The Hindu Business Line : IRRATIONAL OPPOSITION

There are important messages from the recent decision by Dubai Ports World (DPW) to divest its stake in six US ports rather than risk taking on the growing opposition among American legislators. DPW, which manages ports in several countries, got access to the US facilities following its takeover of the venerable British shipping icon, P&O, which had been managing them without any opposition. Therefore, the present controversy, stoked by US legislators and raising popular interest, has, per se, little to do with foreign ownership and control over critical domestic infrastructure. The US legislators raised security issues over an Arab (UAE) government-owned company getting the rights to manage the ports. A House of Representatives Committee voted against the deal, and just as the Senate was preparing to follow suit, DPW decided to pull out. The President, Mr George Bush, had argued strongly against the action of the legislators and at one stage even spoke of vetoing any legislation to block the deal.

DPW's decision may have saved the US Administration some embarrassment but clearly it demonstrates yet again the double standards among legislators and those who influence decisions in the US. Last summer, a state-owned Chinese company, CNOOC, was thwarted in its bid to buy the American petroleum company, Unocal. Somewhat similar reasons were cited then: That strategic energy assets should not fall into foreign hands, especially if they are part of a government. Though IBM's sale of its PC business to the Chinese computer manufacturer, Lenova, did not raise similar concerns, the fact is that cross-border deals involving companies from Europe or North America are not subject to any type of scrutiny at all.

The DPW episode ought to be viewed as another extreme form of protectionism, which is never far from the surface in the US and in many developed countries. In the US the protection given to the steel industry and apparel manufacturers, as indeed the opposition to business outsourcing, are all manifestations of the protectionist sentiment. What made the DPW saga special was the raising of security concerns. No such justification can be made in the bid to thwart Mittal Steel's attempt to take over the European giant Arcelor. Instead, the governments of France and Luxembourg are citing such nebulous issues as economic patriotism to rally opposition to the bid. More likely — and this was strongly hinted by the politicians of the two countries — is the unsubstantiated fear over the absence of a `cultural fit' between the acquirer and the target. Like the security fears over the DPW deal, the cultural argument too is illogical. But to the extent they can be irritants or can stall the transaction, these non-economic factors need to be reckoned with and countered.

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