More on the Dubai Ports World acquisition of P&O

Bloggers and politicians left and right have expressed concern and, in some cases, outrage at the acquisition of British company Pensinsular & Oriental Steam Navigation and with it a stake in terminal operations in the ports in New Orleans, Miami, Baltimore, Philadelphia and Newark. From Bloomberg News:

Feb. 18 (Bloomberg) — The United Arab Emirates reassured U.S. senators including Charles Schumer that Dubai’s takeover of the U.S. port assets of Peninsula & Oriental Steam Navigation Co. is not a threat to national security.

The country’s Foreign Minister Abdullah bin Zayed al-Nahyan said concerns voiced by some members of the U.S. Congress that the takeover of P&O terminals in New York, New Jersey, Philadelphia, Miami, Baltimore and New Orleans by Dubai’s port company, DP World were “understandable.”

“But, we want to make clear we have also worked very closely with the U.S. in a number of issues especially when it comes to combating terrorism, prior-to and post Sept. 11,” Al-Nahyan said in a statement in response to questions sent by Bloomberg today. “As an example we have recently concluded a joint task force agreement with the U.S. on how to fight funding for terrorist groups, and also non-proliferation.”

A bipartisan group of U.S. lawmakers is calling for hearings on the $6.8 billion purchase of London-based Peninsula & Oriental that would give DP World, a company that’s owned by Dubai’s ruling Maktoum family, control over most operations at six U.S. ports, including New York. The measure, supported by Senator Hillary Clinton, is intended to block the sale.

U.S. Secretary of State Condoleezza Rice yesterday said the administration continued to support the sale and would brief members of Congress on its decision. “It’s the considered opinion of the U.S. government that this can go forward,” Rice told a roundtable of Arab journalist yesterday.

Joe Gandelman, of course, has a complete media rundown on the story.

Blogger reaction both left and right has been overwhelming negative.  Judith Apter Klinghoffer of HNN is concerned that DPW is a government-owned company:

The same limits do not apply to government owned or controlled companies. Imagine the national security nightmare resulting from a pro-Iranian or another Jihadist coup in Dubai at a time when a company controlled by Dubai is running 6 American ports. Not only will that company not be motivated by the profit motive, it would be directly controlled by a government dedicated to the destruction of the American republic. It’s orders may not only include a refusal to examine certain cargo but also to use its position to ensure the delivery of “particular” cargoes.

So, no. This is not a case of racial or ethnic prejudice, economic nationalism or hypocrisy of the type involved in the French outcry against a possible take over of Danone by Pepsi or Arcelor bid by Mittal Steel. The problem with Dubai Ports World is not that it is owned by Arabs but that it is owned by an Arab government. Those needing proof should examine the use Russia made of its state owned Gazprom in its quarrel with Ukraine just a few weeks ago.

Indeed, just as the time has come to end the practice of treating tyrannies and democracies as equals when it comes to international law, the time has come to treat private companies differently from government owned ones when it comes to international trade. Doing otherwise is just too dangerous. Therefore, do everything you can to stop the dangerous port deal.

There are other voices, however.  John B. Chilton of Emirates Economist, who has been on this story since it was first reported, writes:

This isn’t about homeland security; it’s about being open to foreign investment. It’s about unfettered markets. It’s about the American institutions that make the U.S. the economic dynamo of the world. Americans are not especially smart or virtuous compared to other peoples. It’s their institutions that make Americans exceptional. Some Arabs come along and want to invest in the U.S., and you want to change the rules so they can’t? Nonsense. You’re ditching the very principles you’re trying to transfer.

My own view is that we need to be very careful in distinguishing between legitimate security concerns which should be examined and dealt with to the extent necessary and xenophobia or anti-Arab prejudice.  Most especially we need to consider security threats in proper proportion:  Dubai isn’t the only country that has influential government-owned companies and shouldn’t be singled out.  China leaps to mind.

20 comments… add one
  • Or Singapore, or France, or the UK, or….

    Governmental involvement in fimrs is rather more common than Americans suppose. Not that this is good.

    I note that P&O is not even 100 percent owner of most of the East Coast US port facilities.

    Re the cited post drawing an analogy with Gazprom, that is frankly stupidly illiterate. Gazprom’s ability to manipulate markets depends the control of choke points and the particularities of the gas market. Partial ownership of container terminals is not even remotely comparable – the employees will be American, the ships of course will continue to be under whatever ownership, and security will continue to be in the hands of US Gov forces.

