DPWs Aden arrangement ends in divorce

Interestingly, when the news was announced it was positively received, the company’s stock value on the Nasdaq Dubai rising one per cent to $11.20. The company’s London listing rose even higher, by 2.5%, to 705 pence in afternoon trading.

This makes sense given that the marriage was never an entirely happy one and one that had some dimensions to it that were never really understandable in the land of logic.

A 30-year management contract was forged in 2008 – the basic aim being that DP World would deploy its expertise to develop Aden as a major transhipment hub in the region. At the end of 2008, however, the first vessel called at the new Doraleh Container Terminal in Djibouti, designed as a major transhipment hub and in which DP World is a major partner.

Djibouti is just ‘across the road’ from the Yemen and as such prompted some significant scratching of heads by industry professionals as to why you would want to sign up a strategic partner in Aden that was busy developing a major new competitive platform nearby? Conversely, why would you want to enter such a relationship unless it was for ‘strategic reasons’?

False fortunes

It is indeed striking that while the Doraleh Container Terminal has prospered, the Aden Container Terminal appears to have lost its way. DCT, which in addition to serving transhipment traffic also handles gateway cargo to Ethiopia, is now actually congested and on the brink of a major new expansion phase. Reports from within the Yemen, including statements made by Abdullah Bathib, Minister of Transport, suggest that falling annual cargo volume – around 140,000 teu in 2011 compared with 500,000 teu in 2008 – and the failure of DP World to deliver new port infrastructure were key drivers to end the relationship.

In a transhipment context, it appears there was a clear conflict of interest for DP World by having a foot in both camps. Indeed, much of the cargo that has left Aden has migrated to Djibouti. This said, the Yemen Government has never been easy to deal with – PSA was the first major port investor to leave the Yemen.

That said, the idea of a management contract or full-blooded concession for Aden is undoubtedly a good idea. Will the Gulf of Aden Ports Corporation be able to steer a positive course under its own steam going forward? Conventional thinking is that the result will inevitably be better with the help and guidance of a strategic partner that is a global operator.

Who now, however, will want to take up such a poisoned chalice, particularly situated against the potential for ongoing volatility in the Yemen, the Middle East’s poorest country and a known base for international terrorists. Yemen has plainly suffered at the hands of resource mismanagement but the sad fact is that it looks like it is set to continue to do so as part of the legacy of what has gone before.