Business | Opinion
American paranoia about DP World deal is baseless
The current furore in Washington about the takeover of P&O, the UK-based ports operator, by Dubai Ports World says more about the United States Congress than the UAE.
- Financial Times
- Published: 00:00 February 22, 2006
The current furore in Washington about the takeover of P&O, the UK-based ports operator, by Dubai Ports World says more about the United States Congress than the UAE. The bluster about national security conceals one of the uglier faces of US protectionism ? the one with the slightly racist tinge.
DP World, the mainly Dubai government-owned ports operator, paid top dollar, $6.8 billion, for P&O, part of its bid to build a worldwide network of maritime terminals with Dubai at its centre. The bold move was very much in character with the vaulting ambition of Dubai ? one of the seven emirates in the UAE.
Dubai is the most dynamic of the glittering cities that dot the east of the Arabian peninsula. It long ago decided to invest its (relatively modest) endowment of oil in other ways of making a living.
So far it has done very well. By creating excellent airport infrastructure and Emirates, one of the world?s best and most profitable airlines, it seeded not just a regional but international air transport, transhipment and tourism hub. It has also become a regional financial and services centre.
Oil revenue now amounts to only seven per cent of Dubai?s income, although it benefits from its federal ties with oil-flush Abu Dhabi.
It excites a bit of derision by seeming to want the biggest of everything: the largest man-made island, the highest tower (the planned 3,000 foot-plus Burj Dubai), the richest horse-racing prize or the biggest airliners order. Yet its diversification strategy is increasingly admired and copied in a region that desperately needs to create jobs.
But some western governments and international companies ? while benefiting from the boom in Dubai and the UAE ? tend to be either patronising or paranoid.
Either Dubai?s success is overreach and financial levitation, or murky and in hock to sinister Arab aims. Being the Singapore of the Gulf is not the same as being Singapore.
Because DP World acquires through P&O American ports including New York, New Jersey and Miami, both Republicans and Democrats in Congress are denouncing a possible breach in the frontline against terrorism.
This is a more strident response than last year?s rebuff of CNOOC, the Chinese state-owned oil company, and its $18 billion bid for Unocal. The UAE is a strategic US ally in the Middle East. The Bush administration is right to defend the deal and the alliance.
First, the deal has been vetted by an inter-agency committee. And ports, in any case, are in one of the most highly regulated sectors in the US. What matters is how they are managed, not who owns them.
Second, leading Dubai companies such as DP World bring with them certain advantages. They habitually: spend money to make money; headhunt the best professionals (in DP World that includes top Americans); and produce high rates of growth. The ambitious new $15 billion aerospace enterprise Dubai announced this week will be built around that formula.
Third, the honourable senators might get this purchase in perspective by pondering the extent to which the Gulf allies they so distrust already own vast quantities of US assets, as well as dollar assets held offshore. For Abu Dhabi alone, a one percentage point move in US interest rates now means more than a $10 per barrel swing in the price of oil. Do the maths.
? Financial Times
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