requires establishment of norms for pollution control and improving maintenance of the commercial vehicle fl eet; and • Strengthen the policy formulation, planning, regulatory and quality control capacities of federal and regional transportation institutions.

Adoption of Specifi c Actions for Road Transport Sub-sector In a fi rst step, this study concurs with the detailed Road Transport Actions prepared by the “National Transport Master Plan for Ethiopia” (Road Transport sub-sector) in 2007/2008. Fourteen (14) Specifi c Actions were then made, as summarized in Table 10.1 below

164 Table 10.1 National Transport Master Plan Speciﬁ c Actions for Road Transport

Objective Action Description 1) Introduce CPC, ADR, DGSA and Customs training for With assistance from EU fund a programme to introduce national “Train the Trainers” and cascade to establish courses and international CPC to raise the awareness of the changes needed for MoTC staff, transport managers, commercial driv- in legislation to reduce accidents and improve commercial vehicle ers, etc. truck and bus efﬁ ciency. 2) Establish new legislation for truck and bus operator (O)  Establish a system of control, and review the policy and law on licensing and access to the profession, to manage qual- access to the profession to gradually introduce the international ity and safety of truck and bus operation in Ethiopia. style O license system to institutionalize the concepts of professional competence, good repute and ﬁ nancial security.

 Introduce a requirement for approved parking sites when not in use to ensure safety of vehicles and pedestrians and to limit vehicles parked in residential or unsafe areas. 3) Strengthen the vehicle testing regime for all vehicles Strengthen the testing procedure by changes to the law and re-estab- to ensure they comply with a new law on Construction lish private testing stations equipped with internationally compliant and Use to be introduced. equipment to check all aspects of vehicle roadworthiness. Enforce regulations for all vehicles over 20 years old as a fi rst stage, for vehicles over 15 years next and gradually extend the enforcement to fi ve-year old vehicles. 4) Establish the Road Safety Council with authority to act. Use the existence of the new body to infl uence change in working New legislation planned. practice of the enforcement agencies to implement the law. Establish coordination between Traffi c Police, ERA and other road agencies. 5) Insurance, banking, lending and leasing reforms. Review the current situation regarding insurance policy and fi nancial investment sources to look in more depth at the constraints facing the transport industry. Investigate leasing opportunities. 6) Identify preferred locations for future dry ports, bus By government tax incentives encourage private investment or pub- terminals and international logistics centres (ILC’s). lic-private partnerships in approved facilities when needed. Ensure through market research that investment is matched to demand and customer requirements. 7) Establish compulsory CPC testing before license issue Training to be established at Kaliti and other key locations for na- for truck and bus operators. tional and international CPC's. Regional training courses to be established. 8) Establish compulsory ADR training prior to license Establish ADR in law for drivers and compliance of vehicles. Re- issue for truck operators who handle hazardous prod- quire license to be issued to each driver after training, renewable ucts. every three years. Vehicle testing to comply with ADR to be phased in over fi ve years to include special vehicle testing, starting with the oldest vehicles.

9) Introduce new drivers’ license regime for all drivers of The new test would be based on best practice requiring written and road vehicles. driving experience that is compulsory and unable to be obtained by payment alone. This to include a retest of drivers prosecuted for specifi c traffi c offences (speeding, personal injury accidents, convictions for dangerous driving, etc.) 10) Introduce the fi tting and compulsory wearing of seat For new cars this could be introduced immediately and for older ve- belts. hicles phased in. Non-compliance will result in a failed vehicle test. 11) Introduce compulsory 3rd party insurance, fi re and Bring legislation in line with best practice. If insurance is not pos- theft for cars. sible due to vehicle condition it has either to be repaired or scrapped.

12) Introduce a driver logbook system for all heavy This would enable the new agreed drivers’ hours limits to be con- commercial vehicles over 3.5 gross tons followed by trolled with immediate effect and enable the authorities to limit the compulsory ﬁ tting of tachographs for those under 3 driving hours of freight and passenger bus vehicles. (Digital tacho- years old. graphs to be phased in as available.) 13) International Driving Permits. Establish in law the status of such permits for tourists and other visitors to prevent the considerable confusion that exists today (there should be no need for tourists on visits less than 90 days to apply for an Ethiopian license).

165 Objective Action Description 14) Introduce improved road markings and signs in Addis  Road markings on paved roads should be applied consistently. Ababa and on the rural road network The application of double white centre lines needs special care and training, as if not related to sight distance the system falls into disrepute. More signs are needed on gravel roads where road markings are impracticable.

 The use of “box junctions” in Addis Ababa should be considered as these are a low cost way to reduce blockage at junctions and could have immediate effect.

 More directional signs are needed everywhere, for the beneﬁ t of tourists and other visitors, to avoid loss of time and fuel.

It is understood that most of these proposals have been accepted as policy by the GoE. The National Transport Master Plan recommendations for this sub-sector provided above have been elaborated in more detail in Annex 10: National Transport Master Plan Speciﬁ c Actions for the Road Transport Industry, which incorporates details of proposed Timescale and Initiator/ Responsibility against each Action.

Development of Wider Action Plans by Implementing Institution In a second step, the present study assimilated the detailed proposals for the Road Transport prepared by the National Transport Master Plan for Ethiopia in 2007/2008 with some of the new and broad activities identiﬁ ed within the present study. The composition of the individual Action Plans has been considered quite carefully. If the Action Plans were to be expanded to become mere “Wish- lists”, they would lose credibility and would never be implemented. In this study, the consultant carefully adopted the Ethiopian National Transport Master Plan approach. These proposals have been presented to the GoE and other Stakeholders in Workshops and are understood to, in most parts, have been subsequently accepted as policy by the GoE.

The Action Plans need to be read in conjunction with the principal road transport sub-sector strategy. The Action Plans are organised not by transport mode, nor even by type of activity (policy instrument), but by the organizations and establishments whose efforts and goodwill will be essential to ensure that the road transport sub-sector interventions are successful.

A reasonably limited number of targeted Action Plans have been incrementally expanded, in particular by enhancing Plan No. 9: Private Sector, including AACCSA’s Private Sector Development [PSD] Hub.

Some ninety-ﬁ ve (95) detailed Actions were then made for sixteen (16) principal actors, and these have been summarized in Table 10.2 below. Some key activities and studies that could be overseen by the Addis Ababa Chamber of Commerce and Sectoral Associations, Private Sector Development (PSD) Hub are highlighted in Action Plan No. 9. The Action Plans are elaborated in more detail in Annex 11: Action Plans for Principal Actors with Timelines.

166 Table 10.2 Action Plans: Recommendations by Principal Actors

1. Action Plan: Ministry of Transport and Communications

Activity Indicators/Goals/Targets

1) Introduce operator licensing Proclamation No. 468/2005 amended accordingly

2) Make CPC a requirement for new operator licenses Proclamation No. 468/2005 amended accordingly

3) New trafﬁ c regulations  Simpliﬁ ed speed limit regulations in place  Regulations on tyre condition, seat belts and mobile phones in place  Regulations on drivers’ hours in place  Regulations on fuel quality and vehicle emissions updated and coordinated  Regulations on amounts of alcohol and chat allowed in bloodstream adopted

4) Create Implementation Unit Unit created and fully staffed

5) New General Transport Law Law enacted

6) Create National Transport Council Council created, meeting twice yearly under Prime Minister

7) Institute a framework in support of Energy efﬁ ciency in Frame established sector 8) [With the Transport Authority and Regional Transport Of- Capacity building program established ﬁ ces]: Build an effective capacity building program

9) Prohibit restrictive practices by transport associations; al- Proclamation No. 468/2005 amended accordingly low licensing for intra-zonal trips at zonal level

10) Study for new system of providing interurban bus ser- Study completed, trial started vices, and introduction of trial

11) Implement rail line to Doraleh and branch into Comet Lines in place and open to trafﬁ c Yard 12) Create Railway Infrastructure Authority Authority created and staffed 13) Study of Sudan rail links and possible Berbera and Assab Studies completed connections, international road links

14) Develop international road transport (bilateral/interna- Agreements to be signed and implemented tional agreements) WTO

15) Establish National Road Safety Council Council established and reporting to Prime Minister

2. Action Plan: Ministry of Finance and Economic Development

Activity Indicators/Goals/Targets 1) Strengthen oversight of transport sector; approve investment Activities completed and institutionalized criteria, programme and budgets; veriﬁ cation of feasibility studies and back-checking (post-evaluation of project success and sustainability)

2) Permit a public transport levy on fuel to support public trans- Levy approved port in Addis Ababa and other cities (could replace municipal tax, which is already collected by Road Fund)

167 3. Action Plan: Addis Ababa City

Activity Indicators/Goals/Targets 1) Create new Addis Ababa City Transport Organisation (AACTO), AACTO created and fully operational and subsume AACRA and others into AACTO

2) Ensure ﬁ nancing for approved AACTO programme Plans and budgets 3) Assume ownership of Anbassa from PPESA Ownership transferred

4. Action Plan: Addis Ababa City Transport Organisation (AACTO)

Activity Indicators/Goals/Targets 1) Establishment of AACTO AACTO created and fully operational 2) Staffi ng, job descriptions, agreements with Traffi c Police, EPA Tasks completed and Anbassa 3) Southern bus way on existing rail alignment; electrifi cation Bus way open to traffi c; energized for trolleybuses 4) East–west bus corridor and new long distance bus terminal at Solutions proposed and implemented Lagar station 5) Addis Ababa Transport Plan Plan approved and implemented to schedule 6) Air quality monitoring system Monitoring and reporting system in place 7) Purchase of new buses or trolleybuses; provision of bus depots, Progress as per Master plan including arranging technical assistance for new bus operators [Note:Anbassa procured fi rst batch of 500 medium sized buses in 2009] 8) Create new bus companies (possibly one per depot) Progress as per Master plan 9) Create new bus service subsidy and franchising arrangement Arrangements in place and proclaimed by regulation 10) Continue road network expansion, while increasing expenditure Progress as per Master plan (as adapted by future Addis on traffi c management and public transport Ababa Transport Plan) 11) Study on the regulatory arrangements needed for urban bus and Study completed, trial started minibus operations

5. Action Plan: Chemin de fer Djibouto-Ethiopien

Activity Indicators/Goals/Targets 1) Install line into Doraleh port Line open to traffi c 2) Install line into Comet Yard Line open to traffi c 3) Agreements with oil companies Agreements completed 4) Tank depot sidings Sidings open to traffi c 5) Continue rehabilitation Staged programme for full rehabilitation 6) Install three-year management contract if no concession agree- Contractor assumes management role ment [Note: No progress on concession agreement as at March 2009] 7) Re-let concession (or other permanent management solution) Permanent solution in place 8) New station at Akaki; lease Akaki–Addis Ababa line to Govern- Station opens to traffi c. Line within city available for city ment for 20 years use 9) Provision of new rolling stock Orders placed. Deliveries completed 10) Communications, train control and ticketing Orders placed. Facilities installed and in operation

6. Action Plan: Comet Transport Share Company

Activity Indicators/Goals/Targets 1) Create separate accounting/business units for trucking and dry port Units created and functional operations 2) Create separate companies for each unit Companies formed

168 Activity Indicators/Goals/Targets 3) Privatize trucking unit Trucking unit sold [Note: Privatization is not foreseen in the near future (at least not within the next ﬁ ve years] 4) Enter into joint venture for dry port operations Joint venture entered into

7. Action Plan: Ministry of Labour Affairs

Activity Indicators/Goals/Targets 1) Make plan with TA on how to enforce existing legal maximum Plan accepted by TA working hours for road transport sector workforce (TA to implement)

2) Review with TA more speciﬁ c drivers’ hours legislation; ensure this Plan accepted by TA is promulgated (TA to implement)

8. Action Plan: Ministry of Trade and Industry

Activity Indicators/Goals/Targets 1) Privatize MTSE Enterprise privatized [Note: privatization is not foreseen in the near future (at least not within the next ﬁ ve years] 2) Ensure PPESA privatizes remaining state-owned trucking operations Measures completed. [Note: The Walia Public Transport and Walia bus company, and transfers Anbassa to Addis Ababa and Enterprise will be privatized within 2009]. Jimma cities

3) Remove all preferences for Ethiopian Shipping Lines vis-à-vis the Proposals agreed by NTC private sector 4) Study of optimal future ownership of ESL; implement same Proposals agreed by NTC

9. Action Plan: Private Sector, including AACCSA’s Private Sector Development [PSD] Hub

Activity Indicators/Goals/Targets 1) Chair a Forum for discussion of issues and for making proposals for Forum established possible solutions to improve the efﬁ ciency and capacity of industry

2) Implement Capacity building, with emphasis on business planning, Capacity building established ﬁ nancial management, etc

3) Organize training programs and workshops on the Management of Organize training programs and run workshops Logistics 4) Develop transport and logistics services in all modes Value-added in transport and logistics sectors

5) Establish passenger and freight transport user associations Associations established and invited to NTC deliberations

6) Undertake a seminal Study of Urban Freight Operations in Addis Study completed Ababa

7) Undertake a Study of the impact of Food Aid and Fertilizer imports, Study completed etc., on Transport costs

8) Set up appropriate database M& E for road transport industry Database established

9) Investigate commercial opportunities for drop trailer operations Study completed

10) Private Sector encouraged to develop terminal facilities, modern Increase in Private Sector investment in these activities vehicle maintenance workshops, warehouses and other related facilities, etc

11) Develop a proposal for improvements of the tenure period & interest Improvements in loan tenure period and availability of credit rates for industry loans to industry

169 10. Action Plan: Privatization and Public Enterprises Supervisory Authority (PPESA)

Activity Indicators/Goals/Targets 1) Transfer Anbassa bus company to Addis Ababa and Jimma Anbassa transferred cities 2) Privatize remaining trucking operations (including the truck- Operations privatized [Note: Privatization is not foreseen in ing activities of Comet) the near future (at least not within the next ﬁ ve years]

3) Restructure Comet as dry port operator in joint venture with Comet restructured private sector

11. Action Plan: Regional Transport Bureaus

Activity Indicators/Goals/Targets 1) Introduce operator licensing All commercial road transport operators to be licensed by 2010 2) Create CPC system and approve training institutions in all Trainers trained and schools licensed by 2009/10 regions/zones 3) Make CPC a requirement for new operator licenses All new licenses, and all license renewals, after 2012 to depend on CPC 4) Enforcement of labour laws for all commercial vehicle driv-  Log books introduced and regularly checked. ers  Number of inspections, violations and prosecutions 5) Preparation, distribution and enforcement of new trafﬁ c Regulations distributed and trafﬁ c police trained regulations 6) Prepare routes for night operation Routes agreed with ERA/RRA's and night operations permitted

7) Prohibit restrictive practices by transport associations; allow Implementation of revised proclamation licensing for intra-zonal trips at zonal level

8) Construct New bus terminals Terminals constructed as needed; paved surfaces and good passenger facilities

12. Action Plan: Transport Authority

Activity Indicators/Goals/Targets 1) Introduce operator licensing All commercial road transport operators to be licensed by 2010 2) Create CPC system and approve training institutions in all re- Curriculum completed 2008. Trainers trained and schools gions/zones; ‘training of trainers’ courses licensed by 2009/10 3) Make CPC a requirement for new operator licenses All new licenses, and all license renewals, after 2012 to depend on CPC 4) Enforcement of labour laws for all commercial vehicle drivers  Log books introduced and regularly checked.  Number of inspections, violations and prosecutions 5) Preparation, distribution and enforcement of new traffi c regula- Regulations distributed and traffi c police trained tions 6) Introduce mandatory third-party motor insurance, with agreement System introduced and enforced by traffi c police of Ministry of Health

