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Djibouti port

How Djibouti is redeveloping port operations after DCT concession termination

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Though on 22 February this year, the Republic of Djibouti terminated the DCT (Doraleh Container Terminal) concession, in which DP World is a shareholder and operator, the decision was taken after numerous unsuccessful attempts to get DP World to renegotiate a contract that was clearly contrary to the fundamental interests of the nation.

The termination of the contract has in no way stopped port operators from expressing their confidence and interest in the new public structure that has taken over its management – SGTD (Doraleh Container Terminal Management Company). Singaporean ship-owner PIL signed an agreement in March to triple transshipment traffic handled by the terminal. Numerous discussions are underway with other major players in the sector. The port’s productivity has undergone a marked increased since its operation was placed in the hands of its Djiboutian managers.

Djibouti’s scope and ambition goes way beyond the success of Doraleh port. Major investments are ongoing and the amounts committed attest to the confidence of international partners: the Djibouti-Addis-Ababa railway line, Tadjourah mineral port, Goubet port, Doraleh multipurpose port, the start of construction work on the new Djibouti mega free zone in Khor Ambado and the launch of the Damerjog industrial development free zone, etc. One of the more recent agreements is for an ambitious energy sector project. The first phase provides for the commissioning of a gas pipeline between Ethiopia’s Ogaden Basin natural gas fields and the coast of Djibouti. The second phase concerns the construction and operation of a natural gas liquefaction plant and a gas terminal in the Damerjog area, all privately financed by the mega project’s developer, China’s POLY-GCL Petroleum Group Holdings Limited, to the tune of US$4 billion.

These major projects are being undertaken within a particularly attractive macroeconomic and regulatory framework. Economic growth is expected to remain at high levels – around 7% for 2018 and 2019 – making Djibouti one of Africa’s top ten economies in terms of growth. The Djiboutian Franc is a stable currency, pegged to the US dollar, freely convertible (without restriction) and its exchange rate has remained unchanged since 1973.

The sustainability of these investments is buoyed by the Republic of Djibouti’s ambition and by excellent medium- and long-term prospects, since Djibouti is strategically located at the crossroads of one of the busiest shipping routes in the world, linking Europe, the Far East, the Horn of Africa and the Persian Gulf. Quite naturally, Djibouti positions itself as the main gateway to East Africa, and particularly Ethiopia, an emerging nation of 100 million people and the Republic of Djibouti’s leading strategic partner. While maintaining very close relations with its other traditional partners, Djibouti is linked to China’s big New Silk Road development strategy. In reality, Djibouti is the entry point to a formidable logistics corridor designed to serve an emerging African continent.

Business Hilights gathered on Tuesday that the termination was a sovereign decision, and part of a legal procedure, and executed at the end of a transparent process. It was instigated by an unfair and unbalanced contract, the clauses of which imposed unacceptable limits on Djibouti’s development policy. The decision is linked to an exceptional and aberrant situation that by no means calls into question the strength or credibility of the signature of the Republic of Djibouti.

The decree terminating the concession, as well as the law governing it, provide for a compensation procedure in accordance with commonly accepted international rules and practices. This compensation procedure will continue, despite the obvious unwillingness of the former partner. Djibouti hopes to reach a rapid and equitable solution that is in accordance with the law.

Besides, emerging developments show that Djibouti’s investment ambitions are being rolled out in a context of optimal security. Its solid institutions guarantee stability and visibility in an often difficult regional context. It is a welcoming land where dialogue is key. The country’s respect for its international commitments since its independence has made it a reliable and respected player in the concert of nations. Djibouti is an essential partner for peace, and a stalwart in the fight against terrorism and piracy, hosting on its territory American, Chinese, French, Japanese, European (Operation Atalanta) and Saudi military bases. Thus Djibouti ensures the de facto safety of the world’s main shipping route through which 70% of international traffic passes.

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