VZCZCXRO2968
PP RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHKW RUEHLA RUEHLN RUEHLZ
RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHIK #0051/01 1771548
ZNR UUUUU ZZH
P 251548Z JUN 08
FM AMCONSUL THESSALONIKI
TO RUEHC/SECSTATE WASHDC PRIORITY 0350
INFO RUEHTH/AMEMBASSY ATHENS PRIORITY 0258
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHIK/AMCONSUL THESSALONIKI 0391

UNCLAS SECTION 01 OF 02 THESSALONIKI 000051 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EUR/SE 
 
E.O. 12958: N/A 
TAGS: ECON EINV PGOV SOCI CH HK GR
SUBJECT: DESPITE CONTINUING PROTESTS, THESSALONIKI PORT'S 
PRIVITIZATION PROCESS NEARS COMPLETION 
 
THESSALONI 00000051  001.2 OF 002 
 
 
¶1.  (SBU) SUMMARY:  A prolonged and controversial competition to 
identify a private company to upgrade and run the container 
terminal at the Port of Thessaloniki is nearing completion. 
Striking port workers have delayed the privatization process, 
which the Greek government hopes will modernize the port and 
help develop Thessaloniki as a regional trade center.  Three 
companies have submitted closed bids for the terminal, Chinese 
COSCO, Hong Kong-based Hutchison and Dubai Ports World.  With 
labor protests subsiding, Port officials expect to complete the 
review of bidder's supporting documentation, open the bids and 
select a winner as early as mid-July. Media speculate Dubai 
Ports is the favorite, while a senior Port manager told post 
Hutchison is the best candidate.  The port of Thessaloniki is 
the second largest in Greece with a market value of 354m 
($552.5m).  END SUMMARY 
 
¶2.  (SBU) After long delays and costly worker protests, the 
tender process for identifying a private company to upgrade and 
run the container terminal at the Port of Thessaloniki is 
nearing completion.  A senior Port manager told post on June 22 
that officials handling the tender are likely to finish 
reviewing supporting documentation submitted by the three 
bidders within the next two weeks, after which the actual bids 
will be opened.  The GoG hopes to announce the winning bidder by 
mid-July.  Several factors could delay the process, however, 
including lawsuits bidders might bring against the winning 
bidder.  Each of the three bidders has already accused the 
others of numerous irregularities and threatened litigation. 
 
¶3.  (U) The three remaining bidders (from the five that 
originally expressed interest in the GoG's January 2008 
international call for tenders) are:  China's COSCO Pacific; 
Hong-Kong based Hutchison Port Holdings together with Greek 
pharmaceutical group Alapis, and finally, the join venture 
between Dubai Ports World and Greece's Piraeus Bank.  The 
successful bidder will be expected to upgrade and run the 
currently state operated facilities for a set period of thirty 
(30) years.  The GoG hopes that by the end of this period, the 
port will have developed into a major regional hub. 
 
¶4.  (SBU) According to its website, China Ocean Shipping (Group) 
Company Pacific (COSCO) is a $17 billion (2007 revenues) 
corporation  that specializes in shipping and modern logistics, 
serves as a shipping agency, and provides a range of related 
services.  It operates a fleet of around 600 vessels, with a 
traffic volume of more than 300 million tons.  It is active in 
around 160 countries and employs a total of 80,000 people. 
[Note: COSCO recently won a similar bid for container terminal 
operations at Piraeus, Greece's largest port.  According to 
press reports, COSCO will pay approximately 4.3 billion euros 
for a 35 year contract to upgrade and manage the port's two main 
cargo terminals.  The GoG would prefer a different operator for 
Thessaloniki, for diversification, according to Port officials.] 
 Dubai Ports World's network of 44 terminals and 13 new 
developments covers 28 countries.  Its work force exceeds 30,000 
people.  In 2007, the company handled more than 43.3 million 
TEU.  Local media speculate that Dubai is the front-runner. 
Hutchison Port Holdings is controlled by Hong-Kong based 
Hutchison Whampoa Ltd, which is also active in, among other 
areas, energy and telecommunications.  HPH claims to be "the 
world's leading port investor, developer and operator" with 
interests in a total of 292 berths in 47 ports.  In 2007 it 
managed 47 facilities in 24 countries and handled a combined 
throughput of 66.3 million TEU worldwide. A senior Port official 
told us that based on available information the GoG would prefer 
HPH over the other bidders. 
 
¶5.  (SBU) The decision by the GoG for the long-term leasing of 
the port's cargo station has provoked strong reactions.  When 
the bill was brought before Parliament in March, the opposition 
spoke of a "scandalous give-away of national assets."  The bill 
was eventually ratified with voting in the parliament along 
straight party lines.  Trade unions have maintained strikes and 
work slowdowns for the last five months, protesting against the 
plans that they believe will require substantial lay-offs.  Port 
officials claim workers fear private management will require 
them to work more and give up under-the-table payments they 
routinely extract from port clients.  Officials say patient 
negotiations and generous concessions to workers have convinced 
a large number of workers to accept the privatization. 
Currently, the majority of dock workers say they want to resume 
their duties, but their administrative colleagues disagree and 
have prevented them from doing so. 
 
¶6.  (U) According to a survey conducted by the Northern Greece 
Chamber of Commerce, the lengthy mobilization of port workers 
has resulted in delays for 96% of businesses surveyed, lost 
clients for 52% and reduced production for 27%.  It is estimated 
 
THESSALONI 00000051  002.2 OF 002 
 
 
that financial losses for the port exceed1 million per month. 
The Federation of Industries of Northern Greece has demanded 
compensation and threatened legal action against the Port 
Authority for ineffective handling of the case. 
 
¶7.  (SBU) The port of Thessaloniki is vital to the economy of 
northern Greece and strategically linked to fast-growing markets 
in the Balkans and the wider area of the Eastern Mediterranean 
and the Black Sea.  Thessaloniki officials have long dreamed of 
reviving the city's former exalted status as a regional hub and 
"gateway to the Balkans," but port development has been hampered 
by inefficient state operation and labor unions with deeply 
entrenched interests in the status quo.  The port is a key link 
in the supply chain for U.S. and European troops in Kosovo.  At 
present, the port handles over 16,000,000 tons of cargo annually 
and 370,000 TEU containers.  Thessaloniki's port is the second 
largest in Greece, behind that of Piraeus, and has a market 
value of 354m ($552.5m.) 
 
 
¶6.  (SBU) COMMENT:  Privatization of the cargo station 
operations will represent a significant step forward in the 
modernization of vital national infrastructure and in the 
commercial development of northern Greece.  The privatization 
will also provide tangible proof of GoG determination to 
implement badly needed reforms of state operations and to shrink 
the size of the public sector despite strong opposition from 
organized labor.  While supportive of the privatization, local 
businesses are furious at the government's perceived lack of 
preparation and hasty launch of the tender process, which 
businesses blame for the robust labor protests and resulting 
commercial losses.  The losses will continue to accumulate, 
albeit at a slower rate since the first cracks in the strikers' 
front have started to appear.  The sooner the troubled process 
declares a winner, the better for all.   END COMMENT. 
YEE