With political instability in Ethiopia, will there be enough trade to keep Somaliland and Djibouti’s ports busy?
When Djibouti makes international headlines, it is usually in
connection with the many superpowers that have built military bases on
its shore. France, the United States, China , Italy and Japan all have a
major military presence in the tiny East African nation. But for
Djibouti’s government, there is another major power that is even more
important: Ethiopia.
connection with the many superpowers that have built military bases on
its shore. France, the United States, China , Italy and Japan all have a
major military presence in the tiny East African nation. But for
Djibouti’s government, there is another major power that is even more
important: Ethiopia.
It is difficult to overstate just how
dependent Djibouti’s economy is on its much larger neighbour. There is
almost no fresh water in Djibouti, so it must import water from
Ethiopia. Most of its electricity comes from Ethiopia too. Little grows
in Djibouti’s arid desert landscape, so fresh fruits, vegetables and
grains are trucked across the Ethiopian border every day.
dependent Djibouti’s economy is on its much larger neighbour. There is
almost no fresh water in Djibouti, so it must import water from
Ethiopia. Most of its electricity comes from Ethiopia too. Little grows
in Djibouti’s arid desert landscape, so fresh fruits, vegetables and
grains are trucked across the Ethiopian border every day.
Economically, by far Djibouti’s most valuable assets are its ports. But
these too are almost entirely reliant on a healthy trading relationship
with Ethiopia, which, being landlocked, requires an outlet to the sea.
these too are almost entirely reliant on a healthy trading relationship
with Ethiopia, which, being landlocked, requires an outlet to the sea.
Ethiopia is an anchor in the Horn of Africa – any disruption will have knock-on effects
More than a century ago, when the old Port of Djibouti was built by the
French colonisers, it was connected with a railway that linked Addis
Ababa to Djibouti City. Given the size differences of the two countries –
today Ethiopia’s population is more than 100 million, while Djibouti’s
is less than 1 million – the port was never about trade with Djibouti,
but trade with Ethiopia. It is no coincidence that today, the new
Doraleh Container Terminal is the end of the line for the new
Chinese-built Addis-Djibouti standard gauge railway .
French colonisers, it was connected with a railway that linked Addis
Ababa to Djibouti City. Given the size differences of the two countries –
today Ethiopia’s population is more than 100 million, while Djibouti’s
is less than 1 million – the port was never about trade with Djibouti,
but trade with Ethiopia. It is no coincidence that today, the new
Doraleh Container Terminal is the end of the line for the new
Chinese-built Addis-Djibouti standard gauge railway .
If trade
from Ethiopia dries up, ships will no longer be queuing at sea for their
turn to dock at these ports. This is significant because there are two
separate situations that threaten the trading relationship between
Ethiopia and Djibouti. The first is the brewing political crisis in
Ethiopia.
from Ethiopia dries up, ships will no longer be queuing at sea for their
turn to dock at these ports. This is significant because there are two
separate situations that threaten the trading relationship between
Ethiopia and Djibouti. The first is the brewing political crisis in
Ethiopia.
In February, Prime Minister Hailemariam Desalegn
unexpectedly submitted his resignation. Immediately, the ruling party
declared a state of emergency, which was recently ratified by
Parliament. Despite this, the widespread anti-government protests
continue, especially in the Oromia region which surrounds the capital
Addis Ababa, as well as in Amhara Region. At the same time, a power
vacuum within the ruling coalition has created uncertainty about
Ethiopia’s political future, prompting fears of further instability. A
new prime minister is expected to be announced soon.
unexpectedly submitted his resignation. Immediately, the ruling party
declared a state of emergency, which was recently ratified by
Parliament. Despite this, the widespread anti-government protests
continue, especially in the Oromia region which surrounds the capital
Addis Ababa, as well as in Amhara Region. At the same time, a power
vacuum within the ruling coalition has created uncertainty about
Ethiopia’s political future, prompting fears of further instability. A
new prime minister is expected to be announced soon.
This is
potentially very bad news for Djibouti. Any disruption to Ethiopia’s
economy will have a knock-on effect on Djibouti, while a political
crisis may precipitate a humanitarian emergency that would result in an
increase of refugees across the border. Although Djibouti has recently
reformed its refugee laws, earning praise from the United Nations
Refugee Agency, it remains ill-equipped to deal with a major refugee
influx.
potentially very bad news for Djibouti. Any disruption to Ethiopia’s
economy will have a knock-on effect on Djibouti, while a political
crisis may precipitate a humanitarian emergency that would result in an
increase of refugees across the border. Although Djibouti has recently
reformed its refugee laws, earning praise from the United Nations
Refugee Agency, it remains ill-equipped to deal with a major refugee
influx.
