Mogadishu Port Concession re-negotiations

Economy, Development & Health
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Mogadishu port renegotiation

In 2018, following FGC advice, FGS commenced renegotiation of the Mogadishu port contract
which had been signed with a Turkish firm, Al Bayrak, in 2013. The stated objective of the
renegotiation was to achieve efficient operation of the port by enabling necessary capital investment, ensuring transparency, clarifying the roles and responsibilities of the parties, and adjusting tariff levels and revenue shares as necessary. The parties met on a number of occasions throughout 2018 and reached agreement on many elements of a term sheet that would form the basis of a longform revised agreement. However, the parties were unable to reach agreement on a number of key commercial terms, including revenue share
and investment amounts. The contractor did not provide justification for its position on these
issues and the renegotiation process ground to a halt, culminating in a last and final offer sent by FGS to the contractor in December 2018.

The FGS did not take further action until May 2019, when the FGS met with the Turkish government and representatives of the contractor in Turkey. During this meeting the parties committed to finding a way forward and reached a high-level agreement on revised commercial terms, enabling the renegotiation process to move forward. Negotiations resumed in August 2019, taking the high-level agreement as a starting point. In November 2019, a number of other issues not resolved via negotiations were elevated to FGS senior leadership for discussion. In March 2020, discussions between the contractor and FGS
achieved some progress on the unresolved issues, and shortly thereafter negotiations recommenced on a largely virtual basis.

FGS has submitted a final version of the revised concession agreement to the contractor for
review. The revised agreement is expected to be signed during the third quarter of 2020,
following IMCC approval and registration with the OAG, as required by the Procurement Act.
Legal support funded by the ALSF and technical support funded by the World Bank and, more
recently, by the EU have played an important role in supporting FGS to develop a revised
agreement that marks a significant step towards comparative good practice.

The main improvements captured in the Revised Agreement, as compared to the 2013 agreement, are as follows:

  • Port investment: The Revised Agreement enables FGS to require the contractor to
    undertake essential investments in the Mogadishu port.
  • Commercial basis: The proposed sharing of port revenue between the parties has been
    updated based on estimated costs for port operations and investments.
    Operating requirements: The Revised
    Agreement captures a clearer specification
    of contractor operating obligations.
  • Taxation: The Revised Agreement requires the payment of taxes according to prevailing
    legislation.
  • Monitoring and reporting: The Revised Agreement provides clear requirements
    for the reporting and audit of operational and financial data related to the operation
    of the port.
  • Termination provisions: The Revised Agreement adds clear language around
    the events that would give rise to a right to terminate and the consequences of
    termination

The Revised Agreement requires that the FGS play an active role in its management. This
is particularly true with respect to monitoring required investments. The Revised Agreement
places on FGS the responsibility for closely monitoring the execution of the Implementation
Plan and for working continually with the contractor to review and approve specifications
for investment requirements not covered by the initial Implementation Plan. The FGS will be
supported technically by a qualified engineer. FGS will still need to pay close attention, however, to ensure that it meets its own obligations under the contract. Failure to review or approve/reject submissions from the contractor in a timely manner may affect FGS’s ability to hold the contractor to its responsibilities as spelled out under the Revised Agreement.

The need for active contract management is not unique to the port concession agreement. For long-term partnerships, such as concessions, the active engagement of the conceding
authority is generally a requirement to ensure value for money and protect the interests of
the government. Following the signature of the renegotiated concession agreement for the Mogadishu airport, the FGC recommended that FGS retain specialised support to assist in fulfilling its obligations under the agreement. These obligations include the review of detailed designs and works to be completed, the monitoring of performance standards, and financial reporting. The FGC further recommended that the IMCC require updates from the conceding authority, the Ministry of Transport and Civil Aviation, every six months to keep apprised of progress and fulfil FGS obligations. These recommendations do not appear to have been considered seriously. Little information is currently available on the status of implementation of key provisions of the airport concession agreement, including basic financial reporting.