    Where on earth does any logical security concern come from? Deliberate slowing of off-loading containers? As if US Teamsters would go for such.

    There is no logical problem – this is pure xenophobic bigotry aimed at Arabs. The utterly contemptible hand waving about UAE and terror is illogical and ridiculous.

  • Hey, why not sell the whole shebang to Maersk, which I think, is a Danish Company? That should satisfy everyone, right?

  • Because Maersk (i) has not bid on P&O (ii) because it is P&O’s decision as the owner of the assets (lease and attendant management rights) who to dispose, (iii) governmental interference into a private transaction for no reason other than politically driven xenophobia is bad policy.

  • Why do they hate us? Western culture, with an underscored respect for reason, capitalism, and individual rights for all members of society is diametrically opposed to the virus of Islamic extremism which is escalating a battle for greater control of the Arab world and beyond. Any progress in lifting the Arab world into modern western standards is not going to be achieved by bribing these regimes to not attack us or capitulating to the demands of the extremists. Our greatest weapon is appealing to the self-interest of Arab companies and workers with the mutual benefits thankfully available through cooperation in modern global markets. Shared interests and shared fortunes with the Arab world will create equal incentives for security both on our shores and theirs. An attack on America by Arabs becomes a self-inflicted wound and sets off internal forces overseas to eradicate the virus.

    In the long run, free trade is a more effective diplomacy tool than any number of guns. We are open to working with the Arab world as equals, not as terrorists. Money knows no borders or race or religion.

    If these Clintonian political postures are successful, we will send a clear message to the Arab world that America is xenophobic – Arabs need not apply to the modern world, leaving options such as Hamas the seemingly only viable alternative. Assuming the deal is accepted, we send the message that America responds positively to peaceful cooperation and our wrath is only reserved for attacks on the rights that make such free trade available at all.

  • And, additionally, the managers of P&O have a fiduciary responsility to secure the best value for the shareholders.

    In re: ownership of corporations by foreign governments. It’s occurred to me that the size and power of U. S. corporations tends to motivate foreign governments and co-ops of foreign governments to form and subsidize their own companies as a counterbalance. As you say, not that this is good.

  • I believe I largely agree with MPH’s comment (except the overly pejorative tone), above all with respect to building on self-interest.

  • Col-

    It’s a joke. Danish, Arab…. get it? I am well acquainted with markets and with acquisitions. I don’t need tutoring.

  • Sorry mate, given the amount of silliness out there it’s hard to know which way to read things. My sincere apologies then.

  • For what it is worth though, even you knowing better and it being a joke, 2/3 of those who might read this won’t.

  • Is it that pejorative?

  • Col-

    Fair enough. My apologies, also. Let’s get a drink next time you’re in Rabat…

    You drink there, I’ll drink here. Sorry, I’ve never mastered those smiley face things. I must get myself re-educated.

  • You have a Rabat connexion?

  • Which pejorative?

  • Forgive me. Yes, I have a Rabat connexion. I would rather not dislcose right now.

  • THAT pejoritive.

  • Daniel Berczik

    Well understood, no problems at all.

    As to the pejoratives, I am remain befuddled. Well, nothing unusual there. I suppose my poor opinion of the average American’s reading of MENA situs. Long experience, but one does get surprised in the positive from time to time, which is more pleasant than the inverse.

    Re Dave’s comment:
    In re: ownership of corporations by foreign governments. It’s occurred to me that the size and power of U. S. corporations tends to motivate foreign governments and co-ops of foreign governments to form and subsidize their own companies as a counterbalance.
    It certainly is a factor. Not the only one to be sure. But in both Europe and in the MENA region. E.g. in Jordan and Morocco, there is massive and irrational paranioa with respect to the US FTAs on the imagined threat from US firms coming in and buying up everything. As I told a local CEO once, when discussing financing over drinks, ‘if you guys seriously had that problem, it would great.’

  • I’m grateful for the link. And, yes, this American in the UAE is still blogging on the subject at The Emirates Economist and at UAE community blog.

  • Pagedown1986 Link

    First take our jobs, bury us in debt, let our elderly die like dogs in the street during natural disasters, then take our safty. What’s next our freedom?? With the way our gov. is selling us out I won’t be surprised WHEN it happens….. Someone stop the madness!!!

  • What on earth is the above comment about?

  • Since no jobs are lost in the acquisition or government debt, the deaths of elderly in New Orleans were caused by negligent nursing home operators, and there’s no change in the people who will actually be operating the port terminals after the acquisition, the comment would seem off-target wouldn’t it?

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