Identifier
Created
Classification
Origin
09MONROVIA479
2009-07-06 15:10:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Monrovia
Cable title:  

LIBERIA INKS MORE TRANSPARENT DEAL FOR SHIP REGISTRY

Tags:  ECON EWWT EINV LI 
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VZCZCXRO9499
RR RUEHMA RUEHPA
DE RUEHMV #0479 1871510
ZNR UUUUU ZZH
R 061510Z JUL 09
FM AMEMBASSY MONROVIA
TO RUEHC/SECSTATE WASHDC 1141
INFO RUEHZK/ECOWAS COLLECTIVE
RUEATRA/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAWJB/DEPARTMENT OF JUSTICE WASHDC 0018
RHEHAAA/NSC WASHDC
UNCLAS MONROVIA 000479 

SENSITIVE
SIPDIS

E.O.12958: N/A
TAGS: ECON EWWT EINV LI
SUBJECT: LIBERIA INKS MORE TRANSPARENT DEAL FOR SHIP REGISTRY

REF A: 08 MONROVIA 751
REF B: MONROVIA 70

UNCLAS MONROVIA 000479

SENSITIVE
SIPDIS

E.O.12958: N/A
TAGS: ECON EWWT EINV LI
SUBJECT: LIBERIA INKS MORE TRANSPARENT DEAL FOR SHIP REGISTRY

REF A: 08 MONROVIA 751
REF B: MONROVIA 70


1. SUMMARY: The Liberian Ship and Corporate Registry (LISCR) signed
a new 10-year deal with the GOL June 30 to manage the country's
lucrative "flags of convenience" business. Weary from years of
haggling with the Bureau of Maritime Affairs (BMA) over control of
revenues, and spurned by specious allegations of corruption, LISCR
CEO Yoram Cohen insisted on a simplified revenue sharing agreement
that ensures all future funds bypass the BMA and are deposited
directly into the coffers of the Central Bank of Liberia. END
SUMMARY.


2. Cohen met June 30 with the Ambassador, hours after the conclusion
of protracted negotiations with the GOL, to share the details of
LISCR's new 10-year contract to manage Liberia's ship registry.
According to the agreement, the GOL will receive two-thirds of
revenue and LISCR will retain one-third, from which it will pay
operating costs and International Maritime Organization dues. In a
departure from the past, when the BMA enjoyed extra-budgetary
authority for all proceeds from the ship registry, funneling it to
former President Charles Taylor and enriching its commissioners,
LISCR now will remit all GOL revenues directly to the Central Bank.



3. (SBU) Cohen said he hoped to accomplish three things with the new
contract: insulate LISCR from future accusations of corruption while
sidelining the BMA; pre-empt politically-motivated charges that
LISCR enjoys an exploitative share of revenues from the ship
registry; and guard against frivolous lawsuits from any future
Liberian government.


4. (SBU) Evincing a distrust of both President Ellen Johnson Sirleaf
and BMA Commissioner Binyah Kesselly, Cohen said he wished to avoid
the repetition of scandals that plagued LISCR and the BMA over the
past year. In August 2008, e-mails emerged claiming LISCR had
bribed government officials in order to maintain the ship registry
(ref A). Although the GOL later determined the e-mails were
fraudulent, Cohen resented the slight to his reputation and wants to
extract LISCR from any future political tug-of-war over profits from
the ship registry. In 2008, LISCR disbursed $20.8 million to BMA,
but the BMA, as a "self-funded" entity separate from the GOL's
direct revenue streams, sent only $14.6 million to the CBL. The
remainder funded legitimate training initiatives and security
upgrades, but also subsidized travel and salary expenses (reported
to be exorbitant) that remain hidden from the public (ref B).


5. (SBU) Cohen believes the GOL will receive more revenue from the
new contract. But if they do not, he was careful to add, the
contract's simplicity, and the fact that Liberia bears no risk or
cost burden, should forestall charges that LISCR retains an
unwarranted portion of the proceeds. In exchange for a greater
share of revenues from the ship registry, the GOL agreed to reduce
its cut from the offshore corporate registry, an ancillary business
that LISCR also manages, from 80 to 67%. However, he thinks the
trade-off will prove no great sacrifice for Liberia: the ship
registry continues to grow while offshore banking is unlikely to do
the same, given President Sirleaf's distaste for offshore banking as
a form of tax evasion, and Liberia's imperfect reputation with
international investors.


6. (SBU) Although Cohen remains optimistic that President Sirleaf
will be re-elected in 2011, he insisted upon safeguards in the
contract against political risk. A new government cannot rescind
the contract without arbitration in the United States, and the GOL
must pay LISCR $10 million in the event of a lawsuit that U.S.
courts later deem frivolous.


7. (SBU) COMMENT: The BMA's financial independence may not be as
unambiguously sinister as Cohen suggests. With ample funds,
Kesselly has overhauled a once-languishing agency, meeting
International Ship and Port Facility Security Code requirements, and
moving to re-open a Liberian Maritime Training Institute. However,
Kesselly came under intense media scrutiny in June, when reports
surfaced that he granted himself a $240,000 annual salary from BMA,
received an additional $180,000 from LISCR, and racked up $500,000
in travel expenses. Although he denied the claims, he refused to
produce internal documents revealing his compensation. Cohen
confirmed that Kesselly's actual salary is only $180,000, which is
still quite substantial by Liberian standards. On balance, the new
contract is a positive development, which should impose fiscal
discipline upon the BMA and ensure more budgetary transparency. END
COMMENT.

THOMAS-GREENFIELD