Identifier
Created
Classification
Origin
09MONROVIA753
2009-10-14 17:10:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Monrovia
Cable title:  

DESPITE PORT AUTHORITY ROADBLOCKS, PORT REFORM CONTINUES

Tags:  ECON EWWT EAID LI 
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VZCZCXYZ0000
RR RUEHWEB

DE RUEHMV #0753/01 2871710
ZNR UUUUU ZZH
R 141710Z OCT 09
FM AMEMBASSY MONROVIA
TO RUEHC/SECSTATE WASHDC 1394
INFO RUEHZK/ECOWAS COLLECTIVE
UNCLAS MONROVIA 000753 

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EWWT EAID LI
SUBJECT: DESPITE PORT AUTHORITY ROADBLOCKS, PORT REFORM CONTINUES
APACE

REF: MONROVIA 135

UNCLAS MONROVIA 000753

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EWWT EAID LI
SUBJECT: DESPITE PORT AUTHORITY ROADBLOCKS, PORT REFORM CONTINUES
APACE

REF: MONROVIA 135


1. (SBU) SUMMARY: Internal disputes within the GOL and second
thoughts about the merits of private management at the Freeport of
Monrovia present fresh challenges for the Port Sector Reform Program
(PSRP),but are unlikely to derail a two-year process that enjoys
Presidential and unified donor support. The new leadership at the
National Port Authority (NPA) and the Bureau of Maritime Affairs
claim privatization would weaken the NPA, decrease revenue and
infringe upon Liberia's economic sovereignty, but reformers regard
such objections as the last-gasp opposition of vested interests.
International donors must reinforce the longstanding message that
privatization will unlock widespread economic growth in Liberia and
secure financing for port renovation. The abrupt failure of an
otherwise exemplary concessions process would deter future
investment and could prompt donors such as the World Bank to
withhold funds from the GOL. END SUMMARY.


2. (SBU) The World Bank, GOL, USG, and UNMIL have long regarded port
privatization as the best mechanism for attracting investment to
renovate port infrastructure in order to increase customs revenue,
lower costs and realize economic growth in an import-dependent
country. In recognition of these economic realities, all four
parties signed a memorandum of understanding in December 2007 to
create the Port Sector Reform Program (PSRP),to be housed in the
Executive Mansion. Under the aegis of the PSRP, the GOL has spent
two years screening port management companies and preparing for a
port privatization that requires the winning concessionaire to
invest $50 million to rehabilitate the Freeport of Monrovia
(reftel). Finalists APMT, Bollore, and ICTSI are expected to submit
bids for the 25-year management contract in early December. The
GOL will judge bidders based on their technical proficiency and
their proposed revenue sharing agreement. The contract will be
finalized in January with expected management transfer in July 2010
after the GOL meets conditions precedent.

--------------
Roadblocks from Vested Interests
--------------


3. (SBU) The PSRP envisions the NPA to be a landlord rather than a
port operator with direct access to customs revenues and container
fees. Our conversations with NPA Managing Director Matilda Parker,

Bureau of Maritime Affairs Commissioner and Chairman of the NPA
Board Binyah Kesselly (both of whom assumed their positions well
after the PSRP was underway),and other players suggest they are
using their influence to stall or recast port reform. Both complain
the current concession would reduce revenue to the NPA, hamper
economic growth and infringe upon Liberia's economic sovereignty.
They dismiss donors' opposing arguments, stating that the PRSP has
failed to produce compelling economic data to justify the claim that
an experienced port management company would increase container
volume and reduce expenses, generating more net revenue for the
GOL.


4. (SBU) Given that President Sirleaf continues to support port
reform, Parker and Kesselly maintain a nominal commitment to
privatization. Parker pointed to the fact that selection of a port
management firm constituted the NPA's next 90-day deliverable under
the Poverty Reduction Strategy, while Kesselly acknowledged the need
for some privatization, albeit one that offered more favorable
revenue sharing terms for the NPA.


5. (SBU) However, relations between port leadership and the PRSP
have turned acrimonious, as Port Sector Reform Secretariat Executive
Director Patrick Sendolo charges Parker and Kesselly with inaction
that approaches sabotage. For example, the NPA has yet to proceed
with conditions precedent, most notably the termination of leases on
30 warehouses within the concessionary area to make way for a future
port manager's storage needs. While Kesselly claims it cannot be
done without an Executive Order, Sendolo believes the NPA wants to
force a time-consuming process that would require a considerable
outlay of Presidential political capital. Further, Sendolo charges
Parker with quietly downplaying GOL enthusiasm for privatization
during private meetings with the three finalists, and believes she
refuses to downsize a bloated port staff because it strengthens her
support among the rank and file and makes the concession less
attractive. With both sides eager to cast aspersions, Kesselly
assured Econoff that Sendolo was a "junior employee" with no
influence over the President's thinking.

--------------
Privatization or Bust
--------------


5. (SBU) World Bank Lead Transport Specialist in Africa Gylfi
Palsson dismissed NPA grumblings and GOL infighting as "noise" that
cannot derail a privatization two years in the making. Palsson, a
veteran of numerous West African port privatizations, observed that
every port authority defends its territory jealously and imposes
roadblocks to privatization. Concessionaires will not be swayed by

this customary port authority fuss, he assured. Furthermore,
Sendolo and Palsson both insist the GOL has staked its credibility
on the transparency of this process and invested too much effort to
allow it to fail. Palsson believes the President would issue an
Executive Order cancelling port leases and endure inevitable
lawsuits if it meant saving the deal.


6. (SBU) In fact, Palsson contends that private sector enthusiasm
for the concession has exceeded his expectations, initially low due
to the relatively modest container volume at the Freeport and the
need for extensive up-front investment. All three finalists have
invested considerable time and resources in performing their own due
diligence, and he anticipates receiving at least two completed bids
in December. If NPA inaction were to undermine the concession
process, Palsson warns that the consequences would be dire. Failure
might deter future international investment. Further, he warned
that the World Bank would withhold future funding from the GOL and
predicted that the European Commission might follow suit.


7. (SBU) COMMENT: Port leadership appears to be resisting
privatization as a perceived threat to its autonomy. However, the
logic that privatization achieves better port management and
increased revenue streams cannot be ignored, and the Liberian NPA is
unlikely to reverse a lengthy track record of gross mismanagement
and corruption at the Freeport. However, given that NPA and BMA top
executives are persuasive personalities who enjoy close personal
relationships with the President, the port authority's vested
interests could still work mischief upon the privatization. Post
will continue to signal its support for the PSRP, coordinate
messages with other donors and explain the adverse consequences
should NPA reluctance derail a reform that would benefit millions.

ROBINSON