Logistics Reform Should Deliver More Than Market Entry by Foreign Capital

Jun 13 , 2026.

The recent policy decision to fully open freight forwarding to foreign capital may become yet another major test of the liberalisation drive of Prime Minister Abiy Ahmed's (PhD) Administration. It would also be a belated admission that the national economy has paid dearly for treating logistics as a state preserve rather than the bloodstream of trade.

A few weeks ago, the Ethiopian Investment Board, chaired by Girma Biru, the Prime Minister’s macroeconomic adviser, approved full participation by foreign investors in the freight forwarding sector. The Board, whose members comprise senior federal government officials, including Kassahun Gofe (PhD), Ahmed Shide, Teklewold Atnafu, Eyob Tekalegn (PhD) and Zeleke Temesegen (PhD), concluded that the earlier joint-venture model had not brought the foreign investment, technology or expertise that had been hoped for. It claims to be determined to see faster logistics, lower costs, knowledge transfer and stronger domestic operators.

For nearly three decades, Ethiopia moved the other way. The state-owned Ethiopian Shipping & Logistics Services Enterprise (ESLSE) held a monopoly on multimodal freight forwarding, controlling cargo across linked transport systems. ESLSE is a carrier, forwarder, dry-port operator, trucking presence, and final-delivery gatekeeper rolled into one. In the language of development economics, this is vertical integration. In the language of an importer waiting for a container, it is called having nowhere else to go.

Private firms were largely confined to unimodal forwarding after a regulation governing packaging, forwarding, and shipping-agency business, passed in 2012, reserved the sector for Ethiopian nationals.

An earlier directive, signed by Kassu Ilala (PhD) when he was deputy prime minister, prohibited banks from opening letters of credit for imports unless importers used ESL or secured waivers. Alas! It was evident that a small paper carried a high cost to consumers and the broader economy.

The damage seldom appeared neatly in the budget. It turned up in delayed inputs, demurrage charges, broken schedules, idle machines, costly inventories, lost contracts and higher prices. Ethiopia built industrial parks, courted manufacturers and promised export-led growth. Yet at the factory gate stood a logistics system built for control. A shipment could be financed by a private bank, arranged by a private firm, and sold to a foreign buyer, only to be trapped in a public bottleneck at the port. This was industrial policy in reverse.

Imagine a garment exporter in Hawassa or Bole Lemi trying to reassure a buyer in Europe or America. The buyer wants price, delivery date, traceability, liability, insurance and recourse. The exporter can manage labour, fabric, packaging and quality. However, she cannot control the logistics chain. A missed sailing would be more than a minor nuisance and could lead to the order being cancelled. A container stuck at port is working capital imprisoned in steel.

For a country short of foreign exchange reserves, this was a perverse policy.

The economy needed exports to earn dollars, but policymakers made exports less reliable. It needed cheaper imported inputs, but those in charge of writing policy made them more expensive. It wanted manufacturing jobs, but political leaders chose to protect inefficiencies that weakened job-creating industries.

Logistics costs are estimated at 22pc to 27pc of final costs for many products. Shipping and freight costs are reported to be roughly 60pc higher than in neighbouring countries. A 20ft container from Addis Abeba to Long Beach has been quoted at more than 3,500 dollars, compared with 3,000 dollars from Mombasa and less than 2,500 dollars from some Asian competitors. The macroeconomic bill has been sobering, although ignored by the policymakers and their political chief priests.

For far too long, protectionists argued that the closed system preserved domestic ownership and shielded local forwarders from global giants. Some firms were indeed protected.

There were 330 registered freight forwarding companies two years ago. On paper, that sounded like a market, but in practice, only about 29pc of these are members of the Ethiopian Freight Forwarders & Shipping Agents Association, the industry’s professional body.

Freight forwarding is not a decorative business. A country can have roads, ports, customs offices and shipping contracts. But without competitive freight forwarding, it lacks the connective tissue that turns infrastructure into commerce. An operating system of trade, it decides whether an industrial input reaches a factory before a production line stalls; a coffee exporter meets a shipment date; a pharmaceutical importer clears temperature-sensitive cargo before value is lost; or a construction contractor receives steel, machinery or spare parts before a project’s cost overruns become irreversible.

Consumers pay this cost through higher prices, manufacturers through uncertainty, exporters through missed deadlines, banks through distorted finance, and the country through weaker competitiveness. The privilege was concentrated, while the cost was socialised.

The partial opening in 2018, allowing foreign investors to own up to 49pc of logistics businesses, mattered but did not go far enough. DHL Global Forwarding’s venture with Ethiopian Airlines showed an appetite for modern partnerships. Later, six additional operators were licensed, ending ESLSE’s multimodal monopoly. But minority foreign participation is not a competitive market. It permits entry while preserving caution. Hence, the policy decision in May this year becomes more consequential, for it removes the joint-venture requirement and domestic ownership caps, allowing foreign investors to operate freight-forwarding businesses outright.

It is a long-overdue policy turnaround that came with the acknowledgement that competition in logistics is more than a slogan and a price mechanism with wheels, warehouses, and software.

Evidence elsewhere supports the case for competition. After Rwanda liberalised road freight, prices reportedly fell by 75pc in real terms. Mexico’s deregulation reduced trucking tariffs by 23pc within five years. Removing cross-border freight restrictions between Thailand and Laos cuts costs by about 30pc.

Ethiopia should expect no miracles, for it has an economy constrained by foreign-exchange shortages, port dependence, customs complexity and state incumbency. Liberalisation on paper can be neutralised if foreign operators cannot obtain currency, clear documents promptly, access rail and dry ports fairly, or compete against a privileged state enterprise. The danger is not too much competition, but only one in name.

The government’s wider economic policy reform programme has opened the foreign exchange regime, wholesale and retail trade, finance and other restricted markets, under pressure from domestic necessity and the internationals such as the IMF. The record remains mixed.

Safaricom Ethiopia entered telecoms but has not reached the scale or profitability once expected, while many users still lack a real alternative to Ethio telecom. Safaricom has complained of structural advantages enjoyed by the state operator. A promised third telecom operator has not appeared. Banking is formally open to foreign participation, yet no foreign bank has entered beyond expressions of interest.

That attention has now moved to logistics, where reactions are divided. Ethiopia handles fewer than 300,000 containers a year, and some experts say one large global forwarder could manage that volume. Domestic firms argue that the cargo base is already manageable and that local capacity should come first. Some forwarders, rather understandably, fear that foreign competition could overwhelm domestic firms and cause job losses. Others argue that foreign capital, technology, networks and skills could cut delays, improve tracking, speed clearance and lower transaction costs.

However, reforming the logistics sector should not be about pleasing investors, whether domestic or international. It should be about lowering the cost of being a consumer in Ethiopia in the global market. For 27 years, Ethiopia's leaders protected a monopoly while the economy paid the price in lost time, lost orders, and lost competitiveness. A country can protect a monopoly or its economy. It cannot do both. The new policy should be judged by dwell time, freight prices, export reliability, demurrage bills, customs processing speed, and consumer prices, not by licences issued.

PUBLISHED ON Jun 13,2026 [ VOL 27 , NO 1363]