Djibouti Port Progressing in tandem

The United Arab Emirate is a nation of seven autonomous Emirates of which Dubai and Abu Dhabi are the most prominent. Fueled by an economy with huge oil and gas reserves, they are enjoying a growing influence not only in the Gulf and in Arabia but also internationally. The cities of Dubai and Abu Dhabi are glittering desert gems with record holding facilities and infrastructure that befits the Emirate’s role as the regional shopping, entertainment, banking and tourism hub.
One of the world class U.A.E. companies that has been expanding rapidly to become a global player is Dubai Port or DP-World, which has acquired or is managing numerous ports around the world, including the port of Djibouti, Ethiopia’s main gateway to the world. DP World has modernized Djibouti Port services by upgrading infrastructure and computerizing operations ever since it assumed managerial control in June 2000.
Teguest Yilma discussed with Mr. Guido Heremans General Manager of the Port of Djibouti, about the status of the Port, DP World and other related issues. Excerpts follow:

Bring us up to date on the overall development of the Port of Djibouti since it came under the administration of DP World?
Since the administration was given to DP World in June 2000, the big transformation is of course the management structure that has been completely changed. Security in the Port has also increased and the performance of the container terminal has improved greatly.
During the last few years, the Port has conducted considerable investment for replacement of old equipment and installation of additional equipment to improve services to port customers.
If you compare the status of the Port five years ago to that of now, it is vastly different. The best thing is that everything is self financed. This means that the port is making adequate money to support itself, which helps everybody at the end of the day.

What was the financial status before DP World took over?
When DP took over there existed outstanding loans, which we still have to pay off, but that is not a problem. All the new investment is now auto financed, which was not necessarily the case in the past.

How much would you say the total investment is worth so far?
Major investments have been conducted so far including tug boats, cranes, forklifts, weighbridges and IT among others, for a amount of 10.3 millions USD, in the last three years.

How would you describe the performance of the Port in terms of traffic?
Traffic is growing year by year. The port lost its transshipment business after 2003. This port is utilized 83 % by Ethiopia excluding transshipment traffic. Our major market is Ethiopia so when Ethiopia does well so does the port. Transshipment cargo, which is an additional business for us, is now returning and we are anticipating being a major player, that is why we have the project of the new container terminal that will start operation by the end of 2008. We want a dedicated transshipment terminal, with a capacity between 1.5 million and 3 million containers in phase two compared to the current 225,000 containers, of which 186,000 are for Ethiopia.

You said that the relation between Ethiopia and the port was one to one. To what extent does the relationship depend on the Ethiopian economy?
Regarding the number of containers handled, you can see that there is an average growth in traffic from Ethiopia of 13% but it is obvious to us that in order to keep pace with the growth of Ethiopia, we have to maintain the expansion of the port. That is why we have conducted additional investment on equipment and software.

How did you lose the transshipment business?
We lost the transshipment business in 2003 because this port has physical limitations on the ever increasing transshipment traffic and this in addition to the Ethiopian traffic.
The Doraleh port will be able to accommodate both. The port has a natural draft of over 18 meters, so the largest vessels in the market today and tomorrow will have no problem there. The entire investment can today be estimated at 300 million USD for phase one.

What stage is construction at? Does the 320 million USD investment include the oil terminal as well?
No, the investment doesn’t include the oil terminal, as that is a project that came operational in mid 2005. So the 300 million is only for the new container terminal and the work is underway.
Everything is going according to plan and should be completed at the latest in January 2009. We are working on a master plan to optimize the use of logistics. All container operations will be transferred to Doraleh port.

What have you observed in terms of Ethiopian volume of imports and exports?
It is growing in volume at an average of 13% per year, showing that the Ethiopian economy is expanding. This is not only in terms of containers that are being imported, but also in the number of conventional cargoes, industrial equipment and other. These are all transferred to Ethiopia.

What kind of direct relationship does the Port have with Ethiopia?
We are working especially with the Ethiopian Shipping Lines and Ethiopian freight forwarders. We have a very good relationship. In fact I have received recently a letter from Mr. Ambachew Abraha, ESL manager relating his great satisfaction with the port’s performance and the inauguration of the new vessel - Shebelle.

Many negotiations have been undertaken by Ethiopian authorities with other ports. What do you feel about the competition from these ports?
We are very confident on the competitiveness of Djibouti Port and confident it is the best option for Ethiopia foreign trade. However we understand that Ethiopia needs other options.
Today, I think the word competition is not even on the table, because the ports that could serve Ethiopia are not well equipped to do so. Other ports can perhaps provide services for break bulk cargo or cattle traffic, but not for other main container shipments. The performance of Djibouti Port is the highest within Africa and competes even with Europeans ports. If for what ever reasons Ethiopian authorities decide to use another port, we are confident that it won’t be because of poor performance on our part.

There was a time when the Ethiopian side believed that the port was lagging concerning the through bill of lading, which was finally signed in November 2006. What effect do you think this will have on Ethiopian shipments?
It is not the port that steers the through bill of lading. It is a transport document initiated by the shipping lines. Through their agents they sell the actual through bill of lading whereby they basically transport the cargo from point A to point B with only one document instead of involving different parties in the chains of transport. In other words with the through bill of lading you need only one document and one agent from point A to point B. I have seen this in other parts of Africa when I was working for CMB (Compagnie Maritime Belge) which was a pioneer in through bill of lading. Once the process is in place, it will be a great improvement for Ethiopian shipments by simplifying documentation and improving the transit time.
But again, a through bill of lading is a document and shipping lines will only be willing to sell it when all the steps are in place and the most important things are road and train connections and ICD’s (Inland Container Depot) in Ethiopia in order to give assurance to the shipping lines that their containers are monitored and follow up. That is why same shipping lines prefer the Port of Djibouti as a stop point.
As long as there is no through bill of lading shipping lines will be reluctant to send their containers into Ethiopia because they have to deal with too many agents to do the follow up on their boxes. You also need return cargo, just like during the coffee season, there will be a need for containers; again when you have ICD, the lines can preposition their boxes anticipating the export volumes.

