VZCZCXRO2737
RR RUEHMA RUEHPA
DE RUEHMV #0533/01 2021734
ZNR UUUUU ZZH
R 211734Z JUL 09
FM AMEMBASSY MONROVIA
TO RUEHC/SECSTATE WASHDC 1181
INFO RUEHZK/ECOWAS COLLECTIVE
RUEHRH/AMEMBASSY RIYADH 0010

UNCLAS SECTION 01 OF 02 MONROVIA 000533 
 
SIPDIS 
 
E.O.12958: N/A 
TAGS: ECON EAID EWWT LI
SUBJECT: GOL VOWS THAT FRIVOLOUS LAWSUIT AND DEFUNCT SAUDI LOAN WILL 
NOT DERAIL MONROVIA PORT CONCESSION 
 
REF A) MONROVIA 469; B) MONROVIA 135 
 
¶1. SUMMARY: The Government of Liberia (GOL) has chosen to move 
forward with its search for a port management company to 
rehabilitate and oversee the Freeport of Monrovia.  Saudi Arabia's 
withdrawal of a highly-concessional loan for port renovations (Ref 
A), and the recent revelation of an outstanding $44 million judgment 
(Ref B) against the port may constitute setbacks, but the Port 
Sector Reform Secretariat (PSRP) believes such disappointments need 
not translate into higher port fees or derail a concession process 
that has been a model of international best practices.  The USG 
should continue to press the Saudis to renegotiate Liberia's 
outstanding debt, because the concessional loan remains the least 
expensive source of financing and would enable the GOL to 
renegotiate a concession on more favorable terms. END SUMMARY. 
 
¶2. Econoffs met July 15 with Executive Director of the Port Sector 
Reform Secretariat Patrick Sendolo to discuss the concession 
process.  On July 1, PSRP issued its long-awaited request for 
proposals for a 25-year contract to manage the Freeport of Monrovia 
(Ref B).  Three internationally-recognized bidders, APMT, Bollore 
and ICTSI, passed a rigorous pre-screening process.  Once bids are 
submitted in September, Sendolo will appoint an Inter-ministerial 
Concessions Committee, which will select a concessionaire based on 
pre-determined technical requirements, lowest cost service, and the 
most favorable profit-sharing.  Sendolo expects the National Port 
Authority (NPA) to yield port management to the winning bidder in 
early 2010, and anticipates the concessionaire will need to invest 
at least $30 million in port renovations in the first three years. 
 
¶3. Despite the PSRP's best efforts to run a methodical and 
transparent concession process, two unexpected hurdles appeared in 
the last month: a previously unknown $44 million judgment against 
the NPA, and the withdrawal of a promised $50 million loan from the 
Saudi Development Fund for port renovations. Sendolo articulated 
GOL's strategy to address these hurdles, and stressed his belief 
that the PSRP is not in danger. 
 
------------------------- 
What $44 million judgment? 
------------------------- 
 
¶4. Rumors of corruption and questionable legality plagued the 
Freeport of Monrovia management concession awarded to Global 
Security Seals (GSS) under the National Transitional Government of 
Liberia (NTGL) in August 2005. NTGL President Gyude Bryant cancelled 
the contract in December 2005, writing in a letter to GSS that "the 
justification for single-sourcing the contract was invalid and the 
contract is financially disadvantageous for Liberia." GSS pursued 
legal action against NPA claiming the contract was unjustly 
cancelled; a U.K. arbitration court awarded a $44.3 million 
settlement in May 2009 when the GOL failed to appear at a hearing in 
London.  GOL expressed surprise at the outstanding settlement and 
maintained they had no knowledge of the suit until notified by the 
Embassy on July 2 after DLA Piper, the firm representing the 
plaintiff, contacted AF/W.  (Note: Sendolo believes the fact that 
DLA Piper contacted the State Department the day after the release 
of the RFP is no coincidence.  "They understand they have a weak 
case and the odds of enforcing it are next to nil," so they 
attempted to influence the port through sabotage of the concessions 
process.  However, Sendolo's cynicism may be unwarranted as the 
damages had only been awarded on May 7. End Note.) 
 
