The Ethiopian government wants to develop port facilities in countries such as Sudan and Somaliland. Would Djibouti provide opportunities for the Ethiopian government if there is a similar request?
By Berhanu Fekade
Ilyas Moussa Dawaleh is the Djiboutian Minister of Economy and Finance. He is an outspoken official who emphasizes on the work that needs to be done for the common benefit of countries in the region and their people. He believes that the development of Ethiopia is also the development of Djibouti. A leader who believes in openness Dawaleh says that the best days for the two countries are yet to come. During this week, a group of Ethiopian journalists, who were invited by the Djibouti Chamber of Commerce, had the opportunity to talk to Dawaleh regarding Ethiopia’s alternative ports development strategy, what Djibouti can do to cater to Ethiopia’s import and export needs and some of the challenges the two sides need to address with regards to establishing business-to-business relations. Birhanu Fikade of The Reporter was part of the group of journalists that interviewed the minister. Excerpts:
The Reporter: The Government of Djibouti is investing a lot in infrastructure development. I stand to be corrected but I believed that some USD 12 billion has been invested or is going to be invested. This is a huge investment. Doesn’t it worry you that the investment may not generate the expected return?
Ilyas Moussa Dawaleh: What worries me the most is if we would not be able to benefit from these investments due to poverty, vulnerability, instability or crises. What worries me the most is instability; nothing else. But in this part of Africa, we can see that we are on the right track when viewed from an economic perspective and from a development outlook. We have to work to live together. It’s a must for us. Poverty and instability are the two things we can’t afford to have at this point in time.
The region we live in is well known for lack of stability. Hence, nothing else worries me more than that. We know that we have made good decisions. We know we have a strong common understanding when it comes to our shared destiny. Here, I am specifically talking about Ethiopia and Djibouti. Both countries must move farther and bring onboard neighboring countries to share prosperities than vulnerabilities.
The Reporter: You talked about the dilemmas you have concerning regional and global economic situations. You mentioned that your country wants to be completer than a competitor. You have also talked about port developments in Sudan, Somaliland or Eritrea and Kenya. Tell me specifically what this dilemma is?
At a global level, we hear about countries – including the superpowers – being consumed by their own individual interests. They push away the globalization agenda. We hear of leaders bluntly talking about protectionism. They are trying to confine themselves. However, protectionism is no more valid. It can’t work in the globalized and interconnected world. In Djibouti, we believe that our destiny depends on what’s happening in Ethiopia, in Somalia, in Eritrea, and in Yemen. Whatever is happening in any of our neighbors, will directly impact us.
But at the same time, we have the capacity and wisdom to make wise decisions instead of focusing on the problems. We have to work on the solutions i.e. the more Djibouti contributes to the economic and social transformation of Ethiopia, the more our country benefits out of such actions. We can create wealth together. Djibouti might be seen as a small country but it’s very important for Ethiopia. It’s a very important country for the global superpowers. They are all in Djibouti not because they love us. They come because we occupy a very strategic geopolitical position. Hence, we prefer to provide whatever we have.
Before the Ethio-Eritrean war, ten percent or less of Ethiopia’s export-import was transiting in Djibouti. Then, all of a sudden, there was a 100 percent shift in traffic to Djibouti. We had zero failure in delivering the services. We didn’t take advantage of the situation. We actually reduced all port tariffs. At the time, I was the Chief Operations Officer of the port. We worked 24 hours in order to make sure that all operations went smoothly. So, there was no risk of collapse of the Ethiopian economy. The country grew strong and is still growing. That strong growth benefited Djibouti and that’s why we are investing billions of dollars hoping to generate much more wealth and share among ourselves.
At some point in the future, Eritrea will come back to the playground. It will become a contributor to the wealth creation process. A new leadership and a new policy will emerge and we believe that it will happen through time. At that very time, we should welcome them and we should make sure that we are communicating through infrastructures; we are communicating in trade; we are communicating instability across our borders. With regards to ports, we don’t consider anyone in the region as a competitor.
We are working strong and hard to make sure that we will remain the major logistic hub not only to serve Ethiopia but the region as a whole. But this doesn’t mean that we have to have 100 percent traffic of Ethiopia’s shipment. It doesn’t make sense. Ethiopia, from its policy perspective, may have other interests and alternatives. Djibouti alone can’t provide all the needed services. I don’t have to look at 100 percent traffic of Ethiopian shipments to come to my port. I also need to look at other opportunities where I need to see investors coming into the industrial parks in Ethiopia or look at logistic facilities to create more market based on our comparative advantages.
In some sectors, Ethiopia has a comparative advantage when compared to Djibouti and others in the region. I can’t go and compete with Ethiopia in the business of industrialization. That doesn’t make any sense for me. It will be a waste of time and money. I will rather encourage myself to serve Ethiopia in its drive to industrialization. What I should look into are areas where I am in a better position to have a comparative advantage.
But Djibouti lives on its ports services and how could the coming of other ports as alternatives be ok with you?
You have to look at the overall economic history of Ethiopia with regards to the question raised. From my previous experience, the more Ethiopia builds infrastructures and invests within its borders, the more it benefits the port activities in Djibouti. Infrastructure facilitates market access in Ethiopia. It facilitates access to its agricultural sector. The volume of traffic to Djibouti would eventually increase. In terms of capacity and opportunities, we know we have great days ahead of us. Let me give you some figures that will help you better understand the case.
