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Cablegate: Despite Continuing Protests, Thessaloniki Port's

VZCZCXRO2968
PP RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHKW RUEHLA RUEHLN RUEHLZ
RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHIK #0051/01 1771548
ZNR UUUUU ZZH
P 251548Z JUN 08
FM AMCONSUL THESSALONIKI
TO RUEHC/SECSTATE WASHDC PRIORITY 0350
INFO RUEHTH/AMEMBASSY ATHENS PRIORITY 0258
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHIK/AMCONSUL THESSALONIKI 0391

UNCLAS SECTION 01 OF 02 THESSALONIKI 000051

SENSITIVE
SIPDIS

DEPT FOR EUR/SE

E.O. 12958: N/A
TAGS: ECON EINV PGOV SOCI CH HK GR
SUBJECT: DESPITE CONTINUING PROTESTS, THESSALONIKI PORT'S
PRIVITIZATION PROCESS NEARS COMPLETION

THESSALONI 00000051 001.2 OF 002


1. (SBU) SUMMARY: A prolonged and controversial competition to
identify a private company to upgrade and run the container
terminal at the Port of Thessaloniki is nearing completion.
Striking port workers have delayed the privatization process,
which the Greek government hopes will modernize the port and
help develop Thessaloniki as a regional trade center. Three
companies have submitted closed bids for the terminal, Chinese
COSCO, Hong Kong-based Hutchison and Dubai Ports World. With
labor protests subsiding, Port officials expect to complete the
review of bidder's supporting documentation, open the bids and
select a winner as early as mid-July. Media speculate Dubai
Ports is the favorite, while a senior Port manager told post
Hutchison is the best candidate. The port of Thessaloniki is
the second largest in Greece with a market value of 354m
($552.5m). END SUMMARY

2. (SBU) After long delays and costly worker protests, the
tender process for identifying a private company to upgrade and
run the container terminal at the Port of Thessaloniki is
nearing completion. A senior Port manager told post on June 22
that officials handling the tender are likely to finish
reviewing supporting documentation submitted by the three
bidders within the next two weeks, after which the actual bids
will be opened. The GoG hopes to announce the winning bidder by
mid-July. Several factors could delay the process, however,
including lawsuits bidders might bring against the winning
bidder. Each of the three bidders has already accused the
others of numerous irregularities and threatened litigation.

3. (U) The three remaining bidders (from the five that
originally expressed interest in the GoG's January 2008
international call for tenders) are: China's COSCO Pacific;
Hong-Kong based Hutchison Port Holdings together with Greek
pharmaceutical group Alapis, and finally, the join venture
between Dubai Ports World and Greece's Piraeus Bank. The
successful bidder will be expected to upgrade and run the
currently state operated facilities for a set period of thirty
(30) years. The GoG hopes that by the end of this period, the
port will have developed into a major regional hub.

4. (SBU) According to its website, China Ocean Shipping (Group)
Company Pacific (COSCO) is a $17 billion (2007 revenues)
corporation that specializes in shipping and modern logistics,
serves as a shipping agency, and provides a range of related
services. It operates a fleet of around 600 vessels, with a
traffic volume of more than 300 million tons. It is active in
around 160 countries and employs a total of 80,000 people.
[Note: COSCO recently won a similar bid for container terminal
operations at Piraeus, Greece's largest port. According to
press reports, COSCO will pay approximately 4.3 billion euros
for a 35 year contract to upgrade and manage the port's two main
cargo terminals. The GoG would prefer a different operator for
Thessaloniki, for diversification, according to Port officials.]
Dubai Ports World's network of 44 terminals and 13 new
developments covers 28 countries. Its work force exceeds 30,000
people. In 2007, the company handled more than 43.3 million
TEU. Local media speculate that Dubai is the front-runner.
Hutchison Port Holdings is controlled by Hong-Kong based
Hutchison Whampoa Ltd, which is also active in, among other
areas, energy and telecommunications. HPH claims to be "the
world's leading port investor, developer and operator" with
interests in a total of 292 berths in 47 ports. In 2007 it
managed 47 facilities in 24 countries and handled a combined
throughput of 66.3 million TEU worldwide. A senior Port official
told us that based on available information the GoG would prefer
HPH over the other bidders.

5. (SBU) The decision by the GoG for the long-term leasing of
the port's cargo station has provoked strong reactions. When
the bill was brought before Parliament in March, the opposition
spoke of a "scandalous give-away of national assets." The bill
was eventually ratified with voting in the parliament along
straight party lines. Trade unions have maintained strikes and
work slowdowns for the last five months, protesting against the
plans that they believe will require substantial lay-offs. Port
officials claim workers fear private management will require
them to work more and give up under-the-table payments they
routinely extract from port clients. Officials say patient
negotiations and generous concessions to workers have convinced
a large number of workers to accept the privatization.
Currently, the majority of dock workers say they want to resume
their duties, but their administrative colleagues disagree and
have prevented them from doing so.

6. (U) According to a survey conducted by the Northern Greece
Chamber of Commerce, the lengthy mobilization of port workers
has resulted in delays for 96% of businesses surveyed, lost
clients for 52% and reduced production for 27%. It is estimated

THESSALONI 00000051 002.2 OF 002


that financial losses for the port exceed1 million per month.
The Federation of Industries of Northern Greece has demanded
compensation and threatened legal action against the Port
Authority for ineffective handling of the case.

7. (SBU) The port of Thessaloniki is vital to the economy of
northern Greece and strategically linked to fast-growing markets
in the Balkans and the wider area of the Eastern Mediterranean
and the Black Sea. Thessaloniki officials have long dreamed of
reviving the city's former exalted status as a regional hub and
"gateway to the Balkans," but port development has been hampered
by inefficient state operation and labor unions with deeply
entrenched interests in the status quo. The port is a key link
in the supply chain for U.S. and European troops in Kosovo. At
present, the port handles over 16,000,000 tons of cargo annually
and 370,000 TEU containers. Thessaloniki's port is the second
largest in Greece, behind that of Piraeus, and has a market
value of 354m ($552.5m.)


6. (SBU) COMMENT: Privatization of the cargo station
operations will represent a significant step forward in the
modernization of vital national infrastructure and in the
commercial development of northern Greece. The privatization
will also provide tangible proof of GoG determination to
implement badly needed reforms of state operations and to shrink
the size of the public sector despite strong opposition from
organized labor. While supportive of the privatization, local
businesses are furious at the government's perceived lack of
preparation and hasty launch of the tender process, which
businesses blame for the robust labor protests and resulting
commercial losses. The losses will continue to accumulate,
albeit at a slower rate since the first cracks in the strikers'
front have started to appear. The sooner the troubled process
declares a winner, the better for all. END COMMENT.
YEE

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