VZCZCXRO5628
RR RUEHDE RUEHROV RUEHTRO
DE RUEHDJ #0924/01 3251154
ZNR UUUUU ZZH
R 201154Z NOV 08
FM AMEMBASSY DJIBOUTI
TO RUEHC/SECSTATE WASHDC 9724
INFO RUCNIAD/IGAD COLLECTIVE
RUCNSOM/SOMALIA COLLECTIVE
RUEHAD/AMEMBASSY ABU DHABI 0198
RUEHDE/AMCONSUL DUBAI 0186
RHMFIUU/CJTF HOA
RUEHLMC/MILLENNIUM CHALLENGE CORPORATION WASHINGTON DC

UNCLAS SECTION 01 OF 02 DJIBOUTI 000924 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR AF/E AND EEB 
LONDON, PARIS FOR AFRICA WATCHER 
CJTF-HOA FOR POLAD 
 
E.O. 12958: N/A 
TAGS: ECON EINV EWWT PHSA PREL KCOR DJ XA
SUBJECT: DP WORLD CEO BULLISH ON DJIBOUTI INVESTMENTS 
 
REF: DJIBOUTI 893 
 
DJIBOUTI 00000924  001.2 OF 002 
 
 
¶1. (U) SUMMARY.  In a recent meeting with the Ambassador, 
Dubai Ports World (DP World) CEO Mohammad Sharaf outlined DP 
World's growing investments in Djibouti and throughout the 
region.  Sharaf said that the multimillion-dollar Doraleh 
Port project was on track to receive its first ships in 
December, and to more than double container volume to 720,000 
units in 2009.  Djibouti will then have the most technically 
sophisticated port in East Africa, Sharaf said.  He praised 
the GODJ's openness to investment, and called Djibouti the 
"cleanest country in Africa" in terms of absence of 
corruption.  On security, Sharaf said that DP World was 
generally pleased with Djibouti's stability, and expressed 
concern that overly nervous security ratings were 
unnecessarily driving up shipping insurance rates.  END 
SUMMARY. 
 
¶2. (U) Dubai Ports World (DP World) CEO Sharaf and his team 
of nine visiting and resident DP World officials paid a 
courtesy call on the Ambassador November 13.  Sharaf 
chronicled DP World's growing operations in Djibouti, from 
its small initial interest in the Port of Djibouti, to its 
current status as the largest source of foreign direct 
investment (FDI) in the country.  DP World has invested in 
Djibouti's port, airport, customs service, and premier luxury 
hotel, and has previously estimated its total investment in 
Djibouti at $800 million to $1 billion. 
 
---------------------- 
WAR RISK AND INSURANCE 
---------------------- 
 
¶3. (SBU) The Ambassador outlined USG programs contributing to 
Djibouti's increased port and maritime security, and 
emphasized the USG's shared interest with DP World in keeping 
Djibouti and its port secure and open.  Sharaf agreed with 
the Ambassador that Djibouti provided a pocket of political 
and economic stability in a troubled region.  While 
acknowledging DP World's ongoing security concerns about 
piracy off the coast of Somalia, Sharaf said that DP World 
considered Djibouti a safe place to operate.  Consequently, 
he said that DP World had been working for over two years to 
have Djibouti removed from the war risk list of Lloyd's of 
London's Joint War Committee (JWC).  Sharaf said that the 
JWC's rating for Djibouti was leading to significantly higher 
insurance costs for shippers--up  to $12,000 more per ship. 
He said that DP World was concerned that this premium was 
impacting business, and taking a toll on the Djiboutian 
economy.  Given the presence of French and U.S. forces in 
Djibouti, Sharaf said that DP World had already asked France 
to work with the European Union to influence the JWC rating. 
Likewise, Sharaf asked the Ambassador if the USG might be 
able to weigh in on this question, saying that the JWC "does 
listen, but needs to be told." 
 
