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