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MIDDLE EAST DEVELOPMENT:

Due Diligence and Business/Security Assessment

Summary

The following report consists of a due-diligence investigation of Middle East Development L.L.C. and its founder, Tarek Mohammed bin Laden, regarding plans to construct a bridge linking Yemen and Djibouti across the Strait of Bab al Mandeb. In this investigation, it was found that Tarek bin Laden, a half brother of Osama bin Laden, is generally respected by international businessmen operating in the region but allegedly has links to terrorist activity, none of which has been proved.

In addition, a security assessment is included to indentify risks in Yemen and Djibouti related to the business environment, terrorism, crime, war and insurgency, political instability and other “miscellaneous” factors (weather, health care, transportation, etc.). The risk assessment reveals high levels of corruption, imprecise property laws, bureaucratic inefficiencies, the presence of al Qaeda and other Islamist militants, the proliferation of weapons, ineffective policing and drug trafficking, all of which pose major risks to a project as big and as highly publicized[other than the CPN report alluded to below, has there been much press about this project? Several news reports on this subject, even the Washington Post and Bloomberg.] as the Bab al Mandeb Bridge.

Company Background

Middle East Development L.L.C. (MED), based in Dubai, is involved in real estate development, project management and investment in the Middle East, North Africa and Southeast Asia. The [privately held? Yes, but MED Singapore is the investment holding company listed on the secondary board of the Singapore Stock Exchange ] company was founded in 2004 by Sheikh Tarek Mohammed bin Laden, a half brother of Osama bin Laden, to build world-class properties and provide contracting and financial services to investors wanting to take advantage of expanding real estate markets in the Middle East [and Asia? Only SE Asia country with operations is Singapore, and that is the investment holding company. Actual developments built in Middle East]. Tarek bin Laden is MED’s chairman and controlling shareholder. In 2007, according to boilerplate in a MED news release, the company had “ongoing projects having [a] completion value in excess of $1 billion.”

On June 2, 2008, Commercial Property News[or can we say MED announced the project on this date? CPN probably based this on a news release, but I can’t find one on the MED Web site. No, discussion in the press of this project dates back to Oct. 2007)] reported that MED planned “to raise about $190 billion to build two new cities in Djibouti and Yemen and a bridge linking them.” The report said Tarek bin Laden would provide at least $10 billion for the $200 billion project. Construction of the 18-mile-long bridge, which would carry [oil and gas? The bridge is being designed to carry road vehicles, trains, and pipes for gas and water.] transmission lines as well as vehicular traffic, is due to begin in 2009 and is expected to take about 15 years to complete. The project also includes the development of two new cities on either end of the bridge that are intended to attract manufacturing, technology and leisure ventures. $100bn city and free trade zone at the Yemeni end-- Yemen has given Tarek bin Laden 500 square miles of territory, gratis, to build the City of Light.

MED is the parent company of Middle East Development Singapore, Ltd. (MEDS), which is listed on the Singapore Stock Exchange. Formerly known as Hitchins Group, Ltd., MEDS is a leading waterproofing specialist with expertise in preservation, restoration and maintenance of concrete structures. In April 2007, MED signed a contract with MEDS to manage construction of five of MED’s residential tower projects in Dubai -- the Arabian Crowne and Windsor Tower in Dubailand and the Red Residence, Kensington Royale and Sports Plaza in Dubai Sports City -- as well as MED’s Diamond Plaza in Bahrain.

According to an August 2007 news release, total construction value for these projects was roughly $354 million. For the 2007 fiscal year, MEDS reported revenue of $11.8 million, solely attributed to the Hitchins’ waterproofing business, which had broken even. Overall, MEDS lost approximately $300,000. With a cash injection in 2007 of $13.3 million (from a “strategic investment exercise involving new shares to its controlling shareholder, new investors and a one-for-two rights issue”), MEDS increased its cash reserves from $1.7 million to $13.3 million. Oussama al Dimashki is MEDS’ current executive chairman and chief executive officer.

According to data cited by CoreData, Inc., the charts below represent MEDS’ financial status [from June 2004 through June 2006? yes]:

|Assets (000's SGD) |

|1 Singapore dollar = 0.731689 U.S. dollars |

|  |June 06 |June 05 |June 04 |

|Cash and Equivalents |1,704 |1,523 |1,813 |

|Marketable Securities |0 |0 |0 |

|Inventories |950 |1,165 |1,012 |

|Other Current Assets |630 |368 |590 |

|Total Current Assets |9,394 |8,837 |9,804 |

|PP&E |3,052 |3,449 |3,506 |

|Accumulated Depreciation & Depletion |-2,038 |-2,164 |-1,925 |

|Net PP&E |1,014 |1,285 |1,581 |

|Intangibles |0 |0 |0 |

|Other Non-Current Assets |12 |28 |8 |

|Total Non-Current Assets |1,026 |1,313 |1,589 |

|Total Assets |10,420 |10,150 |11,393 |

[Korena, in the columns to the right, can we make the headings consistent (e.g., Jun-06 vs. 6-Jun). I assume they are meant to be the same, in other words, June 2006, June 2005 and June 2004? changed]

|Income Statement (000's SGD) |

|1 Singapore dollar = 0.731689 U.S. dollars |

|  |June 06 |June 05 |June 04 |

|Operating Revenue (Revenue/Sales) |11,709 |10,103 |10,384 |

|Cost of Sales |7,488 |5,825 |5,618 |

|Gross Operating Profit |4,221 |4,278 |4,766 |

|Research & Development |0 |0 |0 |

|Selling, Gen. & Administrative Expense |3,983 |4,451 |4,488 |

|Operating Income b/f Depreciation (EBITDA) |NA |NA |NA |

|Interest Income |21 |14 |16 |

|Other Income, Net |-67 |125 |190 |

|Special Income/Charges |-32 |-4 |-17 |

|Total Income Avail for Interest Expense (EBIT) |-194 |-424 |55 |

|Interest Expense |81 |72 |68 |

|Pre-tax Income (EBT) |-286 |-486 |-14 |

|Income Taxes |-92 |45 |97 |

|Minority Interest |0 |0 |0 |

|Net Income from Continuing Operations |-194 |-531 |-111 |

|Net Income from Discontinued Ops. |NA |NA |NA |

|Net Income from Total Operations |-194 |-531 |-111 |

|Extraordinary Income/Losses |NA |NA |NA |

|Income from Cum. Effect of Acct Chg. |0 |0 |0 |

|Income from Tax Loss |0 |0 |0 |

|Other Gains (Losses) |0 |0 |0 |

|Total Net Income |-194 |-531 |-111 |

|Normalized Income |-226 |-535 |-128 |

|Revenues Year-to-Date |11,709 |10,103 |10,384 |

|Income Year-to-Date fr. Total Ops. (Earnings/Net Income) |-194 |-531 |-111 |

Tarek Mohammed bin Laden

Born in 1947 in [where? Nothing written found about birth city, but Tarek’s father was already living and working in SA at that time of his birth) Tarek bin Laden is the second-oldest surviving son of Mohammad [‘Awad? yes] bin Laden, the patriarch of the giant construction conglomerate Saudi bin Laden Group (SBG), which has interests and investments in a variety of industries, particularly construction. Tarek remains a key SBG executive and shareholder.