Ethiopia is considered an anchor in the Horn of Africa,
so any disruption will have knock-on effects. ‘Unrest in Ethiopia has
serious implications for regional stability,’ says Emily Estelle, a
senior analyst for the Critical Threats Project at the American
Enterprise Institute.
so any disruption will have knock-on effects. ‘Unrest in Ethiopia has
serious implications for regional stability,’ says Emily Estelle, a
senior analyst for the Critical Threats Project at the American
Enterprise Institute.
Djibouti’s ports are almost entirely reliant on a healthy trading relationship with Ethiopia
The second situation of some concern to Djibouti’s government is
Ethiopia’s recent acquisition of a 19% stake in the Port of Berbera in
neighbouring Somaliland. Berbera is positioning itself as a rival to
Djibouti, and is clearly making a major play to handle more Ethiopian
freight. Somaliland is also in the process of building the Berbera trade
corridor, which will eventually link Berbera to Addis Ababa by road.
Ethiopia’s recent acquisition of a 19% stake in the Port of Berbera in
neighbouring Somaliland. Berbera is positioning itself as a rival to
Djibouti, and is clearly making a major play to handle more Ethiopian
freight. Somaliland is also in the process of building the Berbera trade
corridor, which will eventually link Berbera to Addis Ababa by road.
Historically, one of Djibouti’s strategic advantages has been its
stability . In an inherently unstable part of the world – its other
neighbours include Eritrea, Somalia and Yemen – Djibouti represents a
relatively low-risk investment destination. But Somaliland is providing
competition on this front.
stability . In an inherently unstable part of the world – its other
neighbours include Eritrea, Somalia and Yemen – Djibouti represents a
relatively low-risk investment destination. But Somaliland is providing
competition on this front.
The self-declared republic operates
entirely independently of Somalia proper, even though this independence
is not formally recognised by anyone else. Nonetheless, Somaliland has
successfully established a peaceful democracy marked by regular
transitions of power – in marked contrast to President Ismaïl Omar
Guelleh’s long rule in Djibouti (19 years and counting).
entirely independently of Somalia proper, even though this independence
is not formally recognised by anyone else. Nonetheless, Somaliland has
successfully established a peaceful democracy marked by regular
transitions of power – in marked contrast to President Ismaïl Omar
Guelleh’s long rule in Djibouti (19 years and counting).
Therefore Somaliland too is becoming an attractive investment
destination on the coast of the Horn of Africa – and Ethiopia, in
acquiring its Berbera stake, clearly agrees. What does this mean for
Djibouti? Will Ethiopia incentivise local freight traffic to run through
the port in which it retains a financial interest? Or is there enough
cargo to go around?
destination on the coast of the Horn of Africa – and Ethiopia, in
acquiring its Berbera stake, clearly agrees. What does this mean for
Djibouti? Will Ethiopia incentivise local freight traffic to run through
the port in which it retains a financial interest? Or is there enough
cargo to go around?
Somaliland is also becoming an attractive investment destination on the coast of the Horn of Africa
That’s the view of port operator DP World’s chairman and CEO Sultan
Ahmed bin Sulayem. ‘I am so excited about the prospects of working with
the Ethiopian government. Ethiopia is home to approximately 110 million
people. The ports of Berbera and Doraleh will provide significant
capacity to the region. Both these ports and more capacity will be
needed to serve the region’s growth potential in the future,’ he said.
Ahmed bin Sulayem. ‘I am so excited about the prospects of working with
the Ethiopian government. Ethiopia is home to approximately 110 million
people. The ports of Berbera and Doraleh will provide significant
capacity to the region. Both these ports and more capacity will be
needed to serve the region’s growth potential in the future,’ he said.
Sulayem’s comments came even after DP World suffered a dramatic setback
in Djibouti. Until recently, DP World operated both the Berbera port
and the Doraleh Container Terminal in Djibouti. But in February the
Djibouti government unilaterally cancelled the DP World contract and
seized its stake in the port, claiming that DP World had obtained the
contract in a corrupt manner – a charge the company denies.
in Djibouti. Until recently, DP World operated both the Berbera port
and the Doraleh Container Terminal in Djibouti. But in February the
Djibouti government unilaterally cancelled the DP World contract and
seized its stake in the port, claiming that DP World had obtained the
contract in a corrupt manner – a charge the company denies.
If
all goes according to plan, Sulayem is right – a rising Ethiopia should
provide more than enough trade to keep both Berbera and Doraleh busy,
and fill the coffers of both the Djibouti and Somaliland governments.
But against a background of increasing political instability in
Ethiopia, there can be no guarantees that the plan is going to work –
and tiny Djibouti may pay the price for hitching its wagon so close to
Ethiopia’s train.
all goes according to plan, Sulayem is right – a rising Ethiopia should
provide more than enough trade to keep both Berbera and Doraleh busy,
and fill the coffers of both the Djibouti and Somaliland governments.
But against a background of increasing political instability in
Ethiopia, there can be no guarantees that the plan is going to work –
and tiny Djibouti may pay the price for hitching its wagon so close to
Ethiopia’s train.