Experts estimate that when Ethiopia becomes a middle-income country, one ton of food per each individual per year will be the required consumption. If we assume the size of Ethiopia’s population to be 100 million, it means that 100 million tons of food will be required for consumption. Let’s assume that 50 percent of that is produced in Ethiopia and the remaining needs to be imported. Let’s also consider that a portion of that amount; maybe half of the locally produced items, is destined for exported. By taking things into account, we have increased the capacity of our ports to a level that can handle some 20 million tons per year. My goal in three or four years is to reach 50 million tons. Even if that’s the case, we can’t afford to handle 100 percent of Ethiopia’s shipments alone.
We also need to diversify our market for other partners like China or countries in the Middle East and Europe. If we can manage to have 60 to 70 percent of Ethiopia’s international trade traffic volume, then my ports will be working to their capacity. The remaining must be distributed to the rest of the ports in the region. I have developed my infrastructure knowing I will remain being the largest port service provider to Ethiopia.
This is why we have invested a lot together for the development of the railway. Our president, Ismaïl Omar Guelleh, and other officials initially haven’t thought of spending USD 500 million on the railway project. I would have simply built additional highways to the Ethiopian border. However, since we believe in a common destiny, we took the risk and, together with Ethiopia, decided to make the necessary investments for the development of the railway. The rail project is expected to enhance the competitiveness of Ethiopia.
Time and cost across corridors have been making Ethiopia less competitive but the two or three days of transport from the ports to Mekelle or Addis Ababa is going to be shortened to less than 10 hours. We have to contribute for Ethiopia to become more competitive because that benefits my country as well. It’s all about a win-win philosophy.
What about investment for the construction of pipes that run between the two countries?
Yes, we have a number of investments in pipeline projects. To be honest, I will tell you that we are reaching our limit when it comes to our public finance capacity. We should not look at public investment exclusively for regional as well as national infrastructure development. There are opportunities. Finance is not an issue as a capital resource is available around the world. There is a huge abundance of capital. But it’s all about implementing a sound policy.
The regulatory framework and dependable bodies are required for the direct investment. Hence, we have formulated and are entering to implementing a Public Private Partnership (PPP) legal framework. We know Ethiopia is also coming in that direction. The investment will increase once the business environment is properly set out. Regulatory and institutional frameworks are very critical here. The role of the private sector is fundamental for transformation. But most importantly what matters is the stability of a country. Unless you have peace and stability, forget about your billions and trillions of dollars investment.
We can’t afford fighting poverty and vulnerability while we are not properly making our own homes stable. A small problem in Ethiopia will mean a very big problem in Djibouti. It will be because of the population and economic dimensions. We are playing our part in the stabilization of Somalia even though we have other priorities at home. That money we are spending in the army to stabilize Somalia is because we think we have to in order to have a stable region. A single madman from Al-Shabaab could blow what we have built with a great deal effort. Hence, stability and teamwork and hope matter for our youth.
The Reporter: The Government of Ethiopia has this idea of developing alternative ports in the region. The government wants to develop port facilities in countries such as Sudan and Somaliland. Would Djibouti provide opportunities for the Ethiopian government if there is a similar request?
What will be the sense of having Ethiopia invest in a new port when we have already built ports by investing billions of dollars? The investment we made is not necessarily for Djibouti but to serve Ethiopia and the region. Looking for alternative port development is logical. If I were an Ethiopian leader or a senior official, I would have been looking for alternatives as they are doing now. That doesn’t mean that we don’t need each other. It’s common that a leader has to see more options for his country. By the same token, I am not developing my ports with the view of having 100 percent of Ethiopia’s traffic volume. I have to look at other alternatives.
If I could see there is a comparative advantage for me in building industrial parks I would rush to do it. There must be an alternative in case something happens in either of our countries. As the saying goes we shouldn’t put our all eggs in the same basket. We have a clear understanding about that. But I also have a clear understanding that I should be the one who has the lion’s share in serving Ethiopia at least for the coming 20 years.
What can be said about the first International Trade Fair and Regional Economic Integration Forum, which was held this week in your country, and the role it could play in attracting foreign investment and bolstering the integration of the two countries?
The forum was good. However, for the integration of Ethiopia and Djibouti, we need to have a special dedicated forum. We have strong public-to-public relations. We also have strong people-to-people relations. I was born in Dire Dawa but I am a Djiboutian. I feel proud of being born in Ethiopia and being able to serve Ethiopia as a Djiboutian high-ranking official. That is what it is. You can’t change that. My relatives still live in different places in Ethiopia.
We are not two different people. We might have different names or different flags but we are one. Hence, policies should be based on what would satisfy our people. When our policy delivers to people living in Ethiopia – to my relatives – I know it would affect me positively and vice versa. The missing middle, in this case, is the business-to-business relations.
The business communities between the two countries need to discuss the challenges they face. They have to discuss the policies of the countries and whether they fulfill their expectations. We need to take advantage of the mindset orientations of our businesspeople of our two countries. Let me give you an example. The owner of Kurifu Resort and Spa, Tadios Belete is investing in one of the islands of Djibouti. His customers will have what they won’t get at tourist destinations is Ethiopia: seashore visits. The Government of Djibouti is more than happy to have Ethiopian investors to come and do business for the benefit of the two countries.
With that in mind we provided land free of any charges. We wanted to see his investment on the island. Unfortunately, he was not able to transfer 10 percent of the project finance, which is USD one million, in order to get bank facilities in Djibouti. He is stuck because of that. The rule in Ethiopia doesn’t allow a single dollar to leave the country for investment. It’s even getting more difficult for trade because of the currency issue. So how can we deal with these issues? For example, could I facilitate Tadios’ investment in Djibouti by letting him access finance from Djiboutian banks? In that regard, he should provide collaterals for his finances and his properties in Ethiopia might serve as collaterals. So we can then work on making finance available from Djiboutian banks. We can do that vice versa. This is a kind of idea we can find out from the business-to business-connections. Both governments must seriously work that out.
