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