According to multiple Stratfor sources, MED has an relatively good reputation in the region and is considered a highly professional organization. These sources also say there is little doubt about Tarek bin Laden’s reliability, truthfulness and integrity. With considerable experience operating in a multicultural business environment, Tarek is considered to be one of the more Western-minded businessmen in the Middle East. Sources who have done business with him say he is flexible, values loyalty and will not cheat or double-cross business partners. According to a Stratfor source who works in international business and is well connected to the Saudi community, no one has anything negative to say about Tarek bin Laden or his company.

Nevertheless, while MED may not be inherently corrupt, the company does operate in a corrupt regional environment. It is virtually impossible to do anything in the Middle East, especially engage in high level business transactions, without paying commission money to[bribing?] politicians and bureaucrats. It depends on the situation. It is SoP that business owners are required to pay politicians a cut of their profits. However, this they do not always have to offer up bribes to get the business. This is standard business practice in the region and MED is no doubt well aware of it. According to Stratfor sources, MED also employs cheap labor from South Asia and provides these workers with substandard accommodations and makes them work in excessively hot temperatures.

And MED may not be as substantial a player as the media make it out to be. Rarely do the firm’s large projects materialize. [This is an important claim. Can we support it? For example: Since it was founded in 2004, MED has completed only 25 percent of the real estate development projects it has embarked upon ] While Tarek is by no means viewed as a shady character, his reputation is not stellar [we certainly imply that it is in this report]. Those considering doing business with Tarek and MED should be mindful of the business environment that both operate in as well as Tarek’s business and political connections. Based on MED’s track record, there is a [good?] chance that not all MED projects on the drawing board will actually be built. Working with Kamran to get some last-minute examples to back up this claim.

To Stratfor’s knowledge, neither MED nor its founder have ever been the subject of a criminal investigation in Yemen or Djibouti. According to sources who have done business with Tarek, he is not known to directly associate with any individuals or organizations involved in criminal or terrorist activities. Stratfor sources also say that MED does not have a history of engaging in “dirty tricks” with business partners or competitors. In fact, MED’s corporate leaders have a reputation for being straightforward and above board in their business dealings. Despite petty jealousies [among themselves? can we elaborate here a bit? seems unclear and a little out of the blue], no members of MED’s ownership team appear to have enemies among governments, organized crime groups, media organizations or the general public. There appear to be no significant enmities among the company’s top executives, either personal or professional, that could affect MED’s business endeavors.

The MED leadership team does not appear to have aspirations for political power, either directly or indirectly. Tarek bin Laden and his associates operate in repressive political environments and cannot reconcile business success with political ambition. Despite a lack of political ambition, Tarek bin Laden still maintains [close? yes] relations with those in power. Stratfor sources have been told that Tarek has direct personal contact with Yemeni President Ali Abdullah Saleh and Djibouti President Ismail Omar Guelleh. Tarek has spent a considerable amount of time trying to convince the two leaders that the Bab al Mandeb Bridge would be good for their countries. (While the Yemeni and Djibouti presidents initially gave Tarek approval to proceed with the bridge project, disagreement recently surfaced regarding the proposed city on the Yemen side of the bridge-- the “City of Light”, also called “Al-Noor City”, which is intended to provide economic opportunities, infrastructure and housing. The Yemeni government wants to have full control over the development while promoters believe the city should be a free-trade zone. Those participating in the project with MED and Tarek bin Laden should be aware that this controversy, which could delay the project.)

Tarek’s father was also close to power. After completing work on the Saudi royal palace, Mohammed bin Laden was awarded other major [Saudi government] contracts -- including the renovation of Mecca -- that helped make the bin Laden family business an industrial powerhouse. The relationship between the bin Ladens and the Saudi royal family goes beyond business ties. As Abdul Aziz’s official contractor, bin Laden also became his confidant and the two families grew close. Many of bin Laden’s sons went to Victoria College in Alexandria, [Egypt?], along with King Hussein of Jordan, Former Jordanian Prime Minister Zaid Al Rifai ([who is/was he?]), Adnan Kashoggi ( a Saudi billionaire and businessman whose father was one of the king's physicians), and Kamal Adham (who ran the Saudi security services under King Faisal), present-day contractors Mohammed Al Attas, Fahd Shobokshi and Ghassan Sakr, and the actor Omar Sharif. Although Tarek bin Laden may not have any personal aspirations to run for political office, he has many contacts that are deeply entrenched in the political system. [did Tarek go to college? if so, where?] Tarek spent most of his teenage years studying in England and Switzerland (uncertain at what schools) and returned to Saudi Arabia in 1967 when he was about 18 to start his own construction business. No mention of where he went to college.

Sources indicate it would be only realistic to expect Tarek Bin laden to make financial contributions to the presidents of Yemen and Djibouti. It can also be assumed that MED would make financial contributions to charitable organizations [in the countries in which it operates such as the Tarek bin Laden Hospital & Clinic in Jeddah, Saudi Arabia.]. This is normal in the Middle East -- in fact, it is a religious duty. According to Stratfor sources, MED has been careful since 9/11 to heed [U.S.? Saudi] government warnings [about giving money to charitable organizations that may be fronts for terrorist groups?].

Relationship with Saudi bin Laden Group

Mohammed Awad bin Laden (born in Yemen) created SBG in 1950. Even after Mohammed’s death in a plane crash in 1968, the bin Laden family companies[company? yes] continued to expand, helping the bin Laden’s become the second wealthiest family in Saudi Arabia (behind only the Saudi royal family). With business ties to major multinational corporations such as General Electric, Unilever, Motorola, Schweppes, Citigroup and Bank HSBC, SBG has become a multinational construction conglomerate and holding company for assets owned by the bin Laden family.

After spending his teenage years at schools in England and Switzerland, Tarek returned to Saudi Arabia around the age of 18 to start his own construction business, taking advantage of the housing boom that came with new work in the country after the price of oil rose in 1973.

After a 1975 interview with Tarek bin Laden, journalist Kenneth C. Crowe[can we identify this guy?] called him the “personification of the dichotomy of Saudi Arabia,” embodying both conservatism and change. At the age of 29, Tarek ran the Mohammed bin Laden Organization[SBG?] in the south[southern Saudi Arabia yes?], overseeing 7,000 workers and projects estimated to cost a billion Saudi riyals [not sure I get what this means]. At the time, Tarek was quoted as saying that he did not like to invest money outside of Saudi Arabia, feeling that “money that’s not in [his] country was not [his] money.” Despite his fiscal conservatism, Tarek was already constructing cutting-edge developments in Saudi Arabia early in his career, including the country’s first movie theater.

