Dubai ‘s dominance: what does it imply?

I am amazed at the paranoia and quasi-racism of the uproar in the US over the takeover of six port terminals in that country by DP World (a.k.a. Dubai Ports). P&O of Britain has traditionally run the terminals. When Dubai Ports acquired P&O, control of the six terminals also changed hands. Americans viewed British control as uncontroversial, but are now outraged by Arab control. They say their objections are based not on racist but security grounds: some of the 9/11 hijackers were Dubai citizens. I fail to see the logic of this. It is like forbidding German takeovers of US companies because Hitler was a German citizen. Besides, security at ports is under the control of US authorities, not the terminal operator.

A House of Representatives committee voted 62-2 to block the ports deal. To avoid a confrontation, Dubai Ports said it would sell the six terminals to an American company. This is a victory of paranoid bigotry over common sense.

I am sceptical of conspiracy theories, most of which are steeped in prejudice. So, I was sceptical when an Indian maritime expert told me that the P&O takeover affected India even more than the US. However, the facts are startling. Dubai Ports will now dominate container traffic in not just India but the whole Arabian Sea.

See the accompanying map. Dubai Ports controls the container terminals in the United Arab Emirates: Jebel Ali, Port Rashid, Khorfakkan and Fujairah. What is not well known is that it also controls almost all the major ports between India and Suez. It controls Jeddah, Djibouti, Aden, Karachi and Colombo. The only major port not under its control in this region is Salalah in Oman, run by Denmark’s Maersk.

After acquiring P&O, Dubai Ports will control all container terminals in India save one at Pipavav (run by Maersk) and two at JNPT (Jawaharlal Nehru Port Trust near Mumbai), run by Maersk and the government respectively. Dubai Ports will control the terminals at Chennai, Vishakapatnam, Cochin, Mundra (Kutch) and one terminal at JNPT. It has also got the contract for building a big new container transshipment terminal at Vallarpadam in Kerala.

Should India worry about this dominance? The Vishwa Hindu Parishad may well protest about dangerous Muslim dominance of Indian ports, a security risk. I think such objections have as little logic in India as in the US. If British and Danish companies can run our terminals, why not a Dubai company? Dubai Ports is owned by UAE sheikhs who oppose Islamic terrorism, and indeed are threatened by it.

What about economic dominance? Monopolists can manipulate prices in the absence of competition. So, I think Indian authorities will have to keep an eye on port charges levied by Dubai Ports.

A second possible threat voiced by some experts is that Dubai Ports will manipulate port charges to encourage transshipment of containers via Dubai rather than direct container trade from India to other destinations. I am sceptical: multinational corporations (like Dubai Ports) are interested in maximizing profits from new acquisitions, not in starving them. Besides, Indian exports are rising by over 20% annually, and only a small fraction of this could be diverted to Dubai. Provided port charges in India are not manipulated to high levels, any diversion to Dubai will be marginal.

In sum, there is a possible port charges threat that needs to be met by regulation. But there is no security threat. Our ports are not going to be converted into madrassas, or bases for Al Qaeda

What do you think?