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Regulators Should Not Fear Dubai-NASDAQ Deal

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By FAROOQ MITHA

Published: October 8, 2007

The recently announced deal between the NASDAQ and Borse Dubai brings back memories of 2006 deal, in which Dubai Ports World would have inherited six American ports in its takeover of the British firm P&O.

This deal evoked outrage among United States lawmakers and Dubai Ports was forced to sell its United States port assets to an American firm. The NASDAQ-Borse Dubai deal is again generating protest from some lawmakers, who fear nation security could be compromised because it would sell one of the pillars of our financial markets.

The key question is whether such deals are good for the United States.

Opponents to the NASDAQ deal should note that this deal is significantly different than the Dubai Ports World deal. Borse Dubai only would acquire a 20 percent stake in the NASDAQ and its voting rights would not exceed 5 percent.

Thus, its impact on the way the NASDAQ operates would be limited. The deal also contains a 'standstill' provision, which will bar Dubai from increasing its stake in the NASDAQ or publicly criticizing its management. This is in contrast to the Dubai Ports deal, which would have given full control of those six ports to the foreign entity.

Contrary to comments from New York Sen. Charles Schumer comments last year that Dubai has 'a nexus with terrorism,' the United Arab Emirates (UAE) has been an ally of the United States in the war on terror and has arrested al-Qaida operatives.

Foreign companies play a large role in our economy; some $267 billion worth of U.S. assets were acquired by foreign interest this year alone. The growing trade deficit increases the need for foreign money in the United States to bridge the gap.

The recent economic boom in the Persian Gulf has enabled places like Dubai to look beyond petroleum and become a center for international financial markets and business. In addition, today many American universities, banks, corporations and private equity firms have a significant and growing presence in countries such as the UAE, Qatar and Bahrain. We also have free trade agreements with the majority of Gulf States.

The United States should increase its presence in international financial markets to allow its investors to benefit from cross-border and cross-asset trading. This deal will increase NASDAQ's global presence and its reach into the Middle East, without giving control to Dubai. Such deals also create competition in the markets, offer larger liquidity pools, create jobs, and give our markets advantages over competitors in other regions.

While it is important to examine each transaction to ensure it does not compromise national security, the deals should not be used to stir up fears and score cheap political points.

Farooq Mitha is a law student at the University of Florida and conducted research in the Middle East on economic and legal reform.

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