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DP World coming to Odessa?

January 18, 2017

Whilst Chinese President Xi Jinping made a valiant defence of globalisation at the World Economic Forum on 17th January 2017, indeed a speech that placed both China and himself as the torch bearers of globalisation in the world (and displaying just how far through the looking glass the world has traveled in the past few years), perhaps insufficiently noted for Ukraine (and Odessa) was not the constructive oratory of the presidents of China and Ukraine, but a statement by Boris Lozhkin.

The former head of the Presidential Administration who now leads the National Investment Council let it be known that long and protracted communication with DP World has progressed somewhat.

DP World is a major enabler of global trade, running 77 marine and inland terminals in 40 countries across 6 continents.  This complimented by a further 40 supporting companies.

Across marine and inland terminals, maritime services, logistics and ancillary services, and technology-driven trade solutions it employs 37,000 people from 110 countries.

A truly global player that has managed to cultivate long-standing relationships with governments, shipping lines, importers and exporters, communities, and many other important constituents of the global supply chain.

Mr Lozhkin let it be known that DP World and its P&O Maritime subsidiary are ready to invest in Ukraine both at Yushni and Odessa Commercial Port.  CEO and Chairman Sultan Ahmed bin Salim had already met with the Ukrainian political elite, including President Poroshenko prior to the WEF gathering.  Further discussions will undoubtedly occur at WEF.

The positives to any final deal, if one is reached, is that Ukraine can clearly attract significant FDI that does not originate from international lenders and supportive nations.  With respect to DP World in particular it would attract a company that has experience of dealing with all sorts of dysfunctionality, local shenanigans and general nefariousness and criminality associated with ports globally.  It is also a taxpayer that Ukraine would have little trouble with when it comes to revenue collection.

The negative view however, is perhaps that in attracting DP World to run one port and have a lucrative role at another in Odessa, it is something of an admission that Ukraine itself cannot, or more accurately will not, summon the political will to sort out the management of the ports and the nefarious activities therein for itself.

In short, if any deal with DP World is finalised, it represents an outsourcing of these problems to a global company that has dealt with all of this before many times over, where clearly the Ukrainian authorities failed.

That is not to say that DP World should not be welcomed, nor indeed that if Ukraine recognises that as a State it cannot, or more accurately will not, address the many issues at its ports, that this is a poor option.

Perhaps it is politically more expedient to back a major FDI investor as it attempts to sort out the port issues than it is to take on vested interests directly – but the question is whether there will be robust and unwavering support from Kyiv as and when DP World would want to deal with the flotsam and jetsam within the port personnel, many of whom are de facto impossible to remove when the courts de jure overturn many rightful sackings of the most criminally minded.

Maybe there is a recognition in government that there is no other way to clean up the Ukrainian ports than to have somebody do it for them.  If that be so, (and clearly Ukraine won’t do it itself) then a reader may be wise to keep an eye on the DP World negotiations.

It is far from a done deal, but Mr Lozhkin is not a man who normally makes statements without reasonably firm foundations.  As far as the legitimate economy of Odessa is concerned, DP World’s arrival would be a good thing.  Whether the illegitimate mercantile economics that are ingrained in the life (and culture) of Odessa life would adjust to any new circumstances remains to be seen – though a reader has to suspect it would.

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