January 8 2021

China Merchants signs deal for $3bn expansion of Djibouti City port

Source: Global Construction Review

China’s biggest port operator, China Merchants Group, has agreed a deal with Djibouti to turn its port into a regional hub.

The agreement was reached with state-owned investment company Great Horn. According to its terms China Merchants will carry out a $3bn expansion of the East African micro-state’s century-old port.

Aboubaker Omar Hadi, chairman of the Djibouti Ports and Free Zones Authority (DPFZA), said on Twitter that the project would “profoundly transform our capital and create numerous economic  opportunities in the years to come”.

As well as an expansion of the port, the project will create the “East Africa International Special Business Zone”.

The $513m first phase of the project, which involves the construction of an exhibition centre and a four-star hotel for the zone, began on 8 October.

China Merchants, which already owns a 23.5% stake in the port, said in a filing to the Hong Kong stock exchange that Djibouti had “a stable geopolitical environment and the largest deep water port in East Africa”.

China’s involvement in Djibouti has been growing in recent years. The country hosts China’s only overseas military base, opened in 2017, and it is the terminus for Chinese-built, $3.4bn railway from Ethiopia, China’s closest ally in the region.

The South China Morning Post lists other notable projects, including Huawei Marine’s project to build an undersea fibre-optic cable between Djibouti and Pakistan, and China Merchants’ previous involvement in the building of the $590m Doraleh Multipurpose Port, to the west of Djibouti City. This is presently the subject of a legal dispute with Dubai port operator DP World (see further reading).

The paper quoted John Calabrese, an academic at the Middle East Institute in Washington, who said Djibouti was the “linchpin of China’s efforts to gain a strategic foothold in the Horn of Africa and as part of its broader engagement on the continent as a whole”.

China Merchants signs deal for $3bn expansion of Djibouti City port - News - GCR (globalconstructionreview.com)