Emotion hijacked US ports deal: ex-defence secretary; Line has to be drawn between prudence and paranoia, he says
By Wong Wei Kong
 
(SINGAPORE) The United States must be careful about the way it handles security concerns when it comes to investment by foreign companies, in order to avoid a repeat of the recent debacle which sank the plans of Dubai Ports World to take over terminal operations at six US ports, said former US defence secretary William Cohen.

'There is a line between prudence and paranoia that has to be drawn. I think we saw a spike in fear over the DP World situation where a sober, objective analysis of the company, its capabilities and its role was overwhelmed by the emotion reaction,' Mr Cohen said in an interview with BT while in Singapore to attend the Shangri-La Dialogue at the weekend, an annual gathering of regional defence and security officials.

Mr Cohen, who served in the Clinton administration as defence secretary from 1997-2001, is now chairman and chief executive officer of The Cohen Group, a high-powered strategic consulting firm he set up after leaving office to help multinational clients explore opportunities overseas.

The firm's vice-chairmen are retired general and former Supreme Allied commander Joseph Ralston and former undersecretary of state for political affairs Marc Grossman.

Security concerns are not new to the US, and Singapore's ST Telemedia also had to address security issues when it acquired US-based fibre-optic network operator Global Crossing in 2003. 'It is an important issue. It is even more subject to scrutiny now than ever before by virtue of 9/11 and concern about the spread of terrorism and the continued vulnerability of the country. It will continue to be high-priority,' he said.

DP World became embroiled in a furore in the US Congress after its acquisition of British ports and ferries company P&O, which operates six US terminals. While the Bush administration backed the deal, US lawmakers opposed the move and raised security concerns over an Arab-owned company entering the US ports scene.

In the end, DP World offered to divest the US ports to end the political firestorm, but the controversy fanned fears of growing economic nationalism in the US.

'There, the emotions got way in front of the facts. I think it should have been better handled by all parties concerned. The emotion carried the issue long before reason took a grip,' said Mr Cohen. 'Frankly, there were some miscalculations. The administration failed to be sensitive to the political aspects of the issue and how it could be elevated until it became impossible to consider.'

To avoid a DP World-type situation in the future, he said substantial consultations and briefings for key members of Congress are essential the next time a similar situation occurs, including assessing the capabilities of the investing firm and the possible conditions that may be needed.
'I think lots of consultation on Capitol Hill and with key policy-makers and legislators would be important in the future. It is about being aware of how important an issue is to our security system and to be politically atuned so that you can anticipate the likely reactions and how you can defuse that,' said the former Senator and Congressman.

Apart from security, other issues faced by companies in doing business internationally include the rule of law, commercial codes, transparency, and the integrity of government processes, Mr Cohen said. In China, where The Cohen Group has a dedicated practice, intellectual property (IP) is probably the biggest problem.

Foreign companies doing business in the US, including Asian firms, should have greater awareness of the importance of lobby groups, he said. 'I think it is important for any foreign company to have an understanding of the rules they have to comply with, what the legislative landscape looks like, and the politics of an issue. To be on a level playing field, they should turn to major lobby firms. It is a sound investment. You want to have experts tell you what the opportunities are and how to maximise those opportunities.'

While The Cohen Group is not a lobby group, it has a strategic alliance with DLA Piper Rudnick Gray Cary, the world's second-biggest law firm, to provide clients with legal and lobbying advice.

Singapore-based DLA Piper regional managing director Desmond Ong said the partnership benefits the law firm as well. 'Our association with The Cohen Group gives a unique differentiating factor which results in a huge advantage that is unparalleled.'

 
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