ITP Business, Dubai, Thursday, 13 April, 2006
by James Bennett
The combined effects of the ongoing Dubai Ports World furore over the sale of six major US ports that sparked a catalytic delay in Free Trade Agreement talks between the US and the United Arab Emirates, could provide a significant economic boost to not only the UAE, but also to the Middle East, experts have suggested.
Many regional-based companies and chief executives had feared that the UAE economy and, on a broader basis, the Middle East, would suffer economically in terms of investment, tourism, and general imports and exports. A large majority, however believe that recent negative events could swiftly be turned into a series of positives.
James Magee, chairman of CEO Clubs UAE that, along with its 27 other global branches, represents over 10 000 chief executives, says that the events of the past few months will put Dubai and the rest of the region firmly on the business map.
“Most of America didn’t know where Dubai was but do now. Curiosity will have a very positive knock-on effect. Educated business people will be the first people interested in anyone who can raise US $10 billion dollars.
“This is the time where the Dubai Tourism board, the Chamber of Commerce, Dubai Holdings, Emirates airlines and Sheikh Mohammed himself could join forces and put a very positive spin on this by inviting the World to Dubai to ‘see for itself’.”
This argument could well hold true with more and more foreign investors and foreign direct investment (FDI) attracted to the UAE and the rest of the region due to increased liberalisation of various markets including property, telecoms, construction, leisure and tourism and banking and financial services.
Official reports show that trade between the US and the UAE is not only healthy, but sharply on the rise, having increased to US $9.95 billion (AED36.5 billion) last year, compared to US $5.2 billion (AED19.2 billion) in 2004.
On the other side of the coin, the US Trade Department very positively suggested in a recent report that as investment laws and regulations evolved in the UAE, it expected this continuing trend to make the business climate “more hospitable to foreign investment”.
This rather vague comment has an underlying message that can only mean more US investment in the UAE and Middle Eastern markets.
Trade figures will also almost certainly continue to rise due to constant market liberalisation and the ongoing opportunities that lay ahead for foreign investors looking to purchase newly freed up property alongside other sectors that will open up in the coming years.
The UAE is doing its utmost to encourage FDI and has opened up its trade sectors in line with its World Trade Organisation obligations. The government has also has taken steps to cut red tape for foreign investors, and now exempts investors from the need to obtain a labour card in addition to a visa.
Not even the UAE government’s plans to introduce a VAT levy at the end of next year appeared to frighten the US off in its report. So, if relations and trade are so healthy and continually on the up, what made DPW backdown from running six major US ports and opening them up to purely US bidders in order to satisfy the ‘fearful’ US Congress and its general public?
And what makes an astonishing majority of Americans (63%) choose the mafia ahead of an Arab-led organisation when asked in a CNN poll who they would rather have overseeing US ports operations?
With a US election only two years away, Magee says that the whole episode has been nothing more than a “political game” by those who feel they can get some mileage out of it by “again raising questions about the origins of the 9/11 highjackers and the risk of allowing an Arab owner to operate the ports.”
“The top 5% of Americans are educated and worldly wise and see the P&O debate as nothing more than a political game. The business leaders who know the value of close ties with the Middle East are taking a strong view on this, stepping into Dubai’s defence,” he says.
Both President Bush and Michael Chertoff, Secretary for the Department for Homeland Security have stepped in to criticise the DPW backlash. In a speech to the Council on Foreign relations, Chertoff said that the US had “missed an opportunity” to make its shores safer when it drove DPW away from its ports. “We could have actually built in some additional assurances, which would have given us more security in the wake of the deal, than we had before the deal.
“The irony of this, is that had the deal gone forward we would have had greater ability to impose a security regime worldwide on the company than we have now,” he added.
The irony of the situation is that another UK ports company is in rumoured talks over its sale to another foreign business. Investment bank Goldman Sachs is said to be in discussions about a £2.3bn (AED14.7 billion) bid for Associated British Ports in partnership with a Canadian pension fund and a secretive Asian investor.
The Wall Street bank is said to be linking up with Borealis, the investment vehicle of the Ontario pension fund OMERS, and GIC Special Investments, the private-equity arm of the Singapore government, who also bid for P&O. The bid is said to be worth up to 740p (AED47) a share. AB Ports is the biggest UK port operator, handling 25% of the country’s seaborne trade from 21 locations.
Whether this deal raises fresh concerns about a key UK asset being sold to foreign investors in an age of global terrorism is yet to be seen but many in the Middle East seem to doubt it will.