Changing maritime trade in the Horn of Africa
Saad Ali Shire (PhD) was appointed as Minister of Foreign Affairs and International Cooperation of Somaliland in October 2015. Prior to his appointment he was the Minister of National Planning and Development for five years from 2012 to 2015. During his tenure as minister of national planning, he served in many committees including the National Planning Commission, the Somaliland Development Fund Joint Steering Committee, Somaliland Business Fund Grant Advisory Panel, Civil Service Reform Committee, Public Finance Reform Committee, Budget Policy Committee, Private Sector Reform Committee, Land Policy Reform Committee, Berbera Port/Corridor Development Committee. Prior to joining the public sector, Shire was the Managing Director of UK and Europe Dahabshiil Transfer Services Limited, a money transfer service company. Before that, he held senior positions in the community development sector, lectured at the college of Agriculture of Somali National University and worked for the UN Food and Agricultural Organization (FAO) and the World Bank. Shire is an economist and an agronomist. He studied agriculture at both Havana University, Cuba, and Somali National University where he earned his bachelor’s degree. He subsequently went to Pennsylvania State University in the US, where he did his master’s and PhD degrees in Agricultural Economics. He also has a post graduate diploma in Islamic Banking, and is an IMC member of the Chartered Financial Analysts (CFA) Society of UK. On the commencement of the USD 100 million Berbera Port project last week, Birhanu Fikade of The Reporter sat down with Shire for a brief interview in Hargeisa. Excerpts:
The Reporter: How do you see Somaliland’s economic role in the Horn of Africa from the perspective of maritime trade?
Saad Ali Shire (PhD): Berbera is a strategic port in the region. It is a natural gateway to eastern part of the Horn of Africa. Just take Ethiopia. Ethiopia has three prominent population centers: east, west and the south. For the western region, the Port of Assab could be the natural gateway and the Port of Djibouti could serve well for the central part of Ethiopia. For the eastern part, Berbera is uniquely positioned to serve just by considering its mere distance that region of Ethiopia. Berbera Port is not well developed yet to deal with such level of cargo traffic; particularly, it is not that developed to meet the demands of the expected containerized traffic. Initially, the Port was meant for bulk handling; it was not a container handling port. The Port expansion project ushers in a new era in which the Port will be able to accommodate the container traffic. It will serve Somaliland together with Ethiopia and even Somalia and beyond.
There was an assumption that at least 30 percent of Ethiopia’s maritime trade will be handled via Berbera Port. But now, Eritrea is entering the game; with both Assab and Massawa Ports ready to serve Ethiopia. What is going to happen to such projects under this new reality? Will it remain as it was or would it be revised? Is there any negotiated terms as to how much of the trade volume will be diverted to Berbera?
That figure was mentioned in the previous five-year plan [Growth and Transformation Plan (GTP-I)]. It is no longer mentioned in the current one. No one can give you a guarantee. You see, most of the imports and exports process in Ethiopia is handled by the private sector and the private sector goes to where the cost is very reasonable. Hence, they have options. Let’s say an Ethiopian businessman wants to import goods from China and he has a number of potions on how to ship the cargo. He can take the cargo to Port Sudan, or now can take it to Assab. Perhaps to Port of Djibouti or can take it to Berbera Port. In order to get a better share of the cargo, any port needs to be more competitive. Every port gets as much as share of the overall cargo based on its competitiveness. Due to that, nobody can guarantee whether Berbera gets a 10 percent or 30 percent share of the cargo. It is a free economy.
You indicated the comparative advantages Berbera has to serve the eastern part of Ethiopia. Apart from that, what could be said about the importance of Berbera to the Ethiopia?
We have signed a tripartite agreement with the governments of Ethiopia and DP World. That agreement still alive and nothing has changed. The government of Ethiopia didn’t communicate with us about backing out of the agreement. There is no indication that they intend to do so. We hope that all the three parties will be onboard to contribute to the development of an efficient port which will serve the whole region.
Could you elaborate on the details of the tripartite agreement signed between three parties? What are the stakes and the responsibilities?
We have signed the concessions. The agreement we had entered into with DP World divides the work into two. There are marine services operations to be handled by the government of Somaliland namely by the Somaliland Port Authority. Handling goods is the second part and that’s what DP World Berbera, a joint venture company, is responsible for. It basically handles loading and unloading of ships, storing, maintaining and cleaning containers and that sort of staff. That is what it has come for. So, we all are going to contribute towards the DP World Berebera JV company. It’s responsible to run the port operations. As far as construction and tendering is concerned, as within the concession agreement, DP World is responsible for contracting the port developer. According to that, tender was floated and I think there were three or four companies which have been shown interest and finally one selected.
What do you mean by corridor development? We have leant that the government of Ethiopia has an interest in the Berbera corridor development but we lack the specifics of that?
The corridor development is part of the African corridors. There is a plan to improve and increase infrastructural connectivity within Africa and we are part of the East African corridors. Corridor development consists of ports, roads, railways, and other infrastructural accessories that include energy and that sort of thing. Hence, the first thing we are going to do to develop this corridor is to expand and develop the Berbera port and then we will negotiate on the corridor agreement on how we will going to move goods and services across.