7) Prepare routes for bus night operation Routes agreed with ERA/RRA’s and night operations permitted 8) Promote new bus terminals in Addis Ababa and elsewhere Addis Ababa terminal complete when bus way opens. Other cities as required. 9) Prohibit restrictive practices by transport associations; allow li- Implementation of revised proclamation censing for intra-zonal trips at zonal level, Relax fare restrictions

10) Sub-contract or franchise some long-distance routes to operators Implementation of route franchises

11) Develop international/bilateral road transport agreements Number of relevant agreements entered into; number remaining; number implemented and in force

170 13. Action Plan: Ministry of Education

Activity Indicators/Goals/Targets

1) Work with NRSC to promote universal road safety educa- Schools visited and number of hours per visit and children ad- tion dressed 2) Work with MoTC, TA and RADA to develop appropriate Transport sector training needs assessment completed; courses academic and professional education in the transport sector designed and introduced; numbers of teachers and students compared with plan; pass rates and international benchmarking of standards

14. Action Plan: National Road Safety Council (NRSC)

Activity Indicators/Goals/Targets

1) Formation of Council Council formed 2) Council to develop its database of accidents and causes, and its Plans approved and implemented to schedule short and long term plans based on analysis

15. Action Plan: Police Commission

Activity Indicators/Goals/Targets

1) Ensure traffi c police have suffi cient status, budgets, equipment A study is needed of traffi c police capacity and a develop- and training ment plan prepared. The implementation of this plan must be monitored. NRSC to be involved in plan development. 2) Develop means to identify unsafe levels of chat in blood- Report produced on safe/unsafe levels and regulations in stream (to be assessed by urine tests) place

3) Ensure that key elements of road trafﬁ c law are respected Number of violations of each key element. Penalties and (need to priorities in conjunction with NRSC) trends (targets to be developed by NRSC)

4) Develop means to measure harmful emissions from road Report produced and measures in place vehicles

5) Have trafﬁ c management desk located in AACTO Desk established and equipped; memorandum of understanding agreed with AACTO on roles of each body

16. Action Plan: Road Fund Administration

Activity Indicators/Goals/Targets 1) Gradual increase of fuel levy, to reduce dependence on value-  Percent of revenue received from each funding source. added tax, and to ensure income increases in parallel with  Amount of revenue compared with demands from road road maintenance and safety funding needs authorities and NRSC 2) Public transport levy on fuel to support public mass transport Levy agreed. Amount of revenue collected and disbursed in in Addis Ababa and other cities (could replace municipal tax, relation to public transport plans which is already allocated to Road Fund)

Source: National Transport Master Plan Study for Ethiopia, Consultant’s estimates.

Possible Follow-Up Process In future it would be possible to expand and/or reﬁ ne the content and scope of these action plans. The main area of possible follow-up suggested falls under the category of review of the budget envelope (ﬁ nancing).

Review of the Budget Envelope (Approach to Financing) Ethiopia's development creates large demands for transport investment in all sub-sectors for maintenance, upgrading, services and new projects. But there are only modest levels of fi nancing available. The credit crunch has reinforced this reality. Increasing sub-sector fi nancing is therefore a 171 critical issue for developing road transport strategy. Increasing user charges (e.g., via the Road Fund) and private sector participation (PSP) are practical ways of raising sector funds whilst also supporting economic effi ciency.

However, PSP will generally take some time to implement – maybe 5-10 years. During a transition period it seems inevitable that sub-sector funding will need to be a combination of: • Focusing existing ﬁ nancing to maximise economic returns; • Utilising donor funds where available; and • Preparing the PSP environment, building capacity quickly, assisted by experimenting with PSP concessions.

Developing Budget Envelope The reason for adopting a Budget Envelope approach is that it is considered essential to reﬁ ne the existing road transport sub-sector strategy. Its strategic output would be:

• The formulation of a Core Sub-sectoral Investment Strategy consistent with a “low” budget estimate (that will “almost certainly” be available); together with • Rough prioritisation of and “extra” investments or interventions, to be implemented if higher levels of spending become available. This could be called the Core+ investment/intervention strategy.

The objective of the identifi cation of a realistic “budget envelope” for intervention measures within the road transport sub-sector is that it would then be taken as a guide with which to better refi ne present action plan proposals. Once a budget envelope has been prepared and defi ned, taking into account the credit crunch, further discussions could be made with appropriate parties to look in more detail at some of the additional information raised in this study.

172 ANNEXES

ANNEX 1: Minibus Taxi Service Supply Characteristics Introduction Much of the data for intercity bus operations is sourced from the Consultant’s study. However, urban bus and taxi operations are of great importance in the capital, and consequently there are some important reference documents for urban bus operations in Addis Ababa, and the reader is referred to these, notably the detailed:  “ Study of Urban Public Transport Conditions in Addis Ababa, Ethiopia” Public Private Infra- structure Advisory Facility PIAF, World Bank, IBIS Transport Consultants Ltd March 2005; and  “ Diagnostic Evaluation of Public Transportation Mode Choice in Addis Ababa” Mintesnot Gebeyehu and Shin-ei Takano Hokkaido University, Sapporo, Japan Journal of Public Trans- portation, Vol. 10, No. 4, 2007

For ease of analysis, the Annex is sub-divided as follows:  Urban minibus taxi operations; and  Metered taxi operations.

Operational Characteristics – Minibus Services Routes Operated The urban transport study identiﬁ ed 106 minibus routes in Addis Ababa. However there is clear evidence that the operators break these routes down into smaller sections, particularly at peak times, in order to exploit the authorised fares structure and maximize their income. The Transport Authority estimates that there may be as many as 300 route segments, but has not carried out a detailed analysis.

There are two consequences of this multiplicity of routes within the urban network. First the level of service that can be justiﬁ ed on each is either infrequent, raising passenger waiting time, or requires the use of small buses that are relatively costly to operate and are inefﬁ cient users of road space. Second, each route is likely to have a high overlay on other routes that increases the potential for on-road competition even within a regulated system.

The Transport Authority is planning regulatory reform for this sector, but this will not take the form of route franchising or service contracting. Rather the development of strong area-based owner associations will be fostered, and these will take responsibility for the design and operation of routes in their zone.

Scheduled Timetables Minibus taxis do not operate to scheduled timetables. Rather, the practice in the industry is for each vehicle to wait in line at its terminal until it has been ﬁ lled (“ﬁ ll and run”) and only then to commence its operation. This can provide a good level of service throughout the day on more busy routes, but often results in excessive waiting time in the off-peak period for quieter routes.

Service accessibility along the routes also suffers, as vehicles passing intending passengers near to the terminals will mostly already be full. As a result, passengers are forced to walk to the terminal even if another boarding point would be more convenient for them.

Vehicle Kilometres Run

Obtaining estimates for minibus kilometres is not at all easy. Owners have no clear idea of what their drivers actually achieve each day, and most vehicles don’t have working odometers that would enable them to monitor this. The drivers don’t think in terms of kilometres, but rather in terms of the fuel they use (litres) or the cost 175 they incur (Birr). Both of these ﬁ gures need to be interpreted through the different prices for petrol and diesel, and assumed rates of consumption under Addis Ababa operating conditions.

The study on improving transport interviewed both the owner associations and a number of drivers at three of the main terminals (Piazza, Mercato, and Saris). Owners believed that it was possible to cover on average 200 kilometres per day on “hot” routes, and that this would involve 6 to 8 round trips in the day implying an average route length of 14 kilometres. Given that the weighted average trip length for minibus users surveyed was 5.5 kilometres, this would appear to be on the high side.

The drivers, moreover, indicated daily utilization over the wide range of 50 to 160 kilometres, with route lengths of 6 to 10 kilometres. Recognizing that the vehicles at Mercato are strongly inﬂ uenced by market activity, possibly involving the carriage of produce as well as people, their data should probably be ignored. Figures from the other two sites suggest the possibility of 140 kilometres in an area with all-day demand (Piazza), and 70 kilometres in one where the demand is highly peaked (Saris).

Owners and drivers associations were more consistent in their estimations of fuel spend, with this ranging only from Birr 120 to 140 per day. This is broadly consistent with estimates given by the Transport Authority of 30 litres of fuel per day (Birr 129 and 165 for diesel and petrol respectively).

However these ﬁ gures make no allowance for the very different consumption rates for diesel and petrol vehicles, which might be expected to be in the order of 8 and 5 kilometres per litre respectively under Addis Ababa operating conditions. Implied distances run therefore range from 240 to 110 kilometres. Observation suggests, though, that the large majority of minibus taxis are still petrol engined (vehicle age, reported country of sourcing, engine noise at idle, relative absence of black smoke, need for power at altitude in hilly terrain), and so the implied distance operated would be at the lower end of this range.

The more detailed driver interviews at the three terminals again gave rather lower ﬁ gures than the associations’ estimates. Those at Piazza indicated a daily spend of Birr 130, which would equate to 120 kilometres at the assumed consumption for petrol-engined vehicles and this would be consistent with their kilometre estimates. Those at Saris indicated a daily spend of Birr 90, that would equate to 80 kilometres on the same basis. Per- haps the average rate of fuel consumption is slightly higher without much off-peak operation out of congested trafﬁ c.

The urban transport study, on the other hand, attempted to reconstruct the fi nancial viability of minibus services, and used a fi gure of 180 kilometres per day based on 6 round trips on a typical route of some 15 kilometres in length. However, as justifi ed above, this assumption on route length seems to be excessive. Its derivation came from an arithmetical mean of observed route lengths, and not the geometric mean of 11 kilometres that is probably more appropriate. On the latter basis, daily kilometres would be around 135.

Fuel consumption was estimated at 25 litres of petrol daily, suggesting a distance operated of about 125 kilometres at the assumed consumption given earlier. Combining the two estimates would result in a typical daily operation of 130 kilometres. This would be broadly consistent with ﬁ ndings in the similarly sized city of Accra, and with the earlier analysis.

On that basis, and assuming that 80 percent of the 7,500 registered minibuses are put into service each day, then the kilometres covered are in the order of 800,000. For a 30-day month, this would then approximate to 22 million kilometres run (allowing for some service reduction on Sundays). This is more than ten times the kilometres run by Anbassa, and would be consistent with a broad equality in their transport volumes allowing for the difference in their respective passenger capacities.

176 Driver Training and Control The drivers of all taxis, both sedans and minibuses, require a Class 3 license with a higher standard of qualiﬁ cation and testing than for a private car. Drivers of larger buses require a Class 4 license, with even more stringent standards. However testing in this case is likely to be on a freight vehicle that may not be as large as a full-sized bus. These requirements do provide the potential for a better standard of driving of taxis and minibuses than for their equivalent sized cars, and of large buses in comparison with smaller vehicles.

However the Transport Authority advises that the current design of driving licenses can easily be tampered with, and relevant details altered or the photograph replaced. As such, a new more secure design of license is to be introduced with tenders for the necessary equipment already having been issued.

Pending the introduction of this technology, the Transport Authority is severely hampered in its enforcement activities. In particular, the more severe range of penalties applicable to repeat offenders becomes impossible to apply if license details are altered.

Vehicle Maintenance Practices No operators interviewed claimed to undertake any preventive maintenance for their vehicles. Rather, their general practice is to undertake essential repairs only when absolutely necessary to ensure continued operation. Requirements for roadworthiness assumed a low priority under this regime, and no real pressure was felt from the enforcement agencies.

The Transport Authority has recognized this problem, and is hoping to raise maintenance standards through more effective technical inspection to be undertaken by 18 private vehicle test stations. However examination of the contract for these services suggests that there may be insufﬁ cient performance incentives, and ineffective sanctions against transgressions of their duties.

Service Monitoring There is no body, either within the local civil administration or the operator associations, that monitors and controls service delivery on a formal basis. However the Transport Authority has a small research group that monitors services on an ad hoc basis in order to improve its understanding of the workings of the sector.

Equally, there is no authority to which a passenger can formally make complaints other than the owners’ association if the offending vehicle belonged to a member, and the association can be identiﬁ ed. Both situations are unlikely, with low membership rates in the industry and no speciﬁ c vehicle markings. The Transport Authority will receive complaints, but again on an ad hoc basis.

The Transport Authority has recognized the problem, and is planning to introduce regulatory reforms to strengthen the powers of the owners’ associations and facilitate their effective implementation through restructuring on an area basis. Responsibility for operational control will rest with the associations, but the Authority would still monitor service delivery.

Bus Terminal Management Minibus terminal management is provided by self-appointed Tera askebari, literally taxi-order attendants. These are referred to in the referenced studies as “marshals”, and that term will be used throughout this report.

The urban transport study reports that the marshals have formed into informal “community co-operatives” or “unions” based on terminals. Membership fees are reputed to be as high as Birr 2,000 per year, which is both indicative of the potential earnings of the marshals and of the sums of money ﬂ owing through the system.

It seems most unlikely that the cooperatives would need to collect such sums for their own immediate purposes, and this therefore suggests that there is probably some hidden authority beyond these organizations. Anecdotal 177 evidence has identiﬁ ed individuals who appear to have beneﬁ ted personally from these arrangements, but detailed investigation would be needed to quantify the problem.

Minibus drivers make payments to the marshals either for the right to use the terminal for the day if operating on a ﬁ xed route, or per departure if ﬂ oating in the network. Charges are between Birr 0.5 and 1.0 per departure, and could result in payments up to Birr 10 per day as a consequence, according to the urban transport study.

Some commentators think that the true ﬁ gure could be even higher, when charges at the interchange points are also taken into account, and might even reach Birr 20 per day. If so, the extraction from the operating industry would be around USD 2.3 per vehicle per day. This would still place it towards the bottom of the range falling between Accra (USD 1.7 per day) and Kampala (USD 10 per day).

Again the Transport Authority has recognized the problem, and plans to address this through its regulatory reforms. The proposed structure would require the marshals to be employed by, and reporting to, the owners associations. The Authority considers that it has the necessary powers to instigate such a relationship, and to enforce its implementation. It also recognizes that the transition may prove problematic, but that the necessary legal powers are in place to break the hold of any unauthorized controlling bodies should that prove necessary.

Operational Characteristics: Minibus Services Most imported used buses are of a small capacity (minibuses) since the price of high capacity buses of the same condition lies beyond the ﬁ nancial capacity of importing individuals. For these reasons, regional short distance services and Addis Ababa city taxi services are dominated by this category of vehicle.

Minibuses are not efﬁ cient in terms of capacity, although they account for over 20 percent of daily passenger trafﬁ c. Their safety standards and quality of services have not been satisfactory. Also, the business is fragmented, and the associations are weak to promote improved service quality and accountability.

There are weaknesses in the enforcement of existing laws and regulations affecting route assignment by size and capacity of the vehicle. Such regulatory lenience and lack of coordination with Regional Transport Ofﬁ ces have opened the way for minibus operators to be engaged in long distance contract service at a relatively high rate not affordable by the poor. Furthermore, the extension of minibus services to long cross-country routes and covering the distance in a very short time, coupled with poor driving skill have raised serious safety concerns.

Covering a distance of 750 kms from Addis Ababa to Gondar in less than 8 hours by a minibus is an example on how a lack of regulatory control can expose life and property to high rates of accident. The uncontrollable movement of minibuses and unfair competition have led to reckless driving and poor discipline, excessively long hours of driving thereby endangering safety.

