DPW in Mid-Kerfluffle

Just for the record, here is a letter I wrote to Powerline and which they published on their blog. It was written at the height of the "kerfluffle".

There are several other points worth making:

1) Over the past five to seven years there has been significant investment by international companies in the US freight transportation infrastructure. As the US investors demand high returns on investment, increasingly foreign companies have moved into lower return industries where they have certain scale advantages. The logistics and transportation industry is but one example. Freight companies like DHL (owned by the German post office), PWC Logistics (a Kuwaiti warehouse company), and others have made significant investments in the US.

The fact that DPW seeks to manage port operations may make for better political fodder, but if the truth be known, the companies who manage transportation networks have a greater impact on security. After all, they have responsibility for ensuring that dangerous cargo is not loaded in foreign ports where there is the greatest opportunity for abuse. To those who fear DPW, I ask, where were you when PWC bought GeoLogistics, or DHL bought AEI?

2) As Commissioner Ahern noted this morning, the post-9/11 initiatives to secure intra-continental freight networks have been focused on pushing the inspection process to the points of origin. Immediately after 9/11 there was a rush by people in my industry to put in place tracking systems that would secure cargo containers from door-to-door. That being said, even prior to 9/11, US customs and the carriers used relatively sophisticated data base management tools to track cargo. As such, we in the industry cringe every time we hear the "we only inspect 3% of shipments" shibboleth. In point of fact, the 3% number more accurately describes success than failure.

3) Perhaps the most interesting part of the whole DPW issue has been completely overlooked by the press and the politicians. From what I understand, the UAE is working to establish a locally based capital market that trades in Sukuk, a debt instrument that conforms to Islamic law (usury being against the teachings of Islam). In this effort, they are using DPW as a "base company" - an enterprise with enough trading volume to stabilize the new market.

That taken into account, it becomes more clear why President Bush is so adamant about letting this deal go through. Not only is there payback for the help the UAE has provided in the GWOT, but it also fits his vision of integrating the Middle East economies into the broader, global economy. For without their own method for raising capital, the likes of Saudi Arabia and the UAE will forever be beholden to foreigners for capital and will have much more difficulty diversifying their oil/gas based economies.

Even just a month after the story broke, it is a sad commentary on the things that power politics in this country. I also read a lot less of Michelle Malkin these days.

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