Close to a year back, the UAE port operator DP World and the government of Somaliland opened a new container terminal in the Berbera port signaling a new era of East African trade. The port is strategically located on the Gulf of Aden, a crucial maritime hub for a fast-growing region that processes up to 20% of global trade annually.
As experts have long said, the new route will be an alternative for Somaliland’s landlocked neighbor such as Ethiopia and provides an important boost for the region that will open up palpable opportunity.
Capital to this end reached out to Supanchia Wattanaveerachaiceo, Chief Executive Officer of DP World Berbera, and Dr. Saad Ali Shire, Minister of Finance of the Republic of Somaliland; for insights on the port progress and the limitless benefit of the port. Excerpts;
Capital: Tell us about the Berbera Project.
SupanchiaWattanaveerachai: Based on the concession agreement between the government of Somaliland and DP world in September 2016, we committed to invest up to 442 million US dollars and we took over the port on March 2017. Following the takeover, we started the expansion project in October 2018.
Currently, the first phase of the expansion project has been completed with operations starting last year July which resulted in the upward capacity from 100,000 TEU to half a million. So far, DP world has spent approximately 214 million US dollar.
Capital: What benefits does the port have for Ethiopia, since Ethiopia is land locked and the port seems to be near to the boarder of Ethiopia?
Supanchia Wattanaveerachai: As we all know 95% percent of Ethiopian cargo currently goes through the Djibouti port.
If you look back at the capacity of Berbera port, say four or five years ago, the port did not have the capacity to handle the country’s cargo. But today, it has half million TEU capacity and can serve as an alternative gate way, to which we believe that Ethiopia deserves multiple gateways.
In terms of benefits, if you notice the political issues in recent times has led to the blocking of the corridor, that is, the road from Djibouti to Addis Ababa.
As Ethiopia mainly uses the Djibouti corridor it could be something that could interrupt the flow of the Ethiopian import and also export. In order to mitigate such risks, it’s better to have multiple options. Introducing options also creates a healthy competition which in the long run improves cost and efficiency.
Berbera port is probably the best location for the eastern part of Ethiopia. The berbera corridor road upgraded project and the Hargeisa Bypass road Corridor will link to the existing modern highway on the Ethiopian side of Somaliland and position Berbera as a direct fast and efficient trade route for Ethiopia, which present an array of benefits to this regard.
Capital: DP world is also developing a special economic Zone in Berbera. What benefits does it have for Somaliland and Ethiopia as well?
Supanchia Wattanaveerachai: The special economic zone is a combination of the increased Berbera port development and will support Somaliland and Ethiopia as it seeks to bolster the export competitiveness of the country. Government gave 1200 hectares to develop the economic zone in Berbera and the parliament has passed the free zone law as of March last year. We are now in phase one development which is only 55 hectares, and we have done so to test the market. When the construction started, we began the necessary registration to which 80 percent is booked.
The development of the Berbera Economic Zone (BEZ) in proximity to the Port of Berbera positions it as the new integrated maritime, logistics and industrial hub in the horn of Africa.
Modeled on Jebel Ali Free Zone (Jafza), DP World’s flagship project in Dubai, the BEZ aims at providing local and foreign investors with a conducive and competitive environment for investment and trade.
The conducive environment will be created through readily available infrastructure consisting of prebuilt warehousing facilities, serviced land plots, office and business centre spaces. Investment and trade facilitation services will also be offered through the setting up of the Berbera Economic Zone Authority’s one stop shop which will be managed by DP World.
In simple word traders from say, Ethiopia can set up the warehouse here in the economic zone in
Berbera; having full rights to produce and sell goods without paying tax and also traders again from Ethiopia can order the goods or buy without any tax from Somaliland, which helps to reduce working capital.
Capital: How do you see the readiness of the Ethiopian government to use Berbera as its alternative port?
Supanchia Wattanaveerachai: It is very obvious that Berbera is one of the important gateways. If I’m the government, I need to have multiple options to handle the national Cargo; I cannot just rely on one option. This is beneficial for risk mitigation. Thus I believe readiness from government naturally exists.
Capital: Tell us about the Road projects that will connect Berbera to Ethiopia?
Supanchia Wattanaveerachai: Currently, there are two road projects which are ongoing. The first being the Berbera Corridor from Berbera up to Wechale, which is a 250 kilometers project supported by the UAE Government which is expected to be completed by the end of this year.
The other project is the Hargeisa bypass which enhances better connections from Berbera to Wechale being the key link to the Berbera corridor. The bypass is also well on its way to be completed this year.
So everything on the ground is ready and the remaining transit agreements from both governments I believe will be agreed upon this year or early next year.
Currently, there are two shareholders for the port of which 65% is owned by the DP world and 35% is owned by the Somaliland government.
Capital: As you stated, the capacity of the port has increased. As the capacity has increased, can we say that it’s operating as expected?
Supanchia Wattanaveerachai: Definitely, it’s probably one of the fastest improvements in terms of the efficiency. Mainly food items are the main transaction commodities, also building materials, including cement for both domestic consumptions and also for Ethiopia through the World Food Program.
Our main customer target is Ethiopia, especially the Eastern part, not only in import but also for export. We do believe in the near future we will have more export and also our operation will expand to this regard.
Capital: Do you think that there could be a chance for Ethiopia to get back ownership of the port?
Supanchia Wattanaveerachai: That actually depends on the government of Somaliland. In 2016, the two countries had talks but the negotiations did not fall through and the time window has since then expired. So if changes are now required in ownership, I believe it has to follow the path and decision of parliament.
Capital: Last year the government of Ethiopia signed a deal with DP world to establish a logistic company. How is the process faring on?
Supanchia Wattanaveerachai: I think that the MOU was about developing a logistics platform such as cargo, distribution and a consolidation platform. To be honest I don’t have the current updates on this.
Capital: Is there anything you want to add?
Supanchia Wattanaveerachai: I really wish for the fast finalization of the transit agreement; because now the infrastructure and everything’s ready. We need Ethiopian traders to come and utilize the port of Berbera more. As I said, the capacity we have today is 500,000 TEU and we will utilize it so as to stay competitive so as to offer an alternative to the main port used by Ethiopia. The Ethiopian government has a national strategy to use Berbera port for 30% of its cargo transaction.
But yet again I believe 30% is just a number, and we are not competitive we may probably be able to handle 2%. Thus we will strive to be competitive when compared to the neighboring ports, and if we do so, in the long haul 30% will be a limit that we can even surpass.