The Middle East / April 2001
By Larry Luxner
DJIBOUTI -- The blue-and-orange gantry cranes working overtime at this East African container terminal are labeled "Port of Djibouti," but the brains required to run the port efficiently come from the tiny sheikhdom of Dubai in the United Arab Emirates.
Dubai Ports International (DPI), a subsidiary of the state-owned Dubai Ports Authority, began operating in Djibouti last June. Under the 20-year concession between DPI and the government of Djibouti -- a former French colony that won independence in 1977 -- DPI will improve container-handling operations at the Red Sea port.
Already, DPI says it has boosted efficiency from 10.5 container moves per crane hour to 23 in the seven months since it took over operations here.
"The ships are working twice as fast as they used to, so they're in port only half the time," said Luc Deruyver, director-general of the Port of Djibouti. He added that "this year, we will improve our performance by eliminating dead time and improving logistical support on the ground, pre-planning of the yard and inventories. We hope to become a major transshipment port for East Africa. By improving our performance, other ports will have to start competing against Djibouti."
How much DPI is getting paid to manage the Port of Djibouti is unclear. There was no competitive bidding, and terms of the deal are unclear. But Djibouti's president, Ismail Omar Guelleh, said in a recent interview that his government is investing $50 million in the project, and that DPI is getting only $400,000 a year for its role in managing the port.
"They want to help us," said Guelleh, without further elaboration.
John Fewer, director of DPI, noted that while the president's figure was on the low side, he could not be more specific because the agreement is strictly confidential.
"Payment for our services are on a commercially competitive basis that are most satisfactory to both DPI and the Government of Djibouti," he told The Middle East. "We believe the agreement is going to mean gains for the Port of Djibouti. It's also a good management contract for ourselves."
At the moment, Dubai Ports Authority manages the Port of Dubai and the Jebel Ali Free Zone, which together handled 3.06 million twenty-foot equivalent units (TEUs) and another 14 million tons of bulk cargo in 2000 -- up 8% from 1999 figures. Since September 1999, DPI has also managed the Jeddah South Container Terminal in Saudi Arabia, which in 2000 handled 945,000 TEUs, as well as the Port of Djibouti, which did around 130,000 TEUs last year.
The Port of Djibouti, which covers 80 hectares, boasts four post-Panamax gantry cranes: two manufactured by China's ZMPC, and two made by Italy's Fantuzzi Reggiane. The brightly painted cranes are about the only signs of modernity in this otherwise impoverished, dusty port city, home to most of Djibouti's 650,000 French, Arabic and Somali-speaking inhabitants.
Deruyver, originally from Belgium, said that Ethiopia accounts for about 75% of cargo entering and leaving the port. Another 8% is cargo destined for Djibouti itself. The remaining 17% of cargo volume represents transshipments to East Africa -- mainly Dar es Salaam and Mombassa.
Since May 1998, when a fierce border war erupted between African neighbors Ethiopia and Eritrea, the Eritrean ports of Assab and Massawa have been off-limits to Ethiopian importers and exporters. As a result, Ethiopia -- a nation of 60 million people -- has become totally dependent on Djibouti for everything from weapons to wheat.
"When they closed the Port of Assab because of the war, Djibouti really profited," said one diplomat who asked not to be identified. "It's a lot more efficient than any place else around here."
The Port of Djibouti is working 24 hours a day to handle the increased business, which in 2000 consisted of roughly two million tons of bulk cargo, mainly food shipments;1.6 million tons of containerized cargo; 1.5 million tons of oil products, and 150,000 tons of miscellaneous goods -- everything from soap to steel to automobiles.
According to Deruyver, Djibouti's biggest single customer is Mediterranean Shipping Co. Ltd. In second place is Pacific International Lines of Singapore, followed by the Beacon Consortium, (which includes P&O Nedlloyd, Andrew Weir and others) and finally by Ethiopian Shipping Lines.
Despite Djibouti's membership in the Arab League, blue-and-white containers belonging to Zim Israel Navigation Ltd. can also be seen at the port, though not as frequently as in years past.
"Zim Lines used to have a larger presence here, but for performance reasons they now bypass Djibouti and use Mombassa," said Deruyver. "There is no political reason for this as far as I can see."
The Port of Djibouti, which ranks 104th in the world in terms of shipping volume, provides work to 1,100 people directly and another 2,000 people indirectly, making it Djibouti's biggest single largest employer. Some of them are civil servants, others working under contract for DPI.
