Regional Study on Reducing Transportation Costs among the Agadir Agreement Countries
Although the importance of the trade of the four-member states with the rest of the world is high with a size that exceeds 249 million tons annually, the size of intra trade between the member states is still very small except for Jordan that has strong commercial relations with the neighbouring countries especially Egypt and KSA.
The inexistence of regular maritime transportation lines between the member states is the primary cause of the low intra trade between these countries, and the very high cost of transportation
This study is trying to analyze the previous problems and to reach practical solutions.
Summary of the intra trade study between Agadir member states
The intra trade between the member states of Agadir witnessed a quick growth which exceeded 50% annually during the period (2006 -2010) due to the enforcement of the Agadir Agreement. The study of the foreign trade of Agadir member states shows the following results:
Ø European Union is the main trading partner for Tunisia, as it contributes to 66% of the trade for Tunisia, whereas the intra trade with Agadir member states does not exceed 1 % , and is around 6% with the Arab Maghreb Union Countries;
Ø EU is the main trading partner of Morocco, as it occupies more than 53% of its foreign trade, whereas Agadir member states countries do not exceed 1.8% and 11% for the Arab countries;
Ø Asian countries come in the first place for Egypt since it occupies more than 39% of its external trade, EU comes in the 2nd place with 38%, 2% with Agadir member states and not more than 4% with the Arab Maghreb Union Countries; and
Ø Arab countries come in the first place for Jordan with 39% of its foreign trade, EU comes in the 2nd place with 15% and 4% for Agadir member states.
These results show the followings:
- Intra trade between Agadir member states is weak in comparison to Tunisia, Morocco and Egypt trade with the EU.
- Intra trade between Agadir member states is weak in comparison to Tunisia and Morocco trade with the Maghreb countries.
- Bilateral trade between Agadir member states is weak in comparison to Egypt’s trade with the Asian countries.
- Bilateral trade between Agadir member states is weak in comparison to Jordan’s trade with the Middle East countries.
Therefore, establishing a maritime transportation line between Agadir member states has to be connected to the EU countries, the Arab Maghreb Union Countries and the Middle East in order to make use of the competitive advantage and the geographical location of each country in order to achieve integration in a network that connects them with their partners in the EU, Middle East and the Maghreb.
The creation of regular multi-modal transportation:
The creation of a regular multi-modal transportation line joining Jordan to Egypt Tunisia, Morocco and Marseilles will lower the cost and duration of transport and will boost intra-trade between Agadir countries and their export to the EU
Tunisia can facilitate trade between Agadir member states and the EU, Libya, Algeria, and the North African countries. Morocco can facilitate the exchange between Agadir member states with the EU, Mauritania, and the Western Mediterranean countries. While Jordan & Egypt can facilitate the exchange between Tunisia & Morocco with the Middle East countries.
China is the main competitor of the member states in exporting to the international markets in general and to the EU in particular for many products that can accomplish the accumulation of origin. The most important products are textiles, shoes and furniture. Also, due to the increase in the cost of the labour force in Tunisia, Morocco and Jordan, those countries became incapable of competing with China except for the goods that require quick delivery.
The member states can compete with China if multi-modal transportation is activated using RORO which guarantees quick delivery periods that do not exceed one week.
In order to achieve this goal, a regular RORO transportation line with high frequency should be established to connect the member states with the EU. In order to study the feasibility of this line, the size of exchanged goods among the member states and with the EU have been studied and categorized into three major types of goods based on the mean of transportation that can be targeted in order to maintain the quality and the quick delivery:
1. Liquid and dry bulk that can be shipped using irregular vessels that are booked based on demand.
2. General goods that can be shipped using traditional maritime transportation or multi means transportation using the containers vessels or RORO vessels that transport the goods in trucks.
3. Valuable goods that require quick delivery duration, which has to be transported using RORO.
The exported quantities from Jordan to Tunisia and Morocco for all the products that require RORO is very small in the years 2010, 2012 and 2017 and do not require establishing a maritime line from Aqaba to a Moroccan port that goes through Alexandria and Tunis.
In order to improve Jordan's exports to the EU and the other Agadir member states, and to decrease the transportation duration, the best solution is to support the RORO line (Aqaba – Nuweiba) in order to connect through the land with Alexandria and reaches Europe, Tunisia and Morocco.
Also, it is possible to make use of the size of trade between Aqaba and Al-Sukhneh to establish a RORO line or a double line (RORO and containers) to connect Aqaba with Al-Sukhnah in order to connect through roads to Alexandria and to get to the EU, Tunisia and Morocco.
