C O N F I D E N T I A L SANAA 001589

SIPDIS

E.O. 12958: DECL: 06/11/2015
TAGS: PREL PGOV ECON EWWT ETRD KMCA KMPI YM ECON COM
SUBJECT: GOOD NEWS FOR YEMEN’S INVESTMENT CLIMATE: DUBAI
PORTS AWARDED ADEN TENDER

REF: A. SANAA 1338
¶B. SANAA 106

Classified By: DCM Nabeel Khoury for reasons 1.5 b and d.

¶1. (C) Summary and Comment. On June 8 the ROYG announced
Dubai Ports International (DPI) the winner of a 35-year concession to operate and develop the Aden Port and Aden Container Terminal (ACT). DPI is the world’s fifth largest port operator, managing 18 international ports and terminals worldwide. The ROYG’s choice quelled the fears of international organizations and observers that corruption and mismanagement by the High Tender Committee would result in a port operator without the ability and experience to do the
job. Although the tender process itself lacked transparency and failed to meet international standards, the fact that DPI won the contract may indicate that, at the highest levels, the ROYG is beginning to see the danger of allowing parochial interests to tank Yemen’s economicprospects. End Summary and Comment.

¶2. (U) The Aden Port and Container Terminal contract deal is worth 500 to 600 million USD, with at least a one billion USD investment by the management company. The proposals offered the following financial terms: an upfront 100 million USD payment to ROYG; and, a shared revenue stream accrued to both the winning company and the ROYG over the next 20 to 30 years. DPI will likely invest at least one billion USD in port infrastructure improvements over the coming years to
revitalize Aden Port.

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A less Than Perfect Process
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¶3. (C) John Speakman, World Bank economist and advisor to the
ROYG on this tender, reported that the ROYG ignored his advice on how to conduct a transparent tender process. The committee shared the financial terms of all the original bids with the bidders during the second round, encouraging each to resubmit their bids in light of their competitors proposals. In the final round, the choice was between DPI and Kuwait Gulf League (KGL). The parameters for assessing each tender were disclosed but their weights were not, leading some local
observers to charge that the committee purposefully obscured the decision-making matrix so that it could potentially award the contract to whichever firm offered the biggest payoffs.

¶4. (C) Both deals offered approximately the same financial terms. KGL quoted higher projected revenue to the ROYG and smaller guaranteed revenue, while DPI offered higher guaranteed revenue with lower projected revenue. While the tender process was flawed throughout, falling far short of international transparency standards, Spearman rated it as “slightly improved over previous years.”

¶5. (C) In the many months leading up to the decision, international organizations and interested observers feared corruption would ultimately determine the final outcome. The choice of an inexperienced firm would spell a major lost opportunity to improve Yemen’s failing economy, attract foreign investment, and help wean Yemen from oil dependency.

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Saleh: I Picked DPI Myself
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¶6. (C) Ambassador praised the ROYG’s decision to President Saleh on June 9, calling it a strong symbol that Yemen is serious about opening its economy to foreign investment. DPI, said Ambassador, is an excellent and experienced company with an international reputation. It is the right choice to develop the huge potential of Aden Port and the Aden Free Zone. Saleh responded that he personally had made the
decision to pick DPI.

¶7. (C) Comment: Three days prior to the announcement ceremony, Kuwait sent a royal delegation to petition President Saleh directly on behalf of KGL. Saleh reportedly told the Kuwait officials, “My hands are off this project. I,m going to let the tender committee decide on technical merits.” By his own admission, Saleh did not keep his hands
off, however, his direct intervention was, in fact, to ensure the ROYG’s choice was based on merit. A hopeful sign that Saleh is beginning to understand that the choice of Aden’s port operator should not be influenced by corruption. That the tender committee did not adopt transparency or international standards as advised by the WB, however, is yet another indicator that Yemen’s institutions remain weak and implementing important political and economic reforms is
still ultimately decided according to the President’s whims.
End Comment.
Krajeski