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Cablegate: Dp World Explains Djibouti Port Tariff Increases

VZCZCXRO5114
RR RUEHROV
DE RUEHDJ #0618 2061340
ZNR UUUUU ZZH
R 241340Z JUL 08
FM AMEMBASSY DJIBOUTI
TO RUEHC/SECSTATE WASHDC 9408
INFO RUCNIAD/IGAD COLLECTIVE

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

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