US embassy cable - 05SANAA1338

C O N F I D E N T I A L SECTION 01 OF 02 SANAA 001338 
 
SIPDIS 
 
PLEASE PASS TO USDOC/TYLER HOFFMAN, USTR/JASON BUNTIN 
 
E.O. 12958: DECL: 05/17/2015 
TAGS: ECON, EWWT, EINV, YM, ECON/COM 
SUBJECT: ADEN CONTAINER TERMINAL TENDER: ROYG ANGLES FOR 
MORE MONEY 
 
REF: SANAA 106 
 
Classified By: Ambassador Thomas C. Krajeski for reasons 1.4 (b) and (d 
). 
 
1. (C) Summary.  The tendering process for the Aden Container 
Terminal was delayed this month when the ROYG,s High 
Tendering Committee decided not to award the tender at the 
self-imposed deadline.  The Committee believed that the 
proposals did not apportion a high enough share of ROYG 
revenue, and asked that the companies resubmit bids by May 
18.  As part of an effort to increase the offers, the 
Committee violated international tendering norms by sharing 
details of each company,s bid with its competitors.  The 
companies have not yet submitted revised bids, but they 
remain interested in the ACT despite the setbacks.  End 
summary. 
 
2. (C) Yemen entered a new chapter in the tortuous history of 
the Aden Container Terminal (ACT) in April, when the ROYG 
High Tender Committee refused to select any of the three 
competing companies for the contract.  According to Dr. 
Mohamed Hamood Alwadan, Chairman of Aden Free Zone and a 
member of the ACT Tender Technical Committee, the Committee 
believed that bids from Kuwait and Gulf League Company, 
International Container Terminal Services Incorporated 
(ICTSI), and Dubai Ports International (DPI), all offered the 
government too small a revenue share, and decided to postpone 
an early April deadline for selecting a bid. 
 
3. (C) Alwadan reported that the ROYG's tender consultant, 
Rotterdam Management Group (RMG), proposed three options to 
resolve the stalemate: (1) Re-tender; (2) Negotiate 
individually with each bidder; or, (3) Initiate a second 
round of bidding among the three existing bidders.  The 
Tender Committee decided on the third option and sent 
notification letters to the three bidders to this effect. 
Contrary to international confidentiality norms, DPI Director 
Ganesh Raj shared that the letters addressed specific terms, 
sections, and paragraphs of other bidders, proposals. 
Alwadan confirmed this move, saying it was intended to drive 
up the ROYG,s share of revenue.  Bidders were asked to 
submit new bids by May 18. 
 
4. (C) This is but the latest in a long series of false 
starts for the ACT.  The Terminal was originally awarded in 
March 1999 to the Port of Singapore, however the ROYG 
cancelled the contract in October 2003 for reasons that 
remain unclear.  Overseas Port Management, Inc. (OPM), in 
combination with local partners, took over ACT management in 
November 2003 without a public tender.  That contract was set 
to expire in 2005.  In the wake of the 2000 USS Cole and the 
2002 V/M Limburg attacks, commercial maritime traffic to the 
Port of Aden took a dramatic downturn.  International 
observers had high hopes for the rejuvenation of Aden and 
Yemen,s economy in general through a safe and secure Aden 
Port, container terminal, and free zone.  In the past two 
years, however, corrupt tendering and mismanagement has led 
international observers and commercial interests to lower 
their expectations. 
 
5. (C) When the current tender was announced in Fall 2004, 
however, Aden still represented a significant investment 
opportunity for international companies.  Seven potential 
bidders traveled to Aden in January 2005 for a meeting with 
the tender committee, and all expressed strong interest in 
bidding.  (Note:  Other sources reported as many as fifteen 
participating companies.  End note.)  However, after studying 
the tender documents, only three of these companies submitted 
bids for the tender by the March 2 deadline.  According to 
industry and sector analysts, only two of the remaining three 
bidders (DPI and ICTSI) are well known in the international 
port and shipping management community.  According to Raj, 
the Kuwait & Gulf League Company is mainly a cargo handling 
company that has not operated any port terminals to date and 
does not have adequate machinery and equipment to operate a 
cargo terminal. 
 
6. (C) The tender committee anticipates receiving replies 
from the bidders by the end of May, intends to sign a 
contract in July, and to begin operations by October 1.  In 
the meantime, they have negotiated a contract extension with 
the current operator, OPM, until the new port operator can 
take over management.  To date, however, none of the three 
companies has met the new deadline for revised bids. 
Nonetheless, it appears that ICTSI and DPI will continue with 
their bids.  After a May 2, 2005 annual stockholder's 
meeting, ICTSI Chairman Enrique Razon told reporters that his 
company remains interested in bidding on the ACT &because of 
its outstanding location and (because) the growth prospects 
there are already strong.8 
 
7. (C) Comment.  The current delay in the ACT bidding process 
demonstrates the lack of transparency with which the ROYG 
approaches the tendering process.  For months, the ROYG has 
insisted that there were at least nine bidders, and that the 
Tendering Committee was trying to narrow the field.  Sources 
report that there were in fact only three bids (one from a 
company of questionable capacity), with most of the initial 
international interest dissipating after close examination of 
the tender documents.  Not satisfied with the ROYG's profit 
share in the proposals it did receive, the Committee revealed 
the financial terms of the competitors, bids to each other 
to pressure them to modify their original bids.  This may 
bring in quick cash for the ROYG, but could harm the ACT and 
the city of Aden in the long run.  The company most willing 
to pay the ROYG,s price is not necessarily the company best 
able to run an efficient and profitable ACT.  At the very 
least, continued delays and unorthodox procedures undermine 
faith in the process and reflect badly on Yemen,s reputation 
as a place to do business.  End comment. 
Krajeski