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Djibouti continues to build huge infrastructure projects that will transform the country into the continent’s major trading hub.
On Wednesday May 24, the same day it inaugurated its close to USD 600 million Doraleh Multipurpose Port (DMP), Djibouti sealed a deal to add new economic and logistical projects.
Aboubaker Omar Hadi, Chairman of Djibouti Ports and Free Zones Authority (DPFZA), told Capital that the Authority and China Merchant Group, a shareholder at the Port of Djibouti SA (PDSA), are undertaking two new endeavors around Doraleh and Damerjog.
“We have already planned to launch new mega projects after DMP is completed, and the agreement signed on Wednesday is part of it,” he said.
First is the Doraleh International Container Terminal (DICT) that will be the nation’s largest container terminal with a handling capacity of three million TEUs, according to the president of DPFZA.
The terminal will be completed in two phases; the first phase will commence in the coming September with a total investment cost of USD 660 million while the second phase will consume USD 400 million. The project is scheduled to be completed within a 24 month period.
The current container port, Doraleh Container Terminal, managed by DP World has a capacity of handling two million TEUs.
The other project is a revision of the formerly planned project of Damerjog Livestock Port to Damerjog Heavy Industry Free Zone (DHIFZ) which is scheduled to commence after a month, in July.
“The design of Damerjog Port has been completely changed so that it can be used not only for cattle but for heavy industries as well,” Aboubaker said.
“The development cost of the free zone and the port at DHIFZ will be around one billion USD,” he added.
“We are developing this infrastructure to attract investors. We are going to invest five times more to accommodate heavy industries, a shipyard , a ship building site, and an oil refinery,” he explained the change in design of the original Damerjog Port.
Djibouti will be developing this industrial zone for a cluster of 20 Chinese heavy industry companies that have already confirmed their interest, according to DPFZA. They will invest in ship building, oil refining, oil rigs and off shore drilling among others.
Both projects are in partnership with China Merchants and DPFZA with 40 and 60 percent shares respectively.
Aboubaker said that DPFZA will get the funding through equity negotiations for 30 percent of the cost and the rest through loans from financial institutions.
This project is expected to expand and share Chinese expertise in ship building, since the second largest world economy is the biggest shipbuilder in the world today.
Belt and Road Forum
Chinese President Xi Jinping has pledged billions of dollars to realize the One Belt One Road initiative over the coming few years.
Ethiopia and Djibouti stand to benefit from this initiative.
“We have the second railway project that we are planning to construct from Tadjoura to Woldeya as common Djibouti-Ethiopia projects that need financing. So certainly we are going to request the financing from the One Belt One Road fund,” Aboubaker said.
The electricity interconnection is not completed yet, with a short distance remaining from Afar region to Tajourah; which could also be supported by this fund. Currently, the two countries are already connected with an electric line via Dewale, Ethiopia Somali region. The second interconnection project will stretch to the northern part of Djibouti from north east of Ethiopia.
Djibouti’s national shipping company ready to set sail
Recently Djibouti has launched the establishment of the state owned Djibouti Shipping Lines (DSL). The company will be the second for the continent after Ethiopian flag carrier, Ethiopian Shipping and Logistics Services Enterprise.
Aboubaker said that DSL is preparing to begin operation this September 2017. He said that it will be purely container carrier.
The shipping lines will transport containerized cargos from the port of Djibouti to other eastern and southern African ports. “Since Djibouti has become a multinational hub for containers the large mother vessels will drop their containers in Djibouti and then we are going to use DSL as a feeder to redistribute in the region,” he explained.
Large part of Djibouti’s coastal area is naturally deep and can manage large vessels to dock to the different port facilities. “We are already working for countries that have their own port but cannot accommodate big ships,” he added.
Currently other shipping companies are doing this business up to Durban to distribute container cargos that drop at Djibouti with smaller vessels, according to Aboubaker.
“However, it would be good if the African Union would put in place a regulation that enforces exclusivity for African Shipping Lines for feeding services in African ports,” he said.
“This is to protect African Ship owners. In Europe, there is an EU regulation and you cannot carry transshipments from Spain to Italy for instance unless you are a European ship,” he explained.
In the continent Ethiopia is the only commercial ship operator since the South African private firm, Safmarine, was sold to the Copenhagen based global logistics operator, Maersk 18 years ago.
Stevedoring at DMP
DMP will be handling the stevedoring service (loading and unloading of ships) in the new port.
As this port service used to be offered by other freight forwarding companies working at DPSA including the state owned Ethiopian Shipping and Logistic Services Enterprise (ESLSE), many are not happy to lose their business.
The DPFZA head argued that DPSA has a right by law to handle the cargo by itself.
He said that it is one of the operations of the port but it used to outsource it to ESLSE and other freight forwarders. “The Port has always given a yearly renewable service license, not only to ESLSE but to 18 companies in Djibouti,” he explained.
“Now with this sophisticated and huge investment at DMP, we have decided to handle it ourselves, and ensure international standard efficiency,” he added.
Asked whether Ethiopia’s recent show of interest in Berbera Port will affect in any way the huge investment that Djibouti is undertaking in its Ports realizations, the Chairman said that his government and the authority are not worried about Ethiopia’s plan to use the port at Berbera, Somaliland. “We are not worried about it because Ethiopia’s volume is increasing exponentially ever year,” he added.
“If there is a free and fair competition, then we can still invest more and more and Ethiopian companies can also compare their options in other places,” he concluded.