Taxi Development in the Capital City Residents of Addis Ababa have had to face great inconveniences, as well as additional costs to the daily trips to their various destinations. Taxi drivers and their conductors often take undue advantage of the acute shortage of public transport in the city to determine both the length of their routes and the fares they charge.

A shortage of public transportation has been just one of Addis Ababa’s many woes. In a city with growing demand for the service, the three major service providers – the 12-seater white and blue minibus taxis, the about 500 midi-buses that seat 22 to 27 people which are fairly new entrants yet getting increasingly popular, and the limited 300 big city buses (which carry 30 people seated and 70 standing) – are hardly able to cope with the public's demand for city transport.

The particular acute dearth of the service during peak hours causes despondency among those who really need the service to get to and from work. Ironically this results in a windfall for those who ﬁ ll up their vehicles as they ply the routes, as they net in maximum proﬁ t during peak hours. It provides an ideal opportunity to bal- 178 ance the daily revenue expected from them, as the hours in between the peak periods are spent predominantly in unproductive use.

Often passengers must wait for a taxi for more than half an hour at the "taxi terminal" near Mexico Square. Trafﬁ c congestion on most major streets of Addis Ababa is a common sight, and often passengers need to jump from one taxi to another at least three or four times as the service providers maximize proﬁ ts by only serving shorter destinations. This action translates into more frequent trips. Often the "Weyala" (conductor) negotiates with commuters to go the longer distances at a slightly higher fare.

The minibuses are the main culprits of some peak hour extortionate fare levels. Taxis often take advantage of the shortage of public transport. However, some drivers of minibuses argue that the main reason they cut trips is due to trafﬁ c jams in the city.

A minibus taxi driver on the Gerjji-Mexico Square route will earn a 300 Birr ﬁ xed monthly salary. A daily 15- 45 Birr in extra income depends on how much over the driver sets daily on the 100 birr revenue target that he has to hand to the owner of the minibus.

With a daily extra income on average of 15-20 Birr, trip cutting will result in daily income as high as 40-45 Birr. Minibus drivers would be happy to work on long trips if the trafﬁ c congestion eases. Smoother trafﬁ c would enable minibuses to increase the current average six trips a day to seven, and would help generate more for service providers, whilst also serving the longer trips.

However, the city government has a long way to go before it can ﬁ nalize all of the major road construction works currently ongoing on almost every part of the city. In the meantime, with no immediate solutions in sight to absorb the increasing number of commuters, the apparently unregulated minibus operators may continue to operate in any way they choose, something most commuters believe is tantamount to abusing residents, as they have to pay extra money to get to their destinations.

According to the 2005 Urban Transportation Research Project Report by the Addis Ababa City Transport Au- thority, residents of the metropolis make 3.4 million trips every day. Of this, students' trips account for 30.2 percent, with 16.7 percent being carried out by workforces provided with transport services by their organizations. Some 4.9 percent are business trips.

Recent information from the Federal Transport Authority's Addis Ababa Branch Ofﬁ ce indicates that the 336 Anbassa city buses that are now operating to handle the vast majority of about 1.2 million commuters, while the nearly 500 midi-buses service 700,000 commuters. The second largest group of commuters (1.1 million in total) is catered for by the estimated 20,000 taxis operating all over the city. Private vehicles account for only ﬁ ve percent of trips. The remaining 60.5 percent carry out trips on foot.

The major ofﬁ cially recognized sources of the city's transport problems, as stated by city executives are: the absence of a policy and strategy to regulate the transport system; the increase in demand for transport stem- ming from population growth; the shortage of vehicles to cater for the demand; and in sharp contrast, an increased number of vehicles beyond the capacity of the low-level trafﬁ c management and road networks.

The estimated 20,000 minibus taxis (up from 12,500 in 2005) have about 105 operational routes. Nevertheless, the chairman of the Taxi Owners Association stated that not all the 20,000 taxis are on the road at any given time. A number of them left the trade, due to old age, rising running costs and the absence of proper regulations governing the sector. It is estimated that the taxis currently operational do not exceed 14,000.

A further reason for some owners going out of the business is the alleged swindling by the drivers and their assistants. In addition to covering their meal expenses from the daily income, drivers and their assistants get 20 to 30 birr in pocket money each day, but they can also take an additional 50 to 60 birr a day on the sly. Drivers and their assistants often make the extra money from customers' side of the business, through cutting trips and charging extra during peak hours. 179 Operational Characteristics: Metered Taxis Sheger City Meter Taxi S.C. is a recently established urban transport private company, which launched new and modern business meter taxi cabs to operate on a system using distance meters.

Under the meter-based system, fares are determined based on the distance the taxi travels through to get to its destination regardless of the types of roads. The meter taxis will not be limited to a certain designated areas as in the case of the present taxis according to the Manager of the Federal Transport Authority, Addis Ababa Branch Ofﬁ ce. The new taxi service is expected to operate in an organized way. Promoters claim that the 150 vehicles, expected to be delivered in a couple of months, will have "state-of-the-art" features. Apart from the taximeter for pricing and receipting, they would have a radio communicator. Customers can also call the central dispatcher to get door-to-door service. They also have a built-in DVD and LCD for broadcast commercials and entertainment. Each of these custom-made vehicles is expected to cost 230,000 Birr, according to promoters.

When these vehicles start business, after six months, the already crowded streets of Addis Ababa would have to handle more cars, while city residents will have another option to urban transport with the meter taxis being exclusive to the capital. Sheger, however, envisages expanding the business to other towns as well.

Currently, some 14 to 20,000 taxis serve the over 3.6 million inhabitants of the metropolis, where 1.2 million people are transported in 105 lines each day. The taxi sector has created 25,000 direct and 12,500 indirect job opportunities. However, the plate number of the taxis in the streets of the metropolis has already gone beyond 20,000.

180 ANNEX 2: Competition and Effi ciency—General Issues Introduction For the market economy to work effectively, competition needs to be on an equal basis so that the most effi cient can survive and the least effi cient go out of business. Bankruptcies are not a loss to the economy, as the assets remain and will be used by others. The threat or reality of bankruptcy is an essential part of the economic mechanism that leads to effi ciency.

If effi cient organizations cannot survive and grow because of unequal competition from protected ineffi cient operators, or from hidden subsidies to others, then effi ciency will not be achieved.

Some Government and other aid organizations associated with grain marketing or disaster relief seem to follow no clear pattern of use and cross over from “own account” to “hire and reward” as demand dictates, confusing an already confused market, while operating with vehicles donated free from many sources. When they do this they have an unfair advantage in the market and in effect “steal” trafﬁ c from the haulage industry.

This is a matter of balance. There is a need to protect the “equal rights” of the commercial road haulage industry, but there is also an economic need to make use of the limited vehicle ﬂ eet of the country to the maximum extent possible. Licensing such operations for hire and reward purposes would at least allow the extent of the problem to be diagnosed.

In this report the introduction of a new “Operator’s License” is proposed. Any own-account operators that wish to offer an additional hire and reward service should apply for the hire and reward license.

There are also “endowment” companies in Ethiopia funded and operated in a manner that may get advantages over private Ethiopian operators, although this may change in time, as some endowment funds seem not to have many ﬁ nancial resources left.

As a general rule current government policies and the tax regime do not create an incentive for private companies to invest in new vehicles that would lead to greater transport efﬁ ciency. There are some exceptions to this rule (the ﬂ ower industry is one) but the evidence for these exceptions is not transparent.

Restrictions on Foreign Investment Presently there are also government policies in place that restrict investment in transport by foreign investors which inhibits the free market principles found to be effective in many other countries, in Africa and elsewhere, in boosting the economy through joint ventures.

The following areas of activity are exclusively reserved for domestic investors: • Car hire and taxi-cabs; • Commercial road transport; • Inland water transport; and • Customs clearance services.

In addition, only Ethiopian nationals may invest in air transport services using aircraft with 20 seats or less.

It is natural for the government to want to protect local transport industries but by doing so they protect a road

181 transport industry which cannot progress, for the reasons already given, to the detriment of the economy as a whole. The result is an adverse effect on growth and poverty reduction.

This restrictive policy also applies to the state-owned Ethiopian Shipping Lines (ESL) and Maritime Transit Services Enterprise (MTSE). Such protective policies may need to be addressed before Ethiopia’s application to join the World Trade Organisation (WTO), is accepted.

Commercialization Public ownership is not the real issue but if they have privileges denied to the private sector they reduce overall efﬁ ciency and add to costs. The present policy runs counter to the objectives of poverty reduction and growth as transport efﬁ ciency is impeded by such state intervention. ESL, in particular, has such privileges and a better way of funding that organisation needs to be found.

Some operational constraints are seen where government departments with government contracts for the movement of goods are obliged to use only state-owned shipping and freight forwarders and state-owned freight transport companies. This limits the trafﬁ c available to privately-owned companies and private owner-drivers who belong to transport associations.

In practice this leads to a cascade effect when large government contracts are awarded, leaving only crumbs of work for the private owner-drivers who are at the bottom of the pile. This policy also limits the ability of private operators to invest in vehicles that are more efﬁ cient.

182 ANNEX 3: Bus Fares and Tariffs Introduction An examination of vehicle operating costs and tariffs is important for gaining an awareness of the proﬁ tability of the road passenger transport industry.

Historical Bus Fares Intercity Bus Fares Bus fares have now been deregulated for small and medium buses in the intercity sector. For long-distance they remain controlled by the Transport Authority, though TA will duly consider requests made by the associations for an increase. From January 2001 to December 2003, fares were set at Birr 0.09195 per passenger-km on asphalt roads, and Birr 0.1145 per pass-km on unpaved roads. In January 2004 these rates were revised upwards by just over 10 percent to Birr 0.1095 and Birr 0.1265 respectively. They have been revised again in September 2006 by between 9 and 10 percent, to Birr 0.1200 and Birr 0.1380 on asphalt and unpaved surfaces respectively. According to operators in (2007) this increase was insufﬁ cient to compensate for the rises in the price of fuel in that period.

Annex Table 3.1 Long Distance Bus Passenger Tariffs, 2005/06 (Ethiopian ﬁ scal year 1997)

Road Surface Birr/passenger – km Asphalt 0.11 Gravel 0.14 Note: Passenger tariff data set by the Transport Authority (TA). (August 2006) Source: Transport Authority.

Anbassa Bus Fares Fares on Anbassa buses range from 0.25 Birr for up to 9 km to 2.25 birr for 32–47 km. Almost 95 percent of passengers pay between 0.25 birr and 0.50 Birr. Some exceptions apply to recently introduced routes. For example, one new 40 km route has a fare of 3.00 Birr.

As noted, Anbassa fares are subsidized by the city government, although the level of subsidy has dropped in recent years. The subsidy is presently 0.10 birr per trip; the total amount paid is based on records of numbers of tickets sold. Fares on Anbassa buses are collected by conductors. Paper tickets are used, with different colors for inward and outward journeys. Ten-trip tickets are also issued. Because tickets are not sold to passengers before the bus’s arrival, at busy times buses may wait several minutes as passengers’ board and buy their tickets. And because many passengers must stand it is common practice for conductors to collect fares from passengers through the bus window before they board the bus.

The company estimated that between 5 to 10 percent of revenue is lost through fare evasion and conductor malpractice, despite the presence of ticket inspectors. The fares charged for express services are normally 0.10 Birr more than the standard fare. Schoolchildren and students are charged a ﬂ at fare of 0.15 Birr.

In 2006 the trip over 45 km from Addis Ababa to Debre Zeit cost Birr 2.25, at a cost of Birr 0.05 per km.

183 Tariff systems vary between buses and taxis. For the former, there is an approved fare for each route irrespective of the length of the individual boarding made on it. This fare is correlated to, but not directly dependent on, the length of the route. Variances will occur depending on how recently the route has been introduced or revised, or whether the services are nominally limited-stop. Previous studies have estimated that, taking a weighted average of fares applicable to the core network, fare rates approximate to Birr 0.046 per kilometre for those riding the full length of the route and proportionately more for those making shorter boardings. At current exchange rates, this fare rate equates to 0.53 US cents per kilometre representing some of the cheapest travel in the world. Fares are low both because of the subsidy provided to users (roughly 25 percent of the fare actually paid, but declining), and the extremely high average load factor (over 100 percent) representing tolerance of crush conditions in the peak.

Calculating transport costs is problematic. The offi cial accounts for Anbassa do not refl ect the full true costs of its operation, but do include a depreciation charge relating largely to capital expenditures not actually made by the enterprise at a rate set by tax legislation and not economic life considerations. Notwithstanding these reservations, recorded costs are some Birr 5.3 per kilometre, or Birr 0.053 per pax-km at an average load factor of 100. The latter fi gure represented 0.61 US cents at the then exchange rates. Even though these historical cost/tariff estimations are a little dated they clearly illustrate the poor fi nancial health of Anbassa.

Bus Fares: Recent Changes

Intercity Bus Fares The Transport Authority under the auspices of the Ministry of Transport and Communications of Ethiopia has announced new tariffs on cross-country bus transport services a day after announcement by the Ministry of Trade and Industry fuel retail price readjustment amidst ever-rising cost of petroleum products in the global market.

Accordingly, the Authority said, effective January 26, 2008 on travels by cross-country buses, the new tariff on asphalted roads is 0.12325 Birr per pax-km (up from 0.11 Birr per pax-km, and that on gravel roads 0.14966 Birr per pax-km (up from 0.14 Birr per Pax-km). The new tariffs were made in consideration of average incomes of commuters and in line with the subsidy the government continues to make on fuel imports.

Anbassa Bus Fares In 2009 the Anbassa bus fare from Addis Ababa to Debre Zeit cost Birr 3.80 per passenger at a cost of Birr 0.085 per km. Anbassa bus fares are ﬁ xed by the company, but kept as low as possible to make bus transport available to all.

Historical Minibus and Taxi Fares The fares for minibus taxis ranged from 0.60 birr for up to 2.5 km to 3.00 birr for 25 km. The minimum fares for minibus journey are shown as follows:  Up to 2.5 km Birr 0.65  Up to 5.0 km Birr 1.25  Up to 7.0 km Birr 1.65  Up to 9.0 km Birr 2.25

184 Previous studies have estimated that, approved fares for taxis are directly related to the length of the trip being fi xed within bands of kilometres run. However, the setting of the band limits has resulted in certain anomalies with regard to fare rates, with these being far higher for trips up to 4 kilometres in comparison with those of 6 kilometres or more. As a result, most operators artifi cially break their routes (especially at peak times) so as to force passengers to pay two higher rated fares. Taking that higher rate as being applicable to the large majority of journeys, taxi fare rates work out at about Birr 0.26 per kilometre. At current exchange rates, this fare rate equates to some 3.0 US cents per kilometre. This fi gure is somewhat higher than that generally typical in Sub-Saharan Africa, and refl ects the small authorised capacity of the vehicles being used and greater control of overloading.

For taxis, operating margins are hard to determine in such a dispersed ownership system. However attempts have been made to estimate these, leading to fi gures of an 8 percent return on sales for the driver and an 8 to 15 percent return on sales for the owner. Taking a mid fi gure for the owner, total operating costs then represent some Birr 0.21 per pax-km. This fi gure equates to 2.4 US cents per kilometre. Even though these historical cost/tariff estimations are a little dated they illustrate the better fi nancial health of the taxi operations.

Prices for premium services are not controlled and may be set by the operator. This applies for instance to the private taxis in Addis Ababa, where the fare must be agreed between driver and passenger.

