Over a long period of time, landlocked Ethiopia has been forced to rely on neighboring Djibouti for most of its trade. The country of about 100 million people has been carrying out its import and export trade through Djibouti, which has a population of fewer than 1 million people.
Ethiopia lost access to its coastline, impeding its economic growth and limiting the nation’s ambitions of becoming a regional hegemon when Eritrea seceded in 1993.
Ethiopia’s overdependence on Djibouti is also a result of the strained relations between Addis Ababa and Asmara. However, Ethiopia is set to get a major trade gateway after the completion of Berbera port.
A new container terminal opened at Berbera port in the semi-autonomous Somaliland region is expected to be a major trade gateway for the landlocked country. The port, according to reports, will further enhance trade relations among East African and Gulf countries.
It was officially inaugurated on Thursday last week by the government of Somaliland alongside the Dubai-based giant port operator, DP World, which is developing and expanding the Berbera port.
Somaliland President Muse Bihi Abdi is reported to have said that the newly built terminal will open up an economic opportunity in the East African region.
Somaliland and DP World officials have indicated that Berbera’s newly built terminal will increase the port’s container capacity to 500,000 twenty-foot equivalent units (TEUs) annually from the current 150,000 TEUs.
DP World is due to commence the second phase expansion of the Berbera port after the completion of the first phase.
Completion of the second phase expansion is expected to boost the port’s accommodation capacity to two million TEUs annually.
The new shipping facility is said to enable Somaliland to play a key role in trade relations between the Horn of Africa countries and the Gulf region.
In addition to the expansion of new container terminal, Somaliland is building a Berbera free trade zone and corridor, and major road projects which intend to connect it mainly with Ethiopia.
Ethiopian officials indicated that the road project due for completion later this year will not only serve as an alternative corridor for Ethiopia but it will also provide efficient service as it will allow imports from the port of Somaliland to enter Ethiopia “directly, quickly and efficiently”.
Last May, DP World, agreed with the Ethiopian Ministry of Transport to develop a road linking the port of Berbera to Ethiopia.
Ethiopian Transport Minister Dagmawit Moges then said that the corridor’s development would meet his country’s increasing demand for international trade.
Ismail Shirwac, head of Cooperation and Development Partnerships at the Somaliland’s Mission in Kenya told a local daily that the expansion of Berber port is part of Somaliland’s effort to build a major regional trade hub.
Addis Ababa is rapidly signing these deals to prevent Djibouti from utilizing its monopoly to Ethiopia’s disadvantage.
Some Ethiopians fear that, given the prevalence of international military bases in Djibouti, geopolitically motivated foreign meddling and international conflict could devastate their economy.
Overall, Ethiopia’s push to foster port competition will likely bring more stability to its economy. It will also potentially lower shipping costs for Ethiopian cargo, since Ethiopian firms and the government pay between $1.5 billion and $2 billion in port fees to Djibouti annually.
Under Abiy Ahmed, Ethiopia’s Prime Minister since April 2018, there have been signs that Ethiopia’s peculiar relationship with Djibouti is set to change.
Abiy signed a peace agreement with his Eritrean counterpart on July 17, bringing a formal end to the 1998-2000 Eritrean-Ethiopian War and potentially opening Eritrea’s ports on the Red Sea to Ethiopian exports.
By also pursuing deals with ports in Sudan and Somaliland, Ethiopia is making it clear that the first priority in its quest to become a regional power is establishing direct control over its access to the Red Sea and Gulf of Aden.