Ethiopia: Addis Ababa-Djibouti railway

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Ethiopia and Djibouti’s economies have been reliant for a long time now. Djibouti is the main port that connects Ethiopia with global economy, in particular with China, the most important  trading partner of the country.

eth2A symbiotic relationship has developed between Djibouti and Ethiopia. Addis Ababa handles 90 per cent of its import-export trade via the port of Djibouti, which, in turn, serves as port for  Ethiopia, which accounts for about 70 per cent of  traffic.  The partnership between the two countries is expected to become even stronger. According to the International Monetary Fund estimates, in fact, the Ethiopian economy is expected to  show  a 7 percent record growth in the current year. IMF data are no surprise, considering that the country has registered a 10 per cent economic growth rate per annum, over the last decade.
Ethiopia, which is the second-largest country in terms of population in Africa with 85 million people, expects to join the World Trade Organization in 2015. Its membership in WTO will further increase its role as East African economic giant. The country has undertaken over the past few years, strategic investments in order to become major player in both regional and African geopolitics. Infrastructure deficit  and the high cost of logistics slow down the country’s economic growth. For this reason, the Ethiopian government is  planning to build 5,000 km of railway lines by 2020.

Chinese investments

The macro-project includes new railway connections to Kenya and South Sudan, as well as the modernization of the old single-track rail, which is non electrified and only partially viable, and that connected Addis Ababa to the Red Sea port of Djibouti. The modernization of the railway system represents the most strategic part of the Ethiopian  infrastructural project, increasing of 8 times the freight volumes  between the capital and the Indian Ocean, strategic maritime point for the  trade of  European, Asian and Gulf countries’ goods.
eth4Ethiopian Prime Minister, Hailemariam Desalegn and Djiboutian President, Ismail Omar Guelleh inaugurated, at the beginning of July 2013, the construction of the 800 km route connecting Addis Ababa, Dewele and Djibouti City. The project cost  is estimated around $ 4.5 billion.
Over the past decade several countries showed interest in Ethiopian rail development, as the financing would have a strategic more than a commercial value. The “BRIC countries” (Brazil, Russia, India and China), were among the major contenders.
The struggle between Beijing and New Delhi  got really hot. In the end, China  prevailed  and  will secure financing  for construction of the two sections of the Addis Ababa/Djibouti railway project in the  Ethiopian territory . The agreement was signed by the Ethiopian government and the Chinese  state-controlled construction companies: China Civil Engineering Construction Corporation and China Railways Construction. The Ethiopian government is expected to cover 40% of the cost, with the Chinese investor securing the 60% left,  a US$2billion loan,  from China Exim Bank, China Development Bank  and Industrial and Commercial Bank of China. The Djibouti government will take over the reconstruction of the remaining 100 km railway project. By 2018 the new Addis Ababa-Djibouti railway should be ready, improving the Ethiopian economy as well as China’s , which is increasingly playing a central role in East Africa. (P.Q.)


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