Small in size, big in ambitions Djibouti may be one of the tiniest and least-known nations in Africa but it stands out as a haven of stability and neutrality. Sadly many travelers miss out when they bypass the mysterious Lac Abbé, the vast salt lake, Lac Assal, the verdant slopes of the Goda Mountains which rise like a green surprise in the northwest or unforgettable snorkeling with whale sharks in the Gulf of Tadjoura.
If you travel by land from Dire Dawa you’ll get a glimpse of just how much the two nations rely on each other and have in common. After Dire the language turns to Somali and Afar and the border crossing is clogged with trucks and overnight busses. Like the Oxpecker Bird and Hippopotamus, Ethiopia’s relationship to Djibouti is interdependent and intertwined, yet the citizens of the two nations often act as distant cousins rather than brothers and sisters.
Now much of that may change as Capital’s Deputy Editor-in-Chief Teguest Yilma sits down and talks with Djibouti’s ambassador to Ethiopia Mohamed Idriss Farah about major new tourism, and trade projects, while explaining the new port rules which greatly affect Ethiopian bussiness.
Capital: The relationship between Ethiopia and Djibouti goes back for years and is symbiotic. How would you say the relationship has evolved, say in the last 10 years?
Amb. Mohamed Idriss Farah: It didn’t just happen yesterday, of course. Ethiopia and Djibouti will celebrate 99 years together this year. That is also including the colonization period. But since our independence in 1977, which is almost 40 years now, our relationship has been improving and became even stronger, especially after former Prime Minister Meles Zenawi and President Ismael Omar Guelleh came to power. Since 1999, Djibouti made it possible for the two countries to work towards full economic and political integration. This is a testament to the will of the two leaders and it is continuing under the current administration of Prime Minister Hailemariam Desalegn. But the only drawback, if we may say so, is the lack of understanding the citizens of each nation have about each other. They are not necessarily aware about the relationship between Ethiopia and Djibouti.
Why do you think this is? Do you think that there is not enough information getting out to the public?
Both populations have known one another perfectly well since the dawn of time. We have communities living on both sides of the border. In Galafi, we have the Afars who are settled there, and on the other side of Galafi (on the Djiboutian border) Afar people who are related are also there. We even find families on both sides. Likewise, on the border of Dawale we have Somali people that live on both sides and that are relatives. So really, the two countries are very close, and once again, one of the aspects on which I have to work as an ambassador is to show people how important our relationship is.
Djibouti is linked to Ethiopia in terms of history, culture, and religion, as a significant part of Ethiopia is also Muslim. Unfortunately Many Djiboutians do not know the importance of Ethiopia for Djibouti. On the same token, many Ethiopians don’t know the importance of the small brotherly country it is attached to. We really need the media on both sides to focus on what is going on in both countries.
Why do you think the press has not followed up, since the press is also part of the population and part of the civil society in both nations?
I’ve noticed the lack of information about the two nations since I arrived here almost three years ago. As for Djibouti, it is a nomadic population and they do not necessarily read the newspapers, which is a disadvantage. Now people do listen to the radio a lot, so I think we need to work more on radio, to get the message out, about all the major projects going on between us. Be it the railway venture between Addis Abeba and Djibouti, be it the Port of Tadjoura, which is going to link the region of Tigray -Mekele- by railroad. People know about it. But it stops exactly at this level. We really need a radio marketing campaign to explain how important Ethiopia is to us. With regards to the audiovisual press here, it is mentioned by Ethiopia when there are joint commissions of course, when there are meetings, but what is lacking, is the onsite reporting in Djibouti to show that at the end of the day, Djibouti, the ports of Djibouti are essentially working for Ethiopia. And therefore the media needs to show the importance that our country has. Fortunately, we have newspapers like Capital that follow Ethiopia and Djibouti and I do congratulate you for the work that you are doing, and you are practically the only one. I would like to encourage other Ethiopian media to talk about our relationship. It is impossible to do otherwise. We have a common destiny you know. Today in Djibouti, thanks to the Prime Minister, we are benefiting from electricity and water from Ethiopia. And conversely, everything that is consumed here in Ethiopia comes from Djibouti. Even if in the future other ports may attract Ethiopian businesses, the Port of Djibouti will always be vital because our relationship is not limited to this.
Ethiopia already supplies Djibouti with electricity, and recently there is a talk of provision of potable water. Can you tell us what the modalities are and how much that represents?
