US embassy cable - 05SANAA1589

C O N F I D E N T I A L SANAA 001589 
 
SIPDIS 
 
E.O. 12958: DECL: 06/11/2015 
TAGS: PREL, PGOV, ECON, EWWT, ETRD, KMCA, KMPI, YM, ECON/COM 
SUBJECT: GOOD NEWS FOR YEMEN'S INVESTMENT CLIMATE: DUBAI 
PORTS AWARDED ADEN TENDER 
 
REF: A. SANAA 1338 
     B. SANAA 106 
 
Classified By: DCM Nabeel Khoury for reasons 1.5 b and d. 
 
1. (C) Summary and Comment.  On June 8 the ROYG announced 
Dubai Ports International (DPI) the winner of a 35-year 
concession to operate and develop the Aden Port and Aden 
Container Terminal (ACT).  DPI is the world's fifth largest 
port operator, managing 18 international ports and terminals 
worldwide.  The ROYG's choice quelled the fears of 
international organizations and observers that corruption and 
mismanagement by the High Tender Committee would result in a 
port operator without the ability and experience to do the 
job.  Although the tender process itself lacked transparency 
and failed to meet international standards, the fact that DPI 
won the contract may indicate that, at the highest levels, 
the ROYG is beginning to see the danger of allowing parochial 
interests to tank Yemen's economic prospects.  End Summary 
and Comment. 
 
2. (U) The Aden Port and Container Terminal contract deal is 
worth 500 to 600 million USD, with at least a one billion USD 
investment by the management company.  The proposals offered 
the following financial terms: an upfront 100 million USD 
payment to ROYG; and, a shared revenue stream accrued to both 
the winning company and the ROYG over the next 20 to 30 
years.  DPI will likely invest at least one billion USD in 
port infrastructure improvements over the coming years to 
revitalize Aden Port. 
 
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A less Than Perfect Process 
--------------------------- 
 
3. (C) John Speakman, World Bank economist and advisor to the 
ROYG on this tender, reported that the ROYG ignored his 
advice on how to conduct a transparent tender process.  The 
committee shared the financial terms of all the original bids 
with the bidders during the second round, encouraging each to 
resubmit their bids in light of their competitors  proposals. 
 In the final round, the choice was between DPI and Kuwait 
Gulf League (KGL).  The parameters for assessing each tender 
were disclosed but their weights were not, leading some local 
observers to charge that the committee purposefully obscured 
the decision-making matrix so that it could potentially award 
the contract to whichever firm offered the biggest payoffs. 
 
4. (C) Both deals offered approximately the same financial 
terms.  KGL quoted higher projected revenue to the ROYG and 
smaller guaranteed revenue, while DPI offered higher 
guaranteed revenue with lower projected revenue.  While the 
tender process was flawed throughout, falling far short of 
international transparency standards, Spearman rated it as 
"slightly improved over previous years." 
 
5. (C) In the many months leading up to the decision, 
international organizations and interested observers feared 
corruption would ultimately determine the final outcome.  The 
choice of an inexperienced firm would spell a major lost 
opportunity to improve Yemen's failing economy, attract 
foreign investment, and help wean Yemen from oil dependency. 
 
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Saleh: I Picked DPI Myself 
-------------------------- 
 
6. (C) Ambassador praised the ROYG's decision to President 
Saleh on June 9, calling it a strong symbol that Yemen is 
serious about opening its economy to foreign investment. 
DPI, said Ambassador, is an excellent and experienced company 
with an international reputation.  It is the right choice to 
develop the huge potential of Aden Port and the Aden Free 
Zone.  Saleh responded that he personally had made the 
decision to pick DPI. 
 
7. (C) Comment: Three days prior to the announcement 
ceremony, Kuwait sent a royal delegation to petition 
President Saleh directly on behalf of KGL.  Saleh reportedly 
told the Kuwait officials, "My hands are off this project. 
I,m going to let the tender committee decide on technical 
merits."  By his own admission, Saleh did not keep his hands 
off, however, his direct intervention was, in fact, to ensure 
the ROYG's choice was based on merit.  A hopeful sign that 
Saleh is beginning to understand that the choice of Aden's 
port operator should not be influenced by corruption.  That 
the tender committee did not adopt transparency or 
international standards as advised by the WB, however, is yet 
another indicator that Yemen's institutions remain weak and 
implementing important political and economic reforms is 
still ultimately decided according to the President's whims. 
End Comment. 
Krajeski