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 
 
¶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