Concerning the electricity, we are working with EEPCO. Around two and a half years ago the first power lines were built. The former Prime Minister attended the launching ceremony. These power lines provide up to 70% of Djibouti’s electricity, which is quite significant. The other important aspect is that we have a good rate that is extremely interesting thanks to Ethiopia and once again thanks to Meles. It really demonstrates the good relationship between the two countries; and we are hoping to establish a second power line, as a backup in case there is a problem, and with this, we will eventually be able to draw 100% of our electricity needs from Ethiopia.
The fee per month is USD 1.8 million which is settled by EDD of Djibouti (Electricté de Djibouti) to EEPCO, and this 1.8 million is paid one month in advance.
Now with regards to the water project, it will come from Adigala in the Somali region. A company has already been identified by both parties for water exploitation and also for the distribution from Ethiopia to Djibouti and the work is starting this year. The financing has been secured; the contract is worth USD 300 million and has already been signed.
Where are we on the railway project from Djibouti to Mekele and the road project to Addis Abeba?
As you are aware, work has already begun on the Port of Tadjoura, when it is finished there will be a rail line attached to the port that goes from Northern Djibouti to Mekele. We started constructing it last July and Prime Minister Hailemariam was there when it began. With regards to the railway from Djibouti-Addis Abeba, there has been significant progress on the Ethiopian side. Traveling by road, I was able to see all the work that has been done for this new rail. In Djibouti we commenced the work much later, because the distance is not that long compared to the distance leading to Addis Abeba. The two rail lines, the two sides will join in 2017. Even so, logically since all the materials come to Djibouti first, we should have started first from Djibouti. But I do not think it was a mistake to begin work on an 800 to 900km stretch on the Ethiopian side; on the Djiboutian side it is roughly 130km.
What about the financing?
It is the EXIM Bank of China that provided the financing up to USD 4.5 billion. The Djiboutian side is only USD 569 million, I think. The rest of the money is for the Ethiopian side. Again, this is what the former Ethiopian Prime Minister has left us. The electricity, the rail, etc…. up to his time of passing away, he had insisted that these projects be finalized at the financial level and that was done. And we started the work after his passing away. But at any rate, know that in Djibouti, the former Prime Minister was very much appreciated. I was with him two years ago when we launched the interconnection of the power lines. I was in the car with him and in Djibouti everybody greeted him and I told him “Mr. Prime Minister, I think the Djiboutian people like you very much,” and he told me “I love the Djiboutian people more”. He left a very good memory in Djibouti.
Yes, I think he understood that the two countries have to be linked through infrastructure and ensure that both countries develop together to assure long lasting stability
Both the former Prime Minister and the current Premier, Hailemariam Desalegn, said a country cannot develop itself alone. We cannot take the risk of seeing Ethiopia develop itself alone without Djibouti and conversely. The two countries must develop themselves at the same time and this is being done. And today when there are difficulties, because, you know even within a family, at times there are difficulties or problems, the heads of the families talk it over and problems are solved. That is how deep our relationship is; the two countries are inseparable.
That is correct. With regards to the rail project, Tadjoura -Mekele, does transportation between the two locations Djibouti and Mekele justify such an important investment?
The port of Tadjoura will have a railroad that is going to link the city of Tadjoura to Mekele. This allows the Tigray region which is more distant, to open up. Currently, everything that comes to Djibouti or that goes to Tigray has to make a huge detour. With this port, it will enable the goods to reach directly. There is also the export of potash, a determining element that has led to the financing for Tadjoura’s port construction and the railroad.
There is a significant amount of reserves of potash which is an absolute source of wealth for Ethiopia and represents a significant quantity for exports. And potash is very popular in Europe which justifies the investment of close to 600 million USD for the port of Tadjoura.
What about the railroad? And how is it financed?
The port and the railroad as such, represent roughly 780 million USD and the entire amount has been pledged and finalized. That is why the work has begun. There is the EXIM bank of India, the African Development Bank and also Arabic Funds for Development who participated in financing both the Port and the railway.
Let’s talk about the Port. Currently the Chinese have a 23% stake in the Port of Djibouti. Was the acquisition open to other investors as well or is there a specific reason why you chose the Chinese?
You know, the relationship between Djibouti and Ethiopia is not only about the Port; Djibouti and Ethiopia have relations at every level. Djibouti’s security for instance is essential to Ethiopia. As you may know, both of our Army Chiefs are in constant communication about intelligence matters. The security aspect is very important to us as well as the political aspect. Since we participate in many political forums, Djibouti and Ethiopia speak with the same voice and this is extremely important. We have significant economic interactions as well, including trade. The Chinese in Djibouti are investors and they are involved in the port of Djibouti and represent less than 23%. They are involved at roughly 15%. Your question might be whether Ethiopians can get involved. Of course, we have always been very open to Ethiopians in particular. At one time, an important operator wanted to work on the Port of Djibouti.
