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.

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The Port
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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.

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History
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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.

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Feasibility Study
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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.

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Growing Interest in Port Opportunities
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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.