A Partnership for Progress: Djibouti and Neighbouring Ethiopia Enjoy a Particularly Close and Mutually Beneficial Relationship. with Trade Set to Increase, Infrastructure Links Are Being Upgraded
In order to handle the growing volumes of cargo flowing to and from Ethiopia, the Djibouti government not only privatised the country's ports but also contracted one of the world's foremost port operators, Dubai Port World (DP World) to optimise operations. This has led to productivity increasing exponentially, so that today the Port of Djibouti is one of the world's leading ports, not just in terms of volumes--currently with a capacity amounting to 1.5m loft equivalent containers a year--but the standard measures of a port's efficiency.
These measurements include criteria such as the movements of cranes each hour and ship turnaround times, critical areas when the choice of trans-shipment terminals is made by global shipping lines. Furthermore, Djibouti has built one of the biggest oil storage and handling complexes in Africa at Doraleh. This terminal, built at a cost of $120m, has two berths with 20m drafts, and operates around the clock to handle 3m tonnes of fuel a year. The terminal can, in fact, pump 2,000t of fuel an hour as well as liquefied gas.
These two facilities are crucial not just for Djibouti, which remains a net energy importer, but also the region as a whole, and especially landlocked Ethiopia. When disputes between Ethiopia and Eritrea led to conflict, Eritrea closed the ports of Massawa and Assab to Ethiopian goods, and ports that Ethiopia had used since before Eritrea's independence, when the two countries were one unified entity, were denied to them.
Suddenly, without access to the ocean, Ethiopia was in a dire situation. It simply had to find alternative routes to the ocean for its exports like coffee, livestock and flowers--and for imports to fuel the country's economy. Ethiopia has Africa's second-largest population and is one of the continent's fastest growing economies, but it was Ethiopia's great fortune to have Djibouti as a neighbour with the capacity to assist.
The Port of Djibouti's operations today are dominated by Ethiopia's imports and exports, which comprise over 9o% of the total throughput--although, of course, Djibouti handles significant trans-shipment volumes, i.e. where trade goods are offloaded at the port and then forwarded on a different vessel to other world destinations.
Consequently, relations between Ethiopia and Djibouti are particularly strong and mutually beneficial. Not only does Ethiopia depend on Djibouti for the transit of its trade goods, but Ethiopia also supplies essential foodstuffs to Djibouti. The establishment of a Free Trade Zone adjoining the port has also been a boon to both countries. Not only were Ethiopian companies able to establish operations here in proximity to the port, and to conduct business under a fiscal regime that was essentially as conducive as that within Ethiopia proper, but Djibouti was able to offer multi-dimensional services within the zone. The country is also pioneering an air-sea-land link for landlocked countries within the region.
Djibouti Free Zone is currently home to over loo leading regional and global companies including BMMI, SDV Bollore, and Seven Seas. It has emerged as one of Africa's leading trading and distribution hubs. The strategic location of the free zone allows companies located in DFZ to serve not just Ethiopia but 380m people in 19 countries in East and Central Africa.
It is also recognised that the energy sector is a further spur for co-operation and with tremendous opportunities for strengthening regional integration both within the Horn of Africa and the Eastern region of the continent. The African Development Bank has already financed the electrical interconnection network between Djibouti and Ethiopia.
However, on the horizon is the potential to generate massive amounts of power in Djibouti by exploiting the country's geothermal assets. Located at the junction of three tectonic plates, Djibouti has significant geothermal potential, and with many points beneath sea level and lying on the Great Rift Valley, drilling presents a more viable and affordable option to many other places. …