FRENCH FIRM PROJECT TO REHAB BERBERA

UNCLAS SECTION 01 OF 02 ADDIS ABABA 002285

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON PREL SO ET
SUBJECT: FRENCH FIRM PROJECT TO REHAB BERBERA


1. (SBU) At a September 16 dinner organized by the French
Ambassador, representatives of the French firm Bollore Group
briefed the British, EU, and U.S. heads of mission on a
proposal to rehabilitate and operate the port of Berbera in
Somaliland. The Bollore Group representatives reported that
the proposal had been in development for months, and that a
draft of their final proposal had been presented to
Somaliland President H.E. Dahir Rayaale Kahin earlier that
day. The company representatives and the French Ambassador
also indicated that the proposal has the firm backing of the
Ethiopian government, including PM Meles.


2. (SBU) In brief, the Bollore Group proposes substantial
investment to rehabilitate Berbera,s port infrastructure
including quays, storage, equipment, and organizational
overhead and systems, with subsequent operations of the port
to be handled by a new company with equity shares held by the
Bollore Group, the Somaliland government through the Berbera
Port Authority, and the Ethiopian government. While the
company representatives were vague regarding specific
shareholding arrangements, they indicated that the Bollore
Group would hold a sufficient percentage as to assure
management control and sound commercial practices. (Comment:
The implication of the presentation was that negotiations
remained regarding specific share interests. End comment.)
The company indicated that their business plan was based on a
goal of attracting 30 percent of the traffic in the area over
10 years, primarily consisting of imports to Ethiopia with
some export traffic, in direct competition to the area,s
current primary port in Djibouti. The Bollore Group already
operates or supports a number of African ports, and through
the new Berbera port company would help facilitate customs
and transit procedures in Berbera and Ethiopia, the latter
with support of a &dry port8 facility to be built at or
near the border. As well, the Bollore Group will help
develop a commercial and marketing strategy for the port and
transit corridor.


3. (SBU) In response to questions, the company
representatives were very firm that insurance rates had
already been secured through Lloyds that would provide
adequate coverage at competitive rates, and they appeared
confident that they would be able to match or beat Djibouti
port rates and services relative to Ethiopian traffic. Among
other items, they noted a commitment to provide priority
berthing to respond to Ethiopian Shipping Lines (a
state-owned enterprise) recommendations to ensure good
Ethiopian shipping services.


4. (SBU) Discussions suggested the two major risk
considerations for the Bollore Group were adequate security
conditions to be provided to the port, apparently largely to
be supplied by the Somaliland government, and the road
running to the Ethiopian border. The Bollore representatives
reported they had undertaken an assessment of the road, and
it would clearly need upgrading and reinforcement to handle
effectively the anticipated traffic loads. Development of
the road was not included in the Bollore proposal, with the
suggestion that the Group was looking to potential donor
funding, specifically European Union financing, for this
project.


5. (SBU) The Bollore Group's proposals were supported by
extensive documentation and plans. The group reported strong
support in Somaliland and Addis Ababa, and they appealed for
general support for the project by European and American
governments.


6. (SBU) Comment: Obviously the idea of a viable second
ocean port outlet would be appealing to the GOE. Enthusiasm
in Addis for the project would be fairly easy to generate,
particularly if such support came at low financial or other
risk to the GOE, which would seem to be the case. Likewise,
if successful the port operation would almost certainly
become the primary source of revenue to the Somaliland
government, presumably with attendant support from that
quarter. It is unclear what significant commercial
arrangements would remain to be negotiated beyond the
specific share composition of the new port operating company,
but the Bollore company representatives did not appear
particularly concerned on that score. The major remaining
variables clearly center on minimally acceptable security
conditions, and the corridor road development. In fact, the

ADDIS ABAB 00002285 002 OF 002


Managing Director of Ethiopian Shipping Lines recently
expressed concerns about these two issues to Embassy
officers. If the latter is assured by the EU and/or other
donors, the major remaining factor would seem to be an
assessment of security conditions. The Bollore Group reps
indicated the Group is no stranger to questionable operating
environments in Africa, including security issues, but the
Group obviously still is keeping an eye on this area. No
specific requests were addressed to the U.S. government
during the presentation, although EU support for the road,
and active British support were clearly desired. End
comment.
MEECE