Today, SBG is directed by Mohammed’s son Bakr M. bin Laden. SBG’s board of directors includes[is this all the directors? If so, it should say “consists of”] Saleh Gazaz, Mohammed Bahareth, Abdullah bin Said, Mohammed Nur Rahimi, Tarek bin Laden and Omar bin Laden. Thirteen other bin Laden brothers, including Tarek bin Laden, make up the board of SBG. The company is represented throughout Saudi Arabia and in regional capital cities such as Beirut, Cairo, Amman and Dubai. In Egypt, SBG is headed by Abdul Aziz bin Laden, who also represents that country's largest foreign-owned private equity group, with over 40,000 employees.[is this referring to SBG in Egypt or some other company? SBG in Egypt, headed by Abdul Aziz bin Laden] In Lebanon, SBG is represented by Yehia bin Laden, who, prior to the 2006 war between Hezbollah and Israel in southern Lebanon, was holding negotiations with local authorities for a $50 million share in the rebuilding of central Beirut in cooperation with the Saudi conglomerates al Baraka Group and bin Mahfouz Group.

SBG’s international operations are handled by the Saudi Investment Company (SICO), which is based in Geneva and headed by Yeslam bin Laden, also a half brother of Osama bin Laden. SBG also has a representative firm in London. The group is discreet about its financial activities, contracts and projects.

According to Jean-Charles Brisard, a [French?] consultant on international terrorism who has written about the financial network of the bin Laden organization, including [the book?] "Ben Laden: La Vérité Interdite,” SBG is made up of multiple divisions and affiliates [is the following a complete list? if not, we should say “including”]:

• The international affiliate of SBG, bin Laden Group International (BGI), based in Jeddah, is equally directed by Bakr Bin Laden (CEO), Yahia Bin Laden (General Director), Omar Bin Laden (President) and Hasan Bin Laden (Vice President), and present in Egypt, Jordan, Lebanon, Malaysia and the United Arab Emirates.

• Bemco for energy.

• Mohammed Bin Laden Organization for infrastructure.

• Project Management and Development Co. Real Estate for real estate.

• Al Salem Group for industrial manufacturing of steel and metal products; engineering, maintenance

• Mimar Industrial Group for textile, present in Lebanon, Great Britain and Spain.

• Casareen Contract Manufacturing for clothing distribution in Great Britain.

• Palwa Beleuchtungs GmbH and Palwa Iberica for crystal production in Germany and Spain.

• Hazar Media Group for newspapers in Lebanon, France, Great Britain, Egypt and the United Arab Emirates.

• United Saudi Maintenance & Services Co. for maintenance services.

• GFC and Casareen Retail International for distribution in Great Britain, Malaysia, Singapore, Egypt, Lebanon, France and the United States.

• Forship Ltd. for the transport of freight in Great Britain, France, Egypt and Canada.

• Baud Telecommunications and the Middle East International Group in Switzerland for public relations.

• The international affiliate of SBG, Bin Laden Group International (BGI), based in Jeddah, is equally directed by Bakr Bin Laden (CEO)[didn’t we mention BGI in the first bullet point?]

Business Ventures

In Saudi culture, family groups stay together, including family business groups. Some family members may branch out on their own ventures, but only when they receive a consensus of support from the entire family. Since Tarek bin Laden has pursued his own business ventures separate from the SBG group, Tarek is viewed as a maverick, having an erratic personality. In fact, despite his respect in the Middle East business community, Stratfor sources indicate that Tarek is not highly thought of by his family members, which is very unusual in Saudi culture. [Is this what you mean here? Tarek bin Laden has pursued his own business ventures separate from the SBG group, which is not typical of Saudi family practice. Thus he is viewed by many of his family members as a maverick with something of an erratic personality. Despite his relatively good reputation in Middle East business circles, according to Stratfor sources, Tarek is not highly thought of within the bin Laden family.]

Cannot verify t his claim anywhere, best to remove? In [when?], Tarek bin Laden reportedly started a textile business with Swedish actor Kjell Bergqvist in [Egypt?]. It is thought that the two planned to sell clothing to the West, making use of the large state-owned textile mills in Egypt. However, [they discovered that the mills were poorly designed and were busy producing textiles for the Soviet Union. Their textile business never got off the ground?]. Tarek also was affiliated with the Tarek bin Ladin Hospital & Clinic in Jeddah, Saudi Arabia. [can you elaborate here? this seems sort of out of the blue.] Even today, MED is considered to be a relatively small player in the Saudi business arena. Notwithstanding the publicity surrounding the Yemen-Djibouti bridge project, Tarek himself is not that well known amongst the general public outside of those individuals that have done business with him.[this seems somewhat inconsistent with what we say elsewhere in the report] His bridge project illustrates the uniqueness of his case compared to other influential and successful Saudi businessmen and highlights the scope of Tarek’s maverick personality and business goals, going far beyond the conventional construction projects pursued by other companies in the region.[how so? this is unclear]

Regarding the construction of the bridge, MED CEO Oussama Al-Dimashki, Al Noor City Holding [Co.?] is also controlled by Tarek bin Laden.[why is this here? I believe this is the first mention of this entity. can you elaborate? did Al-Dimashki tell us this?] Regarding the bridge development plan, Al-Dimashki said MED wishes to emulate Dubai’s success and implement the MED development model in other countries, beginning with Yemen and Djibouti. Noor City Development Corp. (NCDC)[is there a connection to Al Noor City Holding?], a San Francisco-based information technology, planning, development and management company, was hired by MED to handle planning, development, construction and management of the Yemen-Djibouti bridge. Tariq Ayyad, an American of Kuwaiti origin and a civil engineer, construction manager and a former bridge engineer with the California Dept. of Transportation, is the company’s chairman. MED is also planning to build giant free-trade zones and expanded ports on both sides of the crossing, which includes plans to build the “City of Light”, also called “Al-Noor City” on the Yemeni side of the bridge with the purpose of providing economic opportunities, infrastructure and housing.-moved to different section.

Tariq Ayyad also is the founder of Digital Equity Exchange (DEE) and ShareChive LLC.

According to NCDC the NCDC Web site, Spokesman? News release?], DEE [is a brokerage firm?] that has secured additional funding to support development of the Al-Noor cities and is currently preparing shares, establishing trading requirements and [calculating?] gains and benefit for all shareholders and beneficiaries of the developments. DEE will monitor, facilitate and record these[all stock?] transactions. ShareChive is a company that provides construction management of large government infrastructure projects. Using ruggedized tablet PCs, ShareChive clients can view their plans and reference material, record project data, and communicate wirelessly.[is this relevant? Why are we even mentioning ShareChive? Is it involved in Al-Noor City developments?]

In May 2006, Tariq Ayyad tried to obtain a court order in the Northern District of California to prevent the inspector general of the Department of Housing and Urban Development (HUD) from accessing his financial records. According to court records, Ayyad was a landlord who participated in HUD’s Section 8 subsidized-housing program. He rented a property to tenants at a reduced price and, in return, received payments from the Housing Authority of the City of Napa. The payments were transferred electronically into his bank account. In November 2003, Ayyad allegedly transferred ownership of the property to a different person but continued to receive the government payments until April 2004, as if he were still the landlord. HUD investigated whether Ayyad had received payments to which he was not entitled and subpoenaed the records of the bank where he had the account. Ayyad attempted to quash the subpoena but the motion was denied because he failed to support his motion with a required sworn statement. Available records show that this case is now closed.

