After the Opium Wars of the mid-19th century had laid them low, the Chinese developed a saying. “Fear not the sun, fear not the moon; fear the foreign devil who speaks English.” Well, now that everyone speaks English, it looks as if everyone has to fear everyone. That is perhaps why American law-makers refused to countenance the management of some of their ports by a company owned by an Arab government. These ports were managed by a British firm, P&O, which the American pols didn’t mind. But then P&O was bought up by DP World, a Dubai-based ports operator which does business in several continents, including Europe. National security is under threat, the US law-makers said. Now DP World has given in. Sorry, Uncle Sam, it says, we will divest our holdings in American port operations.
P&O runs ports in India, and no one in the government was concerned about the Dubai takeover. In the US, DP World and P&O had asked for, and obtained, unanimous clearance from an official committee that looks specifically into the security aspects of investment deals. DP World also got endorsement from an Israeli shipping firm. And if the concern is terrorism, Dubai and other ports of the United Arab Emirates play host to more American naval ships than any other port outside the US. So is the American reaction fear of terrorism, racism, Islamophobia, or simply the old rule that what is sauce for the goose is not sauce for the gander? There is only one way to find out: DP World should sell its holdings to, say, a Korean or Indian or Russian firm, and watch the response.
The objections and roadblocks are amusing when the developing countries are regularly lectured on the virtues of allowing foreigners to buy their companies, including in the “strategic” sectors. Indeed, when the Indian government raised national security concerns about the foreign handling of airport cargo, it was severely criticised. Recall that the Americans had blocked the Chinese company CNOOC’s buying of Unocal, though no one has objected to Chinese firms operating ports in the US, as they do. A Dubai company, meanwhile, wants to buy a British firm that supplies parts to American defence suppliers, and the same American security committee is looking at the deal. The Mittal-Arcelor stand-off adds a European-Indian dimension to the issue.
A study by two economists shows that recent Chinese attempts to buy assets in the US and the EU have not been successful. The paper discusses what it calls “the implications for global arrangements over cross border acquisitions” and concludes that issues like subsidies for foreign acquisition, the actual against the apparent owners, and national security concerns have not been covered by existing OECD/WTO investment policy. Obviously not, because who would have thought that the boot could be on the wrong foot, or what is the same thing, the money in the “wrong” pockets? Since more money will continue to go into the wrong pockets, more such episodes will occur. The issue regarding the role that governments can or should play in deciding who can buy domestic assets and who can’t, will therefore gain legitimacy. The effect will be to increase governments’ discretionary power. Already, in the context of the controversy over the foreign shareholding of a telecom company, the question must be asked: Should India have its equivalent of the Committee on Foreign Investments in the United States?
Sauce for the gander
Business Standard / New Delhi Mar 13, 2006, 22:08 IST
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