Djiboutis Investment Environment Dealt Strong Shock

Dubai: Ports operator DP World has contributed hundreds of millions of dollars of direct and indirect economic benefits to Djibouti, enhancing the African country’s attractiveness as an investment destination in East Africa.

DP World, one of the world’s biggest ports operators, said its terminal in Djibouti is the “largest employer and biggest source of revenue in the country.” The port has operated at a profit since it opened, the Nasdaq Dubai-listed company said.

The company, with presence in over 40 countries, has reportedly helped boost trade in those countries in direct and indirect ways over the years.

The comments come after the government of Djibouti last week seized control of the DP World-operated Doraleh Container Terminal, a move that DP World described as “illegal”. The government had awarded the company the concession in 2006.

The seizure of the Terminal, in which DP World owns a 33 per cent equity stake, is the culmination of efforts by Djibouti’s government to force DP World to renegotiate terms of the concession. The terms were found to be fair and reasonable by a London Court of International Arbitration tribunal.

UAE’s response

The UAE government said the investment environment of Djibouti was dealt “a strong shock” after the contract termination with Dubai’s DP World.

In a series of tweets by Anwar Gargash, the UAE’s Minister of State for Foreign Affairs, the Minister called the seizure of control of the port “regrettable,” and said that DP World has contributed positively over two decades in developing Djibouti’s trade role.

“The damage from the recent arbitrary measures is bigger for Djibouti than it is for DP World. Success is based on respecting laws and agreements, and Djibouti has failed that test,” tweeted Anwar Gargash, marking the first official response from the UAE.

In response to the government’s move, DP World commenced a new arbitration on February 20 in London, seeking a declaration that the contracts are valid.

The government of Djibouti, however, did not explain why it suddenly decided to seize control of the port, but a statement from the president’s office said the Doraleh Terminal will now be under the authority of the Doraleh Container Terminal Management Company, which is fully owned by the government.

When contacted by Gulf News on Sunday, Sultan Bin Sulayem, DP World’s group chairman and chief executive officer, did not answer questions put forth to him with regards to this issue.

Meanwhile, a political analyst based in Abu Dhabi, who did not wish to be named, said Djibouti will have to make sure the termination with DP World does not define their reputation as a place for foreign direct investments.

In its statement, DP World confirmed there will be “no material financial impact” to the group as a result of the termination.

And analysts agreed with that view.

Saleem Khokhar, head of equities — investment management at First Abu Dhabi Bank, said he doesn’t expect the termination to be a hurdle to DP World’s plans to invest in other emerging markets, a strategy that will continue as the company seeks to expand its footprint.

“We’re pretty positive on DP World. We do see them participating within the global environment in terms of pickup in growth in trade, so that works positively for them. The areas they’re focusing in [including] emerging markets have a lot of potential and room for growth,” he said.

Global operations

DP World globally has operations in countries such as Australia, Canada, Ecuador, Turkey, India and Somaliland, among others. Earlier this month it reported handling 70.1 million twenty-foot equivalent units (TEU) globally in 2017, a 10 per cent increase year-on-year.

Bin Sulayem said at the time that he expects the company to continue to grow ahead of the market, expecting to see increased contributions from its new developments. The company is also planning to expand in Africa, Latin America and the Far East.