Is there any potential detail that you can share with us about the Berbera Corridor development?
We have an agreement with Ethiopia regarding customs since 2004. We are now working to have a trade agreement. The UK is also assisting us on how to develop a trade map with the possibility of developing the trade corridor to make trade possible between Somaliland and Ethiopia. Some agreements have already been made and others are on their way to be signed.
Could we expect a bilateral trade agreement to be signed any time soon?
I hope so. We have established two joint committees composed of committee members from Ethiopian and Somaliland. The Somaliland committee is working on the contents of the agreement. In fact, it has already been agreed upon but it requires some amendments. Hopefully the two committees will meet sometime in November. That is my expectation.
The road project that links Berbera to Ethiopia was not completed on Somaliland side; especially from the border town of Togochalle to the Port. However, according to President Musse Bihi Ali the road will start operations starting next month. Tell us how that could happen?
The road from Berbera to Wuchalle is going to be developed. Already a company has been selected to work on the design. They have finalized the data collection process to work on the road design. When that is completed, tender will be issued for the construction of the road.
It is a USD 100 million project, right?
So far it is a USD 90 million project but depending on circumstances that might change.
Is Ethiopia involved in the road project? Is it a joint ventured development too?
At present, the amount of money mentioned will be provided by the UAE. But, we hope EU will also contribute. We hope UK will also be contributing to the project. If that’s not enough; we will ask Ethiopia to contribute as well.
The issue of military base which the Emiratis are reported to be building is another sensitive issue. Could you say anything about its implications on the regional geopolitics? Would it affect the business environment in the Horn region?
I think the military base is not a secret. We have offered a 25-year concessions to UAE to use what was originally a military facility used by the Russians and the US at different stages. We don’t see the base is going to create headaches in the region. All information is open and available to the public. Military bases are used for different activities and sometimes for multiple purposes. Some are used for managing situations such as rescue missions. This way they will be deployed to rescue marine ships. Some military bases are used as resting bases for the troops. Some bases might be used for training purposes. Some will be needed to facilitate logistics. Military bases have multiple functions. They are not merely used for warfare. Because they have military base it does mean that they will have planes or bombard any given target from that base. It does not work like that.
Is it not true that the Emiratis are going to construct their own military facilities at the base in Berbera?
Of course they are going to construct their own facilities. The existing facilities are dilapidated and they are in bad shape. They will be building their own facilities and will be sending troops as well. They will be building runways and small ports as well.
What would be priority number one for Somaliland as the Port expansion starts is over and it starts to offer services? What keeps you awake at night?
I think our people have served during the union with Somalia and we had a very long struggle that lasted for almost a decade from 1981 to 1991. We had a depressing time to reclaim our independence. We feel we had lost 30 years and we need to catch up. That’s really the main motive we have. Generally speaking, our people are entrepreneurs. Somlilanders are enterprise minded; they know how to make something out of nothing. That spirit is there in the public sector as well. What keeps us awake is how to build a stable and prosperous nation in the coming 20 or 30 years. That is where our priorities are.
There seems to be a competition among Asia, the Middle East and the West in terms of projecting geopolitical interests in Horn region. In fact, it is looking like a key battle ground for the super powers of the day. Hence, how do you think you could manage and negotiate the best terms out of the political markets?
The region has been of interest to all powers in its entire history. The attraction arises from its strategic location. Since the opening of the Suez Canal, it has remained an important maritime lane which connects Africa with Europe, the Middle East and Asia. It’s a very important point. For instance, during the 19th century, the British came to Somaliland with the view of protecting this trade lane. They had garrisons and a navy. They came to Berbera as well, which by the way is found in close proximity to the Red Sea, to make sure that their cargo traffic is safe. It is the strategic location that attracts powers to the countries in the Horn. When it comes to competition, we are not competing with anybody with regard to military base or that sort of thing. But off course, when somebody talks to us or come to us with an agreement which benefits our people, we will consider it.
How is Somaliland seeing the current political developments in Ethiopia? Do you see any change coming to the relationship of the two countries following this dynamics?
Our relationships haven’t really changed that much. But coming back to the changes that are happening in Ethiopia, I would like to say that we welcome any changes. We welcome a peaceful resolution of conflict in the country. We welcome economic integrations among countries. We welcome respects of human rights and we welcome the opening of the public sector to the private sector. These are all the changes we like and see as beneficiary not only to Ethiopia but to us and the rest of the region as a whole. Off course all changes have their own challenges. There are people who have a vested interest with the status quo. When you change that, you might go against the perceived interests of those people. Normally, at the beginning, you will face some turbulence; and if it is managed well, it could be overcome quickly. But if it’s poorly managed, it could cause a lot of trouble. We have concerns. But, we hope everything goes right because we don’t want problems happening in Ethiopia. For instance, as a neighbor, if things go out of hand, we just can’t handle the influx of refugees. We don’t have resources. That is always a concern; the issue of people moving in huge numbers is one that will be difficult for us.