China Merchants Consolidates its Hold in Djibouti

DCT (file image)

Published Feb 21, 2019 12:55 PM by The Maritime Executive

China Merchants Port Holdings (CM Port), the state-owned conglomerate with port operations and investments around the world, is said to be taking control at Doraleh Container Terminal (DCT), the primary containerized cargo facility in Djibouti. 

The growing presence of Chinese operators at Djibouti's strategic seaport is concerning for American defense officials. In a Senate hearing last year, AFRICOM commander Gen. Thomas Waldhouser (USMC) noted that two out of five terminals in Djibouti were already under Chinese control, and that U.S. forces rely on DCT to supply nearby Camp Lemmonier, the largest U.S. military base in Africa.

Until recently, DCT was managed by DP World, which holds a 33 percent stake in the facility. The remaining 66 percent is held by PDSA, a Djibouti state holding company in which CM Port owns a minority stake. In February 2018, the government of Djibouti unilaterally terminated DP World's concession and took over operation of DCT, despite DP World's protests, then nationalized the DCT shares held by PDSA. The Djiboutian government asserted that it was acting to protect the interests of the nation and the interests of its partners in the face of what it called "severe irregularities."

Shortly after, DP World filed suit at the High Court of England and Wales in London, and it won an injunction against PDSA in August. However, Djibouti disregarded the ruling, and it is working with CM Port to develop a large free zone business park within the concession area's bounds. 

At the time of the nationalization of DCT, Djibouti inspector general Hassan Issa Sultan told media that "there is no China option and no secret plans for the Doraleh Container Terminal." However, according to the Wall Street Journal, China Merchants is now "asserting control" over operations at DCT, in addition to its operations at the adjacent Doraleh Multipurpose Port terminal.  

While the facts on the ground appear to be shifting in CM Port's favor, the litigation is far from over. In November, DP World filed a lawsuit against CM Port in Hong Kong, alleging that China Merchants illegally "induced" Djibouti to breach its contract with DP World. The case will be the first related to China's state-backed "Belt and Road" initiative to be heard in a Hong Kong court.