Dubai Ports World Essay
Dubai Ports World (DP World) was established in September 2005 when the Dubai Port Authority merged with the Dubai Port International. It is wholly owned by the Dubai government and is controlled through the Ports, Customs, and Free Zone Corporation (PCFC), a holding company of the government headed by Sheik Mohammed bin Rashid Al Maktum, ruler of Dubai. (Corsi. 2006) DP World acquired the Peninsular and Oriental Steam Navigation (P&O), a London-based shipping company in January 2006 when it outbid PSA International of Singapore, ? 3. 88 billion to ? 3. 5 billion.
DP World started with a bid of ? 3. 3 billion in November 2005 after which PSA followed with its own bid of ? 3. 5 billion in January 2006. However, PSA withdrew from the bidding when DP World raised its bid to ? 3. 88 billion a few weeks later. (Timmons. 2006) DP World is raising this ? 3. 88 billion through a syndicated loan being raised jointly by Barclays Capital and Deutsche Bank AG involving around 30 international banks. (Corsi. 2006) DP World started its overseas expansion in 1999 in India and Romania then followed it up in December 2004 with the acquisition of the port
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(Timmons. 2006) It’s acquisition of CSX enabled DPW to establish its presence in the terminal business of Hong Kong and China in Asia, Germany, Australia, the Dominican Republic in the Caribbean, and Venezuela in South America. (Source Watch. 2006) The acquisition of P&O in January 2006, on the other hand, enabled DP World to occupy one of the top three positions in the port companies in the world, handling around 33 million containers or more than 9% of the total containers in the world.
(Timmons. 2006) The uproar over this transaction between DP World and P&O concerns P&O Ports, one of the subsidiaries of P&O which is engaged in the operation of container terminals in more than 100 ports located in 19 countries, including the United States. (P&O Ports. n. d. ) The acquisition of P&O Ports will allow DP World to control terminal operations in the six American ports of “New York, New Jersey, Baltimore, New Orleans, Miami and Philadelphia. ”(Corsi.
2006) New Jersey and New York handled around 4. 5 million units of containers in 2004, Miami came next with 1 million, and the port in Baltimore handled around 558,000 container units. The agreement, which was effective March 2, was assailed by critics who showed concern over the security risk involved in the deal. They reminded the government that two of the 9/11 hijackers came from the United Arab Emirates who used funds drawn from Dubai bank accounts. (CNN. com. 2006)
Opponents of the deal further questioned the intentions of the Dubai government-owned firm by raising the following points: first, the United Arab Emirates was among the only three countries which recognized the oppressive Taliban regime in Afghanistan during its rule from 1996-2001; second, according to the MSNBC which quoted Wayne Downing, former counter-terrorism chief of President Bush, Sheik Mohammed bin Rashid al Maktum, then defense minister and now ruler of Dubai (who also happens to head DP World), was one of the rich Arabs who had visited Osama bin Laden “for horseback riding and hunting parties” in Afghanistan in September 2003.
(Zunes. 2006) Furthermore, critics of the deal contend that aside from the financial connection with al-Qaida operatives and Sheik Maktum’s possible friendship with bin Laden, Dubai is also very closely connected with the radical clerics who are ruling Iran. This includes Prime Minister Hashemi-Rafsanjani, the billionaire mullah who is making Dubai his vacation home. In addition, these critics contend that thousands of Iranian students are now living and studying in Dubai while at least 6,500 businesses owned by Iranians have been found to be registered “under Iranian nationality” in the United Arab Emirates.
In fact the Dubai government estimated that Iranians would have transferred around $300 billion to Dubai at the end of 2006. They also cited a June 2005 figure from the Chamber of Commerce of Dubai which showed that “31 percent of the luxurious villas of Al Hamra tourism-residential complex, located in Ras Al Khaimah, north of Dubai” has been purchased by Iranians. Their concern was further fueled by the fact that Iran is believed to be developing a nuclear arsenal, in defiance of the appeal from the international community.
(Corsi. 2006) Lawmakers from both the administration and the opposition parties joined forces in opposing the deal. The chairman of the Homeland Security Committee of the House of Representatives, Republican Peter King, worked together with Democrat Senator Charles Schumer from New York and filed a bill which would put the transaction on hold. Senators Hilary Clinton (D-New York) and Bob Menendez (D-New Jersey), meanwhile, were about to sponsor a bill meant to “block the sale of U. S. port operations to foreign governments.
” Senator Susan Collins (R-Maine), chairperson of the Government Affairs and Homeland Security Committee of the U. S. Senate, on the other hand, voiced her concern over the fact that terrorists have been using the United Arab Emirates as a base of operations and financial center. Nancy Pelosi, Minority Leader and a Democrat from California, added her opposition by saying that the deal was approved hastily and in secret without the knowledge of Congress and the officials of the states involved.
(CNN. com. 2006) Opponents of the deal further suspected that the transaction might have been facilitated by the appointment of David C. Sanborn as maritime administrator. Sanborn had been the operations director of DP World for Latin America and Europe before his appointment as maritime administrator. (Corsi. 2006) Meanwhile, when President Bush defended the deal he said that the nation’s security would not be threatened and that everything about the transaction had proper prior approval.
