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Djibouti

From rail and airports to its first overseas naval base, China zeroes in on tiny Djibouti

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Djibouti President Ismail Omar Guelleh will arrive in China on Wednesday for a three-day state visit that is expected to further boost ties with the African nation.

 Situated in the Horn of Africa – adjacent to one of the world’s busiest shipping routes – Djibouti has a population of less than one million and is home to China’s first overseas military base.

With access to the Gulf of Aden and the Indian Ocean beyond, the area is a gateway into Northeast Africa and the Red Sea region.

According to United Nations trade data, Djibouti’s exports to China – including leather, salt and cement – totalled just US$7,500 in 2009. That compares to China’s exports to Djibouti, such as vehicles and electronic equipment, which reached US$20.7 million that year. But the relationship between the two nations goes far beyond trade.

PLA personnel attend the opening ceremony of China’s new military base in Djibouti in August. Photo: AFP

People’s Liberation Army naval base

China is the seventh country to set up a military base in Djibouti, a relatively stable nation with proximity to restive areas in Africa and the Middle East.

But Beijing has played down military use of the base, claiming it will be used for “logistics purposes”.

It said the base would enable China to better support its peacekeeping and humanitarian missions in waters off nearby Somalia and Yemen, in particular.

Other countries with military bases in the former French colony include the United States, Japan and France, and these bases provide the country’s biggest source of income and employment.

China agreed to pay US$100 million per year for its base in Djibouti, while the US pays US$63 million.

Natural gas

Last week, China’s POLY-GCL Petroleum Group signed a memorandum of understanding to invest US$4 billion in a natural gas project at Damerjog. The preliminary agreement will be finalised in six months, with work to begin on the project soon afterwards. It includes a natural gas pipeline, a liquefaction plant and an export terminal.

The gas pipeline will transport 12 billion cubic metres of natural gas a year from Ethiopia to Djibouti, while the liquefaction plant has a target capacity of 10 million tonnes per year of liquefied natural gas.

Djibouti President Ismail Omar Guelleh arrives in China on Wednesday for a three-day state visit. Photo: AFP

Addis Ababa-Djibouti railway

The 750km railway linking Djibouti and Ethiopia is the first fully electrified cross-border railway line in Africa.

China Railway Group and China Civil Engineering Construction Corp (CCECC) financed 70 per cent of the US$490 million project. Under the deal, Chinese staff will run the project for the first five years, after which Ethiopians will take over.

Launched in October last year, it took four years to build and connects the Ethiopian capital, Addis Ababa, to the Red Sea port of Djibouti – through which 90 per cent of Ethiopia’s goods are traded. Commercial operations are due to begin this month.

Airports

Two new airports in Djibouti were to be built by CCECC at a combined cost of nearly US$600 million under contracts signed in 2015. But the projects are expected to be put out for tender again, according to a Bloomberg report last month. It is unclear why the projects will go through another tendering process, but the report quoted a local official as saying that the Chinese company “will have no exclusivity”, although it can apparently bid for the contracts again.

Hassan Gouled Aptidon International Airport will be 25km from the capital and was due to open in 2018. With capacity for 1.5 million passengers per year, the airport is to have runways big enough for commercial jets including the Airbus A380.

The other airport, Ahmed Dini Ahmed International Airport, located in the north of the country, will have capacity for 767,400 passengers annually.

The Port of Doraleh in the capital, Djibouti City. China’s exports to the African nation reached US$20.7 million in 2009. Photo: Felix Wong

Free-trade zone

In January, Djibouti started construction of a free-trade zone with Chinese funding. The 48 sq km free-trade zone is being built by Dalian Port. The zone will be operated by the Djibouti Ports and Free Zone Authority in a joint venture with China Merchants Holdings.

Djibouti

Ethiopian Government Cancels Ethio-Djibouti Fuel Pipeline Project

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THE REPORTER — The Ethiopian government canceled the planned Ethio-Djibouti fuel pipeline project, reports the Ethiopian weekly English newspaper, the Reporter.

In 2014 the South Africa-based infrastructure investment group, Black Rhino, proposed to the Ethiopian government to build a 550km long pipeline to transport diesel, gasoline and jet fuel from the Port of Djibouti to central Ethiopia.

A senior Ethiopian government official stated that the government has canceled the project due to financial reasons. The official said though the pipeline project is viable, the government wants to protect the Ethiopian Railway Corporation which will soon start transporting petroleum products.
“We have built a new railway line to Djibouti with an investment cost of four billion dollars. And 100 fuel tanker wagons are ready to transport fuel from Djibouti. We have to maximize the use of the railway and pay back the loan to the Export Import (EXIM) Bank of China first,” the Ethiopian official said.

The project is estimated to cost 1.5 billion dollars. The Ethiopian government had reviewed and accepted the proposal in principle. Backed by the US investment group Black Stone, Black Rhino has undertaken a feasibility study on the project, which was going to be the first fuel pipeline in Ethiopia.

He said that while the country has a newly-built railway line, the construction of another expensive infrastructure cannot be justified. The International Finance Corporation (IFC) – the investment arm of the World Bank – had expressed interest in financing the planned Ethiopia-Djibouti fuel pipeline project.

“It is not that the project is unable to secure loan but while we are having the railway line in place building another fuel transport infrastructure is not economically a sound decision,” the Ministry of Transport official said. However, he said the construction of the pipeline can be considered after four or five years.

Ethiopia’s annual fuel import, which is growing at a rate of ten percent, has reached 3.8 million MT. The country so far uses tanker trucks to transport the fuel from the Port of Djibouti to central Ethiopia costing the country dearly. Fuel theft, adulteration and waste are also other challenges with the road transport.

The governments of Ethiopia and Djibouti signed a framework agreement on the planned pipeline construction in 2015.

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