A gateway for investors in Africa

The Djibouti port, which saw commissioning of a new terminal this month, will be able to move 1.5 million containers a year.

In November, four Super Post Panamax ship-to-shore cranes arrived at the port of Djibouti. Three months later, the massive cranes are busy offloading 65-tonne containers from a Chinese ship.

Two more cranes are expected this month, completing the expansion of Djibouti’s port, which is run by a Dubai company. While Djibouti sits in the middle of a dangerous maritime area, its port remains the lifeline of this Red Sea state’s economy.

“The port is the most important activity in Djibouti’s economy,” said Zeinab Ali, the executive director of Djibouti Ports and Free Zones Authority. “It’s the economy’s engine.”

The new container terminal of Doraleh, which opened this month, is operated by Dubai-based DP World, one of the largest marine terminal operators in the world. Besides the port, UAE companies have invested in Djiboutian hotels, free trade zones and operate Djibouti’s customs.

“We have invested both financial and human resources in Djibouti over the past nine years as part of our long-term commitment to our partnership here,” said Sultan Ahmed bin Sulayem, the DP World chairman. “That investment in efficient infrastructure has helped stimulate the economy and supported trade, which in turn has benefited our business. But importantly, it has created jobs, created wealth and created opportunities for young Djiboutians.”

With less than one per cent arable land and few minerals to speak of, Djibouti’s economy relies almost entirely on the service sector, and its modern port is the centrepiece of that sector. Djibouti is strategically located at the mouth of the Red Sea on one of the world’s busiest shipping lanes. Ships going from Asia to Europe via the Suez Canal must pass by Djibouti, making the port a prime transhipping location.

“The advantage we have is our location,” said Aden Douale, chairman of the port authority. “Most of the world’s traffic is going to pass through us. Djibouti is in an ideal position.”

When it is at full capacity, the port will be able to move 1.5 million containers per year, making it one of the busiest ports in Africa. But before the supertankers can dock at the port in Djibouti, before the giant cranes can begin moving around cargo, the ships must navigate the pirate-infested Gulf of Aden, some of the most dangerous waters in the world.

Last year, pirates off the coast of Somalia attacked more than 100 vessels and hijacked dozens. Ship owners paid ransoms of up to US$3 million (Dh11m) for the release of their boats. The territorial waters of Djibouti, which is next door to Somalia, have not experienced the pirate scourge. But some shipping companies have avoided Djibouti and the Red Sea recently for the safer but longer route around the Cape of Good Hope.

Mr Douale downplayed the piracy threat. It will not deter many ships from Djibouti, he said. “The problem is there, but the cargo will still have to come here. The cargo volume is still going up.”

The original phase of Djibouti’s modern port opened in 1985. It took advantage of landlocked Ethiopia’s need for a sea outlet. To this day, Ethiopian commerce represents 70 per cent of the port’s traffic. The Addis Ababa-Djibouti railway and motorway end at Djibouti’s port.

A planned bridge between Djibouti and Yemen, the first of its kind to link Africa and the Middle East, could take some business away from the port, although the development is a long way off. A Dubai company led by Osama bin Laden’s brother has announced plans to build what would be the world’s longest suspension bridge, although construction has yet to begin on the 20-year project. Port officials do not seem threatened by a bridge many call a pipe dream.

The biggest competition to Djibouti’s port is from the container terminal at Aden, Yemen. In 2000, when Djibouti was looking for an organisation to run its port, Dubai Ports Authority was rivalling Singapore’s port for control of ports worldwide. Aden’s port was already operated by Singapore so Dubai jumped at the chance to manage Djibouti’s port.

“It was a win-win marriage,” Mr Douale said. “Dubai was worried about the threat from Singapore and we were looking for a partner.”

The expanded port is expected to create 1,600 jobs, which will go a long way to alleviating the 60 per cent unemployment rate in this nation of 500,000 people. Besides the port, a new modern oil terminal and two free trade zones run by Dubai-based Jafza International help make Djibouti an attractive shipping location.

“Without our infrastructure, we wouldn’t keep investors interested in Djibouti,” Ms Ali said. “We want to be the gateway for investors in Africa.”