Wednesday, March 7, 2018

Container, General Cargo and Out of Gauge Freight Shipping Line Moves in on Port

After DP World Facility Seized - Government Signs New Agreement with Carrier
Shipping News Feature
DJIBOUTI – Just weeks after the government of Djibouti seized control of the Doraleh Container Terminal (DCT) from DP World, the Djibouti Ports and Free Zones Authority (DPFZA) has signed an agreement with Pacific International Lines (PIL), container, general cargo and out of gauge freight carrier, and which will see the Singaporean shipping company aim to increase the amount of cargo handled at the port by 33%.

Whilst no further information has been provided for this contract, the DPFZA has defended its right to cancel its contract with DP World for the DCT concession, saying that it took the decision ‘in light of the recent poor performance of the DCT, and to rectify irregularities in the agreement covering its operations’.

As a result, the government of Djibouti has now asserted its legal right to assume management of the DCT and the terminal has now been placed under the authority of the Doraleh Container Terminal Management Company, a fully state-owned company that will be managed by the DPFZA. The government says the port will be managed and developed in line with DPFZA's strategy to develop Djibouti as a world-class trade and logistics hub.

In a statement, the DPFZA justified the actions by arguing:

  • Contrary to the statement released by the Government of Dubai, the agreement was not for DP world to design, build, and operate DCT, but a joint venture between DP World (33.33% share) and Port Autonome International de Djibouti (66.66% share).
  • Since 2008, DCT has achieved only 57% of its total volume, despite operating in a favourable import-export environment
  • In the meantime DP World developed other ports in countries close to Djibouti and used aggressive tactics such as deliberate slowing of development of DCT in favour of their main asset at Jebel Ali
  • The original agreement, which contained a number of irregularities, excluded Djibouti from decision-making processes and the management of the company

In the statement, the DPFZA further added that negotiation undertaken in good faith by the government of Djibouti and its representatives to find a solution, going back six years, were rejected by DP World, including the establishment of dedicated working groups, and the use of international legal assistance.

Last month, DPFZA engaged DP World in detailed discussions, with a view to finding a good faith settlement that included the purchase of DP World's stake. DPFZA alleges that DP World declared their desire to sell their shares in DCT, but subsequently added an additional restriction on Djibouti developing new ports on their territory, a condition that was rejected by the government of Djibouti.

DP World was of course criticised by another African government just this week when the Somali authorities objected to the deal done by the port and logistics company concerning the Somaliland port of Berbera in which the Ethiopian government bought a stake in the facility in what the Somali’s consider an illegal state.

Photo: PIL has a large and varied fleet.