Links to Terrorism and Criminal Activity

In 1979, when SBG was renovating Mecca, the company had the exclusive contract to make repairs in the city’s “Holy Places.” SBG trucks entered and left Mecca at all hours without being inspected, and it is believed that a group of anti-al-Saud militant Wahhabis led by Juhaiman al-Utaibi [jihadists?] used the company’s trucks to smuggle weapons into the city and briefly took over the mosque at Mecca. Tarek’s brother, Mahrous bin Laden, [who helped supervise the Mecca project?], had studied in England, where he became acquainted with Fadhi[full name?], the son of the ex-sultan of Yemen’s southern Abdin region who had been radicalized by Syrian members of the Muslim Brotherhood. Familiar with a group of Syrian Muslim Brothers in exile in Saudi Arabia, intelligence investigations revealed that the group had taken advantage of Tarek’s brother, using the bin Laden trucks unbeknownst to Mahrous. This case demonstrates the ties between the royal family and the bin Laden Group for if it had been another group, those involved in the incident would most likely have been jailed and barred from further economic activity in Saudi Arabia.[Is this what you mean to say here? It is believed that Mahrous provided assistance to the militants, enabling them to seize the mosque. Saudi intelligence later found that a group of Syrian exiles who belonged to the Muslim Brotherhood had taken advantage of Mahrous and had used the SBG trucks to transport weapons into Mecca, unbeknownst to Mahrous, who was arrested but later released. The case demonstrates the loyal ties between the Saudi royal family and the bin Laden family for Mahrous was the only person not beheaded out of the 63 who took part in the incident.

Yeslam bin Laden, Tarek’s brother who heads the Saudi Investment Company (SICO), also has ties to persons thought to be involved in terrorist activity. During the 1980s, SICO’s board of directors included members of the Shakarshi family, which is linked to criminal activity, including money-laundering and drug trafficking in Zurich. [that is suspected of being linked to al Qaeda? Some other terrorist group?] As of 2001, Yeslam was still thought to maintain relations with the Shakarshi family.

Yehia bin Laden, Tarek’s brother who represents SBG in Lebanon, has links to the bin Mahfouz Group, a Saudi conglomerate founded by Khalid bin Mahfouz. Khalid bin Mahfouz, who is also founder of the National Commercial Bank of Saudi Arabia, the first bank in the country, and once personal banker for the Saudi royal family, has been accused of providing financial support to Osama bin Laden. Bin Hahfouz was also a close friend of another of Tarek’s brothers, Salem bin Laden.

According to the book “House of Bush, House of Saud”, by the American writer Craig Unger, [do you mean ‘according to’ this book? what do you mean ‘cancelled’? do you mean this published book (available from Amazon) was banned in Great Britain? The report I referenced said the book did not go to print but looks like it has] bin Hahfouz responded to the accusations, claiming he donated $270,000, upon Salem’s request, to Osama’s cause to assist the U.S.-sponsored resistance to Soviet forces in Afghanistan. Bin Hahfouz said the money was never intended to be used to fund future terrorist activities of Osama bin Laden.

Of course, Tarek bin Laden’s most obvious potential link to terrorism is through his half brother Osama, who orchestrated the events of Sept. 11, 2001. Osama bin Laden is one of Mohammed’s bin Laden’s youngest sons and the only to be born to a Saudi mother-other reports incidate she was of Syrian decent, delete. [Can we say something like this here? But the bin Laden family is a big one, and links between Osama’s terrorist activities and his siblings -- including Tarek -- have long been alleged but never proved. This has not kept those affected by Osama’s terrorist acts from trying to establish links to his family members in law suits and investigations related to 9/11]. Stratfor came across a total of 11 suits, including those filed by surviving victims and relatives of those killed in the 9/11 attacks, have been filed [naming Tarek a defendant yes ?]. Continental Casualty Company v. al Qaeda Islamic Army dismissed the charges against Tarek in January 2006. Many of the other cases are still open.

In July 2003, in a New York District Court, plaintiffs Euro Brokers Inc., Maxcor Financial Group Inc., Maxcor Financial Inc., Maxcor Financial Asset Management Inc., Tradesoft Technologies, Inc., Maxcor Information Inc., Euro Brokers Ltd., Euro Brokers Financial Services Limited, Euro Brokers Mexico, S.A. de C.V. and Euro Brokers (Switzerland) S.A. listed Tarek bin Laden as a defendant in an action to recover property damage sustained as a result of the hijacking and crash of United Airlines Flight 175 into the South Tower of the World Trade Center on Sept. 11, 2001. The plaintiffs alleged that the defendants knowingly provided money and other aid to terrorists, which enabled the 9/11 attacks and other attacks to occur.

In a similar case filed in September 2004 in a U.S. District Court for the Southern District of New York, plaintiffs World Trade Center Properties L.L.C., World Trade Center L.C.C., 2 World Trade Center L.L.C., 5 World Trade Center L.L.C., Silverstein WTC Management Co. L.C.C. and 7 World Trade Center L.P. alleged that on Sept. 11, 2001, they suffered massive damages to their properties as a result of intentional damage inflicted upon them by the crashes of two hijacked aircraft into two buildings, the North and South Towers of the World Trade Center. According to their plaintiffs, the financial resources and support network of the defendants -- charities, banks, front organizations and financiers -- are what allowed the attacks of Sept. 11, 2001 to occur. In addition to Osama bin Laden, individual members of the bin Laden family, including Bakr bin Laden, Tarek bin Laden, Omar bin Laden, Abdullah Awad bin Laden and Yeslam bin Ladin, were listed as defendants in the law suit.

According to the [September? yes] 2004 civil complaint[this is the same law suit described above? yes], Tarek served as general supervisor of the International Islamic Relief Organization (IIRO) in the early 1990s. The IIRO, which was established to provide resources to and assist orphans and immigrants in the Islamic world, grew as an organization because of support provided by the Saudi royal family. The IIRO also was alleged to be a supporter of al Qaeda, used to transfer funds and personnel to the terrorist group. On Aug. 3, 2006, the U.S. Treasury Department included the IIRO’s Indonesia and Philippines branch offices on a list of individuals and groups belonging to or associated with the Taliban. According to the department, Mohammad Jamal Khalifa, Osama bin Laden's brother-in-law and a senior al Qaeda member, was at one point the director of the IIRO’s Philippine branch.

The U.S. Treasury Department designated the Philippine and Indonesian IIRO branches as terrorist financiers for funneling money to al Qaeda and other radical groups, including six militant camps in Afghanistan in the 1990s. Specifically, the department listed the IIRO Philippine branch as a source of funding for the al Qaida-affiliated Abu Sayyaf Group (ASG) and noted that the IIRO Indonesia director channeled money to two Indonesia-based Jemaah Islamiah (JI)-affiliated foundations. The IIRO Indonesia branch allegedly supported JI by providing assistance with recruitment, transportation, logistics, and safe havens. In 2002, IIRO Indonesia allegedly financed the establishment of training facilities [where? Indonesia? yes] for use by al Qaida associates.

