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Abu Dhabi, UAEThursday 21 June 2018

Somaliland defends stake sale of DP World Berbera port to Ethiopia

DP World and the Republic of Somaliland agreed to grant Ethiopia a 19 per cent stake on Thursday

DP World signed a $442 million agreement with the Government of Somaliland in 2016 to develop and operate a regional trade and logistics hub at the Port of Berbera. Pawan Singh / The National
DP World signed a $442 million agreement with the Government of Somaliland in 2016 to develop and operate a regional trade and logistics hub at the Port of Berbera. Pawan Singh / The National

The Republic of Somaliland has hit back against the Somalian prime minister’s statement on Friday that a tripartite port deal involving UAE ports operator DP World to grant Ethiopia a stake in the Port of Berbera was “null and void”.

“The present agreement is nothing new,” a statement from the office of the president of Somaliland, Muse Bihi Abdi, said on Saturday. “It is an extension of the agreement entered into between the Republic of Somaliland and DP World and approved by the Parliament."

Somaliland’s parliament approved the partnership with DP World in 2016, paving the way for the world's foruth biggest port operator to invest $442 million to rebuild the Port of Berbera and manage it through a 30-year concession.

According to deal announced on Thursday, Ethiopia will become a 19 per cent shareholder in the Port of Berbera, with DP World controlling 51 per cent stake in the project. Somaliland will hold the remaining 30 per cent.

The Ethiopian government will also invest in infrastructure to develop the Berbera Corridor as a trade gateway for the landlocked nation, which is one of the fastest growing countries in the world with forecast GDP growth of 8.2 per cent in 2018, according to the World Bank.

However, the Somalian Ministry of Ports and Marine Transport dismissed the agreement as “defective” in a statement on Friday, saying the terms of the deal “contravene procedure and are in blatant breach of the Provisional Constitution [of] Somalia. “The Ministry therefore, considering the above factors, declares this deal as non-existent, null and void.”

The ministry said that the Somalian government was not party to the agreement, which it termed as "detrimental to the sovereignty of the Federal Republic of Somalia and the unity of the country.”

In its response, Somaliland said Somalia’s oppositional stance is “not helpful in creating a conducive environment for dialogue between Somaliland and Somalia, and has no bearing, whatsoever, on the commercial and investment agreement between the Republic of Somaliland, the Federal Democratic Republic of Ethiopia and DP World, which we expect the international community and the neighbouring countries to support,” its statement said.

Development of the Berbera corridor is expected to address some of the region’s most pressing employment and investment issues, Saad Al Shire, Somaliland’s minister of foreign affairs said in a statement announcing the deal last week.

The economies of the region are growing at a pace that necessitates the development of multiple ports and outlets…to accommodate the increase in trade,” he said.

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DP World plans to build an additional berth in line with the Berbera masterplan as part of its concession agreement, and said on Sunday it had signed the final agreement with the Government of Dubai to develop a 12 square kilometre greenfield economic free zone in Somaliland to complement growth of the port.

“Our vision for Berbera is to make it a regional maritime hub in the Horn of Africa and its development will encourage growth for the region’s economy,” DP World chairman Sultan bin Sulayem said.

The ports operator declined to comment on Somalia’s rejection of the Ethiopia deal or Somaliland’s defence. The latter’s statement on Saturday said Article 90 of its constitution gives it “every right to sign treaties and agreements with third parties that advance its development aspirations”.

“This is a development initiative which creates jobs, meets the fast-growing demand for logistics and infrastructure corridors in the region and facilitates economic integration,” the statement said.

DP World is embroiled in a separate dispute over its operations at the Port of Djibouti, west of Somalia. The company said last month Djiboutian authorities took control of the Doraleh Container Terminal from a DP World-owned entity that designed, built and operated the terminal after winning the concession in 2006.

DP World has commenced arbitration proceedings in the UK to protect its rights, or to secure damages and compensation for breach or expropriation.

The illegal move will have “no material impact” on its finances, DP World, which recorded 10.1 per cent growth in gross container volumes on a reported basis in 2017, said in a bourse filing in February.