In December 2007, MIGA issued guarantees to DP World Djibouti FZCO (DPW), Standard Chartered Bank (SCB), and Dubai Islamic Bank PJSC (DIB) for their investments in Doraleh Container Terminal S.A.R.L. in Djibouti. The guarantees include $5 million to cover DPW’s equity investment into the project and $422 million to cover funding provided by DIB, SCB, and other participating banks under an Islamic project finance facility. The coverage is for a period of 10 years against the risks of transfer restriction, war and civil disturbance, expropriation, and breach of contract. MIGA’s gross exposure under the project is $427 million (including $21 million for the SWAP contracts).
MIGA will reinsure $50 million with the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) under MIGA’s facultative reinsurance program. MIGA’s participation is allowing the syndication of a significant amount of financing provided by the mentioned banks under this Islamic financing structure. This is MIGA’s first guarantee for an Islamic project finance facility and the agency’s first collaboration with ICIEC.
Doraleh Container Terminal S.A.R.L. (DCT) has a 30-year concession for the development, financing, design, construction, management, operation, and maintenance of a new container terminal in the city of Doraleh. DCT will have a total quay length of 2,000 meters and will be developed in two phases. During the construction phase, it is expected that approximately 350-500 local workers will be employed. On completion, the port will employ about 670 full-time employees. In addition to direct employment at the port, the project will require other services such as engineering, warehousing, spare parts, information technology and services, catering and cleaning, which will contribute to the local economy. The project will also lead to the transfer of management expertise and technology.
This is MIGA’s first project in Djibouti, which became a member in 2007. Djibouti is strategically located in East Africa along one of the fastest growing East-West international shipping routes. About 85 percent of imports into Djibouti are destined for the land-locked nation of Ethiopia.
By improving container facilities in Djibouti, the project will increase port traffic and open up new opportunities for investment and growth, including breaking the country’s reliance on Ethiopia’s trade and attracting other African countries to use the port as a gateway too. A state-of-the-art container terminal could establish Djibouti as a gateway for the Common Market for Eastern and Southern Africa (COMESA) members, and in light of trade flows through that part of the world, promote regional integration through trade development.
By supporting this project, MIGA will help Djibouti meet the growing volume of trade and strengthen its position as the gateway to the African hinterland. Development and expansion of port infrastructure is also a pillar of the World Bank Group’s Country Assistance Strategy for Djibouti.
MIGA’s presence is helping to mitigate perceived political risks for the banks and enabling the project sponsors to raise medium-term, cross-border project financing. This project is also consistent with MIGA’s strategic objective of increasing its presence in the Middle East and North Africa and in the infrastructure sector. The project is also aligned with MIGA’s priority of supporting South-South investments.