Issue 203

Contrary to its tradition of policies on trade, where any foreigner could do any type of business in its territory, the Government of Djibouti has introduced a finance law that requires all insurance companies to deposit in cash or secure a physical asset worth millions of dollars to continue operating in Djibouti .

This new requirement has indicated Djibouti 's growing attitude in discriminating nationals from foreign businesses, since those insurance companies wholly owned by foreigners asked to deposit four million Dollars, while the amount for those that are fully or partially owned by Djiboutians is one million Dollars.

The new directive subsequently led to the emergence of two mergers by Amerga insurance company (controlled by the family of Marill) and AGF (controlled by the family of Buchet) with Djiboutian businesspeople, while the Ethiopian Insurance Corporation's (EIC) branch in Djibouti is made to be inactive following its failure to deposit what was required from foreign insurance companies.

These mergers, positioning the two companies to a less competitive market, now influenced them to increase their prices to insure Ethiopian trucks three times more than what the market had been costing two months back.

And this is a new restrictive trend developing in Djibouti that but worries Ethiopian businesses that are engaged in import and export.

A new directive issued last week by the government has indicated the creation of a committee that will be entrusted with power of issuing or revoking licenses on marine operations.

Though a follow up directive is being expected from President Ismael Guelleh's office, detailing further the newly introduced law, our sources disclosed that stevedoring operation (a lucrative business of unloading vessels) will be put under the exclusive domain of Djiboutian companies, furnishing a monopoly position to few companies that may pop up in the coming months.

In the meantime, however, there remain only one company, COMAD, that gives stevedoring services, determining its prices as it pleases being free from any competition, fears Ethiopian businesspeople.

"We'll soon be at the mercy of COMAD," said a concerned CEO of a company that does import and export business. "Even if we want to believe that other Djiboutian companies will be created soon, their prices will not be as competitive as it is now."

The major concern for most businesses is the fact that COMAD's largest competitor, the Ethiopian Maritime Transit Services Enterprise (MTSE), which is seen as a stabilizing factor, will not be in the business of stevedoring if Djibouti is serious about its new policy.

COMAD's officials, however, say that they have no intention of increasing their prices in a move to take advantage of their would be short-lived monopoly position.

"Our strategy with Ethiopian businesses has always been a long term interest," said Ali Ahmed Toubeh, a personal advisor to Saad Chiek, who owns COMAD.

"We would like to assure once again to our clients that our prices will remain the same now and in the future."

Ali, who is now in Addis in a bid to asses the reaction of his company's customer's to the new policy, said since 90pc of COMAD's business comes from Ethiopia , his management will remain committed to deliver the required "quality services with similar rates we have been charging so far".

"We've no intention of undermining our long term interest with Ethiopian businesses over a short term advantage," said Ali, whose company will not be concerned about the toughest competition that is now coming from Ethiopia 's giant MTSE. But, MTSE's fate in Djibouti will be something to be taken for grant.

According to sources, the new directive will require companies to choose between one of the two marine services allowed for foreign companies: ship agency or transit operations. Even Djiboutian companies will have to create different companies to do these different businesses since the new policy will not allow them to so both ship agency and transit business under one company.

What is more difficult for MTSE or any other Ethiopian company (all foreign companies for that matter) will be, their home countries should allow Djiboutian companies to do similar businesses in their territories.

Ethiopia is thus a country that has laws that puts businesses such as transit, clearing and forwarding to the exclusive rights of its own citizens. Consequently, the government of Ethiopia will face the options of allowing Djiboutians open offices that will do ship agency, transit and forwarding businesses so that Ethiopian companies will be allowed to do operational works inside the Port of Djibouti; depending entirely on Djiboutian companies to process everything on behalf of Ethiopian companies; or move to a more open and liberal port in the region - this time, perhaps to Port of Berbera.

Until the dust settles, however, the cloud of uncertainty among Ethiopian businesses as a result of Djibouti 's new mood, surfaces as strong as it could ever be.

"We don't really now what to think from now on," explains one importer

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