International Comparison of Urban Bus Fares Annex Table 3.2 Average Bus Fare (USD per trip)

City Large Bus Minibus Abidjan 0.40 0.40-0.70 Accra - - Addis Ababa 0.25 0.12 Bamako 0.25-0.30 0.20-0.25 Conakry 0.18 0.21 Dakar 0.30 0.18 Dar es Selaam n/a 0.16-0.24 Douala 0.30 n/a Kampala n/a 0.20-0.25 Kigali 0.28 0.28 Kinshasa 0.33 - Lagos 0.40-0.56 0.38-0.39 Nairobi 0.25-0.40 - Ouagadougou 0.30 n/a Average 0.31 0.25 Sources: City Authorities, Published documents, various. Note: =not available; n/a = not applicable.

185 Affordability Index Annex Table 3.3 Spending on Urban Transport as a Share of Household Income

Percentage of Percentage of Absolute monthly Percentage Percentage households household budget expenditure on of average of ﬁ rst quin- reporting positive spent on transport transport for household tile household expenditure on for households households with budget needed budget needed transport with positive ex- positive expendi- to pay for 60 to pay for 60 penditures (%) ture (USD) one-way trips one-way trips per month (%) per month (%)

Abidjan 77 10.1 31.47 10.5 42.9 Accra 95 6.0 16.36 - - Addis Ababa 87 3.3 3.83 6.3 18.6 Bamako - - - - - Conakry - - - - - Dakar 92 4.3 15.08 3.1 11.3 Dar es Selaam 92 11.6 12.04 11.6 53.2 Douala 77 4.0 6.94 10.4 23.5 Kampala 81 7.4 13.08 7.8 41.0 Kigali 80 4.4 14.55 5.1 46.0 Kinshasa 49 2.8 5.43 10.1 31.0 Lagos 58 13.8 14.44 27.5 105.2 Nairobi 61 10.1 25.97 7.5 33.6 Ouagadougou 3 5.5 0.30 8.9 35.8 Average 90 6.5 13.29 8.0 32.7 Sources: Analysis of recent household budget surveys, Africa Infrastructure Country Diagnostic, 2007. Note: All data is for cpital city, except for Douala and Ouagadougou, where spending at the urban level nationwide is taken as a proxy for spending in the capital city. - = data unavailable

In order to permit international comparisons based on this data, a standardized affordability index is calculated. This is based on the cost of 60 public transport trips, which represents the minimum level of mobility needed to allow one family member to commute to and from work for a month.

The cost of these trips is expressed as a percentage of the monthly budget of the average household and the ﬁ rst quintile household (Annex Table 3.3). The results indicate that 60 trips would typically absorb 8 percent of the monthly budget of an average household. In some cities (Abidjan, Dakar, Dar-es-Salaam, Kampala, Ki- gali), there is a close correspondence between the actual budget share and the budget share needed to purchase the 60 trips. Elsewhere the difference is quite large and can run in either direction, with households spending substantially more (Nairobi) or less (Addis Ababa, Douala, Kinshasa, Lagos) than what is needed to purchase the 60 trips.

In all cases, however, ﬁ rst quintile households are at a disadvantage. They would typically need to spend 33 percent of their budget to purchase the 60 trips and in many cases a lot more, indicating that this level of mobility is completely unaffordable for the poorest households. Calculations of the same index for a number of Indian cities indicate broadly comparable results, with the average household needing to spend 5-10 percent of its monthly budget on the 60 trips, with that share rising to 15-25 percent for the poorest households.

Furthermore, in most of the cities (other than Addis Ababa and Nairobi), passengers conﬁ rm that the actual fares charged vary somewhat arbitrarily depending on circumstances such as bad weather and congestion. In Lagos, for example, a nominal N40 fare may be hiked to N70 (or even N90 on occasions). In Nairobi, by contrast, the fare is normally displayed inside the vehicle’s windscreen; gouging is reportedly much less com- 186 mon. Uncertainty about fares is a serious concern of many passengers, as revealed in various surveys. Poor passengers making the journey home after work often do not know whether they will be able to afford the ride. Passengers also report other operating practices that increase uncertainty, such as curtailing a trip to take advantage of a better commercial opportunity in the other direction. So-called short-turning leaves passengers stranded along the road, and full compensation is rarely paid. Once again, ﬁ rm conclusions cannot be reached, but the results presented here suggest that the price of urban bus fares remains high in relation to the purchas- ing power of the typical family, so that usage of buses is correspondingly low. The average family is barely able to afford one round trip each day, while for the poorest households even this basic level of mobility is unattainable.

Nevertheless, even this low level of expenditure translates into peak demand for around 200 seats per thousand residents, about ﬁ ve times higher than the supply available in any of the cities sampled.

187 ANNEX 4: Road Freight Industry Structure Introduction Ethiopia’s trucking industry has been deregulated and, as in so many other African countries, it is highly fragmented. Good statistical data is therefore somewhat difﬁ cult to collect and care must be taken, in particular, with analysis and forecasting.

Historical Perspective Under the communist regime (1974-1991) all commercial transport operators were organised into zones, i.e., “Ketena's”. These were controlled by either the Ethiopian Transport Corporation (EFTC) or the PTC. The state corporations operated there own large trucks and managed the other operators.

EFTC ran a ﬂ eet of over 1,200 trucks and managed the private truckers as its subcontractors. EFTC obtained the business, allocated loads, organised payments, received a 5 percent commission, etc. Freight rates were set by Government. The rate/km varied little with trip distance, commodity or road type and conditions. To ensure equity among operators, routes were rotated.

Proclamation No. 14/1992 in May 1992 deregulated the transport sector EFTC to become Comet, Shebele, Woyira and Gefersa. A transport company called Abyssinia was also created. The four companies were allowed to operate independently with their own budgets and management.

Several large trucking companies also emerged in this period with quasi-governmental backing. The large companies were later encouraged to form associations. This led to the dilution of the domination of the public enterprises and the ex- “Ketena's” in the market.

Today there is competition for freight trafﬁ c, at least in the Djibouti corridor. However there are some complaints for the private sector with regards to the public enterprises and endowment companies. The public enterprises are expected to be converted to share limited companies and then privatized, but this process is slow.

Breakdown of Industry by Truck Type In 2006, from the total number of 10,567 registered cargo vehicles 7,593 (72 percent) were operated by associations, 1,691 (12 pecent) by private companies.

The largest freight transport associations may have perhaps 200 to 300 members, operating 300 to 400 trucks, but many are much smaller; on average, however, there are over 100 trucks per association. Eighteen associations operate more than 100 trucks.

Annex Table 4.1 Commercial Trucks Licensed by Transport Authority ( 2006)

Number of Trucks Classifi ed by Type Operator Group Trucks Trucks/ Trailers Semi Trailers Others Total Associations (66) 4,729 1,231 310 1,323 7,593 Individual commercial (124) 123 80 30 20 253 Private companies (66) 56 885 239 87 1,267 Enterprises (3) 3 32 131 --- 166 Enterprise affi liates (3) 740 25 8 73 846 Government organizations 197 198 46 1 442 Total (334 groups) 5,848 2,451 764 1504 10,567 188 Source: Transport Authority. On the other hand private companies operate on average nearly 20 trucks, and the largest, such as Tana Transport and Trans Ethiopia, have up to 200. Endowment companies are owned and operated by different EPRDF organizations. Examples are Trans Ethiopia (TESCO) , Blue Nile Transport Company and Dinsho transport. TESCO, founded in 1993, is regarded as the most effi cient transport company in Ethiopia. It is involved in dry and liquid bulk transport, engineering workshops and garaging services, import and selling of vehicles, spare parts, tyres etc.

The three enterprises (Comet, Bekelcha and Shebele) operate a total of 166 trucks on their own behalf, but both Bekelcha and Shebele have affi liates operating 300 or more. The 72 government organizations have on average six trucks in their fl eets. Comet is the largest of the three general goods transporters formed from the former EFTC, currently operating a fl eet of 225 trucks.

Current Industry Structure Data from the Transport Authority showed that in 2000 there were 17 associations, 8 companies, 3 parastatals and 80 individual operators having some 9,893 vehicles. The share of associations at that time was 3,831 vehicles or c. 39 percent.

The one-time lifting capacity of associations in 2000 was 46,373 tons, while companies and parastatals accounted some 48,525 tons, e.g., some 45 percent of the total lifting capacity.

Annex Table 4.2 Dry Cargo Fleet by Capacity and Ownership (2004/5)

Capacity (tons) Individual Operators Associations Parastatals Private Co. Total 0.9-4.0 368 1713 9 2090 4.1-5.4 13 139 4 156 5.5-9.4 271 1429 42 1742 9.5-12.0 194 1838 60 2092 12.1-15.5 90 464 16 74 644 15.6-22.0 20 540 42 62 664 22.1-25.0 13 688 - 65 766 25.1-29.9 10 261 1 96 368 30.0-37.0 10 356 405 314 1085 37.1-41.0 2 296 10 965 1273 Total 991 7724 474 1691 10880 Source: Transport Authority. In 2005, from the total number of 10,880 registered dry cargo vehicles 7,724 (71 percent) were operated by associations and 1,691 (15.5 percent) by private companies. Individual operators and parastatals had ﬂ eets consisting of 991 and 474 trucks respectively. Hence, the trend between 2000 and 2005 showed a rapidly increasing share of the total dry cargo ﬂ eet by the associations.

Comet, besides its trucking operations, plays an important role as operator of the country’s main existing inland clearance depot (ICD) at its yard in the southern outskirts of Addis Ababa. For the moment it has a near monopoly in performing this function, as all import goods trucked from Djibouti to Addis Ababa must be cleared here; however, a Government committee led by MoTC considered future development of ICD’s, and was expected to report by the ﬁ nal quarter of 2006. In the meantime Comet has been investing its own funds in increasing the throughput capacity of the yard, especially in respect of container storage capacity.

Comet container handling station (depot) in the eastern outskirts of Addis Ababa, on the road to Djibouti, was established some ﬁ ve years ago to provide: • Open and closed warehouse service; and • Container handling service (machinery).

189 It closely works with Customs Authority which has a facility in the centre. In the future it is planned to support the dry ports being developed in the country. The development of dry ports is handled by an Agency established under the MoTC. Currently the dry port at Modjo (75 km east of Addis) is nearing completion and another one at Semera in Afar Region near Djibouti (580 km from Addis Ababa) is planned to be developed in the near future.

Comet has 225 trucks of its own (115 with 40 tons capacity and 110 with 30 tons capacity each) and has 8 closed warehouses with a total of 3,735 tons storage capacity, an open warehouse to handle 2,000 vehicles and 18,000 square meters space to handle 540 containers. Over the last ﬁ ve years Comet has handled the following trafﬁ c shown in Annex Table 4.3. Annex Table 4.3 Comet Haulage Performance, by Year

Year Throughput (tons) 2004 1,042,260 2005 982,180 2006 1,169,187 2007 1,129,968 2008 1,240,169

Government owned and Government managed associations include SOE’s such as Comet, Bekelcha Transport Enterprise, Shebele Transport Enterprise, Comet associations, etc. These public enterprises are very active in the movement of fertilizer imported by GoE. They partner with private companies to form and manage associations, thus expanding their inﬂ uence in the market.

Most factories owned by the GoE, such as cement and sugar plants have their own internal ﬂ eets. The import of a large quantity of road motor vehicles has had an impact on the capacity and operational performance of for-hire carriers. The shift from hired trucks to own private commercial vehicles might not have necessarily been intended to reduce cost of transport, but primarily was to avoid the risk of high quay rent at the port of Djibouti, in case a shortage of supply of trucks develops. Some of these importers, who may not fully utilize their ﬂ eet of private commercial trucks for their own goods alone, might also get involved in moving other shipper’s cargo by competing for it with for-hire commercial trucks.

Associations and PLC’s are private operators. They account for some 90 percent of the truck fl eet. Associations provide a legal umbrella for small yet independent trucking operators. Most associations have been formed from former “Ketena” members. The associations are allowed to operate countrywide, however many tend to specialize in a particular area or on particular routes. One of the key weaknesses of associations is the loose structure that binds membership and the in general weak human capital among members. Each member is often independent-minded, and that makes it diffi cult to run them on a commercial basis. They provide limited services for their owners, and customers are restrictive and have monopolistic tendencies. They hinder the development of independent operators and most probably limit the profi tability of the more effi cient members. The implication is that there are no economies of scale, or operational advantages, in belonging to an association.

Although domestic costs are somewhat competitive, weak contestability of the market is a limit for higher efﬁ ciency gains. The endowment and government enterprises dominating the market are the only exceptions, since they are much more organised, have enough capital and modern ﬂ eets have greater access to information and as a result dominate the market, and could create important barriers to entry1.

As far as ownership structure of tankers supply is concerned, that data shows that from the total number of 1591 registered vehicles in 2004/05, the share of private limited companies was 560 vehicles or 35 percent of the total; followed by four associations owning 492 vehicles or 31 percent of the total ﬂ eet. Vehicles in the

1 PPIAF 2004 190 category of registered individuals and unregistered operators were 314 and 225 respectively. One time lifting capacity of three associations and a company had grown from 337,000 tons in 1995 to 890,000 tons in 2004, with average annual growth rate of 18.2 percent.

The dissolution of the “Ketena’s” as one of major liberalization steps, without their replacement by a market responsive form of organization, has left cargo trafﬁ c management activities like cargo booking, consolidation, and truck assignment in a somewhat disordered state.

Breakdown of Industry: Survey Data For-hire carriers are commercial road transport organizations only concerned with moving other persons or other's freight. They are separate from private carriers, users of the system who provide their own carriage, in the sense of movement in their own vehicles. There is mixed ownership of for hire-carriers in both public passenger and commercial road transportation. A number of for hire-carriers are public-owned.

There are ﬁ ve types of for hire-carriers in intercity public passenger and commercial road transport, excluding private carriers who provide their own carriage. These include private limited companies, share companies, public-owned enterprises, associations ("cooperatives" of individuals or owner operators) and for-hire transport business entities of regional development associations.

In intercity freight transport, share companies, private limited companies, public-owned enterprises and for-hire transport business entities of regional development associations are better organized and provide a relatively reliable supply of hauling capacity. The associations could be a lower cost alternative to company-owned fl eet. However, the distinguishing characteristics of most of the associations are that they have insuffi cient resources or inputs such as strong capital base, modern fl eet, skilled manpower and basic facilities, including facilities for vehicle storage and maintenance workshops.

Because of the diversity among share companies, private limited companies and associations, it is not possible to establish a single structure to represent the commercial road transport industry in Ethiopia. In general, however, organization structures are laid out in the shape of a matrix, based on functional specialization. Such a structure offers advantages of specialization to deal effectively with speciﬁ c environmental and internal problems in public passenger and freight transport.

Market Concentration: Survey Data There are no apparent signs of market concentration in commercial road transport, since competitive pressures have led to lower freight rates, though the circumstances in public passenger transport are different than in freight. Although complete time series data does not exist to be able to illustrate the development of the average size of commercial road transport (for-hire carriers), there has not been any expansion of the number of share and private limited companies.

However, there are signs of increasing market share by companies (share, private limited and ownership of regional development associations) on the major import-export corridor. The companies have been able to modernize their ﬂ eet, and as their supply increases, prices (freight rates) come under pressure. The associations make up for great share of intercity freight transport and they are particularly dominant outside the major import-export corridor.

