With traffic booming and new management, the port is investing in new facilities and plans a sharp rise in capacity.

The port, the heart of this tiny nation at the southern end of the Red Sea, suffered throughout the 1990s from political turmoil across the Horn of Africa and civil war at home.

But it has benefitted from the vicious two-year border war between neighbouring Ethiopia and Eritrea and from a drought and famine striking large areas of the Horn.

Landlocked Ethiopia moved all its import and export traffic from the Eritrean port of Assab to Djibouti, which previously handled less than a third of Ethiopia's imports.

Ethiopia refused to allow the United Nations to use Assab for the delivery of food aid to millions of hungry Ethiopians so those shipments now also pass through Djibouti.

The U.N. World Food Programme and bilateral donors are currently feeding 7.7 million Ethiopians with all of the grain moving through Djibouti. The U.N. has begun work on a $2.7 million plan to increase the port's handling capacity to 145,000 tonnes a month from 100,000 currently.

Djibouti officials estimate traffic at the port has jumped 80 percent since the Ethiopia-Eritrea war began in May 1998 and they are confident Ethiopian customers will not now switch back to Eritrea despite a ceasefire deal signed last month.

NEW MANAGEMENT FOCUSES ON EFFICIENCY

In a bid to increase efficiency and traffic even further, Djibouti's government recently signed a 20-year contract handing over management to the Dubai Ports Authority.

The contract came into effect last month and the port's new director, Luc Deruyver of Dubai Port International, is confident he can quickly increase the number of containers handled from 120,000 to 300,000 a year using current equipment.

"We reckon we can turn around two-and-a-half times the present container numbers," Deruyver told Reuters, adding that he was sure demand would rise along with capacity.

"We are convinced that we will succeed and we are convinced the cargo will come when the port is up to international standards," he said.

Djibouti has for long dreamed of becoming "the Singapore of Africa," the key trans-shipment point for trade between eastern, central and southern Africa and the rest of the world.

The port is Djibouti's raison d'etre and, with a small domestic market, it depends on trans-shipment trade to East Africa and on the surrounding markets of Ethiopia and Somalia.

Government officials hope that an end to Djibouti's civil war and the war between Ethiopia and Eritrea as well as peace efforts under way for Somalia will all lead to greater regional stability and help fuel the port's growth.

Economy Minister Yacin Elmi Booh said the port is undergoing a $50 million expansion and that the government would resist the temptation to increase taxes on port activities in order to ease its fiscal deficits.

"We want our port to be competitive. That is our main objective," he told Reuters.