Takeover of port terminal operator will have little effect on security

Uproar over buyout of P&O's U.S. operations could be much ado about nothing

By Jeff Berman, Senior Editor -- Logistics Management, 3/1/2006

BOSTON—The potential takeover by Dubai Ports World (DPW) of some terminal operations at more than 20 U.S. ports has garnered much criticism from politicians who are worried about national security. But maritime industry experts contend that the controversy that has made port security front page news may be much ado about nothing.

DPW, which is buying the U.K.'s Peninsular and Oriental Steam Navigation Co. (P&O), is owned by the government of Dubai in the United Arab Emirates. The political backlash stems from opponents' belief that giving the company control of port operations would create a security risk. Discussions initially centered on six U.S. ports, but a total of 22 U.S. ports will be affected, according to the Associated Press. P&O Ports North America manages terminals at some of those ports and provides stevedoring or other limited services at the others.

As this issue went to press, DPW reportedly was considering dropping its bid for P&O's U.S. operations and selling them to a U.S.-based company.

Because the deal involves a foreign government, the United States Committee on Foreign Investment in the United States (CFIUS) vetted the proposed sale. The committee, which is required by law to review such investments, considered the potential national security issues inherent in the sale and determined that there was little or no security risk.

Although many politicians have denounced the deal as compromising U.S. security, industry experts say there's no need for concern. "Port security is a problem, but this [shift in control] is not going to change anything," said Dr. N. Shashikumar, dean of business at the Maine Maritime Academy's Loeb-Sullivan School of Business in Castine, Maine. "This will not impact shippers or carriers, because Customs and Border Protection, the Department of Homeland Security, and the Coast Guard will continue to be the ones who call the shots when it comes to security."

One reason for the high level of concern is the misconception that DPW intends to buy entire ports. Shashikumar points out that the scenario described in press conferences and news outlets—that an Arab company is taking over U.S. ports—is a far cry from what will actually happen. "The politicians are playing their roles very well by putting an emphasis on national security in an election year, but I think when it's all said and done, the deal will go through because it is not changing how port security is operated," he said.

As politicians prepare legislation designed to block foreign-owned companies from operating U.S. port terminals, one thing that must be clear, regardless of who controls the terminals, is who has access to port security plans, said Capt. Joseph Ahlstrom, professor of maritime transportation at SUNY Maritime in Bronx, N.Y.

"What we need to do is identify who will be the designated facility security officer at each terminal," said Ahlstrom. "This should not be a foreign national, and there should be some legislation saying that. But a U.S. citizen working for DPW at these ports is acceptable."

In an effort to quell lawmakers' concerns, Dubai Ports World asked the CFIUS for a second, 45-day review of the national security implications of the pending transaction. That in-depth investigation, say critics, should have been conducted the first time around.

Regardless of the eventual outcome of that review, it will remain business as usual, said Andrea C. Muñiz, public affairs officer at the Port of Miami.

"Security is very important to us and is always going to be at the top of our agenda," said Muñiz. "But in terms of operations with a new foreign company coming in and impacting our security processes, that is impossible. Things do not work that way."