Parastatals: Survey Data The parastatals have started with better organizational resources — mix of professionals with background in transport, relatively modern ﬂ eet, maintenance facilities and experience. They have: • Proper organization structure which lay down the authority and reporting line of operational and functional units; • Management job descriptions that describes the role, responsibility and accountability of a

191 management member; • Job descriptions for the staff to serve as basis for personnel actions, to fi x responsibility and accountability, to investigate disciplinary offences and arrive at judicious conclusions, etc; • A classifi cation and pay system to determine salary and benefi ts, to rate performance, etc.; • Better data management systems—computerized fi nancial management and maintenance management system; and • Their own facilities—workshops equipped with basic maintenance equipment, terminals, parts and supplies stores, fuel depots and other required property at their premises for the smooth operation of the business.

Private Limited Companies: Survey Data The private limited companies are better organized too, in having better organizational designs with the required job descriptions, position classiﬁ cation and pay systems, facilities — workshop, terminals, and stores, than the associations. They have better data management systems, although most companies were not willing to provide access to records for commercial reasons.

The private transport carriers should enhance their organizational capacity, so that they can effectively carry out business planning, fl eet scheduling, cost analysis and tariff setting, fi nancial management and control in order to be sustainable within a competitive environment. In order to adopt a competitive environment and improve service quality, it may be necessary to determine optimum fl eet size for effi cient management and adjust association membership accordingly. Of particular signifi cance is for private transport carriers to establish their business objectives in terms of vehicle productivity, market share and profi tability for sustainability. As the technology of commercial road transport continues to change, the dependence of passengers and shippers on a limited number of common carriers (generally for-hire carriers) will change. Some operators can even afford to operate their own truck fl eets. As the regulatory environment is becoming more competitive, the hire- carriers, particularly the associations have to be much more responsive to the needs of shippers.

New private companies have entered the bulk oil transport market, increasing supply in response to increasing demand for petroleum products.

Private sector participation and owner-operator businesses have grown, which have resulted in increased competition, thus ensuring that some of the savings in vehicle operating costs from better roads will be passed on to customers.

Public-owned Enterprises: Survey Data For most of the enterprises, the existing facilities have become supplementary income generating sources by rendering interrelated services to customers engaged in the commercial road transport industry.

Transport Associations: Survey Data Associations are merely gatherings of owner-operators acting together for securing cargo in the form of "cooperatives". The market condition of the industry is characterized by no dominant group of operators, and there are many operators who hunt for available cargo, in most cases inefﬁ ciently. Freight transport has a very high proportion of small-operators, organized into associations.

The characteristics of the sampled transport associations/operators (public and dry cargo freight) are summarized as follows: • Associations are groupings of in general a small number of vehicle owners; • Associations act as brokers facilitating prompt loading to their members and collecting commissions for the services they render; • As associations are not registered companies, but are groups of independent operators, the

192 sizes of their combined capital could not be estimated; • There are defi ciencies in data management: in recording, organizing, retrieving operational and fi nancial data for management purposes; • Some of the associations do not have proper offi ce facilities and personnel. Offi ces of most associations are not well organized, there is insuffi cient space and they serve other purposes aside from transport. Conversely, some have organized offi ces with the necessary human resources; very few associations have small and clean offi ces with reasonably skilled personnel; • In general associations are fragmented, uncoordinated and unorganized; • The Consultant was unable to secure data about the fl eet sizes of some of the associations; and • Associations are preoccupied with day-to-day management of operations.

They do not engage in business planning, study of costs, revenues, tonnages and other operational and ﬁ nancial performance indicators. There are no organized consultations on problems of common interest.

In general, a shortage of skilled staff, a lack of proper facilities and ineffective management, an absence of rationale for pricing, the instability of demand, poor asset management and weak ﬁ nancial position characterize a large share of the associations that were sampled.

Some associations have simple structure and some functional structures, which are replicated from both the parastatals and private limited companies. On the contrary, most associations have no formal organization structures and stafﬁ ng plans prepared on purpose.

Associations have no organizational resources—e.g., own maintenance facilities (workshops), terminals or spare parts and other supplies stores which are required to serve the association members.

The form of organization of associations is an innovative one, but changes have not been forthcoming to shift from just "grouping" of individual operators to companies managed on the basis of business lines. There may be other possible forms of organizations, which should be considered. Generally, the thrust to corporatize the associations is consistent with the objective of promoting productivity and efﬁ ciency. Although this is the most desirable approach, during an interim period many steps could be taken to improve the management and performance of Associations.

Regulatory and Institutional Environment

There are no policy guidelines to improve the operating efﬁ ciency of the industry (though deregulated and simpliﬁ cations for market entry). There is a low level of drivers' skill, which contributes to low vehicle performance and the poor safety standard. This is attributed to a weak skill development capacity, which is exacerbated by ineffectiveness in the enforcement of regulations.

Business Environment There is a lack of awareness of the signiﬁ cance of the entire management logistics chains. There are weaknesses in the organization of associations (in management, in systems procedures, in commercial principles, etc).

There is no forum established, as yet, to discuss and resolve problems among stakeholders, parastatals, private limited companies and associations, in order to bring issues to the attention of the Government or for dialogue.

There is no visible preparedness, in view of Ethiopia’s possible World Trade Organization Accession Agree- ment (in terms of freight transport, maintenance and repair services, storage and warehousing, etc.); and there is an absence of, or inadequate, freight forwarding and cargo consolidation services at strategically located centres.

There is generally a low level of ﬁ nancial support (bank and insurance), due to absence of supportive credit policies to the industry. 193 ANNEX 5: Public Transport Industry Structure Introduction A review of the historical development of the passenger industry is helpful in understanding the current situation.

Historical Perspective During the Imperial Era, the private sector provided public passenger transportation services. Long distance interurban scheduled services were offered by a limited number of companies with conventional bus ﬂ eets, while short and medium distance interurban services were provided by individual operators that organized themselves in associations. Anbassa, which was established as a share company in 1952, was the only organization providing both urban and interurban service.

The key dimension of the period prior to 1974 was that the market, through the forces of supply and demand, determined decisions on the allocation of resources in the commercial road transportation industry. The roles of government included making investment in roads, setting of safety standards, and promotion of road transportation services and regulation of private industry, without public sector involvement in the delivery of commercial services.

Before the establishment of the Road Transport Administration by Proclamation No. 256/1967 to control and regulate travel and transport on the road, driver and vehicle licensing, annual inspection and registration and issuance of route permit for long distance public passenger transport vehicles were carried out by Land Trans- port Division of the Imperial Ministry of Transport and Communications. There were about 14 private cross- country bus operators each having its fl eet of over 45 seat capacity vehicles, maintenance facilities and offi ces. Anbassa was one of these private companies providing long distance interurban service. Individuals with a limited number of buses could be registered with any one of the enterprises as associates, mainly to get scheduling and dispatching services. During this period, public road transport fare for all types of services (urban, regional, and interurban) was determined by the market. At this early stage of development, there were no other barriers to entry to the industry aside from fi nancial capacity to buy a vehicle and obtain route operating permit.

In an environment where there were a large number of operators compared to demand, there were reductions in fares as there were no controls on pricing. As a result, passenger fare, which was initially more than two cents per passenger kilometer, had declined to 1.5 cents per passenger kilometer. However, the intense competitive pressure had adversely affected passenger convenience and safety. In an attempt to overcome the problems associated with weaknesses in control over prices charged, quantity and quality of services, the Road Transport Administration was established in 1967 as an autonomous agency. Its main functions were to control public road transport fares and reduce barriers affecting expansion of services.

The establishment of the Road Transport Authority during the Derg regime was accompanied by extensive regulation of commercial road transportation involving entry to and exit control from the business, control over passenger fares and freight rates and zones of operations (the “Ketena’s”). The signifi cance of an extensively regulated commercial road transport industry is that it had resulted in the distortion of the normal market mechanism, and forcing carrier rates below what would otherwise be charged. This led to serious consequences in the long run as many private operators were not able to be fi nancially sustainable, adopt technological innovations and maintain the quality of services at a satisfactory level. As a consequence, the vehicle fl eet of the private operators was very old (on average as high as 15 years), compared to the age of the public-owned fl eet (about 8 years).

194 Immediately after the rise of the Derg regime to power in 1974, Anbassa was one of the commercial establishments nationalized and mandated to manage state-owned public transport vehicles and expand its services to gradually replace the private sector’s involvement. It was one of the seven subsidiaries under the National Road Transport Corporation (NATRACOR). The service of medium and small private bus operators was coordinated and controlled by Public Road Transport Coordination Ofﬁ ce under NATRACOR. The coordination ofﬁ ce was responsible for dispatching privately owned medium and small commercial buses in the country through its three zones of operation known as “Ketena’s”. Long distance large bus private companies with the exception of Anbassa were not nationalized, and their service continued under a heavily regulated environment.

As the public-owned ﬂ eet, particularly the number of trucks rapidly increased, the need to reorganize NATRA- COR was required, and in 1987 when NATRACOR was split into two: Public and Freight Road Transport Corporations. These two corporations operated their own large truck or bus ﬂ eets and dispatch vehicles of individual private operators. Following change in the regulatory environment during the transition period, the role of “Ketena’s” was transferred to private regional associations.

Anbassa City Bus Enterprise is predominantly conﬁ ned to Addis Ababa, while its 114 DAF cross-country buses were transferred to the then newly created Walia Intercity Bus Services. In addition to these parastatals for urban and interurban services, Abay, was formed, with the function of providing heavy maintenance to both Anbassa and Walia, and supply parts to all operators.

One of the aims of the recent reorganization was to facilitate future privatization and for the public sector to withdraw from the delivery of commercial transport services. As a result of this restructuring, “Ketena’s” were replaced by private associations and the role of the corporation was assumed by the Supervising Agency.

One of the issues raised by private operators following commercial public passenger transport industry liberalization is that some regional associations propose tariffs and get the approval of the Regional Transport Bureaus, while others are obliged to comply with the rates set by the Transport Authority. In contrast to commercial freight transportation, most fares for public passenger services have not been deregulated. There are limitations to the availability of more ﬂ exible and customer oriented services. In long distance intercity public passenger transport, the private sector has won back a rapidly increasing share of the market, compared to the period prior to the deregulation of the industry.

The Addis Ababa Taxi Service, formerly under the control of the Public Road Transport Corporation was transformed to three poorly organized associations. Despite the liberalization of entry to taxi business, passenger fares are controlled.

Current Passenger Transport Industry Structure There are ﬁ ve types of for-hire carriers in intercity public passenger road transport, excluding private carriers who provide their own carriage. These include private limited companies, share companies, public-owned enterprises, associations ("cooperatives" of individuals or owner operators) and for-hire transport business entities of regional development associations. Because of the diversity among share companies, private limited companies and associations, it is not possible to establish a single structure to represent the commercial road transport industry in Ethiopia.

Intercity Passenger Transport Industry The Transport Authority supplied details of buses operating on interurban routes for 28 associations, one enterprise (Walia), afﬁ liates of Walia, and two private companies (Selam Bus Line and GTS). These are summarized in Annex Table 5.1.

195 Annex Table 5.1 Intercity Buses (Including Minibuses) Licensed by the Transport Authority (2006)

No. of Buses Classiﬁ ed by Number of Seats Operator Group Up to 43 44-47 48-60 61 and over Total Associations (28) 2,939 1,193 530 250 4,912 Walia I/City Bus — — 114 — 114 Enterprise (1) Walia I/City Bus 1,259 93 105 47 1,504 Enterprise Associates (1) Private companies (2) — 10 44 3 57 Total (32 groups) 4,198 1,296 793 300 6,587

Source: Transport Authority.

Some 15 of these operators are engaged primarily in long-distance bus transport, including 11 associations, two private companies, one state enterprise (Walia), and afﬁ liates of Walia. The numbers of buses with seating capacities of 44 or more, operated by these organizations, may be summarized as follows.

Annex Table 5.2 Bus Seats

44-47 seats 393 48-60 seats 779 61 seats and over 300 Total 1,472

Other buses listed in the above table, including around 4,200 buses with up to 43 seats and 900 buses with 44 to 47 seats, are primarily engaged in short-and-medium distance interurban transport.

Walia Bus Walia Bus was born in 1995 detaching itself from Anbassa Buses Enterprise. Going operational with a capital of 16.9 million Birrr, Walia has a ﬁ ve percent market share with its 31 buses. However, the company is operating at a loss. Though PPESA has repeatedly placed the company on the auction block, no buyer has been interested to acquire it. Therefore, of the 900 staff, GoE has laid off 500.

Associations Some characteristics of the public transport associations/operators are as follows: 1. Associations are grouping of small number of vehicle owners; 2. Associations are not registered companies, but groups of independent operators; and 3. Associations are fragmented, uncoordinated and unorganized.

Some strong associations distribute to their members tyres and lubricants at less than retail market prices. They have their own property, such as small ofﬁ ce buildings and fuel stations. A few associations negotiate with insurance companies and secure better premium for their members. For instance, an association operating over 130 medium and small buses has an agreement with one of the private insurance companies to pay an annual premium of Birr 750 for an 11-seat capacity minibus for third party motor insurance coverage. The premium for a 44-seat capacity bus is Birr 1,350. If the policy is to cover passengers, the driver and his assistant, the annual payments go up to 900 Birr and 1750 Birr for 11 and 44-seater buses, respectively. One major problem that operators are currently facing is the difﬁ culty to get genuine spare parts in the market.

196 Urban Large Bus With its large bus ﬂ eet, Anbassa City Bus Enterprise dominates conventional bus service in Addis Ababa. Although the federal government owns the company, its operations are supported by the city administration, which pays a subsidy for each passenger carried. The level of these subsidies is being reduced gradually .

Originally a private enterprise that held an exclusive franchise for passenger transport services in the city, An- bassa was nationalized in 1974 and made a part of the Passenger Transport Corporation (PTC). Two other PTC divisions were responsible for long-distance bus services and bus materials (spare parts and bodies). In 1996 PTC was broken into its three component parts, restoring Anbassa to its previous status as a freestanding commercial enterprise. Since then the workshop component of Abay Technical Services (the bus materials supply division of PTC) has merged with Anbassa, with which it shares a depot in Yeka Sub-city.

In Addis Ababa, the Transport Authority already has the power to issue route licenses, but it intends to develop a devolved licensing process that passes some responsibility down to the operators’ associations.

Urban Minibus The Addis Ababa Taxi Service, formerly under the control of the Public Road Transport Corporation was transformed to three poorly organized associations. Despite the liberalization of entry to taxi business, passenger fares are controlled. In addition to Anbassa’s bus ﬂ eet, Addis Ababa is served by more than 10,000 minibus taxis that provide service of far higher quality. Minibus taxis are not restricted in terms of the routes or areas in which they may operate

Most imported used buses are of a small capacity (minibuses) since the price of high capacity buses of the same condition lies beyond the ﬁ nancial capacity of importing individuals. For these reasons, regional short distance services and Addis Ababa city taxi services are dominated by this category of vehicle.

The market for shorter distance transport has been transformed with the expansion of the services of minibuses, which operate relatively efﬁ ciently in the urban environment and on improved trunk and link roads. The markets in the short-distance operations are increasingly competitive, while the fare of long-distance conventional bus operations continues to be regulated.

Metered Taxis Ten individuals organized Sheger City Meter Taxi S.C., a recently established urban transport private company, which launched new and modern business meter taxi cabs to operate on a system using distance metres instead of the embattled zone system.

