US embassy cable - 04DJIBOUTI597

UNCLAS SECTION 01 OF 02 DJIBOUTI 000597 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR AF, AF/E AND AF/EPS ADLER; 
CJTF HOA FOR J5 MAJOR RATINAUD AND MARCENT DJIBOUTI 
 
E.O. 12958: N/A 
TAGS: PREL, PGOV, ETRD, ECON, DJ, TC 
SUBJECT: DORALEH PORT: AN OPPORTUNITY FOR AMERICAN BUSINESS 
IN DJIBOUTI 
 
1. (SBU) Summary: The prospective mega-project at 
Doraleh port in Djibouti offers significant 
opportunities for U.S. companies.  Dubai Ports 
International has hired an American company, 
Han-Padron Associates of New York, to do the 
feasibility study and full market forecast for all 
aspects of the project.  Moreover, a Master Plan 
for port sectors is to be completed by mid-November 
2004.  DPI and Han-Padron recently held talks in 
Washington with USTDA and EXIM on financing for this 
portion of the project.  A major issue to be resolved 
is the future of the existing oil company business in 
Djibouti - including U.S. company Exxon Mobil - once 
Emirates National Oil Company assumes management of a 
new oil container terminal envisioned for the new 
port.  End Summary. 
 
2. (SBU) Ambassador and Pol/Econ met April 15 with 
visiting Dubai Ports International (DPI) officials and 
American company Han-Padron Associates regarding future 
developments on the Doraleh Port project and to hear 
their brief on USTDA and EXIM meetings the group held 
in Washington the week prior.  DPI won its first 
contract with the Port of Djibouti in 1999.  Since 
then, DPI has acquired the contract for management of 
the Ambouli International Airport in Djibouti.  DPI 
told Ambassador and Pol/Econ that it appreciated the 
presence of both Djiboutian government officials and 
Department of State representatives at the Washington 
meetings.  They felt their presence gave greater 
credibility to their presentation to EXIM and TDA. 
 
TAKING PRELIMINARY STEPS 
------------------------ 
3. (SBU) DPI stated that from a business viewpoint, 
Djibouti is in line with the future of shipping in the 
region and that the Government of Dubai supports 
finding a commercially and financially feasible way to 
develop port possibilities in Djibouti.  In January 
2004 DPI put out a Request for Proposals (RFP) to get a 
development study and project started.  DPI began the 
bid process for Sole Source funding on February 15. 
Through a competitive bidding process, American company 
Han-Padron Associates was chosen to do the feasibility 
study and full market forecast for all sectors of the 
project: airport, port, free-zone, etc.  It will be 
necessary to study the current port as well as the 
future container terminal to answer pivotal questions 
on the development process, such as how does migration 
to the new container terminal facility happen and what 
is to be done with the current oil terminal. 
 
A MASTER PLAN IN THE WORKS 
-------------------------- 
4. (SBU) The creation of a Master Plan for Port sectors 
is to be completed by mid-November.  This plan will 
include what to do with the current port facility and 
how to take care of pollution at the oil terminal in 
that port.  DPI's view is that if there is a stable 
competitive service provider within a short distance 
from the East-West shipping route, there would be strong 
potential for use of Djibouti for transshipment 
activities from Dubai.  This possibility can provide a 
large potential economic benefit for Djibouti. 
Han-Padron brought TSG, a free-zone specialist based in 
Washington DC, Black & Veech, to look at water and 
electricity, and Mercator out of Tacoma, Washington to 
look at the marketing forecast.  DPI said it is very 
interested in working with the three American companies 
on the Doraleh project. 
 
NEED FOR QUICK TDA ACTION 
------------------------- 
5. (SBU) DPI mentioned one caveat: if the decision by 
USTDA to fund the feasibility study does not come 
quickly, DPI will have to look elsewhere immediately 
for financing.  It is under pressure from the 
Government of Djibouti to move forward.  The estimated 
cost of the project, from preliminary studies, is $300 
million.  This amount would rise to $750 million if 
the free-zone, water and electricity were added. 
Han-Padron will study the costs, and pros and cons of 
the project and whether the move to Doraleh will be 
financially and economically beneficial.  DPI is 
confident that over the lifetime of the project, a 
good return on investment is likely based on similar 
experiences in India and Romania.  The DPI official 
said the outlook is based on a project's predictions 
of minimal profit returns. 
 
ROLE FOR ENOC 
------------- 
6. (SBU) Emirates National Oil Company (ENOC) has 
contracted with the Government of Djibouti to build a 
21-tank farm at Doraleh with a capacity of 235,000 
cubic meters.  These tanks will be made available by 
ENOC for commercial leasing.  DPI addressed the concern 
expressed by oil companies currently in Djibouti, that 
the ENOC contract was a move to push them out of the 
Djiboutian market.  DPI clarified that these companies 
will have to lease a tank from ENOC and relocate to 
Doraleh if they choose to continue to do business in 
Djibouti.  The amount of pollution caused by existing 
tanks cannot be sustained, DPI said.  DPI indicated that 
the possibility of increased transshipment could allow 
the Djiboutian market to hold multiple competitors and 
emphasized that ENOC is not going to take existing 
business from others but will bring in new business. 
The oil farm project is set to go operational May 31, 
2005. 
 
THE LABOR QUESTION AND THE FUTURE 
--------------------------------- 
7. (SBU) Addressing the issue of employment and finding 
necessary skilled labor, DPI said the Master Plan will 
provide answers to these issues.  It is clear, DPI said, 
that a large number of skilled workers would need to be 
brought in for the construction of the facility.  DPI 
is also interested in promoting entrepreneurship in 
Djibouti and is looking to find seed projects to fund 
that would create business opportunities.  These 
businesses would then be encouraged to seek contracts 
with the port. 
 
8. (SBU) DPI said for the duration of the construction 
(15 months) it would like to have two Han-Padron 
associates on the ground in Djibouti to provide 
independent supervision.  The representatives hoped 
that, once they had procured office space and were set 
up, the Ambassador and the Embassy would stay in close 
contact.  Embassy pledged to do so. 
RAGSDALE