RoryN
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Some in Congress Object to Arab Port Operator
Company Based in United Arab Emirates Set to Manage 6 East Coast Facilities After Takeover
By Paul Blustein
Washington Post Staff Writer
Friday, February 17, 2006; Page A11
The management of major U.S. ports taken over by an Arab-owned company? What was the Bush administration thinking when it allowed such a thing?
That is the question being asked by members of Congress from both parties. Their indignation is aimed at the $6.8 billion purchase by Dubai Ports World, a state-owned company in the United Arab Emirates, of a firm that handles most operations at ports in New York, New Jersey, Baltimore, New Orleans, Miami and Philadelphia.
At a news conference yesterday, a bipartisan group of seven House and Senate members demanded that an interagency task force on foreign investments, which approved the transaction, examine it more closely. The group contended that although the UAE may have a strongly pro-U.S. government, the country was traversed by some of the Sept. 11, 2001, hijackers and its banking system has been used by groups affiliated with al Qaeda.
"Our ports are major potential terrorist targets," said Sen. Christopher J. Dodd (D-Conn.). "I strongly urge the administration to thoroughly investigate this acquisition."
Sen. Tom Coburn (R-Okla.) said, "Handing the keys to U.S. strategic ports to a regime that recognized the Taliban is not a sound next step in our war against terror."
Taken aback by the uproar, administration officials defended approval of the deal by the Committee on Foreign Investment in the United States (CFIUS), a panel with representatives from 12 U.S. agencies that reviews foreign takeovers of U.S. companies or possible risks to national security.
The company that currently operates the ports, they noted, is foreign -- Peninsular and Oriental Steam Navigation Co., a British firm -- and its employees in U.S. ports, who are mostly Americans, are expected to do the same work they're doing now. Furthermore, Dubai Ports World, which won a bidding war this month for the company, has proved itself to be a reliable partner in screening cargo headed for the United States. And once cargo arrives, federal agents would continue their current level of inspections, regardless of who runs the ports.
"This company will be subject to any U.S. laws that apply to port security, and will be obliged to have a port security plan that we will review," Stewart A. Baker, the assistant secretary for policy at the Department of Homeland Security, said in a phone interview. "So if there's a falloff in compliance on security here in the United States, we're not completely lacking in ability to respond to that."
The flap has some potentially major implications beyond the port security issue, as illustrated by the readiness of administration officials to comment on the decision made by the committee, which deliberates in secret.
After many years in which foreign investment in the United States has become generally welcome as a generator of jobs, Congress has recently become more wary of purchases by certain foreign interests. Last year's takeover by a Chinese company of International Business Machines Corp.'s personal computer business aroused concern that China might gain access to sensitive technology. Although the administration brushed off worry about that deal, congressional opposition to the Chinese takeover of Unocal Corp., the international oil firm, helped transfer ownership of Unocal to another U.S. oil giant. That controversy also inspired plans by powerful members of Congress to tighten the 1988 law that created CFIUS.
Talk of major changes in the law has subsided, but the Dubai Ports World deal could reignite the effort. If the administration is perceived as not vetting the deal carefully enough, congressional skeptics of foreign investment may feel obliged to take matters into their own hands, said Todd M. Malan, executive director of the Organization for International Investment, which represents the U.S. subsidiaries of many foreign companies. Malan was especially concerned because CFIUS did not conduct a 45-day investigation on top of the initial 30-day review that it usually gives to foreign purchases of U.S. businesses.
"There's obviously a very broad interest in Congress in this particular transaction, and we hope that it doesn't lead to broad changes in the CFIUS process," Malan said. "Clearly, a larger number of members of Congress would have been more comfortable if this transaction had gone to the full investigation phase."
DP World, the company at the center of the controversy, has been aggressively expanding since 1999 from its home in Dubai into operating ports in many other parts of the world, including Asia, Europe and South America. The takeover of Peninsular and Oriental would make it one of the three biggest port operators in the world, with companies from Denmark and Hong Kong.
Normally, such a company will be checked out by CFIUS for any "derogatory" information before being allowed to invest in a sensitive U.S. business, Baker said. In this case, the Homeland Security Department already knew the company well, he said.
"We have a relationship with this company because they have been a participant in some of our cargo and port security measures," Baker said. "Remember, our interest in port security extends well beyond the United States. If we discover weapons of mass destruction inside a U.S. port, we've already lost. So we do a lot of screening abroad, and our general experience with this company has been positive."
The extra 45-day investigation wasn't necessary, Baker said, because the company approached CFIUS in late November, when it decided to bid for Peninsular and Oriental. So the committee had "at least a few weeks longer" than the standard 30 days to look into the ramifications of the takeover, he said.
House Homeland Security Committee Chairman Peter T. King (R-N.Y.) said, "I am not convinced that the system that's used is satisfactory in a post-9/11 world.
"They just seem to do an analysis of what's known about the company -- is there anything known showing that they're a threat?" said King, who met with Baker and other administration officials yesterday. "To me, much more of an investigation is required. If someone was nominated for a sub-Cabinet post in this administration, they would get far more scrutiny than this company, which will be running major ports in this country."