The share company, which has a seven-member board, ﬂ oated the public sale of shares with par value of 1,000 Birr each with a nine percent premium, to expand its capital base to 50 million Birr. The sale of shares started on October 16, 2008, and will continue until February 12, 2009, with possibility of extension.

The minimum amount of share to be subscribed is ﬁ ve shares that would require a minimum investment of 5,450 Birr, including the premium. The maximum number of shares a single shareholder can buy 100 which amounts 109,000 Birr.

Market Share Intercity Bus Operations In long distance intercity public passenger transport, the private sector has won back a rapidly increasing share of the market. In the long-haul public passenger transport, conventional bus operators are not yet able to respond to changing market conditions, as the regulatory regime is not ﬂ exible as it should be. There are also problems of safety of services and capacity for the enforcement of economic and qualitative standards.

197 The market for shorter distance transport has been transformed with the expansion of the services of minibuses, which operate relatively efﬁ ciently in the urban environment and on improved trunk and link roads.

The ﬂ eet expansion of the minibuses has increased capacity for passenger movement. However, although customers have beneﬁ ted from the expanded supply through reduced waiting times, without drastic improvements to allow the market to determine the number of mini-buses with the introduction of other types of services, it would not be possible to achieve a well-functioning Demand-Responsive System. Operators and regulators should focus on managing changes to adapt to markets, customer expectations, technology and competition.

The markets in the short-distance operations are increasingly competitive, while the fare of long-distance conventional bus operations continues to be regulated. Regional mini and medium capacity public passenger services are dispatched by owners associations. Field visits conﬁ rmed the dominance of the market (above 40 percent) by minibuses. Improved road conditions have provided incentives to minibus operators to expand the network of their services beyond the suburbs of Addis Ababa. Now minibuses are providing charter services on long-distances such as from Addis Ababa to Dire Dawa. This is a very good development as it enhances competitiveness and put pressure on regulatory authorities to consider options to the current controls on schedules and fares.

198 ANNEX 6: Access to Credit/Loans

Introduction An investigation of access to medium term credits and loans is important for the road transport industry. All sources in this Annex are from the W.T Co. Draft report and are repeated verbatim.

W.T Cosult Market Survey

Loans Granted All the banks surveyed by W.T Co., except the Development Bank of Ethiopia, provide credit facility for partial fi nancing of purchases of commercial vehicles (freight and public). Some of the fi nanciers have only 3 or 4 years of experience in granting loans to the sector. The Commercial Bank of Ethiopia (CBE), which has several years of experience in providing loans to the industry had suspended the credit facility for the past six years due to the diffi culties it faced in recovering both principal and interest payments. However, CBE reinstated the credit facility at the beginning of 2006 and provided loans totaling about Birr 190 million during that fi scal year.

Most of the data obtained from the banks is not detailed enough to provide a basis for meaningful analysis. On the basis of the data collected, an aggregate amount of Birr 976 million loan was granted to the commercial transport industry by the CBE, Awash Bank, Bank of Abyssinia, United Bank, Nib Bank, Dashen Bank and Construction and Business Bank over the last ﬁ ve years (2002-2006), as shown in Annex Figure 6.1 and Annex Table 6.1 below.

Annex Figure 6.1 Loans Granted to the Road Transport Sector

199 Annex Table: 6.1 Loans Granted to Commercial Road Transport by Ethiopian Banks

Year Amount of Loan Granted in million Birr 2002 23,197,200 2003 14,722,000 2004 12,998,000 2005 154,870,000 2006 712,730,000 Total Loans Granted in 5 years 975,747,200

Since CBE reinstated the credit facility in 2006, the magnitude of the loan balance in 2006 was much higher than for the preceding years.

As shown in Annex Table 6.1, the loans provided each year for the industry has shown a continuing upward trend, and consequently the cumulative total reached about Birr 976 million in 2006. According to the data collected from the transport operators, the interest rate charged by the bank on loans advanced ranges between 7.5 and 11 percent.

Nonperforming Loans Although banks consider trucking as a high-risk business, the nonperforming loans (NPL) of the industry are minimal or negligible, and for some of the banks the NPL is almost zero. The NPL is remarkably far lower than 15 percent, which is the NPL benchmark set by the National Bank of Ethiopia (NBE), or lower than 10 percent that is an internationally accepted NPL rate. Even those loans reported as “Nonperforming Loans” by some Banks, have been settled through the process of negotiation and rescheduling. This signiﬁ es that borrowers are meeting their commitments accordingly or are creditworthy.

This is a fundamental issue when considering the future upgrading of the technology of the vehicle ﬂ eet to enhance competitiveness through the reduction of unit vehicle operating costs.

Annex Table 6.2 below provides details of Nonperforming Loans.

Annex Table 6.2 Nonperforming Loans as % of Total RT Industry Loans

Year In Percent (%) 2002 2.84 2003 6.10 2004 7.32 2005 3.68 2006 2.02

200 Loan Terms and Conditions Most banks have the same terms and conditions for both urban and rural transport commercial vehicles. Over- all, the terms and conditions that apply to the creditors of the Commercial Road Transport Industry can be summarized as follows: • Banks seem to have different modus operandi for different borrowers described in the following terms:- - If clients are capable of paying 50 percent of the price of the truck, some banks can lend the remaining 50 percent by holding the ownership certifi cate as guarantee; - Some banks cover 60 percent of the purchase value of the vehicles holding the ownership certifi cate, if the borrower settles 40 percent; - Some banks require contribution ranging between 30 percent and 60 percent of the purchase value of the vehicle plus additional collateral, depending on the credit risk posed by the applicant, to lend the balance required for the purchase; - Some banks require the client to contribute 30 percent of the purchase value of the vehicle and effect a maximum balance of 70 percent directly to the supplier by keeping the ownership certifi cate of the equipment plus additional fi xed asset collateral; - Some banks do not have distinctive or discriminatory credit policy for fi nancing either freight or public transport; and - Some banks do not provide credit for public passenger transport companies. • Most banks require a clearance from all fi nanciers, which show that the applicants have non- default status; no record of any mal-operational practice of checking account in the banking industry; • Applicants are expected to have: - Suffi cient experience and be licensed to operate in the business, and - Tax identifi cation number; • Applicants need to submit feasibility study or project profi le that demonstrate attractiveness — fi nancial forecast, market research, pro forma invoice and other relevant social and economic information; • There are no banks that fi nance 100 percent of the value of vehicles to be purchased by creditors. • Different banks have different criteria on the kind of vehicle they fi nance.- - Some banks fi nance truck with loading capacity of up to 10 tons; buses less than 45 seats. - Others fi nance a truck with trailer up 300 quintals loading capacity, a fuel tanker with 40000 litres loading capacity and a bus with at least 30 seats. - Some banks require that the motor vehicle to be purchased meets the standard specifi cation of the Transport Authority; • The maximum tenure of the loan is 4-5 years; and • If the loan is sought for the procurement of tanker, some banks require a tripartite agreement, involving the borrower, the oil company and the bank.

Although the percentage contribution of the loan to be covered by the client varies, entrepreneurs borrow from banks on “asset based lending” (such as building and equipment of the business or individual as collateral). Asset based ﬁ nancing relies on the value of the underlying collateral to minimize the loan's credit risk.

The introduction of an efﬁ cient charging rate for fund lent for the purchase of vehicles and the development of competitive market structures within the sub-sector need to be investigated.

201 ANNEX 7: Free Trade Zone

Introduction The Transport Master Plan investigated the various types of zone that could be considered. Details are provided below. It is recommended that a customer survey be conducted to obtain more concrete data on precise requirements.

Potential Legal Options that could operate within a Dry Port In order of Likely Preference

Free-Trade / Export Processing Zone The traditional free-trade zone (FTZ) or export processing zone (EPZ) is deﬁ ned as a secure piece of land which contains production, display or storage units, importation to which is free of domestic taxes and duties. Taxes and duties would be applied to goods released from the zone to the domestic market, but may be exempted for exports.

Special Economic Zone The special economic zone, (SEZ) has been used to describe the EPZ concept in China, with the best-known example being the Shenzhen region, neighbouring Hong Kong. A further variation of the EPZ is the Admin- istrative EPZ. An example is found on the island of Mauritius, where any investor can apply for ‘EPZ status’, and locate anywhere in the territory. It is generally felt that all these regimes are ‘second-best’ solutions to more widespread liberalization of the economy.

Free Port / Free Zone The free port, or free zone, describes an area that can range in size from a few hundred square meters, to a few hundred hectares. Here goods of any description can be imported and stored under customs control, free of customs duties and tax.

Local Free Trade Zone A further option is the local free trade zones, or border markets. These tend to be informal affairs, which have generated a momentum of their own, and which can be formalized in due course. The best known international examples, albeit now historical examples, might be those border towns and villages, such as Andorra and Cer- vigno, on the borders and France and Spain, and France and Italy respectively, which offer, or offered in the latter case, duty-free shopping to visitors, and which developed from border free trade zones.

Bonded / Customs Warehouse The more traditional bonded, or customs warehouse is a type of facility that usually has customs offi cers on-site, and offers the opportunity for importation free of duty and taxes, under certain tightly specifi ed conditions. This type of facility can also allow some limited re-labelling, or processing, of consignments for re-export. This type of initiative is frequently an acceptable compromise, as it can, depending on the precise form of institutional framework, provide many of the benefi ts of the above, whilst avoiding many of the worst potential problems.

202 Distribution Centre Finally, there is the pure distribution centre, which is generally, located in a particular place to maximize the logistical advantages of a particular location. These centres represent the optimal point, within a given geographical, institutional and supply chain framework, for the distribution, or importation and distribution, of a particular commodity, or commodities. Whilst, they can have a bonded warehouse on-site they are dependent on whether the intended market is national or international, although the standard distribution centre serves a domestic market.

Current demand A customer survey would need to be conducted to establish what the current need is for such a range of services. It is likely that any of the above mechanisms would be used, but that a local free-trade zone would be most wanted.

203 ANNEX 8A: WTO Accession Introduction It is useful to consider the WTO when investigating the future direction of the freight forwarding industry and the road freight transport industry in Ethiopia.2

The WTO • Established in 1995. • Replaced the GATT 1947 system with a single undertaking. • Member driven organization with 153 member countries. • 29 observer countries, including Ethiopia

The WTO’s Main Agreements • Multilateral agreements on trade in goods --- includes 13 agreements covering different areas of trade in goods. • The General Agreement on Trade in Services (GATS) - agreement covering services trade divided into 12 main sectors. • The Agreement on Trade Related Intellectual Property Rights (TRIPS) --– agreement covering 7 intellectual property rights.

The Accession Process A country wishing to accede to the WTO undergoes the following major processes: • Application for accession. • Fact ﬁ nding. • Bilateral and multilateral negotiations. • Adoption of Working Party Report and accession.

Status of Ethiopia’s Accession Negotiation • In 1997 Ethiopia became an observer. • In January 2003, it submitted an application to accede to the organization. • In February 2003, a Working Party on the accession of Ethiopia was set up. • In December 2006, the Memorandum of Foreign Trade Regime was submitted. • In 2007, Ethiopia received the ﬁ rst round of questions from WTO members. • In January 2008, Ethiopia submitted its replies to these questions. • On May 16, 2008, the First Working Party meeting on Ethiopia’s accession was held at the WTO. • In summer 2008, Ethiopia received a second round of questions from WTO members.

Potential Beneﬁ ts of Ethiopia’s WTO Accession • It serves as a tool to lock in reforms. • It ensures market access for Ethiopian exports. • It provides for a transparent and predictable regulatory framework. • It prohibits arbitrary and discriminatory restrictions on foreign trade. • It increases Ethiopia’s opportunity to attract foreign investment. • Ethiopia can utilize the WTO’s dispute settlement mechanism to settle trade disputes with other WTO members. • It provides a platform to integrate Ethiopia in the multilateral trading system.

2 Booz Allen AND Hamilton USAID, Wendwesson Shewarega, November 13, 2008 Conference on Law and Economic Development Addis Ababa, Ethiopia. 204 ANNEX 8B: Developments in the Freight Industry-World Experiences The road transport sector is characterized by easy entry and poor economies of scale. Combined with the development of motorway networks starting in the 1930’s and 1950’s and the increases in commercial speeds and net loads, this explains why the sector has developed so quickly and so competitively. It also explains the low concentration: for example, in 1985 in Ethiopia, 60 percent of operators were owners driving their own vehicle.

Since the 1930’s, road transport has been subjected to tight quantitative regulation. The aim was to introduce a system of licenses, quotas and tariffs. For its part, the road transport profession had the benefi t of a market closed to new entrants and tariffs fi xed at a level that enabled the least competitive to survive. Thus, until the two waves of deregulation in the 1960’s and 1980’s the profession had to operate within the context of various forms of mandatory road transport pricing and freight bureaus benefi ting from anti-trust exemptions.

These domestic regulations were supplemented by international regulations based on bilateral agreements incorporating the same principles: quantitative restrictions and ﬁ xed tariffs.

The economic regulation of the sector was also accompanied by social regulations (driving hours, no driving on Sundays and public holidays) and a body of technical and safety legislation (axle loads, dimensions, speed).

The quota system did not achieve all the objectives set for it by its promoters: it did not succeed in regulating capacity or in preventing the erosion of rail transport, and it encouraged fraud and the development of transport on own account. These systems of quantitative regulation have gradually disappeared domestically. In the United States this took place within the framework of the deregulation movement.

In Europe, in the European Community, the process of establishing a single road transport market started (price deregulation in 1990, abolition of intra-EEC quotas, progressive liberalization of cabotage completed on 1 January 1998, deﬁ nition of qualitative criteria for access to the profession, harmonization of driving hours and weights and dimensions, and a start on the harmonization of the taxation of vehicles, use of infrastructure and fuel).

In Ethiopia, liberalization has been quite sudden and abrupt and has been succeeded by a period of re-regulation or rather regulation, since the previous state-owned ﬂ eets did not need to be regulated, all this accompanied by a collapse in the market share of rail transport and a considerable increase in that of road transport.

In recent years, wherever there were domestic quantitative regulatory and mandatory pricing systems or indeed State haulage enterprises, there has been a trend towards liberalization and, where necessary, denationalization, especially at the instigation of the World Bank.3

The effect of this domestic liberalization has been a fall in prices, the creation of new enterprises but also bankruptcies, an acceleration of concentration and specialization, the establishment of networks, a decline in the proﬁ tability of the sector, an adaptation of services to market demand, job creation and a relative decline in wages. The impact on safety and working conditions has been the subject of doctrinal controversy in the specialized literature. On the other hand, there is consensus among economists that liberalization has been successful in taking into account the short-term objectives of transport policy (lower prices, diversiﬁ cation of supply) but less so at internalizing the medium-term objectives: reduced congestion of the road infrastructure, pollution control, and energy conservation, etc.

In terms of trade and modes of supply this internal liberalization process has been of great importance. Road transport is essentially short-haul (for example, in the European Community 66 percent of loads—measured in tonnes—are delivered within a radius of less than 50 kilometres), and thus most trafﬁ c, particularly in large countries, is conﬁ ned within the boundaries of the state

3 See "Sustainable Transport Priorities for Policy Sector Reform", World Bank, 1995. 205 As regards cross-border supply, international regulations have also begun to be liberalized mainly, in view of the "intra-continental" nature of this mode of transport, through regional agreements. Thus, outside the single road transport market of the European Community, the European Conference of Transport Ministers (ECTM) administers a multilateral license quota4, and as a ﬁ rst step towards complete multi-lateralization has undertaken to standardize the bilateral agreements on a recommended model.5 Moreover, road transport is included in NAFTA where it is the subject only of limited reservations concerning mainly cabotage trafﬁ c. Finally, several regional agreements in Central America and South America concern road transport and have been the subject of MFN exemptions.