The Egyptian exported goods that can be transported from the exporter warehouse to the importer warehouse using RORO to Tunisia, Morocco, Jordan and the EU are as follows: (89 thousand tons in the direction of the Jordanian ports, 1856 thousand tons in the direction of the European ports and around 80 thousand tons in the direction of Tunisia and Morocco).
Considering this quantity in the direction to Tunisia as very low and does not account for more than 8 vessels a year with a capacity of 3000 tons. However, it amounts to three 3000 tons capacity vessels daily when considering all Agadir countries export to the EU and between them will transit through Tunisia (Jarjis Port) and Marseilles (French port) Thus confirming the feasibility of establishing ( setting up) a regular high frequent line from the exporter warehouse to the importer warehouse from Jordan, Egypt, Tunisia, Morocco to the European Countries,
In order to accomplish this project, it is necessary to initiate an export development program in the direction of the EU motivated by the short delivery periods which enables Egypt to face the Chinese and Turkish competition, especially since more than half of Egypt's exports are to Europe since most of them are automotive spare parts, electronic devices garments and food. All these goods require quick shipping and short transportation durations, much less than the current duration spent for transportation from Egypt to the EU (on month)
In this regard, it should be highlighted that the Mediterranean Countries that export to Europe such as Turkey, Tunisia and Morocco, use multi-modal transportation from the exporter’s manufacturing facility to the importing company warehouse which allowed them to reduce the delivery time to three days or a week at the most.
Tunisia exports of goods requiring multi-modal transportation from door to door RORO is very important and exceeds a million ton 56% out of it is to the EU.
These goods are those achieving accumulation of origin when exporting to Europe and currently supporting the high growth of intra trade between Agadir member states. Indeed Tunisian exports to Agadir member states from goods requiring multi-modal transportation are achieving a very important annual growth rate of 142% for Egypt, 62% for Jordan and 50% for Morocco.
Finally, it is to note that using Sfax and Jarjis ports as a gateway for the trade of Jordan and Egypt with Libya and Algeria will increase the feasibility of the project
Suggestions & Recommendations
1. Reinforcing Aqaba/Sukhnah/Alexandria Line and Aqaba/Nuweiba/Alexandria Line:
ü Shipping from Aqaba to Alexandria using containers is the most expensive and takes a long duration of 21 days which cannot be endured by precious goods, in addition to the fact that there are not sufficient quantities that can guarantee a regular maritime line that connects Aqaba to Alexandria and then to EU and Agadir member states.
Picture (10-6-1) Path of the transportation line from Aqaba to Alexandria using containers
ü On the other hand, (Aqaba/Sukhneh/Alexandria) and (Aqaba/Nuweiba/Alexandria) lines using RORO are the least costs and take the shortest duration (5 days in the current situation and 1 day if the procedures used in Tunisia and Morocco are endorsed). This is an important factor to promote the export of Jordanian precious goods to the EU, Agadir member states, Libya and Algeria, especially to fulfil the requirements of big projects of quick delivery.
Picture (10-6-2) Path of (Aqaba/Sukhnah/Alexandria) transportation line using RORO
ü Al-Sukhneh port importance comes from its connection to the Gulf ports and Asian ports, and from the importance of its trade with Aqaba which enables Al-Sukhneh Port to provide enough quantities of cargos that guarantees a regular line from Jordan to Egypt and then EU countries.
ü Unlike Nuweiba Port, Al-Sukhneh Port has the capability of receiving containers and re-shipping them in a shorter duration than Alexandria Port and in a much quicker action than Suez Port that is overloaded.
Picture (10-6-3) Path of (Aqaba/Nuweiba/Alexandria) transportation line using RORO
2. Establishing a maritime line that connects Egypt to Agadir member states:
ü The Egyptian exported goods that can be transported from the exporter warehouse to the importer warehouse using RORO to Tunisia, Morocco, Jordan and the EU are as follows: (89 thousand tons in the direction of the Jordanian ports, 1856 thousand tons in the direction of the European ports and around 80 thousand tons in the direction of Tunisia and Morocco).
ü Considering this quantity in the direction to Tunisia as very low and does not account for more than 8 vessels a year with a capacity of g tons. However, the annual growth rate is significant, as it amounts to 57% of the quantity in the direction of the EU Countries, Tunisia and Morocco. Thus confirming the feasibility of establishing (setting up) a line from the exporter warehouse to the importer warehouse from Egypt to the European Countries, Tunisia and Morocco passing through Marseille or Genoa Ports as shown in the following picture.