Some in Congress Object to Arab Port Operator
Company Based in United Arab Emirates Set to Manage 6 East Coast Facilities After Takeover
By Paul Blustein
Washington Post Staff Writer
Friday, February 17, 2006; Page A11
The management of major U.S. ports taken over by an Arab-owned company? What was the Bush administration thinking when it allowed such a thing?
That is the question being asked by members of Congress from both parties. Their indignation is aimed at the $6.8 billion purchase by Dubai Ports World, a state-owned company in the United Arab Emirates, of a firm that handles most operations at ports in New York, New Jersey, Baltimore, New Orleans, Miami and Philadelphia.
At a news conference yesterday, a bipartisan group of seven House and Senate members demanded that an interagency task force on foreign investments, which approved the transaction, examine it more closely. The group contended that although the UAE may have a strongly pro-U.S. government, the country was traversed by some of the Sept. 11, 2001, hijackers and its banking system has been used by groups affiliated with al Qaeda.
"Our ports are major potential terrorist targets," said Sen. Christopher J. Dodd (D-Conn.). "I strongly urge the administration to thoroughly investigate this acquisition."
Sen. Tom Coburn (R-Okla.) said, "Handing the keys to U.S. strategic ports to a regime that recognized the Taliban is not a sound next step in our war against terror."
Taken aback by the uproar, administration officials defended approval of the deal by the Committee on Foreign Investment in the United States (CFIUS), a panel with representatives from 12 U.S. agencies that reviews foreign takeovers of U.S. companies or possible risks to national security.
The company that currently operates the ports, they noted, is foreign -- Peninsular and Oriental Steam Navigation Co., a British firm -- and its employees in U.S. ports, who are mostly Americans, are expected to do the same work they're doing now. Furthermore, Dubai Ports World, which won a bidding war this month for the company, has proved itself to be a reliable partner in screening cargo headed for the United States. And once cargo arrives, federal agents would continue their current level of inspections, regardless of who runs the ports.
"This company will be subject to any U.S. laws that apply to port security, and will be obliged to have a port security plan that we will review," Stewart A. Baker, the assistant secretary for policy at the Department of Homeland Security, said in a phone interview. "So if there's a falloff in compliance on security here in the United States, we're not completely lacking in ability to respond to that."
The flap has some potentially major implications beyond the port security issue, as illustrated by the readiness of administration officials to comment on the decision made by the committee, which deliberates in secret.
After many years in which foreign investment in the United States has become generally welcome as a generator of jobs, Congress has recently become more wary of purchases by certain foreign interests. Last year's takeover by a Chinese company of International Business Machines Corp.'s personal computer business aroused concern that China might gain access to sensitive technology. Although the administration brushed off worry about that deal, congressional opposition to the Chinese takeover of Unocal Corp., the international oil firm, helped transfer ownership of Unocal to another U.S. oil giant. That controversy also inspired plans by powerful members of Congress to tighten the 1988 law that created CFIUS.
Talk of major changes in the law has subsided, but the Dubai Ports World deal could reignite the effort. If the administration is perceived as not vetting the deal carefully enough, congressional skeptics of foreign investment may feel obliged to take matters into their own hands, said Todd M. Malan, executive director of the Organization for International Investment, which represents the U.S. subsidiaries of many foreign companies. Malan was especially concerned because CFIUS did not conduct a 45-day investigation on top of the initial 30-day review that it usually gives to foreign purchases of U.S. businesses.
"There's obviously a very broad interest in Congress in this particular transaction, and we hope that it doesn't lead to broad changes in the CFIUS process," Malan said. "Clearly, a larger number of members of Congress would have been more comfortable if this transaction had gone to the full investigation phase."
DP World, the company at the center of the controversy, has been aggressively expanding since 1999 from its home in Dubai into operating ports in many other parts of the world, including Asia, Europe and South America. The takeover of Peninsular and Oriental would make it one of the three biggest port operators in the world, with companies from Denmark and Hong Kong.
Normally, such a company will be checked out by CFIUS for any "derogatory" information before being allowed to invest in a sensitive U.S. business, Baker said. In this case, the Homeland Security Department already knew the company well, he said.
"We have a relationship with this company because they have been a participant in some of our cargo and port security measures," Baker said. "Remember, our interest in port security extends well beyond the United States. If we discover weapons of mass destruction inside a U.S. port, we've already lost. So we do a lot of screening abroad, and our general experience with this company has been positive."
The extra 45-day investigation wasn't necessary, Baker said, because the company approached CFIUS in late November, when it decided to bid for Peninsular and Oriental. So the committee had "at least a few weeks longer" than the standard 30 days to look into the ramifications of the takeover, he said.
House Homeland Security Committee Chairman Peter T. King (R-N.Y.) said, "I am not convinced that the system that's used is satisfactory in a post-9/11 world.
"They just seem to do an analysis of what's known about the company -- is there anything known showing that they're a threat?" said King, who met with Baker and other administration officials yesterday. "To me, much more of an investigation is required. If someone was nominated for a sub-Cabinet post in this administration, they would get far more scrutiny than this company, which will be running major ports in this country."
