Djibouti is in talks with shipping companies PIL and CMA CGM to develop ports in Doraleh. The agreement includes adding additional containers to the existing terminal and constructing a brand new port at an initial cost of $660 million.
Once built, the Doraleh International Container Terminal will have an annual capacity of 2.4 million TEUs (twenty-foot equivalent units) and will take two years to complete. Further expansion will bring its total capacity to 4 million TEUs.
Doraleh is located near the strategic Strait of Bab al-Mandeb and is well-suited for trans-shipment cargoes. The Djibouti Ports and Free Zones Authority (DPFZA) is also planning to construct a $350 million airport and expand Air Djibouti's fleet of cargo aircraft.
"We are taking the first important steps towards the DCIT fulfilling its capacity potential," said Aboubakar Omar Hadi, Port Chairman. "It is our goal to become a sea-air trans-shipment hub for the entire continent, and not just East Africa. The project has been discussed at length with PIL and CMA CGM."
The news comes at a time when Djibouti's government have ended a contract with another shipping company, DP World, to run its existing terminal in the region. This move has been deemed illegal and proceedings have begun before a court in London.
Djibouti have offered to buy back DP World's 33 percent stake in order to avoid further conflict but that has also been met with hostility. It has been a turbulent relationship for both parties since 2006, when Djibouti agreed on a 30-year concession to work with DP World.
In 2014, Djibouti launched a suit against DP World over allegations the company had made improper payments to Abdourahman Boreh, former head of the port authority. Djibouti sought to exit the deal, but DP World denied any wrongdoing and won the case. The existing Doraleh Container Terminal (DTC) is a state-of-the art gateway and largest employer in Djibouti. It has operated a profit every year since opening so the latest turn of events has angered the Dubai government, who own DP World.
"We demand Djibouti cease its unlawful conduct and continue to work with us as partners," said Sultan Ahmad bi Sulayem, Group Chairman. "The cooperation has been in place for 18 years and has yielded hundreds of millions of dollars. Africa needs infrastructure and if nations can change laws to take assets it will be difficult to attract further investment."
The Port of Doraleh is located 5km from Djibouti City and has terminals for handling oil, bulk cargos and containers. It currently has at total of 15 berths with one reserved for the Chinese Navy. Seventy percent of cargo at the port is shipped to or from Ethiopia, accounting for over 95% of its foreign trade. The two countries are linked by the Addis Ababa-Djibouti railway and National Highway 1. Economically, by far Djibouti's most valuable assets are its ports which are home to military bases belonging to USA, China, France, Italy and Japan.
DPFZA's deal with PIL (Pacific International Lines) is set to bolster cargo volume at the existing terminal by 33 percent. 300,000 additional TEU containers are expected a year, providing 20 percent of its total capacity. PIL, headquartered in Singapore, have partnered with CMPH Co for the project. This Chinese company financed 23.5 per cent in another Doraleh port last year which is based next to China's military base.
PIL is headquartered in Singapore and is one of the largest ship owners in Asia. They rank themselves as 11th in the world. The group operate a fleet of 158 modern vessels and offer multi-purpose services in 100 countries worldwide. PIL employ 18,000 people and in 2014 the company turned over US$4.6 billion.
Djibouti hosts the largest US military base in Africa and although Chinese investment has been welcomed, America sees it as a threat. US Africa Command General Thomas Waldhauser warned last week that a Chinese takeover of Doraleh could have "significant" consequences if there were restrictions on the U.S.'s ability to use the facility. DPFZA officials described it ridiculous to imagine China could restrict or deny any access.
As well as the deal with PIL, Djibouti is also working with CMA CGM to construct a $660 million new terminal. The French shipping company already operate 3 direct weekly services calling in and out of Djibouti and have recently added another two. Named MEX1 and REX2, the new routes link Ethiopia to Asian, European and Middle Eastern markets.
CMA CGM Group is present in more than 160 countries through its network of over 755 agencies and employs more than 30,000 worldwide. The shipping company has 504 vessels and serves over 420 of the world's 521 commercial ports. Fifteen percent of the new project with Djibouti will be financed through equity. DPFZA will contribute eighty five percent and the rest will be raised via international institutions and banks. In 2016 CMA CGM turned over $USD16 billion.
The Port of Berbera in Somaliland is positioning itself as a rival to Doraleh with a new $USD 442 million investment from DP World. Ethiopia has already acquired 19% in the project and is developing the Berbera trade corridor, linking the port to Addis Ababa by road. A free zone is also planned for the region and has the potential to take significant amounts of trade from Djibouti shores.
"We want the East African region to get more done," said Aboubaker Omar from the DPFZA. "We do not feel threatened and Berbera is welcome to come and share the business."