The U.S. Treasury Department also designated Abd Al Hamid Sulaiman al-Mujil, an IIRO official in Saudi Arabia who channeled money to the Philippine and Indonesian branches, as a terrorist financier, stating that Mujil specifically provided funds directly to al Qaeda. According to a declassified memo by Matthew Levitt, a former deputy assistant secretary in the Treasury Department’s the Office of Intelligence and Analysis, the IIRO supported terrorists from the early 1990s through the first half of 2006. Investigators have also found an IIRO[-Saudi Arabia?] report showing that members of the royal family play a supervisory role in connection with some of the local IIRO offices in Saudi Arabia. The US government has been reluctant to prosecute it due to its direct links to the Saudi government as members of royal family allegedly play a supervisory role in connection with some of the local IIRO offices

Despite the organization’s suspected links to terrorist activity, the IIRO still carries out charitable operations through legitimate channels. For example, on June 9, 2008, the United Nations Children’s Fund (UNICEF) signed a memorandum of understanding with IIRO Saudi Arabia at its headquarters in Jeddah. Present at the signing was Dr. Adnan bin Khalil Basha, secretary general of the IIRO, and Dr. Ayman Abu Laban, UNICEF representative in the [Persian?] Gulf.

Tarek bin Laden is a well-established [and relatively well-regarded?] businessman in the Middle East with many political and business connections. Despite suspicions regarding his alleged links to terrorist activity, there is no hard proof of such links, and doing business with MED should pose no major business risks. However, companies considering any involvement with MED may have shareholders who would object to dealing with a half brother of Osama bin Laden who may or may not have been involved in funneling money to al Qaeda. These companies should be prepared to answer shareholders’ inquiries and to make prudent decisions based on the known risks of the business venture.

Business/Security Assessment

Apart from the bin Laden connection, there are indeed significant business and security risks on the ground in Yemen and Djibouti, including corruption, terrorism, crime, war, insurgency and political instability. Clearly, such threats could impact the construction of a proposed 18-mile-long bridge between the two countries that would include the longest suspended span in the world (3.1 miles). Bureaucracies on both sides of the Red Sea would be sorely tested by the project, and the temptation for poorly paid civil servants to ask for bribe money to expedite licensing and project approvals would be very high. Construction could also be delayed, employees could be threatened and the structure itself could be damaged or destroyed.

However, both countries are eager to attract foreign investment, and a project like this would help induce the flow of money. With enough attention and focus on the part of the host governments -- and on the part of foreign participants -- such a major construction project could help create a more disciplined bureaucratic and security apparatus and maximize the economic benefits of successful project completion.

The following assessment addresses the specific business and security risks any foreign business should be aware of when operating in these two countries.

Business Environment: Yemen

Since the end of Yemen’s civil war in 1990, the government of President Ali Abdullah Saleh has tried to boost the country’s economy. The International Monetary Fund (IMF) is working to improve the financial management of the country’s assets and the World Bank is currently involved in 19 projects there. Yemen also is a member of the World Trade organization, although it is the only country on the Arabian Peninsula that has yet to join the Gulf Cooperation Council (its membership is pending). Yemen’s economic health depends largely on its oil and natural gas deposits and several foreign oil companies operate there in cooperation with the government.

Since 1990, property expropriation from foreigners has been rare in Yemen, but establishing legal land ownership is a complex process. Yemen only recently adopted a system of property registration and land titles. For much of the country’s history, land rights were hereditary and informally administered by regional tribes. The increase in foreign presence in Yemen has pressured the government to put a system in place that guarantees property ownership. Before operating in Yemen, foreign companies are encouraged to communicate and negotiate with regional and tribal leaders in addition to the government. Land disputes are often messy and can involve violence.

As in most other countries on the Arabian Peninsula, foreign companies in Yemen are required to act through Yemeni agents. Not only does this ensure that Yemenis benefit directly from foreign investment, it also opens up avenues for corruption. Yemen is a Muslim country that follows a form of Sharia law, and foreigners should be aware that claims on accumulated interest are difficult to recover. Foreigners should also be aware that cultural and religious differences in Yemen result in varying business practices and customs. [For example? Can we have just a few specifics? Seems rather vague otherwise].

In terms of economic freedom and [government?] transparency, Yemen is ranked very low worldwide and below average for the region. This is largely because of burdensome corporate taxes, corruption and political intervention[what is this, exactly? intervention into what?]. While the government has tried to streamline the process of registering a new company (creating a single agency to handle foreign investors), red tape is still a barrier.

Corruption in Yemen consists mainly of bribery, blackmail, nepotism and backroom negotiating. Special commercial courts set up to handle business disputes are corrupt and inefficient, and the regular court system is slow and subject to political pressure. As a result, business disputes are more commonly settled by informal arbitration that relies on bargaining and negotiating and does not necessarily adhere to the laws of the country. Bargaining and negotiating is required in almost every business transaction, including those with government officials.

The level of risk in Yemen’s business environment is high.1

Business Environment: Djibouti

Djibouti’s economy is based on its proximity to a major shipping thoroughfare (the Strait of Bab el Mandeb), its position as a sea-access point for Ethiopia and its relative stability in a fairly unstable region. The Djiboutian government supports foreign investment and is seeking to increase transparency. The port of Djibouti has undergone a $800 million expansion paid for by its new manager, Dubai Ports World. The investment is aimed at making Djibouti the next Dubai -- a small, poor country that became enormously wealthy very quickly [because of its oil and gas resources?]. While Djibouti does not have the oil reserves that [Dubai?] or the United Arab Emirates (UAE) have, it is touting its updated port facilities and 60 percent unemployment rate[a country will typically tout its high unemployment rate? I would think it would tout the quality of its workforce.] to lure investors.

In an effort to attract foreign capital, Djibouti has privatized transportation sectors (such as port and rail), but the country’s commercial[delete? is it just the laws related to commerce or the entire legal code?] legal code is outdated, based on laws established during French colonial rule, and this causes bureaucratic slowdowns for businesses seeking to set up operations. Several free trade zones have been established near the port of Djibouti (the capital city), and most businesses operate from there. There is very little financial activity outside of the capital city and port area.

Although there are anti-corruption laws on the books, they are rarely enforced. Politicians and civil-service employees require bribes and favors in return for cooperation. Sometimes politicians will require that foreign investors use a specific contractor (a company owned by a relative, an important supporter or perhaps the politician himself) before a project can be approved. Also, especially outside the capital city, the line blurs between formal and informal economic activity. Tax collection and essential services are administered based on bargaining, relations and bribery.

The level of risk in Djibouti’s business environment is medium.1

Terrorism: Yemen

There are currently two terrorist threats in Yemen: the al Qaeda node in Yemen (known as the Yemen Soldiers Brigade, or YSB) and tribal violence in the hard-to-patrol areas outside of the Sada’a, Sana’a and Aden population centers. These threats are exacerbated by the large supply of weapons in Yemen’s desert bazaars, where vendors sell assault rifles, hand grenades and rocket-propelled grenade launchers.