What would you say are the main impediments to a smoother flow of goods in and out of Djibouti?
Here at the port, it is rare that the vessels have to stay out when because of congestion like we had last year and at the beginning of this year as well. Now we have implemented windows where we can receive the vessels along side.
Djibouti has changed or improved its documentation flows as far as customs are concerned; there is another department within Dubai World called Dubai Customs who give technical assistance to Djibouti customs. They have in place new software for customs that is working very well. The software helps in reducing the documentation process by 80%. Today we can say that if you know the system, the documentation is completed from half a day to half an hour at the Djibouti port.
Today we have changed somewhat our system by introducing a gate pass and organizing a parking space called PK12, 12 km outside the Port.
It is already in operation but we hope to put our IT so that the gate passes will be delivered there. This means there will be no congestion in the port. When given a gate pass, truckers come to the port, do what they have to do and leave promptly, which is also a big advantage.
The new roads are not far from there, they go through the mountains to the new petroleum port and then later on of course, to the new container terminal, which will be a major improvement for Djibouti and the truckers as well.

In terms of business and service satisfaction, there were complaints from cattle exporters in Ethiopia because of some additional payments for cattle that had to stay in the port. Why was this so and what has been done to remedy the situation?
I would like to inform you that there have been no additional demands for payment by the port. The port hasn’t increased any tariff in the matter of Ethiopian cattle exporters. It is at the level of the Ministry of Agriculture, and what I know is that apparently, there is a new requirement where all the cattle have to go through a quarantine center, where the cattle will be treated and vaccinated and be given additional certificates making them fit for export. The additional costs are linked to that.
The certificates are required according to the request from importing countries. I believe than when cattle are exported to Saudi Arabia they have to be processed through this quarantine system.
I understand the quarantine process is an added cost in cattle exports. But there are also logistical problems in the export of Ethiopian cattle. Bringing camels by truck is not a convenient solution. The camels are forced to sit tied up, and you can imagine after the long drive from Ethiopia to the port, the camels suffer from muscle atrophy and even sometimes break their legs when they disembark from the truck. The Ministry of Agriculture maintains that camels should be transported by train, because there is standing room. It seems that trucks are not being used anymore and we hope that it will continue.

On a personal note, you have been the port director for the past three months. What are your observations so far and what are your plans?
I am pleased with my new job. Before I took this position, I was the financial manager of Djibouti Port and prior to that I was working with a company called SDV, engaged in clearing, transiting, shipping and forwarding. I was with SDV with 20 years and this experience has been an asset because it acquaints you with all kinds of problems clients may encounter. Managing a port is not only dealing with the terminal. Efficient administration is a very important element for any company, and there, I feel confident as well.
My plan of course is to retain the existing port, making it break even as soon as the container terminal begins work. Of course the new project of Doraleh Port will be the eye catcher, but the existing port should not be forgotten, and I guarantee that we will put a decent master plan in place which will show us exactly what we are going to do.

There were plans to build a new headquarters. Can you tell us where that plan is right now? Do you have a cost estimate for the building?
The plan is still there and the latest version sites the headquarters in front of the new port at Doraleh. It will also host the administrative wings. The ground floor will be used as a room for all the documentation. We will also reserve space for our biggest clients such as the Ethiopian Shipping Lines.
As for the total cost of the building, it is not part of the 300 million USD invested on the Doraleh port, it will be close to 10 million dollars by itself.

What will be the share of the port of Djibouti in the new port?
The port of Djibouti holds a 66.66% share out of the 300 million USD. DP World holds the other 33.34%. The management will be under DP World’s control. Part of the 66% will be equity in cash, and according to the terms of the contract, we are very confident that Djibouti Port will meet the requirements.
Administration-wise, since 2000 the port has had four different managers (one every two years). Is that a trend or is there another reason? Do you see yourself staying here for two years only?
I will stay here for sure until the new project is up and running and then I will move on.
Now, you can’t compare for instance my position today with that of Luc Deruver’s, the first manager of the port under DP World, as he came in while the Port was under total government control. You appreciate that initiating change is difficult and you have to be tough and persevering.

Your predecessor also used to manage the airport. Does your sphere of responsibility also include the airport?
I am not personally involved with the airport, but DP World is. The airport has its own general manager. What we want to do from the outset is have a back office to streamline all non-operational aspects such as human resources, accounting, and IT to create synergy between of all the sectors we have at DP World and simplify the administration within the company, and also strengthen our workforce.

What would you like to convey to your Ethiopian customers?
I think Djibouti is very well aware that the Ethiopian economy and trade is a very important part of its economy; and we also realize that Ethiopian trade is fueling the port activities. The state of relations today is heart warming. However it is a business and sometimes, in business you take decisions, which are not always liked by other partners.
Two years ago, we increased tariffs, and there was a big misconception from the Ethiopian side saying that the tariffs rose by 80% or something like that. So we explained the matter and finally everyone agreed that let alone 80% there was not even a 5% increase.
Communication is important and should be conduced often among professionals as confusion affects good intentions.