3. Establishing a line that connects Tunisia to Agadir member states:
ü Tunisian Exchanged intra trade status study has shown that the Tunisia exports of precious goods that require multi mean transportation from door to door and RORO is very important and exceeds a million ton 56% out of it is to the EU.
ü Tunisian exports to the EU and to the other member states is important is confirming the importance of establishing a RORO line from the exporter warehouse to the importer warehouse to the EU, Egypt and Morocco going through Marseille or Genoa.
ü Tunisian exports to Egypt from general goods, using RORO and containers is about 92,704 tons, and to Morocco 5,487 Tons which assures the feasibility of going ahead with the establishment of a double line; containers and RORO.
ü Using Sfax and Jirjis ports as a gateway for the trade of Jordan and Egypt with Libya and Algeria will increase the feasibility of establishing a double line (containers & RORO) and will decrease the cost of transportation between Agadir member states, as shown in the following picture (10-6-5)
4. Establishing a transportation line that connects Morocco to Agadir member states:
The size of exports to the EU using a door to door transportation by RORO is very important, this explains the spreading use of this type of transportation when exporting to Morocco and supports the establishment of a RORO line from the exporter warehouse to the importer warehouse that connects Egypt to the EU, Tunisia and Morocco through Marseille or Genoa ports. Consequently, Morocco size of exports through RORO helps in increasing the connection of Egypt with west Europe, and Tunisia size of exports through RORO increases the connection of Egypt with east and middle Europe as shown in the picture (10-6-6).
The feasibility study of the recommended lines find out an interesting internal rate of return IRR as detailed in the following Table:
|Line||Vessel Type||Internal Rate of return |
|Alexandria- Jarjies- Alexandria||Container Vessel||23%|
|Suknah/Adabiyah- Aqaba||RORO Vessel||32%|
|Tangier- Marseille||RORO Vessel||36 %|
Create a PPP project managed by a shareholding company in partnership between the Tunisian Government, Egyptian, Moroccan and the private sector that will handle the management of the marine line and will connect Alexandria, Jarjies and Marseille and Marseille, Jarjies and Alexandria similar to The Arab Bridge Company (Al- Jirs Alarabi).
Also, it should be acknowledged that The European Development Bank grants soft loans at an interest rate of 5% to purchase vessels in order to achieve an increase in the Euro-Mediterranean trade. The feasibility study of the suggested lines in the case of purchasing vessels through a loan from the European Development Bank at 5% interest rate for 70% of the vessels cost.
5. Trade facilitation Measures:
For achieving successfully this project Agadir countries should adopt trade facilitation measures regarding Logistics and Transportation Supporting Services:
· It is important that there should be complete coordination among the transportation means from shipping, loading, unloading, and marine and land transportation and with high efficiency.
· Providing the possibility of clearance for imported and exported goods in the importer and exporter warehouse in Jordan and Egypt.
· Facilitating and unifying the external trade procedures among the Aghadeer countries.
· Activating the necessary agreements among the Aghadeer countries to achieve:
o Free movement of drivers, trailers and containers among the agreement countries, and eliminating the administrative and procedural obstacles to ease the issuance of visas for drivers. Due to the difficulty in achieving this recommendation in the near future, the study adopted shipping the trailers without drivers. Thus the presence of liaison offices in all the Agadir Agreement countries and creating a cooperation network among the transportation brokers in the Aghadeer countries and encouraging the trailer transportation sector and regulating it. These are among the fundamental procedures that should be done for the success of the suggested lines.
o Unifying the special specifications regarding trucks among the Aghadeer countries and applying the regulations concerning safety.
o Working towards unifying a multimode transportation document among the Aghadeer countries.
o Unifying the procedures and legislations for regulating the trailers transport among Aghadeer countries.
· Adopting international standards that govern the exchange of containers.
· Establishing integrated systems for the exchange of information.
· Creating a cooperation network linking transport brokers in the Aghadeer countries.
· Encouraging the trailers transportation sector and regulating it similar to Al- Jisr Alarabi as a first stage, then considering creating an independent fleet for the suggested company at a later stage to ensure its productivity.
· Issuing invitations for the establishment of liaison offices in each of the countries of the Agadir Agreement whose job is to organize the marketing for the proposed lines and expand the network of freight brokers working for the benefit of those lines