Al Qaeda has been in Yemen for some time -- at least since 2000, when al Qaeda operatives bombed the USS Cole in the Port of Aden. Osama bin Laden’s ancestral home is Yemen, where the government is sympathetic to Islamic militants. The government’s military and intelligence institutions are largely made up of ultra-conservative Salafists, who form an important supporting pillar for President Saleh. In addition, Yemen is at the heart of an Islamic region struggling with jihad -- Somalia, Saudi Arabia, Iraq, Pakistan and Afghanistan -- and it attracts jihadists from these neighboring countries as they are squeezed out by military operations and police crackdowns.

Since January, al Qaeda or al Qaeda-inspired groups have been increasing their activity in Yemen. The deadliest attack so far has been the gunning down of two Belgian tourists and two of their Yemeni guides on January 18. Since then, nearly all al Qaeda-inspired attacks in Yemen have been [improvised explosive device (IED) or?] mortar attacks against energy targets. A French pipeline in Saah district was attacked with a timed explosive[IED?] and a Chinese oil field in the eastern Hadramout district was shelled [hit by mortar fire?]. In Yemen’s capital, Sana’a, terrorists have attacked the Italian embassy and a housing compound for Westerners. None of the attacks against energy targets this year have resulted in deaths, and they appear to have been carried out by poorly trained operatives; often the mortar attacks involved firing two or three rounds from the back of a pickup truck and then driving away.

A much more common form of violence is the tribal activity in Yemen’s hinterlands. The central government has control over the populated areas of Sa’dah, Sana’a and Aden, but tribal law dominates outside of these cities. The most common tribal bargaining chip in dealing with the government is kidnapping -- especially the kidnapping of foreign tourists. This will typically bring diplomatic pressure of a country like Germany, Japan or France upon the Yemeni government. In September 2006, two German and two French tourists were kidnapped by tribal elements in an effort to negotiate the release of fellow tribal members from jail. In May 2008, two Japanese women were kidnapped near Marib, a popular tourist area approximately 100 miles east of Sana’a. Some 200 foreigners have been kidnapped in Yemen since the brief civil war there in 1994. All but four have been returned unharmed.

The internal threats Yemen faces reflect its fractured political landscape. Yemen is hardly a country ruled by consensus, and many factions do not believe the Saleh government represents their interests. The central government has enough problems remaining cohesive and is hardly in a position to prevent al Qaeda strikes against energy interests or rein in the tribal factions. While there have been no significant attacks in areas near the site of the proposed bridge project, such a project could well match the target set that al Qaeda typically uses when preparing attacks.[would likely be part of the al Qaeda target set?]

The threat of terrorism in Yemen is high.2

Terrorism: Djibouti

There have been no significant terrorist attacks in Djibouti[ever?], and the country does not face an jihadist threat from within. Given its proximity to countries known to harbor terrorists, however, Djibouti does face significant security issues. Militant Islamist groups are active in Northern Africa, Sudan and Somalia. Because of its [rough, mountainous?] terrain and the fact that Djibouti lacks the military manpower to strictly control its borders, it is possible that terrorists are hiding in certain inaccessible areas of the country. There are certainly plenty of targets for them to hit. Both the United States (with about 2,000 special operations personnel) and France (with nearly 3,000 soldiers, including a special operations component) have significant military bases in the country. The port of Djibouti is a major hub of trade for the region, and the country’s location along the strategic Strait of Bab el Mandeb offers terrorists the opportunity to strike ships, which they did in 2002 in the Gulf of Aden in an attack against the Limburg, a French oil tanker.

In addition to being a terrorist target, foreign militaries also bring a certain level of stability to the region. Their bases ensure that security is tight not only inside the wire but also in the surrounding areas. For example, a French counterterrorism and hostage-rescue team was stationed at the[is there only one French base?] French base in April 2008 as a result of pirate attacks against French ships in the port of Aden.

Terrorists could certainly pose a significant threat to the bridge project -- during and after construction -- and to the planned urban development on either end. The bridge would be a major symbol [of what?], and since it would carry oil pipelines, it would also be a significant component of the region’s energy infrastructure. Al Qaeda has struck at both of these kinds of targets numerous times. Terrorist attacks could delay construction of the bridge or, at the very least, require a burdensome[how so?] security presence to prevent attacks. Not only could the bridge be targeted, but so could the legion of laborers, engineers and managers stationed at either end. Once construction is complete and the bridge is open for traffic, it also could become an important transit and smuggling route for militants.

However, the fact that the bridge has the backing of[would be built by a company founded by?] Tarek bin Laden, the half brother of Osama bin Laden, could give it some protection against Islamist militant attacks. Although Tarek bin Laden has no direct links to his half brother or the al Qaeda organization, [Korena says in her section above that he does have ‘links to terrorist activity’] his name alone may prevent any major attack. If the bridge could be portrayed as a domestic project and not the work of foreign companies, it would not draw the ire that previous foreign activities (such as oil extraction) have. The region is very poor and local people would most likely welcome investment in the area so long as it provided jobs and an increased standard of living. If the project is viewed in this light, then attacking the bridge may not be in the long-term strategic interests of al Qaeda.

This does not mean that the bridge would not be targeted. Especially on the Yemen side, there are many al Qaeda “franchise” groups that carry the al Qaeda flag but are not under the centralized command and control of al Qaeda “prime.” The prospect of attacking such a prominent target would attract many al Qaeda imitators, but these groups do not pose as much of a threat as al Qaeda prime does. Franchise groups typically do not have the training, discipline or materials to carry out serious, coordinated attacks. They are usually intercepted by police before they can launch their attacks or their attacks are ineffective. In Yemen, al Qaeda has been responsible for many attacks but few deaths. The same can be said for tribal factions. So far, neither has shown a high level of martial sophistication. Security around the bridge site is key to successful project completion, but if the project is seen as largely benefiting the region and the people who live there, terrorists will have less of an incentive to attack it.

The threat of terrorism in Djibouti is medium.2

Crime: Yemen

Crime in Yemen poses more of a threat to the bridge project than terrorism does. Kidnapping for ransom, political kidnapping, drug trafficking, police corruption and the proliferation of weapons all make Yemen an unstable environment. Kidnappings are common in the country and most are not reported to police. The bridge project as well as urban development on either end would involve thousands of workers, many of whom would likely be foreigners, and many of whom would be based in a largely uninhabited corner of Yemen. Their presence and paychecks would surely attract criminals seeking to profit by the project in more nefarious ways.

One significant threat would be illicit drugs. In [when?], UAE officials assisted Yemenis in intercepting a shipment of 1,700 kilograms of hashish in the eastern Hadramout region, a popular area for distributing drugs throughout the Arabian Peninsula. Corrupt police in Yemen either turn a blind eye to the drug traffic or actively assist drug smugglers.

