September 17, 2013 1:26 pm

Breakaway Somaliland hopes to become gateway for Horn of Africa

Hajj pilgrims wait to board a plane at Berbera International Airport, in Hargeisa, Somaliland.)©AP

Passengers wait to board a flight at Bebera Airport. The port could become a $2.5bn logistics hub

The wreckage of fighter jets and goats nibbling the grass alongside the newly laid tarmac at Somaliland’s small Hargeisa airport hardly suggest the territory is about to become an infrastructure hub for the region.

But authorities in the breakaway costal nation in the Horn of Africa say the recently unveiled $10m Kuwaiti-funded makeover of its two airports is just the beginning. They hope the investment will kick-start its efforts to become the new gateway for landlocked Ethiopia’s 92m people, developing connections by road, rail, air and sea in a nation at the meeting point of the African and Arab worlds.

“We believe [developing our export infrastructure] would contribute a lot to the region in terms of our strategic location and help the region’s trade,” says foreign minister Mohamed Bihi Yonis of the territory, which already exports millions of dollars of livestock across the Gulf of Aden to Yemen and Saudi Arabia.

In recent months, bottlenecks at ports in Mombasa, Dar es Salaam and Djibouti have highlighted the demand for better infrastructure in a fast-growing region.

Ethiopia, a $43bn economy largely closed to the outside world, is growing at 7 per cent a year and keen to develop coffee and leather manufacturing exports. Ethiopia’s vulnerability was exposed after it lost its main access to the sea when Eritrea won independence in 1994.

“Ethiopia is the only landlocked country in Africa that has only one export port,” says Lars Christian Moller, the World Bank’s lead economist in Addis Ababa, referring to the small city-state of Djibouti, where Dubai’s DP World runs a huge port operation.

“Relying only on one trade corridor makes the management of the political economy of logistics particularly vulnerable to the relationship with the partner country Djibouti,” says a recent World Bank report co-authored by Mr Moller. It counsels Ethiopia to develop transport routes through Somaliland to “diversify Ethiopia’s options and thus improve its negotiating power with transit corridors”.

It could also greatly assist Somaliland’s efforts to secure international recognition. Hargeisa declared independence from Somalia when civil war started 22 years ago, but has yet to be recognised by neighbours reluctant to undermine Mogadishu, only now emerging towards a fragile peace. The fact that Hargeisa is officially seen as part of Somalia could yet complicate investors’ efforts to secure insurance and financing.

The former British colony has no banks, no access to international finance and survives on a budget that runs only to $125m a year for its 4m mostly nomadic people. It derives much of its income from transport taxes and remittances.

We expect Somaliland to be a growing trade centre in east Africa and are positioning ourselves to meet and cater to the demand

- Esayas Woldemariam Hailu, Ethiopian Airlines

Still, Somaliland officials say they hope one day to serve 30 per cent of Ethiopia’s exports, worth close to $1bn a year. They are to meet counterparts in neighbouring Ethiopia for trade talks later this year. “We would start tomorrow if we had the infrastructure ready,” says Suleiman Diriye, director-general at the ministry of finance. Ethiopia’s trade ministry did not return requests for comment.

Jason McCue, a British businessman appointed as an envoy for Somaliland’s independence bid, is trying to assemble a consortium of investors to develop the beachside town of Berbera as a $2.5bn logistics hub, including an oil pipeline when exploration for crude accelerates in Somaliland and Ethiopia.

“The economic case for developing Somaliland is just mind-blowing – Berbera port is key,” says Mr McCue, whose Berbera Development Company is tasked by government to select a port developer and operator.

Ethiopian Airlines, among the three biggest airlines on the subcontinent, is “very confident” that volumes of passengers and goods via Somaliland will rise, and intends to start a joint venture to develop cargo flights to serve goods transiting the port.

“We expect Somaliland to be a growing trade centre in east Africa and are positioning ourselves to meet and cater to the demand,” says deputy CEO Esayas Woldemariam Hailu, who attended the reopening of Hargeisa airport last month.

At the airport reopening ceremony, a luxurious private jet delivered Kuwaiti benefactors to the airport, littered as it is with fighter jets. Yet, Hargeisa is long used to such contrasts: goats and Hummers, camels and four by fours regularly share the hot dusty streets. But if proof were needed of the scale of the territory’s ambitions, look no further than the high-powered VIP lounge: Hargeisa’s small, revamped airport has two.

Related Topics

Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.

NEWS BY EMAIL

Sign up for email briefings to stay up to date on topics you are interested in

SHARE THIS QUOTE