You mean Sheik Al Amoudi?
Sure, we gave him the go but the investments did not follow through unfortunately. In the future, however, if there are Ethiopian investors, of course we will give them the privilege ahead of others and the Chinese. Ethiopians are the first ones to whom we have opened the doors, and the doors will always remain open, they will not be closed. We are hoping to meet with Ethiopian businesspeople that will be stakeholders in the Port of Djibouti’s economic activities. Next year, I plan to set up an economic mission with Ethiopian businesses so that they can see firsthand all the economic opportunities that exist there. I remain available at any time to business entities for discussions.
And I am happy to inform you that the Boston Day Spa Group has already invested in Djibouti on the Musha Islands for a resort that will be of the same standard as that of Kuriftu in Debrezeit or elsewhere in Ethiopia. A contract has been signed, work has begun. So this is one positive aspect that we need to bring out.
Do you know the size of the investment?
I do not know about the amount but we have made land available for him in the Musha Islands and he is setting up the resort with all the amenities for an investment up to hundreds of millions of dollars. He is already legally permitted to begin work and has done so.
A month ago, there was an agreement that was signed with a Chinese company, Touchroad International Holdings Group, to undertake the construction in Obock. I believe there will be a shipyard, luxury hotels and an airport etc. Also another construction is going to be undertaken in Tadjoura. What are the latest developments?
On Tadjoura, we have Chinese investors who came to explore and they want to develop the region of Ras Syan, which is an island. They want to set up a sea resort next to Obock with a private airport. This is a big investment and I believe it was one and a half months ago, that an agreement was signed. Now we are waiting for the plans and the costs for this investment. It is something that is pending and we expect the work to begin this year.
Are the Chinese investors present in the Port of Djibouti financing other projects, in Doraleh for instance?
They are involved in expanding the Port of Doraleh. You know, there is the second and third phase for the Port of Doraleh that has begun. Djibouti is the main stakeholder for the Port of Doraleh at 67% and the rest is for DPWorld. Within the 67% stake from Djibouti, the Chinese are in for up to 15% roughly. The Port of Doraleh is the property of the state of Djibouti, and the Port of Djibouti is also for the nation of Djibouti. So the Chinese are taking part in the modernization and the expansion of the Port of Doraleh. This is a Chinese company, which is as big as DPWorld, if not bigger. And we hope to draw from the experience of South East Asia, of course, Ethiopia will automatically profit from it as well. Once again, we have always invited our Ethiopian brothers and sisters to come and invest in the port of Djibouti and we welcome them with great pleasure.
What is the current role of DP World, is it just the management?
The management if you want, we have reset the balance during the time of Mr. Abdourahman Boreh, the former chairman of the Port of Djibouti Authority. We had many advantages with DPWorld when they arrived. Basically, it was an opportunity to see a big port operating company in Djibouti. But because of various personal interests from Mr. Boreh, the advantages were skewed toward DPWorld, even though most shares were from Djibouti. At the Board of Administration level, there was no balance of power. So now they have the management of Doraleh, which is normal, and the powers were restored.
There is also an American company, Black Rhino Group that wants to put an oil pipeline between Ethiopia and the port of Djibouti. Another Chinese company has also signed an agreement, again for a pipeline project that would go between South Sudan and Djibouti through Ethiopia. I believe it is Toyota that also wants to build one. So, where are we with regards to all these pipelines projects and also vis a vis the conflicts in South Sudan?
The pipeline that was well advanced was that of Juba via Ethiopia to Djibouti. The petrol from South Sudan, the tripartite decision was signed by the three Ministers here in Addis Abeba almost a year ago, but unfortunately because of the civil war in South Sudan, it did not materialize yet. But it is extremely important for the South Sudanese, to have this petrol reach Djibouti via Ethiopia; first for economic reasons because it is the shortest distance compared to the Port of Lamu which is under construction and also because it is the safest route.
The Port of Lamu in Kenya.
Yes, because Kenya and Djibouti were vying for the pipeline project and the Chinese, who are financing, thought it would be better that the point of entry from Djibouti via Ethiopia was much safer. This is because Ethiopia is a safe country in terms of security, Djibouti as well, so it was much safer to have the petrol exported through Djibouti. Moreover the cost was more affordable and the distance much shorter compared to the Port of Lamu. So this project is really in the pipeline. It has been approved by the three parties with official signatures signed in Addis Abeba. We are hoping that peace is restored quickly so as to enable South Sudan to make progress for this pipeline.
