ABU DHABI, 13 March 2006 — The Dubai Ports furor will color foreign investors’ perceptions of the United States and affect future investment decisions, the United Arab Emirates’ central bank governor said yesterday.
The governor’s comments were the first from a senior UAE official since state-owned Dubai Ports announced on Thursday that it would transfer six US ports to a US entity, to allay concerns that the deal posed a threat to American security.
Governor Sultan Nasser Al-Suweidi said the row kicked up by US lawmakers over the ports deal betrayed a double standard.
“It is against the principles of international trade... which the US was instrumental in making. They are contravening their own principles in this respect,” Al-Suweidi told reporters.
“Investors are going to take this into consideration... They will look at investment opportunities (in the United States) through new binoculars.” While Al-Suweidi made no specific reference to Arab investment, his remarks underscored growing concern of a backlash among Gulf Arab investors.
Governments in the world’s biggest oil exporting region are diversifying away from US assets, as record oil prices drive up cash available for foreign investment by about $180 billion a year — about 16 percent of the external funding needed to cover the US current account deficit.
Without making a link to the ports affair, Al-Suweidi said the central bank was looking to convert up to 10 percent of its foreign exchange reserves from dollars into euros — double the target the bank had previously set.
UAE central bank foreign reserves — estimated at $23 billion in December — are held virtually entirely in dollars. The bank said in July it was looking to convert 5 percent of that into euros.
“Yes it’s an increase. The euro will become more attractive definitely and once it becomes more attractive the decision will be to shift but in a reasonable way,” Al-Suweidi said.
He said bank executives would consider the shift at a meeting in April.
The central bank controls only part of the official foreign exchange reserves of the UAE, an oil-exporting federation of seven emirates. Other major holders include the investment arms of the emirates’ governments.
Speculation that major central banks were looking to trim their dollar holdings reached fever pitch during the dollar’s slide against the euro in the three years to 2004, but eased as the US currency regained ground last year.
Meanwhile, Dubai Ports World is unlikely to find many bidders for its six US port terminals, making a sale or spinoff difficult, ship brokers have said.
Potential buyers seem limited to three US companies, brokers said, citing SSA Marine Inc. of Seattle, a unit of Carrix Inc.; Maher Terminals Inc. of Berkeley Heights, New Jersey; and Marine Terminals Corp. of Oakland, California.
“These are among the larger companies handling the movement of goods at port and are big enough to handle additional capacity,” said one broker on condition of anonymity.
Another broker, who also asked not to be identified so as to avoid getting involved in US politics, said “there are companies out there in the United States which operate at ports and do this kind of work.” “The question is whether they want to and whether it is commercially viable for them to do so,” he added.
SSA and Marine Terminals declined to comment, while officials with Maher Terminals could not be reached.
Dubai Ports World could sell the assets to private equity firms, which were watching the process from the sidelines.
However, none of the major players were making any commitment about joining any sale process.
SSA operates more than 120 facilities worldwide, including seven marine container terminals on the US west coast. Maher Terminals operates the largest marine container terminal in the port of New York and New Jersey.
Marine Terminals provides stevedoring, terminal operating and related cargo handling services in most US West coast ports as well as several major US South Atlantic ports.