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The renegotiation of contract was most likely prompted by Somaliland’s DP World deal. It seems from this outset the contract they entered into back in 2013 with the Turkish Firm Al-Bayrak was a sellout. The Turkish firm was given a 25 year contract with no binding requirement for the Turkish to invest in the port at all.

What caught my eyes was the fact that the re-negotiations of the contract for Mogadishu Port between FGS and Al Bayrak started back in 2018 and almost broke down several times. If it wasn’t for the Goodwill of the Turkish Gov’t, Al Bayrak was well within its contractual obligations to resist any overtures for renegotiation of agreements.

Even after this renegotiation, it seems the offer from Al Bayrak is very inferior to the DPWorld Berbera port deal. Which is why they are mum about it and not advertising the size of the investment.

This squabble was ongoing for almost 3 years and not a single word leaked to the media.

Can you imagine if this was in Somaliland? within hours this would have hit the news and every Faarax and Xaliimo would be discussing about it. Somaliland need to up their game in terms of government secrecy and classified information.

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Hello Geeljire,

Well, nice place we have here, finally. It seems it’s so fitting to say it as Brits used to say during the first few years of WWII (before others join in): “ourselves, alone”. And they meant in the sense of slugging out from their fortress island against the might of the Germany.

So, in that sense, it will be fitting that we will be slugging out from our newly minted political fortress, with the added bonus of us being the owners of it, unlike some former debating platform in which we used to give by both barrels to those who had the temerity not the see how eternally blessed SL is and was.

Hence, with that being said, let me take a crack at this discussion and say the following.

1- In so far as SL is concerned, the public appetite for open discussion may be a bit of a pain in the rear end, but at least the saving grace is that the larger public can be taken into the confidence of the government. Besides, our innate culture is not really made for it in anything of a skulduggery secrety sort of skulking around in the dark of the night and dealings of that kind.

2- Even, in Somalia, if such talks were going on innately for all that time and in hush secret of intense negotiations sort, which I think it was not the case, in the sense that the talks were about Turkish outfit basically hoping to get a good deal and dragging this thing along during that time. But, in the final analysis, it’s the result that matters. And in here, just compare what DP World is doing and have already accomplished there in Berbera on one hand, and in the other hand, what has this Turkish outfit have done for Mogadishu.

That was the test, and by all account, we can see those who are calling themselves as leaders of Somalia, who probably were the ones negotiating this sort of deal in secret, have failed and failed miserably, as they have failed everything else they tried their hand on it. Which is why the UN just renewed its mandate of keeping Somalia under its “Trusteeship supervision” for at least another year.

So all in all, I am bit sanguine about the lack of watertight secrecy in our part, at least if the standard in which we shall judge SL is what seems to have been obtained in Somalia with its alleged secret negotiations, given that we can see what that had gotten for them. Although, of course, we shouldn’t make a habit of “bartering” in public with any economically or diplomatic partners that may be inclined to enter some kind of a deal with us in SL. And we should at least try to “inculcate” ourselves with the learned habit of such statecraft.

But, in so far as these two diametrically opposite negotiations are concerned, I would gladly take our way of doing things, provided the deal that shall be the outcome of such negotiations is similar to one in which DP World contract with SL turned out to be.

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Renegotiated Concession Agreement For Mogadishu Port

On October 07, 2020 The Minister of Ports and Marine Transport, Mariam Aweis Jama, signed a 14-year Concession Agreement with the Albayrak Group from Turkey for the Rehabilitation and Operation of the Port of Mogadishu on behalf of the Federal Government of Somalia. In part as a response to the Government’s policy to review all government concession agreements which has now been completed, the two Parties agreed on a more ambitious agreement after Albayrak had been operating the Port already since 2013

. The new agreement covers:

  • the continuation of the Port’s exclusive terminal operations and marine services by Albayrak under a revised revenue share arrangement;
  • a five-year, US$ 50 million rehabilitation and investment program to safeguard the port assets and respond to increasing trade flows;
  • the implementation of a state-of-the-art terminal operating system to increase efficiency and speed at the port and increase service quality for shipping lines and cargo owners;
  • compliance with international agreements and conventions as well as international quality and safety standards to increase the attractiveness of the Port; and finally,
  • a planning and approval process for the long-term development of Mogadishu Port beyond the initial five years.