The third barrier mentioned by the IRU concerns border-crossing diffi culties. In this connection, the IRU has invited governments to recognize the costs and dislocation of international trade caused by ineffi cient and uncoordinated border-crossing procedures, has asked all states concerned to accede to the international agreements and UN conventions governing international road transport and apply them in an effi cient and har- monized manner, and also recommends the development of cooperation between national control services on each side of the border and the introduction of "one-stop" technology, improved training of border personnel and improved quality and capacity of border infrastructure, with international fi nancing institutions and private investors being invited to fi nance them.

These border-crossing problems seem to be universal, as evidenced, for example, by a recent Southern African Development Community document6 which estimates that these delays cost its members 48 million dollars every year.

The industry also considers that, a variety of measures such as total or partial bans on transit, quantitative restrictions on road transport which distort intermodal competition, bureaucracy which prevents forwarders from freely choosing their mode of transport, quantitative restrictions on road transit in the form of authoriza- tion quotas or limitations on vehicle weights and dimensions below the levels usually accepted and excessive transit charges all impair the freedom of transit recognized by Article V of the GATT and the principle defi ned in Article V.4, according to which "all charges and regulations imposed by contracting parties on traffi c in transit to or from the territories of other contracting parties shall be reasonable, having regard to the conditions of the traffi c".

Finally, the industry considers that the inadequate harmonization of ﬁ scal charges (excise duties on fuel, road use charges and tolls) and of technical regulations (specifying weights and dimensions and making it necessary to under-load goods vehicles in order to comply with the legislation of the transit country) constitutes a serious barrier, as does the very uneven application of social legislation concerning driving and rest times (number of controls, penalties). In this connection, the literature also mentions the existence in Europe of optimization strategies and a trend to divert trafﬁ c to those countries whose social legislation is less strict. These comments by the industry mostly relate to the European Community but it seems that they could also be extended to other geographical areas.

In the case of freight, the distinctions are based not on transport organization and structure but on the nature of the goods transported. Although the analysis of commitments shows signifi cant variations between the various kinds of goods, only one type seems to deserve special treatment or some kind of classifi cation clarifi cation, namely mail transport, especially in relation with postal and courier services.

4 See document CEMT/CM (98)7/fi nal 5 See documents CEMT/CM (97)21 and CM (97)21/Add.1 6 SADC "Transport and Communications", Maputo Conference, 29-30 January 1998 206 ANNEX 9: National Transport Master Plan: Strategic Direction for Road Transport Introduction Main Priorities and Strategic Direction The main priorities for road transport aspects of the Transport Master Plan, bearing in mind Ethiopia’s landlocked status, were stipulated as follows: • Effi ciency measures and continued road and rail network development to complete and upgrade the national network, reduce freight transport costs, enhance national competitiveness, improve safety, and give greater opportunities for mobility and development of natural resources and industry; • Reduction in shipping costs by the development of dry ports and multimodal transport to facilitate transits and retain as much as possible of the value added from port activities within the national economy. There is also a need to diversify shipping routes and review the status and fi nancing of ESL to ensure that the benefi ts of competition in shipping can be obtained. Opening up new roads to borders and facilitating international road transport have an important role to play in the diversifi cation of shipping routes

Critical Issues Some critical issues for road transport aspects of the Master Plan to address the key priorities include the following: • The need to improve road safety through training, better road designs, clear and up-to-date traffi c regulations, effective enforcement, and rapid rescue services; • The need for improved skills and management in the transport sector, and the adaptation and strengthening of institutions, to enable objectives to be reached; • The need for an enabling strategy, to release the potential of the private sector. Steps to increase the contribution that private sector investment can make will release public funds for complementary infrastructure or other investments; • The need for more effi cient passenger transport, which will increase dramatically due to population growth – both within urban centres and between them. Effi cient urban and interurban transport will become essential; • Finally, continued worldwide globalization will provide more opportunities for increased international trade, including high-value goods such as perishable products. The development of international transport corridors and effi cient national entry points for road, rail, air and maritime transport is vital. International transport links can also grow regional markets, and are an important component in the development strategy for Africa as a whole.

Constraints to be overcome The main constraints that need to be overcome for the road transport aspects of the Master Plan to be able to meet the challenges ahead include the following: • More professional commercial companies are needed. Training and skills development are essential. An important constraint on the private sector is lack of access to ﬁ nancing sources for investment or re-investment in movable equipment such as vehicles. The ﬁ nancial markets are not yet ready to manage this problem. Government limitations on imports also play a part, and vehicle ownership remains in the hands of a multitude of small investors and endowment funds linked with the regional states; • The expansion of the Ethiopian transport sector to deal with increased volumes of international transport requires both capital and knowledge.