And the other pipeline from the American company Black Rhino Group, is it between Ethiopia and Djibouti?
Yes, but the petrol from Ethiopia will come from South Sudan. Based on my understanding the most viable project is the one between Juba and Djibouti via Ethiopia under Chinese financing because the cash is in the hands of the Chinese and the petrol from South Sudan is currently managed by the Chinese.
I would like to come back to the ports, recently there were issues with regards to unpaid port dues by Ethiopian forwarding companies. A resolution was taken stating that all the arrears must be paid within two months and that in four months Djibouti will start imposing advance payment method; and that goes without saying as Djibouti pays all its electricity and other bills in advance; so where are we today on these issues especially as there is only one month left for the new payment system to take effect?
First, it was a decision dating from November – December when the Port of Djibouti or at least the forwarding agencies in Djibouti decided to be paid one month in advance. Why? Because it was simply a matter of collecting their payment in foreign currency in Djibouti. The money from the Ethiopian forwarding agencies was supposed to be collected here, but the Ethiopian law does not permit taking foreign currency out of the country, and we have to absolutely respect the laws of our brotherly country – Ethiopia. Therefore, the decision was taken by the transit companies, based on the restrictions of the law, that they be paid in Djibouti and in advance, which is perfectly normal.
Actually as you have mentioned, electricity, water as well as fruits and vegetables and all these items are paid in advance to Ethiopia. Khat, which is an extremely important element for Djibouti is also paid one month in advance, so it is only normal for them to ask to be paid one month in advance, but most importantly in Djibouti. However, it was their decision and the misunderstanding here in Ethiopia is that people thought that the State of Djibouti had decided this. So first, it was not the State of Djibouti; it was the transit companies that decided that they should be paid here and they seized the attention of the Port Authority and so forth. Afterwards, the Port Authority sent a memorandum, I think to the Ethiopian Shipping Lines to inform them that they would have to pay starting from such and such dates.
In the aftermath the two States intervened because when there is a deadlock, the States have to step in at a certain point. We held a meeting in Djibouti on the 6th of January at a ministerial level with the concerned ministries. The Ministers of Transportation from the two countries were present with the Minister of Economy & Finance, and the Minister of Foreign Affairs from the Djibouti side, while from the Ethiopian side, Ahmed Shide the State Minister of Finance & Economic Development and officials from Ethiopian Revenue and Customs Authority were attending. The Ethiopian delegation understood the situation at hand perfectly, and we set up a technical commission to start the process to pay the arrears. The Ethiopians wanted to know who has arrears, and we noticed at the end, none of the parties wanted to name the companies that had arrears or who had to be paid. At the end of the day, it was both countries that were losing money because the Ethiopian businesses did not want to tell to the State of Ethiopia to whom they owed money and also, the Djiboutians did not want to tell from whom they have to collect their money, which could be one million USD for instance, on which they have to pay taxes. So that suited them both, the Djiboutian forwarding businesses and the Ethiopians at the end of the day. It is quite a challenge on both sides to know the real situation once and for all in terms of arrears, but we have to be able to find a solution for these matters.
So today, there is a commission working on that so that we can pay each and everyone, and most importantly, to enable the forwarding Djiboutian businesses to be paid without violating Ethiopian laws. When the Djiboutians collect their money in cash here, they are perceived as thieves trying to make off with the cash, and in doing so they violate the laws. We are currently working on a payment method that is clear, which will enable the Ethiopian Customs Authority to know the people that pay in Djibouti and for the Ethiopians to know who is authorized to take money, so that our States may collect their dues. So this is something that we are going to work on, and these problems came mainly from the private sector which involved the States at the end of the day. Fortunately we are very vigilant now in this matter. The next meeting is scheduled to take place in Djibouti in the first week of April.
So will this advance payment method be enforced in the coming month?
First, we will have to sort out within a month how the people are going to be paid. The Ministry of Finance from Ethiopia and that of Djibouti are working to come up with a method of payment. You know, the transit part, what the Ethiopians pay to the port of Djibouti, accounts for 1%, in other words it is not much.
One percent in terms of imports costs?
One percent of the cost of the activities from both sides. So it is really nothing in terms of money. But we have to find out how, the Djiboutians that live off this work can collect their money. And the problem is that these businesses take a loan from the banks in Djibouti so that they can continue their work, and if there are no loans, these businesses disappear. Then there is the problem of unemployment etc that arise as well. We encourage the Ethiopian authorities to work out a payment method and we will work on a formula. But if one month is not enough to finalize the work, we will take the time that will be required to have permanent structures which will enable everyone to sort things out.
