Strictly Business with Alternative Port
Dagem Belayneh
Ethiopia’s volume of imports has increased tremendously over the past dozen years as the rapid economic growth and expansion of infrastructure demand more commodities to be imported. Ethiopia’s import of crude oil and petroleum products has also risen over the years. The much improved performance of the industrial sector coupled with the country’s growing profile as a manufacturing hub has also boosted exports although they have not met the projected rate of growth.
This revamped import and export commotion mainly passes through the port of Djibouti as Ethiopia has become a land locked country following the secession of Eritrea. Sources indicate that 98% of Ethiopia’s import/export passes through the port of Djibouti. Therefore, there is a high level of Ethiopian dependency on the port. An article entitled Ethiopia, Berbera port and the shifting balance of power in the horn of Africa by Brendon J. Cannon in The Rising Powers Quarterly (Volume 2 , Issue 4 , 2017 , 7-29) state: “Arguably, the most important constraint on Ethiopia’s aspirations for regional leadership is its lack of sea access. There will always be a considerable gap between its aspirations and its ability to act as regional power so long has it has a high level of dependency on one neighbour to access international waters.”
The argument is that the lack of direct sea access inhibits integration with the global economy and entails a transport cost disadvantage compared to states with sea access. Reducing maritime transit costs and more advanced logistics technology exacerbates this imbalance in favor of sea-access states with well-developed ports. Also, argue the proponents of this view, the fact that trade from a landlocked country must pass through a sovereign transit country in order to access international shipping markets creates a serious political vulnerability on the former. If a landlocked country and its transit neighbour are in conflict, either military or diplomatic, the transit neighbour can block borders, implement regulatory changes that impede trade, or simply increase tariffs. Even when there is no direct conflict, landlocked countries are extremely vulnerable to the political vagaries of their transit neighbours.
Considering Ethiopia experienced the above stated scenario when it went to war with Eritrea and subsequently lost its use rights of the port of Assab, it would be wise if it looked for other alternative ports to use in the region. Accordingly, it has three major options to consider. These are Port Sudan in Sudan, Berbera in the Somaliland, and Mombasa in Kenya. Of the three, Berbera is the closest to Ethiopia as it is located 937 km from Addis Ababa. With the port of Djibouti standing at 910 km from Addis Ababa, the port is almost as near as the closest port to the capital.
The problem with Somaliland, however, is that it is not an independent state recognized by the international community. The major western powers running Mogadishu from behind advocate a unified Somalia going forward. The largely peaceful and burgeoning regions of Somaliland and Puntland are, therefore, only self-proclaimed states but not internationally recognized states. The Somali government in Mogadishu, thus, claims that these territories are within its administrative jurisdiction. As a result, it deems engagements with Somaliland as a breach of its sovereignty.
It was under these conditions that Dubai Ports World (DP World) signed an agreement with Somaliland to develop and manage Berbera port for 30 years in May, 2016. The President of the Mogadishu government (SFG), Hassan Sheikh Mahamud, then approved the agreement between the two parties.
As one of the main potential clients of the Berbera port and as a body in search of alternative routes to the sea, the Ethiopian government was following developments closely. Considering it refrained from pursuing its interests over the Berbera port for a long time to keep out of the feud between Somaliland and Somalia, the agreement of both parties to the deal granted Ethiopia a ground to pursue its interests. It welcomed the decision and sought to cooperate with both Somaliland and DP World as the development of the port with an outlay of 442 million dollars from the latter would provide it an alternative port.
DP World has set out to serve the demands of the landlocked country with the largest population through its developments. Reports cite experts as saying that the company and Somaliland decided to offer a stake for Ethiopia on the port to attain the demand. After the deliberations, Ethiopia has acquired a 19% stake in the Port of Berbera in Somaliland following an agreement with DP World and the Somaliland Port Authority. The agreement leaves DP World as the majority shareholder in the port, with 51%. Somaliland will hold 30%. Under the deal, Ethiopia will invest in the port as a trade gateway.
Though President of the Mogadishu government approved the agreement with his signature, there are those who are largely infuriated by the whole development. However, the Ethiopian government has announced that it dealt with the issue as strictly business leaving the political sense of it to the two parties. The spokesperson of the Ethiopian Ministry of Foreign Affairs, Meles Alem, stated last week that the intent of investing in Berbera or other alternatives is purely economic.