Weapons are also smuggled into Yemen and are readily available. Hand grenades sell for as little at $7.50 each and can be bought with no questions asked. For those with more money, assault rifles, rocket-propelled grenade launchers and mortars are also available. The arms markets supply terrorists and criminals as well as the wider Yemeni population. There are an estimated three guns for every one Yemeni. The Yemeni government recently announced measures to restrict people from carrying guns in public and launched a campaign to close down weapons bazaars. Guns are indeed rare in cities now but are still quite common outside metropolitan areas.

The threat of crime in Yemen high.3

Crime: Djibouti

Crime is also widespread in Djibouti. Poverty, unequal distribution of wealth, high unemployment and nearly 25,000 refugees from Somalia and Ethiopia contribute to the country’s high crime rate. Petty crime is most common and most prevalent around transportation terminals such as bus stations, train stations, airports and seaports.[there are more than one airport and more than one seaport in Djibouti, correct?] Intermittent power outages encourage theft in these areas. Driving can be especially dangerous. In addition to the high accident rate on Djibouti highways, bandits set up blockades on roads and steal from motorists after they come to a stop. In many cases, perpetrators might start out asking for water, food or a ride into the next town then demand money or other valuables. Djibouti’s national police force does not have the resources to deal with crime outside of the major cities. Like Yemen, most of Djibouti is very rural and hard to reach or patrol on a regular basis. The risk of transporting people and goods in Djibouti is high.

As in Yemen, the infusion of cash and construction workers on the Djibouti end of the bridge project would be a powerful magnet for crime in the area. Expensive equipment and personal possessions on and around the construction sites would attract local criminals. Workers with incomes and not much to do in Djibouti’s desolate corners would also be tempted by drugs.

Road traffic in Djibouti also is very dangerous, and any supplies coming in to construction sites by road would be vulnerable to hijacking. Security measures should be taken to prevent such activity.

The threat of crime in Djibouti is high.3

War and Insurgency: Yemen

In northwestern Yemen, near the town of Sa’dah, an insurgent group referred to as the al-Houthi rebels is fighting the government over the government’s ties to the United States and Israel. The founding leader of the rebel group, Shiite cleric Hussein Badr al-Din al-Houthi, was killed in 2004 but sporadic violence continues. An estimated 700 people have died in the fighting so far. Most recently, two mosque bombings in Sadaa[Sa’dah?] and a small-arms attack[where?] killed 52 people and injured over 100. There is little reason to believe that this violence will end anytime soon, but it also seems to remain contained to the northwestern corner of the country, around Sadaa[Sa’dah?]. The violence is unlikely to affect the bridge project since it shows little sign of spreading to southwestern Yemen.

The threat of war and insurgency in Yemen is medium.4

War and Insurgency: Djibouti

Djibouti gained independence peacefully from France in 1977 and, for the most part, the two countries have maintained good relations ever since. Land-locked Ethiopia, Djibouti’s largest neighbor, is a peaceful ally since it depends on Djibouti’s port for nearly all of its external trade.

Relations are not so good with neighboring Eritrea to the north. Djibutian officials blame Eritrean forces for a border incursion in the Ras Doumeira region on April 16, 2008. In response, Djibouti sent troops north to seal the border. Both sides have essentially been in a standoff since April 16, with no major developments until June 10, when Eritrean forces fired upon deserters who were fleeing to the Djibutian side. Low-level conflict has ensued since then, leaving at least a nine Djibutian soldiers dead as of June 18. The Eritreans have begun to move across the border and even set up temporary camps on what Djibouti considers its territory. The patch of land in question is small, desolate and contentious mainly because a proper border was never fully established by the two countries’ colonial occupiers (Italy for Eritrea and France for Djibouti). The contested area lies very close to the area in which the bridge would be built, along with related urban development (Ras Doumeira is approximately 20 miles from Fagal).

It is not clear what Eritrea hopes to gain in this latest incursion. Tensions have flared up several times in the past over this same stretch of land. In 1996, Djibouti accused Eritrea of shelling the border area and in 1999 Djibouti accused Eritrea of stirring up ethnic tensions. Eritrea also is engaged in a border dispute with its neighbor to the west, Ethiopia, from which Eritrea gained independence in 1993. As a relatively new country, Eritrea could be asserting itself and using military actions to consolidate domestic power. In any event, all-out war between Eritrea and Djibouti is in neither country’s best interests; if it conducted any serious incursion, Eritrea could be easily defeated by the U.S. and French military forces stationed in Djibouti, and Djibouti does not have the military means to defeat Eritrea by itself.

Political instability and shifting alliances caused by wars and insurgencies could disrupt the proposed bridge project -- especially in Djibouti, where a border dispute is dangerously close to the expected construction site. The situation along the Eritrean/Djibouti border is volatile and should be watched closely.

The threat of war and insurgency in Djibouti is medium.4

Political Instability: Yemen

Yemen faces threats of political instability in the form of militant Islamist influence in government and calls for secession in the south, around the port of Aden. President Saleh depends on a significant faction of ultra-conservative Salafists for political support and protests in the south are the vestiges of a socialist movement supposedly put down in 1994.

During the Cold War, Yemen created a conservative Islamic education system with Saudi assistance to counter the threat of socialism in the country. At the time, Yemen was split north and south, with the south receiving overt Soviet assistance. The support and cultivation of elite Islamic schools resulted in the birth of a Salafist-jihadist tendency within Yemeni society that played a key role in the defeat of the southern socialists in the 1994 civil war. Later, these Salafist-jihadist elements attained influence over key institutions of the unified Yemeni state, especially the country’s intelligence and military establishments. President Saleh -- who has ruled the country since 1978, first as president of the northern Yemen Arab Republic and, since 1990, as president of the unified Republic of Yemen -- has relied heavily over the years on the Salafist-jihadists to maintain his regime. This dependence has become a major political vulnerability for the president. Increasingly under pressure from the United States since 9/11 to rein in al Qaeda in his country, Saleh has tried to balance Washington’s desires with those of his jihadist supporters.

However, he has failed to satisfy U.S. demands, and by succumbing to pressure to the Salafists-jihadists at home, he is weakening not only his government but the state itself. Meanwhile, the al-Houthi insurgency in the north and the unrest in the south have intensified. If not checked, the growing chaos could cripple the central government.

Saleh did act to check the power of the Salafist-jihadists in the intelligence establishment after 9/11 by creating of a new intelligence service headed by a close ally, Ali al-Anisi. He also reshuffled his cabinet to include more pro-government ministers. But these changes at the top will take time to work their way down. Until they do, the new organizations will be no match for the institutions dominated by the Salafist-jihadists.

The problem of rival commands extends to the military as well. Saleh depends heavily on one key commander, Ali Mohsen al-Ahmar, who is in charge of northern and western Yemen. Al-Ahmar ignited the problem with the al-Houthis, though this group’s threat to Saleh pales in comparison to the jihadist menace. Al-Ahmar, a member of the president’s tribe who studied in Saudi Arabia, is dogmatic even for a Salafist. He led the fight against the Communists[socialists?] in Yemen’s 1994 civil war. He is also the main rival of the president’s son, Ahmed Ali Saleh. There is a major competition between the two, though at present the president’s son needs time to strengthen his position.

