US embassy cable - 04DJIBOUTI874

C O N F I D E N T I A L SECTION 01 OF 02 DJIBOUTI 000874 
 
SIPDIS 
 
E.O. 12958: DECL: 06/23/2014 
TAGS: PREL, PGOV, EINV, ECON, EPET, DJ 
SUBJECT: U.S. COMPANY BLACK AND VEATCH ON DORALEH PORT AND 
DJIBOUTIAN DEVELOPMENT 
 
REF: DJIBOUTI 731 
 
Classified By: Ambassador Marguerita D. Ragsdale. 
Reasons 1.4 (b) and (d). 
 
1. (U) SUMMARY: Ambassador and Pol/Econ met 22 June, with 
visiting Black & Veatch Corporation Director of International 
Consulting Engineering Services, Shahid Qadri, visiting Han 
Padron Associates Engineers Project Manager, Tony Bryan, and 
Director General of Djibouti International Airport, David 
Hawker, also an employee of Dubai Ports International, to 
discuss Black & Veatch's involvement in Djibouti.  Black & 
Veatch, provides engineering consulting services to port 
projects throughout the world.  It will focus on the water 
and electricity supply for Djibouti's new port facility at 
Doraleh.  The meeting covered prospects for success of the 
Doraleh project and its impact on different sectors of 
Djibouti's economy. END SUMMARY. 
 
2. (U) Black & Veatch's (BV) mission for this trip to 
Djibouti is an initial survey of Djibouti's port facilities 
in preparation for the master plan for Dubai Ports 
International that BV is developing on the country's 
transportation sector, including its marine and air ports, in 
cooperation with Han Padron (HP), a New York based marine 
engineering company.  BV is also assessing Djibouti's 
infrastructure needs and available resources, as well as how 
BV might provide support.  Qadri agreed that most companies 
are not in the business of charity, but what they can do 
often enhances development goals and opens doors for other 
investment opportunities.  BV's role in HP's feasibility 
study is covering all bases relating to the Doraleh port, 
although its expertise and focus lies in water and 
electricity.  The main question BV will answer is whether 
these two utilities should be supplied from existing units or 
whether new units should be constructed. 
 
3. (C) HP representative, Tony Bryan, said he understood 
Electricite de Djibouti (EDD) is not planning to provide 
electrical power to the new Doraleh port.  In meetings with 
EDD, EDD indicated its hope that Doraleh would generate its 
own power.  EDD also said it would be receptive to a buy-back 
agreement should Doraleh choose to build a generator that 
could produce surplus energy.  The surplus energy generated 
would then be sold to EDD.  The comment was made that EDD 
projected a three percent growth rate for Djibouti, but had 
not yet created a plan to adapt production to the country's 
future population or economic growth requirements. 
 
4. (C) Qadri stated that BV's mission is not to invest, but 
to research the necessary information to enable investors to 
make the best decisions about putting their dollars to 
optimum use.  This information will be placed in the HP 
transportation sector/port master plan.  BV also hopes the 
master plan will identify commercial options for other 
companies.  BV and HP both commented that it was not 
necessary for the Port of Doraleh to pay the full cost of the 
investment needed to bring it to fruition.  Rather, it was 
preferable to offer up investment opportunities to work in 
cooperation with the Port of Doraleh.  Qadri commented that 
while investment potentials existed, the high cost of energy 
may be a deterrent. 
 
5. (C) Ambassador noted that the three resident oil companies 
- Mobil, Shell and Total - were being required by the 
government of Djibouti to move to Doraleh. (See Reftel) She 
queried the representatives on whether, in their opinion, the 
storage tank rental arrangement with Emirates National Oil 
Company (ENOC) envisioned in the move might result in lower 
fuel costs.  Bryan responded that the situation in Djibouti 
was akin to a can of worms and it might be better to start 
over with a new arrangement than try to untangle and sort out 
the current mess.  Hawker added that the head of ENOC had 
told him that he had been pressuring the head offices of all 
three companies to get in on the Doraleh project for the past 
three years, but all had declined.  Hawker said this may have 
been because the companies didn't think the project would 
succeed.  However, now that the project is well underway and 
going well, he continued, Shell Aviation has apparently 
shown interest in getting in on it.  Dubai Ports 
International (DPI), which manages the current port and 
airport, has announced that it will construct a new airport 
terminal to service Doraleh. 
 
6. (C) On whether the new port would succeed, attendees of 
the meeting seemed confident.  However, all agreed with 
Ambassador that regional conflict might be the potentially 
disrupting factor.  The question of how much it will improve 
the Djiboutian economic situation is still undetermined. 
Bryan commented that the current structure of employment in 
Djibouti was poor and that over-employment of people was 
endemic to the system.  He continued that the new port will 
create a higher level of employment, giving those already 
highly-skilled a greater choice.  This in turn would lead to 
the creation of lower level jobs.  However, Bryan said, for a 
real change in the high unemployment level in Djibouti, 
matters may worsen before getting better.  He said the 
Djiboutian economy will not pick up drastically until there 
is a period of vast unemployment, where the social welfare 
structure of the family can no longer provide for those 
unemployed.  Another key to improving the economic situation 
is the lowering of salaries and exchange rates, two 
recommendations also made by the IMF and World Bank. 
However, the comment was made that the Djiboutian government 
may not be concerned about improvement in these areas as long 
as donor money is coming in.  Qadri opined that the 
Government of Djibouti was now opting to try the 
economic/commercial development approach, which would 
eventually accomplish the same goals. 
RAGSDALE