BERBERA CORRIDOR SHIPPING

UNCLAS SECTION 01 OF 02 DJIBOUTI 000102 SIPDIS STATE FOR AF AND AF/E; LONDON, PARIS FOR AFRICA WATCHER E.O. 12958: N/A TAGS: PREL ETRD ECON EWWT ELTN DJ ET SO SUBJECT: BERBERA CORRIDOR SHIPPING ¶1. Summary: The port of Berbera in Northern Somalia (the self- declared autonomous region also known as Somaliland) recently signed an agreement with Ethiopia, allowing Ethiopia to use Berbera for its import and export needs. The first shipments of cargo successfully transited through Berbera in November 2005. End Summary. -------------- The Port -------------- ¶2. The port of Berbera, which plays a major role in Somaliland's economy, was developed by the Soviet Union in the 1970s. (Note: The town of Berbera has also an airport with a long runaway, which could be developed to enhance the port's competitiveness. END NOTE). The port has a berth of 650 meters long that can accommodate 3 medium size ships or four small ships. It has a sea depth of 11 m, which could be improved to 13 meters with dredging. It was last dredged more than 20 years ago. Berbera is also equipped with an oil jetty that the French oil giant Total recently modernized. While the port was renovated a few years ago, it is still poorly equipped and has no gantry cranes. ¶3. A 250 km long road links Berbera to the Ethiopian border at Tug-Wajaalle. The total distance between Berbera Port and Addis is 964 km, comparable to the 910 km between Djibouti Port and Addis. The roads within Somaliland are generally in good condition because the European Union (EU) funded a project to rehabilitate the main road network, with focused specially on the road to Berbera. -------------- History -------------- ¶4. The port of Berbera is well known for exporting live sheep, goats and camels from the Horn of Africa to the Gulf States. A strict export ban was imposed on the livestock from the Horn of Africa by the Gulf States in 2000 after several cases of Rift Valley were discovered among herds bound for export. As a result of the ban, Somaliland, Northeastern Somalia (Puntland), Southern Somalia and Ethiopia suffered from the ban with huge income losses, with Somaliland's economy hurt worse than the other countries. In 2005, following a request by the government of Djibouti (GOD),the government of Kingdom of Saudi Arabia (KSA) considered lifting the ban, due in part to GOD plans to build a livestock quarantine center. Livestock from the Horn of Africa would be exported through Djibouti once the quarantine center is completed and inspected by Saudi experts. However, Somaliland still hopes to negotiate with the Saudis separately and export directly through Berbera. ¶5. After lengthy negotiations, in May 2005 Somaliland and Ethiopia officially signed, the Berbera Corridor Agreement (BCA),allowing Ethiopia to import and export goods through the port of Berbera. The new agreement is expected to establish formal trade between the two countries. The agreement also calls for the establishments of formal customs offices at key border crossings such as Tug-Wajaalle, as well as the improvement of road infrastructure. The Ethiopian Shipping Line (ESL) and the Maritime Transit Services (MTS) both appointed local agencies in Berbera to handle the clearance and forwarding of Ethiopian cargos. An Ethiopian bank opened its office at the Ethiopia-Somaliland border town of Tug-Wajaalle to process import and export transactions. A high level Ethiopian delegation was in Berbera in November 2005 to observe the first shipment of goods to Ethiopia and discuss the preparation and implementation of the BCA. The new agreement is expected to establish formal trade between the two countries. So far, Somaliland has imported khat (a leafy narcotic legal to purchase and consume in the Horn of Africa) and vegetables from Ethiopia and exported rice, sugar and other commodities in an informal trade. Somaliland is fully supportive of the economic cooperation with Ethiopia, which became a safe haven for people fleeing from the atrocities of the Somali civil war. -------------- Feasibility Study -------------- ¶6. To study the impact of the Addis-Hargeisa-Berbera corridor on trade and economic development in the Horn of Africa, the European Union selected Louis Berger SAS and Afro-Consult to do a feasibility study of upgrading the port and transportation routes. The Berger team concluded that the development of the Port of Berbera would enhance regional trade. Its recommendations included: - Expansions of the quays and yards - Development of the "American Quay" to accommodate large ships; and - Preparation of a port master plan to carefully monitor and integrate future developments. Other recommendations concerned the airports of Berbera and Hargeisa, which both needed modern runaways to better accommodate jet engine aircraft. The team also assisted customs officials in improving their procedures and drafting better enforcement regulations. -------------- Growing Interest in Port Opportunities -------------- ¶7. The "Ethiopian Reporter" indicated that the Ethiopian government recommended the use of Berbera port to all state enterprises importing goods. The November 2005 Ethiopian shipment belonged to the Ethiopia Electric Power Corporation. The cargo consisted of electric goods carried by a Singapore- registered liner PIL. The cargo was later transported by Ethiopian trucks to five destinations in Ethiopia, including the two major towns of Dire-Dawa and Addis Ababa. Ethiopian trucks carried this shipment, consisting of 40 ft containers because trucks from Somlaliland are only fit to carry 20 ft containers. Future shipments are expected to be in 20 ft containers so that Somaliland trucks can compete for a share of the transportation business. However, the Somaliland vehicle owners will have to carry Ethiopian insurance to cover the trucks while they are driving in Ethiopian territory. ¶8. The EU shipped 15,000 tons of relief food supplies to Ethiopia through the Port of Berbera in October 2005. The EU used Berbera for the first time in 1999 and then in 2002 for shipments of food aid destined to Ethiopia. The World Food Programme (WFP) is also planning to use the Port of Berbera after pirates off the cost of South Somalia attacked several of its shipments. WFP has requested quotations for transit services from Berbera's shipping agencies, including Integrated Shipping Services (ISS),which is Inchcape's representative in Berbera. ISS is the agent for P.I.L and P&O Ned Lloyd, which are the only two shipping lines coming to Berbera on a regular basis. The government of Somaliland has authorized the WFP to use a vast compound built and owned by the United Nations High Commissioner for Refugees (UNHCR) in Berbera, which is currently unoccupied. The WFP negotiated the arrangements with UNHCR. ¶9. MIDROC Ethiopia, a subsidiary of Al-Amoudi is planning to use Berbera Port to import all its goods. Furthermore, Al-Amoudi is currently discussing the management of the Port of Berbera with Somaliland officials. Al-Amoudi has reportedly finalized all the necessary feasibility studies and offered to invest more than US$ 20 Million to modernize the Port.