These underlying structural problems have allowed the jihadists to revive their activity in the country. For now, Saleh is defying the United States for fear of losing the support of those elements that provide him with regime security. Al Qaeda is taking full advantage of this, and it knows that Saleh could buckle under external pressure. The recent attacks are thus meant to let the president know the jihadists can hit him hard if he decides to turn on them.

The situation in Yemen is quite volatile, and Saleh is quite vulnerable -- which explains his inability to accede to U.S. demands. A key factor keeping him in power is the absence of an alternative leadership, which suggests that Saleh’s collapse would probably spark chaos rather than result in a rival taking over. A weakened Yemeni state unable to reassert its hold over the country could lead to a situation like the one in neighboring Somalia, where large parts of the country are lawless expanses lending themselves to exploitation by militant and criminal elements. Under the right conditions, the chaos that thrives in the Horn of Africa could cross the Red Sea and spread onto the Arabian Peninsula.

Obviously, political collapse in Yemen would negatively affect the construction and operation of the bridge and related real estate developments. If the construction of the bridge is not approved of by a broad consensus in Yemen, the risk of a political opposition gaining power and reneging on previous construction agreements would be high, as would the threat of violence and logistical disruption. Protests by leftists calling for better employment in the south further complicates the security and political environment for President Saleh. The port of Aden is a major import/export hub for Yemen and is approximately 100 miles from the bridge construction site on the Yemen side.

The threat of political instability in Yemen is critical.5

Political Instability: Djibouti

Djibouti’s political arrangement is based on an ethnic split between the majority Issa tribe and the minority Afar tribe. Tribal conflict erupted in 1991 and the country did not begin to resolve it until 1994. The conflict was between the Issa-dominated government and civil services and a predominantly Afar militant separatist group called the Front for the Restoration of Unity and Democracy (FRUD). The Issa government, with assistance from France, regained control of the north and west (where the FRUD operated) and appointed several FRUD leaders to the president’s cabinet. Issa tribal territory overlaps Djibouti and the western Somalia province of Somaliland while the Afar tribal area overlaps northern Djibouti and parts of Eritrea. During the civil war, Djibouti accused Eritrea of assisting and supplying FRUD.

The tribes’ territorial overlaps lead to entanglements in other regional disagreements. Eritrea’s main enemy is Ethiopia, from which it won independence in 1993. Because of its political support for Ethiopia and status as an outlet for Ethiopian trade, Djibouti has become one of Eritrea’s targets in its struggles against Ethiopia. Afar movements are gaining momentum again in northern Djibouti and they could become convenient political tools for Eritrea. Another civil war is unlikely (Eritrea is no match for foreign forces stationed in Djibouti), but if Eritrea could disrupt the political/tribal balance in Djibouti and perhaps even the flow of goods to and from Ethiopia, it would strengthen its hand immensely.

Bridge construction on the Djibouti side of the Strait of Bab el Mandeb would be in Afar territory, and the ramifications of this should be noted. It is possible that negotiations with the Issa-dominated Djiboutian government may not hold authority in some parts of Afar territory. In addition, Eritrean influence may further complicate the situation on the construction site. The amount of investment expected in this project is enough to alter relations between Eritrea and Djibouti and could very well be a reason for Eritrea encroaching upon Djiboutian border territory. Eritrea may be trying to position itself so that it could extract concessions from Djibouti were the project to be approved and construction begun.

The threat of political instability in Djibouti is medium.5

Miscellaneous Threats: Yemen and Djibouti

[Ben, I think it would be fine to leave the piracy stuff here as long as we include some info on weather, health care, traffic, natural disasters, etc., the usual ‘miscellaneous’ stuff]

Piracy poses a significant threat to both Yemen and Djibouti. Pirates from Somalia and Yemen operate in the Gulf of Aden and Strait of Bab el Mandeb. They attack everything from private yachts to fishing boats to supertankers. The U.N. has recently lowered the threshold for engagement with pirates in this area. High-profile cases of piracy that involve supertankers, such as the Takayama incident on April 21, when [can we include some specifics here?], regularly attract international attention, but smaller shakedowns of indigenous fishermen and traders are much more common and most go unreported. Foreign governments want to protect their assets in the Gulf of Aden and will defend against brazen attacks on supertankers but rarely have the incentive or ability to intervene in smaller-scale activities.

Pirates have a large selection of maritime vessels to choose from; all traffic traveling between the Mediterranean Sea and the Indian Ocean must travel through the Gulf of Aden via the Suez Canal and the Strait of Bab el Mandeb. Pirate attacks on ships moving materials to any construction sites on either side should certainly be a threat to consider. In fact, increased traffic to the construction areas without increased security would most certainly attract more pirate attacks.

The miscellaneous threat level both in Yemen and Djibouti is medium[?].6

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1. Business environment. Threat level low: Environment characterized by established rule of law, government transparency, regulatory and tax system not designed to restrict free enterprise or private ownership, sufficiently developed infrastructure, adequate workforce, physical security and economy conducive to business investment. Medium: Some of those characteristics lacking. High: Most of those characteristics lacking. Critical: Virtually all of those characteristics lacking.

2. Terrorism. Low: No known credible threat. Medium: Potential but unsubstantiated threats by capable indigenous or transnational actors. High: Demonstrable history and continued potential for militant attacks against generalized targets. Foreigners and/or foreign facilities are not specifically targeted. Critical: Demonstrable history and continued likelihood of militant attacks. Foreigners and/or foreign facilities are specifically targeted.

3. Crime. Low: Relatively low crime rate, mainly property or petty crime. Medium: Generally high crime rate with incidents of property crime that specifically targets foreigners, low potential for violence. High: Generally high crime rate with incidents of property crime that specifically targets foreigners, probability of violence and moderate risk of physical crime. Critical: Extensive criminal activity targeting foreigners with a high possibility of physical crime, including violence and kidnapping; heavily armed criminal elements abundant.

4. War and Insurgency. Low: No or relatively low threat of violent insurgency. Medium: Nearby insurgency with the potential of affecting city, region, country or transportation network. High: Insurgency within the city, region or country but with little direct effect on foreigners. Critical: Insurgency within the city, region or country directly threatening foreigners.

5. Political Instability. Low: No or minimal visible activity directed against the government. Medium: Sporadic street demonstrations, largely peaceful. High: Routine large-scale demonstrations, often affecting traffic and having the potential for violence. Critical: Endemic strikes, protests and street demonstrations almost always affecting traffic with a high probability of associated violence.

6. Miscellaneous. Low: Little or no known threats posed by disease, weather, natural disasters, transportation hazards or other dangers. Medium: Moderate level of risk posed by some or all of these threats. High: Considerable danger posed by some or all of these threats. Critical: Extremely high level of danger posed by some or all of these threats.

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MIDDLE EAST DEVELOPMENT:

Due Diligence and Business/Security Assessment

June 25, 2008

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