Published On: Mon, Apr 8th, 2019

Djibouti fined 20% of GDP for seizing port

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DP World

DP World

from SAID ABOUBAKER in Djibouti, Djibouti
DJIBOUTI – A London court has awarded Dubai firm DP World $385m in compensation after the government of Djibouti cancelled the company’s contract to run one of Africa’s most strategic harbours.

Measured as a share of gross domestic product – the amount equals one fifth of the nation’s annual economy – analysts believe the settlement could be the largest claim against a government since the reparations bill given to Germany in the wake of World War l.

Early last year, President Ismaïl Guelleh signed a decree, seizing the
Doraleh container port. DP World had built the facility in 2004 and holds a 50-year operating lease.

Mr Guelleh said the dock was being mismanaged, but an earlier ruling in London found no evidence of this and declared the contract valid.

The latest judgement has potential to stem the power of governments in grab assets, including South Africa’s proposed law aimed at taking land from private owners without compensation.

In 2018, DP World chair, Sultan Ahmed bin Sulayem, warned against nationalisation of any kind. “Africa needs infrastructure and if countries can simply change their laws (on ownership), this will make it more difficult to attract investment,” he said.

However, the Djibouti case has wider ramifications. The US and France both have military bases there, but China has recently built its own fortress with room for more troops than the other two combined.

On a visit to the former French colony last month, President Emmanuel Macron condemned a series of loans from Beijing that have made Djibouti the most indebted country in Africa.

“What can look good in the short term can often end up being bad over the medium to long term,” he said, describing the loans as a risk both to the economy and “national sovereignty”.

Ironically, President Guelleh entertained his French counterpart at a
lavish new palace built by China.

Fears over China

DP World has a separate court case underway in Hong Kong, after part of its concession was handed to the controversial China Merchants Port Holdings (CMPH).

Although CMPH is run as a private company, there are concerns over its link to Beijing, given the Chinese military buildup along the Horn of Africa. Djibouti dominates a narrow straight on the shipping lane between Europe and the Indian Ocean via Suez.

Washington recently barred another Chinese firm, Huawei, from running the new 5G telecom network in the United States for fear it might be forced to eavesdrop on subscribers. In China, both state and private companies have a duty to support the “national interest”.

The US has close on 5 000 troops and other personnel stationed in Djibouti, while naval and commercial shipping makes this one of the world’s busiest sea routes. There has been speculation the Pentagon could shut its operations here as part of President Donald Trump’s plan to cut spending abroad, but that would effectively hand control of the region to China.

President Guelleh has a reputation for ignoring judgements. Now in his fourth term after he scrapped the two-term constitution, he and his allies control politics and the media. Critics say opponents have either disappeared or been forced into exile under one of the harshest regimes in Africa.

With the latest settlement on top of its many loans, Djibouti now owes creditors more than 100 per cent of GDP.

In Dubai, government welcomed the London verdict. DP World is one of the UAE’s most successful entities and runs harbours on all six continents.

– CAJ News

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