“We have taken an important step in securing the future of the Port both physically and as a source of income for the Government, in improving standards and service quality for the benefit of Port users and in showing that Somalia keeps to its contractual obligations while improving the quality and transparency of its government concessions,” says Mahdi Mohammed Gulaid, Acting Prime Minister.

Jama Abdullahi Mohamed, Ambassador of Somalia to Turkey, adds: “We appreciate the good cooperation that our Turkish partners have shown in operating the Port in the past and during these extended and quite involved negotiations in particular. We had tough discussions on some areas over more than two years but are now convinced to have found a new basis for moving forward that balances the interests of both parties well.”

Minister of Finance Abdirahman Duale Beyle further explains: “The Port’s revenues and the customs income flowing to the national treasury are extremely important for the operations of the Government. So we need to make sure that the Port serves its customers well. With the new Concession Agreement we have been able to do this, safeguarding Government income today and expanding in future.”

“Minister Abdirahman and I took part personally in the final negotiations until the early hours of the morning. The Director of the Mogadishu Port Authority, Ahmed Mohamud, has done an excellent job leading the negotiating team and has ensured the integrity of the process at all times. I want to thank him and also Sharmarke Mohamed Farah who has very effectively covered the process from the Office of the Prime Minister.

Finally, I would like to commend our team of financial and transaction advisers from the Africa Enablers, Switzerland, technical advisers from Inveni Portum, Germany, and legal advisers from Clyde & Co, UK. They have shown real persistence over the years and demonstrated an outstanding, competent and thorough job guiding us through this process,” concludes Minister Aweis.

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Somali officials, ministers get free holidays from Turkish ports operator to trample workers right- FESTU report

MOGADISHU (HOL) - Senior Somali Government Official and ministers receive paid holidays and business class tickets from the Turkish airport operator Favori to meddle in labour rights of employees, a report by the country’s worker’s union has said.

The Federal of Somali Employees (FESTU) said in a damning report Friday some government officials collude with Favori LLC to perpetuate abuse of labour rights in violation of the constitution and international labour laws.

“Workers and well-placed officials in the government have disclosed that some Somali officials are paid with business class tickets and free holidays in Turkey and occasionally receive kickbacks,” the report read in part. “There has indeed been evidence of such corruption as some ministers have outrightly failed to defend the rights of workers in the face of Favori LLC exploitation.”

The report singles out Justice Minister Abdulkadir Nur Jama who it accuses of meddling in efforts to resolve the ongoing row between Favori and its employees occasionally receive kickbacks.

There has indeed been evidence of such corruption as some ministers have outrightly failed to defend the rights of workers in the face of Favori LLC exploitation. Case in point is the attempt by the Minister of Justice Abdulkadir Mohamed Nur (Jama) to unashamedly interfere in labour relations between FESTU and Favori LLC.

The Minister, the trade union says ‘has repeatedly lobbied inside the government to protect the exploitation by Favori LLC, and has been mounting an anti-trade union campaign within the government.’

The government officials, deployed as union busters, use Turkey’s generous support to Somalia and the good standing of the Turkish government within the Somali society as a pretext to cover up the egregious rights abuses of Favori LLC, the report adds.

FESTU Secretary General Omar Farouk said Favori has grossly violated labour rights and uses the COVID19 pandemic as an excuse to further frustrate its employees from accessing their rights.

“FAVORI LLC operates with impunity and is a purveyor of corruption at high levels of government to avoid accountability. The company has taken advantage of the COVID-19 pandemic to further entrench its exploitative practices and tactics of intimidation against workers,” Osman said.

The trade union has however lauded the efforts of Labour Ministry in championing for worker’s rights.

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Somalia’s Minister for Ports talks about few issues including Mogadishu Port which is managed by a Turkish firm, Al Bayrak.

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