Djibouti actions will be self-destructive

Jebel Ali Port, managed by DP World in Dubai, United Arab Emirates, May 10, 2007

The country must act in a spirit of cooperation for the long-term strategic development of the region

The Djibouti government’s illegal seizure of the control of Doraleh port from DP World last week is not only a breach of international law but also a desperate manifestation of the country’s motivated campaign to coerce the Dubai-based port operator to renegotiate a 2006 concession.

DP World designed, built and began operating the $400 million (Dh1.47 billion) Doraleh Container Terminal (DCT) in 2006 under the 30-year concession, resulting in thousands of direct and indirect jobs in the East African nation and boosting Djibouti’s trade status. As the most technologically advanced container terminal in Africa, it’s no surprise that the DCT returned profits every year. But in 2016, the Djibouti government mounted a failed attempt to arbitrarily terminate the contract by alleging irregularities in it charges that were dismissed by the High Court of England & Wales and a highly-respected arbitral tribunal in London.

The recent action of seizing control of the port assets, which began in December 2017, has similarly forced DP World to begin proceedings before the London Court of International Arbitration to protect their rights or to secure damages and compensation for their breach or expropriation.
Global market leaders such as DP World will surely feel no impact from such illegal acts in fact DP World and other UAE entities have already strengthened their footprint with alternative hubs in the Horn of Africa, including in Berbera and Bosaso. But the ultimate victim in this episode will be Djibouti itself.

The Djibouti government’s mala fide action undermines decades of the “Dubai Model” of development in the country spurred not only by UAE investments but also by its commitment  Dubai did not just lend and invest in Djibouti but created a wide spectrum of interlocking public-private partnerships ranging from the ultra-modern container port to a network of clinics that serve communities along the trunk road linking Djibouti with Ethiopia, to investments in logistics infrastructure and amenities. In all, Dubai-based entities have invested more than $1.5 billion in Djibouti since 2000.

The UAE’s engagement in Djibouti  as well as the rest of Horn of Africa  thus does not stem from a policy of momentary convenience but from a policy of long-term strategic development of the region.

Reneging on such a partnership will irrevocably damage Djibouti’s credibility in attracting foreign direct investments to the country. Seeking to profit from its strategic position in the Horn of Africa in the current geopolitical climate after being possibly leveraged by other players with vested interest from the region and beyond is guaranteed to backfire on Djibouti.

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