---------------------- 
DORALEH PORT: ON TRACK 
---------------------- 
 
¶4. (U) Sharaf and Port of Djibouti Director-General Jerome 
Oliveira confirmed that the new Port of Doraleh was on track 
for a "soft opening" in mid-December.  With its major 
equipment already in place, Doraleh will be able to receive a 
few debut visits by December 10, to coincide with DP World's 
simultaneous hosting of the 7th Pan African Ports Cooperation 
Conference, the International Association of Ports and 
Harbors Africa-Europe Regional Group Meeting, the 34th Port 
Management Association of Eastern and Southern Africa Board 
and Council meetings, and the Cruise Indian Ocean Association 
Board Meeting.  However, Doraleh Port will not open 
officially until mid-to-late January 2009, and construction 
will continue until July 2009.  Doraleh Port will feature 650 
meters of quay and an 18-meter draft.  According to Sharaf, 
it will be the deepest port in the Red Sea, and the most 
technically sophisticated terminal in East Africa.  Oliveira 
said that with Doraleh, Djibouti hopes to more than double 
its container count, from 350,000 expected twenty-foot 
equivalent units (TEUs) in 2008, to 720,000 TEUs expected in 
¶2009.  Doraleh Port will eventually be able to handle 1.2 
million TEUs, Oliveira noted, as Sharaf commented that "DP 
World believes in creating capacity before demand." 
 
DJIBOUTI 00000924  002.2 OF 002 
 
 
 
---------------------------- 
CONTINUED INTEREST IN AFRICA 
---------------------------- 
 
¶5. (SBU) Sharaf noted that DP World continued to invest 
heavily in African ports, since "growth was in this part of 
the world."  Furthermore, Sharaf said, DP World's vision was 
not solely to establish Djibouti and other African ports as 
transshipment hubs.  Calling the benefits of transshipment 
"negligible to the people," Sharaf said that the end goal was 
for the goods entering Djibouti's port to be used in the 
region.  Sharaf said that DP World continues discussions with 
the Djiboutians, Ethiopians, and the European Union to 
improve and expand the existing regional road and rail 
networks.  Although he noted that an improved 
Djibouti-Ethiopia rail line would offer obvious long-term 
economic advantages, and might help avert the potential 
"environmental disaster" of large amounts of oil being 
trucked from Djibouti to landlocked Ethiopia overland, Sharaf 
reported that the governments of Djibouti and Ethiopia "did 
not agree" on a myriad of railroad issues, such as location, 
narrow gauge vs. regular gauge, etc. 
 
------------------------------------ 
DJIBOUTI: CLEANEST COUNTRY IN AFRICA 
------------------------------------ 
 
¶6. (SBU) Sharaf praised President Guelleh, whom he had met 
with earlier that morning, for "showing and proving his 
commitment" to DP World.  Sharaf said that DP World had found 
Djiboutians to be talented and trainable workers, and, in 
terms of relative lack of corruption, called Djibouti the 
"cleanest country in Africa."  He also highlighted DP World's 
role in improving transparency at the Port, citing the 40% 
uptick in customs revenue following DP World's takeover of 
the management of the Djibouti customs service.  While 
generally positive about the GODJ's policy decisions, Sharaf 
said he thought the GODJ had made the "wrong decision" to 
impose a 7% VAT beginning January 1, 2009 (reftel). 
 
¶7. (SBU) COMMENT.  CEO Sharaf was positive about DP World's 
current Djibouti projects, enthusiastic on the GODJ's general 
attitude and commitment, and optimistic in outlook for future 
DP World investments in Djibouti.  While there are 
indications of some DP World-GODJ cleavages on the ground 
over investment in the airport (septel) and port tariff 
rates, overall DP World-GODJ understanding seems to remain 
strong.  We would welcome recommendations from the Department 
and Embassy London on how to engage Lloyd's and other 
insurers about DP World's concern that war risk assessments 
for Djibouti are unduly negative.  END COMMENT. 
SWAN