207 sponsibility Initiator/ Re- MoTC MoTC MoTC MoTC, Ministry of Education Timescale 7 Start in June 2007 Start in January 2009 ve and phase in over fi years Start in January 2009 ve and phase in over fi years Start training trainers by November 2007 Complete by November 2008, with courses starting in January 2009 Action Description Use the existence of the new body to infl uence change in working practice of the Use the existence of new body to infl c Traffi Establish coordination between enforcement agencies to implement the law. and other road agencies. Police, ERA Strengthen the testing procedure by changes to the law and re-establish private testing stations equipped with internationally compliant equipment to check all aspects of vehicle roadworthiness. rst stage, for vehicles over Enforce regulations for all vehicles over 20 years old as a fi ve-year old vehicles. 15 years next and gradually extend the enforcement to fi Establish a system of control, and review the policy law on access to profes- license system to institutionalize sion to gradually introduce the international style ‘O’ nancial security. the concepts of professional competence, good repute and fi Introduce a requirement for approved parking sites when not in use to ensure safety of vehicles and pedestrians to limit parked in residential or unsafe areas. With assistance from EU fund a programme to introduce national and international With CPC to raise the awareness of changes needed in legislation reduce accidents ciency. and improve commercial vehicle truck bus effi Objective Establish the Road Safety Council with authority to act. New legislation planned Strengthen the vehicle testing regime for all vehicles to ensure that they comply with a new law on Construc- tion and Use to be introduced Establish new legislation for truck and bus operator (O) licensing and access to the profession, manage quality and safety of truck bus operation in Ethiopia Introduce CPC, ADR, DGSA and Customs training for ADR, DGSA Introduce CPC, and cascade to establish courses Trainers’ the ‘Train transport managers, commercial driv- for MoTC staff, ers, etc. this time some of the proposed interventions will have been implemented according to the original schedule whilst others may have been delayed. interventions will have been implemented according this time some of the proposed 4. 3. 2. 1. The starting point for all Timelines in this Annex refers to the year 2007/08, when the main recommendations of the Ethiopian National Transport Master plan Study were originally made. Since Master plan Study were of the Ethiopian National Transport when the main recommendations to the year 2007/08, Annex refers in this The starting point for all Timelines Annex 10: Specifi c National Transport Master Plan Priorities for Road Transport Transport Road Plan Priorities for Master Transport c National Annex 10: Specifi 7 208 sponsibility Initiator/ Re- MoTC MoTC MoTC MoTC TA AA- ERA, CRA, RRA’s MoTC/ MoFED MoTC MoTC MoTC Timescale Start in August 2007 and Start in continue until completed Start in August 2007 and Start in continue until completed Start in March 2008 Start in January 2009 Start in August 2007 Start in Start in August 2007. Start in Start in August 2007 and Start in continue until completed Start in July 2007 Start in August 2007 and Start in continue until completed Action Description For new cars this could be introduced immediately and for older vehicles phased in. Non-compliance will result in a failed vehicle test The new test would be based on best practice requiring written and driving experi- This to include ence that is compulsory and unable to be obtained by payment alone. (speeding, personal injury c offences c traffi a retest of drivers prosecuted for specifi accidents, convictions for dangerous driving, etc.) Establish ADR in law for drivers and compliance of vehicles. Require license to be Establish testing to Vehicle issued to each driver after training, renewable every three years. ve years to include special vehicle testing, ADR to be phased in over fi comply with starting with the oldest vehicles. Road markings on paved roads should be applied consistently. The application of Road markings on paved roads should be applied consistently. double white centre lines needs special care and training, as if not related to sight distance the system falls into disrepute. More signs are needed on gravel roads where road markings are impracticable. Ababa should be considered as these are a low Addis The use of “box junctions” in cost way to reduce blockage at junctions and could have immediate effect. t of tourists and other More directional signs are needed everywhere, for the benefi visitors, to avoid loss of time and fuel. Training to be established at Kaliti and other key locations for national interna- Training tional CPC's. Regional training courses to be established. Establish in law the status of such permits for tourists and other visitors to prevent considerable confusion that exists today (there should be no need for tourists on visits less than 90 days to apply for an Ethiopian license). By government tax incentives encourage private investment or public-private partnerships in approved facilities when needed. Ensure by market research that investment is matched to demand and customer requirements. This would enable the new agreed drivers’ hours limits to be controlled with immedi- This would enable the new agreed drivers’ and enable the authorities to limit driving hours of freight passenger ate effect bus vehicles. (Digital tachographs to be phased in as available.) Review the current situation regarding insurance policy and fi nancial investment Review the current situation regarding insurance policy and fi sources to determine the constraints on transport industry. Bring legislation in line with best practice. If insurance is not possible due to vehicle condition it has either to be repaired or scrapped. party insurance, fi re and theft party insurance, fi rd Objective Introduce compulsory 3 Introduce the fi tting and compulsory wearing of seat Introduce the fi belts Introduce new drivers’ license regime for all drivers of Introduce new drivers’ road vehicles Establish compulsory ADR training prior to license is- Establish compulsory sue for truck operators who handle hazardous products Better road markings and signs in Addis Ababa and on Addis Better road markings and signs in the rural road network Establish compulsory CPC testing before license issue for truck and bus operators International Driving Permits Identify preferred locations for future dry ports, bus terminals and international logistics centres (ILC’s) Introduce a driver logbook system for all heavy commercial vehicles over 3.5 gross tons followed by tting of tachographs for those under 3 compulsory fi years old Insurance, banking, lending and leasing reforms for cars 11. 11. 10. 9. 8. 14. 7. 13. 6. 12. 5. 209 Means to Obtain Indicator Federal Gazette Federal Gazette Federal Gazette Notifi cation Notifi Federal Gazette Minutes of meetings cation Notifi cation Notifi chat allowed Indicators/Goals/Targets 8 Proclamation No.468/2005 amended accordingly Proclamation No.468/2005 amended accordingly Simplifi ed speed limit regulations in place Simplifi Regulations on tyre condition, seat belts and mobile phones in place hours in place Regulations on drivers’ Regulations on fuel quality and vehicle emissions updated and coordinated Regulations on amounts of alcohol and in bloodstream adopted Law enacted Council created, meeting twice yearly under Prime Minister Frame established Capacity building program established Unit created and fully staffed 2012–27 ◙ ▲ ▲ ▲ 2011/12 ● ◙ ●◙ ●◙ 2010/11 ○ ◙ ▲ ▲ ▲ ○ ●◙ ○ ●◙ 2009/10 ▲ ◙● ●◙ ●◙ ◙▲ Implementation assistance needed Technical nancing needed Loan or other external fi 2008/09 ▲ ◙ ◘ ○ ● ○ ● ○ ●◙ ○ ●◙ ○ ●◙ 2007/08 Activity Preparatory studies Detailed preparation 11: Road Transport: Action Plans for Principal Actors with Timelines Actors with Principal Action Plans for Transport: Road 11: Introduce operator licensing Make CPC a requirement for new operator licenses c regulations New traffi Create Implementation Unit New General Transport Law Transport New General Council Transport Create National Institute a framework in support of ciency in sector effi Energy Authority and Transport the [With ces]: Build Offi Transport Regional capacity building an effective program this time some of the proposed interventions will have been implemented according to the original schedule whilst others may have been delayed. interventions will have been implemented according this time some of the proposed 1. 2. 3. 4. 5. 6. 7. 8. ○ ● The starting point for all Timelines in this Annex refers to the year 2007/08, when the main recommendations of the Ethiopian National Transport Master plan Study were originally made. Since Master plan Study were of the Ethiopian National Transport when the main recommendations to the year 2007/08, Annex refers in this The starting point for all Timelines Annex and Communications (MoTC) Transport Action Plan: Ministry of 1. 8 210 Means to Ob- tain Indicator Means to Ob- tain Indicator MoFED advice Federal Ga- zette City and AAC- City and reports TO AACTO report AACTO Means to Obtain Indicator Advice from TA Advice from Federal Gazette Notifi cation Notifi Notifi cation Notifi Advice from CDE Advice by MoTC Federal Gazette Targets Indicators/Goals/ Activities completed and institutionalized Levy approved 27 2012– Indicators/Goals/Targets 2011/12 Indicators/Goals/Targets Plans and budgets AACTO created and fully operational AACTO Agreements to be signed and implemented Council established and reporting to Prime Minister Studies completed. Authority created and staffed Lines in place and open to c traffi Study completed, trial started Proclamation 468/2005 amended accordingly 2010/11 ▲ 2012–27 2012–27 2009/10 2011/12 ▲ ▲ 2008/09 ▲ 2011/12 ▲ 2010/11 ○ ● ○ ● 2007/08 ▲ ▲ ●◙ 2010/11 2009/10 ◙ ○ ▲ ▲ ●◙ ◙▲ ◙▲ ▲◘ 2009/10 2008/09 ○ ● ○ ◙ ○ ● ●▲ ○ ●◙ ○ ●◙ ●◙▲ 2008/09 2007/08 ○ ◙● 2007/08 Activity Activity Activity Strengthen oversight of transport sector; approve investment criteria, programme cation of feasibility studies and back-checking (post-evaluation and budgets; verifi project success and sustainability) Ababa and Addis Permit a public transport levy on fuel to support in other cities (could replace municipal tax, which is already collected by Road Fund) Create new Addis Ababa City Transport Or- Transport Ababa City Addis Create new AACRA and subsume ganisation (AACTO), AACTO and others into AACTO nancing for approved Ensure fi programme tional agreements) WTO tional agreements) connections, international road links Yard vices, and introduction of trial allow licensing for intra-zonal trips at zonal level 15. Establish National Road Safety Council 14. Develop international road transport (bilateral/interna- 13. Study of Sudan rail links and possible Berbera and Assab 13. Study of Sudan rail links and possible Berbera 12. Create Railway Infrastructure Authority 12. Create Railway Infrastructure 11. Implement rail line to Doraleh and branch into Comet 11. 10. Study for new system of providing interurban bus ser- 9. Prohibit restrictive practices by transport associations; 1. 2. 1. 2. 2. Action Plan: Ministry of Finance and Economic Development (MoFED) 2. Organization (AACTO) Transport Ababa City Addis Action Plan: 3. 211 Advice by MoTC AACTO AACTO reports City Gazette AACTO report AACTO AACTO/EPA AACTO/EPA reports AACTO reports AACTO report AACTO Inspection AACTO report AACTO Inspection AACTO report AACTO PPESA and PPESA City reports Means to Obtain Indicator CDE advice CDE/Comet reports CDE advice CDE advice CDE advice CDE advice Study completed, trial started Progress as per Master Plan (as adapted by Plan) Transport Ababa Addis future Arrangements in place and proclaimed by regulation Progress as per Master Plan Monitoring and reporting system in place Anbassa Progress as per Master Plan [Note rst batch of 500 medium sized procured fi buses in 2009] Plan approved and implemented to schedule Solutions proposed and implemented Tasks completed Tasks for trol- c; energized Busway open to traffi leybuses AACTO created and fully operational AACTO Ownership transferred [Note: privatization is not foreseen in the near future -at least not in the next 5 years] Indicators/Goals/Targets ▲ ▲ ▲ ▲ Line open to traffi c Line open to traffi Line open to traffi c Line open to traffi Agreements completed Sidings open to traffi c Sidings open to traffi Staged programme for full rehabilitation Contractor assumes management role. [Note: no progress on concession agreement as at March 2009] ▲ ▲ ▲ ◙▲ 2012–27 ▲ ▲ ▲ ▲ ▲ ▲ ◙● ◙▲ 2011/12 ▲ ▲ ▲ ○ ● ◙● ◙● ◙▲ ◙▲ ◙▲ ▲ 2010/11 ▲ ●◙ ◙● ◙● ●◙ ○ ◙● ◙●▲ ●◙▲ ●◙▲ ▲ ▲ 2009/10 ○ ○ ○ ◙ ○ ◙ ○ ◙● ● ▲ ▲ ▲ ▲ ▲◘ 2008/09 ○ ▲ ○ ● ○ ● ○ ● ●▲ 2007/08 Activity Assume ownership of Anbassa from PPESA Assume ownership of Install line into Doraleh port Install line into Comet Yard Install line into Comet Agreements with oil companies Tank depot sidings Tank Continue rehabilitation Install three-year management contract if no concession agreement for urban bus and minibus operations increasing expenditure on traffi c management increasing expenditure on traffi and public transport ing arrangement provision of bus depots, including arranging technical assistance for new bus operators depot) Traffi c Police, EPA and Anbassa and c Police, EPA Traffi electrifi cation electrifi bus terminal at Lagar station 14. Study on the regulatory arrangements needed 13. Continue road network expansion, while 12. Create new bus service subsidy and franchis- 10. Purchase of new buses or trolleybuses; Create new bus companies (possibly one per 11. 9. Air quality monitoring system 9. 8. Addis Ababa Transport Plan Transport Ababa Addis 8. 6. Southern busway on existing rail alignment; 7. East–west bus corridor and new long distance 5. Staffi ng, job descriptions, agreements with 5. Staffi 4. Establishment of AACTO 4. Establishment of 3. 1. 2. 3. 4. 5. 6. 4. Action Plan: Chemin de fer Djibouto-Ethiopien (CDE) Action Plan: Chemin de fer 4. 212 Indicator Means to Ob- tain Indicator Indicator MoLA/TA MoLA/TA advice MoLA/TA advice Means to Obtain Means to Obtain MoTI to advise Comet advice Comet advice advice Comet/PPESA Comet/MTI advice CDE advice CDE and Addis Ababa City Addis CDE and agreement CDE advice CDE advice Targets Indicators/Goals/ Plan accepted by TA Plan accepted by TA 2012–27 Indicators/Goals/Targets Indicators/Goals/Targets 2011/12 Enterprise privatized [Note: privatization is not foreseen in the near future (at least ve years] not within the next fi Units created and functional Trucking unit sold [Note: privatization is not Trucking ve years] foreseen within the next fi Companies formed Joint venture entered into 2010/11 2012–27 2012–27 Permanent solution in place Station opens to traffi c. Line within city available Station opens to traffi for city use Orders placed. Deliveries completed Orders placed. Facilities installed and in operation 2009/10 2011/12 2011/12 ○ ● 2008/09 2010/11 ▲ ▲ 2010/11 ○ ● 2007/08 2009/10 2009/10 ● ▲ ▲ ▲ ▲ ●▲ 2008/09 2008/09 ○ ▲ ◘▲ ◘▲ ○ ● ○ ● ○ ●▲ ○ ● 2007/08 2007/08 ● ● ● ○ ○ ○ Activity Activity Activity Privatize MTSE Re-let concession (or other permanent management solution) Create separate accounting/business units for trucking and dry port operations Create separate companies for each unit Privatize trucking unit Enter into joint venture for dry port operations New station at Akaki; lease New station at Ababa line to Akaki–Addis Government for 20 years Make plan with TA on how to enforce existing legal maximum working TA Make plan with hours for road transport sector workforce to implement) (TA hours legislation; ensure this is c drivers’ more specifi TA Review with to implement) promulgated (TA Provision of new rolling stock Communications, train control and ticketing 1. 7. 1. 2. 3. 4. 8. 1. 2. 9. 10. 5. Action Plan: Comet Transport Share Company Share Transport Action Plan: Comet 5. Affairs Action Plan: Ministry of Labour 6. and Industry Trade Action Plan: Ministry of 7. 213 cator PPESA to inform PPESA MoTI; MoTI to advise MoTC/NTC MoTI report to NTC to report MoTI MoTI report to NTC to report MoTI Means to Obtain Indi- Notifi cation Notifi cation Notifi cation Notifi CSA/MoFED rm MoTC to confi PSD Hub to advise PSD Hub to advise PSD Hub to advise PSD Hub to advise Indicators/Goals/Targets Measures completed. [Note: The Walia Walia The Measures completed. [Note: Enterprise will be priva- Transport Public tized within 2009]. Proposals agreed by NTC. Proposals agreed by NTC. Forum Established Capacity Building Established training programs and run work- Organize shops in transport and logistics sec- Value-added tors Database established Study completed Associations established and invited to NTC deliberations Study completed Study completed ▲ ▲ ▲ ▲ ▲ 2012–27 ▲ ▲ ▲ ▲ ▲ ▲ 2011/12 ●▲ ▲ ▲ ▲ ▲ ▲ ▲ ◙▲ ◙▲ 2010/11 ○ ● ○ ● ▲ ○ ● ○ ● ○ ● ○ ● ○ ● ○ ●◙ ○ ●◙ 2009/10 ●▲ ●▲ ▲ ▲ 2008/09 ○ ● ○ ● ▲ ○ ● 2007/08 Activity Chair a Forum for discussion of issues and for making proposals possible solutions to improve the ef- ciency and capacity of industry fi Implement capacity building, with emphasis on business planning, nancial management, etc, fi training programs and Organize workshops on the Management of Logistics Develop transport and logistics services in all modes Establish passenger and freight transport user associations Undertake a seminal study of Urban Ababa Addis Freight Operations in Undertake a study on the impact of Aid and Fertilizer imports, etc. Food costs Transport on Set up appropriate database M& E for road transport industry Investigate commercial opportunities for drop trailer operations Ensure PPESA privatizes remaining state- Ensure PPESA bus Walia owned trucking operations and Addis Anbassa to and transfers company, Ababa and Jimma cities Remove all preferences for Ethiopian Ship- ping Lines vis-à-vis the private sector Study of optimal future ownership ESL; implement same 1. 2. 3. 4. 5. 6. 7. 8. 9. 2. 3. 4. 8. Action Plan: Private Sector, including AACCSA’s Private Sector Development [PSD] Hub Private Sector AACCSA’s including Action Plan: Private Sector, 8. 214 Indicator Indicator Means to Obtain Means to Obtain RTB reports RTB reports RTB reports RTB Inspection of and logbooks, RTB police records c and traffi RTB police reports PPESA/Comet advice PPESA advice PPESA PPESA/city advice PSD Hub to advise PSD Hub to advise Indicators/Goals/Targets Indicators/Goals/Targets Comet restructured Operations privatized [Note: privatization is not foreseen in the near future (at ve years] least not within the next fi Anbassa transferred All commercial road transport operators to be licensed by 2010 trained and schools licensed by 2009/10. Trainers All new licenses, and all license renewals, after 2012 to depend on CPC c police trained Regulations distributed and traffi Log books introduced and regularly checked Number of inspections, violations and prosecutions Improvements in loan tenure period and availability of credit to industry Increase in Private Sector investment these activities 2012–27 ▲ ▲ 2012–27 ▲ ▲ ▲ 2011/12 2011/12 ● ▲ ▲ 2010/11 2010/11 ○ ▲ ▲ ▲ ○ ● ○ ● 2009/10 2009/10 ●▲ ●▲ ●▲ ▲ ▲ ▲ ◙● 2008/09 2008/09 ○ ● ○ ● ○ ● ○ ● ○ ● ○ ● ○ ● 2007/08 2007/08 Activity Activity Introduce operator licensing Create CPC system and approve training institutions in all regions/ zones Make CPC a requirement for new operator licenses Enforcement of labour laws for all commercial vehicle drivers Preparation, distribution and enforce- c regulations ment of new traffi Restructure Comet as dry port operator in joint venture with private sector Privatize remaining trucking operations (including the trucking activities of Comet) Transfer Anbassa bus company to Ad- Anbassa bus company to Transfer Ababa and Jimma cities dis Develop a proposal for improvements of the tenure period and interest rates for industry loans Private sector encouraged to develop terminal facilities, modern vehicle maintenance workshops, warehouses and other related facilities, etc 1. 2. 3. 4. 5. 3. 2. 1. 11. 11. 10. 9. Action Plan: Privatization and Public Enterprises Supervisory Authority (PPESA) Action Plan: Privatization and Public Enterprises Supervisory 9. 10. Action Plan: Regional Transport Bureaus Transport Action Plan: Regional 10. 215 Indicator Means to Obtain Reports of ERA, and bus termi- RTB nal managers RTB to monitor RTB changes in services and fares RTB and bus termi- RTB nal manager reports Means to Obtain Indicator Obtain to Means TA report TA TA report TA report TA TA Inspection of logbooks, and police records c police reports and traffi TA c police reports and traffi TA and TA Reports of ERA, bus terminal managers TA and bus terminal man- TA ager reports to monitor changes in TA services and fares Indicators/Goals/Targets Indicators/Goals/Targets Routes agreed with ERA/RRA's and night operations permitted All commercial road transport operators to be licensed by 2010 Curriculum completed in 2008. Trainers Trainers Curriculum completed in 2008. trained and schools licensed by 2009/10 All new licenses, and all license renewals, after 2012 to depend on CPC c police Regulations distributed and traffi trained Log books introduced and regularly checked Number of inspections, violations and prosecutions System introduced and enforced by traf- c police fi and Routes agreed with ERA/RRA’s night operations permitted Addis Ababa terminal completed when Addis busway opens. Other cities as required Implementation of revised proclamation Implementation of revised proclamation Terminals constructed as needed; paved surfaces Terminals and good passenger facilities ▲ ▲ ▲ 2012–27 2012–27 ● ▲ ●▲ ●▲ 2011/12 2011/12 ○ ● ▲ ▲ 2010/11 2010/11 ○ ● ● ▲ ▲ ▲ 2009/10 2009/10 ○ ○ ▲ ▲ ▲ ▲ ▲ ▲ ▲ ◙▲ ◙●▲ 2008/09 2008/09 ○ ● ○ ● ○ ● ○ ● ○ ● ○ ● ○ ● ○ ● ○ ◙● 2007/08 2007/08 Activity Activity trips at zonal level trips at zonal level; Relax Prepare routes for night operation Prohibit restrictive practices by transport associations; allow licensing for intra-zonal Introduce operator licensing Create CPC system and approve training institutions in all regions/ zones; “training of trainers” courses Make CPC a requirement for new operator licenses Enforcement of labour laws for all commercial vehicle drivers Preparation, distribution and enforce- c regulations ment of new traffi Introduce mandatory third-party motor insurance, with agreement of Ministry of Health operation night bus for routes Prepare Addis Promote new bus terminals in Ababa and elsewhere Construct New bus terminals port associations; allow licensing for intra-zonal fare restrictions 6. 7. 1. 2. 3. 4. 5. 6. 7. 8. 9. Prohibit restrictive practices by trans- 8. 11. Action Plan: Transport Authority Transport Action Plan: 11. 216 Indicator

Means to Obtain

MoE reports to NRSC MoTC to commission consultant reports

TA to monitor changes in TA services and fares TA and trafﬁ c police reports and trafﬁ TA

Meansto Obtain Indicator Federal Gazette NRSC to identify in accordance with plan contents

Meansto Obtain Indicator Trafﬁ c police / NRSC to Trafﬁ report on progress

Police report; Federal Gazette

Indicators/Goals/Targets

Implementation of route franchises

Number of relevant agreements entered into; number remaining; number of implemented and in force

Schools visited and number of hours per visit and children addressed Transport sector training needs assessment Transport completed; courses designed and introduced; numbers of teachers and students compared with plan; pass rates and international benchmarking of standards

Council formed Plans approved and implemented to schedule

A study is needed on trafﬁ c police capac- study is needed on trafﬁ A ity and a development plan prepared. The implementation of this plan must be monitored. NRSC to be involved in plan development. Report produced on safe/unsafe levels and regulations in place

▲

2012–27

▲

2011/12

▲

◙▲

2010/11

▲

○●◙

2009/10

●

▲

◙▲

2008/09

●

○

▲

○●

○●◙

2007/08

Activity

chat in bloodstream (to be

Work with NRSC to promote univer- Work sal road safety education Work with MoTC, TA and RADA to and RADA TA with MoTC, Work develop appropriate academic and professional education in the transport sector

Formation of Council Council to develop its database of accidents and causes and its short and long term plans based on analysis

Ensure traffi c police have suffi cient c police have suffi Ensure traffi status, budgets, equipment and training

Develop means to identify unsafe levels of assessed by urine tests)

distance routes to operators

10. Sub-contract or franchise some long-

11. Develop international/bilateral road 11. transport agreements

1. 2.

12. Action Plan: Ministry of Education 12.

13. Action Plan: National Road Safety Council (NRSC) 13.

14. Action Plan: Police Commission 14. 217 cator Means to Obtain Indi- Reports from Road Fund. Road authorities and NRSC to submit annual statement of true maintenance / safety needs, to be published by Road Fund Federal Gazette. City transport organizations ve-year pub- to submit fi lic transport plans. Road Fund to report on amounts collected and disbursed in accordance with plans. City transport organizations to report on spending as compared with plan. Traffi c police reports Traffi Traffi c police / EPA reports c police / EPA Traffi c police and traffi AACTO reports Indicators/Goals/Targets Percent of revenue received from each funding source Amount of revenue compared with demands from road authorities and NRSC Levy agreed. Amount of revenue col- Levy agreed. lected and disbursed in relation to public transport plans Number of violations each key ele- to be ment. Penalties and trends (targets developed by NRSC) Report produced and measures in place Desk established and equipped; memorandum of understanding agreed with on roles of each body AACTO 2012–27 ▲ 2011/12 ▲ 2010/11 ▲ ▲ 2009/10 ▲ ▲ ● ▲ ▲ 2008/09 ▲ ○ ● ○ ○ ● 2007/08 Activity Ensure that key elements of road c law are respected (need to traffi prioritize in conjunction with NRSC) Develop means to measure harmful emissions from road vehicles Have traffi c management desk lo- Have traffi AACTO cated in Gradual increase of fuel levy to reduce dependence on value-added tax, and to ensure income increases in parallel with road maintenance and safety funding needs Public transport levy on fuel to support Ababa Addis public mass transport in and other cities (could replace municipal tax, which is already allocated to Road Fund) 3. 4. 5. 1. 2. 15. Action Plan: Road Fund Administration Action Plan: Road Fund 15. 218 219 220 221 222 223 224 225 226 227 228 229 230