DP WORLD EXPLAINS DJIBOUTI PORT TARIFF INCREASES

UNCLAS DJIBOUTI 000618 DEPARTMENT FOR AF/E PARIS, LONDON, ROME FOR AFRICA WATCHER SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ECON PREL ETRD EWWT ET DJ SUBJECT: DP WORLD EXPLAINS DJIBOUTI PORT TARIFF INCREASES ¶1. (SBU) SUMMARY: Dubai Ports World (DPW) recently announced tariff increases at the Port of Djibouti. Although transshipment traffic has been growing rapidly, approximately 80% of the Port of Djibouti's business is still in supplying landlocked Ethiopia. While the new prices will apply to all port customers, the Government of Ethiopia (GOE) has been especially vocal in protesting the rate hikes. Political negotiations between the GODJ and the GOE are ongoing. However, DPW's rising costs and focus on bottom line probably mean that some eventual rate increase is inevitable. END SUMMARY. ¶2. (SBU) In a letter dated June 25, Dubai Ports World (DPW) announced an increase in port tariffs for all customers, in order to cover rising port operating costs due to the internationally increased price of fuel and steel. The tariff increases will take effect on August 15, 2008. The new tariffs impact containerized import and exports as well as general cargo imports and exports. (NOTE: DPW, representing Dubai sovereign capital, operates Djibouti's port and airport facilities. DPW signed a 20-year agreement of management concession of the Port of Djibouti in May ¶2000. END NOTE.) ¶3. (SBU) In a conversation with EmbOff, DPW Port of Djibouti Commercial Director Abubaker Omar Hadi was careful to emphasize that the new tariffs would apply across the board, to all customers. He also noted that the GODJ and the GOE are holding ongoing talks concerning the nature of commerce on-board the port. Hadi said that many press releases in Ethiopia concerning the tariffs and their effects have been false. In particular, Hadi said, Ethiopian claims of a "sudden" increase were unfounded, since the GODJ had notified the GOE of the tariff increases through diplomatic channels on June 9, 2008. This provided more than the sixty days advance notice required by prior agreement between Djibouti and Ethiopia. ¶4. (SBU) According to Hadi, the Ethiopian Minister of Trade and Industry consulted with the GODJ regarding the tariff increase, but DPW was not a part of these discussions, and DPW received no subsequent feedback or instructions to withhold the tariff increases. Hadi expected that an Ethiopian delegation would visit Djibouti in the future to once again discuss the tariff increases. Following these talks, DPW would decide to implement or adjust the tariff changes. Hadi noted that the protocol agreements signed between Ethiopia and Djibouti do not/not stipulate that Ethiopia accept tariff increases prior to their implementation. ¶5. (SBU) Operating costs for the Port of Djibouti are about 2.5USD/ ton of cargo compared to approximately 3% worldwide. The proposed tariff increases include: --Marine Charges +25% --Container Terminal Charges -Stevedoring +15% (the first increase since 1984) -Storage +25% -Free storage period -Local import/ export cargo to 3 days vice 10 days -Transit import/ export cargo to 8 days vice 15 days --Port Equipment Rental and Services -Tugs and launches +25% -Port handling equipment rental +15% -Port personal service (staff on disposal) +25% --General Cargo -Transit import cargo (not including livestock) +10% -ISPS Charges on non-containerized cargo 0.25 USD per ton of freight ¶6. (SBU) COMMENT: With a national unemployment rate estimated at 60%, and little to no manufacturing in the entire country, Djibouti relies heavily on its services sector. The Port of Djibouti is therefore a key employer in the country, and one of Djibouti's major sources of revenue. Djibouti's economy has been hit hard by rising food and fuel prices, and nearly 10% of the population receives food aid from the World Food Program. END COMMENT. WONG