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GLOBALISATION so vigorously promoted by the US and the West is now facing the threat of a collapse. Some recent developments point to that direction. The stalling of Dubai Ports World's bid to acquire the management of five US harbours has only heightened the fear. China was, earlier prevented from buying Unocol, an US oil company with major investments in Asia including Bangladesh. In both cases, security concern was cited as the major reason for preventing the take-over.
Bids by the foreign companies to takeover the control of domestic business enterprises were stiffly opposed in France, Spain and Poland. In Latin America there is a growing sentiment against free market economy.
The Latin American countries have pledged to regulate all companies that were taken over by foreign companies. Anxiety among workers in the industrialised countries that their existence is at stake due to massive import, immigrants coming in droves and low wage has worked behind decisions to prevent take-overs.
This trend could disrupt the world economy that has become interdependent now. The risk to the US, in particular is that it will discourage the flow of foreign money on which the US economy depends, potentially raising interest rates and slowing the pace of economic growth, the Wall Street Journal in a report said.
Raghuram Rajan, chief economist of the IMF, was quoted as saying that fear of terrorism, fear of unskilled workers taking away cushy jobs in rich countries and the shock of the types of companies that are now up for grab are coming in the way of foreign companies buying business houses in the industrialised west. If direct foreign investment (FDI) is driven away because of political hostility, the US will have to offer higher interest rates to attract additional compensating portfolio investment, Rajan commented.
President Bush expressed his concern at a meeting with newspaper editors over stalling of DPW's taking over management of five US harbours. He feels that this could send a wrong message to the US allies, particularly in the Middle-East. He did not say anything about the US disapproval of Iran making atomic devices for civilian purposes whereas he has extended support to India for the same purpose. Foreign investments in the US have become very tough.
The US was in the forefront campaigning for tearing down barriers to trade and investment. The hostility over the Cnooc and DP world deals is likely to give investors some second thoughts particularly from the developing countries. France has separated 10 areas which it considers potential for foreign investment. Foreign Investment bids in these areas will go through close scrutiny.
The call for renationalisation is growing whereas multilateral donor agencies like the WB, IMF and ADB are pressing developing countries like Bangladesh to divest state-controlled enterprises which often need feather bedding.
In America, Congressmen are pushing up a legislation that would put foreign investment proposals under more intense scrutiny. The US congressmen intend to block foreign companies from investing in a wide array of areas from energy to utilities. These are being done to protect "American Sovereignty". Preventing administration's effort to open the US airline business to outside investment will be a major goal of the US lawmakers.
Most of the US airlines are now operating under bankruptcy law.
About 250,000 Americans work for foreign companies. It would be a hard decision for US to turn its back on foreign investors because it needs to finance its overseas borrowing but also because that such investments add jobs.
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