Ethiopia receives $150 Million credit from World Bank to reduce trade logistics costs

The World Bank’s Executive Board has approved a new $150 million project to increase the efficiency of trade logistics in Ethiopia.

The project will focus on improving the Modjo Dry Port, a key transportation hub that handles 95% of Ethiopia’s trade, but which is a major bottleneck on the vital Ethio-Djibouti trade corridor. It will also support investments in physical infrastructure and ICT systems, as well as regulatory improvements which will increase exports, generate jobs, and raise incomes of producers and traders.

“The logistics sector is the backbone for industrial and agricultural growth, the success of which is crucial if Ethiopia is to meet its goals as articulated in the Growth and Transformation Plan,” said Carolyn Turk, World Bank Country Director, Ethiopia.

“The success of Ethiopia’s large-scale investment in industrial parks and the new rail line to Djibouti will depend on their connectivity to different logistics nodes along trade corridors.”

The move to a modern logistics system requires the effective participation of a variety of logistics providers. The project therefore supports public investment in critical infrastructure, and increasing the role of the private sector in providing logistical services.

Consistent with Ethiopia’s Logistics Strategy, the vision for Modjo is to evolve from being a single-user dry port that focuses on customs clearance, to a multi-user, multi-purpose facility, where third party logistics providers gather together to provide modern services.

“Higher-than-average trade costs are undermining Ethiopia’s international competitiveness,” said Klaus Tilmes, Director in the World Bank Group’s Trade & Competitiveness Global Practice. “By enhancing the performance of the Ethio-Djibouti corridor through improvements in the range and quality of logistics services at Modjo Dry Port, and reducing burdensome regulations in customs, trade finance and trade facilitation, the government will be able to reap the benefits of trade that help to drive growth and reduce poverty.”

The project supports the World Bank Group’s twin goals of reducing extreme poverty and enhancing shared prosperity. Improving transport and logistics for fertilizers and grains will increase smallholder farmers’ agricultural productivity and reduce food insecurity.