I must raise the issue regarding Mr. Abdourahman E. Ismael who was the former representative of the Port of Djibouti here in Ethiopia. There was an incident recently with his car and money being seized at the border. Has this been resolved?
The issue of Mr. Abdourahman is familiar. Mr. Abdourahman, who was a former representative of the Port here was detained for three weeks, and he is not the only person that has experienced this situation. There are other transit agents whose money has been seized at the border as well. Once again this is commonplace, because of Ethiopia’s strict laws on these matters. There was close to 500,000 USD that was seized by the authorities from three transit agents that were arrested. We are working with the Ethiopian authorities to finalize the whole issue and recover it without violating the laws of Ethiopia. As to Mr. Abdourahman, he and his car have been released.
With regards to the dry ports set up in Ethiopia, do they help with decongesting Djibouti?
The dry ports are normally supposed to alleviate the congestion in the port of Djibouti. In Djibouti we have so many containers that remain there for a long time, and for most of these containers after many years in Djibouti, with the approval of Ethiopian Shipping Lines, we have to sell them at an auction. And with the creation of a dry port, it enables us to take the material at once to the dry port in Ethiopia. We take it as something positive for the port of Djibouti, but based on the information that I have, at the level of the authorities of the port of Djibouti, decongestion doesn’t necessarily happen. That is to say that there are many containers that remain there for a long period of time due to delays.
Is it because of the lack of transportation means?
There is the transportation factor. There are two categories of imports, one is brought by ESL (Ethiopian Shipping Lines) which is the main part, and there are the private ones that tend to get services from other sources. So the decongestion happens more with the private ones rather than those managed by ESL. Based on the information that I have, for Ethiopian clients, because of tax clearance payments in Ethiopia, they always delay in collecting their container. But with the presence of Ethiopian customs in Djibouti, normally it is supposed to make the process faster. I was talking with the port people and they also have to strengthen their offices in Addis Abeba in order to provide the clients with enough information so that they can quickly clear their goods from the port of Djibouti.
There was a discussion sometime back about aligning the two customs, that of Djibouti and Ethiopia, to work in unison using similar software etc… Officials from the authorities of Djibouti had come to visit and discuss this option with the relevant entities here. Is there any development in that regards?
In Djibouti, we have considered having the two customs in the same office in order to facilitate a certain number of things; it has been discussed and reviewed by both sides. We in Djibouti are very interested in it, and even at the border level to have the same custom and immigration, because we feel like we are the same people living on both sides. You know, when there are officials that come towards the Ethiopian border, necessarily, the Ethiopian immigration doesn’t know them.
Similarly, when we have Ethiopian officials coming towards the Djibouti border, the Djiboutian immigration doesn’t know them. By working together, we can overcome a certain number of obstacles. That is the first point. The second point, it enables us to speed up the processes. The customs are in the same office, and we do work together at the port of Djibouti. Why not work together at the borders, in Galafi in particular where there are a significant amount of trucks going in both directions. We should enable them to work together. We also know the Ethiopian administration which is a big administration in terms of size. So for us, it is much faster because we are a small country and our administration is not as big as that of the Ethiopian administration. So we are available and we will be waiting.
And maybe that will also help the decongestion of the port because the flow of the goods will be improved.
Yes completely. And also even in terms of security, it will make more sense to have the two work together because they can conduct the search of the trucks at the same time. Nowadays, we do not search trucks the same way we used to 20 years ago, because we have equipment to search and detect what is inside the trucks. It protects against Alshabab in particular, and helps Ethiopia. There are 1,000 trucks for instance that cross the border per day. So can you imagine if there is a grenade per truck in one direction? It is extremely dangerous. Working together, processing and searching together, in terms of security, are very important; not to mention the economy and trade which are going to accelerate. And we believe that it is extremely important and it is in this spirit of economic integration that we are working. When we reach full economic integration, there will be fluidity in our movements.
What we want in Djibouti, and I think Ethiopia shares the same opinion, is that we set an example for Africa. The integration between Ethiopia and Djibouti should be an example like between France and Germany for Europe. This is how I perceive the relationship between Ethiopia and Djibouti. And many countries of the region including West Africa, they hold us up as an example. But we do not fully grasp the importance, and I think we will be a powerhouse of Africa in the future if Ethiopia and Djibouti reach full economic integration. We need to look beyond the traditional ideas of the Djiboutians that Ethiopia is going to swallow us and the Ethiopians saying: Djibouti that little country. I read about these things in the newspapers a few months ago and they are very distant from the reality. What we want and what our leaders want is an integration that will set an example for Africa so that Africa works towards integration. This is what is important.