DP World launches expansion of port in Somaliland

The soporific seaside town of Berbera is slowly transforming as it takes on a major role on the Red Sea shipping route, allowing breakaway Somaliland to dream of prosperity and even recognition. (AFP)
Updated 12 October 2018
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DP World launches expansion of port in Somaliland

  • Somaliland broke away from Somalia in 1991 and has acted as a de-facto independent state since then but is not internationally recognized
  • DP World said the first phase of expansion will consist of constructing a 400-meter quay as well as the development of a free-zone

HARGEYSA: Dubai state-owned port operator DP World has launched a $101 million project to expand a port in the breakaway region of Somaliland.
Somaliland broke away from Somalia in 1991 and has acted as a de-facto independent state since then but is not internationally recognized. The United Arab Emirate’s Dubai government owns DP World.
The port in Berbera exports camels to the Middle East and imports food and other items, but Somaliland hopes it will provide an alternative for neighboring Ethiopia — a landlocked country of 100 million which relies on Djibouti for its trade.
DP World said the first phase of expansion will consist of constructing a 400-meter quay as well as the development of a free-zone, with Emirati firm Shafa Al Nahda the contractor.
“This investment in Berbera ... and the expansion is of a huge benefit for Somaliland to develop its economy. We are thinking to be competitive with our ports in the region,” Muse Bihi Abdi, the breakaway region’s president, told journalists.
The first phase is part of an expansion deal signed with DP World in 2016 and worth a total of $442 million.
DP World’s chairman and chief executive Sultan Ahmed bin Sulayem said Berbera would serve Ethiopia’s expanding economy and its increasing trade.
“We did not get assurances from them. (But) they need every port capacity in Ethiopia. It is only a matter of opening the port and making sure the road is there,” he said in a news conference.
But the launch comes amid opposition from Somalia, which believes its sovereignty is being violated. Senior officials have said such deals “bypassed the legitimate authority” of Mogadishu.
Bihi Abdi dismissed the claim. He said agreements with such international firms would boost the country’s quest to achieve international recognition.
“Because when DP World came to Berbera, there was attention from other countries and big business companies because most of them were thinking that Somaliland was not a recognized country and ignored the peace and stability in Somaliland,” he said in a news conference in Hargeysa.
“DP World was a big, international company which dared to come to Somaliland and I hope a lot of other companies from any continent will follow their path and come to Somaliland.”


Idle India plant victim of Modi policy moves

Updated 16 min 51 sec ago
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Idle India plant victim of Modi policy moves

  • Ban on high-value banknotes and goods and services tax has reduced demand

NEW DELHI:  It was supposed to be Johnson & Johnson’s biggest manufacturing plant in India. It was to eventually employ at least 1,500 people and help bring development to a rural area near Hyderabad in southern India.

Yet, three years after the US health care company completed construction of production facilities for cosmetics and baby products on the 47-acre site, they stand idle.

Two sources familiar with J&J’s operations in India and one state government official told Reuters production at the plant, at Penjerla in Telangana state, never began because of a slowing in the growth in demand for the products.

One of them said that demand didn’t rise as expected because of two shock policy moves by Prime Minister Narendra Modi: A late 2016 ban on then circulating high-value currency notes, and the nationwide introduction of a goods and services tax (GST) in 2017.

J&J spokespeople in its Mumbai operations in India and at its global headquarters in New Brunswick, New Jersey, declined to respond to a list of questions from Reuters.

Modi’s office did not respond to a call and an email with questions.

Aimed at rooting out corruption and streamlining the tax system, the double whammy of “demonetization” and GST, were two of Modi’s signature policy moves. But instead of encouraging economic activity as intended, they did the opposite, at least in 2016-2018, by sapping consumer demand, according to some economists.

Many businesses, especially small and medium-sized enterprises, complained publicly — some in their financial statements — that they suffered a drop off in orders. The suspended J&J project stands as one of the most vivid examples of the impact on the broader investment picture.

In the first month after demonetization, some business surveys showed that sales of products such as shampoos and soap fell more than 20 percent.

Indian Prime Minister Narendra Modi makes a press statement in New Delhi last month. (Reuters)

Lack of jobs growth and a farm-income crisis because of low crop prices have hurt Modi in the current general election, according to several political strategists.

Still, Modi and his ruling Hindu nationalist Bharatiya Janata Party are expected by many of the strategists to be in a position to get a second term — probably with support of some other parties — when votes are counted on Thursday, partly because of his strong stance on national security issues.

A range of Modi’s business policies, such as capping prices of medical devices, forcing tech companies to store more data locally and stricter e-commerce regulations have in the past two years hurt plans of American multinationals such as J&J, Mastercard, Amazon and Walmart-owned Flipkart.

The groundbreaking of the J&J facility in Penjerla, its third in the country, was carried out with much fanfare in 2014, attended by Telangana state’s Chief Minister Chandrashekar Rao, who hailed the foreign investment as a big win for local communities.

A document dated April 2017 that lists products the company planned to make at the facility, submitted to the Telangana government and reviewed by Reuters, names baby oil, baby shampoo, baby lotion, baby hair oil, face wash and creams.

Shaukat Ali, running a tea shop under a bamboo stall on barren land outside the plant, said local workers check in routinely for possible vacancies at the J&J site, but nothing has come up in years.

At the local pollution control board office, the member secretary Satyanarayana Reddy said the J&J plant had all the required approvals and he was not sure why it hadn’t started production.

“It is unusual for such a big plant to stay idle for so long,” he said. “But there is no problem from our side.”

Chandrasekhar Babu, an additional director at the Telangana industries department, said a J&J company official told him the plant hadn’t started due to lack of demand.

GST and demonetization were two key reasons the plan didn’t kick off, one of the sources said, adding that lack of consumer demand since then dented company’s plans.

The second source familiar with J&J’s plans said the company miscalculated Indian market demand.

On a recent visit by a Reuters reporter to the J&J plant, plush, furnished conference rooms and cubicles sat inactive; M. Sairam, who said he was the site manager, told Reuters production areas with machines were idle too.

Local officials had hoped the initial J&J plant would be only the beginning. After the groundbreaking in 2014, Pradeep Chandra, who was Telangana’s special chief secretary of industries, told Business Today magazine that “based on the extent of land (J&J) have acquired we believe that they are looking at much larger expansion here.”

Local media reports at the time said the J&J facility would employ some 1,500 people.

A J&J official, who was not identified by name, was reported subsequently in December 2016 in India’s Business Standard as saying that the $85 million plant would be operational by 2018 after it had overcome procedural delays. The official was quoted as saying the company had earmarked an additional $100 million for expansion.

Vikas Srivastava, the managing director of J&J Consumer (India), who was at the 2014 groundbreaking, did not respond to calls for comment.

Reuters also talked to two workers outside a sprawling Procter & Gamble facility making detergents and diapers, which is next to the J&J plant. They said they were part of the P&G plant’s production team and the plant had been running below capacity.

A P&G spokesperson denied that, saying the plant was “operating at full capacity.” 

“India is a priority market for P&G globally and in recent quarters, P&G’s business in India has registered strong double-digit growth consistently,” the company said.

The weak rural economy, where most Indians work, has also hurt growth in sales of basic items such as detergents and shampoo in the past year.

Hindustan Unilever Ltd, an industry bellwether that would compete with the likes of J&J and P&G in some categories, said its volume growth shrank to 7 percent in the quarter ended March 31, down from double-digit growth in the previous five quarters. The company warned that the daily consumer goods segment in India was “recession resistant ... not recession proof.”