"Before 1998, the port handled only 7% of Ethiopian imports and exports. But the port has developed very quickly because of transshipment activities," President Guelleh said in an interview here. "So even if Ethiopian traffic goes back to Assab someday, the port will continue to develop anyway."
Fewer agrees. "As far as Djibouti goes, we're going to be actively looking at the transshipment business, with many of the customers who are currently re-examining their own networks in the area."
Fewer, a former U.S. shipping executive who spent much of his career in Baltimore and New Orleans, relocated to Dubai in 1989 with Sea-Land to manage the Jebel Ali Free Zone. He later served as operations director for the Dubai Ports Authority before being named director of DPI in June 1999.
"The whole Middle East area is growing at a rate of 5-7% a year," he said. "Several ports have now recognized the gains that can be realized by employing a port manager that has experience with handling large volumes of port business in the region. There's always the possibility of business when a port is privatized."
DPI is hardly alone in going after this business, though it seems to be the most successful. Some of its biggest competitors are Singapore's PSA, which is active in Aden, and the Philippines' ICTSI, which has operations in Dammam, Saudi Arabia. In addition, the Jeddah North Container Terminal is run by rival Gulf Stevedoring, a Saudi company.
"DPI's strategy is to work with ports that can complement our existing services to the shipping lines that are already calling at Dubai," explained Fewer. "We believe that this strategy of offering a continuity of management to the shipping line customers and cargo owners will enable our customers to focus on providing a higher level of service to their customers without having to deal with the uncertainity of how each port is structured or managed."
At Jeddah South, around $25 million has been invested since the signing of the contract, which is actually between the Saudi Ports Authority and Siyanco DPA -- itself an alliance between Dubai Ports Authority and Saudi Maintenance Co.
This includes the purchase of four new Hyundai super post-Panamax cranes, each capable of handling ships carrying containers 20 wide on deck. They have a maximum outreach of 55 meters and a twin spreader capable of handling 20-, 40-, 45- and 48-foot containers, including two 20-foot containers at a time. The new cranes join 11 ship-to-shore cranes already in use at the South Terminal, including a new Fantuzzi Reggiane crane commissioned by the Saudi Ports Authority earlier this year.
In addition, Siyanco DPA will purchase another eight rubber-tired gantry (RTG) cranes in 2001, joining seven RTGs recently ordered from Korea's Samsung. The advanced purchases mean that the South Terminal will have 15 new RTGs available by year's end, compared to the nine envisioned in the original contract.
"The contract is for 20 years, so there's lots of infrastructure development yet to do," said Fewer, adding that the DPI-led joint venture has also hired Navis Corp. of Oakland, Calif., to provide software for computerized vessel and yard-planning systems at Jeddah South, while Tech Logic will supply radio data terminals.
"A lot of our shipping-line customers who we have very good relations with are used to the high level of service we provide in Dubai," Fewer told The Middle East. "They've often said they wish they could get this type of service in other ports in the region. Through discussions with them and others, we decided to reach out and offer to other ports the type of service we provide, and also hopfeully bring more vessels to those ports. So it's a win-win situation for everybody."
Besides DPI's operations in Dubai, Djibouti and Saudi Arabia, says Fewer, "we also have ongoing contract negotiations with the Port of Beirut, but the container terminal there hasn't opened yet. It was scheduled to open the first of this year, but there has been some delay pending the outcome of contract discussions."
In addition, he said, DPI has signed a memorandum of understanding with the Sudanese government to operate Port Sudan, and is trying to win contracts to operate ports in Mangalore and elsewhere in India.
DPI was also on the short list to manage a bulk-handling facility at Jordan's Port of Aqaba, but negotiations were stalled last year by King Abdullah.
"The king organized a ports commission, which started looking at the idea of making the city into a free zone and reassessing the whole management requirement for the Port of Aqaba. They put everybody on hold, but we fully expect they'll be re-issuing a new tender in the future," said Fewer, adding that DPI would probably compete against German, French and other entities for the Aqaba contract.
Asked if DPI's activities in the Arab world preclude the possibility of doing business with Israel -- a country with which the United Arab Emirates has no diplomatic relations and isn't likely to anytime soon -- Fewer answered the question delicately.
"In the Middle East, there are a lot of factors affecting where we'd want to do business," he said. "As the issues of the areas are resolved, we would look forward to a relationship with all neighboring countries."