May 30, 2011
Djibouti Port’s Authority (PAID) is said to have requested an annulment of the 20-year management contract it has with DPWorld. The first notice that was sent to DPWorld indicates that the contract will be terminated by May 2011, but following discussions with the two parties, the date has been extended to June 1st, according to sources. Sources also say that the two parties are actively discussing the notice currently. As of now, it is not still clear how or when the separation will be conducted.
A ministerial visit to Dubai has been scheduled to discuss the modality of the divorce, according to sources who say that there may be a possible extension of the date set by the Authority.
Meanwhile, business has been continuing as usual, and this has not had any immediate effect on the services the Port of Djibouti is giving to its clients.
Why the PAID wishes to end the contract is not clear, but many say that the Authority may be unhappy with the promises that it felt were not fully delivered by DPWorld.
In June 2000, the government of Djibouti and DPWorld signed a 20 year contract to manage the Port of Djibouti facilities, which was later extended. During that period of cooperation, the initiative of a new port construction emerged in November 2006, and since then the cooperation has evolved into a venture that led to the realization of Doraleh Port that will also be managed by DPWorld.
The new Doraleh Port includes a container and an oil terminal. This is a USD 450 million venture where the government of Djibouti owns two thirds and DPWorld one third. During this period of cooperation, other ventures such as the magnificent five-star Kempinski Hotel have been created by another subsidiary of Dubai World, Nakheel Hotels.
It is in this period that President Ismail Omar Guelleh was once quoted as saying “Since our partnership with Dubai our country has become open. We see people coming to invest in banking, insurance and free zone companies.”
The Doraleh Container Terminal has now doubled its services growing from a mere 400,000 TEUs in October last year to 800,000 TEUs per annum today. Doraleh terminal has a capacity to handle 1.2 million TEU (twenty foot equivalent container units) annually, the largest and most modern container terminal in East Africa.
At his inaugural ceremony held on May 8th, Djiboutian President Ismail Omar Guelleh pledged in his speech to focus on developing workers’ skills during what he said will be his final term, aiming to transform one of Africa’s smallest countries into a Red Sea hub.
“We will opt for targeted training, tailored for the real needs of our economy both nationally and regionally. Our aim is to eventually make Djibouti a regional business platform, combining logistics, industry and finance.”
Djibouti relies on services related to its strategic location on the Red Sea as being one of the world’s busiest shipping lanes; the nation’s port provides the best access to the sea for Ethiopia, Africa’s second-most populous nation.
Djibouti’s economy has grown at an average of five percent annually over the past five years, the International Monetary Fund says. “The expansion has been spurred by projects including a new container terminal built by DP World Ltd, the government, and Nakheel PJSC’s construction of a five-star hotel, Kempinski, which has boosted tourism,” states the IMF. Growth is expected to be 4.8 percent this year and 5.7 percent in 2012, according to the IMF’s statement.
Since 1998, the port handles 100% of Ethiopia’s maritime traffic, which moves to and from Addis Ababa mostly by truck. To accommodate this important business, PAID has made an additional 20 hectares of dry yard area available.
DP World is the world’s third largest container terminal operator, which operates 49 container terminals in 28 countries including the Middle East, Asia, Africa, Europe, Australia, and Latin America and is seen as one of the more profitable units of Dubai World, its parent company.
In the first quarter of 2011, DP World’s gross volume grew by 12 percent year on year to 12.6 million TEU’s across its 49 operational terminals.
Today, Djibouti is emerging as one of the most important gateways for trade to the African continent, offering excellent port facilities for import, export, trans-shipment, and onward connections by road, rail, and air. The port of Djibouti is ideally located to serve the COMESA market, linking 19 countries and 380 million people.