 
¶5. Sendolo, a U.S.-trained attorney, said he had reviewed the 
arbitration documents, and was "not losing sleep"' over the matter. 
Citing the Convention on the Recognition and Enforcement of Foreign 
Arbitral Awards (the so-called New York Convention) he questioned 
the award's legitimacy and enforceability for two reasons.  First, 
DLA Piper failed to begin enforcement proceedings in Liberia, as 
required by the convention.  Second, the convention does not 
recognize the validity of contracts that are deemed contrary to 
local law, as Liberia's Public Procurement Concessions Commission 
determined the SSG contract to be. 
 
¶6. Sendolo believes all three would-be concessionaires already are 
aware of the outstanding lawsuit, but does not worry that it will 
detract from their interest in the management contract.  In fact, to 
ease the concerns of the prospective concessionaires, Sendolo 
suggested the NPA offer a letter indemnifying them against any 
settlement.  However, Vishal Gujadhur, advisor to Minister of 
Finance Augustine Ngafuan, said the MOF opposes such a letter on the 
grounds that it constitutes a contingent liability that could 
conflict with Liberia's commitment to zero borrowing under the terms 
of its Poverty Reduction and Growth Facility. 
 
¶7. The President has tapped Commissioner of the Bureau of Maritime 
Affairs, Binyah Kesselly, to oversee the GOL's resolution of the 
lawsuit and mediate between the MOF and the NPA.  The GOL also will 
retain DC-based Hogan & Hartson as its legal counsel, according to 
Gujadhur. 
 
MONROVIA 00000533  002 OF 002 
 
 
 
---------------------------------- 
Moving Ahead Without Saudi Financing 
---------------------------------- 
 
¶8. Although Sendolo expressed disappointment in the withdrawal of 
the Saudi Development Fund's $50 million concessional loan for port 
renovations, he said the dilapidated Freeport could no longer wait 
for funding that might never materialize (Ref A).  He believes the 
MOF's concern that high-quality concessionaires would lose interest 
if they were expected to renovate the port themselves appear 
unfounded; the three pre-qualifed companies continue to show 
interest and are all well respected internationally.  Additionally, 
Sendolo said concerns that the would-be concessionaire would be 
forced to increase port fees to recoup the large upfront investment 
may be overstated.  The Freeport of Monrovia imposes the lowest port 
fees in West Africa.  Even if the port management company passes 
these construction costs directly to the consumer, he estimates that 
costs per container will rise from $100 to $175, well below the 
regional average of $300.  He insisted the impact on the consumer 
would be negligible, translating into less than a 20" (twenty U.S. 
cents) increase per bag of rice.  And if an efficient concessionaire 
reduces the costs associated with the time goods currently languish 
in port, then the effect on the local price level may in fact be 
positive for consumers. 
 
¶9. If the Saudi loan does materialize during the concessions 
process, Sendolo is confident the PSRP could renegotiate the 
concession.  Given that the highly concessional loan would 
constitute cheaper credit than any financing a private company could 
attract, he suspects the contract could be renegotiated on terms 
that would be appealing to both the GOL and the concessionaire. 
 
¶10. COMMENT: To its credit, the GOL has buffered itself against 
these potential setbacks by pursuing a methodical and transparent 
concessions process that attracted only credible port management 
companies (Ref B).  The stringency of the process ensured only 
high-caliber companies with a track record in the region would be 
interested.  As a result, the three finalists likely knew of the 
lawsuit; however, the $44 million settlement will continue to loom 
overhead despite GOL's insistence of its frivolous nature.  GOL's 
claim that the lawsuit was a surprise appears more a symptom of 
internal disorder than deliberate concealment.  Without the Saudi 
loan, concessionaires will most likely be forced to increase port 
fees, which could decrease port volume or lead to higher prices for 
consumers.  Although the Freeport of Monrovia offers the lowest 
regional fees, the quality of service is also the lowest. An 
increase in port fees must be coupled with an increase in services 
to avoid a negative economic impact. 
 
THOMAS- GREENFIELD