Ethiopia has managed to transform its economy from one of the worst performing in the world to become a regional leader. It has recently overtaken Kenya as the biggest economy in East Africa. The country’s capacity to draw foreign investment has also soared during that time with billions of USD already invested from merely a 100 million some years back. Ethiopia has also been tipped as one of sixteen countries expected to replace China as the manufacturing hub of the world.
A geographical location that is closely situated to the biggest markets in the world, cheap labor, large amount of arable land, attractive incentive packages and sustainable peace are all cited as Ethiopia’s comparative advantages. On the other hand, poor infrastructure (energy, roads, water, etc) is considered the most notable drawback to attract foreign investment into the country.
To undo the challenges the public showed great commitment along with human capital development shaping nation destination be the brightest than ever before. Developing strategic goals to invest on infrastructure and power holding it could add values to the mosaic development aspiration of nation, and we are witnessing the fruits.
Realizing the country’s vision of becoming a regional and world manufacturing hub, therefore, demands the radical transformation of the state of infrastructure in the country. The availability of energy, for instance, determines the type and number of investments coming into the country. Similarly, the state of transportation in the country determines the dynamism of the economy and thus its international competitiveness.
One recent development in combating the problem of transportation in the country is the opening of the Ethio-Djibouti electric railway. The railway links Ethiopia's capital, Addis Ababa, to the Red Sea port of Djibouti - a stretch of 784 km. The standard gauge Ethio-Djibouti electrified double-track railway constructed with a cost of 3.4 billion USD is expected to slash the journey time between the two countries to under 10 hours. It used to take three days for trucks to transport freight from the port of Djibouti to Addis Ababa.
Ethiopia is seeking to have 5,000 km of new lines working across the country by 2020. The electrified and environmentally friendly project will also replace a diesel-powered Addis Ababa-Djibouti line constructed more than a hundred years ago. The railway line took four years to complete.
The BBC quoted Getachew Betru, chief executive of Ethiopia Railways, as saying it will be much cheaper and more reliable than traveling to Djibouti by road. "In Ethiopia currently if you want to bring your container from Hong Kong to Djibouti it will take you may be two, three weeks. But it will take you more than that to take it from Djibouti to Addis Ababa. It will now take us one day or more," he said.
At the opening ceremony, goes on the BBC report, Ethiopian Prime Minister Hailemariam Desalegn said that the rail line would be a boost to the economy. He said "It will provide huge benefits to the industrial parks and modern farms that will be built in the future.” There clearly is a huge expectation that the railway will help out with the ongoing economic development in Ethiopia. To assess the scope of these expectations, let’s look into the socio-economic benefits associated with the cross-border railway.
Djibouti Port has become a major cargo entry point for Ethiopia as it stopped using other ports since 1998. Meanwhile, states a research entitled “an economic analysis of the Djibouti-Ethiopia railway project,” the freight traffic since then has quadrupled. Both the Ethiopian and Djiboutian governments are trying to enhance the cross-border transportation capacity to maximum potential. 685 km of the 784 km railway is located within Ethiopia while 99 km is in Djibouti. The research states that this line covers 30 per cent of population as well as cultivated land of Ethiopia and 70 per cent population of Djibouti. Further the industrial centers of Ethiopia located in Dire Dawa, Awash, Metehara, Modjo, Debre Zeit, Akaki, and Addis Ababa falls along this line.”
The rail link is of utter significance for Djibouti, as it would not only renovate this country into a multimodal transport hub but will also provide competitive advantage over other regional ports. This would also help both Ethiopia and Djibouti regenerate their economy and convert it into an economic catalyst.
The project is part of Ethiopia’s Growth and Transformation Plan (GTP), which seeks to boost up economic growth and achieve middle income status by 2025 as well as to revitalize its export sector and energize Ethiopia’s international relations with South and East Asia, North and South America, Africa and Europe. Apart from boosting connectivity the railway project is believed to boost eight key trade route rail corridors of 5,000km kilometers with Kenya, South Sudan, Sudan and Djibouti. Therefore, its completion is expected to boost exports and productivity in general as more exports motivate companies to raise their productive capacities.
The railway provides a cheaper form of transporting freight than the use of trucks. Accordingly, a high proportion of freight traffic from road would be diverted to railway transportation because of the operation of this rail. Reduction in the number of trucks on road reduces the annual road maintenance. The vehicular pollution gets reduced with this project as the rail will be run on electricity and there would be less use of gasoline and diesel. Thus, there will also be high amount of fuel savings and saving in foreign exchange.
Another major benefit associated with the construction of the railway is the increased opportunity to build regional integration. Cheaper prices to transport people and freight to and from the two partnering countries are expected to enhance trade and intercultural communication between the two people. The railway share company formed between the two countries would also engage the two countries more closely in an economic endeavor for mutual gain. As a result of the increased import and export activities and social interactions, the railway would promote regional integration.
By investing in railway transport, Ethiopia has ticked a number of boxes in its well thought out five year development plan – GTP II. From investment to regional integration through increased exports, the Ethio-Djibouti electric railway stimulates economic development.
Editor' Notes: The views entertained here do not necessary reflect
the stance of The Ethiopian Herald.
BY DAGEM BELAYNEH