Bruised by Cole and Limburg, Yemen Seeks New Aden Port Contractor

Bruised by Cole and Limburg, Yemen Seeks New Aden Port Contractor

Gulf States Newsletter

Yemen is poised to invite new international bidders for the contract to manage Aden’s container port from which the Singaporean-owned Yeminvest withdrew in October, bruised by the slump in traffic that followed the terrorist bombings of the USS Cole and the French tanker Limburg. Officials are now
finalising terms of reference for a new tender offer.

Their hopes of attracting a credible new operator have been raised by the decision of the container line PIL to resume calls at Aden by its deep-sea vessels on services from the Far East.

After the withdrawal of Yeminvest – 60%-owned by an offshoot of the Port of Singapore Authority (PSA) and 40% by Saudi Arabia’s Bin Mahfouz group – the government of President Ali Abdallah Saleh was forced to assume responsibility for the port.

Another Asian firm, Overseas Port Management (OPM), headed by MMJ Subramaniam has been hired to run the facility for a six-month transitional period. Subramaniam is a former PSA vice-president with past experience of Aden.

Also expected is a government decision on how the Aden Distripark industrial estate should be managed. Like the port, this is part of the Aden Free Zone. The park has 30ha of prepared ground, with power, water and roads in place; although no foreign companies have yet signed up, it has already secured four local
tenants who are preparing to build premises.

Some allegations of corruption have surfaced in the local media. But these have been rejected by Prime Minister Abdel Qader Bajammal, who has denied suggestions of any secret deal between government and Yeminvest over development terms for the $238m free zone project.

Yeminvest’s decision to pull out appears to be explained by the disastrous slide in business that followed the bomb attacks on foreign vessels. The October 2000 assault on the Cole in Aden highlighted the difficulty of protecting ships berthed at the quayside from attacks by small suicide boats. Two years later,
the attack on the French tanker Limburg off the Ash Shihr oil terminal near Mukalla dispelled any hopes that civilian vessels might be exempt from the Islamist threat.

This struck a serious blow at the viability of the container port, which sought to take advantage of Aden’s location at the mouth of the Red Sea, on the main Europe-Far East shipping route. The terminal’s prime selling point was that deep-sea “mother ships” operated by international groups such as APL of the USA
or Taiwan-based Evergreen could call directly into Aden without significantly diverging from their course. From Aden, cargo could be transhipped to the Gulf, East Africa and other regional destinations.

But the bombings made shipping lines wary of bringing their main vessels into Aden, thus undermining the port’s ambitions to become a major transhipment and distribution hub. Before the Limburg attack, traffic was running at 42,000 twenty foot-equivalent units (teu) per month. Afterwards, as major lines
pulled out, business slumped to just 5,000-8,000 teu/month, mainly import business for the local market.

Although some lines maintained feeder connections, notably to Dubai, Aden had clearly suffered a major blow in its competitive struggle with the rival east Arabian ports of Khor Fakkan – on Sharjah’s east coast – and Salalah in Oman. This was a big setback to the Distripark, whose excellent export/import
connections had been a key selling point.
The final blow came when Yeminvest decided to quit altogether, in October. But in November, local managers’ spirits were revived by PIL’s decision to resume direct services. That month, traffic bounced back, reaching 26,000 teu. December is set to be even better. The government claims to have persuaded insurers to lower the high premiums that had been imposed on ships calling at Aden.

Distripark management is hopeful that the restoration of direct deep-sea transport links will also help them revive investor interest. They point out that local labour costs are much lower than those in the Gulf – and based essentially on a local workforce rather than expatriate migrants.

But it is too early to be sure of Aden’s revival prospects. Given Yemen’s limited financial resources, the port has to be developed on a viable commercial basis. It cannot count on the massive injections of state-backed development capital generally available for new projects in the Gulf states. By contrast,
Sharjah’s Khor Fakkan has just announced a further round of costly expansion.

It would only take another terrorist assault to renew shipping line jitters and send insurance premiums for Aden calls soaring once again