SOMALILAND-DP World Deal: A Daylight Robbery

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Somaliland's Foreign Minister and DP representative signing the draft agreement
Somaliland's Foreign Minister and DP representative signing the draft agreement
Somaliland’s Foreign Minister and DP representative signing the draft agreement

EDITORIAL

SOMALILAND-DP World Deal: A Daylight Robbery

BY GULAID DALHA


There are several important questions that need to be answered if we are going to do any justice to the analysis of the so called investment of Berbera port by DP World. The first question is why the current out-going administration is selling Berbera port without following the proper procedures such as examining the ports immediate and future needs, setting up a tender process and inviting the tenderers to submit their proposals. Moreover, it’s the government job to study the proposals closely, seeking relevant expert advice from independent consultants where it is needed. It is vital to note that in this case, the current administration did not made use of the consultants that were made available to her by the World Bank!

The second indispensable question that is on the mind of most credible pundits is why DP World would agree to invest the only port of Somaliland – a non-recognized break-away country in East Africa and risk a significant amount of money? The International Community does not recognize Somaliland as a country and hence Somaliland government cannot represent itself as country in international courts and tribunals. Would a legal agreement between the Somaliland government and DP World be binding in an international court of law? In addition, why would DP World undertake such a deal without proper financial analysis and valuation of Berbera port?

The last but and most important question that must be answered is how can Somaliland government agree to any deal with a foreign entity handing control of its crown-jewel, without proper valuation of the port? One good example that most people haven’t heard of is the amount of revenue Somaliland government currently receives from Berbera port and with the appropriate revenue projections expected in relation to the recent agreement between Ethiopia and Somaliland.

A quick google search of the latest Somaliland budget (2016) easily puts things in perspective. The Finance Ministry in its 2016 budget projections expects to receive 16.6 million USD in the 2016-2017 fiscal year. Given that the DP World investment was only at most 442 million USD over 30 years, then everyone can easily show that by simply dividing 442 million over 30 years, we get a yearly investment of 14.7 million which is less than the amount already received by the Finance Ministry. Furthermore, soon the Ethiopians will start importing their goods from Berbera which will significantly increase the ports revenue and would make DP Worlds current proposal seem even more shocking and insincere.

Most people were told that the deal is an investment and DP World is going to create jobs and improve the ports infrastructure. However, DP World is signing up to manage the port and our government would allow DP to keep more or less 90% of the port revenue while cutting jobs to minimize expenses.

Let us now take a look the sinister agenda behind the deal.

How DP World Operates and Wins Concession Contracts

 

To summarize the play by play strategy of DP World:

  • You will hear something like that they will invest about $442 million over 30 years to win the concession of the port.
  • However, investing $ 442 million over 30 years is $13.7 per year. One can point out that the Somaliland Ministry of Finance receives over $16.6 million per year from the Berbera Port Authority according to the 2016 budget. Hence, this investment is significantly lower than what the treasury receives.
  • This might not make any sense to anyone with a sane mind. However it will make sense when the real agenda is uncovered.
  • First there will not be any investment at all, only about $15 million bribe money is intended to win for the concession and smooth things with some of the current out going ministers.
  • Establish a company that manages the port and give shares to certain important individuals and to Somaliland government.
  • This company has the right to keep around 90% of the port revenue, the right to hire and fire employees and has only to pay for Somaliland government 10% of the revenue and about $ 2 million fixed amount per year.
  • Instead of investing money the company now has 90% of the port money in which it will use to invest in simple projects, give it to its shareholders and keep certain powerful officers happy while not spending a penny of its own money.

Proof of the Strategy

 

DP World has a proven track record of doing shady deals with corrupt officials in order to win concession deals/contracts to manage ports. There has been several notable countries such as Yemen, Senegal, and Djibouti which accused DP World of corruption and which have kicked them out of their countries within the first few years into the concessionary contract.

In 2007, the Senegalese government signed a 25-year old concession agreement with DP World to manage its container terminal at Dakar Port. Nevertheless, after corruption allegations from the Senegalese government, DP World agreed to pay 48 million USD in June 2013 to compensate for the remaining balance of the concessionary contract [1]. The Senegalese Justice Ministry accused DP World of having connived with Karim Wade, the son to ex-Senegalese president, who is being investigated over illegally acquired wealth estimated to around 1 billion USD. DP World won its concessionary contract when Karim Wade was a minister of the Senegalese government. Karim Wade was accused by the anti-corruption prosecutor of owning the DP World subsidiary in Senegal established to manage the container terminal.

In a similar case, during September 2012, DP World agreed with Yemeni government to divert its entire interest in Dubai and Aden Ports Corporation (DAPC) to Yemen Gulf of Aden Ports Corporation (YGAPC). Under the agreement, DP World has ceased its management of Aden Container Terminal (ACT) and Ma’alla Container Terminal at the Port of Aden with immediate effect and Aden Port Development Company (APDC), a wholly owned subsidiary of YGAPC, took full responsibility for the port’s operations [2]. The Yemeni transport Minister Waed Abdullah Bathib and the country’s anti-corruption body claimed that DP World has not fulfilled its contractual obligations under the 30 year management contract signed in 2008. The Yemeni transport Minister Waed Abdullah Bathib told Reuters in early 2012 that the company had missed the target of raising container capacity to 900,000 20-foot equivalent container units by the end of 2011, and had also failed to build and provide infrastructure as specified in the 2008 agreement [3].

Last but not the least, there is also much publicized court case of Djibouti vs DP world in London in which the Djibouti government has accused DP World and its former port and free-zone manager Abdourahman Boreh of embezzlement, corruption and has rescinded DP World’s contract.

Boreh was accused by the government of Djibouti of corruption during his time as head of DPFZA when DP World was awarded the concession to run the terminal. The government rescinded the 20-year concession agreement amid claims the signed deal favored the Dubai port operator and went to court to seek damages as well as confirmation of the annulment of the contract [4].

During the cross-examination Borreh conceded and did not dispute many important disclosers of contracts in which the judge described them as “sham”. Here are some of the allegations and bribes that Borreh accepted:

  • The Djibouti government’s barrister accused Borreh of procuring himself improper payments, specifically Mr Borreh admitted that he did receive an annual $500,000 consultancy fee from DP World through an off-shore company he controlled called S-flame.
  • Borreh also conceded that DP World paid these amount through his Swiss accounts and the money transfer documents were presented in court.
  • Mr Borreh also admitted receiving $1.3 million payment as a security service contract from DP to his off-shore company S-flame.
  • Similarly Borreh admitted that he secured himself 15% share of DP’s Djibouti subsidiary called DP Djibouti without informing the president of Djibouti. Moreover, in Doraleh container terminal did not dispute that he received indirect 5% share first by paying $1 and then a massive discount at the market price. In addition Mr Borreh also expected to receive 5% of the dividends and 15% of DP’s world management fee for the duration of 50 year agreement.

References

[1] http://news.xinhuanet.com/english/business/2013-06/10/c_132446238.htm

[2] http://www.worldcargonews.com/htm/w20120920.361412.htm

[3] http://www.reuters.com/article/yemen-port-dpworld-idUSL5E8JQ2ZX20120826

[4] http://www.joc.com/port-news/terminal-operators/dp-world/djiboutis-doraleh-container-terminal-benefits-domestic-consumption_20160307.html

 

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