Tuesday, February 21, 2006

Battling port hysteria with knowledge


Like yesterday, I heard a few more strident voices soften their rhetoric. Michael Savage was somewhat tamed by an informative insider in the maritime business. Parting thoughts? He'd be the first person to admit he was wrong, and he sure hopes the caller was right....

"Lob ball" Matthews starts off his show with a Florida representative, a Dem strategist, and a Phillie radio talk show host....all mixed political make up - and all equally mixed up on facts. Matthews did his best to get the guests to admit their fears were based on DPW being Arab. Only the talk show host boldly went where no one will go, responding to a list of countries one by one Chris ran off... nixing everyone Arab.

Talk show host says none of his listeners called in with positive aspects on the deal. Well duh.... Amazing that media types never catch on. Polls and opinions are merely public regurgitations of that which the MSM has been spoonfeeding them recently.

At the end of that segment, Matthews mutters underbreath ... paraphrased (transcripts still unavailable this AM) "I don't know, I don't think there would be a twitter if the company were Dutch".

After giving the fear mongers their time, Matthews then has on former Homeland Sec'y Tom Ridge, who also was Governor of one of these port states. Ridge is in the position of having a better working knowledge of the security-port operations process.

Ridge concessions? Supports the merger, recognizes that those who are dissenting haven't a clue of what they speak. Says what many of us are saying... beef up Coast Guard and Homeland Security tasks. That is where our security lies, not in the port operations provider.

During this segment, Matthews holds off on his usual driving, repeated talking points as questioning. I have to believe that Matthews is also coming around to recogniing we've all been "had" big time.

What become readily apparent to me is that only the eloquent and well educated are going to be able to calm the media storm of hysteria. Realizing that media pundit vs media pundit, blogger vs blogger will get us "know"where, I started looking for the rational minds with a more methodical approach.

I stumbled on to
Starling Hunter and his personal blog, The Business of America is Business. Starling is an MIT professor at the Fugue / Sloan School of Management.

All this leaves me with the distinct impression that the US lawmakers aren't aware of how dependable an ally they have in the UAE. Call me cynical but my hunch is that the all-of-a-sudden concern about an Arab company running the ports is less out of bi-partisan concern over national security and more motivated by other factors. On the left-side we have lawmakers beholden to longshore unions and looking, as always, to score cheap political points against the President.

On the right are lawmakers holding grudges about who did and didn't do what in the period before and immediately after 9/11, who discount to heavily the current cooperation that is now being rendered, and who are, perhaps, a bit unnerved about the Mohammed cartoon-Danish boycott controversy. What both groups should recognize is that this hardly the time to be decreasing economic ties with any of the few friends we have in the region and putting at risk the prospect of further political and economic cooperation at time when it is most needed.

My other hunch is that someone is going to explain it all to the lawmakers pretty soon and that this story will blow over rather quickly. This is not the stuff of which a "gritty film-noir" or even a Michael Moore documentary is made.

Were it not for the rare bipartisanship of anger on this issue, I would have to agree with Starling that unions were a big factor in the Democratic disdain for this merger. Or perhaps that's the reason it started, and Republicans hopped aboard not to appear aloof from the perceived "national security issue". Dunno... I swear, the games of the elected elite and their puppet media oft time eludes me.

One of Starling's students, Nazia Moghul, a young woman who was raised in Dubai, puts in her own thoughts on her blog,
A Guiding Star.

The only issue i see from the acquisition of P&O by DP World is that related to unions. Dubai doesn't have unions which makes it easier to bring cheap man-power from different parts of the world because of its close proxy to Asian countries. However, things will be different in USA and from my expereince in Dubai, I know that DP World will be following the US laws and regulations. This would be its first experience dealing with labor union, but I am confident that it would be quick on learning curves by studying the way unions are delt with in US and making use of the experiences of expatriates (from US, and different part of Europe) in Dubai Ports operational in Dubai.

Two points on Nazia's entry. It should be noted here that the UAE is under internal pressure to amend their own labor laws to be consistent with the standards of the International Labor Organization. Obviously, having ports in countries with strong unions, such as the US, will only further advance their efforts.

The second point is that DP World's offer to purchase, called "The Scheme" in the contract's terminology is available to the public online. And on page 15, item 13, it clearly states that DP World is maintaining the P&O management and employees, safeguarding all their existing employment rights. They are also planning on keeping the P&O offices. There are no plans to fire and rehire. And I suspect that the Longshoremen would make sure that didn't happen without a huge stink.

Thus a few tidbits from upperscale business minds in the US. Perhaps more of the economic and maritime minds should be more high profile in this debate, as theirs has a more sane approach than emotional, mid term election driven Congressmen and women.

Meanwhile Michelle Malkin is raising red flags about where DP World's cash for the purchase is coming from. She also gave prominent mention that PSA Int'l, the competitive bidder out of Singapore (hey... ain't that NEAR Indonesia, another Arab dominated nation??? LOL), had more experience than the new rising star out of Dubai.

What she fails to mention about PSA is that, had they acquired P&O, they would have been by far the largest comglomerate port operations service provider. And in that, perhaps there would have been monopoly concerns raised by those who fear the too rich and powerful of the world. Can you say rock and hard place?

But back to the UAE financing. It all sounds so sinister under the "clarion pen", so again I had to dig. What I did learn is that Sharia law forbids borrowing or lending on interest, so these Islamic bonds are compliant, offerings investors regular payments based on profits.

The UAE Interact, the official news site of the UAE...

A statement gave the Qualified Public Offering (QPO) yield as 7.125 per cent that is the return investors would get in the event of a share offering by the Dubai ports firms. If there was no IPO the bond would pay 10.125 per cent. "The issue was significantly oversubscribed, even more than was indicated in the Dubai Islamic Bank statement in November," said Faisal Mikou, director of investment banking at Barclays Capital in Dubai.

In December, Dubai Islamic Bank said it expected the Sukuk to have a QPO yield of between 7.25 per cent and 8.25 per cent and a return of over 10 per cent if there was no public offering.

Dang... *I* want in! US bonds should have such a yield. Now I'm not economic whiz, but I'm not sure why financing of such a purchase via bonds should cause consternation. Afterall, we're in full knowledge that DP World is part of a government entity, as UAE does with so many of their transit and technology businesses. And considering that is the way our own government works on projects, I'm missing the "oooooh, that's bad" part here. In fact, it appears quite lucrative for those who buy in. Maybe someone can fill me in on Michelle's tangent, as it isn't clear to me by her own scribbles.


Anonymous said...

Good to read an intellectual view point on this subject, thanks.

Dr. Contrarian said...

Nice post. I've been similarly amazed at the uninformed backlash at this deal.

MataHarley said...

I am continually amazed at the thoughtful, if not overly loud voices that can also see thru the Congressional shenanigans.

In light of the pure logic of the deal, combined with safeguards CFIUS committee members have obtained, I can't help but feel this is nothing but political posturing on both sides in a mid-term election year.

Sad to put the quest for power above developing trade relations with Arab nations. A move that will not necessarily result in "winning their hearts and minds". I don't believe the cultural divide will ever permit that.

However I do believe that if we share economic benefits, that we will at least be of more value to countries such as the UAE alive and thriving, than dead. And perhaps that is the best we can hope for to co-exist in peace.