He warned that he would exercise his veto power against any bill filed to delay the agreement. He wanted lawmakers opposed to the agreement to explain why a company from the Middle East should be treated differently from the British company that used to operate the ports in question. Adam Ereli, spokesman for the State Department, on the other hand, allayed the fears of those security-conscious opponents of the deal by declaring that although DP World would be operating the ports, security would remain a function of the Department of Homeland Security.
(CNN. com. 2006) The DP World-P&O deal has directed everybody’s attention to the Committee on Foreign Investments in the United States (CFIUS), an interagency group tasked to examine all buy outs of U. S. corporations being made by foreign concerns for possible national security issues. The CFIUS is composed of representatives from twelve federal government agencies which include, among others, the representatives of Homeland Security, the Department of Defense, the Treasury Department, the State Department, and the National Security Council.
The CFIUS scrutinized the deal and came out with a unanimous decision in favor of the agreement. Some sectors are inclined to place some blame on the panel which was perceived to have acted with haste. This perception resulted from the fact that whenever the committee fails to reach a unanimous decision regarding any foreign purchase, their mandate warrants an additional period of investigation into the deal which should last another 45 days. The extension of 45 days, according to critics, should have been enough to enable them to look deeper into the fine points of the agreement.
(Blustein. 2006) Lawyer Patrick A. Mulloy, a former Senate aide who, 15 years ago, was involved in the drafting of the legislation which regulates foreign investments in the country, said that the hasty decision of the committee could have been influenced by the representative of the Treasury Department who acted as chairman of the panel. He explained that the Treasury Department is always eager to accommodate foreign investors to compensate for the trade deficit.
This was denied by the members of the panel who said that it was the representative of Homeland Security who led the review given that department’s expertise on security, not the Treasury Department representative. However, when Stewart A. Baker was asked if the issue could have been treated any better, the assistant secretary for policy of the Homeland Security Department replied in the affirmative. (Blustein. 2006) In the face of the determination shown by Senators and Congressmen to block the deal, DP World decided to relinquish operations of the U. S. ports.
The following press release was issued to this effect: “Because of the strong relationship between the United Arab Emirates and the United States and to preserve that relationship, DP World has decided to transfer fully the US operations of P&O Operations North America to a United States entity. ” DP World only required one condition: that the transfer would be carried out in such a way that would not cause DP World any economic loss. Reacting to this statement, Congressman Peter King said that a U. S. firm without any connection with DP World should take over the operations.
(BBC News. 2006) Finally, by the end of 2006, DP World announced that it had reached an agreement with AIG Global Investment Group for the sale of its port operations in the United States. AIG Global Investment Group belongs to the American International Group which is the biggest insurer in the world. It has assets in excess of $635 billion. Although AIG refused to divulge their agreed price, Lloyd’s List of London was told as early as October that DP World expected the bid price to be more than $700 million. (Reuters. 2006)
The controversy involving the operations in the six American ports of New York, New Jersey, Baltimore, New Orleans, Miami, and Philadelphia caused the nation anxiety over the issue of national security. While the concerns aired by those who opposed the deal may have been legitimate, the situation could have been just another case of foreign investment had it not been viewed in the context of the 9/11 attack. If only government had been transparent and gave all the stakeholders enough time to study and openly discuss the merits of the case, the offending charges and counter-charges could have been avoided.
After all, globalization has its price. References BBC News. (2006). Dubai firm to ‘transfer’ US ports. (Retrieved April 30, 2007 from: http://news. bbc. co. uk/2/hi/business/4791512. stm) Blustein, P. (2006). Ports Debate Reawakens Foreign-Investment Jitters. washingtonpost. com. (Retrieved April 30, 2007 from: http://www. washingtonpost. com/wp-dyn/content/article/2006/02/22/AR2006022202494. html) CNN. com. (2006). Bush, Congress clash over ports sale.
(Retrieved April 30, 2007 from: http://edition. cnn. com/2006/POLITICS/02/21/port.security/index. html) Corsi, J. (2006). Dubai Ports World is government-owned. WorldNetDaily. (Retrieved April 30, 2007 from: http://www. worldnetdaily. com/news/article. asp? ARTICLE_ID=48907) P&O Ports. (n. d. ). Company Overview. (Retrieved May 1, 2007 from: http://portal. pohub. com/portal/page? _pageid=36,1,36_31151:36/01&_dad=pogprtl&_schema=pogprtl Reuters. (2006). AIG unit to buy Dubai company’s U. S. ports. USA Today. (Retrieved April 30, 2007 from: http://www. usatoday. com/money/industries/2006-12-11-dubai-ports_x. htm) Source Watch. (2006).
DP World. (Retrieved April 30, 2007 from: http://www. sourcewatch. org/index. php? title=DP_World) Timmons, H. (2006). Dubai Wins Bidding Battle for P. & O. NYTimes. com (Retrieved April 30, 2007 from: http://www. nytimes. com/2006/02/11/business/worldbusiness/11port. html? ex=12973/4000&en=9b5458637cc991a8&ei=5088&partner=rssnyt&emc=rss) Zunes, S. (2006). The Dubai Ports World Controversy: Jingoism or Legitimate Concerns? Foreign Policy In Focus Policy Report. (Retrieved April 30, 2007 from: http://www. fpif. org/fpiftxt/3150)