DP WORLD CEO BULLISH ON DJIBOUTI INVESTMENTS

UNCLAS SECTION 01 OF 02 DJIBOUTI 000924 SENSITIVE SIPDIS DEPARTMENT FOR AF/E AND EEB LONDON, PARIS FOR AFRICA WATCHER CJTF-HOA FOR POLAD E.O. 12958: N/A TAGS: ECON EINV EWWT PHSA PREL KCOR DJ XA SUBJECT: DP WORLD CEO BULLISH ON DJIBOUTI INVESTMENTS REF: DJIBOUTI 893 DJIBOUTI 00000924 001.2 OF 002 ¶1. (U) SUMMARY. In a recent meeting with the Ambassador, Dubai Ports World (DP World) CEO Mohammad Sharaf outlined DP World's growing investments in Djibouti and throughout the region. Sharaf said that the multimillion-dollar Doraleh Port project was on track to receive its first ships in December, and to more than double container volume to 720,000 units in 2009. Djibouti will then have the most technically sophisticated port in East Africa, Sharaf said. He praised the GODJ's openness to investment, and called Djibouti the "cleanest country in Africa" in terms of absence of corruption. On security, Sharaf said that DP World was generally pleased with Djibouti's stability, and expressed concern that overly nervous security ratings were unnecessarily driving up shipping insurance rates. END SUMMARY. ¶2. (U) Dubai Ports World (DP World) CEO Sharaf and his team of nine visiting and resident DP World officials paid a courtesy call on the Ambassador November 13. Sharaf chronicled DP World's growing operations in Djibouti, from its small initial interest in the Port of Djibouti, to its current status as the largest source of foreign direct investment (FDI) in the country. DP World has invested in Djibouti's port, airport, customs service, and premier luxury hotel, and has previously estimated its total investment in Djibouti at $800 million to $1 billion. -------------- WAR RISK AND INSURANCE -------------- ¶3. (SBU) The Ambassador outlined USG programs contributing to Djibouti's increased port and maritime security, and emphasized the USG's shared interest with DP World in keeping Djibouti and its port secure and open. Sharaf agreed with the Ambassador that Djibouti provided a pocket of political and economic stability in a troubled region. While acknowledging DP World's ongoing security concerns about piracy off the coast of Somalia, Sharaf said that DP World considered Djibouti a safe place to operate. Consequently, he said that DP World had been working for over two years to have Djibouti removed from the war risk list of Lloyd's of London's Joint War Committee (JWC). Sharaf said that the JWC's rating for Djibouti was leading to significantly higher insurance costs for shippers--up to $12,000 more per ship. He said that DP World was concerned that this premium was impacting business, and taking a toll on the Djiboutian economy. Given the presence of French and U.S. forces in Djibouti, Sharaf said that DP World had already asked France to work with the European Union to influence the JWC rating. Likewise, Sharaf asked the Ambassador if the USG might be able to weigh in on this question, saying that the JWC "does listen, but needs to be told." -------------- DORALEH PORT: ON TRACK -------------- ¶4. (U) Sharaf and Port of Djibouti Director-General Jerome Oliveira confirmed that the new Port of Doraleh was on track for a "soft opening" in mid-December. With its major equipment already in place, Doraleh will be able to receive a few debut visits by December 10, to coincide with DP World's simultaneous hosting of the 7th Pan African Ports Cooperation Conference, the International Association of Ports and Harbors Africa-Europe Regional Group Meeting, the 34th Port Management Association of Eastern and Southern Africa Board and Council meetings, and the Cruise Indian Ocean Association Board Meeting. However, Doraleh Port will not open officially until mid-to-late January 2009, and construction will continue until July 2009. Doraleh Port will feature 650 meters of quay and an 18-meter draft. According to Sharaf, it will be the deepest port in the Red Sea, and the most technically sophisticated terminal in East Africa. Oliveira said that with Doraleh, Djibouti hopes to more than double its container count, from 350,000 expected twenty-foot equivalent units (TEUs) in 2008, to 720,000 TEUs expected in ¶2009. Doraleh Port will eventually be able to handle 1.2 million TEUs, Oliveira noted, as Sharaf commented that "DP World believes in creating capacity before demand." DJIBOUTI 00000924 002.2 OF 002 -------------- CONTINUED INTEREST IN AFRICA -------------- ¶5. (SBU) Sharaf noted that DP World continued to invest heavily in African ports, since "growth was in this part of the world." Furthermore, Sharaf said, DP World's vision was not solely to establish Djibouti and other African ports as transshipment hubs. Calling the benefits of transshipment "negligible to the people," Sharaf said that the end goal was for the goods entering Djibouti's port to be used in the region. Sharaf said that DP World continues discussions with the Djiboutians, Ethiopians, and the European Union to improve and expand the existing regional road and rail networks. Although he noted that an improved Djibouti-Ethiopia rail line would offer obvious long-term economic advantages, and might help avert the potential "environmental disaster" of large amounts of oil being trucked from Djibouti to landlocked Ethiopia overland, Sharaf reported that the governments of Djibouti and Ethiopia "did not agree" on a myriad of railroad issues, such as location, narrow gauge vs. regular gauge, etc. -------------- DJIBOUTI: CLEANEST COUNTRY IN AFRICA -------------- ¶6. (SBU) Sharaf praised President Guelleh, whom he had met with earlier that morning, for "showing and proving his commitment" to DP World. Sharaf said that DP World had found Djiboutians to be talented and trainable workers, and, in terms of relative lack of corruption, called Djibouti the "cleanest country in Africa." He also highlighted DP World's role in improving transparency at the Port, citing the 40% uptick in customs revenue following DP World's takeover of the management of the Djibouti customs service. While generally positive about the GODJ's policy decisions, Sharaf said he thought the GODJ had made the "wrong decision" to impose a 7% VAT beginning January 1, 2009 (reftel). ¶7. (SBU) COMMENT. CEO Sharaf was positive about DP World's current Djibouti projects, enthusiastic on the GODJ's general attitude and commitment, and optimistic in outlook for future DP World investments in Djibouti. While there are indications of some DP World-GODJ cleavages on the ground over investment in the airport (septel) and port tariff rates, overall DP World-GODJ understanding seems to remain strong. We would welcome recommendations from the Department and Embassy London on how to engage Lloyd's and other insurers about DP World's concern that war risk assessments for Djibouti are unduly negative. END COMMENT. SWAN